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: 811-5364
American High-Income Trust
(Exact Name of Registrant as specified in charter)
333 South Hope Street
Los Angeles, California 90071
(Address of principal executive offices)
Registrant's telephone number, including area code: (213) 486-9200
Date of fiscal year end: September 30, 2004
Date of reporting period: September 30, 2004
Julie F. Williams
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071
(name and address of agent for service)
Copies to:
Michael Glazer
Paul, Hastings, Janofsky & Walker LLP
515 South Flower Street
Los Angeles, California 90071
(Counsel for the Registrant)
ITEM 1 - Reports to Stockholders
[logo - American Funds(R)]
The right choice for the long term(R)
AMERICAN HIGH-INCOME TRUST
Special report: How bond traders add long-term value to your portfolio
[photo of a hand resting on a computer mouse]
Annual report for the year ended September 30, 2004
AMERICAN HIGH-INCOME TRUST(SM) seeks a high level of current income and,
secondarily, capital appreciation through a diversified, carefully supervised
portfolio consisting primarily of lower rated, higher risk corporate bonds.
The fund 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.
TABLE OF CONTENTS
Letter to shareholders 1
Results at a glance 1
Chart: The value of a long-term perspective 3
Feature: How bond traders add long-term value to your portfolio 4
Investment portfolio 8
Financial statements 13
Board of Trustees and officers 28
The American Funds family back cover
FIGURES SHOWN ARE PAST RESULTS FOR CLASS A SHARES AND ARE NOT PREDICTIVE OF
RESULTS IN FUTURE PERIODS. CURRENT AND FUTURE RESULTS MAY BE LOWER OR HIGHER
THAN THOSE SHOWN. SHARE PRICES AND RETURNS WILL VARY, SO INVESTORS MAY LOSE
MONEY. INVESTING FOR SHORT PERIODS MAKES LOSSES MORE LIKELY. INVESTMENTS ARE NOT
FDIC-INSURED, NOR ARE THEY DEPOSITS OF OR GUARANTEED BY A BANK OR ANY OTHER
ENTITY. FOR 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 3.75%) HAD BEEN DEDUCTED, THE RESULTS
WOULD HAVE BEEN LOWER.
Here are the average annual total returns on a $1,000 investment with all
distributions reinvested for periods ended September 30, 2004:
Class A shares 1 year 5 years 10 years
Reflecting 3.75% maximum sales charge +6.45% +6.46% +7.87%
The fund's 30-day yield for Class A shares as of October 31, 2004, calculated in
accordance with the Securities and Exchange Commission formula, was 5.97%, which
reflects a fee waiver (5.95% without the fee waiver). The fund's distribution
rate for Class A shares as of that date was 6.80%. Both reflect the 3.75%
maximum sales charge. The SEC yield reflects the rate at which the fund is
earning income on its current portfolio of securities while the distribution
rate reflects the fund's past dividends paid to shareholders. Accordingly, the
fund's SEC yield and distribution rate may differ.
Results for other share classes can be found on page 25. Please see the inside
back cover for important information about other share classes.
The return of principal in bond funds is not guaranteed. Bond funds have the
same interest rate, inflation and credit risks that are associated with the
underlying bonds owned by the fund.
High-yield bonds are subject to greater fluctuations in value and risk of loss
of income and principal. Investing outside the United States involves additional
risks, such as currency fluctuations, political instability, differing
securities regulations and periods of illiquidity, which are detailed in the
fund's prospectus.
[Begin Pull Quote]
[photo of a hand resting on a computer mouse]
We capitalized on the improving economy by increasing our exposure to industries
that directly benefit during periods of economic growth, including industrials
and real estate.
[End Pull Quote]
FELLOW SHAREHOLDERS:
A favorable environment of economic growth, low interest rates and moderate
inflation helped to make fiscal 2004 a rewarding year for investors in American
High-Income Trust.
Shareholders who reinvested monthly dividends totaling 84.4 cents a share earned
a total return of 10.6% for the 12 months ended September 30, 2004, including an
income return of 7.3%. Those results compare with an 11.6% gain for the Lipper
High Current Yield Bond Funds Index, a benchmark of similar funds, and a 13.3%
return for the Credit Suisse First Boston High Yield Bond Index, which attempts
to mirror the high-yield debt markets. The Citigroup Broad Investment-Grade
(BIG) Bond Index, which measures high-quality bond markets including Treasuries,
posted a 3.8% return. The latter two indexes are unmanaged and include no
expenses.
Shareholders who elected to take their dividends in cash saw the value of their
holdings increase 3.2% while earning an income return of 7.1%.
PUTTING THE YEAR IN PERSPECTIVE
The past two years have been particularly strong for the high-yield bond market.
Many issuers of high-yield bonds were able to boost profits and improve their
balance sheets through debt reduction. As a result, credit fundamentals improved
and default rates continued to decline. As the market rallied, more investors
came into the market, bidding the prices of high-yield securities up further.
We capitalized on the improving economy by increasing our exposure to industries
that directly benefit during periods of economic growth, including industrials
and real estate.
[Begin Sidebar]
RESULTS AT A GLANCE
Average annual total returns for periods ended September 30, 2004, with all
distributions reinvested. The market indexes are unmanaged.
Returns 1 year 5 years 10 years
American High-Income Trust +10.6% +7.3% +8.3%
Credit Suisse First Boston
High Yield Bond Index +13.3 +7.7 +8.1
Citigroup Broad Investment-
Grade (BIG) Bond Index +3.8 +7.5 +7.7
Lipper High Current Yield
Bond Funds Index +11.6 +3.6 +6.1
For the 10 years ended September 30, 2004, American High-Income Trust ranked 5th
in total return among the 86 high current yield funds in existence throughout
the period, according to Lipper. For the five years ended September 30, 2004, it
ranked 31st of 276, and for the 12 months ended September 30, 2004, the fund
ranked 276th of 420. Lipper rankings do not reflect the effect of sales charges.
[End Sidebar]
[Begin Pull Quote]
American High-Income Trust concentrates its efforts on in-depth global research
to buy the bonds of the right companies at the right price. This approach has
helped the fund to produce solid returns for shareholders over the long term.
[End Pull Quote]
That recovery continued into the first few months of the 2004 fiscal year. By
the latter part of the period, the high-yield bond market began to slow and even
forfeit some of its earlier gains, in part due to inflationary concerns and
anticipation of interest rate increases. In June, the Federal Reserve raised the
federal funds rate by one-quarter of a percentage point, marking the Fed's first
rate hike in four years. That was followed by two more quarter-percentage point
increases in August and September and a third in November, after the close of
the fiscal period.
Although high-yield bonds are negatively affected by a rise in rates, they can
also benefit when higher rates are accompanied by strong economic growth or
greater pricing power, which allows issuers to improve their credit standing.
During this particular cycle, however, spreads on corporate bonds tightened even
before the first rate increase in June. (Spreads reflect the yield differences
between U.S. Treasury securities, which carry no credit risk, and all other
types of bonds.) That allowed the fund to benefit earlier in the cycle, but
eliminates some cushion going forward.
Whenever bonds become more fully valued, the need for caution increases. With an
improving economy and historically low interest rates, an increasing number of
companies may be borrowing money to make acquisitions or expand their
operations. While these steps can help the long-term potential for a business,
in the short run they require companies to add to their debt loads. Our
intensive research process helps us to invest in companies that are moving in
the right direction from a credit standpoint.
POSITIONING THE PORTFOLIO FOR THE LONG TERM
Although the current environment remains positive for high-yield bonds and
should remain stable in the near future, we know that markets fluctuate.
American High-Income Trust concentrates its efforts on in-depth global research
to buy the bonds of the right companies at the right price. This approach has
helped the fund to produce solid returns for shareholders over the long term.
For the past 10-year period ended September 30, 2004, the fund's shareholders
earned an average annual total return of 8.3%, with dividends reinvested. That
compares with a 6.1% average annual total return for the Lipper High Current
Yield Bond Funds Index and an 8.1% return for the Credit Suisse First Boston
High Yield Bond Index for that same time period.
Going forward, we will continue to seek investments that offer the best
combination of risk and reward. We appreciate your continued support.
Cordially,
/s/ Paul G. Haaga, Jr. /s/ David C. Barclay
Paul G. Haaga, Jr. David C. Barclay
Chairman of the Board President
November 15, 2004
For current information about the fund, visit americanfunds.com.
THE VALUE OF A LONG-TERM PERSPECTIVE
Here's how a $10,000 investment in American High-Income Trust grew between
February 19, 1988, when the fund began operations, and September 30, 2004, the
end of its latest fiscal year. As you can see, that $10,000 grew to $42,235 with
all distributions reinvested.
Fund figures reflect deduction of the maximum sales charge of 3.75% on the
$10,000 investment.(1) Thus the net amount invested was $9,625.
[begin mountain chart]
Year ended September 30
Credit Suisse Lipper High
First Boston Current Yield Citigroup Broad Consumer
Year American High- High Yield Bond Funds Investment-Grade Price Index Original
Ended Income Trust Bond Index(2) Index(2),(3) (BIG) Bond Index(2) (inflation)(4) Investment
<s> <c> <c> <c> <c> <c> <c>
1988(*) $10,182 $10,447 $10,475 $10,222 $10,328 $10,000
1989 $11,189 $11,026 $10,935 $11,367 $10,776 $10,000
1990 $10,735 $10,047 $9,570 $12,237 $11,440 $10,000
1991 $13,873 $13,757 $12,290 $14,198 $11,828 $10,000
1992 $16,376 $16,573 $15,132 $15,999 $12,181 $10,000
1993 $18,764 $19,172 $17,473 $17,627 $12,509 $10,000
1994 $19,066 $19,831 $17,899 $17,063 $12,879 $10,000
1995 $21,604 $22,619 $20,178 $19,461 $13,207 $10,000
1996 $24,570 $25,054 $22,644 $20,423 $13,603 $10,000
1997 $28,176 $28,994 $26,120 $22,406 $13,897 $10,000
1998 $27,491 $28,843 $25,688 $24,975 $14,103 $10,000
1999 $29,721 $29,981 $27,037 $24,908 $14,474 $10,000
2000 $31,295 $30,555 $27,021 $26,632 $14,974 $10,000
2001 $30,218 $29,050 $23,569 $30,110 $15,371 $10,000
2002 $28,442 $29,878 $22,814 $32,632 $15,603 $10,000
2003 $38,197 $38,257 $28,862 $34,423 $15,966 $10,000
2004 $42,235 $43,352 $32,215 $35,738 $16,371 $10,000
[end mountain chart]
*For the period February 19 through September 30, 1988.
(1) As outlined in the prospectus, the sales charge is reduced for accounts
(and aggregated investments) of $100,000 or more and is eliminated for
purchases of $1 million or more. There is no sales charge on dividends or
capital gain distributions that are reinvested in additional shares.
(2) The market indexes are unmanaged and do not reflect sales charges,
commissions or expenses.
(3) Calculated by Lipper. The index does not reflect sales charges.
(4) Computed from data supplied by the U.S. Department of Labor, Bureau of
Labor Statistics.
Past results are not predictive of future results. The results shown are before
taxes on fund distributions and sale of fund shares.
Here are the average annual total returns on a $1,000 investment with all
distributions reinvested for periods ended September 30, 2004.
1 year 5 years 10 years
CLASS A SHARES* +6.45% +6.46% +7.87%
Assumes payment of the 3.75% maximum initial sales charge. The maximum initial
sales charge was 4.75% prior to January 10, 2000.
*Results for other share classes can be found on page 25. For the most current
investment results, please refer to americanfunds.com.
HOW BOND TRADERS ADD LONG-TERM VALUE TO YOUR PORTFOLIO
[photo of Cindy Mandell and Glen Payne in a trading room]
When most people think of a trader, they usually have a vague idea of someone on
a trading floor, frantically waving slips of paper in the air, shouting "buy" or
"sell." But at Capital Research and Management Company, adviser to the American
Funds, traders do more than just execute trades. They play a critical role in
the overall investment decision process, helping portfolio counselors and
analysts build a solid portfolio for the long term.
"The investment process at Capital involves a coming together of views and ideas
to reach a decision," says David Barclay, president of American High-Income
Trust. "Traders bring a larger range of perspectives to the decision-making
process."
In the following pages, we will look at the ways bond traders add value to
American High-Income Trust's portfolio. Glen Payne and Cindy Mandell, high-yield
bond traders for American Funds, take an active role in the investment process,
allowing the fund's managers to make better investment decisions and ultimately
helping shareholders get more value for each investment dollar.
THE DYNAMICS OF TRADING HIGH-YIELD BONDS
Because the role of the high-yield bond trader is shaped by the dynamics of this
particular market, it is important to understand the differences between trading
bonds, particularly high-yield bonds, and trading stocks.
Unlike stocks, which trade on exchanges at prices that are posted almost
instantaneously in an extremely visible and efficient market, high-yield bonds
are traded over the counter where there are no electronic trading systems. The
bond market is made up of various dealers who buy bonds directly from issuers
(the "primary market") and then resell them to other dealers and investors (the
"secondary market"). This process may be efficient for issuance of new bonds in
the primary market, but sometimes buying in the secondary market can be more
difficult, particularly for individual buyers. Price quotes can vary
significantly from dealer to dealer, and may depend on the amount of the sale or
purchase.
"With stocks, prices are quoted in the newspaper and can be called up on the
Internet," says Glen. "That's not the case with high-yield bonds. We spend a lot
of time finding out where prices are and the liquidity of that particular bond.
We have continued conversations with `Wall Street traders' -- the traders at
brokers active in the secondary market -- to find out whether there have
recently been buyers or sellers, what the typical spread is, and generally to
get a feel for how the bond trades. It is a complex process that requires great
interpretive skills."
For all these reasons, the fund's managers rely on Glen and Cindy to support the
investment process in three main ways: building relationships with Wall Street;
providing information about the markets to analysts and portfolio counselors;
and executing trades.
BUILDING RELATIONSHIPS WITH WALL STREET
High-yield bonds are more difficult than stocks to trade efficiently. Because
they do not trade as often and price quotes are not automatically disseminated,
institutions sometimes find they get very different quotes for the same bond
from different dealers.
[Begin Pull Quote]
"The investment process at Capital involves a coming together of views and ideas
to reach a decision. Traders bring a larger range of perspectives to the
decision-making process."
[End Pull Quote]
Because high-yield bonds are traded through individual dealers, it's important
for Capital's traders to develop personal and corporate relationships -- and in
doing so, build mutual trust -- with their counterparts in the dealer firms on
Wall Street. In a market that lacks the same liquidity and transparency of
equity markets, these relationships help the fund's traders to obtain market
information about securities. "Our process lends visibility to a less
transparent marketplace," says Cindy.
The fund's traders also strive to build a good reputation on Wall Street. "The
system at American Funds helps to ensure integrity and fairness in the process,"
says Cindy. "In our market, a good reputation gives you much better access to
timely information and execution."
COMMUNICATING MARKET INFORMATION
Market information is critical in all parts of the bond market, but particularly
so in high-yield bonds.
"Traders serve as another set of eyes and ears," says Cindy. "We know what's
happening in our market, but also what's happening in other markets, including
the broader bond and equity markets. We understand how the different markets
impact each other and are able to determine relative value among various
markets."
[Begin Pull Quote]
"We can help analyze security selection, timing, liquidity and market prices.
That allows the portfolio counselors to focus on long-term investment decisions
and not feel they have to be minding daily market movements."
Glen Payne
12 years of investment experience
[photo of Cindy Mandell and Glen Payne looking at a computer screen]
[End Pull Quote]
[Begin Sidebar]
THE LANGUAGE OF BONDS
Bond traders frequently use shorthand when discussing various aspects of the
market. The following is a glossary of some commonly used terms.
CALENDAR: A list of prospective new issues. If the calendar is building, an
increasing number of issuers is planning to come to market. If the calendar is
light, there is little new supply on the horizon.
LIQUIDITY: A reflection of the ease (or difficulty) in buying or selling a bond.
A liquid bond trades readily, and the price differential from dealer to dealer
is usually small as a result. An illiquid bond trades infrequently, and dealer
quotes are likely to vary significantly.
POSITION: A trader takes a position in securities that reflects an outlook for
the market or a particular bond.
A trader on the sell side is "long" if he or she owns a particular bond. A
trader who is long typically expects that bond prices will be improving over the
near term. A trader is said to take a "short" position when selling a bond he or
she does not own. This is a high-risk position that usually reflects
expectations for weaker bond prices over the near term, allowing the trader to
"cover" the short at a lower price. (American High-Income Trust does not short
positions.)
QUOTE: The market for a bond specifying its buy (bid) and sell (asking) price.
If the quote is "firm," the trader is willing to buy or sell at the stated
levels. In most other instances, the quote is an indication of the bond's
approximate market value at the given time.
SPREAD: The difference in yield between any two bonds, expressed in basis points
(hundreds of a percent). For example, if one bond yields 4% and another yields
4.75%, then the spread between them is 75 basis points. The term also refers to
the difference between the bid (the highest price a buyer is ready to pay) and
the asking price (the lowest price acceptable to the seller) on a given bond.
TRANSPARENCY: The clarity of a given market or bond. Stock markets, for example,
are very transparent with the size and price of trades posted continuously for
all to see. Bond trading is far less transparent, especially in the high-yield
market where bonds are inactively traded and price quotes are not electronically
publicized.
[End Sidebar]
To encourage communication, traders are active participants in all high-yield
investment discussions, including the weekly "calendar" meetings. Every Tuesday
and Thursday, American High-Income Trust bond traders meet with the fund's
analysts and portfolio counselors to discuss developments in the high-yield
market. The "calendar" -- a list of expected new issues -- is an important focus
of these meetings. The traders keep the calendar up to date through daily
contact with Wall Street trading desks. Regular reviews of the calendar help to
identify potentially attractive issues for the fund. Calendar meetings also
afford an opportunity to compare new issues with older ones and evaluate the
relative merits of each.
"We can help analyze security selection, timing, liquidity and market prices,"
says Glen. "That allows the portfolio counselors to focus on long-term
investment decisions and not feel they have to be minding daily market
movements."
