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: 811-1880
The Income Fund of America, Inc.
(Exact Name of Registrant as specified in charter)
P.O. Box 7650, One Market, Steuart Tower
San Francisco, California 94120
(Address of principal executive offices)
Registrant's telephone number, including area code: (415) 421-9360
Date of fiscal year end: July 31, 2005
Date of reporting period: January 31, 2005
Patrick F. Quan
Secretary
The Income Fund of America, Inc.
P.O. Box 7650, One Market, Steuart Tower
San Francisco, California 94120
(name and address of agent for service)
Copies to:
Michael Glazer
Paul, Hastings, Janofsky & Walker LLP
515 South Flower Street
Los Angeles, California 90071
(Counsel for the Registrant)
ITEM 1 - Reports to Stockholders
[logo - American Funds(R)]
The right choice for the long term(R)
THE INCOME FUND OF AMERICA
[cover: photo of the tip of a boat on a lake - trees in the distance]
Semi-annual report for the six months ended January 31, 2005
THE INCOME FUND OF AMERICA(R) seeks current income while secondarily striving
for capital growth through investments in stocks and fixed-income securities.
This fund is one of the 29 American Funds, the nation's third-largest mutual
fund family. For more than seven decades, Capital Research and Management
Company,(SM) the American Funds adviser, has invested with a long-term focus
based on thorough research and attention to risk.
FIGURES SHOWN ARE PAST RESULTS FOR CLASS A SHARES AND ARE NOT PREDICTIVE OF
RESULTS IN FUTURE PERIODS. CURRENT AND FUTURE RESULTS MAY BE LOWER OR HIGHER
THAN THOSE SHOWN. SHARE PRICES AND RETURNS WILL VARY, SO INVESTORS MAY LOSE
MONEY. INVESTING FOR SHORT PERIODS MAKES LOSSES MORE LIKELY. INVESTMENTS ARE NOT
FDIC-INSURED, NOR ARE THEY DEPOSITS OF OR GUARANTEED BY A BANK OR ANY OTHER
ENTITY. FOR THE MOST CURRENT INFORMATION AND MONTH-END RESULTS, VISIT
AMERICANFUNDS.COM. FUND RESULTS SHOWN, UNLESS OTHERWISE INDICATED, ARE AT NET
ASSET VALUE. IF A SALES CHARGE (MAXIMUM 5.75%) HAD BEEN DEDUCTED, THE RESULTS
WOULD HAVE BEEN LOWER.
Here are the average annual total returns on a $1,000 investment with all
distributions reinvested for periods ended December 31, 2004 (the most recent
calendar quarter):
Class A shares 1 year 5 years 10 years
Reflecting 5.75% maximum sales charge +6.42% +8.13% +11.44%
The fund's investment adviser is waiving a portion of its management fees.
Results shown reflect the waiver. Please see the Financial Highlights table on
page 26 for details.
The fund's 30-day yield for Class A shares as of February 28, 2005, calculated
in accordance with the Securities and Exchange Commission formula, was 3.36%,
which reflects a fee waiver (3.35% without the fee waiver). The fund's
distribution rate for Class A shares as of that date was 3.30%. Both reflect the
5.75% maximum sales charge. The SEC yield reflects the rate at which the fund is
earning income on its current portfolio of securities, while the distribution
rate reflects the fund's past dividends paid to shareholders. Accordingly, the
fund's SEC yield and distribution rate may differ.
Results for other share classes can be found on page 32. Please see the inside
back cover for important information about other share classes.
High-yield bonds are subject to greater fluctuations in value and risk of loss
of income and principal. The return of principal for the bond holdings in The
Income Fund of America is not guaranteed. Fund shares are subject to the same
interest rate, inflation and credit risks associated with the underlying bond
holdings. Investing outside the United States is subject to additional risks,
such as currency fluctuations and political instability, which are detailed in
the fund's prospectus.
[photo of the tip of a boat on a lake - trees in the distance]
FELLOW SHAREHOLDERS:
The Income Fund of America's 2005 fiscal year began in August amid concerns
about higher oil prices, rising interest rates and a slowing economy. Over the
ensuing six-month period ended January 31, 2005, some of these concerns were
realized: oil prices rose from approximately $44 to $48 a barrel* and the
Federal Reserve raised the federal funds rate, a short-term lending rate, four
times from 1.25% to 2.25%. After the close of the period, the Federal Reserve
raised rates one more time in February, to 2.5%. Corporate earnings, employment
and the economy, however, all continued to grow. Also, while short-term yields
rose during this time, yields on longer term bonds actually declined.
*Crude oil -- WTI-Cushing Spot Market Price $/Barrel on August 2, 2004, and
January 31, 2005.
(Source: Bloomberg)
In this environment, The Income Fund of America benefited from its focus on
higher-dividend-paying stocks, careful stock and bond selection as well as its
global exposure. As of January 31, 2005, the fund had a six-month total return
of 9.2% (with all dividends reinvested), outpacing the 8.2% total return of the
unmanaged Standard & Poor's 500 Composite Index and well above the 3.8% total
return of the unmanaged Lehman Brothers Aggregate Bond Index. The fund's return
exceeded the 6.3% total return for the average Lipper income fund.
FINDING STRENGTH IN DIVIDENDS
As of January 31, 2005, the fund's dividend yield of 3.6% was more than twice
the S&P 500's 1.6% yield and substantially higher than the 2.5% yield for the
average Lipper income fund. In December 2004, the fund paid a special dividend
of 1.5 cents a share in conjunction with its regular 15.5 cent quarterly
dividend.
Rising corporate cash flows and the federal tax cut on corporate dividends have
led companies to increase their dividends -- a trend we expect to continue for
the near future. Due to these dividend increases and the rise in short-term
interest rates, we are increasing the fund's quarterly dividend from 15.5 to
16.5 cents a share beginning with the June payment.
LOOKING BEYOND TODAY'S HEADLINES TO FIND OPPORTUNITIES
Careful company selection through extensive global research is the cornerstone
of The Income Fund of America. We believe this approach allows us to find good
long-term opportunities that others might forgo because of short-term market
trends or challenging circumstances within a particular industry. Two such
examples are the telecommunication services and pharmaceutical industries.
Telecommunication services has become the third largest sector in the fund's
portfolio. After reaching their lows in 2002, these companies have become an
increasingly attractive source of income and a strong contributor to the fund's
returns thanks to improvements in their balance sheets and increasing cash
flows.
This was especially true for telecommunications companies outside the United
States. Over the six-month period, Telecom Italia was one of the fund's
strongest performers, gaining 49.8%. Eircom Group (Ireland), Chunghwa Telecom
(Taiwan) and Telefonica (Spain) also saw strong gains, increasing 39.6%, 33.2%
and 25.3%, respectively. Since the beginning of the fund's 2005 fiscal year
through February 2005, a number of sizable mergers and acquisitions within the
U.S. telecommunications sector have been announced, including Cingular's
acquisition of AT&T Wireless, SBC's agreement to acquire AT&T and the
prospective merger of Sprint with Nextel. We believe this type of consolidation
will shrink the number of competitors, lower overall capital spending in the
industry and lead to significant cost savings over the long term for those
companies that remain.
In addition to having increasingly attractive valuations, the yields for many
pharmaceutical stocks have, for the first time in a long time, made them
suitable investments for the fund. Uncertainty about the impact of the Medicare
drug care benefit on pharmaceutical prices, the lack of FDA approval of a number
of drugs and the withdrawal of drugs due to adverse side effects have caused
stock prices of pharmaceutical companies to decline. In market conditions like
these, uncertainty often bears opportunity, and with our fundamental research
and analytical process, our focus is on uncovering those pharmaceutical
companies with attractive and sustainable dividends as well as good long-term
value.
FINDING OPPORTUNITIES IN THE FIXED-INCOME MARKETS
For the first half of the fund's fiscal year, U.S. corporate bonds -- the fund's
largest category of fixed-income holdings -- generated some of the best returns
in the bond market thanks to improving corporate balance sheets and increasing
relative value. Within the corporate bond sector, lower-rated high yield bonds
again outpaced their higher quality counterparts. As of January 31, 2005, 10% of
the fund's total assets were invested in high yield bonds from approximately 190
issuers.
ACCESSING WORLD MARKETS
The strength in non-U.S. markets and currencies was a significant contributor to
the fund's return. During the last six months, all 21 of the non-U.S. equity
markets in the unmanaged MSCI EAFE(R) (Europe, Australasia, Far East) Index
outpaced the U.S. equity market+ (when calculated in U.S. dollars with all
dividends reinvested).
+As measured by the unmanaged MSCI USASM Index.
As of January 31, 2005, the fund had 19.3% of its total assets invested in
stocks of non-U.S. companies. Four of the fund's biggest price gainers were
located outside the United States: CVRD (Brazil, 69.1%); Telecom Italia (Italy,
49.8%); Wesfarmers (Australia, 47.3%) and Eircom Group (Ireland, 39.6%).
LOOKING AHEAD
Since mid-2000, the fund has generated above-stock-market returns, attributable,
to a large extent, to the strength of higher dividend-paying stocks as well as
corporate and high yield bonds. In the future, we expect returns for these
investments and the fund to be lower on a relative basis. In addition, we have
tempered our expectations for U.S. stock market returns due to concerns about
the U.S. budget and trade deficits and expectations for further interest rate
increases. It's important to keep in mind that, in a typical reporting period,
The Income Fund of America's total return has fallen between those of the U.S.
stock market, as measured by the S&P 500, and the U.S. bond market, as measured
by the Lehman Brothers Aggregate Bond Index.
No matter what the market environment may be, our goal of providing shareholders
with income significantly higher than the market while growing the value of
their investments is unchanged. The dividend increase we announced earlier in
this letter is an affirmation of this commitment.
We appreciate you entrusting your investments to the management team of The
Income Fund of America, and look forward to helping you reach your long-term
financial goals.
Cordially,
/s/ Stephen E. Bepler /s/ Hilda L. Applbaum
Stephen E. Bepler Hilda L. Applbaum
Chairman of the Board President and Principal Executive Officer
March 8, 2005
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 the most
current information and month-end results, visit americanfunds.com. Fund results
shown, unless otherwise indicated, are at net asset value. If a sales charge
(maximum 5.75%) had been deducted, the results would have been lower.
The Income Fund of America at a glance
Results at a glance For periods ended January 31, 2005
Total returns Average annual total returns
6 months 1 year 5 years 10 years Lifetime(1)
The Income Fund of America +9.2% +10.1% +9.7% +11.7% +12.8%
Standard & Poor's 500 Composite Index +8.2 +6.2 -1.8 +11.5 +12.1
Lehman Brothers Aggregate Bond Index +3.8 +4.2 +7.9 +7.6 +8.72
Credit Suisse First Boston High Yield Index +7.9 +9.8 +8.3 +8.5 --
Lipper income funds average(3) +6.3 +5.9 +4.5 +8.1 +12.1
Consumer Price Index (inflation)(4) +0.7 +3.0 +2.5 +2.4 +4.7
(1) Since December 1, 1973, when Capital Research and Management Company
became the fund's investment adviser.
(2) From December 1, 1973, through December 31, 1975, the Lehman Brothers
Government/Credit Bond Index was used because the Aggregate index did not
yet exist.
(3) Source: Lipper. Figures do not reflect the effect of sales charges.
(4) Computed from data supplied by the U.S Department of Labor, Bureau of Labor
Statistics.
The indexes are unmanaged and do not reflect sales charges, commissions or
expenses. Fund returns do not include sales charges.
A HISTORY OF HIGH CURRENT INCOME For the five years ended January 31, 2005
[begin line graph]
THE INCOME LIPPER INCOME
YEAR-END FUND OF FUNDS AVERAGE S&P 500
AMERICA
1/31/2000 5.40% 4.24% 1.19%
7/31/2000 5.49 4.34 1.15
1/31/2001 4.78 4.33 1.20
7/31/2001 4.80 4.18 1.30
1/31/2002 5.01 3.81 1.40
7/31/2002 5.49 3.67 1.75
1/31/2003 5.45 3.40 1.88
7/31/2003 4.69 3.07 1.66
1/31/2004 4.05 2.63 1.54
7/31/2004 3.98 2.59 1.69
1/31/2005 3.57 2.47 1.64
[end line graph]
All numbers calculated by Lipper. The 12-month dividend rate is calculated by
taking the total of the trailing 12 months' dividends and dividing the month-end
net asset value adjusted for capital gains.
THE PORTFOLIO AT A GLANCE
The following summary investment portfolio is designed to streamline the report
and help investors better focus on a fund's principal holdings. For details on
how to obtain a complete schedule of portfolio holdings, please see the inside
back cover.
January 31, 2005 (unaudited) July 31, 2004
[begin pie charts]
Percent Percent
of net of net
INVESTMENT PORTFOLIO assets INVESTMENT PORTFOLIO assets
U.S. common stock 45.9% U.S. common stock 44.9 %
Non-U.S. common stock 18.0 Non-U.S. common stock 17.3
U.S. and non-U.S. convertible securities & U.S. and non-U.S. convertible securities &
preferred stocks 5.6 preferred stocks 6.3
U. S. Treasury & agency bonds & notes 2.3 U. S. Treasury & agency bonds & notes 2.9
Other fixed-income securities 20.3 Other fixed-income securities 21.0
Cash & equivalents 7.9 Cash & equivalents 7.6
[end pie charts]
January 31, 2005 Percent July 31, 2004 Percent
of net of net
FIVE LARGEST SECTORS IN COMMON STOCK HOLDINGS assets FIVE LARGEST SECTORS IN COMMON STOCK HOLDINGS assets
Financials 17.1% Financials 17.2%
Utilities 8.6 Telecommunication services 7.8
Telecommunication services 8.2 Utilities 7.7
Energy 6.4 Consumer staples 6.8
Materials 6.3 Materials 6.6
January 31, 2005 Percent July 31, 2004 Percent
of net of net
TEN LARGEST COMMON STOCK HOLDINGS assets TEN LARGEST COMMON STOCK HOLDINGS assets
Royal Dutch Petroleum/"Shell" Transport and Trading 2.0% Bank of America 2.2%
SBC Communications 1.6 Royal Dutch Petroleum/"Shell" Transport and Trading 1.8
BellSouth 1.6 SBC Communications 1.8
Dow Chemical 1.4 Verizon Communications 1.7
Verizon Communications 1.3 Dow Chemical 1.4
Bank of America 1.2 Bristol-Myers Squibb 1.3
Bristol-Myers Squibb 1.2 General Motors 1.2
DuPont 1.1 General Electric 1.0
ChevronTexaco 1.0 Altria Group 1.0
General Electric 1.0 Weyerhaeuser 1.0
Summary investment portfolio, January 31, 2005
unaudited
Shares Market Percent
value of net
Common stocks - 63.84% (000) assets
FINANCIALS - 17.05%
Bank of America Corp. 14,378,880 $ 666,749 1.24%
HSBC Holdings PLC (United Kingdom) 19,321,426 319,533
HSBC Holdings PLC (Hong Kong) 11,552,054 191,070 .95
Societe Generale 5,107,300 508,896 .95
Citigroup Inc. 9,485,000 465,239 .87
Washington Mutual, Inc. 10,305,000 415,807 .78
J.P. Morgan Chase & Co. 10,750,000 401,297 .75
U.S. Bancorp 12,920,000 388,246 .73
Lloyds TSB Group PLC 37,062,171 346,231 .65
Fannie Mae 4,506,200 291,010 .54
Wells Fargo & Co. 4,460,000 273,398 .51
Boston Properties, Inc. 4,605,000 266,077 .50
Other securities 4,586,790 8.58
9,120,343 17.05
UTILITIES - 8.61%
National Grid Transco PLC 48,870,000 474,939 .89
E.ON AG 3,975,000 356,258 .67
Southern Co. 9,915,000 334,830 .63
Duke Energy Corp. 11,242,393 301,184 .56
Consolidated Edison, Inc. 5,815,700 255,135 .48
Exelon Corp. 5,720,000 253,110 .47
Other securities 2,628,695 4.91
4,604,151 8.61
TELECOMMUNICATION SERVICES - 8.15%
SBC Communications Inc. 36,805,000 874,487 1.63
BellSouth Corp. 32,185,000 844,534 1.58
Verizon Communications Inc. 19,850,000 706,462 1.32
AT&T Corp. 21,631,000 415,099 .78
TDC A/S 8,347,500 346,831 .65
Telecom Italia SpA, nonvoting 82,419,765 264,430 .49
Other securities 906,639 1.70
4,358,482 8.15
ENERGY - 6.39%
Royal Dutch Petroleum Co. (New York registered) 10,752,000 628,669
"Shell" Transport and Trading Co., PLC 26,985,402 235,458
"Shell" Transport and Trading Co., PLC (ADR) (New York registered) 3,505,300 185,010 1.96
ChevronTexaco Corp. 10,070,000 547,808 1.02
Marathon Oil Corp. 10,135,000 392,529 .73
Kinder Morgan, Inc. 4,422,926 331,896 .62
Sunoco, Inc. 3,100,000 271,219 .51
ENI SpA 10,740,000 261,092 .49
Other securities 566,871 1.06
3,420,552 6.39
MATERIALS - 6.34%
Dow Chemical Co. 15,119,500 751,439 1.41
E.I. du Pont de Nemours and Co. 11,830,000 562,635 1.05
Weyerhaeuser Co. 8,222,000 513,053 .96
International Paper Co. 6,977,340 273,163 .51
Other securities 1,288,419 2.41
3,388,709 6.34
CONSUMER STAPLES - 6.22%
Altria Group, Inc. 7,747,500 494,523 .92
ConAgra Foods, Inc. 16,235,000 478,933 .90
Reynolds American Inc. 4,181,600 336,284 .63
H.J. Heinz Co. 8,540,000 322,897 .60
Sara Lee Corp. 13,130,000 308,292 .58
Other securities 1,384,702 2.59
3,325,631 6.22
INDUSTRIALS - 3.81%
General Electric Co. 14,405,000 520,453 .97
Emerson Electric Co. 4,925,000 331,157 .62
Other securities 1,186,561 2.22
2,038,171 3.81
HEALTH CARE - 2.47%
Bristol-Myers Squibb Co. 27,125,000 635,810 1.19
Merck & Co., Inc. 13,185,000 369,839 .69
Other securities 316,788 .59
1,322,437 2.47
CONSUMER DISCRETIONARY - 2.03%
General Motors Corp. 10,625,000 391,106 .73
May Department Stores Co. 9,973,000 338,085 .63
Other securities 356,968 .67
1,086,159 2.03
INFORMATION TECHNOLOGY - 0.71%
Microsoft Corp. 14,360,000 377,381 .70
Other securities 3,231 .01
380,612 .71
MISCELLANEOUS - 2.06%
Other common stocks in initial period of acquisition 1,101,140 2.06
Total common stocks (cost: $27,706,386,000) 34,146,387 63.84
Shares Market Percent
value of net
Preferred stocks - 0.96% (000) assets
FINANCIALS - 0.95%
HSBC Capital Funding LP, Series 1, 9.547% noncumulative step-up perpetual
preferred (1) (2) 37,500,000 46,512
HSBC Capital Funding LP, Series 2, 10.176% noncumulative step-up perpetual
preferred (1) (2) 10,000,000 15,847 .12
Fannie Mae, Series O, 7.00% preferred 2007 (1) (3) 380,000 21,541 .04
Other securities 421,882 .79
505,782 .95
Other - 0.01% 7,417 .01
Miscellaneous - 0.00%
Other preferred stocks in initial period of acquisition 74 .00
Total preferred stocks (cost: $455,401,000) 513,273 .96
Market Percent
value of net
Warrants - 0.00% (000) assets
Total warrants (cost: $1,021,000) 697 .00
Shares or principal Market Percent
amount value of net
Convertible securities - 4.65% (000) assets
CONSUMER DISCRETIONARY - 1.16%
Ford Motor Co. Capital Trust II 6.50% cumulative convertible trust preferred 2032 8,615,300 430,593 .81
General Motors Corp., Series B, 5.25% convertible senior debentures 2032 $ 19,700,000 17,494 .03
Other securities 172,963 .32
621,050 1.16
Other - 3.44% 1,838,864 3.44
Miscellaneous - 0.05%
Other convertible securities in initial period of acquisition 25,245 .05
Total convertible securities (cost: $2,293,582,000) 2,485,159 4.65
Principal Market Percent
amount value of net
Bonds & notes - 22.64% (000) (000) assets
CONSUMER DISCRETIONARY - 4.65%
Ford Motor Credit Co. 4.05%-7.875% 2007-2011 (2) $ 200,100 212,409
Ford Motor Co. 7.45% 2031 8,000 8,004 .41
General Motors Acceptance Corp. 4.56%-8.00% 2006-2031 (2) 153,400 155,657
General Motors Corp. 7.20% 2011 28,000 28,129 .35
Other securities 2,082,245 3.89
2,486,444 4.65
TELECOMMUNICATION SERVICES - 3.01%
SBC Communications Inc. 4.125%-5.10% 2009-2014 66,680 67,021 .13
Verizon Global Funding Corp. 6.125% 2007 7,000 7,380
Verizon New York Inc., Series A, 6.875% 2012 6,500 7,305 .03
BellSouth Corp. 4.20% 2009 7,000 6,994 .01
Other securities 1,521,496 2.84
1,610,196 3.01
FINANCIALS - 2.39%
SocGen Real Estate Co. LLC, Series A, 7.64% (undated) (1) (2) 45,700 49,828
Societe Generale 7.85% (undated) (1) (2) 11,200 12,084 .11
Household Finance Corp. 4.125%-6.375% 2009-2012 41,000 43,697
HSBC Holdings PLC 5.25% 2012 3,500 3,647
HSBC Bank USA 4.625% 2014 (1) 5,000 4,949
Midland Bank 3.063% Eurodollar note (undated) (2) 5,000 4,400 .11
J.P. Morgan & Co. Inc. 6.70% 2007 5,000 5,384
J.P. Morgan Chase & Co. 4.00%-5.75% 2008-2013 15,000 15,372 .04
Bank of America Corp. 4.25%-4.375% 2010 10,000 10,039 .02
Other securities 1,128,717 2.11
1,278,117 2.39
MORTGAGE-BACKED OBLIGATIONS - 1.97% (4)
Fannie Mae 3.804%-11.822% 2010-2042 (2) 268,530 275,774 .52
Other securities 777,415 1.45
1,053,189 1.97
U.S. GOVERNMENT & GOVERNMENT AGENCY BONDS & NOTES - 1.56%
U.S. Treasury:
5.75% 2005 239,500 244,776
0%-9.25% 2007-2025 (5) 375,042 423,487 1.25
Fannie Mae 6.625%-7.25% 2009-2030 28,000 31,805 .06
Other securities 135,187 .25
835,255 1.56
INDUSTRIALS - 1.43%
General Electric Capital Corp., Series A, 5.375%-6.00% 2007-2012 16,000 17,034
General Electric Co. 5.00% 2013 5,000 5,161 .04
Other securities 746,178 1.39
768,373 1.43
MATERIALS - 1.34%
Weyerhaeuser Co. 5.25%-6.75% 2008-2012 23,534 25,537 .05
Other securities 690,252 1.29
715,789 1.34
Other - 6.29% 3,364,596 6.29
Total bonds & notes (cost: $11,708,074,000) 12,111,959 22.64
Short-term securities - 7.89% Principal Market Percent
amount value of net
Short-term securities - 7.89% (000) (000) assets
U.S. Treasury Bills 1.955%-2.32% due 2/24-4/21/2005 (6) 336,200 335,141 .63
Federal Home Loan Bank 2.20%-2.36% due 2/11-3/16/2005 300,000 299,460 .56
CAFCO, LLC 2.13%-2.57% due 2/8-4/18/2005 (1) 193,500 192,984
Citicorp 2.51% due 4/4/2005 50,000 49,776 .45
Bank of America Corp. 2.40%-2.53% due 3/14-4/6/2005 (6) 112,400 112,014
Ranger Funding Co. LLC 2.29%-2.43% due 2/4-3/15/2005 (1) 72,088 72,011 .34
DuPont (E.I.) de Nemours & Co. 2.21%-2.47% due 2/4-3/28/2005 150,300 150,050 .28
Park Avenue Receivables Co., LLC 2.31%-2.48% due 2/9-2/25/2005 (1) 72,700 72,601
Preferred Receivables Funding Corp. 2.34% due 2/1/2005 (1) 65,000 64,996 .26
FCAR Owner Trust I 2.30%-2.43% due 2/2-3/9/2005 137,000 136,804 .26
Edison Asset Securitization LLC 2.26%-2.37% due 2/1-3/11/2005 (1) 83,700 83,609
General Electric Capital Corp. 2.37% due 2/25/2005 50,000 49,916 .25
New Center Asset Trust Plus 2.30%-2.48% due 2/10-3/18/2005 128,800 128,632 .24
Fannie Mae 2.21%-2.42% due 2/3-3/22/2005 125,000 124,833 .23
SBC Communications Inc. 2.24%-2.43% due 2/2-3/10/2005 (1) 124,500 124,395 .23
BellSouth Corp. 2.26%-2.42% due 2/3-3/7/2005 (1) 111,500 111,337 .21
Other securities 2,109,861 3.95
Total short-term securities (cost: $4,218,465,000) 4,218,420 7.89
Total investment securities (cost: $46,382,929,000) 53,475,895 99.98
Other assets less liabilities 10,755 .02
Net assets $53,486,650 100.00%
"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 required to be disclosed
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 six months
ended January 31, 2005, appear below.
