SEC. File Nos.002-86838

811-03857

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________

FORM N-1A

Registration Statement

Under

the Securities Act of 1933

Post-Effective Amendment No. 47

and

Registration Statement

Under

The Investment Company Act of 1940

Amendment No. 47

__________________

AMERICAN FUNDS INSURANCE SERIES

(Exact Name of Registrant as Specified in Charter)

333 South Hope Street

Los Angeles, California 90071-1406

(Address of Principal Executive Offices)

Registrant's telephone number, including area code:

(213) 486-9200

__________________

Steven I. Koszalka

Capital Research and Management Company

333 South Hope Street

Los Angeles, California 90071-1406

(Name and Address of Agent for Service)

__________________

Copies to:

Mitchell E. Nichter

Paul, Hastings, Janofsky & Walker LLP

55 Second Street, 24th Floor

San Francisco, California 94105-3441

(Counsel for the Registrant)

__________________

Approximate date of proposed public offering:

It is proposed that this filing become effective on October 1, 2008, pursuant to paragraph (b) of rule 485.

....

[LOGO] American Funds(R)              The right choice for the long term(R)




AMERICAN FUNDS
INSURANCE SERIES(R)



PROSPECTUS

Class 1 shares





October 1, 2008      THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
                     DISAPPROVED OF THESE SECURITIES. FURTHER, IT HAS NOT
                     DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE.
                     ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.




American Funds Insurance Series (the "Series") consists of 16 funds, each
representing a separate, fully managed diversified portfolio of securities. The
16 funds are:

   Global Discovery Fund
   Global Growth Fund
   Global Small Capitalization Fund
   Growth Fund
   International Fund
   New World Fund
   Blue Chip Income and Growth Fund
   Global Growth and Income Fund
   Growth-Income Fund
   International Growth and Income Fund
   Asset Allocation Fund
   Bond Fund
   Global Bond Fund
   High-Income Bond Fund
   U.S. Government/AAA-Rated Securities Fund
   Cash Management Fund


Shares of the Series are currently offered to insurance company separate
accounts funding both variable annuity contracts and variable insurance
policies (the "contracts"). Interests of various contract owners participating
in the Series may be in conflict. The board of trustees of the Series will
monitor for the existence of any material conflicts and determine what action,
if any, should be taken. Shares may be purchased or redeemed by the separate
accounts without any sales or redemption charges at net asset value.

The Series offers three classes of fund shares: Class 1, Class 2 and Class 3
shares. This prospectus offers only Class 1 shares and is for use with the
contracts that make Class 1 shares available. The board of trustees may
establish additional funds and classes in the future. The investment
objective(s) and policies of each fund are discussed in this prospectus. MORE
INFORMATION ON THE FUNDS IS CONTAINED IN THE SERIES' STATEMENT OF ADDITIONAL
INFORMATION.


                                                                             ---
                               AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  1
                                                                             ---


GLOBAL DISCOVERY FUND

RISK/RETURN SUMMARY

The fund seeks to make your investment grow over time by investing primarily in
stocks of companies in the services and information areas of the global
economy. The fund may invest up to 25% of its assets in companies outside the
services and information areas. Companies in the services and information areas
include, for example, those involved in the fields of telecommunications,
computer systems and software, the Internet, broadcasting and publishing,
health care, advertising, leisure, tourism, financial services, distribution
and transportation. Providing you with current income is a secondary
consideration. The fund is designed for investors seeking greater capital
appreciation through investments in stocks of issuers based around the world.
Investors in the fund should have a long-term perspective and be able to
tolerate potentially wide price fluctuations.

The prices of securities held by the fund may decline in response to certain
events, including, for example, those directly involving the companies whose
securities are owned by the fund; conditions affecting the general economy;
overall market changes; local, regional or global political, social or economic
instability; and currency and interest rate fluctuations. The growth-oriented,
equity-type securities generally purchased by the fund may involve large price
swings and potential for loss, particularly in the case of smaller
capitalization stocks. Because the fund generally invests in securities of
issuers in the services and information areas, it may be more susceptible to
factors adversely affecting these issuers than funds that do not focus on these
areas. The fund also may be subject to additional risks because it invests in a
more limited group of sectors and industries than the broad market.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.

Investing in countries with developing economies and/or markets generally
involves risks in addition to and greater than those generally associated with
investing in developed countries. For instance, developing countries may have
less developed legal and accounting systems. The governments of these countries
may be more unstable and likely to impose capital controls, nationalize a
company or industry, place restrictions on foreign ownership and on withdrawing
sale proceeds of securities from the country, and/or impose punitive taxes that
could adversely affect security prices. In addition, the economies of these
countries may be dependent on relatively few industries that are more
susceptible to local and global changes. Securities markets in these countries
are also relatively small and have substantially lower trading volumes. As a
result, securities issued in these countries may be more volatile and less
liquid than securities issued in countries with more developed economies or
markets.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.


----
2   AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GLOBAL DISCOVERY FUND
----


INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.


Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)


                                    [CHART]

        2002        2003        2004        2005        2006       2007
        ----        ----        ----        ----        ----       ----
       -21.41%     37.41%       10.72%     11.07%       17.66%    17.55%




The fund's highest/lowest quarterly results during this time period were:

HIGHEST   18.42% (quarter ended June 30, 2003)
LOWEST   -17.48% (quarter ended September 30, 2002)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                                LIPPER MULTI-CAP GLOBAL SERVICE
                                                  GROWTH FUNDS   AND INFORMATION
AVERAGE ANNUAL TOTAL RETURNS   FUND  S&P 500/1/     INDEX/2/        INDEX/3/
--------------------------------------------------------------------------------

        1 year                17.55%   5.49%         12.79%           2.28%
--------------------------------------------------------------------------------
        5 years                18.51   12.82          15.15           14.62
--------------------------------------------------------------------------------
        Lifetime/4/             8.66    4.74           3.86            4.86


/1/Standard & Poor's 500 Composite Index is a market capitalization-weighted
   index based on the average weighted performance of 500 widely held common
   stocks. This index is unmanaged and its results include reinvested dividends
   and/or distributions, but do not reflect the effect of sales charges,
   commissions, expenses or taxes.

/2/Lipper Multi-Cap Growth Funds Index is an equally weighted index of funds
   that invest in a variety of market capitalization ranges without
   concentrating 75% of their equity assets in any one market capitalization
   range over an extended period of time. Multi-cap growth funds typically have
   an above-average price-to-earnings ratio, price-to-book ratio, and
   three-year sales-per-share growth value, compared to the S&P SuperComposite
   1500 Index. The results of the underlying funds in the index include the
   reinvestment of dividends and capital gain distributions, as well as
   brokerage commissions paid by the funds for portfolio transactions, but do
   not reflect the effect of sales charges or taxes.

/3/Global Service and Information Index is a subset of the unmanaged MSCI World
   Index, which is a market capitalization-weighted index that measures the
   returns of companies in 23 developed countries. This subset is 70%
   U.S.-weighted and consists specifically of companies in the service and
   information industries that together represent approximately 60% of the MSCI
   World Index. The index is compiled by the fund's investment adviser, Capital
   Research and Management Company, is unmanaged and its results include
   reinvested dividends and/or distributions, but do not reflect the effect of
   sales charges, commissions, expenses or taxes.

/4/Lifetime results are from July 5, 2001, the date the fund began investment
  operations.


                                                                             ---
        GLOBAL DISCOVERY FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  3
                                                                             ---


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 1
-------------------------------------------------------------------------

             Management fees*                                      0.58%
-------------------------------------------------------------------------
             Other expenses                                         0.02
-------------------------------------------------------------------------
             Total annual fund operating expenses*                  0.60


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 1   $61    $192    $335     $750



----
4   AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GLOBAL DISCOVERY FUND
----


GLOBAL GROWTH FUND

RISK/RETURN SUMMARY

The fund seeks to make your investment grow over time by investing primarily in
common stocks of companies located around the world. The fund is designed for
investors seeking capital appreciation through stocks. Investors in the fund
should have a long-term perspective and be able to tolerate potentially wide
price fluctuations.

The prices of securities held by the fund may decline in response to certain
events, including, for example, those directly involving the companies whose
securities are owned by the fund; conditions affecting the general economy;
overall market changes; local, regional or global political, social or economic
instability; and currency and interest rate fluctuations. The growth-oriented,
equity-type securities generally purchased by the fund may involve large price
swings and potential for loss, particularly in the case of smaller
capitalization stocks.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events, such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.

Investing in countries with developing economies and/or markets generally
involves risks in addition to and greater than those generally associated with
investing in developed countries. For instance, developing countries may have
less developed legal and accounting systems. The governments of these countries
may be more unstable and likely to impose capital controls, nationalize a
company or industry, place restrictions on foreign ownership and on withdrawing
sale proceeds of securities from the country, and/or impose punitive taxes that
could adversely affect security prices. In addition, the economies of these
countries may be dependent on relatively few industries that are more
susceptible to local and global changes. Securities markets in these countries
are also relatively small and have substantially lower trading volumes. As a
result, securities issued in these countries may be more volatile and less
liquid than securities issued in countries with more developed economies or
markets.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.


                                                                             ---
           GLOBAL GROWTH FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  5
                                                                             ---


INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.


Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)


                                    [CHART]
1998    1999     2000     2001     2002    2003   2004    2005    2006   2007
----    ----     ----     ----     ----    ----   ----    ----    ----   ----
29.03%  70.01%  -18.71%  -13.99%  -14.46%  35.63% 13.80% 14.37%  20.73% 15.16%



The fund's highest/lowest quarterly results during this time period were:

HIGHEST   41.07% (quarter ended December 31, 1999)
LOWEST   -20.39% (quarter ended September 30, 2001)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                      MSCI       LIPPER
                                      WORLD   GLOBAL FUNDS
AVERAGE ANNUAL TOTAL RETURNS   FUND  INDEX/1/   INDEX/2/
----------------------------------------------------------

        1 year                15.16%  9.57%      9.28%
----------------------------------------------------------
        5 years                19.67  17.53      17.10
----------------------------------------------------------
        10 years               12.41   7.45       7.78
----------------------------------------------------------
        Lifetime/3/            12.45   8.11       8.30


/1/MSCI World Index is a free float-adjusted market capitalization index that
   is designed to measure global developed-market equity performance. The index
   consists of 23 developed-market country indexes, including the United
   States. This index is unmanaged and its results include reinvested dividends
   and/or distributions, but do not reflect the effect of sales charges,
   commissions, expenses or taxes.

/2/Lipper Global Funds Index is an equally weighted index of funds that invest
   at least 25% of their portfolios in securities traded outside the United
   States and may own U.S. securities as well. The results of the underlying
   funds in the index include the reinvestment of dividends and capital gain
   distributions, as well as brokerage commissions paid by the funds for
   portfolio transactions, but do not reflect the effect of sales charges or
   taxes.

/3/Lifetime results are from April 30, 1997, the date the fund began investment
   operations.


----
6   AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GLOBAL GROWTH FUND
----


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 1
-------------------------------------------------------------------------

             Management fees*                                      0.53%
-------------------------------------------------------------------------
             Other expenses                                         0.02
-------------------------------------------------------------------------
             Total annual fund operating expenses*                  0.55


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 1   $56    $176    $307     $689



                                                                             ---
           GLOBAL GROWTH FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  7
                                                                             ---


GLOBAL SMALL CAPITALIZATION FUND

RISK/RETURN SUMMARY

The fund seeks to make your investment grow over time by investing primarily in
stocks of smaller companies located around the world. Normally, the fund
invests at least 80% of its assets in equity securities of companies with small
market capitalizations, measured at the time of purchase. However, the fund's
holdings of small capitalization stocks may fall below the 80% threshold due to
subsequent market action. This policy is subject to change only upon 60 days'
notice to shareholders. The investment adviser currently defines "small market
capitalization" companies to be companies with market capitalizations of $3.5
billion or less. The investment adviser has periodically reevaluated and
adjusted this definition and may continue to do so in the future. The fund is
designed for investors seeking capital appreciation through stocks. Investors
in the fund should have a long-term perspective and be able to tolerate
potentially wide price fluctuations.

The prices of securities held by the fund may decline in response to certain
events, including, for example, those directly involving the companies whose
securities are owned by the fund; conditions affecting the general economy;
overall market changes; local, regional or global political, social or economic
instability; and currency and interest rate fluctuations. The growth-oriented,
equity-type securities generally purchased by the fund may involve large price
swings and potential for loss, particularly in the case of smaller
capitalization stocks. Smaller capitalization stocks are often more difficult
to value or dispose of, more difficult to obtain information about and more
volatile than stocks of larger, more established companies.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events, such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.

Investing in countries with developing economies and/or markets generally
involves risks in addition to and greater than those generally associated with
investing in developed countries. For instance, developing countries may have
less developed legal and accounting systems. The governments of these countries
may be more unstable and likely to impose capital controls, nationalize a
company or industry, place restrictions on foreign ownership and on withdrawing
sale proceeds of securities from the country, and/or impose punitive taxes that
could adversely affect security prices. In addition, the economies of these
countries may be dependent on relatively few industries that are more
susceptible to local and global changes. Securities markets in these countries
are also relatively small and have substantially lower trading volumes. As a
result, securities issued in these countries may be more volatile and less
liquid than securities issued in countries with more developed economies or
markets.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.




----
8   AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GLOBAL SMALL CAPITALIZATION FUND
----



INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.


Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)


                                    [CHART]

  1999     2000     2001     2002    2003    2004     2005     2006     2007
  -----   ------   ------   -----   -----   -----    ------   ------   ------
  91.78% -16.33%  -12.63%  -18.83%  53.92%   21.13%   25.66%  24.35%   21.73%



The fund's highest/lowest quarterly results during this time period were:

HIGHEST   28.97% (quarter ended December 31, 1999)
LOWEST   -28.17% (quarter ended September 30, 2001)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                                   LIPPER GLOBAL
                                     S&P/CITIGROUP   SMALL-CAP
                                     GLOBAL/WORLD      FUNDS
AVERAGE ANNUAL TOTAL RETURNS   FUND   INDEXES/1/    AVERAGE/2/
----------------------------------------------------------------

        1 year                21.73%     9.87%         9.70%
----------------------------------------------------------------
        5 years                28.81     24.64         22.21
----------------------------------------------------------------
        Lifetime/3/            15.83     10.63          9.96


/1/S&P/Citigroup Global/World Indexes reflect a combination of two
   S&P/Citigroup Global indexes and two S&P/Citigroup World indexes that
   corresponds to the market capitalization ranges used by the fund during
   comparable periods. The S&P/Citigroup Global indexes, which track publicly
   traded stocks around the world with market capitalizations less than $3
   billion and less than $2 billion, were used from May 2006 to the present and
   May 2004 to April 2006, respectively. This index better reflects the fund's
   investments in developing countries during this period. The S&P/Citigroup
   World indexes, which only include stocks in developed countries and reflect
   market capitalizations less than $1.5 billion and less than $1.2 billion,
   were used from 2000 to April 2004 and from 1998 to 1999, respectively. These
   indexes are unmanaged and their results include reinvested dividends and/or
   distributions, but do not reflect the effect of sales charges, commissions,
   expenses or taxes.

/2/Lipper Global Small-Cap Funds Average is composed of funds that invest at
   least 25% of their portfolios in securities with primary trading markets
   outside the United States, and that limit at least 65% of their investments
   to companies with market capitalizations of less than $1 billion at the time
   of purchase. The results of the underlying funds in the average include the
   reinvestment of dividends and capital gain distributions, as well as
   brokerage commissions paid by the funds for portfolio transactions, but do
   not reflect the effect of sales charges or taxes.

/3/Lifetime results are from April 30, 1998, the date the fund began investment
   operations.




                                                                                ---
GLOBAL SMALL CAPITALIZATION FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  9
                                                                                ---



FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 1
-------------------------------------------------------------------------

             Management fees*                                      0.70%
-------------------------------------------------------------------------
             Other expenses                                         0.03
-------------------------------------------------------------------------
             Total annual fund operating expenses*                  0.73


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 1   $75    $233    $406     $906





----
10  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GLOBAL SMALL CAPITALIZATION FUND
----



GROWTH FUND

RISK/RETURN SUMMARY

The fund seeks to make your investment grow by investing primarily in common
stocks of companies that appear to offer superior opportunities for growth of
capital. In seeking to pursue its investment objective, the fund may invest in
the securities of issuers representing a broad range of market capitalizations.
The fund may invest up to 15% of its assets in securities of issuers that are
domiciled outside the United States and Canada. The fund is designed for
investors seeking capital appreciation through stocks. Investors in the fund
should have a long-term perspective and be able to tolerate potentially wide
price fluctuations.

The prices of securities held by the fund may decline in response to certain
events, including, for example, those directly involving the companies whose
securities are owned by the fund; conditions affecting the general economy;
overall market changes; local, regional or global political, social or economic
instability; and currency and interest rate fluctuations. The growth-oriented,
equity-type securities generally purchased by the fund may involve large price
swings and potential for loss.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.


                                                                             ---
                  GROWTH FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  11
                                                                             ---


INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.


Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)

                                    [CHART]

1998    1999   2000     2001     2002    2003    2004   2005    2006    2007
----    ----   ----     ----     ----    ----    ----   ----    ----    ----
35.56%  57.61%  4.72%  -17.93%  -24.27%  37.15%  12.75% 16.50%  10.48% 12.64%


The fund's highest/lowest quarterly results during this time period were:

HIGHEST   30.77% (quarter ended December 31, 1999)
LOWEST   -27.12% (quarter ended September 30, 2001)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                                LIPPER CAPITAL
                                                 APPRECIATION  LIPPER GROWTH
AVERAGE ANNUAL TOTAL RETURNS   FUND  S&P 500/1/ FUNDS INDEX/2/ FUNDS INDEX/3/
-----------------------------------------------------------------------------

        1 year                12.64%   5.49%        16.39%         7.83%
-----------------------------------------------------------------------------
        5 years                17.52   12.82         15.18         12.30
-----------------------------------------------------------------------------
        10 years               12.04    5.91          6.54          4.76
-----------------------------------------------------------------------------
        Lifetime/4/            14.67   12.63         10.74         10.56


/1/Standard & Poor's 500 Composite Index is a market capitalization-weighted
   index based on the average weighted performance of 500 widely held common
   stocks. This index is unmanaged and its results include reinvested dividends
   and/or distributions, but do not reflect the effect of sales charges,
   commissions, expenses or taxes.

/2/Lipper Capital Appreciation Funds Index is an equally weighted index of
   funds that aim for maximum capital appreciation. The results of the
   underlying funds in the index include the reinvestment of dividends and
   capital gain distributions, as well as brokerage commissions paid by the
   funds for portfolio transactions, but do not reflect the effect of sales
   charges or taxes.

/3/Lipper Growth Funds Index is an equally weighted index of growth funds.
   These funds normally invest in companies with long-term earnings expected to
   grow significantly faster than the earnings of the stocks represented in the
   major unmanaged stock indexes. The results of the underlying funds in the
   index include the reinvestment of dividends and capital gain distributions,
   as well as brokerage commissions paid by the funds for portfolio
   transactions, but do not reflect the effect of sales charges or taxes.

/4/Lifetime results are from February 8, 1984, the date the fund began
   investment operations.


----
12  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GROWTH FUND
----


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 1
-------------------------------------------------------------------------

             Management fees*                                      0.32%
-------------------------------------------------------------------------
             Other expenses                                         0.01
-------------------------------------------------------------------------
             Total annual fund operating expenses*                  0.33


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 1   $34    $106    $185     $418



                                                                             ---
                  GROWTH FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  13
                                                                             ---


INTERNATIONAL FUND

RISK/RETURN SUMMARY

The fund seeks to make your investment grow over time by investing primarily in
common stocks of companies located outside the United States. The fund is
designed for investors seeking capital appreciation through stocks. Investors
in the fund should have a long-term perspective and be able to tolerate
potentially wide price fluctuations.

The prices of securities held by the fund may decline in response to certain
events, including, for example, those directly involving the companies whose
securities are owned by the fund; conditions affecting the general economy;
overall market changes; local, regional or global political, social or economic
instability; and currency and interest rate fluctuations. The growth-oriented,
equity-type securities generally purchased by the fund may involve large price
swings and potential for loss.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events, such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.

Investing in countries with developing economies and/or markets generally
involves risks in addition to and greater than those generally associated with
investing in developed countries. For instance, developing countries may have
less developed legal and accounting systems. The governments of these countries
may be more unstable and likely to impose capital controls, nationalize a
company or industry, place restrictions on foreign ownership and on withdrawing
sale proceeds of securities from the country, and/or impose punitive taxes that
could adversely affect security prices. In addition, the economies of these
countries may be dependent on relatively few industries that are more
susceptible to local and global changes. Securities markets in these countries
are also relatively small and have substantially lower trading volumes. As a
result, securities issued in these countries may be more volatile and less
liquid than securities issued in countries with more developed economies or
markets.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.


----
14  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  INTERNATIONAL FUND
----


INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.


Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)


                                    [CHART]
1998    1999   2000     2001     2002    2003    2004    2005    2006   2007
-----  -----   -----    -----    -----   -----   -----   -----   ----- ------
21.22% 76.42% -21.85%  -19.73%  -14.58%  35.12%  19.66%  21.75% 19.33%  20.30%



The fund's highest/lowest quarterly results during this time period were:

HIGHEST   42.45% (quarter ended December 31, 1999)
LOWEST   -19.60% (quarter ended September 30, 2002)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                        MSCI
                                     ALL COUNTRY    LIPPER
                                     WORLD INDEX INTERNATIONAL
AVERAGE ANNUAL TOTAL RETURNS   FUND   EX USA/1/  FUNDS INDEX/2/
---------------------------------------------------------------

        1 year                20.30%   17.12%       14.25%
---------------------------------------------------------------
        5 years                23.09    24.52        21.82
---------------------------------------------------------------
        10 years               12.47    10.09         9.46
---------------------------------------------------------------
        Lifetime/3/            11.44     8.76         9.15


/1/MSCI All Country World Index ex USA is a free float-adjusted market
   capitalization index that is designed to measure equity market performance
   in the global developed and emerging markets, excluding the United States.
   The index consists of 47 developed and emerging market country indexes. This
   index is unmanaged and its results include reinvested dividends and/or
   distributions, but do not reflect the effect of sales charges, commissions,
   expenses or taxes.

/2/Lipper International Funds Index is an equally weighted index of funds that
   invest assets in securities with primary trading markets outside the
   United States. The results of the underlying funds in the index include the
   reinvestment of dividends and capital gain distributions, as well as
   brokerage commissions paid by the funds for portfolio transactions, but do
   not reflect the effect of sales charges or taxes.

/3/Lifetime results are from May 1, 1990, the date the fund began investment
   operations.


                                                                             ---
           INTERNATIONAL FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  15
                                                                             ---


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 1
-------------------------------------------------------------------------

             Management fees*                                      0.49%
-------------------------------------------------------------------------
             Other expenses                                         0.03
-------------------------------------------------------------------------
             Total annual fund operating expenses*                  0.52


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 1   $53    $167    $291     $653



----
16  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  INTERNATIONAL FUND
----


NEW WORLD FUND

RISK/RETURN SUMMARY

The fund seeks to make your investment grow over time by investing primarily in
stocks of companies with significant exposure to countries with developing
economies and/or markets. The fund may also invest in debt securities of
issuers, including issuers of lower rated bonds, with exposure to these
countries. The fund is designed for investors seeking capital appreciation.
Investors in the fund should have a long-term perspective and be able to
tolerate potentially wide price fluctuations.

The fund may invest in equity securities of any company, regardless of where it
is based, if the fund's investment adviser determines that a significant
portion of the company's assets or revenues (generally 20% or more) is
attributable to developing countries. Under normal market conditions, the fund
will invest at least 35% of its assets in equity and debt securities of issuers
primarily based in qualified countries that have developing economies and/or
markets. In addition, the fund may invest up to 25% of its assets in
nonconvertible debt securities of issuers, including issuers of lower rated
bonds and government bonds, primarily based in qualified countries or that have
a significant portion of their assets or revenues attributable to developing
countries. The fund may also, to a limited extent, invest in securities of
issuers based in nonqualified developing countries.

In determining whether a country is qualified, the fund will consider such
factors as the country's per capita gross domestic product; the percentage of
the country's economy that is industrialized; market capital as a percentage of
gross domestic product; the overall regulatory environment; the presence of
government regulation limiting or banning foreign ownership; and restrictions
on repatriation of initial capital, dividends, interest and/or capital gains.
The fund's investment adviser will maintain a list of qualified countries and
securities in which the fund may invest. Qualified developing countries in
which the fund may invest currently include, but are not limited to, Argentina,
Brazil, Chile, China, Colombia, Croatia, Czech Republic, Dominican Republic,
Egypt, Hungary, India, Israel, Jordan, Lebanon, Malaysia, Mexico, Morocco,
Oman, Panama, Peru, Philippines, Poland, Russian Federation, South Africa,
Thailand, Turkey and Venezuela.

The prices of securities held by the fund may decline in response to certain
events, including, for example, those directly involving the companies whose
securities are owned by the fund; conditions affecting the general economy;
overall market changes; local, regional or global political, social or economic
instability; and currency and interest rate fluctuations. The growth-oriented,
equity-type securities generally purchased by the fund may involve large price
swings and potential for loss, particularly in the case of smaller
capitalization stocks. Smaller capitalization stocks are often more difficult
to value or dispose of, more difficult to obtain information about and more
volatile than stocks of larger, more established companies.

The values of most debt securities held by the fund may be affected by changing
interest rates and by changes in effective maturities and credit ratings of
these securities. For example, the values of debt securities in the fund's
portfolio generally will decline when interest rates rise and increase when
interest rates fall. In addition, falling interest rates may cause an issuer to
redeem or "call" a security before its stated maturity, which may result in the
fund having to reinvest the proceeds in lower yielding securities. Debt
securities are also subject to credit risk, which is the possibility that the
credit strength of an issuer will weaken and/or an issuer of a debt security
will fail to make timely payments of principal or interest and the security
will go into default. Lower quality or longer maturity debt securities
generally have higher rates of interest and may be subject to greater price
fluctuations than higher quality or shorter maturity debt securities. The
fund's investment adviser attempts to reduce these risks through
diversification of the portfolio and with ongoing credit analysis of each
issuer, as well as by monitoring economic and legislative developments.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.


                                                                             ---
               NEW WORLD FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  17
                                                                             ---


Investing in countries with developing economies and/or markets may involve
risks in addition to and greater than those generally associated with investing
in developed countries. For instance, developing countries may have less
developed legal and accounting systems. The governments of these countries may
be more unstable and more likely to impose capital controls, nationalize a
company or industry, place restrictions on foreign ownership and on withdrawing
sale proceeds of securities from the country, and/or impose punitive taxes that
could adversely affect security prices. In addition, the economies of these
countries may be dependent on relatively few industries that are more
susceptible to local and global changes. Securities markets in these countries
are also relatively small and have substantially lower trading volumes. As a
result, securities issued in these countries may be more volatile and less
liquid than securities issued in countries with more developed economies or
markets.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.