Communication also happens on a more informal basis. The trading desk is one of
the places where the diverse groups of people involved in the investment process
come together. "We are often used as the point person throughout the day," says
Cindy. "With so many analysts on the road researching companies, the trading
room is the one place all the analysts and portfolio counselors can call to find
out what others are thinking."
FINDING THE BEST VALUES
Of course, a trader's core responsibility is getting the best execution -- in
other words, the best available transaction price for a bond. In doing so,
traders can help shareholders get more value for their investment dollars than
they might otherwise on their own.
There are many moving parts that determine the value of a bond and its yield.
For example, one issuer may be offering several bonds with various maturities,
yields and seniority levels within the capital structure. Traders add to the
evaluation of which company's bonds to buy by helping to determine the best
issue or issues of an individual issuer.
"We first think about a bond within its own capital structure -- for example,
comparing spreads, types of bonds and bonds rated differently within the same
company," says Glen. "From there, we look at how that bond is trading compared
to bonds with similar ratings and fundamentals. Sometimes, we will compare it to
the bonds of companies with similar characteristics. Then we look for relative
values within that sector. We look at the relationship to the bond's yield and
maturity, structural differences -- for example, whether or not there is a call
option --and historical trading ranges."
[Begin Pull Quote]
The trading desk is one of the places where the diverse groups of people
involved in the investment process come together.
[End Pull Quote]
Because the traders are constantly assessing the flows of supply and demand in
the market, they often know the best time to buy or sell a particular security.
"Best execution is partly a balance between price and liquidity," says Cindy.
"Investment ideas are only as good as your ability to actually implement them,
and the trading desk is where those ideas are implemented."
[Begin Pull Quote]
[photo of Glen Payne]
[photo of Cindy Mandell]
"Best execution is partly a balance between price and liquidity. Investment
ideas are only as good as your ability to actually implement them, and the
trading desk is where those ideas are implemented."
Cindy Mandell
27 years of investment experience
[End Pull Quote]
A CRITICAL LINK TO BUILDING A LONG-TERM PORTFOLIO
Ultimately, of course, it is the fund's portfolio counselors who decide which
bonds to buy or sell. Traders, however, strongly influence those decisions by
providing the counselors with timely market data and making recommendations
regarding the valuation and liquidity of particular bonds.
"The traders help us to think about options once we are ready to execute a
trade," says David Barclay, president of the fund. "They are our ears to Wall
Street as well as Wall Street's ear to us. The information they provide helps us
to make better decisions for shareholders."
INVESTMENT PORTFOLIO, September 30, 2004
Beginning with this report, a summary portfolio, approved under rules adopted by
the Securities and Exchange Commission this year, will replace the complete
listing of portfolio holdings used in previous shareholder reports. This summary
portfolio is designed to streamline the report and help investors better focus
on a fund's principal holdings. The schedule includes each of the fund's 50
largest holdings and investments of any issuer for which the total value of all
holdings in that issuer exceeds 1% of the fund's net assets. A complete schedule
of portfolio holdings is available upon request, free of charge, by calling
American Funds Service Company at 800/421-0180 or accessing the U.S. Securities
and Exchange Commission website at www.sec.gov.
[begin pie chart]
% of Net Assets
U.S. corporate bonds 74.7 %
Non-U.S. corporate bonds 14.7
U.S. Government obligations 0.7
Non-U.S. government bonds 3.0
Common stocks & warrants 1.6
Other 0.8
Cash & equivalents 4.5
[end pie chart]
Principal Market Percent
amount value of net
BONDS AND NOTES - 88.10% (000) (000) assets
CONSUMER DISCRETIONARY - 26.97%
Ford Motor Credit Co. 7.375% 2009 $ 38,000 $ 41,667
Ford Motor Credit Co. 7.375% 2011 36,500 39,745
Ford Motor Credit Co. 7.25%-7.875% 2010-2011 39,300 43,356 1.33%
General Motors Corp. 7.20% 2011 7,250 7,688
General Motors Acceptance Corp. 6.125%-7.75% 2006-2011 84,000 88,662 1.02
Six Flags, Inc. 8.875%-9.75% 2009-2014 84,400 80,269 .85
Cinemark USA, Inc. 9.00% 2013 58,218 65,350 .70
Hollinger Participation Trust 12.125% 2010 (1) (2) (3) 46,559 53,426 .57
Young Broadcasting Inc. 10.00% 2011 50,560 52,330 .56
Kabel Deutschland GmbH 10.625% 2014 (1) 41,730 45,694 .49
Quebecor Media Inc. 11.125% 2011 38,678 44,866 .48
Telenet Group Holding NV 0%/11.50% 2014 (1) (4) 53,130 39,316 .42
Mohegan Tribal Gaming Authority 6.375% 2009 36,500 38,051 .40
Other securities 1,893,929 20.15
2,534,349 26.97
TELECOMMUNICATION SERVICES - 11.58%
American Tower Corp. 9.375% 2009 66,322 70,633
American Tower Corp. 7.125 %-7.50% 2011-2012 (1) 50,450 51,017 1.29
Crown Castle International Corp. 7.50% 2013 42,000 44,205
Crown Castle International Corp., Series B, 7.50% 2013 33,300 35,048
Crown Castle International Corp. 9.375%-10.75% 2011 35,750 40,541 1.28
Qwest Capital Funding, Inc. 7.00%-7.75% 2006-2009 44,750 42,701
Qwest Services Corp. 13.50% 2010 (1) 43,215 50,670
Qwest Corp. 8.875% 2012 (1) 3,600 3,978
Qwest Services Corp. 14.00% 2014 (1) 18,400 22,356 1.27
Dobson Communications Corp. 10.875% 2010 28,025 20,668
American Cellular Corp., Series B, 10.00% 2011 57,050 46,496
Dobson Communications Corp. 8.875% 2013 55,835 36,293 1.10
Nextel Partners, Inc. 8.125% 2011 72,075 76,760
Nextel Partners, Inc. 8.125%-12.50% 2009-2011 (1) 19,587 21,201 1.04
Nextel Communications, Inc. 6.875% 2013 19,500 20,377
Nextel Communications, Inc. 7.375% 2015 69,650 75,222 1.02
Western Wireless Corp. 9.25% 2013 79,675 81,667 .87
Cincinnati Bell Inc. 7.25% 2013 56,925 55,075 .59
Other securities 292,997 3.12
1,087,905 11.58
MATERIALS - 11.50%
Freeport-McMoRan Copper & Gold Inc. 10.125% 2010 71,425 81,157 .86
Equistar Chemicals, LP and Equistar Funding Corp. 10.625% 2011 43,875 50,237 .54
Potlatch Corp. 10.00% 2011 33,355 37,858 .40
Associated Materials Inc. 0%/11.25% 2014 (1) (4) 48,210 35,314 .38
Other securities 875,732 9.32
1,080,298 11.50
UTILITIES - 6.28%
Southern California Edison, First and Ref. Mortgage Bonds, 8.00% 2007 3,750 4,153
Edison Mission Energy 10.00% 2008 22,300 26,202
Mission Energy Holding Co. 13.50% 2008 35,600 45,212
Edison Mission Energy 7.73% 2009 40,250 42,464
Edison Mission Energy 9.875% 2011 30,625 35,831
Midwest Generation, LLC, Series B, 8.56% 2016 (5) 25,350 26,633
Homer City Funding LLC 8.734% 2026 (5) 9,495 10,682
Midwest Generation, LLC and Midwest Finance Corp. 8.75% 2034 19,250 21,079 2.26
AES Corp. 8.75% 2013 (1) 43,985 49,813
AES Red Oak, LLC, Series B, 9.20% 2029 (5) 7,000 7,875
AES Corp. 9.00%-10.00% 2005-2015 (1) 53,629 59,565 1.25
Dynegy Holdings Inc. 10.125% 2013 (1) 43,390 50,115 .53
Other securities 211,007 2.24
590,631 6.28
INDUSTRIALS - 5.92%
Allied Waste North America, Inc. 5.75%-9.25% 2006-2014 93,900 95,502 1.02
Other securities 460,554 4.90
556,056 5.92
CONSUMER STAPLES - 5.65%
Burns Philp Capital Pty Ltd., Series B, 9.75% 2012 55,247 59,391
Burns Philp Capital Pty Ltd. and Burns Philp Capital (U.S.) Inc., Series B,
9.50%-10.75% 2010-2011 32,325 35,546 1.01
Koninklijke Ahold NV 5.875% 2008 Euro 15,750 20,598
Ahold Finance U.S.A., Inc.:
6.25% 2009 $ 39,070 40,633
8.25% 2010 18,220 20,634
6.50% 2017 Pound 1,375 2,404
Ahold Lease Pass Through Trust:
Series 2001-A-1, 7.82% 2020 (5) $ 3,783 4,012
Series 2001-A-2, 8.62% 2025 (5) 5,500 5,875 1.00
Pathmark Stores, Inc. 8.75% 2012 54,965 51,667 .55
Jean Coutu Group (PJC) Inc. 8.50% 2014 (1) 43,525 43,416 .46
Gold Kist Inc. 10.25% 2014 (1) 32,475 36,210 .38
Other securities 210,982 2.25
531,368 5.65
INFORMATION TECHNOLOGY - 5.52%
Solectron Corp. 9.625% 2009 54,425 60,548 .64
Sanmina-SCI Corp. 10.375% 2010 51,750 59,448 .63
Micron Technology, Inc. 6.50% 2005 (1) 45,000 44,550 .48
Nortel Networks Ltd. 6.125% 2006 35,075 35,952 .38
Other securities 318,215 3.39
518,713 5.52
ENERGY - 3.98%
Port Arthur Finance Corp. 12.50% 2009 (5) 1,697 1,986
Premcor Refining Group Inc. 7.75% 2012 33,650 36,847
Premcor Refining Group Inc. 9.50% 2013 34,625 40,944
Premcor Refining Group Inc. 6.125%-9.25% 2010-2015 71,275 77,061 1.67
Petrozuata Finance, Inc., Series B, 8.22% 2017 (1) (5) 49,190 48,698 .52
General Maritime Corp. 10.00% 2013 40,700 46,449 .49
Other securities 122,178 1.30
374,163 3.98
HEALTH CARE - 3.21%
Quintiles Transnational Corp. 10.00% 2013 46,900 49,949 .53
Tenet Healthcare Corp. 9.875% 2014 (1) 37,200 39,060 .41
Other securities 213,295 2.27
302,304 3.21
U.S. TREASURY NOTES & BONDS - 0.68%
U.S. Treasury obligations 3.25%-7.50% 2005-2008 60,000 63,744 .68
OTHER - 6.81% 640,195 6.81
TOTAL BONDS AND NOTES (cost: $7,851,752,000) 8,279,726 88.10
Market Percent
Principal amount value of net
CONVERTIBLE SECURITIES - 3.28% (000) or shares (000) assets
CONSUMER DISCRETIONARY - 1.36%
Amazon.com, Inc. 6.875% PEACS convertible subordinated notes 2010 Euro 59,550 74,922 .80
Six Flags, Inc. 7.25% PIERS convertible preferred 2009 1,000 shares 20,600 .22
General Motors Corp., Series B, 5.25% convertible debentures 2032 $ 12,500 11,955 .13
Ford Motor Co. Capital Trust II 6.50% cumulative convertible trust preferred
2032 160,600 shares 8,396 .09
Other securities 12,047 .12
127,920 1.36
TELECOMMUNICATION SERVICES - 0.30%
American Tower Corp. 5.00% convertible debentures 2010 $ 25,925 25,666 .27
Dobson Communications Corp., Series F, 6.00% convertible preferred (1) (6) 57,760 shares 2,744 .03
28,410 .30
UTILITIES - 0.22%
AES Trust VII 6.00% convertible preferred 2008 439,925 20,347 .22
OTHER - 1.40% 131,040 1.40
TOTAL CONVERTIBLE SECURITIES (cost: $247,459,000) 307,717 3.28
Market Percent
value of net
WARRANTS - 0.08% Shares (000) assets
TELECOMMUNICATION SERVICES - 0.08%
American Tower Corp., warrants, expire 2008 (1) (7) 38,250 7,076 .08
Other securities 59 .00
7,135 .08
OTHER - 0.00% 2 .00
TOTAL WARRANTS (cost: $1,233,000) 7,137 .08
Market Percent
value of net
PREFERRED STOCKS - 2.49% Shares (000) assets
FINANCIALS - 2.33%
Fuji JGB Investment LLC, Series A, 9.87% noncumulative preferred
(undated) (1) (2) 61,565,000 $ 72,315
IBJ Preferred Capital Co. LLC, Series A, 8.79% noncumulative preferred
(undated) (1) (2) 51,675,000 59,336 1.40
Other securities 87,490 .93
219,141 2.33
TELECOMMUNICATION SERVICES - 0.15%
Dobson Communications Corp. 13.00% senior exchangeable preferred 2009 (6) 30,187 13,584 .14
Dobson Communications Corp. 12.25% senior exchangeable preferred 2008 (3) (6) 2,000 900 .01
Other securities - .00
14,484 .15
OTHER - 0.01% 614 .01
TOTAL PREFERRED STOCKS (cost: $202,294,000) 234,239 2.49
Market Percent
value of net
COMMON STOCKS - 1.57% Shares (000) assets
TELECOMMUNICATION SERVICES - 1.04%
Nextel Communications, Inc., Class A (7) 613,418 14,624 .16
Dobson Communications Corp., Class A (1)(7) 5,754,785 7,654 .08
Other securities 75,079 .80
97,357 1.04
OTHER - 0.53% 50,341 .53
TOTAL COMMON STOCKS (cost: $186,451,000) 147,698 1.57
Principal Market Percent
amount value of net
SHORT-TERM SECURITIES - 3.32% (000) (000) assets
Wal-Mart Stores Inc. 1.50%-1.67% due 10/5-11/2/2004 (1) $ 69,400 69,331 .74
DuPont (E.I.) de Nemours & Co. 1.61%-1.76% due 10/12-11/18/2004 (8) 54,300 54,228 .58
Eli Lilly and Co. 1.54%-1.56% due 10/18-10/27/2004 (1) (8) 47,400 47,355 .50
U.S. Treasury Bills 1.41%-1.475% due 10/28/2004 42,850 42,805 .46
Other securities 97,763 1.05
TOTAL SHORT-TERM SECURITIES (cost: $311,480,000) 311,482 3.32
TOTAL INVESTMENT SECURITIES (cost: $8,800,669,000) 9,287,999 98.84
Other assets less liabilities 108,847 1.16
NET ASSETS $9,396,846 100.00%
"Other securities" includes all issues that are not required to be disclosed in
the summary investments portfolio.
INVESTMENTS IN AFFILIATES:
A company is considered to be an affiliate of the fund under the Investment
Company Act of 1940 if the fund's holdings in that company represent 5% or more
of the outstanding voting shares of that company. The market value of the fund's
holdings in affiliated companies is included in "Other securities" under their
respective industry sectors in the preceding summary investment portfolio.
Further details on these holdings and related transactions during the year ended
September 30, 2004 appear below.
Beginning
shares
or principal
Company amount Purchases Sales
AirGate PCS, Inc. 9.375% 2009 (1) $- $ 16,253,200 $-
AirGate PCS, Inc. 9.375% 2009 $- $ 6,000,000 $-
AirGate PCS, Inc. (1) (7) - 671,293 -
Clarent Hospital Corp. (6) (7) 576,849 - -
NTELOS Inc. (6) (7) 1,247,194 736,116 -
SpectraSite, Inc. 2,541,328 6,088 2,547,416
ZiLOG, Inc. (7) 3,315,000 - 2,174,500
ZiLOG, Inc. (6) (7) 3,315 - 1,447
Ending Market
shares Dividend value of
or principal income affiliates
Company amount (000) (000)
AirGate PCS, Inc. 9.375% 2009 (1) $ 16,253,200 $- $16,578
AirGate PCS, Inc. 9.375% 2009 $ 6,000,000 - 6,120
AirGate PCS, Inc. (1) (7) 671,293 - 13,157
Clarent Hospital Corp. (6) (7) 576,849 - 721
NTELOS Inc. (6) (7) 1,983,310 - 59,678
SpectraSite, Inc. - - -
ZiLOG, Inc. (7) 1,140,500 - 6,581
ZiLOG, Inc. (6) (7) 1,868 855 -
$ 855 $ 102,835
The following footnotes to the portfolio apply to either the individual
securities noted or one or more of the securities aggregated and listed as a
single line 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 $1,976,090,000, which represented 20.03% of the
net assets of the fund.
(2) Coupon rate may change periodically.
(3) Payment in kind; the issuer has the option of paying additional
securities in lieu of cash.
(4) Step bond; coupon rate will increase at a later date.
(5) 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.
(6) Valued under fair value procedures adopted by authority of the Board of
Trustees.
(7) Security did not produce income during the last 12 months.
(8) This security, or a portion of this security, has been segregated to cover
funding requirements on investment transactions settling in the future.
See Notes to Financial Statements
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
at September 30, 2004 (dollars and shares in thousands,
except per-share amounts)
ASSETS:
Investment securities at market:
Unaffiliated issuers (cost: $8,696,835) $9,185,164
Affiliated issuers (cost: $103,834) 102,835 $9,287,999
Cash 14,330
Receivables for:
Sales of investments 5,145
Sales of fund's shares 24,541
Dividends and interest 170,759 200,445
9,502,774
LIABILITIES:
Payables for:
Purchases of investments 82,765
Repurchases of fund's shares 12,332
Dividends on fund's shares 3,622
Open forward currency contracts 718
Closed forward currency contracts 87
Investment advisory services 2,433
Services provided by affiliates 3,598
Deferred Trustees' compensation 85
Other fees and expenses 288 105,928
NET ASSETS AT SEPTEMBER 30, 2004 $9,396,846
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $9,347,738
Undistributed net investment income 25,548
Accumulated net realized loss (463,114)
Net unrealized appreciation 486,674
NET ASSETS AT SEPTEMBER 30, 2004 $9,396,846
Shares of beneficial interest issued and outstanding - unlimited shares
authorized, 766,701 total shares outstanding
Net asset value
Net assets Shares outstanding per share (1)
Class A $6,920,435 564,647 $12.26
Class B 794,347 64,812 12.26
Class C 811,690 66,227 12.26
Class F 577,814 47,145 12.26
Class 529-A 47,528 3,878 12.26
Class 529-B 12,309 1,004 12.26
Class 529-C 24,955 2,036 12.26
Class 529-E 2,867 234 12.26
Class 529-F 2,058 168 12.26
Class R-1 3,364 274 12.26
Class R-2 43,789 3,573 12.26
Class R-3 58,247 4,753 12.26
Class R-4 23,476 1,915 12.26
Class R-5 73,967 6,035 12.26
(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 $12.74 for each.