Beginning
shares
or principal
Company amount Purchases Sales
iStar Financial, Inc. 6,885,000 300,000 -
iStar Financial, Inc., Series F, 7.80% cumulative redeemable preferred 400,000 - -
iStar Financial, Inc., Series B, 5.125% 2011 $ 10,000,000 $ - $ -
iStar Financial, Inc. 7.00% 2008 $ 6,525,000 $ - $ -
iStar Financial, Inc., Series B, 4.875% 2009 $ 5,000,000 $ - $ -
iStar Financial, Inc. 6.00% 2010 $ 3,750,000 $ - $ -
iStar Financial, Inc. 8.75% 2008 $ 1,028,000 $ - $ -
iStar Financial, Inc., Series B, 5.70% 2014 $ 1,000,000 $ - $ 1,000,000
Arthur J. Gallagher & Co. 3,131,400 2,034,000 -
Montpelier Re Holdings Ltd. 2,290,000 902,000 -
Sunstone Hotel Investors, Inc. - 1,910,000 -
Beverly Hills Bancorp Inc. 2,150,517 - 211,000
Clarent Hospital Corp. (3) (7) 484,684 - -
Ending Dividend
shares or interest Market
or principal income value
Company amount (000) (000)
iStar Financial, Inc. 7,185,000 $9,878 $300,692
iStar Financial, Inc., Series F, 7.80% cumulative redeemable preferred 400,000 390 10,460
iStar Financial, Inc., Series B, 5.125% 2011 $ 10,000,000 441 10,076
iStar Financial, Inc. 7.00% 2008 $ 6,525,000 179 6,991
iStar Financial, Inc., Series B, 4.875% 2009 $ 5,000,000 139 5,061
iStar Financial, Inc. 6.00% 2010 $ 3,750,000 114 3,957
iStar Financial, Inc. 8.75% 2008 $ 1,028,000 31 1,166
iStar Financial, Inc., Series B, 5.70% 2014 $ - 24 -
Arthur J. Gallagher & Co. 5,165,400 2,074 153,154
Montpelier Re Holdings Ltd. 3,192,000 2,073 119,540
Sunstone Hotel Investors, Inc. 1,910,000 544 39,919
Beverly Hills Bancorp Inc. 1,939,517 511 20,074
Clarent Hospital Corp. (3) (7) 484,684 - 242
$16,398 $671,332
The following footnotes to the summary investment portfolio apply to either the
individual securities noted or one or more of the securities aggregated and
listed as a single item.
(1) 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 included in "Other securities" in the summary investment portfolio,
was $4,907,999,000, which represented 9.18% of the net assets of the fund.
(2) Coupon rate may change periodically.
(3) Security did not produce income during the last 12 months.
(4) Pass-through securities backed by a pool of mortgages or other loans on
which principal payments are periodically made. Therefore, the effective
maturities are shorter than the stated maturities.
(5) Index-linked bond whose principal amount moves with a government retail
price index.
(6) This security, or a portion of this security, has been segregated to cover
funding requirements on investment transactions settling in the future.
(7) Valued under fair value procedures adopted by authority of the Board of
Directors.
ADR = American Depositary Receipts
See Notes to Financial Statements
FINANCIAL STATEMENTS
Statement of assets and liabilities unaudited
at January 31, 2005 (dollars and shares in thousands,
except per-share amounts)
Assets:
Investment securities at market:
Unaffiliated issuers (cost: $45,750,284) $52,804,563
Affiliated issuers (cost: $632,645) 671,332 $53,475,895
Cash denominated in non-U.S. currencies (cost: $3,020) 3,326
Cash 17,366
Receivables for:
Sales of investments 190,305
Sales of fund's shares 186,147
Dividends and interest 294,781 671,233
54,167,820
Liabilities:
Payables for:
Purchases of investments 447,927
Repurchases of fund's shares 35,655
Dividends on fund's shares 159,513
Investment advisory services 10,015
Services provided by affiliates 25,930
Deferred Directors' compensation 1,782
Other fees and expenses 348 681,170
Net assets at January 31, 2005 $53,486,650
Net assets consist of:
Capital paid in on shares of capital stock $46,086,973
Undistributed net investment income 271,959
Undistributed net realized gain 34,302
Net unrealized appreciation 7,093,416
Net assets at January 31, 2005 $53,486,650
Total authorized capital stock - 5,500,000 shares, $.001 par value (2,939,003
total shares outstanding)
Net asset value
Net assets Shares outstanding per share (1)
Class A $ 42,360,702 2,325,306 $ 18.22
Class B 3,799,056 209,586 18.13
Class C 4,901,084 270,736 18.10
Class F 1,317,867 72,423 18.20
Class 529-A 262,561 14,425 18.20
Class 529-B 64,011 3,524 18.16
Class 529-C 125,218 6,890 18.17
Class 529-E 14,022 771 18.18
Class 529-F 3,778 208 18.20
Class R-1 11,226 618 18.17
Class R-2 207,407 11,445 18.12
Class R-3 284,707 15,656 18.18
Class R-4 68,974 3,789 18.20
Class R-5 66,037 3,626 18.21
(1) Maximum offering price and redemption price per share were equal to the net
asset value per share for all share classes, except for classes A and
529-A, for which the maximum offering prices per share were $19.33 and
$19.31, respectively.
See Notes to Financial Statements
Statement of operations unaudited
for the six months ended January 31, 2005 (dollars in thousands)
Investment income:
Income:
Dividends (net of non-U.S. withholding tax of $5,329;
also includes $15,470 from affiliates) $640,855
Interest (net of non-U.S. withholding tax of $3;
also includes $928 from affiliates) 500,504 $1,141,359
Fees and expenses:
Investment advisory services 61,006
Distribution services 87,620
Transfer agent services 13,152
Administrative services 5,960
Reports to shareholders 660
Registration statement and prospectus 2,293
Postage, stationery and supplies 1,237
Directors' compensation 367
Auditing and legal 127
Custodian 1,284
State and local taxes 1
Other 13
Total expenses before reimbursement/waiver 173,720
Reimbursement/waiver of expenses 2,656 171,064
Net investment income 970,295
Net realized gain and unrealized appreciation on investments
and non-U.S. currency:
Net realized gain (loss) on:
Investments (includes $235 net loss from affiliates) 40,170
Non-U.S. currency transactions (2,121) 38,049
Net unrealized appreciation on:
Investments 3,248,569
Non-U.S. currency translations 308 3,248,877
Net realized gain and unrealized appreciation
on investments and non-U.S. currency 3,286,926
Net increase in net assets resulting
from operations $4,257,221
See Notes to Financial Statements
Statement of changes in net assets (dollars in thousands)
Six months Year ended
ended January 31, July 31,
2005* 2004
Operations:
Net investment income $970,295 $1,557,944
Net realized gain on investments and
non-U.S. currency transactions 38,049 732,245
Net unrealized appreciation
on investments and non-U.S. currency translations 3,248,877 2,871,155
Net increase in net assets resulting from operations 4,257,221 5,161,344
Dividends and distributions paid or accrued to shareholders
Dividends from net investment income (852,801) (1,635,840)
Distributions from net realized gain on investments (377,651) -
Total dividends and distributions paid or accrued
to shareholders (1,230,452) (1,635,840)
Capital share transactions 5,556,835 10,818,973
Total increase in net assets 8,583,604 14,344,477
Net assets:
Beginning of period 44,903,046 30,558,569
End of period (including undistributed net investment
income: $271,959 and $154,465, respectively) $53,486,650 $44,903,046
*Unaudited
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS unaudited
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - The Income Fund of America, Inc. (the "fund") is registered under
the Investment Company Act of 1940 as an open-end, diversified management
investment company. The fund seeks current income while secondarily striving for
capital growth through investments in stocks and fixed-income securities.
The fund offers 14 share classes consisting of four retail share classes, five
CollegeAmerica(R) 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) are sponsored by the Commonwealth of Virginia and 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 Conversion feature
charge upon redemption
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes A and 529-A Up to 5.75% None (except 1% for None
certain redemptions
within one year of
purchase without an
initial sales charge)
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes B and 529-B None Declines from 5% to zero Classes B and 529-B convert to
for redemptions within classes A and 529-A,
six years of purchase respectively, after eight years
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Class C None 1% for redemptions within Class C converts to Class F
one year of purchase after 10 years
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Class 529-C None 1% for redemptions within None
one year of purchase
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Class 529-E None None None
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes F and 529-F None None None
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes R-1, R-2, R-3, None None None
R-4 and R-5
- ---------------------------------------------------------------------------------------------------------
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 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 purchased with greater than 60 days to
maturity with 60 days or less remaining to maturity is determined
based on the market value on the 61st day. The ability of the issuers
of the debt securities held by the fund to meet their obligations may
be affected by economic developments in a specific industry, state or
region. Securities and other assets for which representative market
quotations are not readily available are fair valued as determined in
good faith under procedures adopted by authority of the fund's Board
of Directors. 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.
CollegeAmerica is a registered trademark of the Virginia College Savings
Plan.(sm)
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security
transactions are recorded by the fund as of the date the trades are
executed with brokers. Realized gains and losses from security
transactions are determined based on the specific identified cost of
the securities. In the event a security is purchased with a delayed
payment date, the fund will segregate liquid assets sufficient to meet
its payment obligations. Dividend income is recognized on the
ex-dividend date and interest income is recognized on an accrual
basis. Market discounts, premiums and original issue discounts on
fixed-income securities are amortized daily over the expected life of
the security.
CLASS ALLOCATIONS - Income, fees and expenses (other than
class-specific fees and expenses) are allocated daily among the
various share classes based on the relative value of their settled
shares. Realized and unrealized gains and losses are allocated daily
among the various share classes based on their relative net assets.
Class-specific fees and expenses, such as distribution, administrative
and shareholder services, are charged directly to the respective share
class.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -Dividends paid to
shareholders are declared daily from net investment income and are
paid to shareholders quarterly. Distributions paid to shareholders
from net realized gain on investments 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 at the
end of the reporting period. Purchases and sales of investment
securities and income and expenses are translated into U.S. dollars at
the exchange rates on the dates of such transactions. In the
accompanying financial statements, the effects of changes in non-U.S.
exchange rates on investment securities are included with the net
realized gain or loss and net unrealized appreciation or depreciation
on investments. The realized gain or loss and unrealized appreciation
or depreciation resulting from all other transactions denominated in
non-U.S. currencies are disclosed separately.
MORTGAGE DOLLAR ROLLS - The fund may enter into mortgage dollar roll
transactions in which the fund sells a mortgage-backed security to a
counterparty and simultaneously enters into an agreement with the same
counterparty to buy back a similar security on a specific future date
at a predetermined price. Each mortgage dollar roll is treated as a
financing transaction, therefore, any gain or loss is considered
unrealized until the roll reaches completion. Risks may arise due to
the delayed payment date and the potential inability of counterparties
to complete the transaction. Income is generated as consideration for
entering into these transactions and is included in interest income in
the accompanying financial statements.
2. NON-U.S. INVESTMENTS
INVESTMENT RISK - The risks of investing in securities of non-U.S. issuers may
include, but are not limited to, investment and repatriation restrictions;
revaluation of currencies; adverse political, social and economic developments;
government involvement in the private sector; limited and less reliable investor
information; lack of liquidity; certain local tax law considerations; and
limited regulation of the securities markets.
TAXATION - Dividend and interest income is recorded net of non-U.S. taxes paid.
3. FEDERAL INCOME TAXATION AND DISTRIBUTIONS
The fund complies with the requirements under Subchapter M of the Internal
Revenue Code applicable to mutual funds and intends to distribute substantially
all of its net taxable income and net capital gains each year. The fund is not
subject to income taxes to the extent such distributions are made.
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; deferred
expenses; cost of investments sold; and paydowns on 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. As of January
31, 2005, the cost of investment securities for federal income tax purposes was
$46,385,709,000.
As of January 31, 2005, the components of distributable earnings on a tax basis
were as follows (dollars in thousands):
Undistributed net investment income and currency gains $433,261
Accumulated short-term capital losses (213,547)
Undistributed long-term capital gains 249,410
Gross unrealized appreciation on investment securities 7,716,256
Gross unrealized depreciation on investment securities (626,070)
Net unrealized appreciation on investment securities 7,090,186
Undistributed net investment income and currency gains above include currency
losses of $2,755,000, that were realized during the period November 1, 2003
through July 31, 2004. During the six months ended January 31, 2005, the fund
realized, on a tax basis, a net capital gain of $38,354,000.
The tax character of distributions paid or accrued to shareholders was as
follows (dollars in thousands):
Six months ended January 31, 2005
Distributions from Distributions from Total distributions
ordinary income long-term capital gains paid or accrued
Share class
Class A $ 708,738 $ 299,584 $ 1,008,322
Class B 50,092 27,214 77,306
Class C 59,529 34,316 93,845
Class F 20,084 9,106 29,190
Class 529-A 3,948 1,788 5,736
Class 529-B 749 447 1,196
Class 529-C 1,424 856 2,280
Class 529-E 188 95 283
Class 529-F 55 25 80
Class R-1 128 77 205
Class R-2 2,354 1,403 3,757
Class R-3 3,543 1,829 5,372
Class R-4 788 430 1,218
Class R-5 1,181 481 1,662
Total $ 852,801 $ 377,651 $ 1,230,452
Year ended July 31, 2004
Distributions from Distributions from Total distributions
ordinary income long-term capital gains paid or accrued
Share class
Class A $ 1,387,880 - $ 1,387,880
Class B 96,494 - 96,494
Class C 99,411 - 99,411
Class F 31,594 - 31,594
Class 529-A 6,046 - 6,046
Class 529-B 1,278 - 1,278
Class 529-C 2,318 - 2,318
Class 529-E 303 - 303
Class 529-F 72 - 72
Class R-1 166 - 166
Class R-2 3,089 - 3,089
Class R-3 4,239 - 4,239
Class R-4 738 - 738
Class R-5 2,212 - 2,212
Total $ 1,635,840 - $ 1,635,840
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 ("AFS"), the fund's
transfer agent, and American Funds Distributors, Inc. ("AFD"), the principal
underwriter of the fund's shares.
INVESTMENT ADVISORY SERVICES - The Investment Advisory and Service Agreement
with CRMC provides for monthly fees accrued daily. These fees were based on a
declining series of annual rates beginning with 0.250% on the first $500 million
of daily net assets and decreasing to 0.129% on such assets in excess of $44
billion. The Board of Directors approved an amended agreement effective January
1, 2005, continuing the series of rates to include an additional annual rate of
0.127% on daily net assets in excess of $55 billion. The agreement also provides
for monthly fees, accrued daily, of 2.25% of the fund's monthly gross income.
During the six months ended January 31, 2005, CRMC reduced investment advisory
services fees by $2,520,000. As a result, the fee shown on the accompanying
financial statements of $61,006,000, which was equivalent to an annualized rate
of 0.245%, was reduced to $58,486,000, or 0.235% of average daily net assets.
CLASS-SPECIFIC FEES AND EXPENSES - Expenses that are specific to individual
share classes are accrued directly to the respective share class. The principal
class-specific fees and expenses are described below:
DISTRIBUTION SERVICES - The fund has adopted plans of distribution for
all share classes, except Class R-5. Under the plans, the Board of
Directors approves certain categories of expenses that are used to
finance activities primarily intended to sell fund shares. The plans
provide for annual expenses, based on a percentage of average daily
net assets, ranging from 0.25% to 1.00% as noted below. In some cases,
the Board of Directors has approved expense amounts lower than plan
limits. 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 for
providing certain shareholder services. Expenses in excess of these
amounts, up to approved limits, may be used to compensate dealers and
wholesalers for shares sold.
For classes A and 529-A, the Board of Directors has also approved the
reimbursement of dealer and wholesaler commissions paid by AFD for
certain shares sold without a sales charge. Each class reimburses AFD
for amounts billed within the prior 15 months but only to the extent
that the overall annual expense limit of 0.25% is not exceeded. As of
January 31, 2005, there were no unreimbursed expenses subject to
reimbursement for classes A or 529-A.
------------------------------------------------ ----------------------------- -----------------------------
Share class Currently approved limits Plan limits
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Class A 0.25% 0.25%
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Class 529-A 0.25 0.50
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes B and 529-B 1.00 1.00
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes C, 529-C and R-1 1.00 1.00
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Class R-2 0.75 1.00
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes 529-E and R-3 0.50 0.75
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes F, 529-F and R-4 0.25 0.50
------------------------------------------------ ----------------------------- -----------------------------
TRANSFER AGENT SERVICES - The fund has a transfer agent agreement with
AFS for classes 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 classes of shares other than classes A
and B. Each relevant class pays CRMC annual fees of 0.15% (0.10% for
Class R-5) based on its respective average daily net assets. Each
relevant 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. During the six months ended
January 31, 2005, CRMC agreed to pay a portion of these fees for
classes R-1 and R-2. For the six months ended January 31, 2005, the
total fees paid by CRMC were $2,000 and $134,000 for Class R-1 and
Class 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 in the accompanying financial statements, the Commonwealth of
Virginia is not considered a related party.
Expenses under the agreements described above for the six months ended
January 31, 2005, were as follows (dollars in thousands):
--------------------------------------------------------------------------------------------------------------
Share class Distribution Transfer agent Administrative services
services services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
CRMC Transfer agent Commonwealth of
administrative services Virginia
services administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class A $43,873 $11,948 Not applicable Not applicable Not applicable
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class B 17,883 1,204 Not applicable Not applicable Not applicable
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class C 22,036 Included $3,305 $332 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class F 1,462 Included 877 69 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-A 172 Included 172 13 $114
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-B 291 Included 44 11 29
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-C 550 Included 83 15 55
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-E 30 Included 9 1 2
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-F 4 Included 2 -* 6
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-1 48 Included 7 5 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-2 651 Included 130 365 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-3 563 Included 169 76 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-4 57 Included 34 2 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-5 Not applicable Included 32 1 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Total $87,620 $13,152 $4,864 $890 $206
--------------------------------------------------------------------------------------------------------------
* Amount less than one thousand.
DEFERRED DIRECTORS' COMPENSATION - Since the adoption of the deferred
compensation plan in 1993, Directors who are unaffiliated with CRMC may elect to
defer the cash payment of part or all of their compensation. These deferred
amounts, which remain as liabilities of the fund, are treated as if invested in
shares of the fund or other American Funds. These amounts represent general,
unsecured liabilities of the fund and vary according to the total returns of the
selected funds. Directors' compensation of $367,000, shown on the accompanying
financial statements, includes $186,000 in current fees (either paid in cash or
deferred) and a net increase of $181,000 in the value of the deferred amounts.
AFFILIATED OFFICERS AND DIRECTORS - Officers and certain Directors of the fund
are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated
officers or Directors received any compensation directly from the fund.
5. CAPITAL SHARE TRANSACTIONS
Capital share transactions in the fund were as follows (dollars and shares in
thousands):
Reinvestments of
Share class Sales(1) dividends and distributions
Amount Shares Amount Shares
Six months ended January 31, 2005
Class A $ 4,710,438 263,518 $ 893,991 49,226
Class B 418,053 23,576 66,241 3,660
Class C 933,156 52,504 76,174 4,214
Class F 316,429 17,722 23,083 1,271
Class 529-A 54,127 3,021 5,611 309
Class 529-B 9,130 512 1,193 66
Class 529-C 24,839 1,386 2,261 124
Class 529-E 3,039 169 278 15
Class 529-F 974 55 77 4
Class R-1 3,901 218 200 11
Class R-2 70,791 3,981 3,612 199
Class R-3 115,701 6,461 5,041 277
Class R-4 39,890 2,216 1,101 61
Class R-5 9,454 527 1,094 60
Total net increase
(decrease) $ 6,709,922 375,866 $ 1,079,957 59,497
Year ended July 31, 2004
Class A $ 9,206,376 549,512 $ 1,103,176 66,213
Class B 1,101,061 66,441 75,097 4,529
Class C 1,949,484 117,251 74,955 4,517
Class F 574,424 34,311 22,212 1,330
Class 529-A 92,062 5,493 5,362 321
Class 529-B 20,391 1,222 1,143 68
Class 529-C 48,073 2,875 2,065 124
Class 529-E 4,740 283 270 16
Class 529-F 2,187 130 62 4
Class R-1 6,192 371 144 9
Class R-2 94,869 5,672 2,697 162
Class R-3 144,994 8,700 3,667 219
Class R-4 23,901 1,420 638 38
Class R-5 18,243 1,090 1,123 67
Total net increase
(decrease) $ 13,286,997 794,771 $ 1,292,611 77,617
Share class Repurchases(1) Net increase
Amount Shares Amount Shares
Six months ended January 31, 2005
Class A $ (1,740,154) (97,332) $ 3,864,275 215,412
Class B (134,209) (7,557) 350,085 19,679
Class C (204,448) (11,505) 804,882 45,213
Class F (90,996) (5,095) 248,516 13,898
Class 529-A (5,916) (331) 53,822 2,999
Class 529-B (970) (55) 9,353 523
Class 529-C (3,556) (199) 23,544 1,311
Class 529-E (346) (19) 2,971 165
Class 529-F (347) (20) 704 39
Class R-1 (1,506) (84) 2,595 145
Class R-2 (15,965) (896) 58,438 3,284
Class R-3 (25,066) (1,413) 95,676 5,325
Class R-4 (3,890) (217) 37,101 2,060
Class R-5 (5,675) (317) 4,873 270
Total net increase
(decrease) $ (2,233,044) (125,040) $ 5,556,835 310,323
Year ended July 31, 2004
Class A $ (3,062,800) (182,922) $ 7,246,752 432,803
Class B (204,546) (12,236) 971,612 58,734
Class C (281,356) (16,825) 1,743,083 104,943
Class F (129,030) (7,671) 467,606 27,970
Class 529-A (6,789) (402) 90,635 5,412
Class 529-B (1,439) (85) 20,095 1,205
Class 529-C (4,315) (256) 45,823 2,743
Class 529-E (516) (30) 4,494 269
Class 529-F (258) (15) 1,991 119
Class R-1 (874) (52) 5,462 328
Class R-2 (17,214) (1,031) 80,352 4,803
Class R-3 (37,073) (2,254) 111,588 6,665
Class R-4 (8,520) (523) 16,019 935
Class R-5 (5,905) (358) 13,461 799
Total net increase
(decrease) $ (3,760,635) (224,660) $ 10,818,973 647,728
(1) Includes exchanges between share classes of the fund.
6. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding short-term
securities, of $10,233,881,000 and $5,809,943,000, respectively, during the six
months ended January 31, 2005.
The fund receives a reduction in its custodian fee equal to the amount of
interest calculated on certain cash balances held at the custodian bank. For the
six months ended January 31, 2005, the custodian fee of $1,284,000, shown on the
accompanying financial statements, includes $122,000 that was offset by this
reduction, rather than paid in cash.
Financial highlights (1)
Income (loss) from investment operations(2)
Net
Net asset gains (losses)
value, Net on securities Total from
beginning investment (both realized investment
of period income and unrealized) operations
Class A:
Six months ended 1/31/2005 (5) $17.10 $.36 $1.20 $1.56
Year ended 7/31/2004 15.44 .70 1.70 2.40
Year ended 7/31/2003 14.49 .72 .98 1.70
Year ended 7/31/2002 16.44 .74 (1.73) (.99)
Year ended 7/31/2001 15.43 .83 1.46 2.29
Year ended 7/31/2000 17.51 .88 (1.28) (.40)
Class B:
Six months ended 1/31/2005 (5) 17.01 .29 1.20 1.49
Year ended 7/31/2004 15.36 .56 1.69 2.25
Year ended 7/31/2003 14.42 .61 .97 1.58
Year ended 7/31/2002 16.39 .61 (1.73) (1.12)
Year ended 7/31/2001 15.39 .72 1.46 2.18
Period from 3/15/2000 to 7/31/2000 14.93 .24 .41 .65
Class C:
Six months ended 1/31/2005 (5) 16.99 .28 1.19 1.47
Year ended 7/31/2004 15.34 .55 1.69 2.24
Year ended 7/31/2003 14.41 .59 .97 1.56
Year ended 7/31/2002 16.37 .59 (1.71) (1.12)
Period from 3/15/2001 to 7/31/2001 15.85 .21 .48 .69
Class F:
Six months ended 1/31/2005 (5) 17.08 .35 1.20 1.55
Year ended 7/31/2004 15.42 .67 1.71 2.38
Year ended 7/31/2003 14.47 .71 .97 1.68
Year ended 7/31/2002 16.44 .71 (1.73) (1.02)
Period from 3/15/2001 to 7/31/2001 15.89 .27 .48 .75
Class 529-A:
Six months ended 1/31/2005 (5) 17.08 .35 1.19 1.54
Year ended 7/31/2004 15.42 .68 1.70 2.38
Year ended 7/31/2003 14.48 .71 .97 1.68
Period from 2/15/2002 to 7/31/2002 15.76 .31 (1.20) (.89)
Class 529-B:
Six months ended 1/31/2005 (5) 17.05 .27 1.19 1.46
Year ended 7/31/2004 15.36 .53 1.70 2.23
Year ended 7/31/2003 14.46 .58 .97 1.55
Period from 2/19/2002 to 7/31/2002 15.63 .25 (1.06) (.81)
Class 529-C:
Six months ended 1/31/2005 (5) 17.06 .27 1.19 1.46
Year ended 7/31/2004 15.39 .53 1.71 2.24
Year ended 7/31/2003 14.46 .58 .97 1.55
Period from 2/19/2002 to 7/31/2002 15.63 .25 (1.06) (.81)
Class 529-E:
Six months ended 1/31/2005 (5) 17.06 .32 1.19 1.51
Year ended 7/31/2004 15.40 .62 1.70 2.32
Year ended 7/31/2003 14.47 .66 .96 1.62
Period from 2/25/2002 to 7/31/2002 15.81 .27 (1.23) (.96)
Class 529-F:
Six months ended 1/31/2005 (5) 17.08 .34 1.20 1.54
Year ended 7/31/2004 15.42 .67 1.69 2.36
Period from 9/17/2002 to 7/31/2003 14.11 .60 1.24 1.84
Financial highlights (1) (continued)
Income (loss) from investment operations(2)
Net
Net asset gains(losses)
value, Net on securities Total from
beginning investment (both realized investment
of period income and unrealized) operations
Class R-1:
Six months ended 1/31/2005 (5) $17.05 $.28 $1.19 $1.47
Year ended 7/31/2004 15.39 .55 1.70 2.25
Year ended 7/31/2003 14.47 .60 .96 1.56
Period from 6/17/2002 to 7/31/2002 15.65 .06 (1.24) (1.18)
Class R-2:
Six months ended 1/31/2005 (5) 17.01 .28 1.19 1.47
Year ended 7/31/2004 15.36 .55 1.69 2.24
Year ended 7/31/2003 14.48 .59 .95 1.54
Period from 5/31/2002 to 7/31/2002 16.26 .09 (1.69) (1.60)
Class R-3:
Six months ended 1/31/2005 (5) 17.07 .32 1.19 1.51
Year ended 7/31/2004 15.41 .62 1.70 2.32
Year ended 7/31/2003 14.48 .65 .98 1.63
Period from 6/4/2002 to 7/31/2002 16.09 .09 (1.51) (1.42)
Class R-4:
Six months ended 1/31/2005 (5) 17.09 .35 1.19 1.54
Year ended 7/31/2004 15.43 .68 1.70 2.38
Year ended 7/31/2003 14.49 .70 .98 1.68
Period from 6/27/2002 to 7/31/2002 15.25 .08 (.84) (.76)
Class R-5:
Six months ended 1/31/2005 (5) 17.10 .38 1.18 1.56
Year ended 7/31/2004 15.44 .73 1.71 2.44
Year ended 7/31/2003 14.49 .75 .98 1.73
Period from 5/15/2002 to 7/31/2002 16.31 .15 (1.77) (1.62)
Financial highlights (1)
Dividends and distributions
Dividends
(from net Distributions Total Net asset
investment (from capital dividends and value, end
income) gains) distributions of period
Class A:
Six months ended 1/31/2005 (5) $(.31) $(.13) $(.44) $18.22
Year ended 7/31/2004 (.74) - (.74) 17.10
Year ended 7/31/2003 (.73) (.02) (.75) 15.44
Year ended 7/31/2002 (.80) (.16) (.96) 14.49
Year ended 7/31/2001 (.80) (.48) (1.28) 16.44
Year ended 7/31/2000 (.87) (.81) (1.68) 15.43
Class B:
Six months ended 1/31/2005 (5) (.24) (.13) (.37) 18.13
Year ended 7/31/2004 (.60) - (.60) 17.01
Year ended 7/31/2003 (.62) (.02) (.64) 15.36
Year ended 7/31/2002 (.69) (.16) (.85) 14.42
Year ended 7/31/2001 (.70) (.48) (1.18) 16.39
Period from 3/15/2000 to 7/31/2000 (.19) - (.19) 15.39
Class C:
Six months ended 1/31/2005 (5) (.23) (.13) (.36) 18.10
Year ended 7/31/2004 (.59) - (.59) 16.99
Year ended 7/31/2003 (.61) (.02) (.63) 15.34
Year ended 7/31/2002 (.68) (.16) (.84) 14.41
Period from 3/15/2001 to 7/31/2001 (.17) - (.17) 16.37
Class F:
Six months ended 1/31/2005 (5) (.30) (.13) (.43) 18.20
Year ended 7/31/2004 (.72) - (.72) 17.08
Year ended 7/31/2003 (.71) (.02) (.73) 15.42
Year ended 7/31/2002 (.79) (.16) (.95) 14.47
Period from 3/15/2001 to 7/31/2001 (.20) - (.20) 16.44
Class 529-A:
Six months ended 1/31/2005 (5) (.29) (.13) (.42) 18.20
Year ended 7/31/2004 (.72) - (.72) 17.08
Year ended 7/31/2003 (.72) (.02) (.74) 15.42
Period from 2/15/2002 to 7/31/2002 (.39) - (.39) 14.48
Class 529-B:
Six months ended 1/31/2005 (5) (.22) (.13) (.35) 18.16
Year ended 7/31/2004 (.54) - (.54) 17.05
Year ended 7/31/2003 (.63) (.02) (.65) 15.36
Period from 2/19/2002 to 7/31/2002 (.36) - (.36) 14.46
Class 529-C:
Six months ended 1/31/2005 (5) (.22) (.13) (.35) 18.17
Year ended 7/31/2004 (.57) - (.57) 17.06
Year ended 7/31/2003 (.60) (.02) (.62) 15.39
Period from 2/19/2002 to 7/31/2002 (.36) - (.36) 14.46
Class 529-E:
Six months ended 1/31/2005 (5) (.26) (.13) (.39) 18.18
Year ended 7/31/2004 (.66) - (.66) 17.06
Year ended 7/31/2003 (.67) (.02) (.69) 15.40
Period from 2/25/2002 to 7/31/2002 (.38) - (.38) 14.47
Class 529-F:
Six months ended 1/31/2005 (5) (.29) (.13) (.42) 18.20
Year ended 7/31/2004 (.70) - (.70) 17.08
Period from 9/17/2002 to 7/31/2003 (.51) (.02) (.53) 15.42
Financial highlights (1) (continued)
Dividends and distributions
Dividends
(from net Distributions Total Net asset
investment (from capital dividends and value, end
income) gains) distributions of period
Class R-1:
Six months ended 1/31/2005 (5) $(.22) $(.13) $(.35) $18.17
Year ended 7/31/2004 (.59) - (.59) 17.05
Year ended 7/31/2003 (.62) (.02) (.64) 15.39
Period from 6/17/2002 to 7/31/2002 - - - 14.47
Class R-2:
Six months ended 1/31/2005 (5) (.23) (.13) (.36) 18.12
Year ended 7/31/2004 (.59) - (.59) 17.01
Year ended 7/31/2003 (.64) (.02) (.66) 15.36
Period from 5/31/2002 to 7/31/2002 (.18) - (.18) 14.48
Class R-3:
Six months ended 1/31/2005 (5) (.27) (.13) (.40) 18.18
Year ended 7/31/2004 (.66) - (.66) 17.07
Year ended 7/31/2003 (.68) (.02) (.70) 15.41
Period from 6/4/2002 to 7/31/2002 (.19) - (.19) 14.48
Class R-4:
Six months ended 1/31/2005 (5) (.30) (.13) (.43) 18.20
Year ended 7/31/2004 (.72) - (.72) 17.09
Year ended 7/31/2003 (.72) (.02) (.74) 15.43
Period from 6/27/2002 to 7/31/2002 - - - 14.49
Class R-5:
Six months ended 1/31/2005 (5) (.32) (.13) (.45) 18.21
Year ended 7/31/2004 (.78) - (.78) 17.10
Year ended 7/31/2003 (.76) (.02) (.78) 15.44
Period from 5/15/2002 to 7/31/2002 (.20) - (.20) 14.49
Financial highlights (1)
Ratio of expenses Ratio of expenses
to average net to average net Ratio of
Net assets, assets before assets after net income
Total end of period reimbursements/ reimbursements/ to average
return (3) (in millions) waivers waivers (4) net assets
Class A:
Six months ended 1/31/2005 (5) 9.22% $42,361 .55% (6) .54% (6) 4.05%(6)
Year ended 7/31/2004 15.76 36,075 .57 .57 4.15
Year ended 7/31/2003 12.18 25,891 .61 .61 4.98
Year ended 7/31/2002 (6.35) 19,585 .61 .61 4.66
Year ended 7/31/2001 15.53 19,519 .62 .62 5.18
Year ended 7/31/2000 (2.08) 18,102 .63 .63 5.52
Class B:
Six months ended 1/31/2005 (5) 8.85 3,799 1.34 (6) 1.33 (6) 3.26 (6)
Year ended 7/31/2004 14.84 3,231 1.35 1.35 3.37
Year ended 7/31/2003 11.37 2,015 1.39 1.39 4.17
Year ended 7/31/2002 (7.14) 800 1.37 1.37 3.88
Year ended 7/31/2001 14.77 254 1.38 1.38 4.15
Period from 3/15/2000 to 7/31/2000 4.33 29 .52 .52 1.73
Class C:
Six months ended 1/31/2005 (5) 8.74 4,901 1.43 (6) 1.42 (6) 3.14 (6)
Year ended 7/31/2004 14.75 3,833 1.44 1.44 3.26
Year ended 7/31/2003 11.23 1,850 1.48 1.48 4.07
Year ended 7/31/2002 (7.17) 614 1.48 1.48 3.77
Period from 3/15/2001 to 7/31/2001 4.35 89 .62 .62 1.28
Class F:
Six months ended 1/31/2005 (5) 9.16 1,318 .68 (6) .67 (6) 3.89 (6)
Year ended 7/31/2004 15.65 1,000 .69 .69 4.02
Year ended 7/31/2003 12.11 471 .72 .72 4.83
Year ended 7/31/2002 (6.56) 156 .73 .73 4.52
Period from 3/15/2001 to 7/31/2001 4.71 22 .31 .31 1.58
Class 529-A:
Six months ended 1/31/2005 (5) 9.16 263 .68 (6) .67 (6) 3.91 (6)
Year ended 7/31/2004 15.61 195 .67 .67 4.06
Year ended 7/31/2003 12.10 93 .68 .68 4.87
Period from 2/15/2002 to 7/31/2002 (5.83) 24 .37 .37 2.02
Class 529-B:
Six months ended 1/31/2005 (5) 8.65 64 1.56 (6) 1.55 (6) 3.04 (6)
Year ended 7/31/2004 14.67 51 1.57 1.57 3.16
Year ended 7/31/2003 11.10 28 1.60 1.60 3.95
Period from 2/19/2002 to 7/31/2002 (5.40) 7 .71 .71 1.62
Class 529-C:
Six months ended 1/31/2005 (5) 8.65 125 1.55 (6) 1.54 (6) 3.04 (6)
Year ended 7/31/2004 14.69 95 1.56 1.56 3.17
Year ended 7/31/2003 11.10 44 1.59 1.59 3.96
Period from 2/19/2002 to 7/31/2002 (5.40) 12 .70 .70 1.63
Class 529-E:
Six months ended 1/31/2005 (5) 8.99 14 1.03 (6) 1.02 (6) 3.56 (6)
Year ended 7/31/2004 15.24 10 1.04 1.04 3.69
Year ended 7/31/2003 11.66 5 1.06 1.06 4.48
Period from 2/25/2002 to 7/31/2002 (6.24) 1 .45 .45 1.79
Class 529-F:
Six months ended 1/31/2005 (5) 9.11 4 .78 (6) .77 (6) 3.82 (6)
Year ended 7/31/2004 15.53 3 .79 .79 3.95
Period from 9/17/2002 to 7/31/2003 13.38 1 .81 (6) .81 (6) 4.68 (6)
Financial highlights (1) (continued)
Ratio of expenses Ratio of expenses
to average net to average net Ratio of
Net assets, assets before assets after net income
Total end of period reimbursements/ reimbursements/ to average
return (in millions) waivers waivers (4) net assets
Class R-1:
Six months ended 1/31/2005 (5) 8.76% $11 1.51% (6) 1.46% (6) 3.12% (6)
Year ended 7/31/2004 14.75 8 1.55 1.48 3.27
Year ended 7/31/2003 11.19 2 1.92 1.50 4.02
Period from 6/17/2002 to 7/31/2002 (7.54) - (7) .32 .18 .42
Class R-2:
Six months ended 1/31/2005 (5) 8.74 207 1.59 (6) 1.42 (6) 3.14 (6)
Year ended 7/31/2004 14.75 139 1.75 1.44 3.30
Year ended 7/31/2003 11.12 52 1.81 1.46 4.02
Period from 5/31/2002 to 7/31/2002 (9.95) 1 .29 .24 .66
Class R-3:
Six months ended 1/31/2005 (5) 8.94 285 .98 (6) .97 (6) 3.58 (6)
Year ended 7/31/2004 15.25 176 1.02 1.02 3.70
Year ended 7/31/2003 11.68 56 1.12 1.08 4.42
Period from 6/4/2002 to 7/31/2002 (8.90) 1 .19 .17 .61
Class R-4:
Six months ended 1/31/2005 (5) 9.16 69 .68 (6) .67 (6) 3.85 (6)
Year ended 7/31/2004 15.64 30 .69 .69 4.05
Year ended 7/31/2003 12.07 12 .72 .72 4.81
Period from 6/27/2002 to 7/31/2002 (4.98) - (7) 5.11 .03 .52
Class R-5:
Six months ended 1/31/2005 (5) 9.26 66 .37 (6) .36 (6) 4.23 (6)
Year ended 7/31/2004 16.01 57 .37 .37 4.35
Year ended 7/31/2003 12.43 39 .40 .40 5.17
Period from 5/15/2002 to 7/31/2002 (9.99) 22 .09 .09 .97
Six months ended
January 31, Year ended July 31
2005(5) 2004 2003 2002 2001 2000
Portfolio turnover rate for all classes of shares 13% 27% 28% 36% 44% 35%
(1) Based on operations for the period 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 the six months ended 1/31/2005,
CRMC reduced fees for investment advisory services for all share classes.
In addition, during the start-up period for the retirement plan share
classes (except Class R-5), CRMC agreed to pay a portion of the fees
related to transfer agent services.
(5) Unaudited.
(6) Annualized.
(7) Amount less than $1 million.
See Notes to Financial Statements
EXPENSE EXAMPLE (unaudited)
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs such as initial sales charges on purchase payments and contingent deferred
sales charges on redemptions (loads); and (2) ongoing costs, including
management fees; distribution and service (12b-1) fees; and other expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the fund so you can compare these costs with the ongoing costs of
investing in other mutual funds. The example is based on an investment of $1,000
invested at the beginning of the period and held for the entire period (August
1, 2004 through January 31, 2005).
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 Class 529-F shareholders may be subject to fees charged by financial
intermediaries, typically ranging from 0.50% to 3.00% 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 shareholders, 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 Class 529-F shareholders may
be subject to fees charged by financial intermediaries, typically ranging from
0.50% to 3.00% 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 Ending account Expenses paid Annualized
value 8/1/2004 1/31/2005 during period (1) expense ratio
Class A -- actual return $ 1,000.00 $1,092.20 $2.85 .54%
Class A -- assumed 5% return 1,000.00 1,022.48 2.75 .54
Class B -- actual return 1,000.00 1,088.49 7.00 1.33
Class B -- assumed 5% return 1,000.00 1,018.50 6.77 1.33
Class C -- actual return 1,000.00 1,087.45 7.47 1.42
Class C -- assumed 5% return 1,000.00 1,018.05 7.22 1.42
Class F -- actual return 1,000.00 1,091.62 3.53 .67
Class F -- assumed 5% return 1,000.00 1,021.83 3.41 .67
Class 529-A -- actual return 1,000.00 1,091.61 3.53 .67
Class 529-A -- assumed 5% return 1,000.00 1,021.83 3.41 .67
Class 529-B -- actual return 1,000.00 1,086.50 8.15 1.55
Class 529-B -- assumed 5% return 1,000.00 1,017.39 7.88 1.55
Class 529-C -- actual return 1,000.00 1,086.51 8.10 1.54
Class 529-C -- assumed 5% return 1,000.00 1,017.44 7.83 1.54
Class 529-E -- actual return 1,000.00 1,089.87 5.37 1.02
Class 529-E -- assumed 5% return 1,000.00 1,020.06 5.19 1.02
Class 529-F -- actual return 1,000.00 1,091.08 4.06 .77
Class 529-F -- assumed 5% return 1,000.00 1,021.32 3.92 .77
Class R-1 -- actual return 1,000.00 1,087.55 7.68 1.46
Class R-1 -- assumed 5% return 1,000.00 1,017.85 7.43 1.46
Class R-2 -- actual return 1,000.00 1,087.38 7.47 1.42
Class R-2 -- assumed 5% return 1,000.00 1,018.05 7.22 1.42
Class R-3 -- actual return 1,000.00 1,089.43 5.11 .97
Class R-3 -- assumed 5% return 1,000.00 1,020.32 4.94 .97
Class R-4 -- actual return 1,000.00 1,091.56 3.53 .67
Class R-4 -- assumed 5% return 1,000.00 1,021.83 3.41 .67
Class R-5 -- actual return 1,000.00 1,092.58 1.90 .36
Class R-5 -- assumed 5% return 1,000.00 1,023.39 1.84 .36
(1) Expenses are equal to the annualized expense ratio, multiplied by the
average account value over the period, multiplied by the number of days in
the period (184), and divided by 365 (to reflect the one-half year period).
OTHER SHARE CLASS RESULTS (unaudited)
Class B, Class C, Class F and Class 529
Figures shown are past results and are not predictive of results in future
periods. Current and future results may be lower or higher than those shown.
Share prices and returns will vary, so investors may lose money. For the most
current information and month-end results, visit americanfunds.com.
Returns for periods ended December 31, 2004
(the most recent calendar quarter): 1 year Life of class
Class B shares
Reflecting applicable contingent deferred sales charge
(CDSC), maximum of 5%, payable only if shares are sold
within six years of purchase +7.01% +9.60%(1)
Not reflecting CDSC +12.01% +9.89%(1)
Class C shares
Reflecting CDSC, maximum of 1%, payable only if shares
are sold within one year of purchase +10.93% +8.58%(2)
Not reflecting CDSC +11.93% +8.58%(2)
Class F shares(3)
Not reflecting annual asset-based fee charged by sponsoring firm +12.80% +9.39%(2)
Class 529-A shares
Reflecting 5.75% maximum sales charge +6.24% +8.83%(4)
Not reflecting maximum sales charge +12.74% +11.09%(4)
Class 529-B shares
Reflecting applicable CDSC, maximum of 5%, payable only
if shares are sold within six years of purchase +6.75% +9.33%(5)
Not reflecting CDSC +11.75% +10.50%(5)
Class 529-C shares
Reflecting CDSC, maximum of 1%, payable only if shares
are sold within one year of purchase +10.82% +10.52%(5)
Not reflecting CDSC +11.82% +10.52%(5)
Class 529-E shares(3) +12.38% +10.69%(6)
Class 529-F shares(3)
Not reflecting annual asset-based fee charged by sponsoring firm +12.63% +17.69%(7)
The fund's investment adviser is waiving a portion of its management fees.