----
18  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  NEW WORLD FUND
----


INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.



  Here are the fund's results calculated on a calendar year basis. (If insurance
  contract fees and expenses were included, results would have been lower.)


                                      [CHART]

    2000     2001    2002    2003    2004   2005    2006    2007
    ----     ----    ----    ----    ----   ----    ----    ----
   -12.43%  -3.99%   -5.45%  39.56%  19.07% 21.10%  32.88%  32.53%



The fund's highest/lowest quarterly results during this time period were:

HIGHEST   15.65% (quarter ended June 30, 2003)
LOWEST   -15.96% (quarter ended September 30, 2001)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                         MSCI            MSCI
                                      ALL COUNTRY      EMERGING
AVERAGE ANNUAL TOTAL RETURNS   FUND  WORLD INDEX/1/ MARKETS INDEX/2/
--------------------------------------------------------------------

        1 year                32.53%    12.18%          39.78%
--------------------------------------------------------------------
        5 years                28.79     18.80           37.46
--------------------------------------------------------------------
        Lifetime/3/            15.16      5.68           16.62


/1/MSCI All Country World Index is a free float-adjusted market capitalization
   index that measures equity market performance in the global developed and
   emerging markets, consisting of 48 developed and emerging market country
   indexes. This index is unmanaged and its results include reinvested
   dividends and/or distributions, but do not reflect the effect of sales
   charges, commissions, expenses or taxes.

/2/MSCI Emerging Markets Index is a free float-adjusted market capitalization
   index that is designed to measure equity market performance in the global
   emerging markets, consisting of 25 emerging market country indexes. This
   index is unmanaged and its results include reinvested dividends and/or
   distributions, but do not reflect the effect of sales charges, commissions,
   expenses or taxes.

/3/Lifetime results are from June 17, 1999, the date the fund began investment
   operations.


                                                                             ---
               NEW WORLD FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  19
                                                                             ---


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 1
-------------------------------------------------------------------------

             Management fees*                                      0.76%
-------------------------------------------------------------------------
             Other expenses                                         0.06
-------------------------------------------------------------------------
             Total annual fund operating expenses*                  0.82


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 1   $84    $262    $455    $1,014



----
20  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  NEW WORLD FUND
----


BLUE CHIP INCOME AND GROWTH FUND

RISK/RETURN SUMMARY

The fund seeks to produce income exceeding the average yield on U.S. stocks
generally (as represented by the average yield on Standard & Poor's 500
Composite Index) and to provide an opportunity for growth of principal
consistent with sound common stock investing. The fund invests primarily in
dividend-paying common stocks of larger, more established companies based in
the United States with market capitalizations of $4 billion and above. The fund
may also invest up to 10% of its assets in equity securities of larger
companies domiciled outside the United States, so long as they are listed or
traded in the United States. The fund will invest, under normal market
conditions, at least 90% of its assets in equity securities. The fund is
designed for investors seeking both income and capital appreciation.

The prices of and the income generated by securities held by the fund may
decline in response to certain events, including, for example, those directly
involving the companies whose securities are owned by the fund; conditions
affecting the general economy; overall market changes; local regional or global
political, social or economic instability; and currency and interest rate
fluctuations. Income provided by the fund may be affected by changes in the
dividend policies of the companies in which the fund invests and the capital
resources available for such payments at such companies.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.




                                                                                ---
BLUE CHIP INCOME AND GROWTH FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  21
                                                                                ---



INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.



Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)

                                    [CHART]

        2002        2003        2004        2005        2006       2007
        ----        ----        ----        ----        ----       ----
      -22.93%      31.24%      9.94%       7.57%       17.73%      2.25%


The fund's highest/lowest quarterly results during this time period were:


The fund's highest/lowest quarterly results during this time period were:



HIGHEST   17.18% (quarter ended June 30, 2003)
LOWEST   -20.45% (quarter ended September 30, 2002)




The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                               LIPPER GROWTH
                                                 & INCOME
AVERAGE ANNUAL TOTAL RETURNS  FUND  S&P 500/1/ FUNDS INDEX/2/
-------------------------------------------------------------

        1 year                2.25%   5.49%        4.28%
-------------------------------------------------------------
        5 years               13.32   12.82        12.86
-------------------------------------------------------------
        Lifetime/3/            4.91    4.74         5.75


/1/Standard & Poor's 500 Composite Index is a market capitalization-weighted
   index based on the average weighted performance of 500 widely held common
   stocks. This index is unmanaged and its results include reinvested dividends
   and/or distributions, but do not reflect the effect of sales charges,
   commissions, expenses or taxes.

/2/Lipper Growth & Income Funds Index is an equally weighted index of funds
   that combine a growth-of-earnings orientation and an income requirement for
   level and/or rising dividends. The results of the underlying funds in the
   index include the reinvestment of dividends and capital gain distributions,
   as well as brokerage commissions paid by the funds for portfolio
   transactions, but do not reflect the effect of sales charges or taxes.

/3/Lifetime results are from July 5, 2001, the date the fund began investment
   operations.




----
22  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  BLUE CHIP INCOME AND GROWTH FUND
----



FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 1
-------------------------------------------------------------------------

             Management fees*                                      0.41%
-------------------------------------------------------------------------
             Other expenses                                         0.01
-------------------------------------------------------------------------
             Total annual fund operating expenses*                  0.42


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 1   $43    $135    $235     $530





                                                                                ---
BLUE CHIP INCOME AND GROWTH FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  23
                                                                                ---



GLOBAL GROWTH AND INCOME FUND

RISK/RETURN SUMMARY

The fund seeks to make your investment grow over time and provide you with
current income by investing primarily in stocks of well-established companies
located around the world.

The fund is designed for investors seeking both capital appreciation and
income. In pursuing its objective, the fund tends to invest in stocks that the
investment adviser believes to be relatively resilient to market declines.

The prices of and the income generated by securities held by the fund may
decline in response to certain events, including, for example, those directly
involving the companies whose securities are owned by the fund; conditions
affecting the general economy; overall market changes; local, regional or
global political, social or economic instability; and currency and interest
rate fluctuations. Income provided by the fund may be affected by changes in
the dividend policies of the companies in which the fund invests and the
capital resources available for such payments at such companies.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.

Investing in countries with developing economies and/or markets generally
involves risks in addition to and greater than those generally associated with
investing in developed countries. For instance, developing countries may have
less developed legal and accounting systems. The governments of these countries
may be more unstable and likely to impose capital controls, nationalize a
company or industry, place restrictions on foreign ownership and on withdrawing
sale proceeds of securities from the country, and/or impose punitive taxes that
could adversely affect security prices. In addition, the economies of these
countries may be dependent on relatively few industries that are more
susceptible to local and global changes. Securities markets in these countries
are also relatively small and have substantially lower trading volumes. As a
result, securities issued in these countries may be more volatile and less
liquid than securities issued in countries with more developed economies or
markets.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.




----
24  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GLOBAL GROWTH AND INCOME FUND
----



INVESTMENT RESULTS

Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.


Here are the fund's results calculated on a calendar year basis.(If insurance
contract fees and expenses were included, results would have been lower.)


                                    [CHART]

                                      2007
                                      ----
                                     13.04%



The fund's highest/lowest quarterly results during this time period were:



HIGHEST  6.80% (quarter ended June 30, 2007)
LOWEST   0.59% (quarter ended December 31, 2007)




The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                         MSCI        MSCI
                                      ALL COUNTRY    WORLD
AVERAGE ANNUAL TOTAL RETURNS   FUND  WORLD INDEX/1/ INDEX/2/
------------------------------------------------------------

        1 year                13.04%     12.18%       9.57%
------------------------------------------------------------
        Lifetime/3/           14.25      13.19       11.55


/1/MSCI All Country World Index is a free float-adjusted market capitalization
   index that measures equity market performance in the global developed and
   emerging markets, consisting of 48 developed and emerging market country
   indexes. This index is unmanaged and its results include reinvested
   dividends and/or distributions, but do not reflect the effect of sales
   charges, commissions, expenses or taxes.

/2/MSCI World Index is a free float-adjusted market capitalization index that
   is designed to measure global developed-market equity performance. The index
   consists of 23 developed-market country indexes, including the United
   States. This index is unmanaged and its results include reinvested dividends
   and/or distributions, but do not reflect the effect of sales charges,
   commissions, expenses or taxes.

/3/Lifetime results are from May 1, 2006, the date the fund began investment
   operations.




                                                                             ---
GLOBAL GROWTH AND INCOME FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  25
                                                                             ---



FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 1
-------------------------------------------------------------------------

             Management fees*                                      0.69%
-------------------------------------------------------------------------
             Other expenses                                         0.02
-------------------------------------------------------------------------
             Total annual fund operating expenses*                  0.71


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 1   $73    $227    $395     $883





----
26  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GLOBAL GROWTH AND INCOME FUND
----



GROWTH-INCOME FUND

RISK/RETURN SUMMARY

The fund seeks to make your investment grow and provide you with income over
time by investing primarily in common stocks or other securities that
demonstrate the potential for appreciation and/or dividends. The fund may
invest up to 15% of its assets, at the time of purchase, in securities of
issuers domiciled outside the United States and not included in Standard &
Poor's 500 Composite Index. The fund is designed for investors seeking both
capital appreciation and income.

The prices of and the income generated by securities held by the fund may
decline in response to certain events, including, for example, those directly
involving the companies whose securities are owned by the fund; conditions
affecting the general economy; overall market changes; local, regional or
global political, social or economic instability; and currency and interest
rate fluctuations. Income provided by the fund may be affected by changes in
the dividend policies of the companies in which the fund invests and the
capital resources available for such payments at such companies.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.


                                                                             ---
           GROWTH-INCOME FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  27
                                                                             ---


INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.


Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)

                                    [CHART]

  1998    1999   2000   2001     2002    2003    2004   2005    2006   2007
  ----    ----   ----   ----     ----    ----    ----   ----    ----   ----
 18.37%  11.48% 8.24%   2.78%  -18.15%   32.76% 10.66%  6.08%  15.51%  5.32%


The fund's highest/lowest quarterly results during this time period were:

HIGHEST   18.92%  (quarter ended December 31, 1998)
LOWEST   -18.64%  (quarter ended September 30, 2002)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                               LIPPER GROWTH
                                                 & INCOME
AVERAGE ANNUAL TOTAL RETURNS  FUND  S&P 500/1/ FUNDS INDEX/2/
-------------------------------------------------------------

        1 year                5.32%   5.49%        4.28%
-------------------------------------------------------------
        5 years               13.65   12.82        12.86
-------------------------------------------------------------
        10 years               8.58    5.91         5.91
-------------------------------------------------------------
        Lifetime/3/           12.84   12.63        11.28


/1/Standard & Poor's 500 Composite Index is a market capitalization-weighted
   index based on the average weighted performance of 500 widely held common
   stocks. This index is unmanaged and its results include reinvested dividends
   and/or distributions, but do not reflect the effect of sales charges,
   commissions, expenses or taxes.

/2/Lipper Growth & Income Funds Index is an equally weighted index of funds
   that combine a growth-of-earnings orientation and an income requirement for
   level and/or rising dividends. The results of the underlying funds in the
   index include the reinvestment of dividends and capital gain distributions,
   as well as brokerage commissions paid by the funds for portfolio
   transactions, but do not reflect the effect of sales charges or taxes.

/3/Lifetime results are from February 8, 1984, the date the fund began
   investment operations.


----
28  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GROWTH-INCOME FUND
----


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 1
-------------------------------------------------------------------------

             Management fees*                                      0.26%
-------------------------------------------------------------------------
             Other expenses                                         0.01
-------------------------------------------------------------------------
             Total annual fund operating expenses*                  0.27


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 1   $28     $87    $152     $343



                                                                             ---
           GROWTH-INCOME FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  29
                                                                             ---



INTERNATIONAL GROWTH AND INCOME FUND

RISK/RETURN SUMMARY

The fund seeks to make your investment grow over time and provide you with
current income. The fund will pursue this objective by investing primarily
in stocks of larger, well-established companies domiciled outside of the
United States.

The fund is designed for investors seeking both capital appreciation and
income. In pursuing its objective, the fund tends to invest in stocks that the
investment adviser believes to be relatively resilient to market declines.

The prices of and the income generated by securities held by the fund may
decline in response to certain events, including, for example, those directly
involving the companies whose securities are owned by the fund; conditions
affecting the general economy; overall market changes; local, regional or
global political, social or economic instability; and currency and interest
rate fluctuations. Income provided by the fund may be affected by changes in
the dividend policies of the companies in which the fund invests and the
capital resources available for such payments at such companies.

Investments in securities issued by entities based outside of the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.

Investing in countries with developing economies and/or markets generally
involves risks in addition to and greater than those generally associated with
investing in developed countries. For instance, developing countries may have
less developed legal and accounting systems. The governments of these countries
may be more unstable and likely to impose capital controls, nationalize a
company or industry, place restrictions on foreign ownership and on withdrawing
sale proceeds of securities from the country, and/or impose punitive taxes that
could adversely affect security prices. In addition, the economies of these
countries may be dependent on relatively few industries that are more
susceptible to local and global changes. Securities markets in these countries
are also relatively small and have substantially lower trading volumes. As a
result, securities issued in these countries may be more volatile and less
liquid than securities issued in countries with more developed economies or
markets.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.





----
30  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  INTERNATIONAL GROWTH AND INCOME FUND
----




FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)*  CLASS 1
--------------------------------------------------------------------------

             Management fees+                                       0.69%
--------------------------------------------------------------------------
             Other expenses                                          0.03
--------------------------------------------------------------------------
             Total annual fund operating expenses+                   0.72


*Based on estimated amounts for the current fiscal year.
+The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS
-----------------------

Class 1   $74    $230






                                                                                    ---
INTERNATIONAL GROWTH AND INCOME FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  31
                                                                                    ---



ASSET ALLOCATION FUND

RISK/RETURN SUMMARY

The fund seeks to provide you with high total return (including income and
capital gains) consistent with preservation of capital over the long term by
investing in a diversified portfolio of common stocks and other equity
securities, bonds and other intermediate and long-term debt securities, and
money market instruments (debt securities maturing in one year or less). The
fund may invest up to 15% of its assets in equity securities of issuers
domiciled outside the United States and not included in Standard & Poor's 500
Composite Index, and up to 5% of its assets in debt securities of issuers
domiciled outside the United States. In addition, the fund may invest up to 25%
of its debt assets in lower quality debt securities (rated Ba or below by
Moody's Investors Service and BB or below by Standard & Poor's Corporation or
unrated but determined to be of equivalent quality). Such securities are
sometimes referred to as "junk bonds."

In seeking to pursue its investment objective, the fund will vary its mix of
equity securities, debt securities and money market instruments. Under normal
market conditions, the fund's investment adviser expects (but is not required)
to maintain an investment mix falling within the following ranges: 40%-80% in
equity securities, 20%-50% in debt securities and 0%-40% in money market
instruments. As of December 31, 2007, the fund was approximately 64% invested
in equity securities, 22% invested in debt securities and 14% invested in money
market instruments. The proportion of equities, debt and money market
securities held by the fund will vary with market conditions and the investment
adviser's assessment of their relative attractiveness as investment
opportunities. The fund is designed for investors seeking above-average total
return.

The prices of and the income generated by securities held by the fund may
decline in response to certain events, including, for example, those directly
involving the companies whose securities are owned by the fund; conditions
affecting the general economy; overall market changes; local, regional or
global political, social or economic instability; and currency and interest
rate fluctuations. Income provided by the fund may be affected by changes in
the dividend policies of the companies in which the fund invests and the
capital resources available for such payments at such companies.

Securities held by the fund may also be affected by changing market interest
rates and by changes in effective maturities and credit ratings. For example,
the prices of debt securities in the fund's portfolio generally will decline
when interest rates rise and increase when interest rates fall. In addition,
falling interest rates may cause an issuer to redeem or "call" a security
before its stated maturity, which may result in the fund having to reinvest the
proceeds in lower yielding securities. Debt securities are also subject to
credit risk, which is the possibility that the credit strength of an issuer
will weaken and/or an issuer of a debt security will fail to make timely
payments of principal or interest and the security will go into default. Lower
quality or longer maturity debt securities generally have higher rates of
interest and may be subject to greater price fluctuations than higher quality
or shorter maturity debt securities. In addition, there may be little trading
in the secondary market for certain lower quality debt securities, which may
adversely affect the fund's ability to dispose of such securities. A security
backed by the U.S. Treasury or the full faith and credit of the United States
is guaranteed only as to the timely payment of interest and principal when held
to maturity. Accordingly, the current market prices for these securities will
fluctuate with changes in interest rates.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.


----
32  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  ASSET ALLOCATION FUND
----


INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.



Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)


                                    [CHART]

1998   1999   2000   2001     2002    2003   2004   2005    2006   2007
----   ----   ----   ----     ----    ----   ----   ----    ----   ----
13.13%  7.25%  4.62%  0.77%  -12.19%  22.14%  8.50%  9.45%   14.96% 6.82%



The fund's highest/lowest quarterly results during this time period were:

              HIGHEST   12.24% (quarter ended June 30, 2003)
              LOWEST   -12.28% (quarter ended September 30, 2002)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                               LEHMAN
                              BROTHERS                CITIGROUP BROAD
AVERAGE ANNUAL             U.S. AGGREGATE             INVESTMENT-GRADE
TOTAL RETURNS        FUND     INDEX/1/    S&P 500/2/ (BIG) BOND INDEX/3/
------------------------------------------------------------------------

1 year               6.82%     6.97%        5.49%          7.22%
------------------------------------------------------------------------
5 years              12.24      4.42        12.82           4.55
------------------------------------------------------------------------
10 years              7.18      5.97         5.91           6.03
------------------------------------------------------------------------
Lifetime/4/           9.54      7.14        10.54           7.21


/1/Lehman Brothers U.S. Aggregate Index represents the U.S. investment-grade
   fixed-rate bond market. This index is unmanaged and its results include
   reinvested dividends and/or distributions, but do not reflect the effect of
   sales charges, commissions, expenses or taxes.

/2/Standard & Poor's 500 Composite Index is a market capitalization-weighted
   index based on the average weighted performance of 500 widely held common
   stocks. This index is unmanaged and its results include reinvested dividends
   and/or distributions, but do not reflect the effect of sales charges,
   commissions, expenses or taxes.

/3/Citigroup Broad Investment-Grade (BIG) Bond Index (formerly Salomon Smith
   Barney Broad Investment-Grade (BIG) Bond Index) is a market
   capitalization-weighted index that includes fixed-rate U.S. Treasury,
   government-sponsored, mortgage, asset-backed and investment-grade corporates
   with a maturity of one year or longer. This index is unmanaged and its
   results include reinvested dividends and/or distributions, but do not
   reflect the effect of sales charges, commissions, expenses or taxes.

/4/Lifetime results are from August 1, 1989, the date the fund began investment
   operations.


                                                                             ---
        ASSET ALLOCATION FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  33
                                                                             ---


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 1
-------------------------------------------------------------------------

             Management fees*                                      0.31%
-------------------------------------------------------------------------
             Other expenses                                         0.01
-------------------------------------------------------------------------
             Total annual fund operating expenses*                  0.32


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 1   $33    $103    $180     $406



----
34  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  ASSET ALLOCATION FUND
----


BOND FUND

RISK/RETURN SUMMARY

The fund seeks to maximize your level of current income and preserve your
capital. Normally, the fund invests at least 80% of its assets in bonds and
other debt securities. This policy is subject to change only upon 60 days'
notice to shareholders. The fund will invest at least 65% of its assets in
investment-grade debt securities (including cash and cash equivalents) and may
invest up to 35% of its assets in debt securities (rated Ba or below by Moody's
Investors Service and BB or below by Standard & Poor's Corporation or unrated
but determined to be of equivalent quality). Such securities are sometimes
referred to as "junk bonds." The fund may invest in debt securities of issuers
domiciled outside the United States. The fund may also invest up to 20% of its
assets in preferred stocks, including convertible and nonconvertible preferred
stocks. The fund is designed for investors seeking income and more price
stability than stocks, and capital preservation over the long term.

The values of and the income generated by most debt securities held by the fund
may be affected by changing market interest rates and by changes in effective
maturities and credit ratings of these securities. For example, the values of
debt securities in the fund's portfolio generally will decline when interest
rates rise and increase when interest rates fall. In addition, falling interest
rates may cause an issuer to redeem, "call" or refinance a security before its
stated maturity, which may result in the fund having to reinvest the proceeds
in lower yielding securities. Debt securities are also subject to credit risk,
which is the possibility that the credit strength of an issuer will weaken
and/or an issuer of a debt security will fail to make timely payments of
principal or interest and the security will go into default. Lower quality or
longer maturity debt securities generally have higher rates of interest and may
be subject to greater price fluctuations than higher quality or shorter
maturity debt securities. In addition, there may be little trading in the
secondary market for certain lower quality debt securities, which may adversely
affect the fund's ability to dispose of such securities. The fund's investment
adviser attempts to reduce these risks through diversification of the portfolio
and with ongoing credit analysis of each issuer, as well as by monitoring
economic and legislative developments.

A security backed by the U.S. Treasury or the full faith and credit of the U.S.
government is guaranteed only as to the timely payment of interest and
principal when held to maturity. Accordingly, the current market prices for
these securities will fluctuate with changes in interest rates. Many types of
debt securities, including mortgage-related securities, are subject to
prepayment risk. For example, when interest rates fall, homeowners are more
likely to refinance their home mortgages and prepay their principal earlier
than expected. The fund must then reinvest the prepaid principal in new
securities when interest rates on new mortgage investments are falling, thus
reducing the fund's income.

The prices and yields of nonconvertible preferred stocks generally move with
changes in interest rates and the issuer's credit quality, similar to debt
securities. The value of convertible preferred stocks varies in response to
many factors, including, for example, the value of the underlying equity
securities, general market and economic conditions, and convertible market
valuations, as well as changes in interest rates, credit spreads and the credit
quality of the issuer.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.


                                                                             ---
                    BOND FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  35
                                                                             ---


INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.


  Here are the fund's results calculated on a calendar year basis. (If insurance
  contract fees and expenses were included, results would have been lower.)


                                      [CHART]

  1998   1999   2000   2001   2002    2003   2004   2005   2006   2007
  ----   ----   ----   ----   ----    ----   ----   ----   ----   ----
  4.37%  2.81%  5.22%  8.48%  4.26%  13.07%  6.04%  1.77%  7.31%  3.66%




The fund's highest/lowest quarterly results during this time period were:

HIGHEST   5.15% (quarter ended December 31, 2002)
LOWEST   -1.72% (quarter ended June 30, 2004)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                        LEHMAN
                                       BROTHERS     CITIGROUP BROAD
                                    U.S. AGGREGATE  INVESTMENT-GRADE
AVERAGE ANNUAL TOTAL RETURNS  FUND     INDEX/1/    (BIG) BOND INDEX/2/
----------------------------------------------------------------------

        1 year                3.66%     6.97%            7.22%
----------------------------------------------------------------------
        5 years                6.30      4.42             4.55
----------------------------------------------------------------------
        10 years               5.65      5.97             6.03
----------------------------------------------------------------------
        Lifetime/3/            6.04      6.08             6.12


/1/Lehman Brothers U.S. Aggregate Index represents the U.S. investment-grade
   fixed-rate bond market. This index is unmanaged and its results include
   reinvested dividends and/or distributions, but do not reflect the effect of
   sales charges, commissions, expenses or taxes.

/2/Citigroup Broad Investment-Grade (BIG) Bond Index (formerly Salomon Smith
   Barney Broad Investment-Grade (BIG) Bond Index) is a market
   capitalization-weighted index that includes fixed-rate U.S. Treasury,
   government-sponsored, mortgage, asset-backed and investment-grade corporates
   with a maturity of one year or longer. This index is unmanaged and its
   results include reinvested dividends and/or distributions, but do not
   reflect the effect of sales charges, commissions, expenses or taxes.

/3/Lifetime results are from January 2, 1996, the date the fund began
   investment operations.


----
36  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  BOND FUND
----


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 1
-------------------------------------------------------------------------

             Management fees*                                      0.40%
-------------------------------------------------------------------------
             Other expenses                                         0.01
-------------------------------------------------------------------------
             Total annual fund operating expenses*                  0.41


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



                             1 YEAR 3 YEARS 5 YEARS 10 YEARS
                    ----------------------------------------

                    Class 1   $42    $132    $230     $518



                                                                             ---
                    BOND FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  37
                                                                             ---


GLOBAL BOND FUND

RISK/RETURN SUMMARY

The fund seeks to provide you, over the long term, with as high a level of
total return as is consistent with prudent management, by investing primarily
in investment-grade bonds issued by entities based around the world and
denominated in various currencies, including U.S. dollars. The fund may also
invest in lower quality, higher yielding debt securities. Such securities are
sometimes referred to as "junk bonds." The total return of the fund will be the
result of interest income, changes in the market value of the fund's
investments and changes in the value of other currencies relative to the U.S.
dollar.

The fund is designed for investors seeking returns through a portfolio of debt
securities issued by entities based around the world. Your investment in the
fund is subject to risks, including the possibility that the value of the
fund's portfolio holdings may fluctuate in response to economic, political or
social events in the United States or abroad.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.

Investing in countries with developing economies and/or markets generally
involves risks in addition to and greater than those generally associated with
investing in developed countries. For instance, developing countries may have
less developed legal and accounting systems. The governments of these countries
may be more unstable and likely to impose capital controls, nationalize a
company or industry, place restrictions on foreign ownership and on withdrawing
sale proceeds of securities from the country, and/or impose punitive taxes that
could adversely affect security prices. In addition, the economies of these
countries may be dependent on relatively few industries that are more
susceptible to local and global changes. Securities markets in these countries
are also relatively small and have substantially lower trading volumes. As a
result, securities issued in these countries may be more volatile and less
liquid than securities issued in countries with more developed economies or
markets.

The values of and the income generated by most debt securities held by the fund
may be affected by changing interest rates and by changes in the effective
maturities and credit ratings of these securities. For example, the values of
debt securities in the fund's portfolio generally will decline when interest
rates rise and increase when interest rates fall. Debt securities are also
subject to credit risk, which is the possibility that the credit strength of an
issuer will weaken and/or an issuer of a debt security will fail to make timely
payments of principal or interest and the security will go into default. Lower
quality or longer maturity debt securities generally have higher rates of
interest and may be subject to greater price fluctuations than higher quality
or shorter maturity debt securities. In addition, there may be little trading
in the secondary market for certain lower quality debt securities, which may
adversely affect the fund's ability to dispose of such securities.