See Notes to Financial Statements
STATEMENT OF OPERATIONS
for the year ended September 30, 2004 (dollars in thousands)
INVESTMENT INCOME:
Income:
Interest $699,472
Dividends (includes $855 from affiliates) 14,788 $714,260
Fees and expenses:
Investment advisory services 31,399
Distribution services 32,871
Transfer agent services 6,317
Administrative services 3,071
Reports to shareholders 394
Registration statement and prospectus 517
Postage, stationery and supplies 661
Trustees' compensation 51
Auditing and legal 153
Custodian 179
State and local taxes 99
Other 48
Total expenses before reimbursement/waiver 75,760
Reimbursement/waiver of expenses 325 75,435
Net investment income 638,825
NET REALIZED GAIN AND UNREALIZED
APPRECIATION ON INVESTMENTS
AND NON-U.S. CURRENCY:
Net realized gain (loss) on:
Investments (includes $2,641 net gain from affiliates) 77,145
Non-U.S. currency transactions (1,911) 75,234
Net unrealized appreciation on:
Investments 163,885
Non-U.S. currency translations 402 164,287
Net realized gain and
unrealized appreciation
on investments and non-U.S. currency 239,521
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $878,346
See Notes to Financial Statements
STATEMENT OF CHANGES IN NET ASSETS (dollars in thousands)
Year ended September 30
2004 2003
OPERATIONS:
Net investment income $638,825 $526,736
Net realized gain (loss) on investments and
non-U.S. currency transactions 75,234 (145,200)
Net unrealized appreciation
on investments and non-U.S. currency translations 164,287 1,380,578
Net increase in net assets
resulting from operations 878,346 1,762,114
DIVIDENDS PAID OR ACCRUED TO SHAREHOLDERS FROM
NET INVESTMENT INCOME (614,168) (509,744)
CAPITAL SHARE TRANSACTIONS 751,870 3,033,873
TOTAL INCREASE IN NET ASSETS 1,016,048 4,286,243
NET ASSETS:
Beginning of year 8,380,798 4,094,555
End of year (including undistributed net investment
income: $25,548 and $2,355, respectively) $9,396,846 $8,380,798
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - American High-Income Trust (the "fund") is registered under the
Investment Company Act of 1940 as an open-end, diversified management investment
company. The fund seeks a high level of current income and, secondarily, capital
appreciation through a diversified, carefully supervised portfolio consisting
primarily of lower rated, higher risk corporate bonds.
The fund offers 14 share classes consisting of four retail share classes, five
CollegeAmerica(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 3.75% 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
- ---------------------------------------------------------------------------------------------------------
CollegeAmerica is a registered trademark of the Virginia College Savings
Plan./SM/
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 at prices
for securities of comparable maturity, quality and type. 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.
Forward currency contracts are valued at the mean of representative
quoted bid and asked prices. Securities and other assets for which
representative market quotations are not readily available are fair
valued as determined in good faith under procedures adopted by
authority of the fund's Board of Trustees. Various factors may be
reviewed in order to make a good faith determination of a security's
fair value. These factors include, but are not limited to, the type
and cost of the security; contractual or legal restrictions on resale
of the security; relevant financial or business developments of the
issuer; actively traded similar or related securities; conversion or
exchange rights on the security; related corporate actions;
significant events occurring after the close of trading in the
security; and changes in overall market conditions.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security
transactions are recorded by the fund as of the date the trades are
executed with brokers. Realized gains and losses from security
transactions are determined based on the specific identified cost of
the securities. In the event a security is purchased with a delayed
payment date, the fund will segregate liquid assets sufficient to meet
its payment obligations. Dividend income is recognized on the
ex-dividend date and interest income is recognized on an accrual
basis. Market discounts, premiums and original issue discounts on
fixed-income securities are amortized daily over the expected life of
the security.
CLASS ALLOCATIONS - Income, fees and expenses (other than
class-specific fees and expenses) are allocated daily among the
various share classes based on the relative value of their settled
shares. Realized and unrealized gains and losses are allocated daily
among the various share classes based on their relative net assets.
Class-specific fees and expenses, such as distribution, administrative
and shareholder services, are charged directly to the respective share
class.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends paid to
shareholders are declared daily from net investment income and are
paid to shareholders monthly. Distributions paid to shareholders are
recorded on the ex-dividend date.
NON-U.S. CURRENCY TRANSLATION - Assets and liabilities, including
investment securities, denominated in non-U.S. currencies are
translated into U.S. dollars at the exchange rates in effect 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.
FORWARD CURRENCY CONTRACTS - The fund may enter into forward currency
contracts, which represent agreements to exchange non-U.S. currencies
on specific future dates at predetermined rates. The fund enters into
these contracts to manage its exposure to changes in non-U.S. exchange
rates arising from investments denominated in non-U.S. currencies.
Upon entering into these contracts, risks may arise from the potential
inability of counterparties to meet the terms of their contracts and
from possible movements in non-U.S. exchange rates. Due to these
risks, the fund could incur losses up to the entire contract amount,
which may exceed the net unrealized value shown in the accompanying
financial statements. On a daily basis, the fund values forward
currency contracts based on the applicable exchange rates and records
unrealized gains or losses. The fund records realized gains or losses
at the time the forward contract is closed or offset by another
contract with the same broker for the same settlement date and
currency.
2. NON-U.S. INVESTMENTS
INVESTMENT RISK - The risks of investing in securities of non-U.S. issuers may
include, but are not limited to, investment and repatriation restrictions;
revaluation of currencies; adverse political, social and economic developments;
government involvement in the private sector; limited and less reliable investor
information; lack of liquidity; certain local tax law considerations; and
limited regulation of the securities markets.
TAXATION - Dividend and interest income is recorded net of non-U.S. taxes paid.
Realized and unrealized gains on securities in certain countries are subject to
non-U.S. taxes. The fund records a liability based on realized and unrealized
gains to provide for potential non-U.S. taxes payable on these securities. For
the year ended September 30, 2004, non-U.S. taxes paid on unrealized gains were
$120,000. In addition, as of September 30, 2004, the liability for non-U.S.
taxes recorded based on realized and unrealized gains was $175,000.
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; paydowns on investments; and net capital
losses. 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 September 30, 2004, the cost of investment securities, excluding
forward currency contracts, for federal income tax purposes was $8,806,380,000.
During the year ended September 30, 2004, the fund reclassified $1,432,000 from
undistributed net investment income to realized gains and $32,000 from
undistributed net investment income to additional paid-in capital to align
financial reporting with tax reporting.
As of September 30, 2004, the components of distributable earnings on a tax
basis were as follows (dollars in thousands):
Undistributed net investment income and currency gains $ 33,796
Loss deferrals related to non-U.S. currency that were realized during the period
November 1,2003 through September 30, 2004 (874)
Short-term capital loss deferrals (461,258)
Gross unrealized appreciation on investment securities 723,249
Gross unrealized depreciation on investment securities (241,630)
Net unrealized appreciation on investment securities 481,619
Undistributed net investment income and currency gains above include currency
losses of $1,527,000 that were realized during the period November 1, 2002
through September 30, 2003. Short-term capital loss deferrals above include
capital loss carryforwards of $161,067,000 and $300,191,000 expiring in 2010 and
2011, respectively. These numbers reflect the utilization of a capital loss
carryforward of $16,330,000 during the year ended September 30, 2004. The
capital loss carryforwards will be used to offset any capital gains realized by
the fund in future years through the expiration dates. The fund will not make
distributions from capital gains while capital loss carryforwards remain. During
the year ended September 30, 2004, the fund realized, on a tax basis, a net
capital gain of $76,385,000, which was offset by capital losses of $60,055,000
that were realized during the period November 1, 2002 through September 30,
2003.
Ordinary Income distributions paid or accrued to shareholders from net
investment income and currency gains were as follows (dollars in thousands):
Share class Year ended September 30, 2004 Year ended September 30, 2003
Class A $ 464,208 $ 396,679
Class B 48,283 37,860
Class C 50,116 37,330
Class F 36,395 28,874
Class 529-A 2,700 1,364
Class 529-B 603 283
Class 529-C 1,260 690
Class 529-E 150 68
Class 529-F 106 31
Class R-1 146 30
Class R-2 1,818 424
Class R-3 2,365 462
Class R-4 1,061 152
Class R-5 4,957 5,497
Total $ 614,168 $ 509,744
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 provided for monthly fees accrued daily. At the beginning of the
period, these fees were based on a declining series of annual rates beginning
with 0.30% on the first $60 million of daily net assets and decreasing to 0.16%
on such assets in excess of $3 billion. The agreement also provided for monthly
fees, accrued daily, based on a declining series of annual rates beginning with
3.00% on the first $8,333,333 of the fund's monthly gross income and decreasing
to 2.00% on such income in excess of $25,000,000. The Board of Trustees approved
amended agreements continuing the series of rates to include additional annual
rates of 0.15% on daily net assets in excess of $6 billion (effective November
1, 2003), 0.14% on daily net assets in excess of $10 billion (effective April 1,
2004) and 1.50% of the fund's monthly gross income in excess of $50,000,000
(effective August 1, 2004). Until the effective date, CRMC reduced investment
advisory services fees to the rates provided by the amended agreement. CRMC also
reduced investment advisory services fees by an additional $128,000. As a
result, the fee shown on the accompanying financial statements of $31,399,000,
which was equivalent to an annualized rate of 0.345%, was voluntarily reduced by
$149,000 to $31,250,000, or 0.344% of average daily net assets.
CLASS-SPECIFIC FEES AND EXPENSES - Expenses that are specific to individual
share classes are accrued directly to the respective share class. The principal
class-specific fees and expenses are described below:
DISTRIBUTION SERVICES - The fund has adopted plans of distribution for
all share classes, except Class R-5. Under the plans, the Board of
Trustees approves certain categories of expenses that are used to
finance activities primarily intended to sell fund shares. The plans
provide for annual expenses, based on a percentage of average daily
net assets, ranging from 0.30% to 1.00% as noted below. In some cases,
the Board of Trustees 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 distribution expenses.
For classes A and 529-A, the Board of Trustees has also approved the
reimbursement of dealer and wholesaler commissions paid by AFD for
certain shares sold without a sales charge. Each class reimburses AFD
for amounts billed within the prior 15 months but only to the extent
that the overall annual expense limit of 0.30% is not exceeded. As of
September 30, 2004, there were no unreimbursed expenses subject to
reimbursement for classes A or 529-A.
------------------------------------------------ ----------------------------- -----------------------------
Share class Currently approved limits Plan limits
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Class A 0.30% 0.30%
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Class 529-A 0.30 0.50
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes B and 529-B 1.00 1.00
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes C, 529-C and R-1 1.00 1.00
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Class R-2 0.75 1.00
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes 529-E and R-3 0.50 0.75
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes F, 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 year ended September
30, 2004, CRMC agreed to pay a portion of these fees for classes R-1,
R-2 and R-3. 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. Administrative services fees are presented gross of any
payments made by CRMC.
Expenses under the agreements described on the previous page for the
year ended September 30, 2004, 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 $14,509 $5,623 Not applicable Not applicable Not applicable
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class B 7,875 694 Not applicable Not applicable Not applicable
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class C 8,299 Included $1,245 $184 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class F 1,342 Included 805 123 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-A 50 Included 59 6 $39
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-B 101 Included 15 6 10
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-C 212 Included 32 9 21
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-E 12 Included 4 -* 2
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-F 4 Included 2 -* 2
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-1 23 Included 3 4 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-2 223 Included 45 251 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-3 182 Included 55 51 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-4 39 Included 23 3 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-5 Not applicable Included 70 2 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Total $32,871 $6,317 $2,358 $639 $74
--------------------------------------------------------------------------------------------------------------
* Amount less than one thousand.
DEFERRED TRUSTEES' COMPENSATION - Since the adoption of the deferred
compensation plan in 1993, Trustees who are unaffiliated with CRMC may elect to
defer the cash payment of part or all of their compensation. These deferred
amounts, which remain as liabilities of the fund, are treated as if invested in
shares of the fund or other American Funds. These amounts represent general,
unsecured liabilities of the fund and vary according to the total returns of the
selected funds. Trustees' compensation in the accompanying financial statements
includes $40,000 in current fees (either paid in cash or deferred) and a net
increase of $11,000 in the value of the deferred amounts.
AFFILIATED OFFICERS AND TRUSTEES - Officers and certain Trustees of the fund are
or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated
officers or Trustees received any compensation directly from the fund.
5. CAPITAL SHARE TRANSACTIONS
Capital share transactions in the fund were as follows (dollars and shares in
thousands):
Share class Sales(1) Reinvestments of dividends
Amount Shares Amount Shares
Year ended September 30, 2004
Class A $ 1,862,662 152,602 $ 359,214 29,474
Class B 167,188 13,713 33,715 2,766
Class C 272,859 22,356 35,669 2,926
Class F 376,997 30,929 26,986 2,214
Class 529-A 20,309 1,663 2,696 221
Class 529-B 4,872 399 601 49
Class 529-C 10,770 882 1,253 103
Class 529-E 1,398 115 149 12
Class 529-F 1,069 88 105 9
Class R-1 2,961 244 144 12
Class R-2 37,305 3,059 1,799 148
Class R-3 53,552 4,384 2,343 193
Class R-4 18,450 1,510 1,056 87
Class R-5 30,926 2,547 3,159 259
Total net increase
(decrease) $ 2,861,318 234,491 $ 468,889 38,473
Year ended September 30, 2003
Class A $ 2,947,678 269,710 $ 293,946 26,810
Class B 401,738 36,762 25,201 2,283
Class C 515,059 47,001 25,987 2,350
Class F 537,925 49,913 19,042 1,721
Class 529-A 17,906 1,629 1,344 121
Class 529-B 4,996 452 279 25
Class 529-C 10,184 929 683 62
Class 529-E 1,070 98 67 6
Class 529-F 915 82 30 3
Class R-1 1,232 110 29 3
Class R-2 15,383 1,383 413 36
Class R-3 14,631 1,322 452 40
Class R-4 9,077 800 146 13
Class R-5 32,990 3,070 3,129 287
Total net increase
(decrease) $ 4,510,784 413,261 $ 370,748 33,760
Share class Repurchases(1) Net increase (decrease)
Amount Shares Amount Shares
Year ended September 30, 2004
Class A $ (1,731,964) (142,224) $ 489,912 39,852
Class B (165,278) (13,595) 35,625 2,884
Class C (292,482) (24,036) 16,046 1,246
Class F (312,222) (25,587) 91,761 7,556
Class 529-A (4,860) (398) 18,145 1,486
Class 529-B (630) (52) 4,843 396
Class 529-C (3,804) (312) 8,219 673
Class 529-E (274) (23) 1,273 104
Class 529-F (168) (14) 1,006 83
Class R-1 (901) (74) 2,204 182
Class R-2 (10,667) (875) 28,437 2,332
Class R-3 (12,081) (993) 43,814 3,584
Class R-4 (5,080) (418) 14,426 1,179
Class R-5 (37,926) (3,102) (3,841) (296)
Total net increase
(decrease) $ (2,578,337) (211,703) $ 751,870 61,261
Year ended September 30, 2003
Class A $ (1,294,863) (117,608) $ 1,946,761 178,912
Class B (84,952) (7,642) 341,987 31,403
Class C (129,541) (11,555) 411,505 37,796
Class F (313,475) (28,218) 243,492 23,416
Class 529-A (1,383) (123) 17,867 1,627
Class 529-B (282) (24) 4,993 453
Class 529-C (791) (72) 10,076 919
Class 529-E (80) (7) 1,057 97
Class 529-F -* -* 945 85
Class R-1 (249) (23) 1,012 90
Class R-2 (2,374) (208) 13,422 1,211
Class R-3 (2,825) (248) 12,258 1,114
Class R-4 (891) (78) 8,332 735
Class R-5 (15,953) (1,410) 20,166 1,947
Total net increase
(decrease) $ (1,847,659) (167,216) $ 3,033,873 279,805
* Amount less than one thousand.
(1) Includes exchanges between share classes of the fund.
6. FORWARD CURRENCY CONTRACTS
As of September 30, 2004, the fund had open forward currency contracts to sell
non-U.S. currencies as follows:
Non-U.S. Contract amount U.S. valuations at September 30, 2004
currency contracts
Unrealized
Non-U.S. U.S. Amount depreciation
(000) (000) (000) (000)
Sales:
Euros expiring 10/19 to 12/31/2004 Euro 29,625 $36,088 $36,806 ($718)
7. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding short-term
securities, of $4,044,608,000 and $3,363,774,000, respectively, during the year
ended September 30, 2004.