Results shown reflect the waiver. Please see the Financial Highlights table on
page 26 for details.
(1) Average annual total return from March 15, 2000, when Class B shares were
first sold.
(2) Average annual total return from March 15, 2001, when Class C and Class F
shares were first sold.
(3) These shares are sold without any initial or contingent deferred sales
charge.
(4) Average annual total return from February 15, 2002, when Class 529-A shares
were first sold.
(5) Average annual total return from February 19, 2002, when Class 529-B and
Class 529-C shares were first sold.
(6) Average annual total return from February 25, 2002, when Class 529-E shares
were first sold.
(7) Average annual total return from September 17, 2002, when Class 529-F shares
were first sold.
OFFICE OF THE FUND
One Market
Steuart Tower, Suite 1800
Mailing address: P.O. Box 7650
San Francisco, CA 94120-7650
INVESTMENT ADVISER
Capital Research and
Management Company
333 South Hope Street
Los Angeles, CA 90071-1406
135 South State College Boulevard
Brea, CA 92821-5823
TRANSFER AGENT FOR
SHAREHOLDER ACCOUNTS
American Funds Service Company
(Please write to the address
nearest you.)
P.O. Box 25065
Santa Ana, CA 92799-5065
P.O. Box 659522
San Antonio, TX 78265-9522
P.O. Box 6007
Indianapolis, IN 46206-6007
P.O. Box 2280
Norfolk, VA 23501-2280
CUSTODIAN OF ASSETS
JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017-2070
COUNSEL
Paul, Hastings, Janofsky & Walker LLP
515 South Flower Street
Los Angeles, CA 90071-2228
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
Two California Plaza
350 South Grand Avenue
Los Angeles, CA 90071-3462
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406
There are several ways to invest in The Income Fund of America. Class A shares
are subject to a 5.75% maximum up-front sales charge that declines for accounts
(and aggregated investments) of $25,000 or more and is eliminated for purchases
of $1 million or more. Other share classes, which are generally not available
for certain employer-sponsored retirement plans, have no up-front sales charges
but are subject to additional annual expenses and fees. Annualized expenses for
Class B shares were 0.79 percentage points higher than for Class A shares; Class
B shares convert to Class A shares after eight years of ownership. If redeemed
within six years, Class B shares may also be subject to a contingent deferred
sales charge ("CDSC") of up to 5% that declines over time. Class C shares were
subject to annualized expenses 0.88 percentage points higher than those for
Class A shares and a 1% CDSC if redeemed within the first year after purchase.
Class C shares convert to Class F shares after 10 years. Class F shares, which
are available only through certain fee-based programs offered by broker-dealer
firms and registered investment advisers, had higher annualized expenses (by
0.13 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 AND COLLEGEAMERICA. THIS AND OTHER IMPORTANT
INFORMATION IS CONTAINED IN THE FUND'S PROSPECTUS AND THE COLLEGEAMERICA PROGRAM
DESCRIPTION, 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 WWW.SEC.GOV, ON THE AMERICAN
FUNDS WEBSITE OR UPON REQUEST BY CALLING AFS. THE FUND'S PROXY VOTING RECORD FOR
THE 12 MONTHS ENDED JUNE 30, 2004, IS ALSO AVAILABLE ON THE SEC AND AMERICAN
FUNDS WEBSITES.
A complete January 31, 2005, portfolio of The Income Fund of America's
investments is available free of charge on the SEC website or upon request by
calling AFS.
The Income Fund of America files a complete list of its portfolio holdings with
the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms
N-Q are available free of charge on the SEC website or upon request by calling
AFS. You may also review or, for a fee, copy the forms at the SEC's Public
Reference Room in Washington, D.C. (800/SEC-0330).
This report is for the information of shareholders of The Income Fund of
America, 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 March 31, 2005, this report must be accompanied by an
American Funds statistical update for the most recently completed calendar
quarter.
[logo - American Funds(R)]
The right choice for the long term(R)
What makes American Funds different?
For more than 70 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 29 carefully conceived, broadly diversified funds has
attracted over 30 million shareholder accounts.
OUR UNIQUE COMBINATION OF STRENGTHS INCLUDES THESE FIVE FACTORS:
o A LONG-TERM, VALUE-ORIENTED APPROACH
Rather than follow fads, we pursue a consistent strategy, focusing on each
investment's long-term potential.
o AN UNPARALLELED GLOBAL RESEARCH EFFORT
American Funds draws on one of the industry's most globally integrated
research networks.
o THE MULTIPLE PORTFOLIO COUNSELOR SYSTEM
Every American Fund is divided among a number of portfolio counselors. Each
takes responsibility for a portion independently, within each fund's
objectives; in most cases, research analysts manage a portion as well. Over
time this method has contributed to a consistency of results and continuity
of management.
o EXPERIENCED INVESTMENT PROFESSIONALS
The recent market decline was not the first for most of the portfolio
counselors who serve the American Funds. More than half of them were in the
investment business before the sharp market decline of 1987.
o A COMMITMENT TO LOW OPERATING EXPENSES
American Funds' operating expenses are among the lowest in the mutual fund
industry. Our portfolio turnover rates are low as well, keeping transaction
costs and tax consequences contained.
29 mutual funds, consistent philosophy, consistent results
o GROWTH FUNDS
AMCAP Fund(R)
EuroPacific Growth Fund(R)
The Growth Fund of America(R)
The New Economy Fund(R)
New Perspective Fund(R)
New World Fund(SM)
SMALLCAP World Fund(R)
o GROWTH-AND-INCOME FUNDS
American Mutual Fund(R)
Capital World Growth and Income Fund(SM)
Fundamental Investors(SM)
The Investment Company of America(R)
Washington Mutual Investors Fund(SM)
o EQUITY-INCOME FUNDS
Capital Income Builder(R)
> The Income Fund of America(R)
o BALANCED FUND
American Balanced Fund(R)
o BOND FUNDS
American High-Income Trust(SM)
The Bond Fund of America(SM)
Capital World Bond Fund(R)
Intermediate Bond Fund of America(R)
U.S. Government Securities Fund(SM)
o TAX-EXEMPT BOND FUNDS
American High-Income Municipal Bond Fund(R)
Limited Term Tax-Exempt Bond Fund of America(SM)
The Tax-Exempt Bond Fund of America(R)
STATE-SPECIFIC TAX-EXEMPT FUNDS
The Tax-Exempt Fund of California(R)
The Tax-Exempt Fund of Maryland(R)
The Tax-Exempt Fund of Virginia(R)
o MONEY MARKET FUNDS
The Cash Management Trust of America(R)
The Tax-Exempt Money Fund of America(SM)
The U.S. Treasury Money Fund of America(SM)
THE CAPITAL GROUP COMPANIES
American Funds
Capital Research and Management
Capital International
Capital Guardian
Capital Bank and Trust
Lit. No. MFGESR-906-0305P
Litho in USA BAG/GRS/8088-S1940
ITEM 2 - Code of Ethics
Not applicable for filing of Semiannual Reports to Shareholders.
ITEM 3 - Audit Committee Financial Expert
Not applicable for filing of Semiannual Reports to Shareholders.
ITEM 4 - Principal Accountant Fees and Services
Not applicable for filing of Semiannual Reports to Shareholders.
ITEM 5 - Audit Committee of Listed Registrants
Not applicable.
ITEM 6 - Schedule of Investments
[logo - American Funds (r)]
The Income Fund of America
INVESTMENT PORTFOLIO
January 31, 2005 unaudited
Market value
Common stocks -- 63.84% Shares (000)
FINANCIALS -- 17.05%
Bank of America Corp. 14,378,880 $666,749
HSBC Holdings PLC (United Kingdom) 19,321,426 319,533
HSBC Holdings PLC (Hong Kong) 11,552,054 191,070
Societe Generale 5,107,300 508,896
Citigroup Inc. 9,485,000 465,239
Washington Mutual, Inc. 10,305,000 415,807
J.P. Morgan Chase & Co. 10,750,000 401,297
U.S. Bancorp 12,920,000 388,246
Lloyds TSB Group PLC 37,062,171 346,231
iStar Financial, Inc.(1) 7,185,000 300,692
Fannie Mae 4,506,200 291,010
Wells Fargo & Co. 4,460,000 273,398
Boston Properties, Inc. 4,605,000 266,077
ING Groep NV 8,189,076 235,819
Wachovia Corp. 4,250,000 233,112
Equity Residential 7,387,700 233,008
Regions Financial Corp. 6,510,000 208,320
ABN AMRO Holding NV 7,127,372 192,975
Kimco Realty Corp. 3,290,000 174,304
Developers Diversified Realty Corp. 4,270,000 169,733
Equity Office Properties Trust 5,575,000 155,989
Arthur J. Gallagher & Co.(1) 5,165,400 153,154
Westpac Banking Corp. 9,480,425 140,923
Fortis 4,880,000 131,936
Commonwealth Bank of Australia 5,000,000 129,756
Montpelier Re Holdings Ltd.(1) 3,192,000 119,540
Bank of Nova Scotia 3,600,000 114,807
PNC Financial Services Group, Inc. 2,000,000 107,740
St. George Bank Ltd. 5,624,451 107,598
Hang Lung Properties Ltd. 70,000,000 105,009
Hospitality Properties Trust 2,425,100 103,431
Allied Capital Corp. 3,848,020 98,548
Unibail Holding 761,100 90,627
XL Capital Ltd., Class A 1,175,000 87,867
Regency Centers Corp. 1,650,000 81,510
Brascan Corp., Class A 2,350,000 80,018
Marsh & McLennan Companies, Inc. 2,350,000 76,375
Allstate Corp. 1,475,000 74,399
Westfield Group(2) 5,530,000 72,954
Bank of New York Co., Inc. 2,342,500 69,596
DnB NOR ASA 7,500,000 68,720
Health Care Property Investors, Inc. 2,442,300 63,402
Weingarten Realty Investors 1,625,150 58,099
Lincoln National Corp. 1,200,000 55,368
St. Paul Travelers Companies, Inc. 1,167,400 43,824
GATX Corp. 1,450,000 43,181
Archstone-Smith Trust 1,252,000 42,944
Hysan Development Co. Ltd. 21,702,509 41,461
Sunstone Hotel Investors, Inc.(1) 1,910,000 39,919
General Growth Properties, Inc. 1,200,000 38,124
Irish Life & Permanent PLC 1,931,100 34,630
Newcastle Investment Corp. 1,077,500 32,584
Chubb Corp. 400,000 29,792
Comerica Inc. 500,000 28,930
Hang Lung Group Ltd. 16,553,000 28,864
Fubon Financial Holding Co., Ltd. 26,830,000 26,881
Beverly Hills Bancorp Inc.(1) 1,939,517 20,074
FirstMerit Corp. 650,000 17,225
American International Group, Inc. 192,150 12,738
AMB Property Corp. 195,000 7,260
Maguire Properties, Inc. 128,100 3,030
9,120,343
UTILITIES -- 8.61%
National Grid Transco PLC 48,870,000 474,939
E.ON AG 3,975,000 356,258
Southern Co. 9,915,000 334,830
Duke Energy Corp. 11,242,393 301,184
Consolidated Edison, Inc. 5,815,700 255,135
Exelon Corp. 5,720,000 253,110
Dominion Resources, Inc. 3,408,498 236,482
Scottish Power PLC 29,008,000 230,171
Ameren Corp. 4,370,000 219,024
DTE Energy Co. 4,539,100 198,858
Progress Energy, Inc. 4,186,924 185,271
Public Service Enterprise Group Inc. 3,460,000 182,515
Equitable Resources, Inc. 2,735,000 156,004
Edison International 4,400,000 142,868
FirstEnergy Corp. 3,488,780 138,714
Xcel Energy Inc. 7,483,500 136,125
Energy East Corp. 4,883,300 127,942
Entergy Corp. 1,651,600 114,819
American Electric Power Co., Inc. 3,150,000 111,038
FPL Group, Inc. 1,155,000 88,519
KeySpan Corp. 2,060,000 81,308
NSTAR 1,305,600 73,479
NiSource Inc. 2,750,000 62,975
Cinergy Corp. 1,449,200 58,388
MDU Resources Group, Inc. 1,750,000 46,795
Northeast Utilities 2,000,000 37,400
4,604,151
TELECOMMUNICATION SERVICES -- 8.15%
SBC Communications Inc. 36,805,000 874,487
BellSouth Corp. 32,185,000 844,534
Verizon Communications Inc. 19,850,000 706,462
AT&T Corp. 21,631,000 415,099
TDC A/S 8,347,500 346,831
Telecom Italia SpA, nonvoting 82,419,765 264,430
Chunghwa Telecom Co., Ltd. (ADR) 8,400,000 181,860
Chunghwa Telecom Co., Ltd. 26,447,000 53,327
Telefonica, SA 10,775,000 196,176
Telefonos de Mexico, SA de CV, Class L (ADR) 3,100,000 115,475
Royal KPN NV 10,900,000 104,770
Eircom Group PLC 30,559,100 73,732
KT Corp. (ADR) 1,755,000 38,013
KT Corp. 738,480 30,021
BCE Inc. 1,722,573 41,152
Swisscom AG 82,200 31,104
NTELOS Inc.(2),(3),(4) 549,504 20,881
BT Group PLC 3,500,000 13,705
Dobson Communications Corp., Class A(2),(3) 3,480,483 6,404
XO Communications, Inc.(2) 6,837 19
4,358,482
ENERGY -- 6.39%
Royal Dutch Petroleum Co. (New York registered) 10,752,000 628,669
"Shell" Transport and Trading Co., PLC 26,985,402 235,458
"Shell" Transport and Trading Co., PLC (ADR) (New York registered) 3,505,300 185,010
ChevronTexaco Corp. 10,070,000 547,808
Marathon Oil Corp. 10,135,000 392,529
Kinder Morgan, Inc. 4,422,926 331,896
Sunoco, Inc. 3,100,000 271,219
ENI SpA 10,740,000 261,092
Occidental Petroleum Corp. 2,200,000 128,436
ConocoPhillips 1,300,000 120,627
Exxon Mobil Corp. 2,285,000 117,906
Enbridge Inc. 1,550,000 78,726
TOTAL SA (ADR) 645,000 69,370
Husky Energy Inc. 1,920,000 51,806
3,420,552
MATERIALS -- 6.34%
Dow Chemical Co. 15,119,500 751,439
E.I. du Pont de Nemours and Co. 11,830,000 562,635
Weyerhaeuser Co. 8,222,000 513,053
International Paper Co. 6,977,340 273,163
Eastman Chemical Co. 3,200,000 173,280
Akzo Nobel NV 4,075,075 170,230
Lyondell Chemical Co. 4,920,000 144,746
UPM-Kymmene Corp. 6,200,000 131,317
DSM NV 2,000,000 124,342
Alcoa Inc. 3,200,000 94,432
Rio Tinto PLC 2,910,000 90,388
MeadWestvaco Corp. 2,800,000 80,892
Cia. Vale do Rio Doce, ordinary nominative (ADR) 1,974,000 59,714
Cia. Vale do Rio Doce, Class A, preferred nominative 675,000 17,069
Temple-Inland Inc. 995,000 63,282
Worthington Industries, Inc. 2,400,000 49,152
Stora Enso Oyj, Class R 3,264,275 47,043
Holmen AB, Class B 942,900 31,489
Freeport-McMoRan Copper & Gold Inc., Class B 300,000 11,043
3,388,709
CONSUMER STAPLES -- 6.22%
Altria Group, Inc. 7,747,500 494,523
ConAgra Foods, Inc. 16,235,000 478,933
Reynolds American Inc. 4,181,600 336,284
H.J. Heinz Co. 8,540,000 322,897
Sara Lee Corp. 13,130,000 308,292
General Mills, Inc. 4,550,000 241,105
Albertson's, Inc. 9,290,000 212,555
Unilever NV (New York registered) 2,230,000 145,641
Unilever NV 500,000 32,605
Lion Nathan Ltd. 20,142,756 127,875
Gallaher Group PLC 7,911,186 116,387
Diageo PLC 6,950,000 94,658
Kellogg Co. 1,875,000 83,700
Tesco PLC 13,103,469 76,037
UST Inc. 1,500,000 75,990
Imperial Tobacco Group PLC 2,765,839 72,477
SABMiller PLC 4,311,000 66,019
Woolworths Ltd. 3,510,482 39,653
3,325,631
INDUSTRIALS -- 3.81%
General Electric Co. 14,405,000 520,453
Emerson Electric Co. 4,925,000 331,157
R.R. Donnelley & Sons Co. 7,250,000 242,513
Raytheon Co. 4,269,284 159,671
Hubbell Inc., Class B 3,213,100 159,113
Cooper Industries, Ltd., Class A 2,100,000 145,950
ServiceMaster Co. 10,082,050 129,958
Caterpillar Inc. 1,200,000 106,920
Sandvik AB 2,000,000 81,698
Wesfarmers Ltd. 2,205,000 67,089
Brambles Industries PLC 8,400,000 43,407
Volvo AB, Class B 934,100 37,956
Delta Air Lines, Inc.(2),(3),(4) 2,532,748 12,286
2,038,171
HEALTH CARE -- 2.47%
Bristol-Myers Squibb Co. 27,125,000 635,810
Merck & Co., Inc. 13,185,000 369,839
Eli Lilly and Co. 2,650,000 143,736
Pfizer Inc 2,500,000 60,400
Wyeth 1,431,500 56,730
Schering-Plough Corp. 3,000,000 55,680
Clarent Hospital Corp.(1),(2),(4) 484,684 242
1,322,437
CONSUMER DISCRETIONARY -- 2.03%
General Motors Corp. 10,625,000 391,106
May Department Stores Co. 9,973,000 338,085
Kingfisher PLC 16,678,565 95,762
Kesa Electricals PLC 13,644,958 82,069
Dixons Group PLC 27,250,000 81,308
John Fairfax Holdings Ltd. 11,143,019 38,045
Harrah's Entertainment, Inc. 585,300 37,014
Delphi Corp. 3,000,000 22,770
TI Automotive Ltd., Class A(2),(4) 7,000,000 --
1,086,159
INFORMATION TECHNOLOGY -- 0.71%
Microsoft Corp. 14,360,000 $ 377,381
ZiLOG, Inc.(2) 455,000 3,231
380,612
MISCELLANEOUS -- 2.06%
Other common stocks in initial period of acquisition 1,101,140
Total common stocks (cost: $27,706,386,000) 34,146,387
Preferred stocks -- 0.96%
FINANCIALS -- 0.95%
SB Treasury Co. LLC, Series A, 9.40% noncumulative preferred(3),(5) 124,434,000 142,334
Fuji JGB Investment LLC, Series A, 9.87% noncumulative preferred(3),(5) 55,950,000 65,199
IBJ Preferred Capital Co. LLC, Series A, 8.79% noncumulative preferred(3),(5) 24,300,000 27,335
HSBC Capital Funding LP, Series 1, 9.547% noncumulative step-up perpetual preferred(3),(5) 37,500,000 46,512
HSBC Capital Funding LP, Series 2, 10.176% noncumulative step-up perpetual preferred(3),(5) 10,000,000 15,847
Tokai Preferred Capital Co. LLC, Series A, 9.98% noncumulative preferred(3),(5) 52,000,000 60,543
Fannie Mae, Series O, 7.00% preferred 2007(2),(3) 380,000 21,541
BNP Paribas Capital Trust 9.003% noncumulative trust preferred(3),(5) 11,750,000 14,417
BNP U.S. Funding LLC, Series A, 7.738% noncumulative preferred(3),(5) 4,200,000 4,615
Royal Bank of Scotland Group PLC, Series 3 Preference Shares, 7.816% 12,000,000 12,418
RBS Capital Trust I noncumulative trust preferred 4.709%(5) 4,550,000 4,475
Duke Realty Corp., Series B, 7.99% preferred cumulative step-up premium rate 300,000 15,741
NB Capital Corp., Series A, 8.35% exchangeable preferred depositary shares 520,000 14,570
Simon Property Group, Inc., Series G, 7.89% preferred cumulative step-up premium rate 200,000 10,831
Public Storage, Inc., Series V, 7.50%, cumulative preferred depositary shares 400,000 10,684
iStar Financial, Inc., Series F, 7.80% cumulative redeemable preferred(1) 400,000 10,460
ACE Ltd., Series C, 7.80% preferred depositary shares 360,000 9,605
DBS Capital Funding Corp., Series A, 7.657% noncumulative guaranteed preference shares(3),(5) 6,500,000 7,490
New Plan Excel Realty Trust, Inc., Series D, 7.80% preferred cumulative step-up premium rate 112,500 5,787
Nationwide Health Properties, Inc., Series A, 7.677% preferred cumulative step-up premium rate 50,000 5,378
505,782
TELECOMMUNICATION SERVICES -- 0.01%
Dobson Communications Corp. 13.00% senior exchangeable preferred 2009 12,789 7,417
XO Communications, Inc. 14.00% preferred 2009(2),(6) 12 --
7,417
INFORMATION TECHNOLOGY -- 0.00%
ZiLOG, Inc. -- MOD III Inc., units(4) 513 0
MISCELLANEOUS -- 0.00%