The values of and the income generated by most debt securities held by the fund
may also be affected by changes in relative currency values. If the U.S. dollar
appreciates against foreign currencies, the value of the fund's securities
denominated in such currencies would generally depreciate and vice versa. U.S.
dollar-denominated securities of foreign issuers may also be affected by
changes in relative currency values.

The fund is non-diversified, which allows it to invest a greater percentage of
its assets in any one issuer than would otherwise be the case. However, the
fund intends to limit its investments in the securities of any single issuer.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.


----
38  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GLOBAL BOND FUND
----


INVESTMENT RESULTS

Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.


  Here are the fund's results calculated on a calendar year basis. (If insurance
  contract fees and expenses were included, results would have been lower.)


                                      [CHART]

                                        2007
                                        ----
                                        9.54%



The fund's highest/lowest quarterly results during this time period were:

HIGHEST  5.01% (quarter ended September 30, 2007)
LOWEST   0.19% (quarter ended June 30, 2007)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                    LEHMAN BROTHERS  LIPPER GLOBAL
                                    GLOBAL AGGREGATE INCOME FUNDS
AVERAGE ANNUAL TOTAL RETURNS  FUND      INDEX/1/      AVERAGE/2/
------------------------------------------------------------------

        1 year                9.54%       9.48%          6.65%
------------------------------------------------------------------
        Lifetime/3/           9.79        9.13           7.05


/1/Lehman Brothers Global Aggregate Index represents the global
   investment-grade fixed-income markets. This index is unmanaged and its
   results include reinvested dividends and/or distributions, but do not
   reflect the effect of sales charges, commissions, expenses or taxes.

/2/Lipper Global Income Funds Average is comprised of funds that invest
   primarily in U.S. dollar and non-U.S. dollar debt securities located in at
   least three countries, one of which may be the United States. The results of
   the underlying funds in the average include the reinvestment of dividends
   and capital gain distribution, as well as brokerage commissions paid by the
   funds for portfolio transactions, but do not reflect the effect of sales
   charges or taxes.

/3/Lifetime results are from October 4, 2006, the date the fund began
   investment operations.


                                                                             ---
             GLOBAL BOND FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  39
                                                                             ---


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 1
-------------------------------------------------------------------------

             Management fees*                                      0.57%
-------------------------------------------------------------------------
             Other expenses                                         0.04
-------------------------------------------------------------------------
             Total annual fund operating expenses*                  0.61


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 1   $62    $195    $340     $762



----
40  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GLOBAL BOND FUND
----


HIGH-INCOME BOND FUND

RISK/RETURN SUMMARY

The fund seeks to provide you with a high level of current income and,
secondarily, capital appreciation by investing at least 65% of its assets in
higher yielding and generally lower quality debt securities (rated Ba or below
by Moody's Investors Service or BB or below by Standard & Poor's Corporation or
unrated but determined to be of equivalent quality). Such securities are
sometimes referred to as "junk bonds." The fund may also invest up to 25% of
its assets in securities of issuers domiciled outside the United States.
Normally, the fund invests at least 80% of its assets in bonds and other debt
securities. This policy is subject to change only upon 60 days' notice to
shareholders. The fund may also invest up to 20% of its assets in equity
securities that provide an opportunity for capital appreciation. The fund is
designed for investors seeking a high level of current income and who are able
to tolerate greater credit risk and price fluctuations than funds investing in
higher quality debt securities.

The values of and the income generated by most debt securities held by the fund
may be affected by changing market interest rates and by changes in effective
maturities and credit ratings of these securities. For example, the values of
debt securities in the fund's portfolio generally will decline when interest
rates rise and increase when interest rates fall. In addition, falling interest
rates may cause an issuer to redeem, "call" or refinance a security before its
stated maturity, which may result in the fund having to reinvest the proceeds
in lower yielding securities. Debt securities are also subject to credit risk,
which is the possibility that the credit strength of an issuer will weaken
and/or an issuer of a debt security will fail to make timely payments of
principal or interest and the security will go into default. Lower quality or
longer maturity debt securities generally have higher rates of interest and may
be subject to greater price fluctuations than higher quality or shorter
maturity debt securities. In addition, there may be little trading in the
secondary market for certain lower quality debt securities, which may adversely
affect the fund's ability to dispose of such securities.

The prices of and the income generated by securities held by the fund may
decline in response to certain events, including, for example, those directly
involving the companies whose securities are owned by the fund; conditions
affecting the general economy; overall market changes; local, regional or
global political, social or economic instability; and currency and interest
rate fluctuations.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.
The fund's investment adviser attempts to reduce these risks through
diversification of the portfolio and with ongoing credit analysis of each
issuer, as well as by monitoring economic and legislative developments.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.


                                                                             ---
        HIGH-INCOME BOND FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  41
                                                                             ---


INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.


Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)


                                    [CHART]

1998   1999    2000   2001    2002    2003   2004   2005    2006   2007
----   ----    ----   ----    ----    ----   ----   ----    ----   ----
0.45% 5.80%  -3.06%   8.02%  -1.51%  29.79%  9.83%  2.46%  10.89%  1.62%



The fund's highest/lowest quarterly results during this time period were:

HIGHEST  10.83% (quarter ended December 31, 2002)
LOWEST   -9.03% (quarter ended June 30, 2002)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                                                         LIPPER
                                    CREDIT SUISSE  CITIGROUP BROAD    HIGH CURRENT
                                     HIGH YIELD    INVESTMENT-GRADE    YIELD BOND
AVERAGE ANNUAL TOTAL RETURNS  FUND    INDEX/1/    (BIG) BOND INDEX/2/ FUNDS INDEX/3/
------------------------------------------------------------------------------------

        1 year                1.62%     2.65%           7.22%             2.13%
------------------------------------------------------------------------------------
        5 years               10.48     10.97            4.55             10.07
------------------------------------------------------------------------------------
        10 years               6.07      6.10            6.03              3.96
------------------------------------------------------------------------------------
        Lifetime/4/           10.06      N/A             8.54              7.85


/1/Credit Suisse High Yield Index is designed to mirror the investible universe
   of the U.S. dollar-denominated high-yield debt market. This index is
   unmanaged and its results include reinvested dividends and/or distributions,
   but do not reflect the effect of sales charges, commissions, expenses or
   taxes. This index was not in existence on the date the fund began investment
   operations; therefore, lifetime results are not shown.

/2/Citigroup Broad Investment-Grade (BIG) Bond Index (formerly Salomon Smith
   Barney Broad Investment-Grade (BIG) Bond Index) is a market
   capitalization-weighted index that includes fixed-rate U.S. Treasury,
   government-sponsored, mortgage, asset-backed and investment-grade corporates
   with a maturity of one year or longer. This index is unmanaged and its
   results include reinvested dividends and/or distributions, but do not
   reflect the effect of sales charges, commissions, expenses or taxes.

/3/Lipper High Current Yield Bond Funds Index is an equally weighted index of
   funds that aim at high (relative) current yield from fixed-income
   securities, have no quality or maturity restrictions and tend to invest in
   lower grade debt issues. The results of the underlying funds in the index
   include reinvestment of dividends and capital gain distributions, as well as
   brokerage commissions paid by the funds for portfolio transactions, but do
   not reflect the effect of sales charges or taxes.

/4/Lifetime results are from February 8, 1984, the date the fund began
   investment operations.


----
42  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  HIGH-INCOME BOND FUND
----


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 1
-------------------------------------------------------------------------

             Management fees*                                      0.47%
-------------------------------------------------------------------------
             Other expenses                                         0.01
-------------------------------------------------------------------------
             Total annual fund operating expenses*                  0.48


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 1   $49    $154    $269     $604



                                                                             ---
        HIGH-INCOME BOND FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  43
                                                                             ---


U.S. GOVERNMENT/AAA-RATED SECURITIES FUND

RISK/RETURN SUMMARY

The fund seeks to provide you with a high level of current income, as well as
to preserve your investment. Normally, the fund will invest at least 80% of its
assets in securities that are guaranteed by the "full faith and credit" pledge
of the U.S. government or debt securities that are rated Aaa by Moody's
Investors Service or AAA by Standard & Poor's Corporation or unrated but
determined to be of equivalent quality. This policy is subject to change only
upon 60 days' notice to shareholders. The fund is designed for investors
seeking income and more price stability than from investing in stocks and lower
quality debt securities, and capital preservation over the long term.

The fund may also invest a significant portion of its assets in securities
backed by pools of mortgages. Certain of these securities may not be backed by
the full faith and credit of the U.S. government and are supported only by the
credit of the issuer. Such securities may include mortgage-backed securities
issued by the Federal National Mortgage Association ("Fannie Mae") and the
Federal Home Loan Mortgage Corporation ("Freddie Mac") and are neither issued
nor guaranteed by the U.S. Treasury.

The values of and the income generated by most debt securities held by the fund
may be affected by changing market interest rates and prepayment risk. For
example, as with other debt securities, the value of U.S. government securities
generally will decline when interest rates rise and increase when interest
rates fall. In addition, falling interest rates may cause an issuer to redeem
or "call" a security before its stated maturity, which may result in the fund
having to reinvest the proceeds in lower yielding securities. Longer maturity
debt securities generally have higher rates of interest but may be subject to
greater price fluctuations than shorter maturity securities.

A security backed by the U.S. Treasury or the full faith and credit of the
United States is guaranteed only as to the timely payment of interest and
principal when held to maturity. Accordingly, the current market prices for
such securities will fluctuate.

Many types of debt securities, including mortgage-related securities, are
subject to prepayment risk. For example, when interest rates fall, homeowners
are more likely to refinance their home mortgages and prepay their principal
earlier than expected. The fund must then reinvest the prepaid principal in new
securities when interest rates on new mortgage investments are falling, thus
reducing the fund's income.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.




----
44  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  U.S. GOVERNMENT/AAA-RATED SECURITIES FUND
----



INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.


Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)

                                    [CHART]

 1998    1999    2000   2001   2002   2003   2004   2005   2006   2007
 -----  ------  ------  -----  -----  -----  -----  -----  -----  -----
 8.19%  -0.53%  11.69%  7.24%  9.45%  2.51%  3.58% 2.70%   3.95%  6.83%



The fund's highest/lowest quarterly results during this time period were:

HIGHEST   4.57% (quarter ended September 30, 2001)
LOWEST   -1.76% (quarter ended June 30, 2004)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                    CITIGROUP    LIPPER
                                    TREASURY/   GENERAL
                                      GOVT.       U.S.
                                    SPONSORED/ GOVERNMENT
                                     MORTGAGE    FUNDS
AVERAGE ANNUAL TOTAL RETURNS  FUND   INDEX/1/  AVERAGE/2/ CPI/3/
----------------------------------------------------------------

        1 year                6.83%   7.87%      6.25%    4.08%
----------------------------------------------------------------
        5 years                3.91    4.33       3.10     3.03
----------------------------------------------------------------
        10 years               5.50    5.94       4.95     2.68
----------------------------------------------------------------
        Lifetime/4/            7.01    7.71       6.54     3.02


/1/Citigroup Treasury/Government Sponsored/Mortgage Index (formerly Salomon
   Smith Barney Treasury/Government Sponsored/Mortgage Index) is a
   market-weighted index that includes U.S. Treasury and agency securities, as
   well as FNMAs, FHLMCs and GNMAs. This index is unmanaged and its results
   include reinvested dividends and/or distributions, but do not reflect the
   effect of sales charges, commissions, expenses or taxes.

/2/Lipper General U.S. Government Funds Average is comprised of funds that
   invest primarily in U.S. government and agency issues. The results of the
   underlying funds in the average include the reinvestment of dividends and
   capital gain distributions, as well as brokerage commissions paid by the
   fund for portfolio transactions, but do not reflect the effect of sales
   charges or taxes.

/3/Consumer Price Index (CPI) is a measure of the average change over time in
   the prices paid by urban consumers for a market basket of consumer goods and
   services. Widely used as a measure of inflation, the CPI is computed by the
   U.S. Department of Labor, Bureau of Labor Statistics.

/4/Lifetime results are from December 2, 1985, the date the fund began
  investment operations.




                                                                                         ---
U.S. GOVERNMENT/AAA-RATED SECURITIES FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  45
                                                                                         ---



FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 1
-------------------------------------------------------------------------

             Management fees*                                      0.45%
-------------------------------------------------------------------------
             Other expenses                                         0.01
-------------------------------------------------------------------------
             Total annual fund operating expenses*                  0.46


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 1   $47    $148    $258     $579





----
46  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  U.S. GOVERNMENT/AAA-RATED SECURITIES FUND
----



CASH MANAGEMENT FUND

RISK/RETURN SUMMARY

The fund seeks to provide you with an opportunity to earn income on your cash
reserves while preserving the value of your investment and maintaining
liquidity. Normally, the fund invests substantially in high-quality money
market instruments such as commercial paper, commercial bank obligations,
savings association obligations, U.S. or Canadian government securities, and
short-term corporate bonds and notes. These securities may have credit and
liquidity enhancements. Changes in the credit quality of banks and financial
institutions providing these enhancements could cause the fund to experience a
loss and may affect its share price.

In addition, the fund may invest in securities issued by entities domiciled
outside the United States or Canada, or in securities with credit and liquidity
support features provided by entities domiciled outside the United States or
Canada. These securities may be affected by unfavorable political, economic or
governmental developments that could affect the repayment of principal or the
payment of interest. Securities of U.S. issuers with substantial operations
outside the United States may also be subject to similar risks.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.

The fund is not managed to maintain a stable net asset value of $1 per share.


                                                                             ---
         CASH MANAGEMENT FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  47
                                                                             ---


INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year, as well as average annual total returns for various periods.
This information provides some indication of the risks of investing in the
fund. Past results are not predictive of future results. Figures shown reflect
fees and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.


Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)


                                    [CHART]

1998   1999   2000   2001   2002   2003   2004   2005   2006   2007
----   ----   ----   ----   ----   ----   ----   ----   ----   ----
5.15%  4.83%  6.04% 3.66%  1.24%  0.67%  0.96%   2.97%  4.81%  4.95%



The fund's highest/lowest quarterly results during this time period were:

HIGHEST  1.57% (quarter ended December 31, 2000)
LOWEST   0.09% (quarter ended March 31, 2004)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



AVERAGE ANNUAL TOTAL RETURNS  FUND
-----------------------------------

         1 year               4.95%
-----------------------------------
         5 years               2.86
-----------------------------------
         10 years              3.51
-----------------------------------
         Lifetime*             4.92


*Lifetime results are from February 8, 1984, the date the fund began investment
 operations.


----
48  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  CASH MANAGEMENT FUND
----


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 1
-------------------------------------------------------------------------

             Management fees*                                      0.32%
-------------------------------------------------------------------------
             Other expenses                                         0.01
-------------------------------------------------------------------------
             Total annual fund operating expenses*                  0.33


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 1   $34    $106    $185     $418



                                                                             ---
         CASH MANAGEMENT FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  49
                                                                             ---


CASH POSITION

The funds may also hold cash or money market instruments, the amount of which
will vary and will depend on various factors, including market conditions and
purchases and redemptions of fund shares. For temporary defensive purposes, a
fund may hold all, or a significant portion, of its assets in such securities.
A larger amount of such holdings could negatively affect a fund's investment
results in a period of rising market prices; conversely, it could reduce a
fund's magnitude of loss in the event of falling market prices and provide
liquidity to make additional investments or to meet redemptions.

MANAGEMENT AND ORGANIZATION

INVESTMENT ADVISER

Capital Research and Management Company, an experienced investment management
organization founded in 1931, serves as investment adviser to the Series and
other mutual funds, including the American Funds. Capital Research and
Management Company is a wholly owned subsidiary of The Capital Group Companies,
Inc. and is located at 333 South Hope Street, Los Angeles, California 90071,
and 6455 Irvine Center Drive, Irvine, California 92618. Capital Research and
Management Company manages the investment portfolios and business affairs of
the Series. The total management fee paid by each fund for the previous fiscal
year, expressed as a percentage of average net assets of that fund, appear in
the Annual Fund Operating Expenses table for each fund. A discussion regarding
the basis for the approval of the Series' investment advisory and service
agreement by the Series' board of trustees is contained in the Series' annual
report to shareholders for the fiscal year ended December 31, 2007.

Capital Research and Management Company manages equity assets through two
investment divisions, Capital World Investors and Capital Research Global
Investors, and manages fixed-income assets through its Fixed Income division.
Capital World Investors and Capital Research Global Investors make investment
decisions on an independent basis.

EXECUTION OF PORTFOLIO TRANSACTIONS

The investment adviser places orders with broker-dealers for the funds'
portfolio transactions. In selecting broker-dealers, the investment adviser
strives to obtain "best execution" (the most favorable total price reasonably
attainable under the circumstances) for the funds' portfolio transactions,
taking into account a variety of factors. Subject to best execution, the
investment adviser may consider investment research and/or brokerage services
provided to the adviser in placing orders for the funds' portfolio
transactions. The investment adviser may place orders for the funds' portfolio
transactions with broker-dealers who have sold shares of funds managed by the
investment adviser or its affiliated companies; however, it does not give
consideration to whether a broker-dealer has sold shares of the funds managed
by the investment adviser or its affiliated companies when placing any such
orders for the funds' portfolio transactions. A more detailed description of
the investment adviser's policies is included in the statement of additional
information.

PORTFOLIO MANAGEMENT

The Series relies on the professional judgment of its investment adviser,
Capital Research and Management Company, to make decisions about the funds'
portfolio investments. The basic investment philosophy of the investment
adviser is to seek to invest in attractively priced securities that, in its
opinion, represent above-average long-term investment opportunities. The
investment adviser believes that an important way to accomplish this is through
fundamental analysis, including meeting with company executives and employees,
suppliers, customers and competitors. Securities may be sold when the
investment adviser believes that they no longer represent relatively attractive
investment opportunities.

PORTFOLIO HOLDINGS

A description of the funds' policies and procedures regarding disclosure of
information about their portfolio securities is available in the statement of
additional information.


----
50  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS
----


MULTIPLE PORTFOLIO COUNSELOR SYSTEM

Capital Research and Management Company uses a system of multiple portfolio
counselors in managing mutual fund assets. Under this approach, the portfolio
of a fund is divided into segments managed by individual counselors who decide
how their respective segments will be invested. In addition, Capital Research
and Management Company's investment analysts may make investment decisions with
respect to a portion of a fund's portfolio. Investment decisions are subject to
a fund's objective(s), policies and restrictions and the oversight of the
appropriate investment-related committees of Capital Research and Management
Company and its investment divisions.

The primary individual portfolio counselors for each of the funds are:






                                                                     PRIMARY TITLE WITH
                                                                     INVESTMENT ADVISER
 PORTFOLIO COUNSELOR FOR                                               (OR AFFILIATE)
   THE SERIES/TITLE (IF         PORTFOLIO COUNSELOR EXPERIENCE         AND INVESTMENT      PORTFOLIO COUNSELOR'S ROLE
       APPLICABLE)                      IN THE FUND(S)                   EXPERIENCE       IN MANAGEMENT OF THE FUND(S)
------------------------------------------------------------------------------------------------------------------------

JAMES K. DUNTON             Growth-Income Fund -- 25 years           Senior Vice          Serves as an equity portfolio
VICE CHAIRMAN OF THE BOARD  (since the fund's inception)             President --         counselor for Growth-Income
                            Blue Chip Income and Growth              Capital Research     Fund and Blue Chip Income and
                            Fund -- 7 years (since the fund's        Global Investors     Growth Fund
                            inception)                               Investment
                                                                     professional for 46
                                                                     years, all with
                                                                     Capital Research
                                                                     and Management
                                                                     Company or affiliate
------------------------------------------------------------------------------------------------------------------------
DONALD D. O'NEAL            Growth-Income Fund -- 3 years            Senior Vice          Serves as an equity portfolio
PRESIDENT AND TRUSTEE                                                President --         counselor for Growth-Income
                                                                     Capital Research     Fund
                                                                     Global Investors
                                                                     Investment
                                                                     professional for 23
                                                                     years, all with
                                                                     Capital Research
                                                                     and Management
                                                                     Company or affiliate
------------------------------------------------------------------------------------------------------------------------
ALAN N. BERRO               Asset Allocation Fund -- 9 years         Senior Vice          Serves as an equity portfolio
SENIOR VICE PRESIDENT                                                President --         counselor for Asset
                                                                     Capital World        Allocation Fund
                                                                     Investors
                                                                     Investment
                                                                     professional for 23
                                                                     years in total; 17
                                                                     years with Capital
                                                                     Research and
                                                                     Management Company
                                                                     or affiliate
------------------------------------------------------------------------------------------------------------------------
ABNER D. GOLDSTINE          Bond Fund -- 13 years (since the         Senior Vice          Serves as a fixed-income
SENIOR VICE PRESIDENT       fund's inception)                        President -- Fixed   portfolio counselor for Bond
                            High-Income Bond Fund -- 11 years        Income, Capital      Fund and High-Income Bond Fund
                                                                     Research and
                                                                     Management Company
                                                                     Investment
                                                                     professional for 56
                                                                     years in total; 41
                                                                     years with Capital
                                                                     Research and
                                                                     Management Company
                                                                     or affiliate
------------------------------------------------------------------------------------------------------------------------
JOHN H. SMET                U.S. Government/AAA-Rated                Senior Vice          Serves as a fixed-income
SENIOR VICE PRESIDENT       Securities Fund -- 16 years              President -- Fixed   portfolio counselor for U.S.
                                                                     Income, Capital      Government/AAA-Rated
                                                                     Research and         Securities Fund
                                                                     Management Company
                                                                     Investment
                                                                     professional for 26
                                                                     years in total; 25
                                                                     years with Capital
                                                                     Research and
                                                                     Management Company
                                                                     or affiliate
------------------------------------------------------------------------------------------------------------------------
CLAUDIA P. HUNTINGTON       Growth-Income Fund -- 15 years           Senior Vice          Serves as an equity portfolio
VICE PRESIDENT              (plus 5 years of prior experience as an  President --         counselor for Growth-Income
                            investment analyst for the fund)         Capital Research     Fund and Global Discovery Fund
                            Global Discovery Fund -- 7 years         Global Investors
                            (since the fund's inception)             Investment
                                                                     professional for 36
                                                                     years in total; 33
                                                                     years with Capital
                                                                     Research and
                                                                     Management Company
                                                                     or affiliate
------------------------------------------------------------------------------------------------------------------------
ROBERT W. LOVELACE          Global Growth Fund -- 11 years           Senior Vice          Serves as an equity portfolio
VICE PRESIDENT              (since the fund's inception)             President --         counselor for Global Growth
                            New World Fund -- 9 years (since         Capital World        Fund and New World Fund
                            the fund's inception)                    Investors
                                                                     Investment
                                                                     professional for 23
                                                                     years, all with
                                                                     Capital Research
                                                                     and Management
                                                                     Company or affiliate
------------------------------------------------------------------------------------------------------------------------
SUSAN M. TOLSON             High-Income Bond Fund -- 14 years        Senior Vice          Serves as a fixed-income
VICE PRESIDENT              (plus 2 years of prior experience as an  President -- Fixed   portfolio counselor for
                            investment analyst for the fund)         Income, Capital      High-Income Bond Fund, Asset
                            Asset Allocation Fund -- 9 years         Research and         Allocation Fund and Global
                            Global Bond Fund -- 2 years (since       Management Company   Bond Fund
                            the fund's inception)                    Investment
                                                                     professional for 20
                                                                     years in total; 18
                                                                     years with Capital
                                                                     Research and
                                                                     Management Company
                                                                     or affiliate
------------------------------------------------------------------------------------------------------------------------
DAVID C. BARCLAY            High-Income Bond Fund -- 15 years        Senior Vice          Serves as a fixed-income
                            New World Fund -- 9 years (since         President -- Fixed   portfolio counselor for
                            the fund's inception)                    Income, Capital      High-Income Bond Fund, New
                            Bond Fund -- 11 years                    Research and         World Fund and Bond Fund
                                                                     Management Company
                                                                     Investment
                                                                     professional for 27
                                                                     years in total; 20
                                                                     years with Capital
                                                                     Research and
                                                                     Management Company
                                                                     or affiliate
------------------------------------------------------------------------------------------------------------------------
DONNALISA BARNUM            Growth Fund -- 5 years                   Senior Vice          Serves as an equity portfolio
                                                                     President --         counselor for Growth Fund
                                                                     Capital World
                                                                     Investors
                                                                     Investment
                                                                     professional for 27
                                                                     years in total; 22
                                                                     years with Capital
                                                                     Research and
                                                                     Management Company
                                                                     or affiliate
------------------------------------------------------------------------------------------------------------------------



                                                                             ---
                               AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  51
                                                                             ---





                                                                         PRIMARY TITLE WITH
 PORTFOLIO COUNSELOR FOR                                               INVESTMENT ADVISER (OR
   THE SERIES/TITLE (IF         PORTFOLIO COUNSELOR EXPERIENCE        AFFILIATE) AND INVESTMENT     PORTFOLIO COUNSELOR'S ROLE
       APPLICABLE)                     IN THE FUND(S)                        EXPERIENCE            IN MANAGEMENT OF THE FUND(S)
---------------------------------------------------------------------------------------------------------------------------------