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
year ended September 30, 2004, the custodian fee of $179,000 included $180,000
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:
Year ended 9/30/2004 $11.88 $.87 $.35 $1.22
Year ended 9/30/2003 9.62 .93 2.25 3.18
Year ended 9/30/2002 11.27 1.08 (1.65) (.57)
Year ended 9/30/2001 12.93 1.20 (1.61) (.41)
Year ended 9/30/2000 13.52 1.18 (.48) .70
Class B:
Year ended 9/30/2004 11.88 .78 .35 1.13
Year ended 9/30/2003 9.62 .84 2.25 3.09
Year ended 9/30/2002 11.27 1.00 (1.65) (.65)
Year ended 9/30/2001 12.93 1.10 (1.61) (.51)
Period from 3/15/2000 to 9/30/2000 13.57 .52 (.53) (.01)
Class C:
Year ended 9/30/2004 11.88 .77 .35 1.12
Year ended 9/30/2003 9.62 .83 2.25 3.08
Year ended 9/30/2002 11.27 .99 (1.65) (.66)
Period from 3/15/2001 to 9/30/2001 12.48 .53 (1.15) (.62)
Class F:
Year ended 9/30/2004 11.88 .86 .35 1.21
Year ended 9/30/2003 9.62 .92 2.25 3.17
Year ended 9/30/2002 11.27 1.07 (1.65) (.58)
Period from 3/15/2001 to 9/30/2001 12.48 .57 (1.15) (.58)
Class 529-A:
Year ended 9/30/2004 11.88 .86 .35 1.21
Year ended 9/30/2003 9.62 .92 2.25 3.17
Period from 2/19/2002 to 9/30/2002 11.37 .65 (1.76) (1.11)
Class 529-B:
Year ended 9/30/2004 11.88 .75 .35 1.10
Year ended 9/30/2003 9.62 .82 2.25 3.07
Period from 2/25/2002 to 9/30/2002 11.23 .59 (1.63) (1.04)
Class 529-C:
Year ended 9/30/2004 11.88 .75 .35 1.10
Year ended 9/30/2003 9.62 .82 2.25 3.07
Period from 2/19/2002 to 9/30/2002 11.37 .60 (1.76) (1.16)
Class 529-E:
Year ended 9/30/2004 11.88 .82 .35 1.17
Year ended 9/30/2003 9.62 .88 2.25 3.13
Period from 3/15/2002 to 9/30/2002 11.57 .57 (1.96) (1.39)
Class 529-F:
Year ended 9/30/2004 11.88 .85 .35 1.20
Year ended 9/30/2003 9.62 .91 2.25 3.16
Period from 9/16/2002 to 9/30/2002 9.88 .08 (.30) (.22)
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:
Year ended 9/30/2004 $11.88 $.76 $.35 $1.11
Year ended 9/30/2003 9.62 .83 2.25 3.08
Period from 7/11/2002 to 9/30/2002 10.00 .23 (.40) (.17)
Class R-2:
Year ended 9/30/2004 11.88 .77 .35 1.12
Year ended 9/30/2003 9.62 .84 2.25 3.09
Period from 6/18/2002 to 9/30/2002 10.76 .31 (1.18) (.87)
Class R-3:
Year ended 9/30/2004 11.88 .82 .35 1.17
Year ended 9/30/2003 9.62 .88 2.25 3.13
Period from 6/21/2002 to 9/30/2002 10.60 .31 (1.01) (.70)
Class R-4:
Year ended 9/30/2004 11.88 .86 .35 1.21
Year ended 9/30/2003 9.62 .92 2.25 3.17
Period from 7/19/2002 to 9/30/2002 9.97 .22 (.38) (.16)
Class R-5:
Year ended 9/30/2004 11.88 .90 .35 1.25
Year ended 9/30/2003 9.62 .95 2.25 3.20
Period from 5/15/2002 to 9/30/2002 11.30 .42 (1.70) (1.28)
FINANCIAL HIGHLIGHTS (1)
Dividends
(from net Net asset Net assets,
investment value, end Total end of period
income) of period return (3) (in millions)
Class A:
Year ended 9/30/2004 $(.84) $12.26 10.57% $6,920
Year ended 9/30/2003 (.92) 11.88 34.30 6,235
Year ended 9/30/2002 (1.08) 9.62 (5.88) 3,327
Year ended 9/30/2001 (1.25) 11.27 (3.44) 2,936
Year ended 9/30/2000 (1.29) 12.93 5.29 2,788
Class B:
Year ended 9/30/2004 (.75) 12.26 9.71 794
Year ended 9/30/2003 (.83) 11.88 33.28 736
Year ended 9/30/2002 (1.00) 9.62 (6.57) 294
Year ended 9/30/2001 (1.15) 11.27 (4.17) 123
Period from 3/15/2000 to 9/30/2000 (.63) 12.93 (.05) 27
Class C:
Year ended 9/30/2004 (.74) 12.26 9.62 812
Year ended 9/30/2003 (.82) 11.88 33.17 772
Year ended 9/30/2002 (.99) 9.62 (6.65) 262
Period from 3/15/2001 to 9/30/2001 (.59) 11.27 (5.11) 44
Class F:
Year ended 9/30/2004 (.83) 12.26 10.44 578
Year ended 9/30/2003 (.91) 11.88 34.17 470
Year ended 9/30/2002 (1.07) 9.62 (5.95) 156
Period from 3/15/2001 to 9/30/2001 (.63) 11.27 (4.86) 32
Class 529-A:
Year ended 9/30/2004 (.83) 12.26 10.48 48
Year ended 9/30/2003 (.91) 11.88 34.17 28
Period from 2/19/2002 to 9/30/2002 (.64) 9.62 (10.11) 7
Class 529-B:
Year ended 9/30/2004 (.72) 12.26 9.47 12
Year ended 9/30/2003 (.81) 11.88 33.01 7
Period from 2/25/2002 to 9/30/2002 (.57) 9.62 (9.54) 2
Class 529-C:
Year ended 9/30/2004 (.72) 12.26 9.49 25
Year ended 9/30/2003 (.81) 11.88 33.03 16
Period from 2/19/2002 to 9/30/2002 (.59) 9.62 (10.52) 4
Class 529-E:
Year ended 9/30/2004 (.79) 12.26 10.06 3
Year ended 9/30/2003 (.87) 11.88 33.73 2
Period from 3/15/2002 to 9/30/2002 (.56) 9.62 (12.29) - (6)
Class 529-F:
Year ended 9/30/2004 (.82) 12.26 10.34 2
Year ended 9/30/2003 (.90) 11.88 34.06 1
Period from 9/16/2002 to 9/30/2002 (.04) 9.62 (2.23) - (6)
Financial highlights (1) (continued)
Dividends
(from net Net asset Net assets,
investment value, end Total end of period
income) of period return (in millions)
Class R-1:
Year ended 9/30/2004 $(.73) $12.26 9.59% $3
Year ended 9/30/2003 (.82) 11.88 33.16 1
Period from 7/11/2002 to 9/30/2002 (.21) 9.62 (1.70) - (6)
Class R-2:
Year ended 9/30/2004 (.74) 12.26 9.63 44
Year ended 9/30/2003 (.83) 11.88 33.21 15
Period from 6/18/2002 to 9/30/2002 (.27) 9.62 (8.05) - (6)
Class R-3:
Year ended 9/30/2004 (.79) 12.26 10.05 58
Year ended 9/30/2003 (.87) 11.88 33.71 14
Period from 6/21/2002 to 9/30/2002 (.28) 9.62 (6.63) 1
Class R-4:
Year ended 9/30/2004 (.83) 12.26 10.45 24
Year ended 9/30/2003 (.91) 11.88 34.17 9
Period from 7/19/2002 to 9/30/2002 (.19) 9.62 (1.58) - (6)
Class R-5:
Year ended 9/30/2004 (.87) 12.26 10.80 74
Year ended 9/30/2003 (.94) 11.88 34.61 75
Period from 5/15/2002 to 9/30/2002 (.40) 9.62 (11.41) 42
FINANCIAL HIGHLIGHTS (1)
Ratio of expenses Ratio of expenses Ratio of
to average net assets to average net assets net income
before reimbursement/ after reimbursement to average
waiver waiver (4) net assets
Class A:
Year ended 9/30/2004 .67% .67% 7.19%
Year ended 9/30/2003 .75 .75 8.49
Year ended 9/30/2002 .88 .88 9.99
Year ended 9/30/2001 .83 .83 9.75
Year ended 9/30/2000 .82 .82 8.87
Class B:
Year ended 9/30/2004 1.46 1.46 6.40
Year ended 9/30/2003 1.51 1.51 7.63
Year ended 9/30/2002 1.59 1.59 9.28
Year ended 9/30/2001 1.57 1.57 8.75
Period from 3/15/2000 to 9/30/2000 1.52 (5) 1.52 (5) 8.18 (5)
Class C:
Year ended 9/30/2004 1.54 1.54 6.31
Year ended 9/30/2003 1.60 1.60 7.49
Year ended 9/30/2002 1.67 1.67 9.21
Period from 3/15/2001 to 9/30/2001 1.70 (5) 1.70 (5) 8.54 (5)
Class F:
Year ended 9/30/2004 .79 .78 7.05
Year ended 9/30/2003 .84 .84 8.26
Year ended 9/30/2002 .93 .93 9.95
Period from 3/15/2001 to 9/30/2001 .93 (5) .93 (5) 9.32 (5)
Class 529-A:
Year ended 9/30/2004 .76 .76 7.12
Year ended 9/30/2003 .77 .77 8.36
Period from 2/19/2002 to 9/30/2002 1.07 (5) 1.07 (5) 10.40 (5)
Class 529-B:
Year ended 9/30/2004 1.67 1.67 6.20
Year ended 9/30/2003 1.73 1.73 7.36
Period from 2/25/2002 to 9/30/2002 1.82 (5) 1.82 (5) 9.67 (5)
Class 529-C:
Year ended 9/30/2004 1.66 1.66 6.21
Year ended 9/30/2003 1.71 1.71 7.43
Period from 2/19/2002 to 9/30/2002 1.80 (5) 1.80 (5) 9.65 (5)
Class 529-E:
Year ended 9/30/2004 1.13 1.13 6.75
Year ended 9/30/2003 1.18 1.18 7.94
Period from 3/15/2002 to 9/30/2002 1.27 (5) 1.27 (5) 10.45 (5)
Class 529-F:
Year ended 9/30/2004 .88 .88 6.99
Year ended 9/30/2003 .92 .92 7.96
Period from 9/16/2002 to 9/30/2002 .05 .05 .77
Financial highlights (1) (continued)
Ratio of expenses Ratio of expenses Ratio of
to average net assets to average net assets net income
before reimbursement/ after reimbursement/ to average
waiver waiver (4) net assets
Class R-1:
Year ended 9/30/2004 1.68% 1.56% 6.32%
Year ended 9/30/2003 2.01 1.60 7.20
Period from 7/11/2002 to 9/30/2002 2.07 .38 2.32
Class R-2:
Year ended 9/30/2004 2.10 1.53 6.36
Year ended 9/30/2003 2.31 1.57 7.34
Period from 6/18/2002 to 9/30/2002 .85 .48 3.17
Class R-3:
Year ended 9/30/2004 1.15 1.14 6.76
Year ended 9/30/2003 1.28 1.18 7.74
Period from 6/21/2002 to 9/30/2002 .51 .36 3.21
Class R-4:
Year ended 9/30/2004 .79 .78 7.11
Year ended 9/30/2003 .86 .83 8.13
Period from 7/19/2002 to 9/30/2002 9.55 .14 2.25
Class R-5:
Year ended 9/30/2004 .47 .47 7.39
Year ended 9/30/2003 .52 .52 8.77
Period from 5/15/2002 to 9/30/2002 .23 .23 4.25
Year ended September 30
2004 2003 2002 2001 2000
Portfolio turnover rate for all classes of shares 39% 41% 34% 44% 46%
(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 some of the periods shown, CRMC
reduced fees for investment advisory services for all share classes. In
addition, during the start-up period for the retirement share classes
(except R-5), CRMC agreed to pay a portion of the fees related to transfer
agent services.
(5) Annualized.
(6) Amount less than $1 million.
See Notes to Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF AMERICAN HIGH-INCOME TRUST:
We have audited the accompanying statement of assets and liabilities of American
High-Income Trust (the "Fund"), including the investment portfolio, as of
September 30, 2004, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of September 30, 2004, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American High-Income Trust as of September 30, 2004, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Costa Mesa, California
November 9, 2004
TAX INFORMATION (unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of certain distributions received by
shareholders during such fiscal year. The information below is provided for the
fund's fiscal year ending September 30, 2004.
Individual shareholders are eligible for reduced tax rates on qualified dividend
income. For purposes of computing the dividends eligible for reduced tax rates,
$9,031,000 of the dividends paid by the fund from ordinary income earned during
the fiscal year are considered qualified dividend income.
Corporate shareholders may exclude up to 70% of qualifying dividends. For
purposes of computing this exclusion, $9,384,000 of the dividends paid by the
fund from ordinary income earned during the fiscal year represent qualifying
dividends.
Certain states may exempt from income taxation that portion of dividends paid by
the fund from ordinary income that was derived from direct U.S. government
obligations. For purposes of computing this exclusion, $3,144,000 of the
dividends paid by the fund from ordinary income earned during the fiscal year
were derived from interest on direct U.S. government obligations.
Dividends and distributions received by retirement plans such as IRAs,
Keogh-type plans and 403(b) plans need not be reported as taxable income.
However, many retirement plan trusts may need this information for their annual
information reporting.
SINCE THE INFORMATION ABOVE IS REPORTED FOR THE FUND'S FISCAL YEAR AND NOT THE
CALENDAR YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX
INFORMATION WHICH WILL BE MAILED IN JANUARY 2005 TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR 2004 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT
THEIR TAX ADVISERS.
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 September 30, 2004: 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 +4.71% +5.77%(1)
Not reflecting CDSC +9.71% + 6.10%(1)
CLASS C SHARES
Reflecting CDSC, maximum of 1%, payable only if shares
are sold within one year of purchase +8.62% +7.52%(2)
Not reflecting CDSC +9.62% +7.52%(2)
CLASS F SHARES(3)
Not reflecting annual asset-based fee charged
by sponsoring firm +10.44% +8.29%(2)
CLASS 529-A SHARES
Reflecting 3.75% maximum sales charge +6.36% +10.00%(4)
Not reflecting maximum sales charge +10.48% +11.61%(4)
CLASS 529-B SHARES
Reflecting applicable CDSC, maximum of 5%, payable
only if shares are sold within six years of purchase +4.47% +9.89%(5)
Not reflecting CDSC +9.47% +11.20%(5)
CLASS 529-C SHARES
Reflecting CDSC, maximum of 1%, payable only if shares
are sold within one year of purchase +8.49% +10.68%(4)
Not reflecting CDSC +9.49% +10.68%(4)
CLASS 529-E SHARES(3) +10.06% +10.55%(6)
CLASS 529-F SHARES(3)
Not reflecting annual asset-based fee charged
by sponsoring firm +10.34% +19.84%(7)
(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 19, 2002, when Class 529-A and
Class 529-C shares were first sold.
(5) Average annual total return from February 25, 2002, when Class 529-B shares
were first sold.
(6) Average annual total return from March 15, 2002, when Class 529-E shares
were first sold.
(7) Average annual total return from September 16, 2002, when Class 529-F
shares were first sold.
There are several ways to invest in American High-Income Trust. Class A shares
are subject to a 3.75% maximum up-front sales charge that declines for accounts
(and aggregated investments) of $100,000 or more and is eliminated for purchases
of $1 million or more. Other share classes, which are generally not available
for certain employer-sponsored retirement plans, have no up-front sales charges
but are subject to additional annual expenses and fees. Annual expenses for
Class B shares were 0.79 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 annual expenses 0.87 percentage points higher than those for Class A
shares and a 1% CDSC if redeemed within the first year after purchase. Class C
shares convert to Class F shares after 10 years. Class F shares, which are
available only through certain fee-based programs offered by broker-dealer firms
and registered investment advisers, had higher annual expenses (by 0.11
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.
EXPENSE EXAMPLE (unaudited)
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs such as initial sales charges on purchase payments and contingent deferred
sales charges on redemptions (loads); and (2) ongoing costs, including
management fees; distribution and service (12b-1) fees; and other expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the fund so you can compare these costs with the ongoing costs of
investing in other mutual funds. The example is based on an investment of $1,000
invested at the beginning of the period and held for the entire period (April 1,
2004 through September 30, 2004).
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 may use the information in the table on the
next page to estimate the impact of these fees by adding the amount of the fees
to the number in the first line for your share class under the heading entitled
"Expenses paid during period," and subtracting the amount of the fees from the
number in the first line under the heading entitled "Ending account value."
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 may use the
information in the table on the next page to estimate the impact of these fees
by adding the amount of the fees to the number in the second line for your share
class under the heading entitled "Expenses paid during period," and subtracting
the amount of the fees from the number in the second line under the heading
entitled "Ending account value."
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 4/1/2004 value 9/30/2004 during period(1) expense ratio
Class A -- actual return $ 1,000.00 $ 1,028.85 $ 3.46 .68%
Class A -- assumed 5% return 1,000.00 1,021.66 3.45 .68
Class B -- actual return 1,000.00 1,024.89 7.36 1.45
Class B -- assumed 5% return 1,000.00 1,017.80 7.33 1.45
Class C -- actual return 1,000.00 1,024.48 7.76 1.53
Class C -- assumed 5% return 1,000.00 1,017.40 7.74 1.53
Class F -- actual return 1,000.00 1,028.35 3.92 .77
Class F -- assumed 5% return 1,000.00 1,021.21 3.90 .77
Class 529-A -- actual return 1,000.00 1,028.42 3.86 .76
Class 529-A -- assumed 5% return 1,000.00 1,021.26 3.85 .76
Class 529-B -- actual return 1,000.00 1,023.80 8.42 1.66
Class 529-B -- assumed 5% return 1,000.00 1,016.75 8.39 1.66
Class 529-C -- actual return 1,000.00 1,023.85 8.37 1.65
Class 529-C -- assumed 5% return 1,000.00 1,016.80 8.34 1.65
Class 529-E -- actual return 1,000.00 1,026.54 5.74 1.13
Class 529-E -- assumed 5% return 1,000.00 1,019.40 5.72 1.13
Class 529-F -- actual return 1,000.00 1,027.86 4.42 .87
Class 529-F -- assumed 5% return 1,000.00 1,020.71 4.41 .87
Class R-1 -- actual return 1,000.00 1,024.35 7.92 1.56
Class R-1 -- assumed 5% return 1,000.00 1,017.25 7.89 1.56
Class R-2 -- actual return 1,000.00 1,024.53 7.71 1.52
Class R-2 -- assumed 5% return 1,000.00 1,017.45 7.69 1.52
Class R-3 -- actual return 1,000.00 1,026.52 5.79 1.14
Class R-3 -- assumed 5% return 1,000.00 1,019.35 5.77 1.14
Class R-4 -- actual return 1,000.00 1,028.34 3.97 .78
Class R-4 -- assumed 5% return 1,000.00 1,021.16 3.95 .78
Class R-5 -- actual return 1,000.00 1,029.98 2.34 .46
Class R-5 -- assumed 5% return 1,000.00 1,022.76 2.33 .46
(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 (183), and divided by 365 (to reflect the one-half year period).