Other preferred stocks in initial period of acquisition 74
Total preferred stocks (cost: $455,401,000) 513,273
Market value
Warrants -- 0.00% Shares (000)
TELECOMMUNICATION SERVICES -- 0.00%
American Tower Corp., warrants, expire 2008(2),(3) 3,000 $ 684
XO Communications, Inc., Series A, warrants, expire 2010(2) 13,674 6
XO Communications, Inc., Series B, warrants, expire 2010(2) 10,256 4
XO Communications, Inc., Series C, warrants, expire 2010(2) 10,256 3
Allegiance Telecom, Inc., warrants, expire 2008(2),(3),(4) 20,000 0
GT Group Telecom Inc., warrants, expire 2010(2),(3),(4) 15,000 0
697
INDUSTRIALS -- 0.00%
Protection One, Inc., warrants, expire 2005(2),(3),(4) 57,600 --
Total warrants (cost: $1,021,000) 697
Shares or
Convertible securities -- 4.65% principal amount
CONSUMER DISCRETIONARY -- 1.16%
Ford Motor Co. Capital Trust II 6.50% cumulative convertible trust preferred 2032 8,615,300 430,593
Amazon.com, Inc. 4.75% convertible subordinated debentures 2009 $59,137,000 59,654
Gap, Inc. 5.75% convertible notes 2009(3) $28,000,000 38,500
Gap, Inc. 5.75% convertible notes 2009 $8,500,000 11,687
Interpublic Group of Companies, Inc., Series A, 5.375% convertible preferred 2006 647,000 31,127
Liberty Media Corp. 3.25% exchangeable debentures 2031 $25,000,000 23,375
General Motors Corp., Series B, 5.25% convertible senior debentures 2032 $19,700,000 17,494
Six Flags, Inc. 7.25% PIERS convertible preferred 2009 400,000 8,620
621,050
INFORMATION TECHNOLOGY -- 1.15%
Sanmina Corp. 0% convertible subordinated debentures 2020 $161,000,000 84,927
SCI Systems, Inc. 3.00% convertible subordinated debentures 2007 $33,500,000 31,992
Celestica Inc. 0% convertible debentures 2020 $181,000,000 100,907
Nortel Networks Corp. 4.25% convertible notes 2008 $50,580,000 48,999
Nortel Networks Corp. 4.25% convertible notes 2008(3) $40,000,000 38,750
Agilent Technologies, Inc. 3.00% convertible debentures 2021(5) $50,092,600 50,531
Agilent Technologies, Inc. 3.00% convertible debentures 2021(3),(5) $30,185,000 30,449
ASM Lithography Holding NV 5.75% convertible notes 2006(3) $57,500,000 64,371
International Rectifier Corp. 4.25% convertible notes 2007 $52,000,000 51,805
Advanced Micro Devices, Inc. 4.75% convertible debentures 2022(5) $50,000,000 50,875
Micron Technology, Inc. 2.50% convertible notes 2010(3) $32,000,000 34,120
Liberty Media Corp. 3.50% exchangeable debentures 2031 $25,000,000 22,500
LSI Logic Corp. 4.00% convertible notes 2006 $3,000,000 2,993
Fairchild Semiconductor Corp. 5.00% convertible notes 2008 $2,500,000 2,531
615,750
FINANCIALS -- 0.80%
Chubb Corp. 7.00% convertible preferred 2005 1,800,000 units 50,580
Chubb Corp. 7.00% convertible preferred 2006 1,600,000 units 45,792
Genworth Financial, Inc. 6.00% convertible preferred 2007 2,400,000 units 76,176
UnumProvident Corp. 8.25% ACES convertible 2006 2,100,000 units 72,765
Capital One Financial Corp. 6.25% Upper DECS 2005 840,000 units 44,856
XL Capital Ltd. 6.50% ACES convertible preferred 2007 1,720,000 units 42,140
St. Paul Companies, Inc., Series E, 9.00% 2005 600,000 units 39,672
Providian Financial Corp. 3.25% convertible debentures 2005 $34,500,000 34,629
Ohio Casualty Corp. 5.00% convertible notes 2022 $20,000,000 21,425
428,035
HEALTH CARE -- 0.45%
Schering-Plough Corp. 6.00% convertible preferred 2007 2,499,900 $ 128,995
Baxter International Inc. 7.00% convertible preferred 2006 925,000 units 50,505
Sepracor Inc. 5.00% convertible subordinated debentures 2007 $46,000,000 48,185
Incyte Corp. 3.50% convertible notes 2011(3) $15,000,000 15,638
243,323
MATERIALS -- 0.32%
Freeport-McMoRan Copper & Gold Inc. 5.50% convertible preferred(3) 50,000 47,722
Phelps Dodge Corp., Series A, 6.75% mandatory convertible preferred shares
(MEDS) 2005 200,000 40,570
Temple-Inland Inc. 7.50% Upper DECS 2005 690,000 units 36,881
Inco Ltd. 0% convertible notes LYON 2021 $26,000,000 23,628
International Paper Co., Capital Trust 5.25% convertible preferred 2025 400,000 20,100
168,901
INDUSTRIALS -- 0.27%
Tyco International Group SA, Series B, 3.125% convertible debentures 2023(3) $50,000,000 84,813
Cummins Capital Trust I 7.00% QUIPS convertible preferred 2031 422,000 36,134
Cummins Capital Trust I 7.00% QUIPS convertible preferred 2031(3) 178,000 15,241
Kansas City Southern 4.25% convertible preferred(3) 15,000 9,720
145,908
UTILITIES -- 0.22%
PG&E Corp. 9.50% convertible note 2010 $28,000,000 77,420
American Electric Power Co., Inc. 9.25% convertible preferred 2005 460,000 22,287
AES Trust VII 6.00% convertible preferred 2008 325,000 16,006
115,713
TELECOMMUNICATION SERVICES -- 0.16%
CenturyTel, Inc. 6.875% ACES 2005 1,750,000 units 44,013
American Tower Corp. 5.00% convertible debentures 2010 $38,100,000 38,243
Dobson Communications Corp., Series F, 6.00% convertible preferred(3) 33,625 2,438
84,694
CONSUMER STAPLES -- 0.07%
Albertson's, Inc. 7.25% convertible preferred 2007 1,500,000 units 36,540
MISCELLANEOUS -- 0.05%
Other convertible securities in initial period of acquisition 25,245
Total convertible securities (cost: $2,293,582,000) 2,485,159
Principal amount
Bonds & notes -- 22.64% (000)
CONSUMER DISCRETIONARY -- 4.65%
Ford Motor Credit Co. 6.50% 2007 $ 1,000 1,030
Ford Motor Credit Co. 4.95% 2008 12,000 11,908
Ford Motor Credit Co. 5.80% 2009 4,000 4,034
Ford Motor Credit Co. 7.375% 2009 130,000 138,568
Ford Motor Credit Co. 4.05% 2010(5) 5,055 5,032
Ford Motor Credit Co. 5.70% 2010 1,445 1,442
Ford Motor Credit Co. 7.875% 2010 29,000 31,587
Ford Motor Credit Co. 7.375% 2011 17,600 18,808
Ford Motor Co. 7.45% 2031 8,000 8,004
General Motors Acceptance Corp. 6.75% 2006 2,000 2,045
General Motors Acceptance Corp. 6.125% 2007 18,250 18,530
General Motors Acceptance Corp. 7.75% 2010 23,500 24,710
General Motors Acceptance Corp. 6.875% 2011 30,000 30,165
General Motors Corp. 7.20% 2011 28,000 28,129
General Motors Acceptance Corp. 7.25% 2011 51,000 52,316
General Motors Acceptance Corp. 6.875% 2012 650 650
General Motors Acceptance Corp. 7.00% 2012 1,000 1,009
General Motors Acceptance Corp. 4.56% 2014(5) 20,000 19,128
General Motors Acceptance Corp. 8.00% 2031 7,000 7,104
Clear Channel Communications, Inc. 4.625% 2008 14,000 14,115
Chancellor Media Corp. of Los Angeles 8.00% 2008 23,000 25,583
Clear Channel Communications, Inc. 7.65% 2010 15,000 16,979
Clear Channel Communications, Inc. 5.75% 2013 7,500 7,663
Clear Channel Communications, Inc. 5.50% 2014 99,000 98,636
Cox Communications, Inc. 7.75% 2006 6,000 6,342
Cox Communications, Inc. 3.04% 2007(3),(5) 8,250 8,271
Cox Communications, Inc. 7.875% 2009 12,500 14,122
Cox Communications, Inc. 4.625% 2010(3) 45,250 45,107
Cox Communications, Inc. 7.75% 2010 10,000 11,454
Cox Communications, Inc. 4.625% 2013 5,000 4,825
Cox Communications, Inc. 5.45% 2014(3) 22,750 22,999
J.C. Penney Co., Inc. 8.00% 2010 45,705 52,047
J.C. Penney Co., Inc. 7.95% 2017 40,275 47,122
J.C. Penney Co., Inc. 8.125% 2027 3,000 3,270
J.C. Penney Co., Inc. 7.625% 2097 4,000 4,300
Liberty Media Corp. 7.75% 2009 10,950 12,027
Liberty Media Corp. 7.875% 2009 55,350 61,068
Liberty Media Corp. 8.25% 2030 19,000 21,384
DaimlerChrysler North America Holding Corp. 6.40% 2006 5,000 5,181
DaimlerChrysler North America Holding Corp. 4.05% 2008 2,560 2,549
DaimlerChrysler North America Holding Corp. 4.75% 2008 1,440 1,465
DaimlerChrysler North America Holding Corp. 7.20% 2009 19,900 22,069
DaimlerChrysler North America Holding Corp. 8.00% 2010 15,000 17,317
DaimlerChrysler North America Holding Corp. 7.75% 2011 25,000 28,946
DaimlerChrysler North America Holding Corp. 7.30% 2012 10,250 11,685
AOL Time Warner Inc. 5.625% 2005 5,000 5,032
Time Warner Inc. 7.75% 2005 9,500 9,663
Time Warner Inc. 8.18% 2007 20,000 22,028
AOL Time Warner Inc. 6.875% 2012 15,750 17,915
Time Warner Companies, Inc. 9.125% 2013 5,000 6,415
Time Warner Companies, Inc. 7.25% 2017 8,000 9,420
AOL Time Warner Inc. 7.625% 2031 9,750 12,048
Toys "R" Us, Inc. 7.625% 2011 12,300 12,823
Toys "R" Us, Inc. 7.875% 2013 40,190 41,496
Toys "R" Us, Inc. 7.375% 2018 28,350 27,393
Mirage Resorts, Inc. 7.25% 2006 4,960 5,208
MGM Grand, Inc. 6.875% 2008 1,159 1,260
MGM MIRAGE 6.00% 2009 33,950 34,799
MGM MIRAGE 8.50% 2010 22,830 25,969
MGM MIRAGE 6.75% 2012 8,000 8,420
TCI Communications, Inc. 8.00% 2005 10,000 10,232
Comcast Cable Communications, Inc. 8.375% 2007 9,925 10,893
Comcast Cable Communications, Inc. 6.20% 2008 24,000 25,756
Lenfest Communications, Inc. 7.625% 2008 2,000 2,192
Comcast Cable Communications, Inc. 6.875% 2009 8,000 8,845
Comcast Cable Communications, Inc. 7.125% 2013 3,100 3,592
CCH II, LLC and CCH II Capital Corp. 10.25% 2010 9,000 9,405
Charter Communications Holdings, LLC and Charter Communications Holdings Capital
Corp. 0%/13.50% 2011(7) 4,375 3,456
Charter Communications Operating, LLC and Charter Communications Operating
Capital Corp. 8.00% 2012(3) 25,950 26,274
CCO Holdings, LLC and CCO Holdings Capital Corp. 8.75% 2013 13,350 13,617
Rogers Wireless Inc. 7.25% 2012(3) 14,825 15,900
Rogers Wireless Inc. 7.50% 2015(3) 21,250 22,897
Harrah's Operating Co., Inc. 7.875% 2005 5,850 6,069
Harrah's Operating Co., Inc. 7.125% 2007 4,150 4,428
Harrah's Operating Co., Inc. 5.50% 2010 26,375 27,245
Standard Pacific Corp. 6.50% 2008 5,000 5,250
Standard Pacific Corp. 5.125% 2009 18,825 18,825
Standard Pacific Corp. 6.875% 2011 6,500 6,841
Standard Pacific Corp. 6.25% 2014 5,500 5,459
D.R. Horton, Inc. 7.50% 2007 3,500 3,813
D.R. Horton, Inc. 5.00% 2009 3,000 3,056
D.R. Horton, Inc. 8.00% 2009 19,900 22,342
D.R. Horton, Inc. 9.75% 2010 3,000 3,626
D.R. Horton, Inc. 7.875% 2011 550 635
D.R. Horton, Inc. 6.875% 2013 2,000 2,216
Visteon Corp. 8.25% 2010 18,300 18,483
Visteon Corp. 7.00% 2014 18,560 17,075
EchoStar DBS Corp. 5.75% 2008 9,300 9,416
EchoStar DBS Corp. 9.125% 2009 22,509 24,591
Royal Caribbean Cruises Ltd. 7.00% 2007 3,000 3,210
Royal Caribbean Cruises Ltd. 8.00% 2010 2,250 2,554
Royal Caribbean Cruises Ltd. 8.75% 2011 19,075 22,461
Royal Caribbean Cruises Ltd. 6.875% 2013 4,500 4,916
Hilton Hotels Corp. 7.625% 2008 2,450 2,695
Hilton Hotels Corp. 7.20% 2009 4,850 5,397
Hilton Hotels Corp. 8.25% 2011 13,158 15,534
Hilton Hotels Corp. 7.625% 2012 5,875 6,907
CBS Corp. 7.15% 2005 21,500 21,745
Viacom Inc. 6.40% 2006 3,000 3,089
Viacom Inc. 5.625% 2007 5,000 5,197
Dana Corp. 6.50% 2009 3,175 3,337
Dana Corp. 5.85% 2015(3) 27,000 26,550
ITT Corp. 6.75% 2005 8,675 8,903
Starwood Hotels & Resorts Worldwide, Inc. 7.375% 2007 12,350 13,199
Starwood Hotels & Resorts Worldwide, Inc. 7.875% 2012 6,750 7,729
British Sky Broadcasting Group PLC 6.875% 2009 10,000 10,944
British Sky Broadcasting Group PLC 8.20% 2009 16,250 18,741
DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. 8.375% 2013 25,475 28,819
K. Hovnanian Enterprises, Inc. 10.50% 2007 16,275 18,635
K. Hovnanian Enterprises, Inc. 8.00% 2012 3,000 3,307
K. Hovnanian Enterprises, Inc. 7.75% 2013 2,500 2,719
K. Hovnanian Enterprises, Inc. 6.375% 2014 2,000 2,055
Dex Media West LLC and Dex Media West Finance Co. 5.875% 2011(3) 24,675 24,243
Young Broadcasting Inc. 8.50% 2008 6,300 6,741
Young Broadcasting Inc. 10.00% 2011 15,640 16,578
Univision Communications Inc. 7.85% 2011 19,685 23,216
Telenet Group Holding NV 0%/11.50% 2014(3),(7) 30,050 22,988
Mohegan Tribal Gaming Authority 6.375% 2009 19,780 20,200
Mohegan Tribal Gaming Authority 8.00% 2012 2,100 2,271
Kabel Deutschland GmbH 10.625% 2014(3) 19,675 22,331
MDC Holdings, Inc. 7.00% 2012 5,000 5,636
MDC Holdings, Inc. 5.50% 2013 15,750 16,143
TRW Automotive Acquisition Corp. 9.375% 2013 15,984 18,062
TRW Automotive Acquisition Corp. 11.00% 2013 3,004 3,530
Boyd Gaming Corp. 9.25% 2009 8,500 9,180
Boyd Gaming Corp. 7.75% 2012 10,950 11,826
Wynn Las Vegas, LLC and Wynn Las Vegas Capital Corp. 6.625% 2014(3) 20,525 20,268
Warner Music Group 7.375% 2014(3) 19,000 19,950
Blockbuster Inc. 9.00% 2012(3) 19,250 19,057
Technical Olympic USA, Inc. 9.00% 2010 8,615 9,304
Technical Olympic USA, Inc. 9.00% 2010 275 297
Technical Olympic USA, Inc. 7.50% 2011 9,250 9,296
Delphi Corp. 6.50% 2013 4,000 3,872
Delphi Trust II, trust preferred securities, 6.197% 2033(5) 15,500 14,488
Radio One, Inc., Series B, 8.875% 2011 16,750 18,299
Adelphia Communications Corp. 10.25% 2006(8) 13,975 11,949
Adelphia Communications Corp. 10.25% 2011(8) 6,100 5,459
CSC Holdings, Inc. 7.25% 2008 8,000 8,500
CSC Holdings, Inc., Series B, 8.125% 2009 8,000 8,820
RH Donnelley Inc. 8.875% 2010(3) 10,500 11,681
RH Donnelley Inc. 8.875% 2010 3,800 4,227
RH Donnelley Inc. 10.875% 2012(3) 1,000 1,175
News America Inc. 6.75% 2038 15,000 16,841
NTL Cable PLC 8.75% 2014(3),(5) 15,019 16,784
Six Flags, Inc. 9.50% 2009 2,875 3,019
Six Flags, Inc. 8.875% 2010 2,500 2,394
Six Flags, Inc. 9.625% 2014 10,725 10,162
Six Flags, Inc. 9.625% 2014(3) 1,000 947
William Lyon Homes, Inc. 7.625% 2012(3) 16,000 15,640
Toll Brothers, Inc. 6.875% 2012 9,000 10,098
Toll Brothers, Inc. 4.95% 2014 5,000 4,933
Argosy Gaming Co. 7.00% 2014 13,525 14,945
Hyatt Equities, LLC 6.875% 2007(3) 14,000 14,660
Stoneridge, Inc. 11.50% 2012 10,950 12,647
YUM! Brands, Inc. 7.70% 2012 10,500 12,484
Tenneco Automotive Inc., Series B, 10.25% 2013 8,125 9,587
Tenneco Automotive Inc. 8.625% 2014(3) 2,425 2,534
Videotron Ltee 6.875% 2014 11,500 11,802
Lear Corp., Series B, 8.11% 2009 9,710 10,958
Staples, Inc. 7.375% 2012 9,000 10,530
NVR, Inc. 5.00% 2010 10,000 10,075
Cinemark USA, Inc. 9.00% 2013 8,575 9,647
Meritor Automotive, Inc. 6.80% 2009 8,500 8,797
Office Depot, Inc. 6.25% 2013 7,875 8,464
LBI Media, Inc. 10.125% 2012 7,500 8,400
CanWest Media Inc., Series B, 10.625% 2011 3,000 3,356
CanWest Media Inc. 8.00% 2012(3) 4,685 5,036
Centex Corp. 4.75% 2008 8,075 8,221
Saks Inc. 8.25% 2008 5,000 5,512
Saks Inc. 7.375% 2019 2,650 2,657
Regal Cinemas Corp., Series B, 9.375% 2012(4) 7,250 7,856
AMC Entertainment Inc. 8.00% 2014 7,500 7,472
Boyds Collection, Ltd., Series B, 9.00% 2008 7,382 7,050
WCI Communities, Inc. 10.625% 2011 1,850 2,053
WCI Communities, Inc. 9.125% 2012 4,150 4,638
Pulte Homes, Inc. 7.625% 2017 5,000 5,829
Payless ShoeSource, Inc. 8.25% 2013 5,500 5,610
NextMedia Operating, Inc. 10.75% 2011 4,580 5,175
Gannett Co., Inc. 4.95% 2005 5,000 5,016
Carnival Corp. 3.75% 2007 5,000 4,979
Fisher Communications, Inc. 8.625% 2014(3) 4,430 4,790
Quebecor Media Inc. 0%/13.75% 2011(7) 2,000 1,990
Quebecor Media Inc. 11.125% 2011 1,750 1,977
Warnaco, Inc. 8.875% 2013 3,425 3,785
Dillard's, Inc. 6.69% 2007 625 644
Dillard Department Stores, Inc. 7.875% 2023 2,875 3,019
Marriott International, Inc., Series C, 7.875% 2009 3,000 3,428
Aztar Corp. 7.875% 2014 2,500 2,763
Gray Communications Systems, Inc. 9.25% 2011 2,000 2,235
Cox Radio, Inc. 6.375% 2005 2,000 2,014
Reader's Digest Association, Inc. 6.50% 2011 1,625 1,718
2,486,444
TELECOMMUNICATION SERVICES -- 3.01%
Qwest Capital Funding, Inc. 7.75% 2006 3,000 3,082
Qwest Services Corp. 13.00% 2007(3) 15,551 17,670
Qwest Capital Funding, Inc. 7.00% 2009 10,000 9,675
Qwest Capital Funding, Inc. 7.90% 2010 13,875 13,702
Qwest Services Corp. 13.50% 2010(3) 22,021 26,260
Qwest Capital Funding, Inc. 7.25% 2011 5,500 5,307
Qwest Corp. 9.125% 2012(3) 12,400 14,167
Qwest Services Corp. 14.00% 2014(3) 25,000 31,437
U S WEST Capital Funding, Inc. 6.50% 2018 10,000 8,450
Qwest Capital Funding, Inc. 7.625% 2021 7,800 6,864
U S WEST Capital Funding, Inc. 6.875% 2028 30,000 24,337
Qwest Capital Funding, Inc. 7.75% 2031 44,670 38,751
American Tower Corp. 9.375% 2009 7,859 8,301
American Tower Corp. 7.25% 2011 49,175 51,634
American Tower Corp. 7.125% 2012(3) 65,025 65,675
American Tower Corp. 7.50% 2012 43,300 44,707
Nextel Communications, Inc. 6.875% 2013 19,900 21,716
Nextel Communications, Inc. 7.375% 2015 109,450 121,216
Dobson Communications Corp. 10.875% 2010 45,930 38,122
Dobson Cellular Systems, Inc. 6.96% 2011(3),(5) 4,850 5,129
American Cellular Corp., Series B, 10.00% 2011 74,000 68,635
Dobson Cellular Systems, Inc. 9.875% 2012(3) 3,850 3,956
Dobson Communications Corp. 8.875% 2013 28,500 21,161
Sprint Capital Corp. 4.78% 2006 10,950 11,117
Sprint Capital Corp. 6.375% 2009 23,220 25,096
Sprint Capital Corp. 7.625% 2011 15,000 17,354
Sprint Capital Corp. 8.375% 2012 34,375 41,709
Sprint Capital Corp. 6.90% 2019 6,988 7,901
Sprint Capital Corp. 6.875% 2028 5,000 5,609
Triton PCS, Inc. 8.75% 2011 15,200 11,932
Triton PCS, Inc. 9.375% 2011 24,400 19,825
Triton PCS, Inc. 8.50% 2013 62,000 59,985
Crown Castle International Corp. 9.375% 2011 4,250 4,739
Crown Castle International Corp. 7.50% 2013 43,375 46,249
Crown Castle International Corp., Series B, 7.50% 2013 30,375 32,387
AT&T Wireless Services, Inc. 7.50% 2007 34,250 36,984
AT&T Wireless Services, Inc. 8.125% 2012 24,935 30,160
SBC Communications Inc. 4.125% 2009 17,465 17,358
SBC Communications Inc. 5.10% 2014 49,215 49,663
AT&T Corp. 9.05% 2011(5) 49,070 57,167
AT&T Corp. 8.35% 2025 9,000 9,326
Deutsche Telekom International Finance BV 8.50% 2010(5) 24,900 29,585
Deutsche Telekom International Finance BV 5.25% 2013 15,000 15,498
Deutsche Telekom International Finance BV 9.25% 2032(5) 10,000 14,729
Nextel Partners, Inc. 12.50% 2009 16,234 18,263
Nextel Partners, Inc. 8.125% 2011 22,050 24,365
Nextel Partners, Inc. 8.125% 2011 5,000 5,525
France Telecom 8.50% 2011(5) 34,500 41,220
Intelsat, Ltd. 7.794% 2012(3),(5) 20,575 21,295
Intelsat, Ltd. 8.25% 2013(3) 15,350 15,964
Western Wireless Corp. 9.25% 2013 28,575 33,433
Centennial Cellular Corp. 10.75% 2008 4,923 5,120
Centennial Communications Corp. and Centennial Cellular Operating Co. LLC 10.125% 2013 16,000 18,200