CHRISTOPHER D. BUCHBINDER   Blue Chip Income and Growth             Senior Vice President --       Serves as an equity portfolio
                            Fund -- 1 year                          Capital Research Global        counselor for Blue Chip
                                                                    Investors                      Income and Growth Fund
                                                                    Investment professional for
                                                                    13 years, all with Capital
                                                                    Research and Management
                                                                    Company or affiliate
---------------------------------------------------------------------------------------------------------------------------------
GORDON CRAWFORD             Global Small Capitalization Fund --     Senior Vice President --       Serves as an equity portfolio
                             10 years (since the fund's inception)  Capital Research Global        counselor for Global Small
                            Global Discovery Fund -- 3 years        Investors                      Capitalization Fund and
                                                                    Investment professional for    Global Discovery Fund
                                                                    37 years, all with Capital
                                                                    Research and Management
                                                                    Company or affiliate
---------------------------------------------------------------------------------------------------------------------------------
MARK H. DALZELL             Bond Fund -- 3 years                    Senior Vice President --       Serves as a fixed-income
                            Global Bond Fund -- 2 years (since      Fixed Income, Capital          portfolio counselor for Bond
                            the fund's inception)                   Research and Management        Fund and Global Bond Fund
                                                                    Company
                                                                    Investment professional for
                                                                    30 years in total; 20 years
                                                                    with Capital Research and
                                                                    Management Company or
                                                                    affiliate
---------------------------------------------------------------------------------------------------------------------------------
MARK E. DENNING             Global Small Capitalization Fund --     Senior Vice President --       Serves as an equity portfolio
                            10 years (since the fund's inception)   Capital Research Global        counselor for Global Small
                            Global Discovery Fund -- 3 years        Investors                      Capitalization Fund and
                                                                    Investment professional for    Global Discovery Fund
                                                                    26 years, all with Capital
                                                                    Research and Management
                                                                    Company or affiliate
---------------------------------------------------------------------------------------------------------------------------------
J. BLAIR FRANK              Global Small Capitalization Fund --     Senior Vice President --       Serves as an equity portfolio
                            6 years                                 Capital Research Global        counselor for Global Small
                            Growth-Income Fund -- 2 years           Investors                      Capitalization Fund and
                                                                    Investment professional for    Growth-Income Fund
                                                                    15 years in total; 14 years
                                                                    with Capital Research and
                                                                    Management Company or
                                                                    affiliate
---------------------------------------------------------------------------------------------------------------------------------
NICHOLAS J. GRACE           Global Growth Fund -- 6 years (plus     Senior Vice President --       Serves as an equity portfolio
                            4 years of prior experience as an       Capital World Investors        counselor for Global Growth
                            investment analyst for the fund)        Investment professional for    Fund
                                                                    18 years in total; 15 years
                                                                    with Capital Research and
                                                                    Management Company or
                                                                    affiliate
---------------------------------------------------------------------------------------------------------------------------------
ALWYN W. HEONG              International Fund -- 12 years          Senior Vice President --       Serves as an equity portfolio
                                                                    Capital Research Global        counselor for International
                                                                    Investors                      Fund
                                                                    Investment professional for
                                                                    20 years in total; 16 years
                                                                    with Capital Research and
                                                                    Management Company or
                                                                    affiliate
---------------------------------------------------------------------------------------------------------------------------------
DAVID A. HOAG               Bond Fund -- 1 year                     Senior Vice                    Serves as a fixed-income
                                                                    President -- Fixed Income,     portfolio counselor for Bond
                                                                    Capital Research and           Fund
                                                                    Management Company
                                                                    Investment professional for
                                                                    20 years in total; 17 years
                                                                    with Capital Research and
                                                                    Management Company or
                                                                    affiliate
---------------------------------------------------------------------------------------------------------------------------------
THOMAS H. HOGH              Global Bond Fund -- 2 years (since      Senior Vice President --       Serves as a fixed-income
                            the fund's inception)                   Fixed Income, Capital          portfolio counselor for
                            U.S. Government/AAA-Rated               Research Company               Global Bond Fund, U.S.
                            Securities Fund -- 11 years             Investment professional for    Government/AAA-Rated
                            Bond Fund -- 1 year                     22 years in total; 18 years    Securities Fund and Bond Fund
                                                                    with Capital Research and
                                                                    Management Company or
                                                                    affiliate
---------------------------------------------------------------------------------------------------------------------------------
GREGG E. IRELAND            Global Growth and Income Fund --        Senior Vice President --       Serves as an equity portfolio
                             2 years (since the fund's inception)   Capital World Investors        counselor for Global Growth
                            Growth Fund -- 2 years                  Investment professional for    and Income Fund and Growth
                                                                    36 years, all with Capital     Fund
                                                                    Research and Management
                                                                    Company or affiliate
---------------------------------------------------------------------------------------------------------------------------------
CARL M. KAWAJA              Global Growth and Income Fund --        Senior Vice President --       Serves as an equity portfolio
                             2 years (since the fund's inception)   Capital World Investors        counselor for Global Growth
                            New World Fund -- 9 years (since        Investment professional for    and Income Fund and New World
                            the fund's inception)                   21 years in total; 17 years    Fund
                                                                    with Capital Research and
                                                                    Management Company or
                                                                    affiliate
---------------------------------------------------------------------------------------------------------------------------------
MICHAEL T. KERR             Growth Fund -- 3 years		    Senior Vice President --       Serves as an equity portfolio
                                              			    Capital World Investors        counselor for Growth Fund
                                                                    Investment professional for
                                                                    25 years in total; 23 years
                                                                    with Capital Research and
                                                                    Management Company or
                                                                    affiliate
---------------------------------------------------------------------------------------------------------------------------------
SUNG LEE                    International Fund -- 3 years           Senior Vice President --       Serves as an equity portfolio
                                                                    Capital Research Global        counselor for International
                                                                    Investors                      Fund
                                                                    Investment professional for
                                                                    14 years, all with Capital
                                                                    Research and Management
                                                                    Company or affiliate



----
52  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS
----






 PORTFOLIO COUNSELOR FOR                                           PRIMARY TITLE WITH INVESTMENT
   THE SERIES/TITLE (IF        PORTFOLIO COUNSELOR EXPERIENCE         ADVISER (OR AFFILIATE)       PORTFOLIO COUNSELOR'S ROLE
       APPLICABLE)                     IN THE FUND(S)                AND INVESTMENT EXPERIENCE    IN MANAGEMENT OF THE FUND(S)
--------------------------------------------------------------------------------------------------------------------------------

JAMES B. LOVELACE           Blue Chip Income and Growth            Senior Vice President --       Serves as an equity portfolio
                            Fund -- 1 year                         Capital Research Global        counselor for Blue Chip
                                                                   Investors                      Income and Growth Fund
                                                                   Investment professional for
                                                                   26 years, all with Capital
                                                                   Research and Management
                                                                   Company or affiliate
--------------------------------------------------------------------------------------------------------------------------------
JESPER LYCKEUS              International Fund -- 2 years (plus 8  Senior Vice President --       Serves as an equity portfolio
                            years of prior experience as an        Capital Research Global        counselor for International
                            investment analyst for the fund)       Investors                      Fund and International Growth
                            International Growth and Income        Investment professional for    and Income Fund
                            Fund -- less than 1 year (since the    13 years in total; 12 years
                            fund's inception)                      with Capital Research and
                                                                   Management Company or
                                                                   affiliate
--------------------------------------------------------------------------------------------------------------------------------
MARK R. MACDONALD           U.S. Government/AAA-Rated              Senior Vice President --       Serves as a fixed-income
                            Securities Fund -- 2 years             Fixed Income, Capital          portfolio counselor for U.S.
                                                                   Research and Management        Government/AAA-Rated
                                                                   Company                        Securities Fund
                                                                   Investment professional for
                                                                   23 years in total; 14 years
                                                                   with Capital Research and
                                                                   Management Company or
                                                                   affiliate
--------------------------------------------------------------------------------------------------------------------------------
RONALD B. MORROW            Growth Fund -- 5 years (plus 6 years   Senior Vice President --       Serves as an equity portfolio
                            of prior experience as an investment   Capital World Investors        counselor for Growth Fund
                            analyst for the fund)                  Investment professional for
                                                                   40 years in total; 11 years
                                                                   with Capital Research and
                                                                   Management Company or
                                                                   affiliate
--------------------------------------------------------------------------------------------------------------------------------
JAMES R. MULALLY            Asset Allocation Fund -- 3 years       Senior Vice President --       Serves as a fixed-income
                                                                   Fixed Income, Capital          portfolio counselor for Asset
                                                                   Research and Management        Allocation Fund
                                                                   Company
                                                                   Investment professional for
                                                                   33 years in total; 28 years
                                                                   with Capital Research and
                                                                   Management Company or
                                                                   affiliate
--------------------------------------------------------------------------------------------------------------------------------
C. ROSS SAPPENFIELD         Growth-Income Fund -- 9 years          Senior Vice President --       Serves as an equity portfolio
                            Blue Chip Income and Growth            Capital Research Global        counselor for Growth-Income
                            Fund -- 7 years (since the fund's      Investors                      Fund and Blue Chip Income and
                            inception)                             Investment professional for    Growth Fund
                                                                   16 years, all with Capital
                                                                   Research and Management
                                                                   Company or affiliate
--------------------------------------------------------------------------------------------------------------------------------
CHRISTOPHER M. THOMSEN      International Fund -- 3 years          Senior Vice President --       Serves as an equity portfolio
                                                                   Capital Research Global        counselor for International
                                                                   Investors                      Fund
                                                                   Investment professional for
                                                                   11 years, all with Capital
                                                                   Research and Management
                                                                   Company or affiliate
--------------------------------------------------------------------------------------------------------------------------------
STEVEN T. WATSON            Global Growth Fund -- 6 years (plus    Senior Vice President --       Serves as an equity portfolio
                            4 years of prior experience as an      Capital World Investors        counselor for Global Growth
                            investment analyst for the fund)       Investment professional for    Fund and Global Growth and
                            Global Growth and Income Fund --       21 years in total; 19 years    Income Fund
                            2 years (since the fund's inception)   with Capital Research and
                                                                   Management Company or
                                                                   affiliate
--------------------------------------------------------------------------------------------------------------------------------
PAUL A. WHITE               Global Growth Fund -- 4 years (plus    Senior Vice President --       Serves as an equity portfolio
                            5 years of prior experience as an      Capital World Investors        counselor for Global Growth
                            investment analyst for the fund)       Investment professional for    Fund
                                                                   20 years in total; 10 years
                                                                   with Capital Research and
                                                                   Management Company or
                                                                   affiliate



Additional information regarding the portfolio counselors' compensation,
holdings in other accounts and ownership of securities in American Funds
Insurance Series can be found in the statement of additional information.

PURCHASES AND REDEMPTIONS OF SHARES

Shares of the Series are currently offered only to insurance company separate
accounts as well as so-called "feeder funds" under master-feeder arrangements
sponsored by insurance companies. All such shares may be purchased or redeemed
by the separate accounts (or feeder funds) at net asset value without any sales
or redemption charges. Such purchases and redemptions are made promptly after
corresponding purchases and redemptions of units of the separate accounts (or
feeder funds).

FREQUENT TRADING OF FUND SHARES

The Series and American Funds Distributors, Inc., the Series' distributor,
reserve the right to reject any purchase order for any reason. The funds are
not designed to serve as a vehicle for frequent trading. Frequent trading of
fund shares may lead to increased costs to the funds and less efficient
management of the funds' portfolios, potentially resulting in dilution of the
value of the shares held by long-term shareholders. Accordingly, purchases,
including those that are part of exchange activity, that the Series or American
Funds Distributors, Inc. has determined could involve actual or potential harm
to a fund may be rejected.


                                                                             ---
                               AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  53
                                                                             ---


The Series, through its transfer agent, American Funds Service Company,
maintains surveillance procedures to detect frequent trading in fund shares.
Under these procedures, various analytics are used to evaluate factors that may
be indicative of frequent trading. For example, transactions in fund shares
that exceed certain monetary thresholds may be scrutinized. American Funds
Service Company also may review transactions that occur close in time to other
transactions in the same account or in multiple accounts under common ownership
or influence. Trading activity that is identified through these procedures or
as a result of any other information available to the funds will be evaluated
to determine whether such activity might constitute frequent trading. These
procedures may be modified from time to time as appropriate to improve the
detection of frequent trading, to facilitate monitoring for frequent trading in
particular retirement plans or other accounts, and to comply with applicable
laws.

In addition to the Series' broad ability to restrict potentially harmful
trading as described previously, the Series' board of trustees has adopted a
"purchase blocking policy" under which any contract owner redeeming units
representing a beneficial interest in any fund other than Cash Management Fund
(including redemptions that are part of an exchange transaction) having a value
of $5,000 or more will be precluded from investing units of beneficial interest
in that fund (including investments that are part of an exchange transaction)
for 30 calendar days after the redemption transaction. Under this purchase
blocking policy, certain purchases will not be prevented and certain
redemptions will not trigger a purchase block, such as: systematic redemptions
and purchases where the entity maintaining the contract owner's account is able
to identify the transaction as a systematic redemption or purchase; purchases
and redemptions of units representing a beneficial interest in a fund having a
value of less than $5,000; retirement plan contributions, loans and
distributions (including hardship withdrawals) identified as such on the
retirement plan recordkeeper's system; and purchase transactions involving
transfers of assets, where the entity maintaining the contract owner's account
is able to identify the transaction as one of these types of transactions.

The Series reserves the right to waive the purchase blocking policy in those
instances where American Funds Service Company determines that its surveillance
procedures are adequate to detect frequent trading in fund shares.

American Funds Service Company may work with the insurance company separate
accounts to apply their procedures which American Funds Service Company
believes are reasonably designed to enforce the frequent trading policies of
the series. You should refer to disclosures provided by the insurance company
with which you have a contract to determine the specific trading restrictions
that apply to you.

If American Funds Service Company identifies any activity that may constitute
frequent trading, it reserves the right to contact the insurance company
separate account and request that the separate account either provide
information regarding an account owner's transactions or restrict the account
owner's trading. If American Funds Service Company is not satisfied that
insurance company separate account has taken appropriate action, American Funds
Service Company may terminate the separate account's ability to transact in
fund shares.

There is no guarantee that all instances of frequent trading in fund shares
will be prevented.

NOTWITHSTANDING THE SERIES' SURVEILLANCE PROCEDURES AND PURCHASE BLOCKING
POLICY, ALL TRANSACTIONS IN FUND SHARES REMAIN SUBJECT TO THE SERIES' AND
AMERICAN FUNDS DISTRIBUTORS, INC.'S RIGHT TO RESTRICT POTENTIALLY ABUSIVE
TRADING GENERALLY (INCLUDING THE TYPES OF TRANSACTIONS DESCRIBED ABOVE THAT
WILL NOT BE PREVENTED OR TRIGGER A BLOCK UNDER THE PURCHASE BLOCKING POLICY).
SEE THE STATEMENT OF ADDITIONAL INFORMATION FOR MORE INFORMATION ABOUT HOW
AMERICAN FUNDS SERVICE COMPANY MAY ADDRESS OTHER POTENTIALLY ABUSIVE TRADING
ACTIVITY IN THE SERIES.

VALUING SHARES

Each fund calculates its share price, also called net asset value, each day the
New York Stock Exchange is open as of approximately 4:00 p.m. New York time,
the normal close of regular trading. Assets are valued primarily on the basis
of market quotations. However, the funds have adopted procedures for making
"fair value" determinations if market quotations are not readily available or
are not considered reliable. For example, if events occur between the close of
markets outside the United States and the close of regular trading on the New
York Stock Exchange that, in the opinion of the investment adviser, materially
affect the value of any of the securities in the funds' portfolios that
principally trade in those international markets, those securities will be
valued in accordance with fair value procedures. Use of these procedures is
intended to result in more appropriate net asset values. In addition, such use
will reduce, if not eliminate, potential arbitrage opportunities otherwise
available to short-term investors.

Because certain of the funds may hold securities that are primarily listed on
foreign exchanges that trade on weekends or days when the funds do not price
their shares, the value of securities held in the funds may change on days when
you will not be able to purchase or redeem fund shares.


----
54  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS
----


Shares of the funds will be purchased or sold at the net asset value next
determined after receipt of requests from the appropriate insurance company.

PLANS OF DISTRIBUTION

The Series has adopted plans of distribution or "12b-1 plans" for Class 2 and
Class 3 shares. Under these plans, the Series may finance activities primarily
intended to sell shares, provided the categories of expenses are approved in
advance by the Series' board of trustees. The plans provide for annual expenses
of .25% for Class 2 shares and .18% for Class 3 shares. For these share
classes, amounts paid under the 12b-1 plans are used by insurance company
contract issuers to cover the expenses of certain contract owner services. The
12b-1 fees paid by the Series, as a percentage of average net assets, for the
previous fiscal year, are indicated above in the Annual Fund Operating Expenses
table for each fund. Since these fees are paid out of the Series' assets or
income on an ongoing basis, over time they will increase the cost and reduce
the return of an investment.

DISTRIBUTIONS AND TAXES

Each fund of the Series intends to qualify as a "regulated investment company"
under the Internal Revenue Code. In any fiscal year in which a fund so
qualifies and distributes to shareholders its investment company taxable income
and net realized capital gain, the fund itself is relieved of federal income
tax.

It is the Series' policy to distribute to the shareholders (the insurance
company separate accounts) all of its investment company taxable income and
capital gain for each fiscal year.

See the applicable contract prospectus for information regarding the federal
income tax treatment of the contracts and distributions to the separate
accounts.


                                                                             ---
                               AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  55
                                                                             ---


FINANCIAL HIGHLIGHTS/1/

The Financial Highlights table is intended to help you understand the funds'
results for the past five fiscal years. Certain information reflects financial
results for a single share of a particular class. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in a fund (assuming reinvestment of all dividends and capital gain
distributions). This information has been audited by PricewaterhouseCoopers
LLP, whose report, along with the funds' financial statements, is included in
the statement of additional information, which is available upon request
(except for the 6 months ended June 30, 2008). Figures shown do not reflect
insurance contract fees and expenses. If insurance contract fees and expenses
were reflected, results would be lower. The information for the six-month
periods presented have been derived from each funds' unaudited financial
statements and includes all adjustments that management considers necessary for
a fair presentation of such information for the periods presented.



                      Income (loss) from investment operations/2/      Dividends and distributions
                      ------------------------------------------- -------------------------------------

                                      Net gains
            Net asset    Net         (losses) on                  Dividends                    Total     Net asset
             value,   investment   securities (both   Total from  (from net  Distributions   dividends    value,
Period      beginning   income       realized and     investment  investment (from capital      and       end of    Total
ended       of period   (loss)       unrealized)      operations   income)      gains)     distributions  period   return/3/


Global Discovery Fund
-----------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/   $   xx      $ xx           $  xx           $  xx       $  xx       $   xx        $   xx      $   xx       xx%
12/31/07      13.05       .17            2.07            2.24        (.16)       (1.04)        (1.20)      14.09    17.55
12/31/06      11.63       .15            1.89            2.04        (.13)        (.49)         (.62)      13.05    17.66
12/31/05      10.79       .14            1.05            1.19        (.11)        (.24)         (.35)      11.63    11.07
12/31/04       9.94       .08             .98            1.06        (.09)        (.12)         (.21)      10.79    10.72
12/31/03       7.26       .05            2.67            2.72        (.04)          --          (.04)       9.94    37.41
CLASS 2
6/30/08/4/       xx        xx              xx              xx          xx           xx            xx          xx       xx
12/31/07      13.00       .14            2.05            2.19        (.13)       (1.04)        (1.17)      14.02    17.22
12/31/06      11.59       .11            1.89            2.00        (.10)        (.49)         (.59)      13.00    17.41
12/31/05      10.76       .11            1.05            1.16        (.09)        (.24)         (.33)      11.59    10.80
12/31/04       9.92       .06             .97            1.03        (.07)        (.12)         (.19)      10.76    10.43
12/31/03       7.25       .02            2.67            2.69        (.02)          --          (.02)       9.92    37.11

Global Growth Fund
-----------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/   $   xx      $ xx           $  xx           $  xx       $  xx       $   xx        $   xx      $   xx       xx%
12/31/07      23.44       .51            2.98            3.49        (.76)       (1.02)        (1.78)      25.15    15.16
12/31/06      19.63       .41            3.62            4.03        (.22)          --          (.22)      23.44    20.73
12/31/05      17.31       .28            2.19            2.47        (.15)          --          (.15)      19.63    14.37
12/31/04      15.30       .18            1.92            2.10        (.09)          --          (.09)      17.31    13.80
12/31/03      11.35       .12            3.91            4.03        (.08)          --          (.08)      15.30    35.63
CLASS 2
6/30/08/4/       xx        xx              xx              xx          xx           xx            xx          xx       xx
12/31/07      23.29       .45            2.95            3.40        (.67)       (1.02)        (1.69)      25.00    14.85
12/31/06      19.52       .36            3.59            3.95        (.18)          --          (.18)      23.29    20.43
12/31/05      17.23       .23            2.18            2.41        (.12)          --          (.12)      19.52    14.07
12/31/04      15.25       .14            1.91            2.05        (.07)          --          (.07)      17.23    13.49
12/31/03      11.32       .09            3.89            3.98        (.05)          --          (.05)      15.25    35.27

Global Small Capitalization Fund
-----------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/   $   xx     $  xx           $  xx           $  xx       $  xx       $   xx        $   xx      $   xx       xx%
12/31/07      24.87       .12            5.27            5.39        (.90)       (2.16)        (3.06)      27.20    21.73
12/31/06      21.29       .19            4.74            4.93        (.14)       (1.21)        (1.35)      24.87    24.35
12/31/05      17.14       .13            4.23            4.36        (.21)          --          (.21)      21.29    25.66
12/31/04      14.15       .02            2.97            2.99          --           --            --       17.14    21.13
12/31/03       9.27        --/5/         4.97            4.97        (.09)          --          (.09)      14.15    53.92
CLASS 2
6/30/08/4/       xx        xx              xx              xx          xx           xx            xx          xx       xx
12/31/07      24.64       .05            5.22            5.27        (.80)       (2.16)        (2.96)      26.95    21.43
12/31/06      21.12       .14            4.70            4.84        (.11)       (1.21)        (1.32)      24.64    24.05
12/31/05      17.02       .09            4.19            4.28        (.18)          --          (.18)      21.12    25.35
12/31/04      14.08      (.01)           2.95            2.94          --           --            --       17.02    20.88
12/31/03       9.23      (.03)           4.95            4.92        (.07)          --          (.07)      14.08    53.53





                         Ratio of   Ratio of    Ratio of
                         expenses   expenses      net
            Net assets, to average to average    income
              end of    net assets net assets  (loss) to
Period      period (in    before     after      average
ended        millions)    waiver   waiver/3/  net assets/3/


Global Discovery Fund
----------------------------------------------------------------------------------
CLASS 1
6/30/08/4/      $ xx         xx%        xx%         xx%
12/31/07          35        .60        .54        1.25
12/31/06          28        .62        .56        1.19
12/31/05          22        .61        .56        1.27
12/31/04          20        .61        .60         .81
12/31/03          17        .61        .61         .55
CLASS 2
6/30/08/4/        xx         xx         xx          xx
12/31/07         240        .85        .79         .98
12/31/06         151        .87        .81         .94
12/31/05          89        .86        .81        1.04
12/31/04          51        .86        .85         .60
12/31/03          24        .86        .86         .28

Global Growth Fund
----------------------------------------------------------------------------------
CLASS 1
6/30/08/4/    $   xx         xx%        xx%         xx%
12/31/07         684        .55        .50        2.06
12/31/06         278        .58        .53        1.95
12/31/05         206        .62        .57        1.56
12/31/04         202        .65        .64        1.15
12/31/03         188        .70        .70         .94
CLASS 2
6/30/08/4/        xx         xx         xx          xx
12/31/07       5,180        .80        .75        1.84
12/31/06       4,015        .83        .78        1.71
12/31/05       2,617        .87        .82        1.30
12/31/04       1,796        .90        .89         .92
12/31/03       1,082        .95        .95         .68

Global Small Capitalization Fund
-----------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/    $   xx         xx%        xx%         xx%
12/31/07         369        .73        .66         .45
12/31/06         247        .77        .69         .82
12/31/05         231        .79        .73         .72
12/31/04         193        .81        .80         .15
12/31/03         163        .83        .83        (.03)
CLASS 2
6/30/08/4/        xx         xx         xx          xx
12/31/07       3,975        .98        .91         .20
12/31/06       2,927       1.02        .94         .61
12/31/05       1,977       1.04        .97         .49
12/31/04       1,198       1.06       1.05        (.07)
12/31/03         665       1.08       1.08        (.28)



----
56  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS
----




                       Income (loss) from investment operations/2/      Dividends and distributions
                       ------------------------------------------- -------------------------------------

                                       Net gains
             Net asset    Net         (losses) on                  Dividends                    Total     Net asset
              value,   investment   securities (both   Total from  (from net  Distributions   dividends    value,
Period       beginning   income       realized and     investment  investment (from capital      and       end of    Total
ended        of period   (loss)       unrealized)      operations   income)      gains)     distributions  period   return/3/


Growth Fund
------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/    $   xx      $ xx           $   xx          $   xx      $  xx       $   xx        $   xx      $   xx       xx%
12/31/07       64.51       .68             7.44            8.12       (.68)       (4.73)        (5.41)      67.22    12.64
12/31/06       59.36       .70             5.46            6.16       (.63)        (.38)        (1.01)      64.51    10.48
12/31/05       51.39       .46             8.00            8.46       (.49)          --          (.49)      59.36    16.50
12/31/04       45.74       .32             5.51            5.83       (.18)          --          (.18)      51.39    12.75
12/31/03       33.47       .16            12.26           12.42       (.15)          --          (.15)      45.74    37.15
CLASS 2
6/30/08/4/        xx        xx               xx              xx         xx           xx            xx          xx       xx
12/31/07       64.08       .50             7.39            7.89       (.52)       (4.73)        (5.25)      66.72    12.35
12/31/06       58.98       .54             5.43            5.97       (.49)        (.38)         (.87)      64.08    10.22
12/31/05       51.10       .34             7.92            8.26       (.38)          --          (.38)      58.98    16.19
12/31/04       45.50       .23             5.45            5.68       (.08)          --          (.08)      51.10    12.50
12/31/03       33.29       .06            12.19           12.25       (.04)          --          (.04)      45.50    36.80
CLASS 3
6/30/08/4/        xx        xx               xx              xx         xx           xx            xx          xx       xx
12/31/07       64.50       .55             7.45            8.00       (.56)       (4.73)        (5.29)      67.21    12.44
12/31/06       59.34       .59             5.46            6.05       (.51)        (.38)         (.89)      64.50    10.29
12/31/05       51.38       .37             7.98            8.35       (.39)          --          (.39)      59.34    16.28
12/31/04/6/    47.74       .24             3.50            3.74       (.10)          --          (.10)      51.38     7.85

International Fund
------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/    $   xx      $ xx            $  xx           $  xx      $  xx       $   xx        $   xx      $   xx       xx%
12/31/07       22.01       .43             3.95            4.38       (.41)       (1.17)        (1.58)      24.81    20.30
12/31/06       18.96       .41             3.21            3.62       (.38)        (.19)         (.57)      22.01    19.33
12/31/05       15.82       .32             3.11            3.43       (.29)          --          (.29)      18.96    21.75
12/31/04       13.41       .22             2.41            2.63       (.22)          --          (.22)      15.82    19.66
12/31/03       10.07       .15             3.38            3.53       (.19)          --          (.19)      13.41    35.12
CLASS 2
6/30/08/4/        xx        xx               xx              xx         xx           xx            xx          xx       xx
12/31/07       21.94       .36             3.94            4.30       (.35)       (1.17)        (1.52)      24.72    20.02
12/31/06       18.92       .35             3.20            3.55       (.34)        (.19)         (.53)      21.94    18.98
12/31/05       15.79       .28             3.11            3.39       (.26)          --          (.26)      18.92    21.50
12/31/04       13.39       .18             2.41            2.59       (.19)          --          (.19)      15.79    19.32
12/31/03       10.05       .12             3.37            3.49       (.15)          --          (.15)      13.39    34.85
CLASS 3
6/30/08/4/        xx        xx               xx              xx         xx           xx            xx          xx       xx
12/31/07       22.00       .39             3.94            4.33       (.36)       (1.17)        (1.53)      24.80    20.10
12/31/06       18.96       .37             3.20            3.57       (.34)        (.19)         (.53)      22.00    19.07
12/31/05       15.82       .29             3.11            3.40       (.26)          --          (.26)      18.96    21.54
12/31/04/6/    13.76       .20             2.05            2.25       (.19)          --          (.19)      15.82    16.45