BOARD OF TRUSTEES
"NON-INTERESTED" TRUSTEES
YEAR FIRST
ELECTED
A TRUSTEE
NAME AND AGE OF THE FUND(1) PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
Ambassador 1999 Corporate director and author; former U.S.
Richard G. Capen, Jr., 70 Ambassador to Spain; former Vice Chairman, Knight-Ridder, Inc.
(communications company); former Chairman and Publisher, The Miami
Herald
H. Frederick Christie, 71 1987 Private investor; former President and CEO, The Mission Group
(non-utility holding company, subsidiary of Southern California
Edison Company)
Diane C. Creel, 56 1994 Chairman of the Board and CEO, Ecovation, Inc. (organic waste
management)
Martin Fenton, 69 1989 Chairman of the Board and CEO, Senior Resource Group LLC (development
and management of senior living communities)
Leonard R. Fuller, 58 1994 President and CEO, Fuller Consulting (financial management consulting
firm)
Richard G. Newman, 70 1991 Chairman of the Board and CEO, AECOM Technology Corporation
(engineering, consulting and professional technical services)
Frank M. Sanchez, 61 1999 Principal, The Sanchez Family Corporation dba McDonald's Restaurants
(McDonald's licensee)
"NON-INTERESTED" TRUSTEES
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX(2)
OVERSEEN BY
NAME AND AGE TRUSTEE OTHER DIRECTORSHIPS(3) HELD BY TRUSTEE
Ambassador 14 Carnival Corporation
Richard G. Capen, Jr., 70
H. Frederick Christie, 71 19 Ducommun Incorporated; IHOP Corporation; Southwest Water Company;
Valero L.P.
Diane C. Creel, 56 12 Allegheny Technologies; BF Goodrich; Teledyne Technologies
Martin Fenton, 69 16 None
Leonard R. Fuller, 58 14 None
Richard G. Newman, 70 13 Sempra Energy; Southwest Water Company
Frank M. Sanchez, 61 12 None
"INTERESTED" TRUSTEES(4)
YEAR FIRST
ELECTED A
TRUSTEE OR PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
NAME, AGE AND OFFICER AND POSITIONS HELD WITH AFFILIATED ENTITIES OR THE
POSITION WITH FUND OF THE FUND(1) PRINCIPAL UNDERWRITER OF THE FUND
Paul G. Haaga, Jr., 55 1987 Executive Vice President and Director, Capital
Chairman of the Board Research and Management Company; Director, The Capital Group
Companies, Inc.(5)
Abner D. Goldstine, 74 1987 Senior Vice President and Director, Capital
Vice Chairman of the Board Research and Management Company
David C. Barclay, 48 1995 Senior Vice President, Capital Research and
President Management Company
"INTERESTED" TRUSTEES(4)
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX(2)
NAME, AGE AND OVERSEEN BY
POSITION WITH FUND TRUSTEE OTHER DIRECTORSHIPS(3) HELD BY TRUSTEE
Paul G. Haaga, Jr., 55 17 None
Chairman of the Board
Abner D. Goldstine, 74 12 None
Vice Chairman of the Board
David C. Barclay, 48 1 None
President
The statement of additional information includes additional information about
fund Trustees and is available without charge upon request by calling American
Funds Service Company at 800/421-0180. The address for all Trustees and officers
of the fund is 333 South Hope Street, Los Angeles, CA 90071, Attention: Fund
Secretary.
(1) Trustees and officers of the fund serve until their resignation, removal
or retirement.
(2) Capital Research and Management Company manages the American Funds,
consisting of 29 funds. Capital Research and Management Company also
manages American Funds Insurance Series,(R) which serves as the underlying
investment vehicle for certain variable insurance contracts, and Endowments,
whose shareholders are limited to certain nonprofit organizations.
(3) This includes all directorships (other than those in the American Funds)
that are held by each Trustee as a director of a public company or a
registered investment company.
(4) "Interested persons" within the meaning of the 1940 Act, on the basis of
their affiliation with the fund's investment adviser, Capital Research and
Management Company, or affiliated entities (including the fund's principal
underwriter).
(5) Company affiliated with Capital Research and Management Company.
OTHER OFFICERS
YEAR FIRST
ELECTED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
NAME, AGE AND AN OFFICER AND POSITIONS HELD WITH AFFILIATED ENTITIES OR
POSITION WITH FUND OF THE FUND(1) THE PRINCIPAL UNDERWRITER OF THE FUND
Susan M. Tolson, 42 1997 Senior Vice President, Capital Research Company(5)
Senior Vice President
Jennifer L. Hinman, 46 2001 Vice President and Director, Capital Research
Vice President Company(5)
Kristine M. Nishiyama, 34 2003 Vice President and Counsel -- Fund Business
Vice President Management Group, Capital Research and Management Company
Julie F. Williams, 56 1987 Vice President -- Fund Business Management
Secretary Group, Capital Research and Management Company
Susi M. Silverman, 34 2001 Vice President -- Fund Business Management
Treasurer Group, Capital Research and Management Company
Kimberly S. Verdick, 40 1994 Assistant Vice President -- Fund Business
Assistant Secretary Management Group, Capital Research and Management Company
Sharon G. Moseley, 36 2003 Vice President -- Fund Business Management
Assistant Treasurer Group, Capital Research and Management Company
OFFICES OF THE FUND AND OF THE
INVESTMENT ADVISER
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1406
135 South State College Boulevard
Brea, CA 92821-5823
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 25065
Santa Ana, CA 92799-5065
P.O. Box 659522
San Antonio, TX 78265-9522
P.O. Box 6007
Indianapolis, IN 46206-6007
P.O. Box 2280
Norfolk, VA 23501-2280
CUSTODIAN OF ASSETS
JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017-2070
COUNSEL
Paul, Hastings, Janofsky & Walker LLP
515 South Flower Street
Los Angeles, CA 90071-2228
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Deloitte & Touche LLP
695 Town Center Drive
Suite 1200
Costa Mesa, CA 92626-7188
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406
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. COLLEGEAMERICA IS SPONSORED BY THE VIRGINIA COLLEGE SAVINGS
PLAN.
"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 portfolio of American High-Income Trust's investments is available
free of charge on the SEC website or upon request by calling AFS.
American High-Income Trust files a complete list of its portfolio holdings with
the SEC for the first and third quarters of each fiscal year on Form N-Q. 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 American High-Income
Trust, but it may also be used as sales literature when preceded or accompanied
by the current prospectus, which gives details about charges, expenses,
investment objectives and operating policies of the fund. If used as sales
material after December 31, 2004, 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 25 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
Emphasis on long-term growth through stocks
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
Emphasis on long-term growth and dividends through stocks
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
Emphasis on above-average income and growth through stocks and/or bonds
Capital Income Builder(R)
The Income Fund of America(R)
o BALANCED FUND
Emphasis on long-term growth and current income through stocks and bonds
American Balanced Fund(R)
o BOND FUNDS
Emphasis on current income through bonds
> 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
Emphasis on tax-free current income through municipal bonds
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. MFGEAR-921-1104P
Litho in USA RCG/L/8049-S1901
Printed on recycled paper
ITEM 2 - Code of Ethics
The Registrant has adopted a Code of Ethics that applies to its Principal
Executive Officer and Principal Financial Officer. The Registrant undertakes to
provide to any person without charge, upon request, a copy of the Code of
Ethics. Such request can be made to American Funds Service Company at
800/421-0180 or to the Secretary of the Registrant, 333 South Hope Street, Los
Angeles, California 90071.
ITEM 3 - Audit Committee Financial Expert
The Registrant's Board has determined that H. Frederick Christie, a member of
the Registrant's Audit Committee, is an "audit committee financial expert" and
"independent," as such terms are defined in this Item. This designation will not
increase the designee's duties, obligations or liability as compared to his
duties, obligations and liability as a member of the Audit Committee and of the
Board; nor will it reduce the responsibility of the other Audit Committee
members. There may be other individuals who, through education or experience,
would qualify as "audit committee financial experts" if the Board had designated
them as such. Most importantly, the Board believes each member of the Audit
Committee contributes significantly to the effective oversight of the
Registrant's financial statements and condition.
ITEM 4 - Principal Accountant Fees and Services
Fees billed by the Registrant's auditors for each of the last two fiscal years,
including fees for non-audit services billed to the adviser and affiliates for
engagements that relate directly to the operations and financial reporting of
the Registrant, and a description of the nature of the services comprising the
fees, are listed below:
Registrant:
a) Audit Fees:
2003 $63,000
2004 $70,000
b) Audit- Related Fees:
2003 none
2004 $10,000
The audit-related fees consist of assurance
and related services relating to the
examination of the Registrant's investment
adviser conducted in accordance with
Statement on Auditing Standards Number 70
issued by the American Institute of
Certified Public Accountants.
c) Tax Fees:
2003 $5,000
2004 $6,000
The tax fees consist of professional
services relating to the preparation of the
Registrant's tax returns.
d)
All Other Fees:
2003 none
2004 none
Adviser and affiliates (includes only fees for non-audit
services billed to the adviser and affiliates for engagements
that relate directly to the operations and financial reporting
of the Registrant and were subject to the pre-approval
policies described below):
b) Audit- Related Fees:
2003 $365,000
2004 $323,000
The audit-related fees consist of assurance
and related services relating to the
examination of the Registrant's transfer
agency and investment adviser conducted in
accordance with Statement on Auditing
Standards Number 70 issued by the American
Institute of Certified Public Accountants.
c) Tax Fees:
2003 none
2004 none
d) All Other Fees:
2003 none
2004 none
The Registrant's Audit Committee will pre-approve all audit and permissible
non-audit services that the Committee considers compatible with maintaining the
auditors' independence. The pre-approval requirement will extend to all
non-audit services provided to the Registrant, the investment adviser, and any
entity controlling, controlled by, or under common control with the investment
adviser that provides ongoing services to the Registrant, if the engagement
relates directly to the operations and financial reporting of the registrant.
The Committee will not delegate its responsibility to pre-approve these services
to the investment adviser. The Committee may delegate to one or more Committee
members the authority to review and pre-approve audit and permissible non-audit
services. Actions taken under any such delegation will be reported to the full
Committee at its next meeting. The pre-approval requirement is waived with
respect to non-audit services if certain conditions are met. The pre-approval
requirement was not waived for any of the services listed above under paragraphs
b, c and d.
Aggregate non-audit fees paid to the Registrant's auditors, including fees for
all services billed to the Registrant and the adviser and affiliates that
provide ongoing services to the Registrant were $378,000 for fiscal year 2003
and $855,000 for fiscal year 2004. The non-audit services represented by these
amounts were brought to the attention of the Committee and considered to be
compatible with maintaining the auditors' independence.
ITEM 5 - Audit Committee of Listed Registrants
Not applicable.
ITEM 6 - Schedule of Investments
[logo - American Funds (r)]
AMERICAN HIGH-INCOME TRUST
Investment portfolio
September 30, 2004
Principal amount Market value
BONDS AND NOTES -- 88.10% (000) (000)
CONSUMER DISCRETIONARY -- 26.97%
Ford Motor Credit Co. 7.375% 2009 $38,000 $41,667
Ford Motor Credit Co. 7.875% 2010 23,300 26,018
Ford Motor Credit Co. 7.25% 2011 16,000 17,338
Ford Motor Credit Co. 7.375% 2011 36,500 39,745
General Motors Acceptance Corp. 6.125% 2006 5,000 5,229
General Motors Acceptance Corp. 6.125% 2007 13,500 14,232
General Motors Acceptance Corp. 6.15% 2007 10,000 10,515
General Motors Acceptance Corp. 7.75% 2010 6,000 6,600
General Motors Acceptance Corp. 6.875% 2011 12,000 12,606
General Motors Corp. 7.20% 2011 7,250 7,688
General Motors Acceptance Corp. 7.25% 2011 16,000 17,105
General Motors Acceptance Corp. 6.875% 2012 21,500 22,375
Cinemark USA, Inc. 9.00% 2013 58,218 65,350
Cinemark, Inc. 0%/9.75% 2014(1) 40,050 27,735
Six Flags, Inc. 9.50% 2009 16,000 15,720
Six Flags, Inc. 8.875% 2010 36,625 34,519
Six Flags, Inc. 9.75% 2013 16,125 15,319
Six Flags, Inc. 9.625% 2014 15,650 14,711
Charter Communications Holdings, LLC and Charter Communications Holdings
Capital Corp. 10.75% 2009 6,925 5,713
CCH II, LLC and CCH II Capital Corp. 10.25% 2010 33,500 34,379
Charter Communications Holdings, LLC and Charter Communications Holdings
Capital Corp. 0%/13.50% 2011(1) 5,525 3,978
Charter Communications Holdings, LLC and Charter Communications Holdings
Capital Corp. 0%/11.75% 2011(1) 6,000 3,750
Charter Communications Holdings, LLC and Charter Communications Holdings
Capital Corp. 0%/12.125% 2012(1) 2,850 1,610
Charter Communications Operating, LLC and Charter Communications Operating
Capital Corp. 8.00% 2012(2) 12,675 12,707
CCO Holdings, LLC and CCO Holdings Capital Corp. 8.75% 2013 15,300 15,090
Hollinger Participation Trust 12.125% 2010(2),(3),(4) 46,559 53,426
CanWest Media Inc., Series B, 10.625% 2011 16,100 18,394
CanWest Media Inc., Series B, 7.625% 2013 3,625 3,915
J.C. Penney Co., Inc. 8.00% 2010 25,995 29,732
J.C. Penney Co., Inc. 9.00% 2012 3,005 3,666
J.C. Penney Co., Inc. 6.875% 2015 10,420 11,149
J.C. Penney Co., Inc. 7.95% 2017 13,800 16,008
J.C. Penney Co., Inc. 8.125% 2027 6,100 6,740
J.C. Penney Co., Inc. 7.625% 2097 7,875 8,190