Centennial Communications Corp. and Centennial Cellular Operating Co. LLC
and Centennial Puerto Rico Operations Corp. 8.625% 2014(5) 9,500 10,094
TELUS Corp. 8.00% 2011 25,150 29,798
Cincinnati Bell Inc. 7.25% 2013 23,275 24,322
Telecom Italia Capital SA, Series A, 4.00% 2008 3,000 2,979
Telecom Italia Capital SA, Series B, 5.25% 2013 19,300 19,694
Koninklijke KPN NV 8.00% 2010 15,750 18,510
Vodafone Group PLC 7.75% 2010 15,050 17,384
British Telecommunications PLC 7.00% 2007 7,000 7,465
British Telecommunications PLC 8.375% 2010(5) 7,500 8,979
PCCW-HKT Capital Ltd. 8.00% 2011(3),(5) 13,000 15,126
Verizon Global Funding Corp. 6.125% 2007 7,000 7,380
Verizon New York Inc., Series A, 6.875% 2012 6,500 7,305
Singapore Telecommunications Ltd. 6.375% 2011(3) 6,000 6,623
Singapore Telecommunications Ltd. 6.375% 2011 4,825 5,326
Verizon Wireless Capital LLC and Cellco Partnership 5.375% 2006 11,000 11,348
UbiquiTel Operating Co. 9.875% 2011 4,875 5,399
UbiquiTel Operating Co. 9.875% 2011(3) 1,875 2,077
BellSouth Corp. 4.20% 2009 7,000 6,994
AirGate PCS, Inc. 9.375% 2009(3) 6,128 6,588
Telefonos de Mexico, SA de CV 8.25% 2006 5,000 5,244
SBA Communications Corp. 8.50% 2012(3) 4,425 4,630
US Unwired Inc., Series B, 10.00% 2012 4,000 4,480
Millicom International Cellular SA 10.00% 2013(3) 3,500 3,666
SpectraSite, Inc. 8.25% 2010 1,000 1,073
GT Group Telecom Inc. 0%/13.25% 2010(4),(7),(8) 15,000 --
1,610,196
FINANCIALS -- 2.39%
Capital One Bank 6.875% 2006 21,600 22,320
Capital One Financial Corp. 7.25% 2006 3,000 3,131
Capital One Financial Corp. 8.75% 2007 3,500 3,824
Capital One Bank 4.875% 2008 20,000 20,477
Capital One Financial Corp. 7.125% 2008 22,100 24,087
Capital One Financial Corp. 6.25% 2013 30,000 32,567
Capital One Capital I 3.71% 2027(3),(5) 20,500 20,500
MBNA Corp. 5.625% 2007 10,000 10,439
MBNA Corp., Series F, 7.50% 2012 10,000 11,589
MBNA Corp., Series F, 6.125% 2013 10,000 10,819
MBNA Global Capital Funding, Series B, 2.96% 2027(5) 42,000 40,014
Rouse Co. 3.625% 2009 32,561 30,652
Rouse Co. 7.20% 2012 32,189 35,003
SocGen Real Estate Co. LLC, Series A, 7.64% (undated)(3),(5) 45,700 49,828
Societe Generale 7.85% (undated)(3),(5) 11,200 12,084
Washington Mutual, Inc. 4.375% 2008 17,000 17,193
Washington Mutual, Inc. 2.96% 2010(5) 16,000 15,998
Washington Mutual, Inc. 4.20% 2010 9,000 8,942
Washington Mutual Bank, FA 5.125% 2015 6,500 6,559
Dime Capital Trust I, Dime Bancorp, Inc., Series A, 9.33% 2027 9,425 10,908
Household Finance Corp. 4.125% 2009 15,000 14,916
Household Finance Corp. 6.375% 2011 16,000 17,672
HSBC Holdings PLC 5.25% 2012 3,500 3,647
Household Finance Corp. 6.375% 2012 10,000 11,109
HSBC Bank USA 4.625% 2014(3) 5,000 4,949
Midland Bank 3.063% Eurodollar note (undated)(5) 5,000 4,400
CIT Group Inc. 3.65% 2007 7,110 7,064
CIT Group Inc. 6.875% 2009 16,500 18,310
CIT Group Inc. 4.75% 2010 10,000 10,235
CIT Group Inc. 7.75% 2012 4,000 4,744
PRICOA Global Funding I, Series 2004-4, 4.35% 2008(3) 8,000 8,094
Prudential Financial, Inc., Series B, 5.10% 2014 3,000 3,046
Prudential Holdings, LLC, Series C, 8.695% 2023(3),(9) 22,250 28,879
ASIF Global Financing XVIII 3.85% 2007(3) 8,500 8,499
International Lease Finance Corp. 4.50% 2008 4,000 4,036
International Lease Finance Corp. 3.50% 2009 10,000 9,730
International Lease Finance Corp. 4.75% 2009 10,000 10,189
International Lease Finance Corp. 5.875% 2013 5,000 5,345
Host Marriott, LP, Series E, 8.375% 2006 4,321 4,515
Host Marriott, LP, Series G, 9.25% 2007 775 860
Host Marriott, LP, Series I, 9.50% 2007 750 816
Host Marriott, LP, Series L, 7.00% 2012(3) 17,750 18,638
Host Marriott, LP, Series K, 7.125% 2013 10,000 10,575
XL Capital Ltd. 5.25% 2014 3,000 3,039
Mangrove Bay Pass Through Trust 6.102% 2033(3),(5),(9) 20,000 20,468
Twin Reefs Pass Through Trust 3.42% (undated)(3),(5) 7,200 7,242
Allstate Financial Global Funding LLC 5.25% 2007(3) 16,750 17,246
Allstate Life Global Funding Trust, Series 2004-1, 4.50% 2009 10,000 10,166
iStar Financial, Inc. 7.00% 2008(1) 6,525 6,991
iStar Financial, Inc. 8.75% 2008(1) 1,028 1,166
iStar Financial, Inc., Series B, 4.875% 2009(1) 5,000 5,061
iStar Financial, Inc. 6.00% 2010(1) 3,750 3,956
iStar Financial, Inc., Series B, 5.125% 2011(1) 10,000 10,076
Hospitality Properties Trust 7.00% 2008 1,210 1,288
Hospitality Properties Trust 6.75% 2013 23,315 25,924
CNA Financial Corp. 6.75% 2006 4,370 4,562
CNA Financial Corp. 6.45% 2008 2,406 2,530
CNA Financial Corp. 6.60% 2008 8,630 9,256
CNA Financial Corp. 5.85% 2014 7,625 7,637
CNA Financial Corp. 7.25% 2023 2,750 3,037
Nationwide Life Insurance Co. 5.35% 2007(3) 8,500 8,766
North Front Pass Through Trust 5.81% 2024(3),(5) 10,000 10,299
Nationwide Mutual Insurance Co. 7.875% 2033(3) 5,000 6,135
EOP Operating LP 7.75% 2007 5,000 5,486
EOP Operating LP 8.10% 2010 6,500 7,582
EOP Operating LP 7.00% 2011 5,000 5,639
EOP Operating LP 6.75% 2012 4,750 5,298
United Dominion Realty Trust, Inc., Series E, 4.50% 2008 20,000 20,383
United Dominion Realty Trust, Inc. 5.00% 2012 2,500 2,495
USA Education, Inc. 5.625% 2007 12,895 13,387
SLM Corp., Series A, 4.00% 2009 2,000 1,999
SLM Corp., Series A, 5.375% 2013 7,000 7,377
Monumental Global Funding Trust II, Series 2001-B, 6.05% 2006(3) 5,000 5,124
Monumental Global Funding Trust II, Series 2002-A, 5.20% 2007(3) 16,750 17,247
ACE INA Holdings Inc. 5.875% 2014 7,000 7,252
ACE Capital Trust II 9.70% 2030 10,250 13,785
J.P. Morgan & Co. Inc. 6.70% 2007 5,000 5,384
J.P. Morgan Chase & Co. 4.00% 2008 10,000 10,027
J.P. Morgan Chase & Co. 5.75% 2013 5,000 5,345
Development Bank of Singapore Ltd. 7.875% 2010(3) 10,000 11,616
Development Bank of Singapore Ltd. 7.125% 2011(3) 5,000 5,703
Downey Financial Corp. 6.50% 2014 15,500 16,397
HBOS Treasury Services PLC 3.75% 2008(3) 14,500 14,391
Scotland International Finance No. 2 BV 4.25% 2013(3) 1,500 1,451
HBOS PLC 5.375% (undated)(3),(5) 500 519
ReliaStar Financial Corp. 8.00% 2006 8,000 8,595
ReliaStar Financial Corp. 6.50% 2008 3,000 3,235
International Nederland Bank NV 5.125% 2015(3) 3,500 3,570
MetLife, Inc. 3.911% 2005 9,760 9,793
Metropolitan Life Insurance Co. 7.00% 2005(3) 5,000 5,135
LaBranche & Co Inc. 9.50% 2009 14,000 14,420
Assurant, Inc. 5.625% 2014 13,500 14,073
Colonial Realty LP 6.25% 2014 12,025 12,903
Westfield Capital Corp. Ltd. and WT Finance (Aust) Pty Ltd. and WEA Finance LLC 5.125% 2014(3) 12,500 12,610
ProLogis Trust 7.05% 2006 12,000 12,538
Standard Chartered Bank 3.063% Eurodollar note (undated)(5) 15,000 12,100
Simon Property Group, LP 4.875% 2010 6,375 6,486
Simon Property Group, LP 6.35% 2012 5,000 5,492
Skandinaviska Enskilda Banken 7.50% (undated)(3),(5) 10,405 11,690
Kazkommerts International BV 8.50% 2013(3) 1,500 1,551
Kazkommerts International BV 7.875% 2014(3) 10,000 9,975
Federal Realty Investment Trust 6.125% 2007 10,000 10,502
Providian Financial Corp., Series A, 9.525% 2027(3) 10,000 10,450
United Overseas Bank Ltd. 5.375% 2019(3),(5) 10,000 10,241
Developers Diversified Realty Corp. 4.625% 2010 10,140 10,080
Bank of America Corp. 4.25% 2010 5,000 5,005
Bank of America Corp. 4.375% 2010 5,000 5,034
Popular North America, Inc., Series E, 3.875% 2008 10,000 9,976
TuranAlem Finance BV 8.50% 2015(3) 10,000 9,900
Duke Realty LP 4.625% 2013 10,000 9,866
Zions Bancorporation 6.00% 2015 9,000 9,673
Independence Community Bank 3.75% 2014(5) 10,000 9,622
Abbey National PLC, Series 1-B, 6.69% 2005 2,000 2,044
Abbey National PLC 6.70% (undated)(5) 1,665 1,794
Abbey National PLC 7.35% (undated)(5) 5,105 5,377
Bayerische Landesbank, Series F, 2.50% 2006 9,000 8,893
Canadian Imperial Bank of Commerce 2.125% Eurodollar note 2085(5) 10,000 8,363
Bank of Nova Scotia 2.115% Eurodollar note (undated)(5) 10,000 8,277
UFJ Finance Aruba AEC 6.75% 2013 5,000 5,639
BCI U.S. Funding Trust I 8.01% noncumulative preferred (undated)(3),(5) 5,000 5,577
Lincoln National Corp. 6.20% 2011 5,000 5,438
Irvine Co., Class A, 7.46% 2006(3),(4) 5,000 5,163
Credit Suisse First Boston (USA), Inc. 4.625% 2008 5,000 5,095
Jackson National Life Global Funding, Series 2002-1, 5.25% 2007(3) 4,000 4,141
Kimco Realty Corp. 6.00% 2012 3,250 3,533
Swedish Export Credit Corp. 4.00% 2010 3,500 3,503
HVB Funding Trust III 9.00% 2031(3) 2,600 3,496
National Westminster Bank PLC 7.75% (undated)(5) 3,024 3,289
BNP Paribas 5.125% 2015(3) 3,000 3,102
Principal Life Global Funding I 4.40% 2010(3) 3,000 3,016
Barclays Bank PLC 6.86% callable perpetual core tier one notes (undated)(3),(5) 1,650 1,928
1,278,117
MORTGAGE-BACKED OBLIGATIONS(9) -- 1.97%
Fannie Mae 9.00% 2010 476 504
Fannie Mae 6.00% 2016 2,222 2,328
Fannie Mae 6.00% 2016 1,201 1,258
Fannie Mae 7.00% 2016 465 492
Fannie Mae 5.00% 2018 24,975 25,448
Fannie Mae 5.50% 2018 23,969 24,761
Fannie Mae 10.00% 2018 620 701
Fannie Mae 9.50% 2022 606 667
Fannie Mae 7.50% 2023 367 395
Fannie Mae 7.50% 2023 38 41
Fannie Mae 8.00% 2024 381 412
Fannie Mae 10.00% 2025 401 454
Fannie Mae, Series 2001-4, Class GA, 10.245% 2025(5) 1,972 2,235
Fannie Mae, Series 2001-4, Class NA, 11.822% 2025(5) 188 217
Fannie Mae, Series 2002-W3, Class A-5, 7.50% 2028 1,884 2,025
Fannie Mae 6.50% 2031 1,017 1,065
Fannie Mae 7.00% 2031 1,528 1,619
Fannie Mae 7.00% 2031 1,087 1,152
Fannie Mae 7.00% 2031 634 672
Fannie Mae 7.50% 2031 796 853
Fannie Mae, Series 2001-20, Class E, 9.595% 2031(5) 1,890 2,109
Fannie Mae 6.50% 2032 4,915 5,148
Fannie Mae 6.50% 2032 2,711 2,840
Fannie Mae 3.804% 2033(5) 8,195 8,166
Fannie Mae 6.50% 2033 6,239 6,535
Fannie Mae 5.50% 2034 25,000 25,473
Fannie Mae 6.00% 2034 7,128 7,369
Fannie Mae 6.00% 2034 5,053 5,239
Fannie Mae 6.00% 2034 4,468 4,622
Fannie Mae 6.00% 2034 3,598 3,731
Fannie Mae 6.00% 2034 2,085 2,162
Fannie Mae 6.00% 2034 1,972 2,038
Fannie Mae 6.00% 2034 1,639 1,694
Fannie Mae 6.00% 2034 1,359 1,405
Fannie Mae 6.00% 2034 1,168 1,208
Fannie Mae 6.00% 2034 599 621
Fannie Mae 5.50% 2035 104,300 105,888
Fannie Mae 5.50% 2035 11,000 11,211
Fannie Mae 6.00% 2035 339 351
Fannie Mae, Series 2001-50, Class BA, 7.00% 2041 3,579 3,814
Fannie Mae, Series 2001-T10, Class A-1, 7.00% 2041 2,374 2,494
Fannie Mae, Series 2002-W1, Class 2A, 7.50% 2042 4,092 4,357
CHL Mortgage Pass-Through Trust, Series 2003-27, Class A-1, 3.781% 2033(5) 7,669 7,619
CHL Mortgage Pass-Through Trust, Series 2003-56, Class 6-A-1, 4.885% 2033(5) 31,179 31,502
CHL Mortgage Pass-Through Trust, Series 2003-58, Class 2-A-2, 4.638% 2034(5) 55,935 55,796
CHL Mortgage Pass-Through Trust, Series 2004-22, Class A-2, 4.73% 2034(5) 9,008 8,985
Merrill Lynch Mortgage Investors, Inc., Series 1999-C1, Class A-2, 7.56% 2031 11,750 12,999
Merrill Lynch Mortgage Investors, Inc., Series 2003-A6, Class II-A, 4.258% 2033(5) 54,892 54,778
Merrill Lynch Mortgage Investors, Inc., Series 2004-A4, Class A-1, 4.289% 2034(5) 28,296 27,931
Merrill Lynch Mortgage Investors, Inc., Series 2004-A1, Class II-A-1, 4.67% 2034(5) 6,664 6,641
Freddie Mac 9.00% 2007 102 105
Freddie Mac 8.50% 2008 25 26
Freddie Mac, Series SF02, Class GC, 2.64% 2009 5,000 4,878
Freddie Mac 8.50% 2009 166 175
Freddie Mac 8.50% 2010 249 264
Freddie Mac 5.00% 2018 16,540 16,841
Freddie Mac 5.50% 2018 8,163 8,427
Freddie Mac 11.00% 2018 572 648
Freddie Mac, Series 178, Class Z, 9.25% 2021 201 201
Freddie Mac, Series 2289, Class NB, 11.446% 2022(5) 433 487
Freddie Mac 5.00% 2033 17,985 18,000
Freddie Mac 6.00% 2033 14,911 15,423
Freddie Mac 6.00% 2033 7,556 7,815
Freddie Mac 6.00% 2034 9,659 9,990
Freddie Mac 6.00% 2035 3,815 3,946
Freddie Mac, Series T-056, Class A-2A, 2.842% 2036 5,863 5,820
CS First Boston Mortgage Securities Corp., Series 2003-AR20, Class II-A-2, 3.988% 2033(5) 4,283 4,272
CS First Boston Mortgage Securities Corp., Series 2003-AR26, Class VI-A-1, 4.224% 2033(5) 54,928 54,557
CS First Boston Mortgage Securities Corp., Series 2001-CF2, Class A-2, 5.935% 2034 8,635 8,791
CS First Boston Mortgage Securities Corp., Series 2004-5, Class IV-A-1, 6.00% 2034 8,747 8,963
CS First Boston Mortgage Securities Corp., Series 2001-CF2, Class A-3, 6.238% 2034 6,000 6,354
CS First Boston Mortgage Securities Corp., Series 1998-C1, Class A-1A, 6.26% 2040 1,360 1,378
Banc of America Mortgage Securities Trust, Series 2003-G, Class 2-A-1, 4.088% 2033(5) 5,031 5,021
Banc of America Mortgage Securities Trust, Series 2003-D, Class 2-A-1, 4.183% 2033(5) 4,822 4,807
Banc of America Mortgage Securities Trust, Series 2003-J, Class 2-A-2, 4.458% 2033(5) 53,102 53,377
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR10, Class A-3-B, 3.89% 2033(5) 14,000 13,976
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR8, Class A, 4.03% 2033(5) 6,013 5,933
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR5, Class A-7, 4.208% 2033(5) 11,934 11,959
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR6, Class A-1, 4.362% 2033(5) 4,401 4,402
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR1, Class A-6, 4.502% 2033(5) 1,367 1,372
WaMu Mortgage Pass-Through Certificates Trust, Series 2004-AR1, Class A, 4.229% 2034(5) 6,082 6,017
WaMu Mortgage Pass-Through Certificates Trust, Series 2004-AR11, Class A, 4.654% 2034(5) 8,034 8,058
Bear Stearns ARM Trust, Series 2003-3, Class II-A-2, 4.14% 2033(5) 1,979 1,978
Bear Stearns ARM Trust, Series 2003-9, Class III-A-3, 4.421% 2034(5) 1,421 1,414
Bear Stearns ARM Trust, Series 2003-8, Class II-A-1, 4.889% 2034(5) 43,463 43,881
Bear Stearns ARM Trust, Series 2003-9, Class III-A-2, 5.046% 2034(5) 3,498 3,554
Government National Mortgage Assn. 9.50% 2009 630 674
Government National Mortgage Assn. 9.00% 2016 89 98
Government National Mortgage Assn. 5.50% 2017 5,741 5,977
Government National Mortgage Assn. 7.50% 2017 95 102
Government National Mortgage Assn. 7.50% 2017 36 39
Government National Mortgage Assn. 8.00% 2017 140 152
Government National Mortgage Assn. 8.00% 2017 46 50
Government National Mortgage Assn. 8.00% 2017 42 45
Government National Mortgage Assn. 8.00% 2017 40 44
Government National Mortgage Assn. 8.00% 2017 38 42
Government National Mortgage Assn. 8.00% 2017 35 38
Government National Mortgage Assn. 8.00% 2017 30 32
Government National Mortgage Assn. 8.00% 2017 27 30
Government National Mortgage Assn. 8.00% 2017 24 26
Government National Mortgage Assn. 8.00% 2017 15 16
Government National Mortgage Assn. 8.50% 2017 41 44
Government National Mortgage Assn. 8.50% 2017 9 10
Government National Mortgage Assn. 8.50% 2017 9 10
Government National Mortgage Assn. 10.00% 2020 1,646 1,879
Government National Mortgage Assn. 8.50% 2021 407 446
Government National Mortgage Assn. 8.50% 2021 109 120
Government National Mortgage Assn. 8.50% 2021 7 8
Government National Mortgage Assn. 9.50% 2021 250 279
Government National Mortgage Assn. 10.00% 2021 2,535 2,894
Government National Mortgage Assn. 7.00% 2022 108 115
Government National Mortgage Assn. 7.00% 2022 49 52
Government National Mortgage Assn. 7.50% 2022 749 807
Government National Mortgage Assn. 7.50% 2022 98 106
Government National Mortgage Assn. 7.50% 2023 193 208
Government National Mortgage Assn. 7.50% 2023 191 205
Government National Mortgage Assn. 7.50% 2023 110 118
Government National Mortgage Assn. 7.50% 2023 107 115
Government National Mortgage Assn. 7.50% 2023 79 85
Government National Mortgage Assn. 7.50% 2023 71 76
Government National Mortgage Assn. 7.50% 2023 70 76
Government National Mortgage Assn. 7.50% 2023 68 73
Government National Mortgage Assn. 7.50% 2023 60 64
Government National Mortgage Assn. 7.50% 2023 33 36
Government National Mortgage Assn. 7.50% 2023 16 17
Government National Mortgage Assn. 8.00% 2023 733 797
Government National Mortgage Assn. 8.00% 2023 480 521
Government National Mortgage Assn. 7.50% 2024 537 578
Government National Mortgage Assn. 10.00% 2025 2,361 2,688
Government National Mortgage Assn. 7.00% 2026 34 36
Government National Mortgage Assn. 7.50% 2026 177 191
Government National Mortgage Assn. 7.00% 2027 127 136
Government National Mortgage Assn. 7.00% 2028 460 491
Government National Mortgage Assn. 7.00% 2029 2,398 2,555
Government National Mortgage Assn. 7.50% 2029 3,218 3,468
Government National Mortgage Assn. 7.50% 2029 1,011 1,089
Government National Mortgage Assn. 7.50% 2029 827 891
Government National Mortgage Assn. 7.50% 2029 307 331
Government National Mortgage Assn. 7.50% 2030 675 727
Government National Mortgage Assn. 7.00% 2031 262 279
Chase Commercial Mortgage Securities Corp., Series 1998-1, Class A-2, 6.56% 2030 7,023 7,516
Chase Commercial Mortgage Securities Corp., Series 2000-1, Class A-2, 7.757% 2032 15,675 17,940
Bear Stearns Commercial Mortgage Securities Inc., Series 2004-HS2, Class J, 4.55% 2016(3),(5) 4,500 4,527
Bear Stearns Commercial Mortgage Securities Inc., Series 1999-C1, Class X,
interest only, 1.163% 2031(3),(5) 80,644 3,395
Bear Stearns Commercial Mortgage Securities Inc., Series 2002-PBW1, Class A-1, 3.97% 2035 8,964 8,937
Bear Stearns Commercial Mortgage Securities Inc., Series 2001-TOP2, Class A-2, 6.48% 2035 7,665 8,510
L.A. Arena Funding, LLC, Series 1, Class A, 7.656% 2026(3) 22,002 24,051
GS Mortgage Securities Corp. II, Series 1998-C1, Class D, 7.212% 2030(5) 20,000 21,673
Morgan Stanley Mortgage Trust, Series 2004-3, Class 4-A, 5.713% 2034(5) 14,237 14,377
GE Capital Commercial Mortgage Corp., Series 2001-1, Class A-1, 6.079% 2033 4,253 4,470
GE Capital Commerical Mortgage Corp., Series 2002-3, Class A-1, 4.229% 2037 9,314 9,327
Host Marriott Pool Trust, Series 1999-HMTA, Class D, 7.97% 2015(3) 10,990 12,012
Banc of America Commercial Mortgage Inc., Series 2001-1, Class A-2, 6.503% 2036 10,000 11,102
Salomon Brothers Commercial Mortgage Trust, Series 2000-C1, Class A-1, 7.46% 2008 3,587 3,869