New World Fund
------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/    $   xx      $ xx            $  xx           $  xx      $  xx       $   xx        $   xx      $   xx       xx%
12/31/07       21.56       .46             6.25            6.71       (.83)       (1.56)        (2.39)      25.88    32.53
12/31/06       16.67       .41             4.95            5.36       (.32)        (.15)         (.47)      21.56    32.88
12/31/05       13.96       .33             2.58            2.91       (.20)          --          (.20)      16.67    21.10
12/31/04       11.99       .23             2.01            2.24       (.27)          --          (.27)      13.96    19.07
12/31/03        8.76       .21             3.21            3.42       (.19)          --          (.19)      11.99    39.56
CLASS 2
6/30/08/4/        xx        xx               xx              xx         xx           xx            xx          xx       xx
12/31/07       21.40       .40             6.20            6.60       (.75)       (1.56)        (2.31)      25.69    32.21
12/31/06       16.56       .36             4.92            5.28       (.29)        (.15)         (.44)      21.40    32.59
12/31/05       13.89       .29             2.56            2.85       (.18)          --          (.18)      16.56    20.74
12/31/04       11.94       .19             2.01            2.20       (.25)          --          (.25)      13.89    18.80
12/31/03        8.73       .19             3.19            3.38       (.17)          --          (.17)      11.94    39.18

Blue Chip Income and Growth Fund
------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/    $   xx      $ xx            $  xx           $  xx      $  xx        $  xx         $  xx      $   xx       xx%
12/31/07       11.97       .24              .07             .31       (.36)        (.39)         (.75)      11.53     2.25
12/31/06       10.91       .20             1.63            1.83       (.16)        (.61)         (.77)      11.97    17.73
12/31/05       10.26       .18              .59             .77       (.12)          --          (.12)      10.91     7.57
12/31/04        9.41       .15              .78             .93       (.08)          --          (.08)      10.26     9.94
12/31/03        7.17       .13             2.11            2.24         --           --            --        9.41    31.24
CLASS 2
6/30/08/4/        xx        xx               xx              xx         xx           xx            xx          xx       xx
12/31/07       11.87       .21              .07             .28       (.31)        (.39)         (.70)      11.45     2.03
12/31/06       10.83       .17             1.61            1.78       (.13)        (.61)         (.74)      11.87    17.42
12/31/05       10.20       .15              .58             .73       (.10)          --          (.10)      10.83     7.24
12/31/04        9.36       .13              .78             .91       (.07)          --          (.07)      10.20     9.74
12/31/03        7.16       .11             2.09            2.20         --           --            --        9.36    30.73





                          Ratio of   Ratio of    Ratio of
                          expenses   expenses      net
             Net assets, to average to average    income
               end of    net assets net assets  (loss) to
Period       period (in    before     after      average
ended         millions)    waiver   waiver/3/  net assets/3/


Growth Fund
-----------------------------------------------------------------------------------
CLASS 1
6/30/08/4/     $   xx         xx%        xx%         xx%
12/31/07        5,051        .33        .30        1.00
12/31/06        3,503        .34        .31        1.14
12/31/05        3,709        .35        .32         .87
12/31/04        3,744        .36        .36         .68
12/31/03        3,877        .39        .39         .41
CLASS 2
6/30/08/4/         xx         xx         xx          xx
12/31/07       25,359        .58        .55         .74
12/31/06       23,122        .59        .56         .89
12/31/05       18,343        .60        .57         .64
12/31/04       12,055        .61        .61         .50
12/31/03        7,107        .64        .64         .16
CLASS 3
6/30/08/4/         xx         xx         xx          xx
12/31/07          425        .51        .48         .81
12/31/06          451        .52        .49         .95
12/31/05          499        .53        .50         .69
12/31/04/6/       516        .54/7/     .53/7/      .54/7/

International Fund
-----------------------------------------------------------------------------------
CLASS 1
6/30/08/4/     $   xx         xx%        xx%         xx%
12/31/07        1,708        .52        .47        1.82
12/31/06        1,648        .54        .49        1.99
12/31/05        1,599        .57        .52        1.92
12/31/04        1,495        .60        .59        1.54
12/31/03        1,431        .63        .63        1.40
CLASS 2
6/30/08/4/         xx         xx         xx          xx
12/31/07        9,719        .77        .72        1.55
12/31/06        7,260        .79        .74        1.72
12/31/05        4,790        .82        .77        1.64
12/31/04        2,752        .84        .83        1.27
12/31/03        1,385        .88        .88        1.08
CLASS 3
6/30/08/4/         xx         xx         xx          xx
12/31/07          123        .70        .65        1.64
12/31/06          120        .72        .67        1.81
12/31/05          116        .75        .70        1.74
12/31/04/6/       115        .77/7/     .77/7/     1.45/7/

New World Fund
-----------------------------------------------------------------------------------
CLASS 1
6/30/08/4/     $   xx         xx%        xx%         xx%
12/31/07          261        .82        .74        1.92
12/31/06          126        .88        .80        2.19
12/31/05           88        .92        .85        2.22
12/31/04           63        .93        .92        1.81
12/31/03           47        .92        .92        2.15
CLASS 2
6/30/08/4/         xx         xx         xx          xx
12/31/07        1,875       1.07        .99        1.69
12/31/06        1,175       1.13       1.05        1.93
12/31/05          677       1.17       1.10        1.97
12/31/04          373       1.18       1.17        1.57
12/31/03          224       1.17       1.17        1.90

Blue Chip Income and Growth Fund
------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/     $   xx         xx%        xx%         xx%
12/31/07          143        .42        .38        1.95
12/31/06          159        .43        .39        1.75
12/31/05          135        .45        .41        1.73
12/31/04          129        .46        .46        1.60
12/31/03          107        .52        .50        1.67
CLASS 2
6/30/08/4/         xx         xx         xx          xx
12/31/07        4,274        .67        .63        1.70
12/31/06        3,937        .68        .64        1.50
12/31/05        3,029        .70        .66        1.48
12/31/04        2,349        .71        .70        1.37
12/31/03        1,490        .76        .74        1.41



                                                                             ---
                               AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  57
                                                                             ---




                       Income (loss) from investment operations/2/      Dividends and distributions
                       ------------------------------------------- -------------------------------------

                                       Net gains
             Net asset    Net         (losses) on                  Dividends                    Total     Net asset
              value,   investment   securities (both   Total from  (from net  Distributions   dividends    value,
Period       beginning   income       realized and     investment  investment (from capital      and       end of    Total
ended        of period   (loss)       unrealized)      operations   income)      gains)     distributions  period   return/3/


Global Growth and Income Fund
------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/    $   xx      $ xx           $  xx           $  xx       $  xx        $  xx         $  xx      $   xx       xx%
12/31/07       10.98       .28            1.14            1.42        (.22)        (.40)         (.62)      11.78    13.04
12/31/06/8/    10.00       .14             .91            1.05        (.07)          --          (.07)      10.98    10.49
CLASS 2
6/30/08/4/        xx        xx              xx              xx          xx           xx            xx          xx       xx
12/31/07       10.97       .25            1.13            1.38        (.20)        (.40)         (.60)      11.75    12.67
12/31/06/8/    10.00       .11             .92            1.03        (.06)          --          (.06)      10.97    10.30

Growth-Income Fund
------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/    $   xx      $ xx           $  xx           $  xx       $  xx       $   xx        $   xx      $   xx       xx%
12/31/07       42.43       .80            1.51            2.31        (.77)       (1.45)        (2.22)      42.52     5.32
12/31/06       38.31       .77            5.03            5.80        (.72)        (.96)        (1.68)      42.43    15.51
12/31/05       36.81       .62            1.61            2.23        (.58)        (.15)         (.73)      38.31     6.08
12/31/04       33.61       .48            3.09            3.57        (.37)          --          (.37)      36.81    10.66
12/31/03       25.63       .42            7.96            8.38        (.40)          --          (.40)      33.61    32.76
CLASS 2
6/30/08/4/        xx        xx              xx              xx          xx           xx            xx          xx       xx
12/31/07       42.19       .68            1.50            2.18        (.66)       (1.45)        (2.11)      42.26     5.04
12/31/06       38.12       .67            4.99            5.66        (.63)        (.96)        (1.59)      42.19    15.20
12/31/05       36.64       .53            1.60            2.13        (.50)        (.15)         (.65)      38.12     5.83
12/31/04       33.48       .41            3.06            3.47        (.31)          --          (.31)      36.64    10.37
12/31/03       25.52       .34            7.92            8.26        (.30)          --          (.30)      33.48    32.43
CLASS 3
6/30/08/4/        xx        xx              xx              xx          xx           xx            xx          xx       xx
12/31/07       42.42       .73            1.50            2.23        (.69)       (1.45)        (2.14)      42.51     5.12
12/31/06       38.31       .70            5.01            5.71        (.64)        (.96)        (1.60)      42.42    15.30
12/31/05       36.80       .56            1.61            2.17        (.51)        (.15)         (.66)      38.31     5.88
12/31/04/6/    34.64       .41            2.07            2.48        (.32)          --          (.32)      36.80     7.18


Asset Allocation Fund
------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/    $   xx      $ xx           $  xx           $  xx       $  xx        $  xx        $   xx      $   xx       xx%
12/31/07       18.34       .51             .75            1.26        (.45)        (.64)        (1.09)      18.51     6.82
12/31/06       16.56       .47            1.97            2.44        (.43)        (.23)         (.66)      18.34    14.96
12/31/05       15.49       .41            1.05            1.46        (.39)          --          (.39)      16.56     9.45
12/31/04       14.58       .39             .84            1.23        (.32)          --          (.32)      15.49     8.50
12/31/03       12.23       .41            2.29            2.70        (.35)          --          (.35)      14.58    22.14
CLASS 2
6/30/08/4/        xx        xx              xx              xx          xx           xx            xx          xx       xx
12/31/07       18.23       .47             .74            1.21        (.41)        (.64)        (1.05)      18.39     6.55
12/31/06       16.47       .42            1.96            2.38        (.39)        (.23)         (.62)      18.23    14.66
12/31/05       15.42       .37            1.04            1.41        (.36)          --          (.36)      16.47     9.14
12/31/04       14.51       .36             .84            1.20        (.29)          --          (.29)      15.42     8.34
12/31/03       12.18       .37            2.27            2.64        (.31)          --          (.31)      14.51    21.74
CLASS 3
6/30/08/4/        xx        xx              xx              xx          xx           xx            xx          xx       xx
12/31/07       18.34       .48             .74            1.22        (.42)        (.64)        (1.06)      18.50     6.56
12/31/06       16.56       .44            1.97            2.41        (.40)        (.23)         (.63)      18.34    14.75
12/31/05       15.49       .38            1.05            1.43        (.36)          --          (.36)      16.56     9.26
12/31/04/6/    14.85       .36             .58             .94        (.30)          --          (.30)      15.49     6.38

Bond Fund
------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/    $   xx      $ xx           $  xx           $  xx       $  xx         $ xx         $  xx      $   xx       xx%
12/31/07       11.64       .65            (.24)            .41        (.91)          --          (.91)      11.14     3.66
12/31/06       11.31       .63             .17             .80        (.47)          --          (.47)      11.64     7.31
12/31/05       11.57       .60            (.40)            .20        (.46)          --          (.46)      11.31     1.77
12/31/04       11.34       .56             .10             .66        (.43)          --          (.43)      11.57     6.04
12/31/03       10.41       .57             .78            1.35        (.42)          --          (.42)      11.34    13.07
CLASS 2
6/30/08/4/        xx        xx              xx              xx          xx           xx            xx          xx       xx
12/31/07       11.53       .61            (.24)            .37        (.87)          --          (.87)      11.03     3.33
12/31/06       11.22       .60             .16             .76        (.45)          --          (.45)      11.53     6.99
12/31/05       11.48       .57            (.39)            .18        (.44)          --          (.44)      11.22     1.59
12/31/04       11.27       .53             .09             .62        (.41)          --          (.41)      11.48     5.72
12/31/03       10.36       .53             .78            1.31        (.40)          --          (.40)      11.27    12.80





                          Ratio of   Ratio of    Ratio of
                          expenses   expenses      net
             Net assets, to average to average    income
               end of    net assets net assets  (loss) to
Period       period (in    before     after      average
ended         millions)    waiver   waiver/3/  net assets/3/


Global Growth and Income Fund
------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/         $xx       xx%        xx%          xx%
12/31/07            79      .71        .58         2.37
12/31/06/8/         45      .72/7/     .65/7/      2.10/7/
CLASS 2
6/30/08/4/          xx       xx         xx           xx
12/31/07         1,997      .96        .83         2.11
12/31/06/8/        638      .97/7/     .90/7/      1.64/7/

Growth-Income Fund
-----------------------------------------------------------------------------------
CLASS 1
6/30/08/4/     $    xx       xx%        xx%          xx%
12/31/07         5,618      .27        .25         1.82
12/31/06         3,759      .28        .25         1.92
12/31/05         3,825      .29        .27         1.68
12/31/04         4,213      .31        .30         1.39
12/31/03         4,402      .34        .34         1.45
CLASS 2
6/30/08/4/          xx       xx         xx           xx
12/31/07        23,243      .52        .50         1.57
12/31/06        22,688      .53        .50         1.67
12/31/05        17,608      .54        .52         1.44
12/31/04        13,105      .56        .55         1.19
12/31/03         7,824      .59        .59         1.18
CLASS 3
6/30/08/4/          xx       xx         xx           xx
12/31/07           405      .45        .43         1.64
12/31/06           458      .46        .43         1.74
12/31/05           471      .47        .45         1.50
12/31/04/6/        537      .49/7/     .48/7/      1.24/7/


Asset Allocation Fund
-----------------------------------------------------------------------------------
CLASS 1
6/30/08/4/      $   xx       xx%        xx%          xx%
12/31/07         1,927      .32        .29         2.69
12/31/06         1,079      .33        .30         2.67
12/31/05           879      .35        .32         2.57
12/31/04           899      .38        .37         2.64
12/31/03           911      .42        .42         3.12
CLASS 2
6/30/08/4/          xx       xx         xx           xx
12/31/07         7,308      .57        .54         2.45
12/31/06         6,362      .58        .55         2.42
12/31/05         5,120      .60        .57         2.31
12/31/04         3,797      .62        .62         2.42
12/31/03         2,314      .67        .67         2.81
CLASS 3
6/30/08/4/          xx       xx         xx           xx
12/31/07            71      .50        .47         2.52
12/31/06            76      .51        .48         2.49
12/31/05            76      .53        .50         2.39
12/31/04/6/         81      .55/7/     .55/7/      2.50/7/

Bond Fund
-----------------------------------------------------------------------------------
CLASS 1
6/30/08/4/      $   xx       xx%        xx%          xx%
12/31/07           436      .41        .37         5.59
12/31/06           230      .43        .39         5.54
12/31/05           182      .44        .40         5.30
12/31/04           195      .45        .44         4.94
12/31/03           213      .47        .47         5.19
CLASS 2
6/30/08/4/          xx       xx         xx           xx
12/31/07         4,679      .66        .62         5.34
12/31/06         3,374      .68        .64         5.29
12/31/05         2,312      .69        .65         5.06
12/31/04         1,759      .70        .69         4.68
12/31/03         1,280      .72        .72         4.88



----
58  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS
----




                        Income (loss) from investment operations/2/      Dividends and distributions
                        ------------------------------------------- -------------------------------------

                                        Net gains
              Net asset    Net         (losses) on                  Dividends                    Total     Net asset
               value,   investment   securities (both   Total from  (from net  Distributions   dividends    value,
Period        beginning   income       realized and     investment  investment (from capital      and       end of    Total
ended         of period   (loss)       unrealized)      operations   income)      gains)     distributions  period   return/3/


Global Bond Fund
-------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/     $   xx      $ xx            $ xx            $ xx        $  xx       $ xx          $  xx      $   xx       xx%
12/31/07        10.18       .49             .47             .96         (.31)        --           (.31)      10.83     9.54
12/31/06/9/     10.00       .10             .15             .25         (.07)        --           (.07)      10.18     2.52
CLASS 2
6/30/08/4/         xx        xx              xx              xx           xx         xx             xx          xx     3.61
12/31/07        10.17       .47             .47             .94         (.30)        --           (.30)      10.81     9.23
12/31/06/10/    10.00       .06             .18             .24         (.07)        --           (.07)      10.17     1.99

High-Income Bond Fund
-------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/     $   xx      $ xx           $  xx           $  xx       $   xx       $ xx         $   xx      $   xx       xx%
12/31/07        12.90       .95            (.72)            .23        (1.48)        --          (1.48)      11.65     1.62
12/31/06        12.41       .92             .37            1.29         (.80)        --           (.80)      12.90    10.89
12/31/05        12.89       .85            (.55)            .30         (.78)        --           (.78)      12.41     2.46
12/31/04        12.54       .84             .32            1.16         (.81)        --           (.81)      12.89     9.83
12/31/03        10.44       .90            2.12            3.02         (.92)        --           (.92)      12.54    29.79
CLASS 2
6/30/08/4/         xx        xx              xx              xx           xx         xx             xx          xx       xx
12/31/07        12.79       .91            (.72)            .19        (1.43)        --          (1.43)      11.55     1.33
12/31/06        12.32       .89             .36            1.25         (.78)        --           (.78)      12.79    10.59
12/31/05        12.81       .81            (.55)            .26         (.75)        --           (.75)      12.32     2.20
12/31/04        12.47       .81             .32            1.13         (.79)        --           (.79)      12.81     9.59
12/31/03        10.39       .86            2.12            2.98         (.90)        --           (.90)      12.47    29.51
CLASS 3
6/30/08/4/         xx        xx              xx              xx           xx         --             xx          xx       xx
12/31/07        12.88       .92            (.72)            .20        (1.43)        --          (1.43)      11.65     1.40
12/31/06        12.39       .90             .36            1.26         (.77)        --           (.77)      12.88    10.66
12/31/05        12.87       .82            (.55)            .27         (.75)        --           (.75)      12.39     2.25
12/31/04/6/     12.79       .78             .11             .89         (.81)        --           (.81)      12.87     7.52

U.S. Government/AAA-Rated Securities Fund
-------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/     $   xx      $ xx           $  xx            $ xx        $  xx       $ xx          $  xx      $   xx       xx%
12/31/07        11.87       .58             .20             .78         (.92)        --           (.92)      11.73     6.83
12/31/06        11.91       .55            (.10)            .45         (.49)        --           (.49)      11.87     3.95
12/31/05        12.07       .48            (.16)            .32         (.48)        --           (.48)      11.91     2.70
12/31/04        12.24       .45            (.03)            .42         (.59)        --           (.59)      12.07     3.58
12/31/03        12.37       .46            (.15)            .31         (.44)        --           (.44)      12.24     2.51
CLASS 2
6/30/08/4/         xx        xx              xx              xx           xx         xx             xx          xx       xx
12/31/07        11.79       .54             .19             .73         (.87)        --           (.87)      11.65     6.49
12/31/06        11.83       .51            (.09)            .42         (.46)        --           (.46)      11.79     3.75
12/31/05        12.00       .45            (.16)            .29         (.46)        --           (.46)      11.83     2.41
12/31/04        12.17       .41            (.03)            .38         (.55)        --           (.55)      12.00     3.30
12/31/03        12.31       .42            (.14)            .28         (.42)        --           (.42)      12.17     2.28
CLASS 3
6/30/08/4/         xx        xx              xx              xx           xx         xx             xx          xx       xx
12/31/07        11.86       .55             .20             .75         (.87)        --           (.87)      11.74     6.63
12/31/06        11.89       .52            (.09)            .43         (.46)        --           (.46)      11.86     3.80
12/31/05        12.05       .46            (.16)            .30         (.46)        --           (.46)      11.89     2.50
12/31/04/6/     12.34       .41            (.11)            .30         (.59)        --           (.59)      12.05     2.58

Cash Management Fund
-------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/     $   xx      $ xx            $ xx            $ xx        $  xx       $ xx          $  xx      $   xx       xx%
12/31/07        11.62       .57              --/5/          .57         (.79)        --           (.79)      11.40     4.95
12/31/06        11.31       .54              --/5/          .54         (.23)        --           (.23)      11.62     4.81
12/31/05        11.09       .33              --/5/          .33         (.11)        --           (.11)      11.31     2.97
12/31/04        11.07       .11              --/5/          .11         (.09)        --           (.09)      11.09      .96
12/31/03        11.17       .07              --/5/          .07         (.17)        --           (.17)      11.07      .67
CLASS 2
6/30/08/4/         xx        xx              xx              xx           xx         xx             xx          xx       xx
12/31/07        11.56       .54              --/5/          .54         (.75)        --           (.75)      11.35     4.73
12/31/06        11.26       .51              --/5/          .51         (.21)        --           (.21)      11.56     4.59
12/31/05        11.05       .30              --/5/          .30         (.09)        --           (.09)      11.26     2.68
12/31/04        11.03       .08              --/5/          .08         (.06)        --           (.06)      11.05      .70
12/31/03        11.12       .05              --/5/          .05         (.14)        --           (.14)      11.03      .47
CLASS 3
6/30/08/4/         xx        xx              xx              xx           xx         xx             xx          xx       xx
12/31/07        11.60       .55              --/5/          .55         (.75)        --           (.75)      11.40     4.83
12/31/06        11.29       .52              --/5/          .52         (.21)        --           (.21)      11.60     4.64
12/31/05        11.07       .30              --/5/          .30         (.08)        --           (.08)      11.29     2.74
12/31/04/6/     11.07       .09              --/5/          .09         (.09)        --           (.09)      11.07      .78





                           Ratio of   Ratio of    Ratio of
                           expenses   expenses      net
              Net assets, to average to average    income
                end of    net assets net assets  (loss) to
Period        period (in    before     after      average
ended          millions)    waiver   waiver/3/  net assets/3/


Global Bond Fund
------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/       $ xx         xx%        xx%          xx%
12/31/07           28        .61        .55         4.61
12/31/06/9/        12        .15        .13         1.00
CLASS 2
6/30/08/4/         xx         xx         xx           xx
12/31/07          279        .86        .80         4.41
12/31/06/10/       15        .13        .12          .60

High-Income Bond Fund
------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/       $ xx         xx%        xx%          xx%
12/31/07          308        .48        .44         7.41
12/31/06          293        .49        .45         7.36
12/31/05          309        .50        .46         6.76
12/31/04          364        .50        .50         6.74
12/31/03          411        .51        .51         7.74
CLASS 2
6/30/08/4/         xx         xx         xx           xx
12/31/07          996        .73        .69         7.17
12/31/06          832        .74        .70         7.12
12/31/05          590        .75        .71         6.55
12/31/04          444        .75        .74         6.48
12/31/03          319        .76        .76         7.41
CLASS 3
6/30/08/4/         xx         xx         xx           xx
12/31/07           28        .66        .62         7.21
12/31/06           34        .67        .63         7.19
12/31/05           37        .68        .64         6.58
12/31/04/6/        46        .68/7/     .68/7/      6.57/7/

U.S. Government/AAA-Rated Securities Fund
-------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/       $ xx         xx%        xx%          xx%
12/31/07          211        .46        .41         4.83
12/31/06          218        .47        .42         4.64
12/31/05          252        .47        .43         3.99
12/31/04          286        .47        .46         3.68
12/31/03          373        .46        .46         3.71
CLASS 2
6/30/08/4/         xx         xx         xx           xx
12/31/07          597        .71        .66         4.58
12/31/06          402        .72        .67         4.40
12/31/05          341        .72        .68         3.75
12/31/04          285        .72        .71         3.42
12/31/03          273        .71        .71         3.43
CLASS 3
6/30/08/4/         xx         xx         xx           xx
12/31/07           29        .64        .59         4.65
12/31/06           32        .65        .60         4.45
12/31/05           39        .65        .61         3.81
12/31/04/6/        43        .65/7/     .65/7/      3.51/7/

Cash Management Fund
-------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/       $ xx         xx%        xx%          xx%
12/31/07          112        .33        .30         4.88
12/31/06           98        .33        .30         4.74
12/31/05           75        .33        .30         2.91
12/31/04           78        .37        .36          .96
12/31/03          103        .47        .47          .68
CLASS 2
6/30/08/4/         xx         xx         xx           xx
12/31/07          452        .58        .55         4.61
12/31/06          282        .58        .55         4.52
12/31/05          153        .58        .55         2.71
12/31/04          110        .61        .61          .76
12/31/03           99        .72        .72          .42
CLASS 3
6/30/08/4/         xx         xx         xx           xx
12/31/07           20        .51        .48         4.70
12/31/06           18        .51        .48         4.53
12/31/05           16        .51        .48         2.70
12/31/04/6/        20        .54/7/     .54/7/       .80/7/



                                                                             ---
                               AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  59
                                                                             ---




                                                   Six months
                                                     ended        Year ended December 31
                                                    June 30,  ------------------------------
Portfolio turnover rate for all classes of shares   2008/4/   2007  2006    2005  2004  2003
-------------------------------------------------  ---------- ----  ----    ----  ----  ----

   Global Discovery Fund                               xx%      50%   31%     53%   28%   30%
   Global Growth Fund                                  xx       38    31      26    24    27
   Global Small Capitalization Fund                    xx       49    50      47    49    51
   Growth Fund                                         xx       40    35      29    30    34
   International Fund                                  xx       41    29      40    37    40
   New World Fund                                      xx       34    32      26    18    19
   Blue Chip Income and Growth Fund                    xx       27    21      33    13    12
   Global Growth and Income Fund                       xx       36     8/8/   --    --    --
   Growth-Income Fund                                  xx       24    25      20    21    21
   Asset Allocation Fund                               xx       29    38      23    20    20
   Bond Fund                                           xx       57    57      46    34    20
   Global Bond Fund                                    xx       85     7/9/   --    --    --
   High-Income Bond Fund                               xx       32    35      35    38    48
   U.S. Government/AAA-Rated Securities Fund           xx       91    76      86    68    63
   Cash Management Fund                                xx       --    --      --    --    --


/1/Based on operations for the periods shown (unless otherwise noted) and,
   accordingly, may not be representative of a full year.