Royal Caribbean Cruises Ltd. 7.00% 2007 18,168 19,621
Royal Caribbean Cruises Ltd. 6.75% 2008 7,340 7,845
Royal Caribbean Cruises Ltd. 8.00% 2010 13,750 15,555
Royal Caribbean Cruises Ltd. 8.75% 2011 14,900 17,470
Royal Caribbean Cruises Ltd. 6.875% 2013 6,750 7,222
Young Broadcasting Inc. 8.50% 2008 12,350 13,184
Young Broadcasting Inc. 10.00% 2011 50,560 52,330
Technical Olympic USA, Inc. 9.00% 2010 22,861 25,147
Technical Olympic USA, Inc. 9.00% 2010 5,930 6,523
Technical Olympic USA, Inc. 7.50% 2011 6,000 6,135
Technical Olympic USA, Inc. 10.375% 2012 22,180 24,952
Telenet Communications NV 9.00% 2013 Euro 16,575 21,883
Telenet Group Holding NV 0%/11.50% 2014(1),(2) 53,130 39,316
AMC Entertainment Inc. 9.50% 2011 7,307 7,544
AMC Entertainment Inc. 8.625% 2012(2) 10,900 11,608
AMC Entertainment Inc. 9.875% 2012 23,175 24,102
AMC Entertainment Inc. 8.00% 2014(2) 16,340 15,441
D.R. Horton, Inc. 5.00% 2009 4,000 4,090
D.R. Horton, Inc. 8.00% 2009 18,270 20,828
D.R. Horton, Inc. 9.75% 2010 6,955 8,433
D.R. Horton, Inc. 7.875% 2011 2,030 2,357
Schuler Homes, Inc. 10.50% 2011 6,280 7,253
D.R. Horton, Inc. 6.875% 2013 5,575 6,119
D.R. Horton, Inc. 5.625% 2014 8,000 8,000
Visteon Corp. 8.25% 2010 27,250 28,817
Visteon Corp. 7.00% 2014 25,660 24,505
Mohegan Tribal Gaming Authority 6.375% 2009 36,500 38,051
Mohegan Tribal Gaming Authority 8.00% 2012 7,775 8,630
Mohegan Tribal Gaming Authority 7.125% 2014(2) 4,850 5,105
Quebecor Media Inc. 0%/13.75% 2011(1) 2,192 2,126
Quebecor Media Inc. 11.125% 2011 38,678 44,866
Sun Media Corp. 7.625% 2013 4,250 4,569
Toys "R" Us, Inc. 7.625% 2011 6,000 6,030
Toys "R" Us, Inc. 7.875% 2013 33,000 33,082
Toys "R" Us, Inc. 7.375% 2018 9,980 9,306
Kabel Deutschland GmbH 10.625% 2014(2) 41,730 45,694
K. Hovnanian Enterprises, Inc. 10.50% 2007 12,480 14,602
K. Hovnanian Enterprises, Inc. 8.875% 2012 14,475 16,248
K. Hovnanian Enterprises, Inc. 7.75% 2013 5,000 5,412
K. Hovnanian Enterprises, Inc. 6.375% 2014 6,000 6,105
William Lyon Homes, Inc. 10.75% 2013 20,395 23,658
William Lyon Homes, Inc. 7.50% 2014 17,750 18,194
Argosy Gaming Co. 9.00% 2011 10,350 11,670
Argosy Gaming Co. 7.00% 2014 27,650 28,652
Boyd Gaming Corp. 9.25% 2009 6,595 7,238
Boyd Gaming Corp. 7.75% 2012 25,750 27,746
Boyd Gaming Corp. 8.75% 2012 4,500 5,040
WCI Communities, Inc. 10.625% 2011 24,425 27,661
WCI Communities, Inc. 9.125% 2012 8,450 9,464
ITT Corp. 6.75% 2005 12,000 12,480
Starwood Hotels & Resorts Worldwide, Inc. 7.375% 2007 3,875 4,195
Starwood Hotels & Resorts Worldwide, Inc. 7.875% 2012 16,825 19,117
Saks Inc. 7.50% 2010 5,000 5,375
Saks Inc. 9.875% 2011 16,492 19,708
Saks Inc. 7.375% 2019 10,575 10,628
Tenneco Automotive Inc., Series B, 11.625% 2009 11,000 11,660
Tenneco Automotive Inc., Series B, 10.25% 2013 21,000 24,045
Lenfest Communications, Inc. 7.625% 2008 6,750 7,455
Tele-Communications, Inc. 9.80% 2012 9,380 11,976
Comcast Corp. 10.625% 2012 2,245 2,952
Tele-Communications, Inc. 7.875% 2013 3,173 3,720
TCI Communications, Inc. 8.75% 2015 7,500 9,366
Antenna TV SA 9.00% 2007 8,852 8,952
Antenna TV SA 9.75% 2008 Euro 20,750 26,171
Mirage Resorts, Inc. 6.75% 2007 $5,700 6,042
Mirage Resorts, Inc. 6.75% 2008 4,800 4,992
MGM MIRAGE 6.00% 2009 11,000 11,206
MGM MIRAGE 6.00% 2009(2) 7,500 7,641
MGM MIRAGE 8.50% 2010 3,100 3,538
DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. 8.375% 2013 28,900 33,018
Circus and Eldorado Joint Venture and Silver Legacy Resort Casino 10.125% 2012 28,180 30,153
Dillard's, Inc. 6.69% 2007 8,000 8,340
Dillard's, Inc. 6.30% 2008 2,950 3,002
Dillard's, Inc. 6.625% 2008 5,115 5,268
Dillard's, Inc. 6.625% 2018 3,000 2,880
Mercantile Stores Company, Inc. 8.20% 2022(5) 7,500 7,425
Dillard's, Inc. 7.00% 2028 3,000 2,835
Carmike Cinemas, Inc. 7.50% 2014 29,150 29,660
AOL Time Warner Inc. 6.15% 2007 20,000 21,270
AOL Time Warner Inc. 6.875% 2012 7,500 8,380
NTL Cable PLC 8.75% 2014(2),(3) 21,000 22,837
NTL Cable PLC 8.75% 2014 Euro 4,500 5,690
Blockbuster Inc. 9.00% 2012(2) 26,700 27,835
Hilton Hotels Corp. 7.625% 2008 4,700 5,287
Hilton Hotels Corp. 7.20% 2009 8,710 9,864
Hilton Hotels Corp. 8.25% 2011 5,615 6,661
Hilton Hotels Corp. 7.625% 2012 3,050 3,561
Warnaco, Inc. 8.875% 2013 22,375 25,004
TRW Automotive Acquisition Corp. 9.375% 2013 14,951 17,156
TRW Automotive Acquisition Corp. 11.00% 2013 5,704 6,816
Buffets, Inc. 11.25% 2010 22,400 23,856
Gray Communications Systems, Inc. 9.25% 2011 20,800 23,452
Payless ShoeSource, Inc. 8.25% 2013 23,400 22,815
Dex Media East LLC, Dex Media East Finance Co., Series B, 9.875% 2009 5,000 5,775
Dex Media, Inc., Series B, 0%/9.00% 2013(1) 16,225 11,966
Dex Media, Inc., Series B, 0%/9.00% 2013(1) 2,500 1,844
Dex Media, Inc., Series B, 8.00% 2013 2,125 2,242
Regal Cinemas Corp., Series B, 9.375% 2012(6) 17,750 19,791
Adelphia Communications Corp. 10.25% 2006(7) 9,955 9,009
Adelphia Communications Corp. 10.25% 2011(7) 6,850 6,490
Century Communications Corp. 0% 2003(7) 4,565 4,291
Stoneridge, Inc. 11.50% 2012 17,290 19,667
Harrah's Operating Co., Inc. 7.875% 2005 10,875 11,514
Harrah's Operating Co., Inc. 7.125% 2007 3,850 4,180
Harrah's Operating Co., Inc. 8.00% 2011 3,189 3,706
Office Depot, Inc. 10.00% 2008 15,375 18,142
Grupo Posadas, SA de CV 8.75% 2011(2) 17,445 17,881
PETCO Animal Supplies, Inc. 10.75% 2011 14,685 17,108
NextMedia Operating, Inc. 10.75% 2011 15,000 16,969
Aztar Corp. 7.875% 2014(2) 14,750 15,709
RH Donnelley Inc. 8.875% 2010(2) 10,605 12,037
RH Donnelley Inc. 10.875% 2012(2) 3,000 3,652
Toll Corp. 8.25% 2011 5,500 6,126
Toll Corp. 8.25% 2011 1,750 1,934
Toll Brothers, Inc. 6.875% 2012 6,750 7,540
MDC Holdings, Inc. 7.00% 2012 10,000 11,201
MDC Holdings, Inc. 5.50% 2013 4,000 4,072
EchoStar DBS Corp. 9.125% 2009 13,425 15,002
Beazer Homes USA, Inc. 8.375% 2012 13,250 14,707
Standard Pacific Corp. 5.125% 2009 8,500 8,479
Standard Pacific Corp. 6.25% 2014 6,000 5,985
Ryland Group, Inc. 5.375% 2008 11,000 11,495
Ryland Group, Inc. 9.75% 2010 1,625 1,810
LBI Media, Inc. 10.125% 2012 11,140 12,532
Radio One, Inc., Series B, 8.875% 2011 11,100 12,293
Atlantic Broadband Finance, LLC and Atlantic Broadband Finance, Inc. 9.375%
2014(2) 12,585 11,987
Liberty Media Corp. 7.75% 2009 4,750 5,276
Liberty Media Corp. 7.875% 2009 5,500 6,145
Dana Corp. 9.00% 2011 9,350 11,337
Perkins Family Restaurants, LP, Perkins Finance Corp., Series B, 10.125% 2007 10,250 10,481
Bombardier Recreation Products 8.375% 2013(2) 9,000 9,517
Sbarro, Inc. 11.00% 2009 10,000 9,400
La Quinta Properties, Inc. 8.875% 2011 2,000 2,250
La Quinta Properties, Inc. 7.00% 2012(2) 6,500 6,882
British Sky Broadcasting Group PLC 8.20% 2009 7,500 8,749
Boyds Collection, Ltd., Series B, 9.00% 2008 8,122 7,797
Reader's Digest Association, Inc. 6.50% 2011 7,350 7,607
Seneca Gaming Corp. 7.25% 2012(2) 7,220 7,491
Meritor Automotive, Inc. 6.80% 2009 2,200 2,266
ArvinMeritor, Inc. 8.75% 2012 4,375 4,867
Entercom Radio, LLC 7.625% 2014 6,500 7,020
Boise Cascade Corp. 7.50% 2008 2,000 2,230
Boise Cascade Corp. 9.45% 2009 3,250 4,014
Boise Cascade Corp. 6.50% 2010 420 470
Videotron Ltee 6.875% 2014 6,500 6,695
Entravision Communications Corp. 8.125% 2009 6,000 6,405
Jostens IH Corp. 7.625% 2012(2) 6,325 6,388
Warner Music Group 7.375% 2014(2) 5,750 5,980
Mandalay Resort Group, Series B, 10.25% 2007 5,000 5,700
Goodyear Tire & Rubber Co. 7.857% 2011 6,000 5,685
Fisher Communications, Inc. 8.625% 2014(2) 5,015 5,241
Delphi Trust II, trust preferred securities, 6.197% 2033(3) 4,500 4,573
R.J. Tower Corp., Series B, 12.00% 2013 5,000 4,025
Globo Comunicacoes e Participacoes Ltda., Series B, 10.50% 2006(2),(7) 2,600 1,885
Globo Comunicacoes e Participacoes SA 10.625% 2008(2),(7) 2,485 1,802
Univision Communications Inc. 7.85% 2011 3,000 3,530
YUM! Brands, Inc. 7.70% 2012 2,900 3,451
Mediacom LLC and Mediacom Capital Corp. 9.50% 2013 3,525 3,410
News America Inc. 6.75% 2038 2,990 3,341
RBS-Zero Editora Jornalistica SA 11.00% 2010(2) 3,479 3,236
Lennar Corp., Series B, 9.95% 2010 2,500 2,725
Wynn Las Vegas, LLC and Wynn Las Vegas Capital Corp. 12.00% 2010 2,007 2,519
Ameristar Casinos, Inc. 10.75% 2009 2,000 2,280
Dura Operating Corp., Series D, 9.00% 2009 2,000 1,790
Key Plastics Holdings, Inc., Series B, 10.25% 2007(6),(7) 9,650 121
2,534,349
TELECOMMUNICATION SERVICES -- 11.58%
American Tower Corp. 9.375% 2009 66,322 70,633
American Tower Corp. 7.25% 2011 5,425 5,669
American Tower Corp. 7.125% 2012(2) 26,725 26,591
American Tower Corp. 7.50% 2012 18,300 18,757
Crown Castle International Corp. 9.375% 2011 15,750 18,191
Crown Castle International Corp. 10.75% 2011 20,000 22,350
Crown Castle International Corp. 7.50% 2013 42,000 44,205
Crown Castle International Corp., Series B, 7.50% 2013 33,300 35,048
Qwest Capital Funding, Inc. 7.75% 2006 17,250 17,401
Qwest Capital Funding, Inc. 7.00% 2009 27,500 25,300
Qwest Services Corp. 13.50% 2010(2) 43,215 50,670
Qwest Corp. 8.875% 2012(2) 3,600 3,978
Qwest Services Corp. 14.00% 2014(2) 18,400 22,356
Dobson Communications Corp. 10.875% 2010 28,025 20,668
American Cellular Corp., Series B, 10.00% 2011 57,050 46,496
Dobson Communications Corp. 8.875% 2013 55,835 36,293
Nextel Partners, Inc. 12.50% 2009 3,587 4,161
Nextel Partners, Inc. 8.125% 2011 72,075 76,760
Nextel Partners, Inc. 8.125% 2011(2) 16,000 17,040
Nextel Communications, Inc. 6.875% 2013 19,500 20,377
Nextel Communications, Inc. 7.375% 2015 69,650 75,222
Western Wireless Corp. 9.25% 2013 79,675 81,667
Centennial Cellular Corp. 10.75% 2008 25,051 26,178
Centennial Communications Corp. and Centennial Cellular Operating Co. LLC
10.125% 2013 32,555 34,427
Centennial Communications Corp., Centennial Cellular Operating Co. LLC and
Centennial Puerto Rico Operating Corp. 8.625% 2014(2),(3) 16,700 16,011
Triton PCS, Inc. 8.75% 2011 25,575 17,519
Triton PCS, Inc. 9.375% 2011 35,635 25,746
Triton PCS, Inc. 8.50% 2013 22,125 20,189
Cincinnati Bell Inc. 7.25% 2013 56,925 55,075
Sprint Capital Corp. 6.375% 2009 6,820 7,468
Sprint Capital Corp. 7.625% 2011 11,960 13,835
Sprint Capital Corp. 8.375% 2012 5,000 6,064
AirGate PCS, Inc. 9.375% 2009(2),(8) 16,253 16,578
AirGate PCS, Inc. 9.375% 2009(8) 6,000 6,120
AT&T Corp. 8.05% 2011(3) 20,000 22,475
France Telecom 8.50% 2011(3) 14,250 17,080
AT&T Wireless Services, Inc. 8.125% 2012 10,000 12,101
US Unwired Inc., Series B, 10.00% 2012 9,150 9,539
UbiquiTel Operating Co. 9.875% 2011 5,875 6,147
UbiquiTel Operating Co. 9.875% 2011(2) 1,850 1,935
Millicom International Cellular SA 10.00% 2013(2) 6,500 6,565
SpectraSite, Inc. 8.25% 2010 5,650 6,102
FairPoint Communications, Inc. 11.875% 2010 4,950 5,668
PCCW-HKT Capital Ltd. 8.00% 2011(2),(3) 4,750 5,468
iPCS Escrow Co. 11.50% 2012(2) 5,000 5,275
Rogers Cantel Inc. 9.75% 2016 1,625 1,822
Cellco Finance NV 12.75% 2005 1,500 1,605
MetroPCS, Inc. 10.75% 2011 1,000 1,080
GT Group Telecom Inc. 0%/13.25% 2010(1),(6),(7) 11,000 --
1,087,905
MATERIALS -- 11.50%
Lyondell Chemical Co. 9.50% 2008 10,000 10,962
Equistar Chemicals, LP 10.125% 2008 16,050 18,177
Equistar Chemicals, LP 8.75% 2009 9,315 10,083
Equistar Chemicals, LP and Equistar Funding Corp. 10.625% 2011 43,875 50,237
Georgia-Pacific Corp. 7.50% 2006 11,625 12,352
Georgia-Pacific Corp. 7.375% 2008 28,700 31,426
Georgia-Pacific Corp. 8.875% 2010 9,925 11,662
Georgia-Pacific Corp. 8.125% 2011 8,475 9,831
Georgia-Pacific Corp. 9.50% 2011 2,525 3,137
Georgia-Pacific Corp. 7.70% 2015 600 687
Georgia-Pacific Corp. 8.25% 2023 7,000 7,245
Georgia-Pacific Corp. 8.875% 2031 10,095 12,291
Freeport-McMoRan Copper & Gold Inc. 10.125% 2010 71,425 81,157
Stone Container Corp. 9.25% 2008 6,425 7,180
Stone Container Corp. 9.75% 2011 10,700 11,904
Jefferson Smurfit Corp. (U.S.) 8.25% 2012 26,670 29,537
Stone Container Corp. 8.375% 2012 2,000 2,215
Jefferson Smurfit Corp. (U.S.) 7.50% 2013 19,375 20,537
Owens-Illinois, Inc. 8.10% 2007 5,250 5,539
Owens-Illinois, Inc. 7.35% 2008 4,440 4,601
Owens-Brockway Glass Container Inc. 8.875% 2009 9,425 10,297
Owens-Illinois, Inc. 7.50% 2010 2,000 2,055
Owens-Brockway Glass Container Inc. 7.75% 2011 15,985 17,104
Owens-Brockway Glass Container Inc. 8.75% 2012 22,225 24,781
Abitibi-Consolidated Co. of Canada 6.95% 2006 1,000 1,037
Abitibi-Consolidated Co. of Canada 5.25% 2008 11,250 10,955
Abitibi-Consolidated Finance LP 7.875% 2009 2,500 2,619
Abitibi-Consolidated Inc. 8.55% 2010 8,500 9,159
Abitibi-Consolidated Co. of Canada 5.38% 2011(3) 8,500 8,627
Abitibi-Consolidated Co. of Canada 6.00% 2013 20,240 18,722
Millennium America Inc. 9.25% 2008 21,875 24,227
Millennium America Inc. 9.25% 2008(2) 13,950 15,450
Millennium America Inc. 7.625% 2026 2,000 1,850
Graphic Packaging International, Inc. 8.50% 2011 26,490 29,735
Graphic Packaging International, Inc. 9.50% 2013 9,750 11,188
Potlatch Corp. 10.00% 2011 33,355 37,858
Associated Materials Inc. 9.75% 2012 1,945 2,242
Associated Materials Inc. 0%/11.25% 2014(1),(2) 48,210 35,314
Gerdau Ameristeel Corp. and GUSAP Partners 10.375% 2011 29,875 34,207
Kappa Beheer BV 10.625% 2009 Euro 16,250 21,606
Kappa Beheer BV 12.50% 2009 6,150 8,253
Ainsworth Lumber Co. Ltd. 7.25% 2012(2) $12,675 12,865
Ainsworth Lumber Co. Ltd. 6.75% 2014 12,555 12,147
Ainsworth Lumber Co. Ltd. 6.75% 2014 4,400 4,257
Crystal US Holdings 3 LLC and Crystal US Sub 3 Corp., Series B, 0%/10.50%
2014(1),(2) 39,350 23,708
BCP Caylux Holdings Luxembourg SCA 9.625% 2014(2) 4,900 5,316
Building Materials Corp. of America 8.00% 2008 5,520 5,699
Building Materials Corp. of America 7.75% 2014(2) 22,300 22,188
United States Steel Corp. 10.75% 2008 3,571 4,232
United States Steel Corp. 9.75% 2010 18,923 21,761
Rhodia 10.25% 2010 20,265 21,076
Rhodia 8.875% 2011 3,000 2,625
Nalco Co. 7.75% 2011 20,690 22,035
Oregon Steel Mills, Inc. 10.00% 2009 19,274 21,153
Norampac Inc. 6.75% 2013 19,850 20,793
Earle M. Jorgensen Co. 9.75% 2012 17,840 19,892
Ispat Inland ULC 9.75% 2014 17,825 19,741
Longview Fibre Co. 10.00% 2009 17,950 19,655
Luscar Coal Ltd. 9.75% 2011 15,215 17,345
Sino-Forest Corp., 9.125% 2011(2) 14,350 14,816
INVISTA 9.25% 2012(2) 13,675 14,666
Huntsman LLC 8.80% 2011(2),(3) 825 874
Huntsman LLC 11.50% 2012(2) 11,485 12,734
Steel Dynamics, Inc. 9.50% 2009 12,050 13,436
Crompton Corp. 7.67% 2010(2),(3) 8,325 8,700
Crompton Corp. 9.875% 2012(2) 2,550 2,690
Graham Packaging Co., LP 9.875% 2014(2) 9,000 9,214
Tekni-Plex, Inc., Series B, 12.75% 2010 10,575 8,883