Salomon Brothers Commercial Mortgage Trust, Series 2000-C3, Class A-1, 6.341% 2033(3) 6,258 6,554
Wachovia Bank Commercial Mortgage Trust, Series 2002-C1, Class A-2, 5.681% 2034 8,200 8,562
First Union Natioanl Bank- Bank of America, N.A. Commercial Mortgage Trust,
Series 2001-C1, Class A-1, 5.711% 2033 8,134 8,460
Morgan Stanley Capital I, Inc., Series 2003-KIDS, Class A, 3.13% 2016(3),(5) 4,830 4,849
Morgan Stanley Capital I, Inc., Series 1998-WF2, Class A-1, 6.34% 2030 888 890
Metropolitan Asset Funding, Inc., Series 1998-A, Class B-1, 7.728% 2014(3) 4,669 4,497
PNC Mortgage Securities Corp., Series 1998-10, Class 1-B1, 6.50% 2028 4,395 4,389
First Union-Lehman Brothers-Bank of America Commercial Mortgage Trust,
Series 1998-C2, Class A-1, 6.28% 2035 3,153 3,164
Morgan Stanley Dean Witter Capital I Trust, Series 2002-HQ, Class A-1, 4.59% 2034 1,737 1,752
Wells Fargo Mortgage Backed Securities Trust, Series 2003-B, Class A-1, 4.15% 2033(5) 1,161 1,155
Structured Asset Securities Corp., Series 1998-RF2, Class A, 8.545% 2027(3),(5) 566 600
Structured Asset Securities Corp., Series 1998-RF1, Class A, 8.747% 2027(3),(5) 436 455
Financial Asset Securitization, Inc., Series 1997-NAM1, Class B-1, 7.75% 2027 778 777
First Nationwide Trust, Series 1999-2, Class 1PA-1, 6.50% 2029 256 258
1,053,189
U.S. GOVERNMENT & GOVERNMENT AGENCY BONDS & NOTES -- 1.56%
U.S. Treasury 5.75% 2005 239,500 244,776
U.S. Treasury 3.25% 2007 41,180 41,080
U.S. Treasury 4.375% 2007 50,000 51,156
U.S. Treasury 2.625% 2008 5,000 4,869
U.S. Treasury 3.625% 2008(10) 52,610 56,720
U.S. Treasury 3.875% 2009(10) 41,053 45,515
U.S. Treasury Principal Strip 0% 2011 5,660 4,376
U.S. Treasury 3.50% 2011(10) 10,974 12,380
U.S. Treasury Principal Strip 0% 2013 11,585 8,005
U.S. Treasury Principal Strip 0% 2015 13,850 8,641
U.S. Treasury 9.25% 2016 10,000 14,389
U.S. Treasury 8.875% 2017 15,025 21,526
U.S. Treasury 8.75% 2020 12,105 17,792
U.S. Treasury 6.875% 2025 106,000 137,038
Freddie Mac 4.25% 2005 75,000 75,375
Freddie Mac 1.875% 2006 3,765 3,716
Federal Home Loan Bank 2.00% 2006 29,865 29,514
Federal Home Loan Bank 2.375% 2006 26,870 26,582
Fannie Mae 6.625% 2009 24,750 27,498
Fannie Mae 7.25% 2030 3,250 4,307
835,255
INDUSTRIALS -- 1.43%
Browning-Ferris Industries, Inc. 7.875% 2005 3,000 3,015
Allied Waste North America, Inc., Series B, 7.625% 2006 29,840 30,661
Allied Waste North America, Inc. 8.50% 2008 4,800 5,028
Allied Waste North America, Inc., Series B, 8.875% 2008 48,750 51,188
Allied Waste North America, Inc., Series B, 6.50% 2010 16,000 15,280
Allied Waste North America, Inc., Series B, 5.75% 2011 8,000 7,340
Allied Waste North America, Inc., Series B, 6.125% 2014 7,925 7,232
Allied Waste North America, Inc., Series B, 7.375% 2014 4,500 4,118
Northwest Airlines, Inc. 7.625% 2005 9,000 9,056
Northwest Airlines, Inc. 8.875% 2006 2,200 1,980
Northwest Airlines, Inc. 9.875% 2007 37,400 30,855
Northwest Airlines, Inc. 7.875% 2008 22,000 16,060
Northwest Airlines, Inc. 10.00% 2009 47,000 34,780
Northwest Airlines, Inc., Series 1999-2, Class A, 7.575% 2020(9) 2,536 2,579
Northwest Airlines, Inc., Series 2001-1, Class A-1, 7.041% 2023(9) 4,340 4,326
Bombardier Capital Inc., Series A, 6.125% 2006(3) 10,000 10,150
Bombardier Inc. 6.75% 2012(3) 30,530 27,630
Bombardier Inc. 6.30% 2014(3) 35,500 30,619
Cendant Corp. 6.25% 2008 28,000 29,717
Cendant Corp. 7.375% 2013 24,250 28,224
Delta Air Lines, Inc. 8.00% 2007(3) 62,396 36,190
Delta Air Lines, Inc., Series 2001-1, Class A-2, 7.111% 2013(9) 10,000 9,472
Delta Air Lines, Inc., Series 1992-A2, 9.20% 2014(9) 5,000 2,500
Delta Air Lines, Inc. 10.375% 2022 3,000 1,245
Tyco International Group SA 6.125% 2008 15,000 16,062
Tyco International Group SA 6.375% 2011 27,915 30,901
Hutchison Whampoa International Ltd. 7.00% 2011(3) 5,000 5,599
Hutchison Whampoa International Ltd. 6.50% 2013(3) 21,000 22,868
Hutchison Whampoa Finance Ltd., Series B, 7.45% 2017(3) 6,750 7,793
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class B, 7.156% 2011(3),(9) 25,998 28,326
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class G, MBIA insured, 6.664% 2013(3),(9) 6,584 7,264
American Standard Inc. 7.375% 2008 5,935 6,482
American Standard Inc. 8.25% 2009 2,124 2,447
American Standard Inc. 7.625% 2010 22,601 25,786
Waste Management, Inc. 7.00% 2006 7,000 7,381
Waste Management, Inc. 6.50% 2008 5,000 5,421
Waste Management, Inc. 5.00% 2014 7,000 7,074
WMX Technologies, Inc. 7.10% 2026 10,125 11,808
Horizon Lines, LLC and Horizon Lines Holding Corp. 9.00% 2012(3) 14,090 15,006
H-Lines Finance Holding Corp. 0%/11.00% 2013(3),(7) 13,000 9,295
General Electric Capital Corp., Series A, 5.375% 2007 8,000 8,277
General Electric Capital Corp., Series A, 6.00% 2012 8,000 8,757
General Electric Co. 5.00% 2013 5,000 5,161
Raytheon Co. -- RC Trust I 7.00% trust preferred 2006 18,000 18,799
Southwest Airlines Co. 5.25% 2014 15,000 15,106
Continental Airlines, Inc. 8.00% 2005 5,010 4,947
Continental Airlines, Inc., Series 2001-1, Class B, 7.373% 2017(9) 7,796 6,253
Continental Airlines, Inc., Series 2001-1, Class A-1, 6.703% 2021(9) 4,033 3,853
Jacuzzi Brands, Inc. 9.625% 2010 13,441 15,054
Caterpillar Inc. 4.50% 2009 10,000 10,196
Nortek, Inc. 8.50% 2014(3) 9,325 9,628
John Deere Capital Corp. 3.90% 2008 9,000 9,028
TFM, SA de CV 10.25% 2007 1,150 1,233
TFM, SA de CV 11.75% 2009 2,675 2,708
TFM, SA de CV 12.50% 2012 4,165 4,873
American Airlines, Inc., Series 2003-1, Class G, AMBAC insured, 3.857% 2010(9) 2,235 2,177
American Airlines, Inc., Series 2001-2, Class A-1, 6.978% 2012(9) 4,573 4,634
Kansas City Southern Railway Co. 7.50% 2009 5,750 6,009
Terex Corp., Class B, 10.375% 2011 2,000 2,230
Terex Corp. 7.375% 2014 3,500 3,693
America West Airlines, Inc., Series 2000-1, Class G, AMBAC insured, 8.057% 2022(9) 4,904 5,391
KinderCare Learning Centers, Inc., Series B, 9.50% 2009 4,990 5,009
AGCO Corp. 9.50% 2008 3,500 3,723
United Air Lines, Inc. 9.00% 2003(11) 8,000 710
United Air Lines, Inc., Series 1996-A2, 7.87% 2019(8),(9) 5,000 2,164
Jet Equipment Trust, Series 1995-A, Class B, 8.64% 2015(3),(8),(9) 7,790 1
Jet Equipment Trust, Series 1995-B, Class C, 9.71% 2015(3),(8),(9) 5,500 1
768,373
MATERIALS -- 1.34%
Abitibi-Consolidated Co. of Canada 6.95% 2006 500 518
Abitibi-Consolidated Co. of Canada 5.25% 2008 24,500 24,010
Abitibi-Consolidated Finance LP 7.875% 2009 12,000 12,570
Abitibi-Consolidated Inc. 8.55% 2010 16,000 17,260
Abitibi-Consolidated Co. of Canada 5.99% 2011(5) 11,850 12,206
Abitibi-Consolidated Co. of Canada 6.00% 2013 13,850 13,123
Owens-Illinois, Inc. 8.10% 2007 750 795
Owens-Illinois, Inc. 7.35% 2008 9,800 10,266
Owens-Brockway Glass Container Inc. 8.875% 2009 20,975 22,784
Owens-Illinois, Inc. 7.50% 2010 750 793
Owens-Brockway Glass Container Inc. 7.75% 2011 13,500 14,580
Owens-Brockway Glass Container Inc. 8.75% 2012 6,000 6,705
Owens-Brockway Glass Container Inc. 8.25% 2013 14,000 15,295
Georgia-Pacific Corp. 7.50% 2006 6,500 6,801
Fort James Corp. 6.875% 2007 5,000 5,313
Georgia-Pacific Corp. 7.375% 2008 15,000 16,313
Georgia-Pacific Corp. 8.875% 2010 14,125 16,420
Georgia-Pacific Corp. 8.125% 2011 8,935 10,320
Georgia-Pacific Corp. 9.50% 2011 7,600 9,405
Georgia-Pacific Corp. 9.375% 2013 250 289
Georgia-Pacific Corp. 7.70% 2015 950 1,097
Lyondell Chemical Co. 9.50% 2008 31,050 33,689
Equistar Chemicals, LP 10.125% 2008 5,825 6,670
Equistar Chemicals, LP and Equistar Funding Corp. 8.75% 2009 625 691
Equistar Chemicals, LP and Equistar Funding Corp. 10.625% 2011 3,550 4,100
Lyondell Chemical Co. 11.125% 2012 4,825 5,694
Norske Skogindustrier ASA 7.625% 2011(3) 35,151 40,434
Norske Skogindustrier ASA 6.125% 2015(3) 9,000 9,376
Boise Cascade, LLC and Boise Cascade Finance Corp. 5.535% 2012(3),(5) 250 258
Boise Cascade, LLC and Boise Cascade Finance Corp. 7.125% 2014(3) 34,730 36,553
Graphic Packaging International, Inc. 8.50% 2011 16,150 17,523
Graphic Packaging International, Inc. 9.50% 2013 10,000 11,200
United States Steel Corp. 10.75% 2008 10,500 12,469
United States Steel Corp. 9.75% 2010 13,205 15,153
Freeport-McMoRan Copper & Gold Inc. 10.125% 2010 23,890 27,115
Smurfit Capital Funding PLC 6.75% 2005 3,425 3,511
JSG Funding PLC 9.625% 2012 2,200 2,442
JSG Funding PLC 15.50% 2013(6) 3,050 3,607
JSG Funding PLC 7.75% 2015(3) 17,650 17,474
Weyerhaeuser Co. 5.95% 2008 8,529 9,069
Weyerhaeuser Co. 5.25% 2009 6,005 6,250
Weyerhaeuser Co. 6.75% 2012 9,000 10,218
Stone Container Corp. 9.25% 2008 8,375 9,213
Stone Container Corp. 9.75% 2011 875 960
Jefferson Smurfit Corp. (U.S.) 8.25% 2012 2,250 2,396
Stone Container Corp. 8.375% 2012 4,500 4,793
Jefferson Smurfit Corp. (U.S.) 7.50% 2013 7,750 8,041
Crystal US Holdings 3 LLC and Crystal US Sub 3 Corp., Series B, 0%/10.50% 2014(3),(7) 19,000 12,991
BCP Caylux Holdings Luxembourg SCA 9.625% 2014(3) 7,000 7,805
Scotia Pacific Co. LLC, Series B, Class A-2, 7.11% 2028(9) 7,400 6,591
Scotia Pacific Co. LLC, Series B, Class A-3, 7.71% 2028 16,000 12,640
Packaging Corp. of America 4.375% 2008 9,500 9,521
Packaging Corp. of America 5.75% 2013 9,250 9,593
Ainsworth Lumber Co. Ltd. 7.25% 2012(3) 8,925 8,970
Ainsworth Lumber Co. Ltd. 6.75% 2014 10,000 9,738
Temple-Inland Inc. 7.875% 2012 14,570 17,342
Phelps Dodge Corp. 8.75% 2011 10,000 12,281
Allegheny Technologies, Inc. 8.375% 2011 10,500 11,550
International Paper Co. 4.00% 2010 7,500 7,368
International Paper Co. 6.75% 2011 2,500 2,814
ICI Wilmington, Inc. 4.375% 2008 5,415 5,446
ICI Wilmington, Inc. 5.625% 2013 3,000 3,131
Ispat Inland ULC 9.75% 2014 6,719 8,315
AMH Holdings, Inc. 0%/11.25% 2014(7) 11,500 8,280
Ball Corp. 6.875% 2012 6,000 6,420
Huntsman LLC 11.50% 2012(3) 5,000 5,950
Crompton Corp. 7.67% 2010(3),(5) 4,775 5,193
Rhodia 10.25% 2010 4,475 5,113
Gerdau Ameristeel Corp. and GUSAP Partners 10.375% 2011 4,125 4,785
Inco Ltd. 7.75% 2012 4,000 4,763
Building Materials Corp. of America, Series B, 8.00% 2007 3,500 3,579
Earle M. Jorgensen Co. 9.75% 2012 2,000 2,245
Oregon Steel Mills, Inc. 10.00% 2009 1,750 1,951
Corporacion Nacional del Cobre de Chile 6.375% 2012(3) 1,500 1,670
AK Steel Corp. 7.75% 2012 1,575 1,626
Rockwood Specialties Group, Inc. 7.50% 2014(3) 1,175 1,216
Pindo Deli Finance Mauritius Ltd. 10.25% 2002(11) 4,000 1,140
715,789
UTILITIES -- 1.24%
Southern California Edison, First and Refunding Mortgage Bonds, 8.00% 2007 15,495 16,771
Edison Mission Energy 10.00% 2008 14,250 16,530
Mission Energy Holding Co. 13.50% 2008 22,230 27,843
Edison Mission Energy 7.73% 2009 16,720 17,807
Edison Mission Energy 9.875% 2011 29,330 34,426
Midwest Generation, LLC, Series B, 8.56% 2016(9) 11,000 12,327
Homer City Funding LLC 8.734% 2026(9) 9,989 11,787
Midwest Generation, LLC and Midwest Finance Corp. 8.75% 2034 24,675 27,698
AES Corp. 9.50% 2009 20,915 23,529
AES Corp. 9.375% 2010 8,752 9,944
AES Corp. 8.75% 2013(3) 63,200 71,100
AES Corp. 9.00% 2015(3) 4,750 5,391
AES Red Oak, LLC, Series B, 9.20% 2029(9) 2,000 2,250
Nevada Power Co., General and Refunding Mortgage Bonds, Series A, 8.25% 2011 6,000 6,878
Nevada Power Co., General and Refunding Mortgage Notes, Series I, 6.50% 2012 4,250 4,494
Nevada Power Co., General and Refunding Mortgage Notes, Series G, 9.00% 2013 24,025 27,869
Sierra Pacific Resources 8.625% 2014 2,725 3,042
Nevada Power Co., Series I, 5.875% 2015(3) 5,675 5,718
Dynegy Holdings Inc. 9.875% 2010(3) 11,750 12,925
Dynegy Holdings Inc. 10.125% 2013(3) 26,400 29,436
Israel Electric Corp. Ltd. 7.70% 2018(3) 22,500 25,862
Israel Electric Corp. Ltd. 8.10% 2096(3) 14,405 15,222
Virginia Electric and Power Co., Series 2002-A, 5.375% 2007 8,000 8,251
Dominion Resources, Inc., Series 2002-D, 5.125% 2009 22,500 23,205
Duke Capital Corp. 7.50% 2009 14,500 16,334
Duke Capital Corp. 6.25% 2013 4,500 4,891
Duke Capital Corp. 5.50% 2014 5,000 5,148
Duke Capital LLC 5.668% 2014 3,000 3,125
PSEG Energy Holdings Inc. 8.625% 2008 8,800 9,515
PSEG Power LLC 7.75% 2011 7,500 8,766
PSEG Power LLC 5.00% 2014 10,000 10,029
NiSource Finance Corp. 7.625% 2005 9,000 9,293
NiSource Finance Corp. 7.875% 2010 15,000 17,614
Alabama Power Co., Series U, 2.65% 2006 5,000 4,967
Alabama Power Co., Series X, 3.125% 2008 3,750 3,668
Alabama Power Co., Series R, 4.70% 2010 1,250 1,276
Southern Power Co., Series B, 6.25% 2012 9,000 9,892
Alabama Power Co., Series Q, 5.50% 2017 5,000 5,276
TXU Corp., Series O, 4.80% 2009(3) 12,000 11,963
Oncor Electric Delivery Co. 6.375% 2015 5,000 5,559
Reliant Energy Resources Corp. 7.75% 2011 13,000 15,092
Cilcorp Inc. 8.70% 2009 9,000 10,596
Cilcorp Inc. 9.375% 2029 3,000 4,391
Exelon Corp. 6.75% 2011 1,000 1,118
Exelon Generation Co., LLC 6.95% 2011 11,300 12,758
Constellation Energy Group, Inc. 6.125% 2009 12,000 12,952
Progress Energy, Inc. 6.75% 2006 5,000 5,168
Progress Energy, Inc. 5.85% 2008 2,500 2,637
Progress Energy, Inc. 7.10% 2011 2,500 2,815
Appalachian Power Co., Series G, 3.60% 2008 6,770 6,676
NRG Energy, Inc. 8.00% 2013(3) 6,000 6,495
Pacific Gas and Electric Co., First Mortgage Bonds, 6.05% 2034 4,000 4,315
MidAmerican Energy Co. 4.65% 2014 3,200 3,188
Tri-State Generation and Transmission Association Inc., Pass Through Trust,
Series 2003-A, 6.04% 2018(3),(9) 2,965 3,155
Texas Genco LLC and Texas Genco Financing Corp. 6.875% 2014(3) 2,800 2,912
661,889
ENERGY -- 1.08%
Port Arthur Finance Corp. 12.50% 2009(9) 497 584
Premcor Refining Group Inc. 9.25% 2010 13,875 15,609
Premcor Refining Group Inc. 6.125% 2011 47,500 49,519
Premcor Refining Group Inc. 6.75% 2011 15,650 16,785
Premcor Refining Group Inc. 7.75% 2012 3,000 3,278
Premcor Refining Group Inc. 9.50% 2013 57,215 66,083
Premcor Refining Group Inc. 6.75% 2014 49,000 51,573
Premcor Refining Group Inc. 7.50% 2015 22,000 23,760
Williams Companies, Inc. 6.75% 2009(3) 8,000 8,460
Northwest Pipeline Corp. 8.125% 2010 5,000 5,544
Transcontinental Gas Pipe Line Corp., Series B, 7.00% 2011 19,765 21,742
Williams Companies, Inc. 7.125% 2011 41,750 45,612
Williams Companies, Inc. 8.125% 2012 12,910 14,911
Williams Companies, Inc. 7.875% 2021 10,000 11,400
Williams Companies, Inc. 8.75% 2032 5,000 6,025
Newfield Exploration Co., Series B, 7.45% 2007 6,000 6,450
Newfield Exploration Co. 7.625% 2011 1,500 1,688
Newfield Exploration Co. 8.375% 2012 11,400 12,711
Newfield Exploration Co. 6.625% 2014(3) 32,075 34,000
Ras Laffan Liquefied Natural Gas Co. Ltd. 3.437% 2009(3),(9) 43,661 42,919
Ras Laffan Liquefied Natural Gas Co. Ltd. 3.437% 2009(9) 769 756
Tengizchevroil Finance Co. S.ar.l., Series A, 6.124% 2014(3),(9) 24,500 24,837
General Maritime Corp. 10.00% 2013 20,225 23,208
Overseas Shipholding Group, Inc. 8.25% 2013 19,660 21,724
Devon Financing Corp., ULC 6.875% 2011 17,000 19,257
Western Oil Sands Inc. 8.375% 2012 10,175 11,956
XTO Energy Inc. 7.50% 2012 8,850 10,405
Oryx Energy Co. 8.125% 2005 8,500 8,713
Pemex Project Funding Master Trust 7.875% 2009 1,600 1,788
Pemex Project Funding Master Trust 7.375% 2014 3,500 3,920
Pemex Project Funding Master Trust 8.625% 2022 500 595
OXYMAR 7.50% 2016(3) 5,500 5,787
PETRONAS Capital Ltd. 7.00% 2012(3) 4,000 4,586
Reliance Industries Ltd., Series B, 10.25% 2097 3,125 3,535
579,720
INFORMATION TECHNOLOGY -- 1.05%
Electronic Data Systems Corp. 6.334% 2006 10,000 10,334
Electronic Data Systems Corp. 7.125% 2009 50,905 55,668
Electronic Data Systems Corp., Series B, 6.50% 2013(5) 132,150 139,837
Motorola, Inc. 4.608% 2007 35,000 35,536
Motorola, Inc. 8.00% 2011 42,985 51,569
Motorola, Inc. 5.22% 2097 14,506 12,291
Jabil Circuit, Inc. 5.875% 2010 53,450 56,091
Flextronics International Ltd. 6.50% 2013 47,375 48,204
Sanmina-SCI Corp. 10.375% 2010 35,500 40,470
Solectron Corp., Series B, 7.375% 2006 5,450 5,614
Solectron Corp. 9.625% 2009 27,775 30,553
Xerox Corp. 7.125% 2010 21,000 22,733
Nortel Networks Ltd. 6.125% 2006 21,000 21,394
Freescale Semiconductor, Inc. 6.875% 2011 15,000 16,013
MagnaChip Semiconductor SA and MagnaChip Semiconductor Finance Co. 5.76% 2011(3),(5) 7,275 7,539
MagnaChip Semiconductor SA and MagnaChip Semiconductor Finance Co. 6.875% 2011(3) 975 1,009
Hyundai Semiconductor America, Inc. 8.625% 2007(3) 4,860 5,006
Micron Technology, Inc. 6.50% 2005(3),(9) 905 898
560,759
CONSUMER STAPLES -- 0.98%
Ahold Finance U.S.A., Inc. 6.25% 2009 71,668 75,251
Ahold Finance U.S.A., Inc. 8.25% 2010 57,355 65,098
Ahold Lease Pass Through Trust, Series 2001-A-1, 7.82% 2020(9) 13,278 14,382
Ahold Lease Pass Through Trust, Series 2001-A-2, 8.62% 2025(9) 8,775 9,614
Rayovac Corp. 7.375% 2015(3) 53,850 54,590
Jean Coutu Group (PJC) Inc. 7.625% 2012(3) 2,500 2,613
Jean Coutu Group (PJC) Inc. 8.50% 2014(3) 48,000 48,120
Delhaize America, Inc. 7.375% 2006 10,000 10,432
Delhaize America, Inc. 8.125% 2011 22,245 25,972
Delhaize America, Inc. 9.00% 2031 5,150 6,850
Burns Philp Capital Pty Ltd. and Burns Philp Capital (U.S.) Inc., Series B, 9.50% 2010 3,000 3,300
Burns Philp Capital Pty Ltd. and Burns Philp Capital (U.S.) Inc., Series B, 10.75% 2011 8,675 9,716
Burns Philp Capital Pty Ltd., Series B, 9.75% 2012 12,100 13,250
Rite Aid Corp. 6.875% 2013 $12,450 $ 11,330
Rite Aid Corp. 9.25% 2013 12,550 12,550
Kraft Foods Inc. 6.25% 2012 14,000 15,427
Kraft Foods Inc. 6.50% 2031 5,000 5,699
SUPERVALU INC. 7.50% 2012 17,740 20,685
Kellogg Co. 6.00% 2006 10,000 10,289
Kellogg Co. 7.45% 2031 5,000 6,499
Anheuser-Busch Cos. Inc. 9.00% 2009 10,000 12,065
Anheuser-Busch Cos. Inc. 4.70% 2012 4,000 4,097
Stater Bros. Holdings Inc. 5.99% 2010(5) 6,525 6,753
Stater Bros. Holdings Inc. 8.125% 2012 5,725 6,054
CVS Corp. 5.789% 2026(3),(9) 7,322 7,661
CVS Corp. 5.298% 2027(3),(9) 3,450 3,491
Playtex Products, Inc. 8.00% 2011 10,000 10,950