/2/Based on average shares outstanding.

/3/This column reflects the impact, if any, of certain waivers by Capital
   Research and Management Company. During some of the periods shown, Capital
   Research and Management Company reduced fees for investment advisory
   services.

/4/Unaudited.

/5/Amount less than $.01.

/6/From January 16, 2004, when Class 3 shares were first issued.

/7/Annualized.

/8/From May 1, 2006, commencement of operations.

/9/From October 4, 2006, commencement of operations.

/10/From November 6, 2006, when Class 2 shares were first issued.


----
60  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS
----


[LOGO] American Funds(R)              The right choice for the long term(R)


Other fund information

Annual/Semi-annual report to shareholders
The shareholder reports contain additional information about the Series,
including financial statements, investment results, portfolio holdings, a
discussion of market conditions and the Series' investment strategies, and the
independent registered public accounting firm's report (in the annual report).

Statement of additional information (SAI) and codes of ethics
The current SAI, as amended from time to time, contains more detailed
information on all aspects of the Series, including the funds' financial
statements, and is incorporated by reference into this prospectus. This means
that the current SAI, for legal purposes, is part of this prospectus. The codes
of ethics describe the personal investing policies adopted by the Series, the
Series' investment adviser and its affiliated companies.

The current SAI and the codes of ethics are on file with the Securities and
Exchange Commission (SEC). These and other related materials about the Series
are available for review or to be copied at the SEC's Public Reference Room in
Washington, D.C. (202/942-8090) or on the EDGAR database on the SEC's website
at sec.gov or, after payment of a duplicating fee, via e-mail request to
publicinfo@sec.gov or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.

Because you cannot purchase shares of the Series directly, the Series does not
maintain an Internet website. However, the current SAI and annual/semi-annual
reports to shareholders may be available on the website of the company that
issued your insurance contract. You also may request a free copy of these
documents or the codes of ethics by calling American Funds at 800/421-4120 or
writing to the Secretary at 333 South Hope Street, Los Angeles, California
90071.

                            Litho in USA    Investment Company File No. 811-3857

The Capital Group Companies
American Funds      Capital Research and Management      Capital International
Capital Guardian      Capital Bank and Trust




[LOGO] American Funds(R)              The right choice for the long term(R)




AMERICAN FUNDS
INSURANCE SERIES(R)



PROSPECTUS

Class 2 shares





October 1, 2008      THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
                     DISAPPROVED OF THESE SECURITIES. FURTHER, IT HAS NOT
                     DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE.
                     ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.




American Funds Insurance Series (the "Series") consists of 16 funds, each
representing a separate, fully managed diversified portfolio of securities. The
16 funds are:

   Global Discovery Fund
   Global Growth Fund
   Global Small Capitalization Fund
   Growth Fund
   International Fund
   New World Fund
   Blue Chip Income and Growth Fund
   Global Growth and Income Fund
   Growth-Income Fund
   International Growth and Income Fund
   Asset Allocation Fund
   Bond Fund
   Global Bond Fund
   High-Income Bond Fund
   U.S. Government/AAA-Rated Securities Fund
   Cash Management Fund



Shares of the Series are currently offered to insurance company separate
accounts funding both variable annuity contracts and variable insurance
policies (the "contracts"). Interests of various contract owners participating
in the Series may be in conflict. The board of trustees of the Series will
monitor for the existence of any material conflicts and determine what action,
if any, should be taken. Shares may be purchased or redeemed by the separate
accounts without any sales or redemption charges at net asset value.

The Series offers three classes of fund shares: Class 1, Class 2 and Class 3
shares. This prospectus offers only Class 2 shares and is for use with the
contracts that make Class 2 shares available. The board of trustees may
establish additional funds and classes in the future. The investment
objective(s) and policies of each fund are discussed in this prospectus. MORE
INFORMATION ON THE FUNDS IS CONTAINED IN THE SERIES' STATEMENT OF ADDITIONAL
INFORMATION.


                                                                             ---
                               AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  1
                                                                             ---


GLOBAL DISCOVERY FUND

RISK/RETURN SUMMARY

The fund seeks to make your investment grow over time by investing primarily in
stocks of companies in the services and information areas of the global
economy. The fund may invest up to 25% of its assets in companies outside the
services and information areas. Companies in the services and information areas
include, for example, those involved in the fields of telecommunications,
computer systems and software, the Internet, broadcasting and publishing,
health care, advertising, leisure, tourism, financial services, distribution
and transportation. Providing you with current income is a secondary
consideration. The fund is designed for investors seeking greater capital
appreciation through investments in stocks of issuers based around the world.
Investors in the fund should have a long-term perspective and be able to
tolerate potentially wide price fluctuations.

The prices of securities held by the fund may decline in response to certain
events, including, for example, those directly involving the companies whose
securities are owned by the fund; conditions affecting the general economy;
overall market changes; local, regional or global political, social or economic
instability; and currency and interest rate fluctuations. The growth-oriented,
equity-type securities generally purchased by the fund may involve large price
swings and potential for loss, particularly in the case of smaller
capitalization stocks. Because the fund generally invests in securities of
issuers in the services and information areas, it may be more susceptible to
factors adversely affecting these issuers than funds that do not focus on these
areas. The fund also may be subject to additional risks because it invests in a
more limited group of sectors and industries than the broad market.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.

Investing in countries with developing economies and/or markets generally
involves risks in addition to and greater than those generally associated with
investing in developed countries. For instance, developing countries may have
less developed legal and accounting systems. The governments of these countries
may be more unstable and likely to impose capital controls, nationalize a
company or industry, place restrictions on foreign ownership and on withdrawing
sale proceeds of securities from the country, and/or impose punitive taxes that
could adversely affect security prices. In addition, the economies of these
countries may be dependent on relatively few industries that are more
susceptible to local and global changes. Securities markets in these countries
are also relatively small and have substantially lower trading volumes. As a
result, securities issued in these countries may be more volatile and less
liquid than securities issued in countries with more developed economies or
markets.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.


----
2   AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GLOBAL DISCOVERY FUND
----


INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.

Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)

                                     [CHART]

  2002        2003        2004         2005         2006         2007
 ------      ------      ------       ------       ------       ------
-21.67%      37.11%      10.43%       10.80%       17.41%       17.22%



The fund's highest/lowest quarterly results during this time period were:

HIGHEST   18.31% (quarter ended June 30, 2003)
LOWEST   -17.62% (quarter ended September 30, 2002)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                                LIPPER MULTI-CAP GLOBAL SERVICE
                                                  GROWTH FUNDS   AND INFORMATION
AVERAGE ANNUAL TOTAL RETURNS   FUND  S&P 500/1/     INDEX/2/        INDEX/3/
--------------------------------------------------------------------------------

        1 year                17.22%   5.49%         12.79%           2.28%
--------------------------------------------------------------------------------
        5 years                18.22   12.82          15.15           14.62
--------------------------------------------------------------------------------
        Lifetime/4/             8.39    4.74           3.86            4.86


/1/Standard & Poor's 500 Composite Index is a market capitalization-weighted
   index based on the average weighted performance of 500 widely held common
   stocks. This index is unmanaged and its results include reinvested dividends
   and/or distributions, but do not reflect the effect of sales charges,
   commissions, expenses or taxes.

/2/Lipper Multi-Cap Growth Funds Index is an equally weighted index of funds
   that invest in a variety of market capitalization ranges without
   concentrating 75% of their equity assets in any one market capitalization
   range over an extended period of time. Multi-cap growth funds typically have
   an above-average price-to-earnings ratio, price-to-book ratio, and
   three-year sales-per-share growth value, compared to the S&P SuperComposite
   1500 Index. The results of the underlying funds in the index include the
   reinvestment of dividends and capital gain distributions, as well as
   brokerage commissions paid by the funds for portfolio transactions, but do
   not reflect the effect of sales charges or taxes.

/3/Global Service and Information Index is a subset of the unmanaged MSCI World
   Index, which is a market capitalization-weighted index that measures the
   returns of companies in 23 developed countries. This subset is 70%
   U.S.-weighted and consists specifically of companies in the service and
   information industries that together represent approximately 60% of the MSCI
   World Index. The index is compiled by the fund's investment adviser, Capital
   Research and Management Company, is unmanaged and its results include
   reinvested dividends and/or distributions, but do not reflect the effect of
   sales charges, commissions, expenses or taxes.

/4/Lifetime results are from July 5, 2001, the date the fund began investment
  operations.


                                                                             ---
        GLOBAL DISCOVERY FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  3
                                                                             ---


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 2
-------------------------------------------------------------------------

           Management fees*                                        0.58%
-------------------------------------------------------------------------
           Distribution and/or service (12b-1) fees                 0.25
-------------------------------------------------------------------------
           Other expenses                                           0.02
-------------------------------------------------------------------------
           Total annual fund operating expenses*                    0.85


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 2   $87    $271    $471    $1,049



----
4   AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GLOBAL DISCOVERY FUND
----


GLOBAL GROWTH FUND

RISK/RETURN SUMMARY

The fund seeks to make your investment grow over time by investing primarily in
common stocks of companies located around the world. The fund is designed for
investors seeking capital appreciation through stocks. Investors in the fund
should have a long-term perspective and be able to tolerate potentially wide
price fluctuations.

The prices of securities held by the fund may decline in response to certain
events, including, for example, those directly involving the companies whose
securities are owned by the fund; conditions affecting the general economy;
overall market changes; local, regional or global political, social or economic
instability; and currency and interest rate fluctuations. The growth-oriented,
equity-type securities generally purchased by the fund may involve large price
swings and potential for loss, particularly in the case of smaller
capitalization stocks.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events, such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.

Investing in countries with developing economies and/or markets generally
involves risks in addition to and greater than those generally associated with
investing in developed countries. For instance, developing countries may have
less developed legal and accounting systems. The governments of these countries
may be more unstable and likely to impose capital controls, nationalize a
company or industry, place restrictions on foreign ownership and on withdrawing
sale proceeds of securities from the country, and/or impose punitive taxes that
could adversely affect security prices. In addition, the economies of these
countries may be dependent on relatively few industries that are more
susceptible to local and global changes. Securities markets in these countries
are also relatively small and have substantially lower trading volumes. As a
result, securities issued in these countries may be more volatile and less
liquid than securities issued in countries with more developed economies or
markets.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.


                                                                             ---
           GLOBAL GROWTH FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  5
                                                                             ---


INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.


Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)

                                     [CHART]

 1998    1999     2000     2001     2002    2003    2004    2005   2006   2007
 ----    ----     ----     ----     ----    ----    ----    ----   ----   ----
28.75%  69.67%  -18.87%  -14.22%  -14.64%  35.27%  13.49%  14.07% 20.43% 14.85%



The fund's highest/lowest quarterly results during this time period were:

HIGHEST   41.03% (quarter ended December 31, 1999)
LOWEST   -20.43% (quarter ended September 30, 2001)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                      MSCI       LIPPER
                                      WORLD   GLOBAL FUNDS
AVERAGE ANNUAL TOTAL RETURNS   FUND  INDEX/1/   INDEX/2/
----------------------------------------------------------

        1 year                14.85%  9.57%      9.28%
----------------------------------------------------------
        5 years                19.35  17.53      17.10
----------------------------------------------------------
        10 years               12.13   7.45       7.78
----------------------------------------------------------
        Lifetime/3/            12.17   8.11       8.30


/1/MSCI World Index is a free float-adjusted market capitalization index that
   is designed to measure global developed-market equity performance. The index
   consists of 23 developed-market country indexes, including the United
   States. This index is unmanaged and its results include reinvested dividends
   and/or distributions, but do not reflect the effect of sales charges,
   commissions, expenses or taxes.

/2/Lipper Global Funds Index is an equally weighted index of funds that invest
   at least 25% of their portfolios in securities traded outside the United
   States and may own U.S. securities as well. The results of the underlying
   funds in the index include the reinvestment of dividends and capital gain
   distributions, as well as brokerage commissions paid by the funds for
   portfolio transactions, but do not reflect the effect of sales charges or
   taxes.

/3/Lifetime results are from April 30, 1997, the date the fund began investment
   operations.


----
6   AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GLOBAL GROWTH FUND
----


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 2
-------------------------------------------------------------------------

           Management fees*                                        0.53%
-------------------------------------------------------------------------
           Distribution and/or service (12b-1) fees                 0.25
-------------------------------------------------------------------------
           Other expenses                                           0.02
-------------------------------------------------------------------------
           Total annual fund operating expenses*                    0.80


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 2   $82    $255    $444     $990



                                                                             ---
           GLOBAL GROWTH FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  7
                                                                             ---


GLOBAL SMALL CAPITALIZATION FUND

RISK/RETURN SUMMARY

The fund seeks to make your investment grow over time by investing primarily in
stocks of smaller companies located around the world. Normally, the fund
invests at least 80% of its assets in equity securities of companies with small
market capitalizations, measured at the time of purchase. However, the fund's
holdings of small capitalization stocks may fall below the 80% threshold due to
subsequent market action. This policy is subject to change only upon 60 days'
notice to shareholders. The investment adviser currently defines "small market
capitalization" companies to be companies with market capitalizations of $3.5
billion or less. The investment adviser has periodically reevaluated and
adjusted this definition and may continue to do so in the future. The fund is
designed for investors seeking capital appreciation through stocks. Investors
in the fund should have a long-term perspective and be able to tolerate
potentially wide price fluctuations.

The prices of securities held by the fund may decline in response to certain
events, including, for example, those directly involving the companies whose
securities are owned by the fund; conditions affecting the general economy;
overall market changes; local, regional or global political, social or economic
instability; and currency and interest rate fluctuations. The growth-oriented,
equity-type securities generally purchased by the fund may involve large price
swings and potential for loss, particularly in the case of smaller
capitalization stocks. Smaller capitalization stocks are often more difficult
to value or dispose of, more difficult to obtain information about and more
volatile than stocks of larger, more established companies.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events, such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.

Investing in countries with developing economies and/or markets generally
involves risks in addition to and greater than those generally associated with
investing in developed countries. For instance, developing countries may have
less developed legal and accounting systems. The governments of these countries
may be more unstable and likely to impose capital controls, nationalize a
company or industry, place restrictions on foreign ownership and on withdrawing
sale proceeds of securities from the country, and/or impose punitive taxes that
could adversely affect security prices. In addition, the economies of these
countries may be dependent on relatively few industries that are more
susceptible to local and global changes. Securities markets in these countries
are also relatively small and have substantially lower trading volumes. As a
result, securities issued in these countries may be more volatile and less
liquid than securities issued in countries with more developed economies or
markets.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.




----
8   AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GLOBAL SMALL CAPITALIZATION FUND
----



INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.


Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)

                                    [CHART]

 1999     2000     2001      2002     2003     2004     2005     2006     2007
------   ------   ------    ------   ------   ------   ------   ------   ------
91.37%  -16.53%  -12.85%   -19.05%   53.53%   20.88%   25.35%   24.05%   21.43%



The fund's highest/lowest quarterly results during this time period were:

HIGHEST   28.90% (quarter ended December 31, 1999)
LOWEST   -28.24% (quarter ended September 30, 2001)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                                   LIPPER GLOBAL
                                     S&P/CITIGROUP   SMALL-CAP
                                     GLOBAL/WORLD      FUNDS
AVERAGE ANNUAL TOTAL RETURNS   FUND   INDEXES/1/    AVERAGE/2/
----------------------------------------------------------------

        1 year                21.43%     9.87%         9.70%
----------------------------------------------------------------
        5 years                28.50     24.64         22.21
----------------------------------------------------------------
        Lifetime/3/            15.55     10.63          9.96


/1/S&P/Citigroup Global/World Indexes reflect a combination of two
   S&P/Citigroup Global indexes and two S&P/Citigroup World indexes that
   corresponds to the market capitalization ranges used by the fund during
   comparable periods. The S&P/Citigroup Global indexes, which track publicly
   traded stocks around the world with market capitalizations less than $3
   billion and less than $2 billion, were used from May 2006 to the present and
   May 2004 to April 2006, respectively. This index better reflects the fund's
   investments in developing countries during this period. The S&P/Citigroup
   World indexes, which only include stocks in developed countries and reflect
   market capitalizations of less than $1.5 billion and less than $1.2 billion,
   were used from 2000 to April 2004 and from 1998 to 1999, respectively. These
   indexes are unmanaged and their results include reinvested dividends and/or
   distributions, but do not reflect the effect of sales charges, commissions,
   expenses or taxes.

/2/Lipper Global Small-Cap Funds Average is composed of funds that invest at
   least 25% of their portfolios in securities with primary trading markets
   outside the United States, and that limit at least 65% of their investments
   to companies with market capitalizations of less than $1 billion at the time
   of purchase. The results of the underlying funds in the average include the
   reinvestment of dividends and capital gain distributions, as well as
   brokerage commissions paid by the funds for portfolio transactions, but do
   not reflect the effect of sales charges or taxes.

/3/Lifetime results are from April 30, 1998, the date the fund began investment
   operations.




                                                                                ---
GLOBAL SMALL CAPITALIZATION FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  9
                                                                                ---



FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 2
-------------------------------------------------------------------------

           Management fees*                                        0.70%
-------------------------------------------------------------------------
           Distribution and/or service (12b-1) fees                 0.25
-------------------------------------------------------------------------
           Other expenses                                           0.03
-------------------------------------------------------------------------
           Total annual fund operating expenses*                    0.98


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 2   $100   $312    $542    $1,201





----
10  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GLOBAL SMALL CAPITALIZATION FUND
----



GROWTH FUND

RISK/RETURN SUMMARY

The fund seeks to make your investment grow by investing primarily in common
stocks of companies that appear to offer superior opportunities for growth of
capital. In seeking to pursue its investment objective, the fund may invest in
the securities of issuers representing a broad range of market capitalizations.
The fund may invest up to 15% of its assets in securities of issuers that are
domiciled outside the United States and Canada. The fund is designed for
investors seeking capital appreciation through stocks. Investors in the fund
should have a long-term perspective and be able to tolerate potentially wide
price fluctuations.

The prices of securities held by the fund may decline in response to certain
events, including, for example, those directly involving the companies whose
securities are owned by the fund; conditions affecting the general economy;
overall market changes; local, regional or global political, social or economic
instability; and currency and interest rate fluctuations. The growth-oriented,
equity-type securities generally purchased by the fund may involve large price
swings and potential for loss.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.


                                                                             ---
                  GROWTH FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  11
                                                                             ---


INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower. Class 2 shares
were first offered on April 30, 1997. Results prior to that date assume a
hypothetical investment in Class 1 shares, reduced by the .25% annual expense
that applies to Class 2 shares and is described in the "Plans of distribution"
section of this prospectus. Results for Class 1 shares are comparable to those
of Class 2 shares because both classes invest in the same portfolio of
securities.


Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)

                                    [CHART]

 1998    1999   2000    2001     2002    2003    2004    2005    2006    2007
------  ------  -----  ------  -------  ------  ------  ------  -----   -----
35.23%  57.27%  4.47%  -18.15% -24.46%  36.80%  12.50%  16.19%  10.22%  12.35%



The fund's highest/lowest quarterly results during this time period were:

HIGHEST   30.71% (quarter ended December 31, 1999)
LOWEST   -27.17% (quarter ended September 30, 2001)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                                LIPPER CAPITAL
                                                 APPRECIATION  LIPPER GROWTH
AVERAGE ANNUAL TOTAL RETURNS   FUND  S&P 500/1/ FUNDS INDEX/2/ FUNDS INDEX/3/
-----------------------------------------------------------------------------

        1 year                12.35%   5.49%        16.39%         7.83%
-----------------------------------------------------------------------------
        5 years                17.23   12.82         15.18         12.30
-----------------------------------------------------------------------------
        10 years               11.77    5.91          6.54          4.76
-----------------------------------------------------------------------------
        Lifetime/4/            14.36   12.63         10.74         10.56


/1/Standard & Poor's 500 Composite Index is a market capitalization-weighted
   index based on the average weighted performance of 500 widely held common
   stocks. This index is unmanaged and its results include reinvested dividends
   and/or distributions, but do not reflect the effect of sales charges,
   commissions, expenses or taxes.

/2/Lipper Capital Appreciation Funds Index is an equally weighted index of
   funds that aim for maximum capital appreciation. The results of the
   underlying funds in the index include the reinvestment of dividends and
   capital gain distributions, as well as brokerage commissions paid by the
   funds for portfolio transactions, but do not reflect the effect of sales
   charges or taxes.

/3/Lipper Growth Funds Index is an equally weighted index of growth funds.
   These funds normally invest in companies with long-term earnings expected to
   grow significantly faster than the earnings of the stocks represented in the
   major unmanaged stock indexes. The results of the underlying funds in the
   index include the reinvestment of dividends and capital gain distributions,
   as well as brokerage commissions paid by the funds for portfolio
   transactions, but do not reflect the effect of sales charges or taxes.

/4/Lifetime results are from February 8, 1984, the date the fund began
   investment operations.


----
12  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GROWTH FUND
----


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 2
-------------------------------------------------------------------------

           Management fees*                                        0.32%
-------------------------------------------------------------------------
           Distribution and/or service (12b-1) fees                 0.25
-------------------------------------------------------------------------
           Other expenses                                           0.01
-------------------------------------------------------------------------
           Total annual fund operating expenses*                    0.58


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 2   $59    $186    $324     $726



                                                                             ---
                  GROWTH FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  13
                                                                             ---


INTERNATIONAL FUND

RISK/RETURN SUMMARY

The fund seeks to make your investment grow over time by investing primarily in
common stocks of companies located outside the United States. The fund is
designed for investors seeking capital appreciation through stocks. Investors
in the fund should have a long-term perspective and be able to tolerate
potentially wide price fluctuations.

The prices of securities held by the fund may decline in response to certain
events, including, for example, those directly involving the companies whose
securities are owned by the fund; conditions affecting the general economy;
overall market changes; local, regional or global political, social or economic
instability; and currency and interest rate fluctuations. The growth-oriented,
equity-type securities generally purchased by the fund may involve large price
swings and potential for loss.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events, such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.

Investing in countries with developing economies and/or markets generally
involves risks in addition to and greater than those generally associated with
investing in developed countries. For instance, developing countries may have
less developed legal and accounting systems. The governments of these countries
may be more unstable and likely to impose capital controls, nationalize a
company or industry, place restrictions on foreign ownership and on withdrawing
sale proceeds of securities from the country, and/or impose punitive taxes that
could adversely affect security prices. In addition, the economies of these
countries may be dependent on relatively few industries that are more
susceptible to local and global changes. Securities markets in these countries
are also relatively small and have substantially lower trading volumes. As a
result, securities issued in these countries may be more volatile and less
liquid than securities issued in countries with more developed economies or
markets.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.


----
14  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  INTERNATIONAL FUND
----


INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower. Class 2 shares
were first offered on April 30, 1997. Results prior to that date assume a
hypothetical investment in Class 1 shares, reduced by the .25% annual expense
that applies to Class 2 shares and is described in the "Plans of distribution"
section of this prospectus. Results for Class 1 shares are comparable to those
of Class 2 shares because both classes invest in the same portfolio of
securities.


Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)

                                     [CHART]

 1998    1999    2000     2001    2002    2003    2004    2005    2006    2007
------  ------  ------  -------  ------  ------  ------  ------  ------  ------
20.93%  75.97% -22.06%  -19.89% -14.84%  34.85%  19.32%  21.50%  18.98%  20.02%


The fund's highest/lowest quarterly results during this time period were:

HIGHEST   42.33% (quarter ended December 31, 1999)
LOWEST   -19.66% (quarter ended September 30, 2002)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                     MSCI ALL
                                     COUNTRY
                                      WORLD       LIPPER
                                      INDEX    INTERNATIONAL
AVERAGE ANNUAL TOTAL RETURNS   FUND  EX USA/1/ FUNDS INDEX/2/
-------------------------------------------------------------

        1 year                20.02%  17.12%      14.25%
-------------------------------------------------------------
        5 years                22.79   24.52       21.82
-------------------------------------------------------------
        10 years               12.19   10.09        9.46
-------------------------------------------------------------
        Lifetime/3/            11.15    8.76        9.15


/1/MSCI All Country World Index ex USA is a free float-adjusted market
   capitalization index that is designed to measure equity market performance
   in the global developed and emerging markets, excluding the United States.
   The index consists of 47 developed and emerging market country indexes. This
   index is unmanaged and its results include reinvested dividends and/or
   distributions, but do not reflect the effect of sales charges, commissions,
   expenses or taxes.

/2/Lipper International Funds Index is an equally weighted index of funds that
   invest assets in securities with primary trading markets outside the
   United States. The results of the underlying funds in the index include the
   reinvestment of dividends and capital gain distributions, as well as
   brokerage commissions paid by the funds for portfolio transactions, but do
   not reflect the effect of sales charges or taxes.

/3/Lifetime results are from May 1, 1990, the date the fund began investment
   operations.


                                                                             ---
           INTERNATIONAL FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  15
                                                                             ---


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 2
-------------------------------------------------------------------------

           Management fees*                                        0.49%
-------------------------------------------------------------------------
           Distribution and/or service (12b-1) fees                 0.25
-------------------------------------------------------------------------
           Other expenses                                           0.03
-------------------------------------------------------------------------
           Total annual fund operating expenses*                    0.77


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 2   $79    $246    $428     $954



----
16  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  INTERNATIONAL FUND
----


NEW WORLD FUND

RISK/RETURN SUMMARY

The fund seeks to make your investment grow over time by investing primarily in
stocks of companies with significant exposure to countries with developing
economies and/or markets. The fund may also invest in debt securities of
issuers, including issuers of lower rated bonds, with exposure to these
countries. The fund is designed for investors seeking capital appreciation.
Investors in the fund should have a long-term perspective and be able to
tolerate potentially wide price fluctuations.

The fund may invest in equity securities of any company, regardless of where it
is based, if the fund's investment adviser determines that a significant
portion of the company's assets or revenues (generally 20% or more) is
attributable to developing countries. Under normal market conditions, the fund
will invest at least 35% of its assets in equity and debt securities of issuers
primarily based in qualified countries that have developing economies and/or
markets. In addition, the fund may invest up to 25% of its assets in
nonconvertible debt securities of issuers, including issuers of lower rated
bonds and government bonds, primarily based in qualified countries or that have
a significant portion of their assets or revenues attributable to developing
countries. The fund may also, to a limited extent, invest in securities of
issuers based in nonqualified developing countries.