Smurfit Capital Funding PLC 6.75% 2005 3,175 3,286
JSG Funding PLC 9.625% 2012 1,650 1,873
JSG Funding PLC 15.50% 2013(4) 2,832 3,299
Ball Corp. 6.875% 2012 7,500 8,025
Peabody Energy Corp., Series B, 6.875% 2013 7,000 7,595
UCAR Finance Inc. 10.25% 2012 5,551 6,384
Georgia Gulf Corp. 7.125% 2013 6,000 6,255
Allegheny Technologies, Inc. 8.375% 2011 5,000 5,350
AK Steel Corp. 7.75% 2012 2,650 2,604
Airgas, Inc. 6.25% 2014 2,500 2,512
Indah Kiat Finance Mauritius Ltd. 10.00% 2007(7) 125 67
Indah Kiat International Finance Co. BV 11.875% 2002(9) 2,250 1,406
Pindo Deli Finance Mauritius Ltd. 10.75% 2007(7) 550 172
Pindo Deli Finance Mauritius Ltd. 10.25% 2002(9) 2,500 781
APP International Finance Co. BV 11.75% 2005(7) 275 142
1,080,298
UTILITIES -- 6.28%
Southern California Edison, First and Ref. Mortgage Bonds, 8.00% 2007 3,750 4,153
Edison Mission Energy 10.00% 2008 22,300 26,202
Mission Energy Holding Co. 13.50% 2008 35,600 45,212
Edison Mission Energy 7.73% 2009 40,250 42,464
Edison Mission Energy 9.875% 2011 30,625 35,831
Midwest Generation, LLC, Series B, 8.56% 2016(5) 25,350 26,633
Homer City Funding LLC 8.734% 2026(5) 9,495 10,682
Midwest Generation, LLC and Midwest Finance Corp. 8.75% 2034 19,250 21,079
AES Corp. 10.00% 2005(2),(5) 8,553 8,724
AES Corp. 9.50% 2009 19,357 21,728
AES Corp. 9.375% 2010 10,569 11,956
AES Corp. 8.75% 2013(2) 43,985 49,813
AES Corp. 9.00% 2015(2) 15,150 17,157
AES Red Oak, LLC, Series B, 9.20% 2029(5) 7,000 7,875
Dynegy Holdings Inc. 9.875% 2010(2) 22,025 24,998
Dynegy Holdings Inc. 6.875% 2011 2,000 1,915
Dynegy Holdings Inc. 10.125% 2013(2) 43,390 50,115
Nevada Power Co., Series A, 8.25% 2011 5,500 6,187
Sierra Pacific Power Co., General and Refunding Mortgage Notes, Series H, 6.25%
2012(2) 3,000 3,075
Nevada Power Co., Series I, 6.50% 2012(2) 3,375 3,502
Nevada Power Co., General and Ref. Mortgage Notes, Series G, 9.00% 2013 29,605 34,194
Sierra Pacific Resources 8.625% 2014(2) 14,575 15,887
AES Gener SA 7.50% 2014(2) 31,850 32,168
Drax Group Ltd., Class A-1, 7.538% 2015(2),(3) Pound 4,127 7,476
Drax Group Ltd., Class A-2, unit, 9.02% 2015(2),(3),(10) 4,746 14,874
Drax Group Ltd., Class B, 7.02% 2025(2),(3) 3,491 5,992
PSEG Energy Holdings Inc. 8.625% 2008 17,089 18,926
Enersis SA 7.375% 2014 15,000 15,753
Duke Capital Corp. 7.50% 2009 9,500 10,836
Duke Capital LLC 5.668% 2014 2,000 2,044
FPL Energy American Wind, LLC 6.639% 2023(2),(5) 8,170 8,590
TNP Enterprises, Inc., Series B, 10.25% 2010 4,250 4,590
590,631
INDUSTRIALS -- 5.92%
Allied Waste North America, Inc., Series B, 7.625% 2006 2,500 2,622
Allied Waste North America, Inc. 8.50% 2008 16,500 17,985
Allied Waste North America, Inc., Series B, 8.875% 2008 16,750 18,257
Allied Waste North America, Inc., Series B, 6.50% 2010 14,500 14,427
Allied Waste North America, Inc., Series B, 5.75% 2011 13,700 13,084
Allied Waste North America, Inc., Series B, 9.25% 2012 3,000 3,353
Allied Waste North America, Inc., Series B, 6.125% 2014 10,000 9,375
Allied Waste North America, Inc., Series B, 7.375% 2014 16,950 16,399
Northwest Airlines, Inc. 7.625% 2005 2,000 1,980
Northwest Airlines, Inc. 8.875% 2006 20,740 17,525
Northwest Airlines, Inc. 8.70% 2007 3,600 2,646
Northwest Airlines, Inc. 9.875% 2007 20,425 15,523
Northwest Airlines, Inc. 7.875% 2008 17,900 12,083
Northwest Airlines, Inc. 10.00% 2009 18,205 12,652
Terex Corp. 9.25% 2011 22,150 24,919
Terex Corp., Class B, 10.375% 2011 7,700 8,740
Terex Corp. 7.375% 2014 11,750 12,396
Jacuzzi Brands, Inc. 9.625% 2010 27,250 30,248
Tyco International Group SA 6.125% 2008 12,500 13,569
Tyco International Group SA 6.125% 2009 11,500 12,515
Tyco International Group SA 6.375% 2011 2,500 2,769
Continental Airlines, Inc. 8.00% 2005 13,815 12,710
Continental Airlines, Inc., Series 2000-2, Class A-1, 7.487% 2012 5,000 4,877
Continental Airlines, Inc., Series 2000-2, Class C, 8.312% 2012(5) 5,429 4,062
Continental Airlines, Inc., Series 2001-1, Class B, 7.373% 2017(5) 3,417 2,682
Continental Airlines, Inc., Series 2000-1, Class A-1, 8.048% 2022(5) 2,968 2,896
United Rentals (North America), Inc., Series B, 6.50% 2012 23,125 22,373
United Rentals (North America), Inc., Series B, 7.00% 2014 3,000 2,678
Nortek, Inc. 8.50% 2014(2) 23,270 24,492
Delta Air Lines, Inc. 7.70% 2005 18,875 8,305
Delta Air Lines, Inc. 10.00% 2008 15,750 4,804
Delta Air Lines, Inc., Series 2000-1, Class B, 7.92% 2010 2,500 1,294
Delta Air Lines, Inc., Series 2001-1, Class A-1, 6.619% 2011(5) 3,119 2,839
Delta Air Lines, Inc. 9.75% 2021 2,200 550
Delta Air Lines, Inc. 10.375% 2022 3,000 750
Delta Air Lines, Inc. 8.30% 2029 11,500 2,760
Koppers Inc. 9.875% 2013 18,875 20,951
American Standard Inc. 8.25% 2009 10,190 11,769
American Standard Inc. 7.625% 2010 6,300 7,166
Horizon Lines, LLC and Horizon Lines Holding Corp. 9.00% 2012(2) 15,525 16,457
KinderCare Learning Centers, Inc., Series B, 9.50% 2009 15,241 15,527
TFM, SA de CV 10.25% 2007 2,295 2,387
TFM, SA de CV 11.75% 2009 9,600 9,744
TFM, SA de CV 12.50% 2012 2,310 2,576
Bombardier Capital Inc., Series A, 6.125% 2006(2) 7,500 7,442
Bombardier Inc. 6.75% 2012(2) 4,000 3,655
Bombardier Inc. 6.30% 2014(2) 2,000 1,730
Argo-Tech Corp. 9.25% 2011(2) 10,850 11,691
AGCO Corp. 9.50% 2008 5,250 5,696
AGCO Corp. 6.875% 2014 Euro 3,750 4,613
Kansas City Southern Railway Co. 9.50% 2008 $3,375 3,713
Kansas City Southern Railway Co. 7.50% 2009 5,615 5,769
DRS Technologies, Inc. 6.875% 2013 7,145 7,467
Standard Aero Holdings, Inc. 8.25% 2014(2) 6,450 6,708
Cummins Inc. 9.50% 2010 5,550 6,438
PHH Corp. 7.125% 2013 5,000 5,728
Synagro Technologies, Inc. 9.50% 2009 5,200 5,590
Esterline Technologies Corp. 7.75% 2013 5,000 5,375
Laidlaw International, Inc. 10.75% 2011 4,225 4,843
Stericycle, Inc., Series B, 12.375% 2009 3,407 3,731
Alliant Techsystems Inc. 8.50% 2011 3,000 3,285
Worldspan, LP and WS Financing Corp. 9.625% 2011 3,304 3,015
Protection One Alarm Monitoring, Inc. 13.625% 2005(3),(6) 3,543 3,012
WMX Technologies, Inc. 7.10% 2026 2,150 2,397
NMHG Holding Co. 10.00% 2009 2,000 2,210
International Shipholding Corp., Series B, 7.75% 2007 1,950 2,106
AMR Corp. 9.00% 2012 2,000 1,230
United Air Lines, Inc., 1991 Equipment Trust Certificates, Series A, 10.11%
2006(5),(7) 1,907 705
United Air Lines, Inc. 9.00% 2003(7) 3,000 191
556,056
CONSUMER STAPLES -- 5.65%
Burns Philp Capital Pty Ltd. and Burns Philp Capital (U.S.) Inc., Series B,
9.50% 2010 16,750 18,258
Burns Philp Capital Pty Ltd. and Burns Philp Capital (U.S.) Inc., Series B,
10.75% 2011 15,575 17,288
Burns Philp Capital Pty Ltd., Series B, 9.75% 2012 55,247 59,391
Koninklijke Ahold NV 5.875% 2008 Euro 15,750 20,598
Ahold Finance U.S.A., Inc. 6.25% 2009 39,070 40,633
Ahold Finance U.S.A., Inc. 8.25% 2010 18,220 20,634
Ahold Finance U.S.A., Inc. 6.50% 2017 Pound 1,375 2,404
Ahold Lease Pass Through Trust, Series 2001-A-1, 7.82% 2020(5) 3,783 4,012
Ahold Lease Pass Through Trust, Series 2001-A-2, 8.62% 2025(5) 5,500 5,875
Pathmark Stores, Inc. 8.75% 2012 54,965 51,667
Jean Coutu Group (PJC) Inc. 7.625% 2012(2) 1,425 1,457
Jean Coutu Group (PJC) Inc. 8.50% 2014(2) 43,525 43,416
Delhaize America, Inc. 8.125% 2011 23,645 27,121
Delhaize America, Inc. 9.00% 2031 10,000 12,083
Gold Kist Inc. 10.25% 2014(2) 32,475 36,210
Rite Aid Corp. 6.875% 2013 17,800 15,664
Rite Aid Corp. 9.25% 2013 11,250 11,588
Rite Aid Corp. 7.70% 2027 6,280 5,291
Rite Aid Corp. 6.875% 2028 4,000 3,050
Winn-Dixie Stores, Inc. 8.875% 2008 28,650 23,493
Winn Dixie Pass-through Trust, Series 1999-1, Class A-1, 7.803% 2017(2),(5) 3,103 2,314
Playtex Products, Inc. 8.00% 2011 14,625 15,576
Playtex Products, Inc. 9.375% 2011 5,750 5,923
Stater Bros. Holdings Inc. 5.38% 2010(2),(3) 5,450 5,559
Stater Bros. Holdings Inc. 8.125% 2012(2) 12,125 12,762
Constellation Brands, Inc. 8.125% 2012 16,000 17,640
Petro Stopping Centers, LP and Petro Financial Corp. 9.00% 2012 14,750 15,709
Del Monte Corp., Series B, 8.625% 2012 10,550 11,790
Fage Dairy Industry SA 9.00% 2007 10,000 10,100
WH Holdings (Cayman Islands) Ltd. and WH Capital Corp. 9.50% 2011 7,300 7,939
Dole Food Co., Inc. 8.875% 2011 5,210 5,692
Great Atlantic & Pacific Tea Co., Inc. 9.125% 2011 300 231
531,368
INFORMATION TECHNOLOGY -- 5.52%
Solectron Corp., Series B, 7.375% 2006 13,095 13,652
Solectron Corp. 9.625% 2009 54,425 60,548
Electronic Data Systems Corp. 6.85% 2004 5,000 5,004
Electronic Data Systems Corp. 7.125% 2009 32,300 34,731
Electronic Data Systems Corp., Series B, 6.50% 2013(3) 27,790 28,076
Sanmina-SCI Corp. 10.375% 2010 51,750 59,448
ON Semiconductor Corp. and Semiconductor Components Industries, LLC 13.00%
2008(3) 22,566 25,387
ON Semiconductor Corp. and Semiconductor Components Industries, LLC 12.00% 2010 11,260 13,005
Semiconductor Note Participation Trust 0% 2011(2) 8,420 11,409
Micron Technology, Inc. 6.50% 2005(2) 45,000 44,550
Nortel Networks Ltd. 6.125% 2006 35,075 35,952
Xerox Corp. 9.75% 2009 2,000 2,340
Xerox Corp. 7.125% 2010 22,750 24,399
Xerox Corp. 7.625% 2013 5,000 5,425
Motorola, Inc. 7.625% 2010 7,000 8,202
Motorola, Inc. 8.00% 2011 14,235 17,134
Motorola, Inc. 7.50% 2025 2,000 2,301
Motorola, Inc. 5.22% 2097 4,550 3,549
Lucent Technologies Inc. 7.25% 2006 15,000 15,975
Lucent Technologies Inc. 5.50% 2008 8,500 8,543
Viasystems, Inc. 10.50% 2011 24,815 23,698
Amkor Technology, Inc. 9.25% 2008 4,475 4,184
Amkor Technology, Inc. 7.75% 2013 16,250 13,406
Jabil Circuit, Inc. 5.875% 2010 14,750 15,449
Flextronics International Ltd. 9.75% 2010 Euro 11,310 15,389
Iron Mountain Inc. 8.625% 2013 2,000 2,180
Iron Mountain Inc. 7.75% 2015 11,200 11,928
Freescale Semiconductor, Inc. 6.875% 2011(2) 9,875 10,319
Hyundai Semiconductor America, Inc. 8.625% 2007(2) 2,600 2,530
Exodus Communications, Inc. 11.625% 2010(6),(7) 3,851 0
518,713
ENERGY -- 3.98%
Port Arthur Finance Corp. 12.50% 2009(5) 1,697 1,986
Premcor Refining Group Inc. 9.25% 2010 12,675 14,450
Premcor Refining Group Inc. 6.125% 2011 6,000 6,240
Premcor Refining Group Inc. 6.75% 2011 23,700 25,359
Premcor Refining Group Inc. 7.75% 2012 33,650 36,847
Premcor Refining Group Inc. 9.50% 2013 34,625 40,944
Premcor Refining Group Inc. 6.75% 2014 5,000 5,200
Premcor Refining Group Inc. 7.50% 2015 23,900 25,812
Petrozuata Finance, Inc., Series B, 8.22% 2017(2),(5) 49,190 48,698
Petrozuata Finance, Inc., Series B, 8.22% 2017(5) 8,900 8,811
Newfield Exploration Co., Series B, 7.45% 2007 1,750 1,916
Newfield Exploration Co. 7.625% 2011 3,500 3,938
Newfield Exploration Co. 8.375% 2012 23,500 26,555
Newfield Exploration Co. 6.625% 2014(2) 17,500 18,331
General Maritime Corp. 10.00% 2013 40,700 46,449
Overseas Shipholding Group, Inc. 8.25% 2013 14,000 15,540
Overseas Shipholding Group, Inc. 8.75% 2013 7,820 8,876
Teekay Shipping Corp. 8.875% 2011 19,625 22,299
Williams Companies, Inc. 8.125% 2012 3,000 3,473
Williams Companies, Inc. 8.75% 2032 8,500 9,541
Pemex Project Funding Master Trust 7.875% 2009 1,400 1,565
Pemex Project Funding Master Trust 8.625% 2022 1,170 1,333
374,163
HEALTH CARE -- 3.21%
Tenet Healthcare Corp. 6.375% 2011 30,260 27,310
Tenet Healthcare Corp. 7.375% 2013 12,590 11,898
Tenet Healthcare Corp. 9.875% 2014(2) 37,200 39,060
Quintiles Transnational Corp. 10.00% 2013 46,900 49,949
Pharma Services Intermediate Holding Corp. 0%/11.50% 2014(1),(2) 22,600 14,351
Concentra Operating Corp. 9.50% 2010 24,600 27,306
Concentra Operating Corp. 9.125% 2012(2) 7,025 7,728
Columbia/HCA Healthcare Corp. 6.91% 2005 13,250 13,553
Columbia/HCA Healthcare Corp. 7.00% 2007 8,255 8,825
HCA -- The Healthcare Co. 7.875% 2011 1,250 1,415
Universal Hospital Services, Inc., Series B, 10.125% 2011 18,000 18,360
Triad Hospitals, Inc. 7.00% 2012 17,000 17,850
Team Health, Inc. 9.00% 2012(2) 17,175 17,175
US Oncology, Inc. 9.00% 2012(2) 6,945 7,223
US Oncology, Inc. 10.75% 2014(2) 6,000 6,195
MedCath Holdings Corp. 9.875% 2012(2) 11,500 12,075
Athena Neurosciences Finance, LLC 7.25% 2008 8,000 8,140
Medical Device Manufacturing, Inc. 10.00% 2012(2) 7,250 7,721
Health Net, Inc. 9.875% 2011(3) 5,000 6,170
302,304
NON-U.S. GOVERNMENT OBLIGATIONS -- 2.99%
Brazil (Federal Republic of), Debt Conversion Bond, Series L, Bearer, 2.125%
2012(3) 6,118 5,705
Brazil (Federal Republic of) 10.25% 2013 26,500 29,455
Brazil (Federal Republic of), Bearer 8.00% 2014(4) 7,578 7,498
Brazil (Federal Republic of) 8.875% 2024 1,895 1,825
Brazil (Federal Republic of) 11.00% 2040 13,110 14,713
Russian Federation 8.25% 2010 6,000 6,539
Russian Federation 8.25% 2010(2) 2,500 2,725
Russian Federation 12.75% 2028 8,000 12,220
Russian Federation 5.00% 2030(3) 25,865 25,024
United Mexican States Government, Series M10, 10.50% 2011 MXP 12,319 1,153
United Mexican States Government Eurobonds, Global 7.50% 2012 $1,450 1,638
United Mexican States Government Eurobonds, Global 6.375% 2013 6,000 6,333
United Mexican States Government, Series MI10, 8.00% 2013 MXP 33,400 2,583
United Mexican States Government Eurobonds 11.375% 2016 $6,751 9,958
United Mexican States Government Global 8.125% 2019 1,663 1,912
United Mexican States Government 8.00% 2023 MXP 116,636 8,097
United Mexican States Government Global 8.30% 2031 $ 3,020 3,443
United Mexican States Government Global 7.50% 2033 2,285 2,407
Panama (Republic of) 10.75% 2020 415 500
Panama (Republic of) Global 9.375% 2023 18,708 20,485
Panama (Republic of) 8.875% 2027 3,500 3,693
Panama (Republic of) 8.125% 2034 3,150 3,056
Peru (Republic of) 9.125% 2012 4,909 5,523
Peru (Republic of) 9.875% 2015 7,500 8,663
Peru (Republic of) 8.375% 2016 2,500 2,613
Peru (Republic of) Past Due Interest Eurobond 5.00% 2017(3) 383 351
Turkey (Republic of) Treasury Bill 0% 2004 TRL 5,000,000,000 3,206
Turkey (Republic of) Treasury Bill 0% 2005 15,000,000,000 7,636
Turkey (Republic of) Treasury Bill 0% 2005 11,000,000,000 5,995
Colombia (Republic of) 10.00% 2012 $1,500 1,670
Colombia (Republic of) Global 10.75% 2013 6,800 7,827
Colombia (Republic of) 11.75% 2020 4,000 4,910
Colombia (Republic of) Global 10.375% 2033 700 763
Venezuela (Republic of) 10.75% 2013 6,000 6,756
Venezuela (Republic of) 9.25% 2027 4,630 4,574
Venezuela (Republic of) 9.375% 2034 3,000 2,972
Ukraine Government 7.65% 2013(2) 7,400 7,437
Ukraine Government 7.65% 2013 3,000 3,015
Dominican Republic 9.50% 2006(2) 3,130 2,692
Dominican Republic 9.50% 2006 1,250 1,075
Dominican Republic 9.04% 2013(2) 6,095 4,754