Pepsi Bottling Holdings Inc. 5.625% 2009(3) 10,000 10,625
Cadbury Schweppes US Finance LLC 5.125% 2013(3) 10,000 10,245
Winn Dixie Pass-Through Trust, Series 1999-1, Class A-1, 7.803% 2017(3),(9) 8,317 6,867
Gold Kist Inc. 10.25% 2014 5,306 6,181
Duane Reade Inc. 7.01% 2010(3),(5) 6,000 6,150
PepsiAmericas, Inc. 4.875% 2015 6,000 6,057
Pathmark Stores, Inc. 8.75% 2012 5,620 5,402
524,265
HEALTH CARE -- 0.89%
Columbia/HCA Healthcare Corp. 6.91% 2005 11,250 11,429
HCA Inc. 7.125% 2006 7,785 8,094
Columbia/HCA Healthcare Corp. 7.00% 2007 6,250 6,575
Columbia/HCA Healthcare Corp. 8.85% 2007 12,500 13,440
Columbia/HCA Healthcare Corp. 7.25% 2008 1,000 1,066
HCA Inc. 5.50% 2009 40,250 40,286
Columbia/HCA Healthcare Corp. 8.70% 2010 9,500 10,710
HCA - The Healthcare Co. 8.75% 2010 7,750 8,862
HCA - The Healthcare Co. 7.875% 2011 40,000 44,174
Tenet Healthcare Corp. 6.375% 2011 17,300 15,613
Tenet Healthcare Corp. 9.875% 2014(3) 31,625 32,969
Tenet Healthcare Corp. 9.25% 2015(3) 4,700 4,724
Warner Chilcott Corp. 8.75% 2015(3) 40,425 41,739
Aetna Inc. 7.375% 2006 22,000 22,805
Aetna Inc. 7.875% 2011 10,625 12,456
Health Net, Inc. 9.875% 2011(5) 27,175 33,088
Cardinal Health, Inc. 6.75% 2011 26,500 29,251
Quintiles Transnational Corp. 10.00% 2013 13,050 14,812
Pharma Services Intermediate Holding Corp. 0%/11.50% 2014(3),(7) 18,250 13,049
Team Health, Inc. 9.00% 2012 24,000 23,760
American Medical Response, Inc. and EmCare Holdings, Inc. 10.00% 2015(3) 22,500 23,231
Triad Hospitals, Inc. 7.00% 2012 15,000 15,769
Humana Inc. 7.25% 2006 13,375 14,012
Wyeth 5.50% 2013(5) 9,000 9,410
Amgen Inc. 4.00% 2009(3) 9,125 9,083
Elan Finance Public Limited Co. and Elan Finance Corp. 6.49% 2011(3),(5) 1,200 1,257
Elan Finance Public Limited Co. and Elan Finance Corp. 7.75% 2011(3) 5,000 5,250
Concentra Operating Corp. 9.50% 2010 4,000 4,460
Universal Hospital Services, Inc., Series B, 10.125% 2011 3,035 3,156
474,530
ASSET-BACKED OBLIGATIONS(9) -- 0.64%
Green Tree Financial Corp., Series 1993-2, Class B, 8.00% 2018 $13,171 $12,400
Green Tree Financial Corp., Series 1995-4, Class B-2, 7.70% 2025(8) 1,624 146
Green Tree Financial Corp., Series 1995-3, Class B-2, 8.10% 2025(8) 13,517 3,379
Green Tree Financial Corp., Series 1995-2, Class B-2, 8.80% 2026(8) 9,716 4,178
Green Tree Financial Corp., Series 1996-2, Class B-2, 7.90% 2027(8) 9,138 46
Green Tree Financial Corp., Series 1996-10, Class B-2, 7.74% 2028(8) 6,023 30
Green Tree Financial Corp., Series 1997-8, Class B-2, 7.75% 2028(8) 4,448 22
Green Tree Financial Corp., Series 1997-1, Class B-2, 7.76% 2028(8) 6,781 34
Green Tree Financial Corp., Series 1997-2, Class B-2, 8.05% 2028(8) 2,283 11
Green Tree Financial Corp., Series 1997-6, Class B-2, 7.75% 2029(8) 7,345 37
Conseco Finance Home Loan Trust, Series 1999-G, Class B-2, 10.96% 2029(8) 17,655 15,360
Green Tree Financial Corp., Series 1998-3, Class B2, 8.07% 2030(8) 3,282 16
Green Tree Financial Corp., Series 1998-4, Class B-2, 8.11% 2030(8) 4,493 22
CWABS, Inc., Series 2004-12, Class 2-AV-2, 2.81% 2033(5) 11,750 11,772
CWABS, Inc., Series 2004-15, Class AF-5, 5.227% 2035 14,250 14,110
Vita Capital Ltd., Series 2003-I, 3.91% 2007(3),(5) 24,000 24,066
Metris Master Trust, Series 2000-3, Class A, 2.76% 2009(5) 14,428 14,408
Metris Master Trust, Series 2001-2, Class A, 2.82% 2009(5) 3,500 3,494
AESOP Funding II LLC, Series 2002-1A, Class A-1, AMBAC insured, 3.85% 2006(3) 7,925 7,949
AESOP Funding II LLC, Series 2003-2, Class A-1, MBIA insured, 2.74% 2007(3) 8,000 7,926
Residential Asset Securities Corp. Trust, Series 2003-KS2, Class A-I-3, 2.66% 2028 1,114 1,109
Residential Asset Securities Corp. Trust, Series 2001-KS3, Class A-I-6, 5.96% 2031 9,304 9,558
Residential Asset Securities Corp. Trust, Series 2003-KS6, Class A-2, 2.83% 2033(5) 4,965 4,974
AmeriCredit Automobile Receivables Trust, Series 2002-C, Class A-4, FSA insured, 3.55% 2009 5,000 5,009
AmeriCredit Automobile Receivables Trust, Series 2003-CF, Class A-4, FSA insured, 3.48% 2010 9,000 8,988
Chase Credit Card Owner Trust, Series 2003-4, Class C, 3.73% 2016(5) 11,500 12,002
Residential Asset Mortgage Products Trust, Series 2004-RS3, Class A-I-2, 3.052% 2029 5,000 4,943
Residential Asset Mortgage Products Trust, Series 2003-RZ4, Class A-7, 4.79% 2033(5) 7,000 7,054
MMCA Auto Owner Trust, Series 2001-4, Class B, 4.84% 2008 1,899 1,906
MMCA Auto Owner Trust, Series 2002-4, Class A-4, 3.05% 2009 5,000 4,967
MMCA Auto Owner Trust, Series 2002-4, Class B, 3.82% 2009 3,701 3,697
Consumer Credit Reference Index Securities Program Trust, Series 2002-2A, Class FL, 7.641% 2007(3),(5) 5,000 5,032
Consumer Credit Reference Index Securities Program Trust, Series 2002-2A, Class FX, 10.421% 2007(3) 5,000 5,205
Home Equity Asset Trust, Series 2004-7, Class M-1, 3.15% 2035(5) 10,000 10,081
MBNA Master Credit Card Trust II, Series 1999-D, Class C, 6.95% 2008(3) 4,700 4,905
MBNA Master Credit Card Trust II, Series 2000-H, Class B, 3.08% 2013(5) 5,000 5,075
Structured Asset Investment Loan Trust, Series 2004-BNC2, Class A-4, 2.85% 2034(5) 9,407 9,444
Mediterranean Re PLC, Class B, 8.16% 2005(3),(5) 9,000 9,261
Centex Home Equity Loan Trust, Series 2003-A, Class AF-3, 2.708% 2026 3,767 3,758
Centex Home Equity Loan Trust, Series 2005-A, Class AF-3, 4.14% 2028 5,000 5,001
First USA Credit Card Master Trust, Series 1997-4, Class C, 3.48% 2010(3),(5) 6,500 6,528
First USA Credit Card Master Trust, Series 1998-6, Class C, 6.16% 2011(3) 2,000 2,112
Vanderbilt Mortgage and Finance, Inc., Series 1999-B, Class I-A-6, 6.925% 2024 7,706 8,164
WFS Financial Owner Trust, Series 2002-3, Class A-4, 3.50% 2010 8,000 8,019
Banco Itau SA, Series 2002, XLCA insured, 2.78% 2007(3),(5) 7,598 7,541
Ameriquest Mortgage Securities Inc., Series 2003-12, Class M-1, 3.28% 2033(5) 7,000 7,037
CitiFinancial Mortgage Securities Inc., Series 2003-3, Class AF-5, 4.553% 2033 6,500 6,478
PIONEER 2002 Ltd., Series 2002-I, Class D, 4.24% 2006(3),(5) 6,000 6,040
CPS Auto Receivables Trust, Series 2002-C, Class A-2, XLCA insured, 3.52% 2009(3) 5,249 5,234
SLM Private Credit Student Loan Trust, Series 2002-A, Class A-2, 3.04% 2030(5) 5,000 5,055
Specialty Underwriting and Residential Finance Trust, Series 2004-BC4, Class A-2B, 2.84% 2035(5) 5,000 5,007
Chevy Chase Auto Receivables Trust, Series 2001-2, Class B, 5.16% 2008 4,332 4,384
Drivetime Auto Owner Trust, Series 2003-A, Class A-3, XLCA insured, 2.524% 2008(3) 4,389 4,378
Providian Master Trust, Series 2000-1, Class C, 3.68% 2009(3),(5) 4,000 3,995
Financial Pacific Funding II, LLC, Series 2003-A, Class A, FSA insured, 2.29% 2009(3) 3,719 3,674
California Infrastructure and Economic Development Bank, Special Purpose Trust, PG&E-1,
Series 1997-1, Class A-7, 6.42% 2008 3,530 3,625
Long Beach Mortgage Loan Trust, Series 2004-A, Class M-3, 3.48% 2024(5) 3,500 3,540
SeaWest Securitization, LLC, Series 2002-A, Class A-3, XLCA insured, 3.58% 2008(3) 1,317 1,318
SeaWest Securitization, LLC, Series 2003-A, Class A-2, XLCA insured, 2.84% 2009(3) 1,894 1,891
Rental Car Finance Corp., Series 1999-1A, Class D, 7.10% 2007(3) 2,500 2,503
Nebhelp Trust, Student Loan Interest Margin Securities, Series 1, Class A, MBIA insured, 6.68% 2016(3) 1,526 1,575
PECO Energy Transition Trust, Series 1999-A, Class A-7, 6.13% 2009 1,250 1,331
Pass-Through Amortizing Credit Card Trusts, Series 2002-1A, Class A-2FX, 4.685% 2012(3) 653 655
Pass-Through Amortizing Credit Card Trusts, Series 2002-1A, Class A-3FX, 6.298% 2012(3) 436 436
NPF XII, Inc., Series 1999-3, Class B, 2.389% 2003(3),(4),(5),(11) 3,000 30
NPF XII, Inc., Series 2001-1A, Class A, 1.989% 2004(3),(4),(5),(11) 5,000 419
NPF XII, Inc., Series 2001-3, Class A, 5.52% 2007(3),(4),(8) 1,000 84
Residential Reinsurance 2002 Ltd. 7.30% 2005(3),(5) 500 504
342,932
NON U.S. GOVERNMENT BONDS & NOTES -- 0.29%
United Mexican States Government Global 4.625% 2008 10,000 10,113
United Mexican States Government Global 8.625% 2008 5,000 5,653
United Mexican States Government Eurobonds, Global 8.375% 2011 3,000 3,533
United Mexican States Government Eurobonds, Global 7.50% 2012 6,310 7,225
United Mexican States Government Global 6.375% 2013 7,500 8,051
United Mexican States Government Global 11.375% 2016 29,684 44,303
United Mexican States Government Global 8.125% 2019 2,061 2,486
United Mexican States Government Global 8.30% 2031 1,965 2,389
United Mexican States Government Global 7.50% 2033 2,833 3,176
Russian Federation 8.25% 2010 25,250 27,851
Russian Federation 8.25% 2010(3) 10,000 11,030
Russian Federation 5.00% 2030(7) 7,770 8,188
State of Qatar 9.75% 2030 9,000 13,523
El Salvador (Republic of) 7.75% 2023 3,000 3,308
El Salvador (Republic of) 7.75% 2023(3) 1,250 1,378
Banque Centrale de Tunisie 7.375% 2012 3,500 4,038
156,245
MUNICIPALS -- 0.12%
State of California, Golden State Tobacco Securitization Corp., Tobacco
Settlement Asset-backed Bonds, Series 2003-A1, 6.25% 2033 19,750 19,842
State of New Jersey, Tobacco Settlement Financing Corp., Tobacco Settlement
Asset-backed Bonds, Series 2003, 4.375% 2019 2,500 2,502
State of New Jersey, Tobacco Settlement Financing Corp., Tobacco Settlement
Asset-backed Bonds, Series 2003, 6.125% 2024 9,625 9,636
State of New Jersey, Tobacco Settlement Financing Corp., Tobacco Settlement
Asset-backed Bonds, Series 2002, 5.75% 2032 3,885 3,778
State of Wisconsin, Badger Tobacco Asset Securitization Corp., Tobacco Settlement
Asset-backed Bonds, 6.125% 2027 9,565 9,603
State of Louisiana, Tobacco Settlement Financing Corp., Tobacco Settlement
Asset-backed Bonds, Series 2001-A, Class A, 6.36% 2025 5,559 5,481
State of California, Department of Water Resources, Power Supply Revenue Bonds,
Series 2002-E, 4.33% 2006 4,500 4,537
State of New York, Dormitory Authority, City University System Consolidated Third
General Resolution Revenue Bonds, Series 2003-2, 2.38% 2005 4,500 4,488
State of South Dakota, Educational Enhancement Funding Corp., Tobacco Settlement
Asset-backed Bonds, Series 2002-A, Class A, 6.72% 2025 4,546 4,389
64,256
Total bonds & notes (cost: $11,708,074,000) 12,111,959
Principal amount Market value
Short-term securities -- 7.89% (000) (000)
U.S. Treasury Bills 1.955%-2.32% due 2/24-4/21/2005(12) $336,200 $ 335,141
Federal Home Loan Bank 2.20%-2.36% due 2/11-3/16/2005 300,000 299,460
CAFCO, LLC 2.13%-2.57% due 2/8-4/18/2005(3) 193,500 192,984
Citicorp 2.51% due 4/4/2005 50,000 49,776
Freddie Mac 2.22%-2.469% due 2/2-3/30/2005(12) 226,900 226,428
Procter & Gamble Co. 2.31%-2.57% due 2/14-4/25/2005(3) 188,700 188,294
Bank of America Corp. 2.40%-2.53% due 3/14-4/6/2005(12) 112,400 112,014
Ranger Funding Co. LLC 2.29%-2.43% due 2/4-3/15/2005(3) 72,088 72,011
Federal Farm Credit Banks 1.99%-2.32% due 2/4-3/16/2005(12) 162,000 161,758
DuPont (E.I.) de Nemours & Co. 2.21%-2.47% due 2/4-3/28/2005 150,300 150,050
Variable Funding Capital Corp. 2.28%-2.37% due 2/2-2/15/2005(3) 150,000 149,912
Wells Fargo & Co. 2.27%-2.46% due 2/4-3/2/2005 145,700 145,700
Clipper Receivables Co., LLC 2.35%-2.51% due 2/18-3/11/2005(3) 143,700 143,439
Wal-Mart Stores Inc. 2.41%-2.49% due 3/8-4/12/2005(3) 141,000 140,458
Park Avenue Receivables Co., LLC 2.31%-2.48% due 2/9-2/25/2005(3) 72,700 72,601
Preferred Receivables Funding Corp. 2.34% due 2/1/2005(3) 65,000 64,996
FCAR Owner Trust I 2.30%-2.43% due 2/2-3/9/2005 137,000 136,804
Edison Asset Securitization LLC 2.26%-2.37% due 2/1-3/11/2005(3) 83,700 83,609
General Electric Capital Corp. 2.37% due 2/25/2005 50,000 49,916
New Center Asset Trust Plus 2.30%-2.48% due 2/10-3/18/2005 128,800 128,632
Fannie Mae 2.21%-2.42% due 2/3-3/22/2005 125,000 124,833
SBC Communications Inc. 2.24%-2.43% due 2/2-3/10/2005(3) 124,500 124,395
BellSouth Corp. 2.26%-2.42% due 2/3-3/7/2005(3) 111,500 111,337
Abbott Laboratories Inc. 2.23%-2.37% due 2/8-2/28/2005(3) 105,000 104,871
Eli Lilly and Co. 2.26%-2.34% due 2/1-2/22/2005(3) 103,000 102,907
IBM Credit Corp. 2.28%-2.32% due 2/3-3/8/2005 90,600 90,434
Pfizer Inc 2.31%-2.35% due 2/7-2/15/2005(3) 71,400 71,357
Triple-A One Funding Corp. 2.33%-2.46% due 2/9-3/11/2005(3) 67,392 67,290
Anheuser-Busch Cos. Inc. 2.07%-2.33% due 2/17-3/7/2005(3) 58,200 58,111
Coca-Cola Co. 2.32%-2.43% due 3/3-3/21/2005 53,800 53,675
Gannett Co. 2.40% due 2/23/2005(3) 50,000 49,923
Tenessee Valley Authority 2.34% due 3/3/2005 50,000 49,899
International Bank for Reconstruction and Development 2.31% due 3/16/2005 50,000 49,845
American Express Credit Corp. 2.50% due 3/23/2005(12) 50,000 49,823
Hewlett-Packard Co. 2.65% due 4/26/2005(3) 50,000 49,691
Three Pillars Funding, LLC 2.34% due 2/7/2005(3) 33,000 32,985
NetJets Inc. 2.39% due 3/18/2005(3) 30,000 29,907
Private Export Funding Corp. 2.08%-2.22% due 2/8-2/15/2005(3) 27,770 27,750
USAA Capital Corp. 2.16% due 2/15/2005 25,000 24,976
Harvard University 2.38% due 3/15/2005 25,000 24,929
Bank of New York Co., Inc. 2.24% due 2/1/2005 15,500 15,499
Total short-term securities (cost: $4,218,465,000) 4,218,420
Total investment securities (cost: $46,382,929,000) 53,475,895
Other assets less liabilities 10,755
Net assets $53,486,650
"Miscellaneous" securities include holdings in their initial period of
acquisition that have not previously been publicly disclosed.
(1) Represents an affiliated company as defined under the Investment Company
Act of 1940.
(2) Security did not produce income during the last 12 months.
(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 was
$4,907,999,000, which represented 9.18% of the net assets of the fund.
(4) Valued under fair value procedures adopted by authority of the Board of
Directors.
(5) Coupon rate may change periodically.
(6) Payment in kind; the issuer has the option of paying additional securities
in lieu of cash.
(7) Step bond; coupon rate will increase at a later date.
(8) Company not making scheduled interest payments; bankruptcy proceedings
pending.
(9) Pass-through securities backed by a pool of mortgages or other loans on
which principal payments are periodically made. Therefore, the effective
maturities are shorter than the stated maturities.
(10) Index-linked bond whose principal amount moves with a government retail
price index.
(11) Company did not make principal payment upon scheduled maturity date;
reorganization pending.
(12) This security, or a portion of this security, has been segregated to cover
funding requirements on investment transactions settling in the future.
ADR = American Depositary Receipts
ITEM 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end
management investment company.
ITEM 8 - Portfolio Managers of Closed-End Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end
management investment company.
ITEM 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers
Not applicable to this Registrant, insofar as the Registrant is not a closed-end
management investment company.
ITEM 10 - Submission of Matters to a Vote of Security Holders
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Registrant's Board of Directors since the Registrant
last submitted a proxy statement to its shareholders. The procedures are as
follows. The Registrant has a nominating committee comprised solely of persons
who are not considered "interested persons" of the Registrant within the meaning
of the Investment Company Act of 1940, as amended. The committee periodically
reviews such issues as the Board's composition, responsibilities, committees,
compensation and other relevant issues, and recommends any appropriate changes
to the full Board of Directors. While the committee normally is able to identify
from its own resources an ample number of qualified candidates, it will consider
shareholder suggestions of persons to be considered as nominees to fill future
vacancies on the Board. Such suggestions must be sent in writing to the
nominating committee of the Registrant, c/o the Registrant's Secretary, and must
be accompanied by complete biographical and occupational data on the prospective
nominee, along with a written consent of the prospective nominee for
consideration of his or her name by the nominating committee.
ITEM 11 - Controls and Procedures
(a) The Registrant's Principal Executive Officer and Principal Financial
Officer have concluded, based on their evaluation of the Registrant's
disclosure controls and procedures (as such term is defined in Rule 30a-3
under the Investment Company Act of 1940), that such controls and
procedures are adequate and reasonably designed to achieve the purposes
described in paragraph (c) of such rule.
(b) There were no changes in the Registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of
1940) that occurred during the Registrant's second fiscal quarter of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the Registrant's internal control
over financial reporting.
ITEM 12 - Exhibits
(a) The Code of Ethics - not applicable for filing of Semiannual Reports to
Shareholders.
(b) The certifications required by Rule 30a-2 of the Investment Company Act of
1940, as amended, and Sections 302 and 906 of the Sarbanes-Oxley Act of
2002 are attached as exhibits hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
THE INCOME FUND OF AMERICA, INC.
By /s/ Hilda L. Applbaum
- ------------------------------------
Hilda L. Applbaum, President and PEO
Date: April 8, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By /s/ Hilda L. Applbaum
- ------------------------------------
Hilda L. Applbaum, President and PEO
Date: April 8, 2005
By /s/ Dayna G. Yamabe
- ----------------------------------
Dayna G. Yamabe, Treasurer and PFO
Date: April 8, 2005