In determining whether a country is qualified, the fund will consider such
factors as the country's per capita gross domestic product; the percentage of
the country's economy that is industrialized; market capital as a percentage of
gross domestic product; the overall regulatory environment; the presence of
government regulation limiting or banning foreign ownership; and restrictions
on repatriation of initial capital, dividends, interest and/or capital gains.
The fund's investment adviser will maintain a list of qualified countries and
securities in which the fund may invest. Qualified developing countries in
which the fund may invest currently include, but are not limited to, Argentina,
Brazil, Chile, China, Colombia, Croatia, Czech Republic, Dominican Republic,
Egypt, Hungary, India, Israel, Jordan, Lebanon, Malaysia, Mexico, Morocco,
Oman, Panama, Peru, Philippines, Poland, Russian Federation, South Africa,
Thailand, Turkey and Venezuela.

The prices of securities held by the fund may decline in response to certain
events, including, for example, those directly involving the companies whose
securities are owned by the fund; conditions affecting the general economy;
overall market changes; local, regional or global political, social or economic
instability; and currency and interest rate fluctuations. The growth-oriented,
equity-type securities generally purchased by the fund may involve large price
swings and potential for loss, particularly in the case of smaller
capitalization stocks. Smaller capitalization stocks are often more difficult
to value or dispose of, more difficult to obtain information about and more
volatile than stocks of larger, more established companies.

The values of most debt securities held by the fund may be affected by changing
interest rates and by changes in effective maturities and credit ratings of
these securities. For example, the values of debt securities in the fund's
portfolio generally will decline when interest rates rise and increase when
interest rates fall. In addition, falling interest rates may cause an issuer to
redeem or "call" a security before its stated maturity, which may result in the
fund having to reinvest the proceeds in lower yielding securities. Debt
securities are also subject to credit risk, which is the possibility that the
credit strength of an issuer will weaken and/or an issuer of a debt security
will fail to make timely payments of principal or interest and the security
will go into default. Lower quality or longer maturity debt securities
generally have higher rates of interest and may be subject to greater price
fluctuations than higher quality or shorter maturity debt securities. The
fund's investment adviser attempts to reduce these risks through
diversification of the portfolio and with ongoing credit analysis of each
issuer, as well as by monitoring economic and legislative developments.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.


                                                                             ---
               NEW WORLD FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  17
                                                                             ---


Investing in countries with developing economies and/or markets may involve
risks in addition to and greater than those generally associated with investing
in developed countries. For instance, developing countries may have less
developed legal and accounting systems. The governments of these countries may
be more unstable and more likely to impose capital controls, nationalize a
company or industry, place restrictions on foreign ownership and on withdrawing
sale proceeds of securities from the country, and/or impose punitive taxes that
could adversely affect security prices. In addition, the economies of these
countries may be dependent on relatively few industries that are more
susceptible to local and global changes. Securities markets in these countries
are also relatively small and have substantially lower trading volumes. As a
result, securities issued in these countries may be more volatile and less
liquid than securities issued in countries with more developed economies or
markets.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.


----
18  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  NEW WORLD FUND
----


INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.


Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)

                                       [CHART]

    2000     2001     2002     2003     2004     2005     2006     2007
   ------   ------   ------   ------   ------   ------   ------   ------
  -12.70%   -4.19%   -5.66%   39.18%   18.80%   20.74%   32.59%   32.21%


The fund's highest/lowest quarterly results during this time period were:

HIGHEST   15.47% (quarter ended June 30, 2003)
LOWEST   -16.07% (quarter ended September 30, 2001)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                         MSCI            MSCI
                                      ALL COUNTRY      EMERGING
AVERAGE ANNUAL TOTAL RETURNS   FUND  WORLD INDEX/1/ MARKETS INDEX/2/
--------------------------------------------------------------------

        1 year                32.21%    12.18%          39.78%
--------------------------------------------------------------------
        5 years                28.47     18.80           37.46
--------------------------------------------------------------------
        Lifetime/3/            14.87      5.68           16.62


/1/MSCI All Country World Index is a free float-adjusted market capitalization
   index that measures equity market performance in the global developed and
   emerging markets, consisting of 48 developed and emerging market country
   indexes. This index is unmanaged and its results include reinvested
   dividends and/or distributions, but do not reflect the effect of sales
   charges, commissions, expenses or taxes.

/2/MSCI Emerging Markets Index is a free float-adjusted market capitalization
   index that is designed to measure equity market performance in the global
   emerging markets, consisting of 25 emerging market country indexes. This
   index is unmanaged and its results include reinvested dividends and/or
   distributions, but do not reflect the effect of sales charges, commissions,
   expenses or taxes.

/3/Lifetime results are from June 17, 1999, the date the fund began investment
   operations.


                                                                             ---
               NEW WORLD FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  19
                                                                             ---


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 2
-------------------------------------------------------------------------

           Management fees*                                        0.76%
-------------------------------------------------------------------------
           Distribution and/or service (12b-1) fees                 0.25
-------------------------------------------------------------------------
           Other expenses                                           0.06
-------------------------------------------------------------------------
           Total annual fund operating expenses*                    1.07


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 2   $109   $340    $590    $1,306



----
20  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  NEW WORLD FUND
----


BLUE CHIP INCOME AND GROWTH FUND

RISK/RETURN SUMMARY

The fund seeks to produce income exceeding the average yield on U.S. stocks
generally (as represented by the average yield on Standard & Poor's 500
Composite Index) and to provide an opportunity for growth of principal
consistent with sound common stock investing. The fund invests primarily in
dividend-paying common stocks of larger, more established companies based in
the United States with market capitalizations of $4 billion and above. The fund
may also invest up to 10% of its assets in equity securities of larger
companies domiciled outside the United States, so long as they are listed or
traded in the United States. The fund will invest, under normal market
conditions, at least 90% of its assets in equity securities. The fund is
designed for investors seeking both income and capital appreciation.

The prices of and the income generated by securities held by the fund may
decline in response to certain events, including, for example, those directly
involving the companies whose securities are owned by the fund; conditions
affecting the general economy; overall market changes; local regional or global
political, social or economic instability; and currency and interest rate
fluctuations. Income provided by the fund may be affected by changes in the
dividend policies of the companies in which the fund invests and the capital
resources available for such payments at such companies.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.




                                                                                ---
BLUE CHIP INCOME AND GROWTH FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  21
                                                                                ---



INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.


Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)

                                     [CHART]

    2002         2003        2004         2005          2006          2007
   -------      -------     ------       ------        ------        ------
   -23.07%      30.73%       9.74%        7.24%        17.42%         2.03%



The fund's highest/lowest quarterly results during this time period were:

HIGHEST   17.08% (quarter ended June 30, 2003)
LOWEST   -20.50% (quarter ended September 30, 2002)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                               LIPPER GROWTH
                                                 & INCOME
AVERAGE ANNUAL TOTAL RETURNS  FUND  S&P 500/1/ FUNDS INDEX/2/
-------------------------------------------------------------

        1 year                2.03%   5.49%        4.28%
-------------------------------------------------------------
        5 years               13.01   12.82        12.86
-------------------------------------------------------------
        Lifetime/3/            4.63    4.74         5.75


/1/Standard & Poor's 500 Composite Index is a market capitalization-weighted
   index based on the average weighted performance of 500 widely held common
   stocks. This index is unmanaged and its results include reinvested dividends
   and/or distributions, but do not reflect the effect of sales charges,
   commissions, expenses or taxes.

/2/Lipper Growth & Income Funds Index is an equally weighted index of funds
   that combine a growth-of-earnings orientation and an income requirement for
   level and/or rising dividends. The results of the underlying funds in the
   index include the reinvestment of dividends and capital gain distributions,
   as well as brokerage commissions paid by the funds for portfolio
   transactions, but do not reflect the effect of sales charges or taxes.

/3/Lifetime results are from July 5, 2001, the date the fund began investment
   operations.




----
22  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  BLUE CHIP INCOME AND GROWTH FUND
----



FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 2
-------------------------------------------------------------------------

           Management fees*                                        0.41%
-------------------------------------------------------------------------
           Distribution and/or service (12b-1) fees                 0.25
-------------------------------------------------------------------------
           Other expenses                                           0.01
-------------------------------------------------------------------------
           Total annual fund operating expenses*                    0.67


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 2   $68    $214    $373     $835





                                                                                ---
BLUE CHIP INCOME AND GROWTH FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  23
                                                                                ---



GLOBAL GROWTH AND INCOME FUND

RISK/RETURN SUMMARY

The fund seeks to make your investment grow over time and provide you with
current income by investing primarily in stocks of well-established companies
located around the world.

The fund is designed for investors seeking both capital appreciation and
income. In pursuing its objective, the fund tends to invest in stocks that the
investment adviser believes to be relatively resilient to market declines.

The prices of and the income generated by securities held by the fund may
decline in response to certain events, including, for example, those directly
involving the companies whose securities are owned by the fund; conditions
affecting the general economy; overall market changes; local, regional or
global political, social or economic instability; and currency and interest
rate fluctuations. Income provided by the fund may be affected by changes in
the dividend policies of the companies in which the fund invests and the
capital resources available for such payments at such companies.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.

Investing in countries with developing economies and/or markets generally
involves risks in addition to and greater than those generally associated with
investing in developed countries. For instance, developing countries may have
less developed legal and accounting systems. The governments of these countries
may be more unstable and likely to impose capital controls, nationalize a
company or industry, place restrictions on foreign ownership and on withdrawing
sale proceeds of securities from the country, and/or impose punitive taxes that
could adversely affect security prices. In addition, the economies of these
countries may be dependent on relatively few industries that are more
susceptible to local and global changes. Securities markets in these countries
are also relatively small and have substantially lower trading volumes. As a
result, securities issued in these countries may be more volatile and less
liquid than securities issued in countries with more developed economies or
markets.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.




----
24  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GLOBAL GROWTH AND INCOME FUND
----



INVESTMENT RESULTS

Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.


Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)

                                     [CHART]

                                      2007
                                     ------
                                     12.67%



The fund's highest/lowest quarterly results during this time period were:

HIGHEST  6.72% (quarter ended June 30, 2007)
LOWEST   0.49% (quarter ended December 31, 2007)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                      MSCI
                                       ALL
                                     COUNTRY   MSCI
                                      WORLD    WORLD
AVERAGE ANNUAL TOTAL RETURNS   FUND  INDEX/1/ INDEX/2/
------------------------------------------------------

        1 year                12.67% 12.18%    9.57%
------------------------------------------------------
        Lifetime/3/            13.91  13.19    11.55


/1/MSCI All Country World Index is a free float-adjusted market capitalization
   index that measures equity market performance in the global developed and
   emerging markets, consisting of 48 developed and emerging market country
   indexes. This index is unmanaged and its results include reinvested
   dividends and/or distributions, but do not reflect the effect of sales
   charges, commissions, expenses or taxes.

/2/MSCI World Index is a free float-adjusted market capitalization index that
   is designed to measure global developed-market equity performance. The index
   consists of 23 developed-market country indexes, including the United
   States. This index is unmanaged and its results include reinvested dividends
   and/or distributions, but do not reflect the effect of sales charges,
   commissions, expenses or taxes.

/3/Lifetime results are from May 1, 2006, the date the fund began investment
   operations.




                                                                             ---
GLOBAL GROWTH AND INCOME FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  25
                                                                             ---



FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 2
-------------------------------------------------------------------------

           Management fees*                                        0.69%
-------------------------------------------------------------------------
           Distribution and/or service (12b-1) fees                 0.25
-------------------------------------------------------------------------
           Other expenses                                           0.02
-------------------------------------------------------------------------
           Total annual fund operating expenses*                    0.96


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 2   $98    $306    $531    $1,178





----
26  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GLOBAL GROWTH AND INCOME FUND
----



GROWTH-INCOME FUND

RISK/RETURN SUMMARY

The fund seeks to make your investment grow and provide you with income over
time by investing primarily in common stocks or other securities that
demonstrate the potential for appreciation and/or dividends. The fund may
invest up to 15% of its assets, at the time of purchase, in securities of
issuers domiciled outside the United States and not included in Standard &
Poor's 500 Composite Index. The fund is designed for investors seeking both
capital appreciation and income.

The prices of and the income generated by securities held by the fund may
decline in response to certain events, including, for example, those directly
involving the companies whose securities are owned by the fund; conditions
affecting the general economy; overall market changes; local, regional or
global political, social or economic instability; and currency and interest
rate fluctuations. Income provided by the fund may be affected by changes in
the dividend policies of the companies in which the fund invests and the
capital resources available for such payments at such companies.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.


                                                                             ---
           GROWTH-INCOME FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  27
                                                                             ---


INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower. Class 2 shares
were first offered on April 30, 1997. Results prior to that date assume a
hypothetical investment in Class 1 shares, reduced by the .25% annual expense
that applies to Class 2 shares and is described in the "Plans of distribution"
section of this prospectus. Results for Class 1 shares are comparable to those
of Class 2 shares because both classes invest in the same portfolio of
securities.


Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)

                                    [CHART]

 1998    1999   2000   2001    2002    2003    2004    2005    2006    2007
------  ------  -----  -----  ------  ------  ------  -----   -----   -----
18.09%  11.20%  7.95%  2.56%  -18.34%  32.43%  10.37%  5.83%  15.20%   5.04%



The fund's highest/lowest quarterly results during this time period were:

HIGHEST   18.85%  (quarter ended December 31, 1998)
LOWEST   -18.70%  (quarter ended September 30, 2002)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                               LIPPER GROWTH
                                                 & INCOME
AVERAGE ANNUAL TOTAL RETURNS  FUND  S&P 500/1/ FUNDS INDEX/2/
-------------------------------------------------------------

        1 year                5.04%   5.49%        4.28%
-------------------------------------------------------------
        5 years               13.36   12.82        12.86
-------------------------------------------------------------
        10 years               8.31    5.91         5.91
-------------------------------------------------------------
        Lifetime/3/           12.52   12.63        11.28


/1/Standard & Poor's 500 Composite Index is a market capitalization-weighted
   index based on the average weighted performance of 500 widely held common
   stocks. This index is unmanaged and its results include reinvested dividends
   and/or distributions, but do not reflect the effect of sales charges,
   commissions, expenses or taxes.

/2/Lipper Growth & Income Funds Index is an equally weighted index of funds
   that combine a growth-of-earnings orientation and an income requirement for
   level and/or rising dividends. The results of the underlying funds in the
   index include the reinvestment of dividends and capital gain distributions,
   as well as brokerage commissions paid by the funds for portfolio
   transactions, but do not reflect the effect of sales charges or taxes.

/3/Lifetime results are from February 8, 1984, the date the fund began
   investment operations.


----
28  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GROWTH-INCOME FUND
----


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 2
-------------------------------------------------------------------------

           Management fees*                                        0.26%
-------------------------------------------------------------------------
           Distribution and/or service (12b-1) fees                 0.25
-------------------------------------------------------------------------
           Other expenses                                           0.01
-------------------------------------------------------------------------
           Total annual fund operating expenses*                    0.52


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 2   $53    $167    $291     $653



                                                                             ---
           GROWTH-INCOME FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  29
                                                                             ---



INTERNATIONAL GROWTH AND INCOME FUND

RISK/RETURN SUMMARY


The fund seeks to make your investment grow over time and provide you with
current income. The fund will pursue this objective by investing primarily
in stocks of larger, well-established companies domiciled outside of the
United States.

The fund is designed for investors seeking both capital appreciation and
income. In pursuing its objective, the fund tends to invest in stocks that the
investment adviser believes to be relatively resilient to market declines.

The prices of and the income generated by securities held by the fund may
decline in response to certain events, including, for example, those directly
involving the companies whose securities are owned by the fund; conditions
affecting the general economy; overall market changes; local, regional or
global political, social or economic instability; and currency and interest
rate fluctuations. Income provided by the fund may be affected by changes in
the dividend policies of the companies in which the fund invests and the
capital resources available for such payments at such companies.

Investments in securities issued by entities based outside of the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.

Investing in countries with developing economies and/or markets generally
involves risks in addition to and greater than those generally associated with
investing in developed countries. For instance, developing countries may have
less developed legal and accounting systems. The governments of these countries
may be more unstable and likely to impose capital controls, nationalize a
company or industry, place restrictions on foreign ownership and on withdrawing
sale proceeds of securities from the country, and/or impose punitive taxes that
could adversely affect security prices. In addition, the economies of these
countries may be dependent on relatively few industries that are more
susceptible to local and global changes. Securities markets in these countries
are also relatively small and have substantially lower trading volumes. As a
result, securities issued in these countries may be more volatile and less
liquid than securities issued in countries with more developed economies or
markets.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.





----
30  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  INTERNATIONAL GROWTH AND INCOME FUND
----




FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)*  CLASS 2
--------------------------------------------------------------------------

            Management fees+                                        0.69%
--------------------------------------------------------------------------
            Distribution and/or service 12b-1) fees                  0.25
--------------------------------------------------------------------------
            Other expenses                                           0.03
--------------------------------------------------------------------------
            Total annual fund operating expenses+                    0.97


*Based on estimated amounts for the current fiscal year.

+The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS
-----------------------

Class 2   $99    $309






                                                                                    ---
INTERNATIONAL GROWTH AND INCOME FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  31
                                                                                    ---



ASSET ALLOCATION FUND

RISK/RETURN SUMMARY

The fund seeks to provide you with high total return (including income and
capital gains) consistent with preservation of capital over the long term by
investing in a diversified portfolio of common stocks and other equity
securities, bonds and other intermediate and long-term debt securities, and
money market instruments (debt securities maturing in one year or less). The
fund may invest up to 15% of its assets in equity securities of issuers
domiciled outside the United States and not included in Standard & Poor's 500
Composite Index, and up to 5% of its assets in debt securities of issuers
domiciled outside the United States. In addition, the fund may invest up to 25%
of its debt assets in lower quality debt securities (rated Ba or below by
Moody's Investors Service and BB or below by Standard & Poor's Corporation or
unrated but determined to be of equivalent quality). Such securities are
sometimes referred to as "junk bonds."

In seeking to pursue its investment objective, the fund will vary its mix of
equity securities, debt securities and money market instruments. Under normal
market conditions, the fund's investment adviser expects (but is not required)
to maintain an investment mix falling within the following ranges: 40%-80% in
equity securities, 20%-50% in debt securities and 0%-40% in money market
instruments. As of December 31, 2007, the fund was approximately 64% invested
in equity securities, 22% invested in debt securities and 14% invested in money
market instruments. The proportion of equities, debt and money market
securities held by the fund will vary with market conditions and the investment
adviser's assessment of their relative attractiveness as investment
opportunities. The fund is designed for investors seeking above-average total
return.

The prices of and the income generated by securities held by the fund may
decline in response to certain events, including, for example, those directly
involving the companies whose securities are owned by the fund; conditions
affecting the general economy; overall market changes; local, regional or
global political, social or economic instability; and currency and interest
rate fluctuations. Income provided by the fund may be affected by changes in
the dividend policies of the companies in which the fund invests and the
capital resources available for such payments at such companies.

Securities held by the fund may also be affected by changing market interest
rates and by changes in effective maturities and credit ratings. For example,
the prices of debt securities in the fund's portfolio generally will decline
when interest rates rise and increase when interest rates fall. In addition,
falling interest rates may cause an issuer to redeem or "call" a security
before its stated maturity, which may result in the fund having to reinvest the
proceeds in lower yielding securities. Debt securities are also subject to
credit risk, which is the possibility that the credit strength of an issuer
will weaken and/or an issuer of a debt security will fail to make timely
payments of principal or interest and the security will go into default. Lower
quality or longer maturity debt securities generally have higher rates of
interest and may be subject to greater price fluctuations than higher quality
or shorter maturity debt securities. In addition, there may be little trading
in the secondary market for certain lower quality debt securities, which may
adversely affect the fund's ability to dispose of such securities. A security
backed by the U.S. Treasury or the full faith and credit of the United States
is guaranteed only as to the timely payment of interest and principal when held
to maturity. Accordingly, the current market prices for these securities will
fluctuate with changes in interest rates.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.


----
32  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  ASSET ALLOCATION FUND
----


INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower. Class 2 shares
were first offered on April 30, 1997. Results prior to that date assume a
hypothetical investment in Class 1 shares, reduced by the .25% annual expense
that applies to Class 2 shares and is described in the "Plans of distribution"
section of this prospectus. Results for Class 1 shares are comparable to those
of Class 2 shares because both classes invest in the same portfolio of
securities.


Here are the funds results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)

                                    [CHART]

 1998   1999   2000   2001     2002    2003    2004    2005     2006     2007
------  -----  -----  -----  -------  ------  -----   -----    -----    -----
12.94%  6.92%  4.40%  0.52%  -12.38%  21.74%  8.34%   9.14%    14.66%    6.55%



The fund's highest/lowest quarterly results during this time period were:

              HIGHEST   12.15% (quarter ended June 30, 2003)
              LOWEST   -12.34% (quarter ended September 30, 2002)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                              LEHMAN                CITIGROUP BROAD
                           BROTHERS U.S.              INVESTMENT-
AVERAGE ANNUAL               AGGREGATE                GRADE (BIG)
TOTAL RETURNS        FUND    INDEX/1/    S&P 500/2/  BOND INDEX/3/
-------------------------------------------------------------------

1 year               6.55%     6.97%       5.49%         7.22%
-------------------------------------------------------------------
5 years              11.95      4.42       12.82          4.55
-------------------------------------------------------------------
10 years              6.92      5.97        5.91          6.03
-------------------------------------------------------------------
Lifetime/4/           9.25      7.14       10.54          7.21


/1/Lehman Brothers U.S. Aggregate Index represents the U.S. investment-grade
   fixed-rate bond market. This index is unmanaged and its results include
   reinvested dividends and/or distributions, but do not reflect the effect of
   sales charges, commissions, expenses or taxes.

/2/Standard & Poor's 500 Composite Index is a market capitalization-weighted
   index based on the average weighted performance of 500 widely held common
   stocks. This index is unmanaged and its results include reinvested dividends
   and/or distributions, but do not reflect the effect of sales charges,
   commissions, expenses or taxes.

/3/Citigroup Broad Investment-Grade (BIG) Bond Index (formerly Salomon Smith
   Barney Broad Investment-Grade (BIG) Bond Index) is a market
   capitalization-weighted index that includes fixed-rate U.S. Treasury,
   government-sponsored, mortgage, asset-backed and investment-grade corporates
   with a maturity of one year or longer. This index is unmanaged and its
   results include reinvested dividends and/or distributions, but do not
   reflect the effect of sales charges, commissions, expenses or taxes.

/4/Lifetime results are from August 1, 1989, the date the fund began investment
   operations.


                                                                             ---
        ASSET ALLOCATION FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  33
                                                                             ---


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 2
-------------------------------------------------------------------------

           Management fees*                                        0.31%
-------------------------------------------------------------------------
           Distribution and/or service (12b-1) fees                 0.25
-------------------------------------------------------------------------
           Other expenses                                           0.01
-------------------------------------------------------------------------
           Total annual fund operating expenses*                    0.57


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 2   $58    $183    $318     $714



----
34  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  ASSET ALLOCATION FUND
----


BOND FUND

RISK/RETURN SUMMARY

The fund seeks to maximize your level of current income and preserve your
capital. Normally, the fund invests at least 80% of its assets in bonds and
other debt securities. This policy is subject to change only upon 60 days'
notice to shareholders. The fund will invest at least 65% of its assets in
investment-grade debt securities (including cash and cash equivalents) and may
invest up to 35% of its assets in debt securities (rated Ba or below by Moody's
Investors Service and BB or below by Standard & Poor's Corporation or unrated
but determined to be of equivalent quality). Such securities are sometimes
referred to as "junk bonds." The fund may invest in debt securities of issuers
domiciled outside the United States. The fund may also invest up to 20% of its
assets in preferred stocks, including convertible and nonconvertible preferred
stocks. The fund is designed for investors seeking income and more price
stability than stocks, and capital preservation over the long term.

The values of and the income generated by most debt securities held by the fund
may be affected by changing market interest rates and by changes in effective
maturities and credit ratings of these securities. For example, the values of
debt securities in the fund's portfolio generally will decline when interest
rates rise and increase when interest rates fall. In addition, falling interest
rates may cause an issuer to redeem, "call" or refinance a security before its
stated maturity, which may result in the fund having to reinvest the proceeds
in lower yielding securities. Debt securities are also subject to credit risk,
which is the possibility that the credit strength of an issuer will weaken
and/or an issuer of a debt security will fail to make timely payments of
principal or interest and the security will go into default. Lower quality or
longer maturity debt securities generally have higher rates of interest and may
be subject to greater price fluctuations than higher quality or shorter
maturity debt securities. In addition, there may be little trading in the
secondary market for certain lower quality debt securities, which may adversely
affect the fund's ability to dispose of such securities. The fund's investment
adviser attempts to reduce these risks through diversification of the portfolio
and with ongoing credit analysis of each issuer, as well as by monitoring
economic and legislative developments.

A security backed by the U.S. Treasury or the full faith and credit of the U.S.
government is guaranteed only as to the timely payment of interest and
principal when held to maturity. Accordingly, the current market prices for
these securities will fluctuate with changes in interest rates. Many types of
debt securities, including mortgage-related securities, are subject to
prepayment risk. For example, when interest rates fall, homeowners are more
likely to refinance their home mortgages and prepay their principal earlier
than expected. The fund must then reinvest the prepaid principal in new
securities when interest rates on new mortgage investments are falling, thus
reducing the fund's income.

The prices and yields of nonconvertible preferred stocks generally move with
changes in interest rates and the issuer's credit quality, similar to debt
securities. The value of convertible preferred stocks varies in response to
many factors, including, for example, the value of the underlying equity
securities, general market and economic conditions, and convertible market
valuations, as well as changes in interest rates, credit spreads and the credit
quality of the issuer.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.


                                                                             ---
                    BOND FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  35
                                                                             ---


INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower. Class 2 shares
were first offered on April 30, 1997. Results prior to that date assume a
hypothetical investment in Class 1 shares, reduced by the .25% annual expense
that applies to Class 2 shares and is described in the "Plans of distribution"
section of this prospectus. Results for Class 1 shares are comparable to those
of Class 2 shares because both classes invest in the same portfolio of
securities.


Here are the fund's results calculated on a calendar year basis. (If insurance
  contract fees and expenses were included, results would have been lower.)

                            [CHART]

  1998    1999    2000    2001    2002     2003    2004    2005    2006    2007
  -----   -----   -----   -----   -----   ------   -----   -----   -----   -----
  4.11%   2.55%   4.99%   8.15%   4.05%   12.80%   5.72%   1.59%   6.99%   3.33%



The fund's highest/lowest quarterly results during this time period were:

HIGHEST   5.07% (quarter ended December 31, 2002)
LOWEST   -1.77% (quarter ended September 30, 1998)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                    LEHMAN BROTHERS  CITIGROUP BROAD
                                    U.S. AGGREGATE   INVESTMENT-GRADE
AVERAGE ANNUAL TOTAL RETURNS  FUND     INDEX/1/     (BIG) BOND INDEX/2/
-----------------------------------------------------------------------

        1 year                3.33%      6.97%            7.22%
-----------------------------------------------------------------------
        5 years                6.01       4.42             4.55
-----------------------------------------------------------------------
        10 years               5.38       5.97             6.03
-----------------------------------------------------------------------
        Lifetime/3/            5.77       6.08             6.12


/1/Lehman Brothers U.S. Aggregate Index represents the U.S. investment-grade
   fixed-rate bond market. This index is unmanaged and its results include
   reinvested dividends and/or distributions, but do not reflect the effect of
   sales charges, commissions, expenses or taxes.