Dominican Republic 2.438% 2024(3) 500 373
State of Qatar 9.75% 2030 3,500 5,049
Ecuador (Republic of) 8.00% 2030(3) 5,550 4,516
Guatemala (Republic of) 10.25% 2011(2) 1,000 1,170
Guatemala (Republic of) 10.25% 2011 1,000 1,170
Guatemala (Republic of) 9.25% 2013(2) 1,500 1,688
Banque Centrale de Tunisie 7.375% 2012 3,500 3,994
Argentina (Republic of) Global 15.50% 2008(11) 1,500 458
Argentina (Republic of) 11.75% 2009(11) 75 23
Argentina (Republic of) 1.98% 2012(3) 2,380 1,757
Argentina (Republic of) Global 12.25% 2018(4),(11) 2,860 855
Argentina (Republic of) Global 12.00% 2031(4),(11) 53 16
El Salvador (Republic of) 7.75% 2023(2) 2,775 3,004
Aries Vermogensverwaltungs GmbH, Series C, 9.60% 2014(2) 2,000 2,255
Indonesia (Republic of) 6.75% 2014(2) 1,250 1,216
280,938
FINANCIALS -- 2.97%
Host Marriott, LP, Series E, 8.375% 2006 6,450 6,837
Host Marriott, LP, Series G, 9.25% 2007 3,675 4,134
Host Marriott, LP, Series I, 9.50% 2007 2,050 2,281
HMH Properties, Inc., Series B, 7.875% 2008 341 353
Host Marriott, LP, Series L, 7.00% 2012(2) 16,450 17,396
Host Marriott, LP, Series K, 7.125% 2013 17,200 18,146
Capital One Financial Corp. 7.25% 2006 2,500 2,653
Capital One Financial Corp. 8.75% 2007 19,800 22,095
Capital One Financial Corp. 7.125% 2008 5,000 5,514
Capital One Bank 6.50% 2013 12,500 13,692
LaBranche and Co., Inc. 9.50% 2009(2) 29,700 29,849
LaBranche and Co., Inc. 11.00% 2012(2) 6,000 6,195
iStar Financial, Inc. 7.00% 2008 7,060 7,659
iStar Financial, Inc. 8.75% 2008 1,714 1,973
iStar Financial, Inc., Series B, 4.875% 2009 2,000 2,014
iStar Financial, Inc. 6.00% 2010 9,600 10,037
iStar Financial, Inc., Series B, 5.70% 2014 2,500 2,518
MBNA Corp. 5.625% 2007 10,000 10,561
MBNA Corp., MBNA Capital A, Series A, 8.278% 2026 7,500 8,373
Kazkommerts International BV 8.50% 2013(2) 7,000 7,140
Kazkommerts International BV 7.875% 2014(2) 10,000 9,675
Providian Financial Corp., Series A, 9.525% 2027(2) 15,000 15,525
Crescent Real Estate LP 7.50% 2007 12,320 12,659
FelCor Lodging LP 9.00% 2011(3) 9,155 10,116
Rouse Co. 3.625% 2009 1,551 1,450
Rouse Co. 7.20% 2012 6,500 6,995
Advanta Capital Trust I, Series B, 8.99% 2026 9,000 8,190
UFJ Finance Aruba AEC 6.75% 2013 6,745 7,491
Sovereign Capital Trust I 9.00% 2027 5,000 5,622
Chevy Chase Bank, FSB 6.875% 2013 5,500 5,583
Refco Finance Holdings 9.00% 2012(2) 5,000 5,363
Mangrove Bay Pass Through Trust 6.102% 2033(2),(3),(5) 5,000 5,106
BankUnited Capital Trust, BankUnited Financial Corp. 10.25% 2026 4,500 4,928
Korea First Bank 7.267% 2034(2),(3) 870 895
279,018
U.S. TREASURY NOTES & BONDS -- 0.68%
U.S. Treasury Obligations 5.75% 2005 14,000 14,540
U.S. Treasury Obligations 7.50% 2005 6,000 6,125
U.S. Treasury Obligations 3.25% 2007 5,000 5,056
U.S. Treasury Obligations 6.625% 2007 25,000 27,418
U.S. Treasury Obligations 4.75% 2008 10,000 10,605
63,744
MUNICIPALS -- 0.40%
State of Wisconsin, Badger Tobacco Asset Securitization Corp., Tobacco
Settlement Asset-backed Bonds, 6.125% 2027(5) $25,735 $ 24,728
State of New Jersey, Tobacco Settlement Fncg. Corp., Tobacco Settlement
Asset-backed Bonds, Series 2003, 4.375% 2019 4,000 4,007
State of New Jersey, Tobacco Settlement Fncg. Corp., Tobacco Settlement
Asset-backed Bonds, Series 2003, 6.125% 2024 5,000 4,855
State of Louisiana, Tobacco Settlement Auth., Asset-backed Bonds, Series
2001-B, 5.50% 2030 4,500 4,001
37,591
ASSET BACKED -- 0.24%
Consumer Credit Reference Index Securities Program Trust, Series 2002-2A, Class
FX, 10.421% 2007(2),(5) 16,500 17,220
Mediterranean Re PLC, Class B, 7.57% 2005(2),(3),(5) 5,000 5,138
22,358
GOVERNMENT AGENCY OBLIGATIONS -- 0.21%
Freddie Mac 4.25% 2005 20,000 20,290
TOTAL BONDS AND NOTES (cost: $7,851,752,000) 8,279,726
Principal amount
CONVERTIBLE SECURITIES -- 3.28% (000) or shares
CONSUMER DISCRETIONARY -- 1.36%
Amazon.com, Inc. 6.875% PEACS convertible subordinated notes 2010 Euro 59,550 74,922
Amazon.com, Inc. 4.75% convertible subordinated debentures 2009 $8,825 8,803
Six Flags, Inc. 7.25% PIERS convertible preferred 2009 1,000 shares 20,600
General Motors Corp., Series B, 5.25% convertible debentures 2032 12,500 11,955
Ford Motor Co. Capital Trust II 6.50% cumulative convertible trust preferred
2032 161 8,396
Gray Communications Systems, Inc., Series C, 8.00% convertible preferred
2012(2),(4),(6) 300 3,244
127,920
INFORMATION TECHNOLOGY -- 0.92%
Celestica Inc. 0% convertible debentures 2020 $32,625 17,984
Fairchild Semiconductor Corp. 5.00% convertible notes 2008 17,850 17,783
Micron Technology, Inc. 2.50% convertible note 2010 5,000 6,050
Micron Technology, Inc. 2.50% convertible notes 2010(2) 8,000 9,680
Conexant Systems, Inc. 4.00% convertible subordinated notes 2007 14,700 13,083
SCI Systems, Inc. 3.00% convertible subordinated debentures 2007 12,000 11,340
Amkor Technology, Inc. 5.75% convertible notes 2006 6,800 5,984
LSI Logic Corp. 4.00% convertible notes 2006 3,000 2,962
Cypress Semiconductor Corp. 3.75% convertible subordinated notes 2005 1,525 1,514
86,380
FINANCIALS -- 0.32%
Providian Financial Corp. 3.25% convertible debentures 2005 20,000 19,800
Equity Office Properties Trust, Series B, 5.25% convertible preferred 2008 200 shares 10,170
29,970
TELECOMMUNICATION SERVICES -- 0.30%
American Tower Corp. 5.00% convertible debentures 2010 $25,925 25,666
Dobson Communications Corp., Series F, 6.00% convertible preferred(2),(6) 58 shares 2,744
28,410
UTILITIES -- 0.22%
AES Trust VII 6.00% convertible preferred 2008 440 20,347
INDUSTRIALS -- 0.16%
Cummins Capital Trust I 7.00% QUIPS convertible preferred 2031(2) $180 $ 14,690
TOTAL CONVERTIBLE SECURITIES (cost: $247,459,000) 307,717
WARRANTS -- 0.08% Shares
TELECOMMUNICATION SERVICES -- 0.08%
American Tower Corp., warrants, expire 2008(2),(12) 38,250 7,076
XO Communications, Inc., Series A, warrants, expire 2010(12) 37,767 31
XO Communications, Inc., Series B, warrants, expire 2010(12) 28,325 17
XO Communications, Inc., Series C, warrants, expire 2010(12) 28,325 11
KMC Telecom Holdings, Inc., warrants, expire 2008(2),(6),(12) 22,500 0
GT Group Telecom Inc., warrants, expire 2010(2),(6),(12) 11,000 0
Allegiance Telecom, Inc., warrants, expire 2008(2),(6),(12) 5,000 0
7,135
INDUSTRIALS -- 0.00%
Protection One, Inc., warrants, expire 2005(2),(6),(12) 30,400 2
TOTAL WARRANTS (cost: $1,233,000) 7,137
PREFERRED STOCKS -- 2.49%
FINANCIALS -- 2.33%
Fuji JGB Investment LLC, Series A, 9.87% noncumulative preferred
(undated)(2),(3) 61,565,000 72,315
IBJ Preferred Capital Co. LLC, Series A, 8.79% noncumulative preferred
(undated)(2),(3) 51,675,000 59,336
Swire Pacific Capital Ltd. 8.84% cumulative guaranteed perpetual capital
securities(2) 1,125,000 30,600
Swire Pacific Offshore Financing Ltd. 9.33% cumulative guaranteed perpetual
preferred capital securities(2) 546,648 15,088
Tokai Preferred Capital Co. LLC, Series A, 9.98% noncumulative preferred
(undated)(2),(3) 24,250,000 28,546
SB Treasury Co. LLC, Series A, 9.40% noncumulative preferred (undated)(2),(3) 8,480,000 10,022
Chevy Chase Preferred Capital Corp., Series A, 10.375% exchangeable preferred 55,994 3,234
219,141
TELECOMMUNICATION SERVICES -- 0.15%
Dobson Communications Corp. 13.00% senior exchangeable preferred 2009(6) 30,187 13,584
Dobson Communications Corp. 12.25% senior exchangeable preferred 2008(4),(6) 2,000 900
XO Communications, Inc. 14.00% preferred 2009(4),(12) 40 --
14,484
CONSUMER STAPLES -- 0.01%
Great Atlantic & Pacific Tea Co., Inc. 9.375% QUIBS preferred 2039 18,500 388
CONSUMER DISCRETIONARY -- 0.00%
Adelphia Communications Corp., Series B, 13.00% preferred 2009(12) 36,196 226
INFORMATION TECHNOLOGY -- 0.00%
ZiLOG, Inc. -- MOD III Inc., units(6),(8),(12) 1,868 0
TOTAL PREFERRED STOCKS (cost: $202,294,000) 234,239
Market amount
COMMON STOCKS -- 1.57% Shares (000)
TELECOMMUNICATION SERVICES -- 1.04%
NTELOS Inc.(2),(6),(8),(12) 1,983,310 $ 59,678
Nextel Communications, Inc., Class A(12) 613,418 14,624
AirGate PCS, Inc.(2),(8),(12) 671,293 13,157
Dobson Communications Corp., Class A(2),(12) 5,754,785 7,654
VersaTel Telecom International NV(12) 779,280 1,549
Netia SA(12) 327,966 388
Cincinnati Bell Inc.(12) 70,740 247
XO Communications, Inc.(12) 18,882 60
97,357
FINANCIALS -- 0.25%
Federal Realty Investment Trust 327,000 14,388
iStar Financial, Inc. 130,000 5,360
Equity Office Properties Trust 150,000 4,087
23,835
INFORMATION TECHNOLOGY -- 0.14%
Fairchild Semiconductor International, Inc.(12) 500,000 7,085
ZiLOG, Inc.(8),(12) 1,140,500 6,581
13,666
CONSUMER DISCRETIONARY -- 0.09%
Emmis Communications Corp., Class A(12) 201,000 3,630
Viacom Inc., Class B, nonvoting 63,225 2,122
Clear Channel Communications, Inc. 51,012 1,590
Radio One, Inc., Class D, nonvoting(12) 44,000 626
Radio One, Inc., Class A(12) 22,000 314
8,282
INDUSTRIALS -- 0.03%
DigitalGlobe, Inc.(2),(6),(12) 3,064,647 3,065
CONSUMER STAPLES -- 0.01%
Winn-Dixie Stores, Inc. 250,000 772
HEALTH CARE -- 0.01%
Clarent Hospital Corp.(6),(8),(12) 576,849 721
TOTAL COMMON STOCKS (cost: $186,451,000) 147,698
Principal amount Market amount
SHORT-TERM SECURITIES -- 3.32% (000) (000)
Wal-Mart Stores Inc. 1.50%-1.67% due 10/5-11/2/2004(2) $ 69,400 $ 69,331
DuPont (E.I.) de Nemours & Co. 1.61%-1.76% due 10/12-11/18/2004(13) 54,300 54,228
Eli Lilly and Co. 1.54%-1.56% due 10/18-10/27/2004(2),(13) 47,400 47,355
U.S. Treasury Bills 1.41%-1.475% due 10/28/2004 42,850 42,805
CAFCO, LLC 1.53% due 10/4/2004(2) 21,300 21,296
Federal Home Loan Bank 1.52% due 10/5/2004 20,300 20,296
IBM Capital Inc. 1.53% due 10/6/2004(2) 18,647 18,642
Pfizer Inc 1.54% due 10/6/2004(2) 15,348 15,344
Private Export Funding Corp. 1.74% due 10/21/2004(2) 12,200 12,187
Park Avenue Receivables Corp., LLC 1.60% due 10/4/2004(2) 10,000 9,998
TOTAL SHORT-TERM SECURITIES (cost: $311,480,000) 311,482
TOTAL INVESTMENT SECURITIES (cost: $8,800,669,000) 9,287,999
Other assets less liabilities 108,847
NET ASSETS $9,396,846
(1) Step bond; coupon rate will increase at a later date.
(2) Purchased in a private placement transaction; resale may be limited to
qualified institutional buyers; resale to the public may require
registration. The total value of all such restricted securities was
$1,976,090,000, which represented 21.03% of the net assets of the fund.
(3) Coupon rate may change periodically.
(4) Payment in kind; the issuer has the option of paying additional securities
in lieu of cash.
(5) 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.
(6) Valued under fair value procedures adopted by authority of the Board of
Trustees.
(7) Company not making scheduled interest payments; bankruptcy proceedings
pending.
(8) Represents an affiliated company as defined under the Investment Company
Act of 1940.
(9) Company did not make principal payment upon scheduled maturity date;
reorganization pending.
(10) This unit also contains 895,000 par of Drax Group Ltd., Class A-3, 9.1803%
2020 and 895,000 shares of Drax Group Ltd. common stock.
(11) Scheduled interest payments not made; reorganization pending.
(12) Security did not produce income during the last 12 months.
(13) This security, or a portion of this security, has been segregated to cover
funding requirements on investment transactions settling in the future.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON DETAILED SCHEDULE OF
INVESTMENTS
To the Shareholders and Board of Trustees of
American High-Income Trust:
We have audited, in accordance with standards of the Public Company Accounting
Oversight Board (United States), the financial statements of American
High-Income Trust (the "Fund") as of September 30, 2004, and for the year then
ended and have issued our report thereon dated November 9, 2004, which report
and financial statements are included in Item 1 of this Certified Shareholder
Report on Form N-CSR. Our audit also included the Fund's investment portfolio
(the "Schedule") as of September 30, 2004 appearing in Item 6 of this Form
N-CSR. This Schedule is the responsibility of the Fund's management. Our
responsibility is to express an opinion based on our audit. In our opinion, the
Schedule referred to above, when considered in relation to the basic financial
statements taken as a whole of the Fund referred to above, presents fairly, in
all material respects, the information set forth therein.
DELOITTE & TOUCHE LLP
November 9, 2004
Costa Mesa, California
ITEM 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end
management investment company.
ITEM 8 - 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 9 - Submission of Matters to a Vote of Security Holders
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Registrant's Board of Trustees since the Registrant
last submitted a proxy statement to its shareholders. The procedures are as
follows. The Registrant has a nominating committee comprised solely of persons
who are not considered "interested persons" of the Registrant within the meaning
of the Investment Company Act of 1940, as amended. The committee periodically
reviews such issues as the Board's composition, responsibilities, committees,
compensation and other relevant issues, and recommends any appropriate changes
to the full Board of Trustees. While the committee normally is able to identify
from its own resources an ample number of qualified candidates, it will consider
shareholder suggestions of persons to be considered as nominees to fill future
vacancies on the Board. Such suggestions must be sent in writing to the
nominating 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 10 - 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 last fiscal half-year (the
Registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 11 - Exhibits
(a) The Code of Ethics that is the subject of the disclosure required by Item 2
is attached as an exhibit hereto.
(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.
AMERICAN HIGH-INCOME TRUST
By
/s/ David C. Barclay
- -------------------------------------------------------
David C. Barclay, President and PEO
Date: December 8, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By
/s/ David C. Barclay
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David C. Barclay, President and PEO
Date: December 8, 2004
By
/s/ Susi M. Silverman
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Susi M. Silverman, Treasurer and PFO
Date: December 8, 2004