/2/Citigroup Broad Investment-Grade (BIG) Bond Index (formerly Salomon Smith
   Barney Broad Investment-Grade (BIG) Bond Index) is a market
   capitalization-weighted index that includes fixed-rate U.S. Treasury,
   government-sponsored, mortgage, asset-backed and investment-grade corporates
   with a maturity of one year or longer. This index is unmanaged and its
   results include reinvested dividends and/or distributions, but do not
   reflect the effect of sales charges, commissions, expenses or taxes.

/3/Lifetime results are from January 2, 1996, the date the fund began
   investment operations.


----
36  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  BOND FUND
----


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 2
-------------------------------------------------------------------------

           Management fees*                                        0.40%
-------------------------------------------------------------------------
           Distribution and/or service (12b-1) fees                 0.25
-------------------------------------------------------------------------
           Other expenses                                           0.01
-------------------------------------------------------------------------
           Total annual fund operating expenses*                    0.66


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



                             1 YEAR 3 YEARS 5 YEARS 10 YEARS
                    ----------------------------------------

                    Class 2   $67    $211    $368     $822



                                                                             ---
                    BOND FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  37
                                                                             ---


GLOBAL BOND FUND

RISK/RETURN SUMMARY

The fund seeks to provide you, over the long term, with as high a level of
total return as is consistent with prudent management, by investing primarily
in investment-grade bonds issued by entities based around the world and
denominated in various currencies, including U.S. dollars. The fund may also
invest in lower quality, higher yielding debt securities. Such securities are
sometimes referred to as "junk bonds." The total return of the fund will be the
result of interest income, changes in the market value of the fund's
investments and changes in the value of other currencies relative to the U.S.
dollar.

The fund is designed for investors seeking returns through a portfolio of debt
securities issued by entities based around the world. Your investment in the
fund is subject to risks, including the possibility that the value of the
fund's portfolio holdings may fluctuate in response to economic, political or
social events in the United States or abroad.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.

Investing in countries with developing economies and/or markets generally
involves risks in addition to and greater than those generally associated with
investing in developed countries. For instance, developing countries may have
less developed legal and accounting systems. The governments of these countries
may be more unstable and likely to impose capital controls, nationalize a
company or industry, place restrictions on foreign ownership and on withdrawing
sale proceeds of securities from the country, and/or impose punitive taxes that
could adversely affect security prices. In addition, the economies of these
countries may be dependent on relatively few industries that are more
susceptible to local and global changes. Securities markets in these countries
are also relatively small and have substantially lower trading volumes. As a
result, securities issued in these countries may be more volatile and less
liquid than securities issued in countries with more developed economies or
markets.

The values of and the income generated by most debt securities held by the fund
may be affected by changing interest rates and by changes in the effective
maturities and credit ratings of these securities. For example, the values of
debt securities in the fund's portfolio generally will decline when interest
rates rise and increase when interest rates fall. Debt securities are also
subject to credit risk, which is the possibility that the credit strength of an
issuer will weaken and/or an issuer of a debt security will fail to make timely
payments of principal or interest and the security will go into default. Lower
quality or longer maturity debt securities generally have higher rates of
interest and may be subject to greater price fluctuations than higher quality
or shorter maturity debt securities. In addition, there may be little trading
in the secondary market for certain lower quality debt securities, which may
adversely affect the fund's ability to dispose of such securities.

The values of and the income generated by most debt securities held by the fund
may also be affected by changes in relative currency values. If the U.S. dollar
appreciates against foreign currencies, the value of the fund's securities
denominated in such currencies would generally depreciate and vice versa. U.S.
dollar-denominated securities of foreign issuers may also be affected by
changes in relative currency values.

The fund is non-diversified, which allows it to invest a greater percentage of
its assets in any one issuer than would otherwise be the case. However, the
fund intends to limit its investments in the securities of any single issuer.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.


----
38  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GLOBAL BOND FUND
----


INVESTMENT RESULTS

Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower.


Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)

                                     [CHART]

                                      2007
                                     ------
                                      9.23%



The fund's highest/lowest quarterly results during this time period were:

HIGHEST  4.92% (quarter ended September 30, 2007)
LOWEST   0.10% (quarter ended June 30, 2007)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                    LEHMAN BROTHERS  LIPPER GLOBAL
                                    GLOBAL AGGREGATE INCOME FUNDS
AVERAGE ANNUAL TOTAL RETURNS  FUND      INDEX/1/      AVERAGE/2/
------------------------------------------------------------------

        1 year                9.23%      9.48%           6.65%
------------------------------------------------------------------
        Lifetime/3/            9.42       9.13            7.05


/1/Lehman Brothers Global Aggregate Index represents the global
   investment-grade fixed-income markets. This index is unmanaged and its
   results include reinvested dividends and/or distributions, but do not
   reflect the effect of sales charges, commissions, expenses or taxes.

/2/Lipper Global Income Funds Average is comprised of funds that invest
   primarily in U.S. dollar and non-U.S. dollar debt securities located in at
   least three countries, one of which may be the United States. The results of
   the underlying funds in the average include the reinvestment of dividends
   and capital gain distributions, as well as brokerage commissions paid by the
   funds for portfolio transactions, but do not reflect the effect of sales
   charges or taxes.

/3/Lifetime results are from October 4, 2006, the date the fund began
   investment operations.


                                                                             ---
             GLOBAL BOND FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  39
                                                                             ---


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 2
-------------------------------------------------------------------------

           Management fees*                                        0.57%
-------------------------------------------------------------------------
           Distribution and/or service (12b-1) fees                 0.25
-------------------------------------------------------------------------
           Other expenses                                           0.04
-------------------------------------------------------------------------
           Total annual fund operating expenses*                    0.86


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 2   $88    $274    $477    $1,061



----
40  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  GLOBAL BOND FUND
----


HIGH-INCOME BOND FUND

RISK/RETURN SUMMARY

The fund seeks to provide you with a high level of current income and,
secondarily, capital appreciation by investing at least 65% of its assets in
higher yielding and generally lower quality debt securities (rated Ba or below
by Moody's Investors Service or BB or below by Standard & Poor's Corporation or
unrated but determined to be of equivalent quality). Such securities are
sometimes referred to as "junk bonds." The fund may also invest up to 25% of
its assets in securities of issuers domiciled outside the United States.
Normally, the fund invests at least 80% of its assets in bonds and other debt
securities. This policy is subject to change only upon 60 days' notice to
shareholders. The fund may also invest up to 20% of its assets in equity
securities that provide an opportunity for capital appreciation. The fund is
designed for investors seeking a high level of current income and who are able
to tolerate greater credit risk and price fluctuations than funds investing in
higher quality debt securities.

The values of and the income generated by most debt securities held by the fund
may be affected by changing market interest rates and by changes in effective
maturities and credit ratings of these securities. For example, the values of
debt securities in the fund's portfolio generally will decline when interest
rates rise and increase when interest rates fall. In addition, falling interest
rates may cause an issuer to redeem, "call" or refinance a security before its
stated maturity, which may result in the fund having to reinvest the proceeds
in lower yielding securities. Debt securities are also subject to credit risk,
which is the possibility that the credit strength of an issuer will weaken
and/or an issuer of a debt security will fail to make timely payments of
principal or interest and the security will go into default. Lower quality or
longer maturity debt securities generally have higher rates of interest and may
be subject to greater price fluctuations than higher quality or shorter
maturity debt securities. In addition, there may be little trading in the
secondary market for certain lower quality debt securities, which may adversely
affect the fund's ability to dispose of such securities.

The prices of and the income generated by securities held by the fund may
decline in response to certain events, including, for example, those directly
involving the companies whose securities are owned by the fund; conditions
affecting the general economy; overall market changes; local, regional or
global political, social or economic instability; and currency and interest
rate fluctuations.

Investments in securities issued by entities based outside the United States
may be subject to the risks described above to a greater extent and may also be
affected by other issues and events such as currency controls; different
accounting, auditing, financial reporting and legal standards and practices in
some countries; expropriation; changes in tax policy; greater market
volatility; differing securities market structures; higher transaction costs;
and various administrative difficulties, such as delays in clearing and
settling portfolio transactions or in receiving payment of dividends. These
risks may be heightened in connection with investments in developing countries.
The fund's investment adviser attempts to reduce these risks through
diversification of the portfolio and with ongoing credit analysis of each
issuer, as well as by monitoring economic and legislative developments.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.


                                                                             ---
        HIGH-INCOME BOND FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  41
                                                                             ---


INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower. Class 2 shares
were first offered on April 30, 1997. Results prior to that date assume a
hypothetical investment in Class 1 shares, reduced by the .25% annual expense
that applies to Class 2 shares and is described in the "Plans of distribution"
section of this prospectus. Results for Class 1 shares are comparable to those
of Class 2 shares because both classes invest in the same portfolio of
securities.


Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)

                                     [CHART]

1998   1999    2000   2001    2002    2003    2004    2005    2006    2007
-----  -----  ------  -----  ------  ------   -----   -----   -----   -----
0.27%  5.53%  -3.31%  7.73%  -1.83%  29.51%   9.59%   2.20%   10.59%  1.33%



The fund's highest/lowest quarterly results during this time period were:

HIGHEST  10.65% (quarter ended December 31, 2002)
LOWEST   -9.10% (quarter ended June 30, 2002)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                                                         LIPPER
                                    CREDIT SUISSE  CITIGROUP BROAD    HIGH CURRENT
                                     HIGH YIELD    INVESTMENT-GRADE    YIELD BOND
AVERAGE ANNUAL TOTAL RETURNS  FUND    INDEX/1/    (BIG) BOND INDEX/2/ FUNDS INDEX/3/
------------------------------------------------------------------------------------

        1 year                1.33%     2.65%           7.22%             2.13%
------------------------------------------------------------------------------------
        5 years               10.21     10.97            4.55             10.07
------------------------------------------------------------------------------------
        10 years               5.81      6.10            6.03              3.96
------------------------------------------------------------------------------------
        Lifetime/4/            9.70      N/A             8.54              7.85


/1/Credit Suisse High Yield Index is designed to mirror the investible universe
   of the U.S. dollar-denominated high-yield debt market. This index is
   unmanaged and its results include reinvested dividends and/or distributions,
   but do not reflect the effect of sales charges, commissions, expenses or
   taxes. This index was not in existence on the date the fund began investment
   operations; therefore, lifetime results are not shown.

/2/Citigroup Broad Investment-Grade (BIG) Bond Index (formerly Salomon Smith
   Barney Broad Investment-Grade (BIG) Bond Index) is a market
   capitalization-weighted index that includes fixed-rate U.S. Treasury,
   government-sponsored, mortgage, asset-backed and investment-grade corporates
   with a maturity of one year or longer. This index is unmanaged and its
   results include reinvested dividends and/or distributions, but do not
   reflect the effect of sales charges, commissions, expenses or taxes.

/3/Lipper High Current Yield Bond Funds Index is an equally weighted index of
   funds that aim at high (relative) current yield from fixed-income
   securities, have no quality or maturity restrictions and tend to invest in
   lower grade debt issues. The results of the underlying funds in the index
   include reinvestment of dividends and capital gain distributions, as well as
   brokerage commissions paid by the funds for portfolio transactions, but do
   not reflect the effect of sales charges or taxes.

/4/Lifetime results are from February 8, 1984, the date the fund began
   investment operations.


----
42  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  HIGH-INCOME BOND FUND
----


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 2
-------------------------------------------------------------------------

           Management fees*                                        0.47%
-------------------------------------------------------------------------
           Distribution and/or service (12b-1) fees                 0.25
-------------------------------------------------------------------------
           Other expenses                                           0.01
-------------------------------------------------------------------------
           Total annual fund operating expenses*                    0.73


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 2   $75    $233    $406     $906



                                                                             ---
        HIGH-INCOME BOND FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  43
                                                                             ---


U.S. GOVERNMENT/AAA-RATED SECURITIES FUND

RISK/RETURN SUMMARY

The fund seeks to provide you with a high level of current income, as well as
to preserve your investment. Normally, the fund will invest at least 80% of its
assets in securities that are guaranteed by the "full faith and credit" pledge
of the U.S. government or debt securities that are rated Aaa by Moody's
Investors Service or AAA by Standard & Poor's Corporation or unrated but
determined to be of equivalent quality. This policy is subject to change only
upon 60 days' notice to shareholders. The fund is designed for investors
seeking income and more price stability than from investing in stocks and lower
quality debt securities, and capital preservation over the long term.

The fund may also invest a significant portion of its assets in securities
backed by pools of mortgages. Certain of these securities may not be backed by
the full faith and credit of the U.S. government and are supported only by the
credit of the issuer. Such securities may include mortgage-backed securities
issued by the Federal National Mortgage Association ("Fannie Mae") and the
Federal Home Loan Mortgage Corporation ("Freddie Mac") and are neither issued
nor guaranteed by the U.S. Treasury.

The values of and the income generated by most debt securities held by the fund
may be affected by changing market interest rates and prepayment risk. For
example, as with other debt securities, the value of U.S. government securities
generally will decline when interest rates rise and increase when interest
rates fall. In addition, falling interest rates may cause an issuer to redeem
or "call" a security before its stated maturity, which may result in the fund
having to reinvest the proceeds in lower yielding securities. Longer maturity
debt securities generally have higher rates of interest but may be subject to
greater price fluctuations than shorter maturity securities.

A security backed by the U.S. Treasury or the full faith and credit of the
United States is guaranteed only as to the timely payment of interest and
principal when held to maturity. Accordingly, the current market prices for
such securities will fluctuate.

Many types of debt securities, including mortgage-related securities, are
subject to prepayment risk. For example, when interest rates fall, homeowners
are more likely to refinance their home mortgages and prepay their principal
earlier than expected. The fund must then reinvest the prepaid principal in new
securities when interest rates on new mortgage investments are falling, thus
reducing the fund's income.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.




----
44  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  U.S. GOVERNMENT/AAA-RATED SECURITIES FUND
----



INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year and how the fund's average annual total returns for various
periods compare with different broad measures of market performance. This
information provides some indication of the risks of investing in the fund.
Past results are not predictive of future results. Figures shown reflect fees
and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower. Class 2 shares
were first offered on April 30, 1997. Results prior to that date assume a
hypothetical investment in Class 1 shares, reduced by the .25% annual expense
that applies to Class 2 shares and is described in the "Plans of distribution"
section of this prospectus. Results for Class 1 shares are comparable to those
of Class 2 shares because both classes invest in the same portfolio of
securities.


Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)

                                     [CHART]

1998    1999    2000   2001   2002    2003   2004    2005     2006     2007
-----  ------  ------  -----  -----   -----  -----   -----    -----    -----
7.93%  -0.78%  11.39%  7.02%  9.15%   2.28%  3.30%   2.41%    3.75%    6.49%



The fund's highest/lowest quarterly results during this time period were:

HIGHEST   4.58% (quarter ended September 30, 2001)
LOWEST   -1.73% (quarter ended June 30, 2004)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



                                    CITIGROUP    LIPPER
                                    TREASURY/   GENERAL
                                      GOVT.       U.S.
                                    SPONSORED/ GOVERNMENT
                                     MORTGAGE    FUNDS
AVERAGE ANNUAL TOTAL RETURNS  FUND   INDEX/1/  AVERAGE/2/ CPI/3/
----------------------------------------------------------------

        1 year                6.49%   7.87%      6.25%    4.08%
----------------------------------------------------------------
        5 years                3.63    4.33       3.10     3.03
----------------------------------------------------------------
        10 years               5.23    5.94       4.95     2.68
----------------------------------------------------------------
        Lifetime/4/            6.69    7.71       6.54     3.02


/1/Citigroup Treasury/Government Sponsored/Mortgage Index (formerly Salomon
   Smith Barney Treasury/Government Sponsored/Mortgage Index) is a
   market-weighted index that includes U.S. Treasury and agency securities, as
   well as FNMAs, FHLMCs and GNMAs. This index is unmanaged and its results
   include reinvested dividends and/or distributions, but do not reflect the
   effect of sales charges, commissions, expenses or taxes.

/2/Lipper General U.S. Government Funds Average is comprised of funds that
  invest primarily in U.S. government and agency issues. The results of the
  underlying funds in the average include the reinvestment of dividends and
  capital gain distributions, as well as brokerage commissions paid by the fund
  for portfolio transactions, but do not reflect the effect of sales charges or
  taxes.

/3/Consumer Price Index (CPI) is a measure of the average change over time in
   the prices paid by urban consumers for a market basket of consumer goods and
   services. Widely used as a measure of inflation, the CPI is computed by the
   U.S. Department of Labor, Bureau of Labor Statistics.

/4/Lifetime results are from December 2, 1985, the date the fund began
  investment operations.




                                                                                         ---
U.S. GOVERNMENT/AAA-RATED SECURITIES FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  45
                                                                                         ---



FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 2
-------------------------------------------------------------------------

           Management fees*                                        0.45%
-------------------------------------------------------------------------
           Distribution and/or service (12b-1) fees                 0.25
-------------------------------------------------------------------------
           Other expenses                                           0.01
-------------------------------------------------------------------------
           Total annual fund operating expenses*                    0.71


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 2   $73    $227    $395     $883





----
46  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  U.S. GOVERNMENT/AAA-RATED SECURITIES FUND
----



CASH MANAGEMENT FUND

RISK/RETURN SUMMARY

The fund seeks to provide you with an opportunity to earn income on your cash
reserves while preserving the value of your investment and maintaining
liquidity. Normally, the fund invests substantially in high-quality money
market instruments such as commercial paper, commercial bank obligations,
savings association obligations, U.S. or Canadian government securities, and
short-term corporate bonds and notes. These securities may have credit and
liquidity enhancements. Changes in the credit quality of banks and financial
institutions providing these enhancements could cause the fund to experience a
loss and may affect its share price.

In addition, the fund may invest in securities issued by entities domiciled
outside the United States or Canada, or in securities with credit and liquidity
support features provided by entities domiciled outside the United States or
Canada. These securities may be affected by unfavorable political, economic or
governmental developments that could affect the repayment of principal or the
payment of interest. Securities of U.S. issuers with substantial operations
outside the United States may also be subject to similar risks.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.

The fund is not managed to maintain a stable net asset value of $1 per share.


                                                                             ---
         CASH MANAGEMENT FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  47
                                                                             ---


INVESTMENT RESULTS

The following information shows how the fund's investment results have varied
from year to year, as well as average annual total returns for various periods.
This information provides some indication of the risks of investing in the
fund. Past results are not predictive of future results. Figures shown reflect
fees and expenses associated with an investment in the fund, including any fee
waivers and/or expense reimbursements in effect during the period presented,
but do not reflect insurance contract fees and expenses. If insurance contract
fees and expenses were reflected, results would have been lower. Class 2 shares
were first offered on April 30, 1997. Results prior to that date assume a
hypothetical investment in Class 1 shares, reduced by the .25% annual expense
that applies to Class 2 shares and is described in the "Plans of distribution"
section of this prospectus. Results for Class 1 shares are comparable to those
of Class 2 shares because both classes invest in the same portfolio of
securities.

Here are the fund's results calculated on a calendar year basis. (If insurance
contract fees and expenses were included, results would have been lower.)

                                    [CHART]

 1998    1999     2000    2001    2002    2003    2004    2005   2006    2007
 ----    ----     ----    ----    ----    ----    ----    ----   ----   -----
 4.90%   4.47%    5.83%   3.43%   1.00%   0.47%   0.70%   2.68%  4.59%   4.73%


The fund's highest/lowest quarterly results during this time period were:

HIGHEST  1.51% (quarter ended September 30, 2000)
LOWEST   0.06% (quarter ended June 30, 2004)



The fund's cumulative total return for the six months ended June 30, 2008, was
x.xx%.



For periods ended December 31, 2007:



AVERAGE ANNUAL TOTAL RETURNS  FUND
-----------------------------------

         1 year               4.73%
-----------------------------------
         5 years               2.62
-----------------------------------
         10 years              3.26
-----------------------------------
         Lifetime*             4.62


*Lifetime results are from February 8, 1984, the date the fund began investment
 operations.


----
48  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  CASH MANAGEMENT FUND
----


FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses associated with an investment in the
fund. It does not reflect insurance contract fees and expenses. If insurance
contract fees and expenses were reflected, expenses shown would be higher.



ANNUAL FUND OPERATING EXPENSES TABLE (DEDUCTED FROM FUND ASSETS)  CLASS 2
-------------------------------------------------------------------------

           Management fees*                                        0.32%
-------------------------------------------------------------------------
           Distribution and/or service (12b-1) fees                 0.25
-------------------------------------------------------------------------
           Other expenses                                           0.01
-------------------------------------------------------------------------
           Total annual fund operating expenses*                    0.58


*The fund's investment adviser is currently waiving 10% of its management fee.
 The waiver may be discontinued at any time in consultation with the fund's
 board, but it is expected to continue at this level until further review. The
 fund's investment adviser and board intend to review the waiver as
 circumstances warrant. Management fees and total expenses do not reflect any
 waivers. Information regarding the effect of any waiver on total annual fund
 operating expenses can be found in the Financial Highlights table in this
 prospectus and in the fund's annual report.

EXAMPLE

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the fund for the time periods indicated, that your
investment has a 5% return each year, that all dividends and capital gain
distributions are reinvested, and that the fund's operating expenses remain the
same as shown above. The example does not reflect insurance contract expenses
or the impact of any fee waivers or expense reimbursements. If insurance
contract expenses were reflected, expenses shown would be higher. If waivers or
reimbursements were reflected, expenses shown would be lower.

Although your actual costs may be higher or lower, based on these assumptions,
your cumulative estimated expenses would be:



         1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------

Class 2   $59    $186    $324     $726



                                                                             ---
         CASH MANAGEMENT FUND  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  49
                                                                             ---


CASH POSITION

The funds may also hold cash or money market instruments, the amount of which
will vary and will depend on various factors, including market conditions and
purchases and redemptions of fund shares. For temporary defensive purposes, a
fund may hold all, or a significant portion, of its assets in such securities.
A larger amount of such holdings could negatively affect a fund's investment
results in a period of rising market prices; conversely, it could reduce a
fund's magnitude of loss in the event of falling market prices and provide
liquidity to make additional investments or to meet redemptions.

MANAGEMENT AND ORGANIZATION

INVESTMENT ADVISER

Capital Research and Management Company, an experienced investment management
organization founded in 1931, serves as investment adviser to the Series and
other mutual funds, including the American Funds. Capital Research and
Management Company is a wholly owned subsidiary of The Capital Group Companies,
Inc. and is located at 333 South Hope Street, Los Angeles, California 90071,
and 6455 Irvine Center Drive, Irvine, California 92618. Capital Research and
Management Company manages the investment portfolios and business affairs of
the Series. The total management fee paid by each fund for the previous fiscal
year, expressed as a percentage of average net assets of that fund, appear in
the Annual Fund Operating Expenses table for each fund. A discussion regarding
the basis for the approval of the Series' investment advisory and service
agreement by the Series' board of trustees is contained in the Series' annual
report to shareholders for the fiscal year ended December 31, 2007.

Capital Research and Management Company manages equity assets through two
investment divisions, Capital World Investors and Capital Research Global
Investors, and manages fixed-income assets through its Fixed Income division.
Capital World Investors and Capital Research Global Investors make investment
decisions on an independent basis.

EXECUTION OF PORTFOLIO TRANSACTIONS

The investment adviser places orders with broker-dealers for the funds'
portfolio transactions. In selecting broker-dealers, the investment adviser
strives to obtain "best execution" (the most favorable total price reasonably
attainable under the circumstances) for the funds' portfolio transactions,
taking into account a variety of factors. Subject to best execution, the
investment adviser may consider investment research and/or brokerage services
provided to the adviser in placing orders for the funds' portfolio
transactions. The investment adviser may place orders for the funds' portfolio
transactions with broker-dealers who have sold shares of funds managed by the
investment adviser or its affiliated companies; however, it does not give
consideration to whether a broker-dealer has sold shares of the funds managed
by the investment adviser or its affiliated companies when placing any such
orders for the funds' portfolio transactions. A more detailed description of
the investment adviser's policies is included in the statement of additional
information.

PORTFOLIO MANAGEMENT

The Series relies on the professional judgment of its investment adviser,
Capital Research and Management Company, to make decisions about the funds'
portfolio investments. The basic investment philosophy of the investment
adviser is to seek to invest in attractively priced securities that, in its
opinion, represent above-average long-term investment opportunities. The
investment adviser believes that an important way to accomplish this is through
fundamental analysis, including meeting with company executives and employees,
suppliers, customers and competitors. Securities may be sold when the
investment adviser believes that they no longer represent relatively attractive
investment opportunities.

PORTFOLIO HOLDINGS

A description of the funds' policies and procedures regarding disclosure of
information about their portfolio securities is available in the statement of
additional information.


----
50  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS
----


MULTIPLE PORTFOLIO COUNSELOR SYSTEM

Capital Research and Management Company uses a system of multiple portfolio
counselors in managing mutual fund assets. Under this approach, the portfolio
of a fund is divided into segments managed by individual counselors who decide
how their respective segments will be invested. In addition, Capital Research
and Management Company's investment analysts may make investment decisions with
respect to a portion of a fund's portfolio. Investment decisions are subject to
a fund's objective(s), policies and restrictions and the oversight of the
appropriate investment-related committees of Capital Research and Management
Company and its investment divisions.

The primary individual portfolio counselors for each of the funds are:




 PORTFOLIO COUNSELOR FOR                                             PRIMARY TITLE WITH INVESTMENT
   THE SERIES/TITLE (IF         PORTFOLIO COUNSELOR EXPERIENCE        ADVISER (OR AFFILIATE) AND    PORTFOLIO COUNSELOR'S ROLE IN
       APPLICABLE)                      IN THE FUND(S)                   INVESTMENT EXPERIENCE        MANAGEMENT OF THE FUND(S)
----------------------------------------------------------------------------------------------------------------------------------

JAMES K. DUNTON             Growth-Income Fund -- 25 years           Senior Vice                    Serves as an equity portfolio
VICE CHAIRMAN OF THE BOARD  (since the fund's inception)             President -- Capital Research  counselor for Growth-Income
                            Blue Chip Income and Growth              Global Investors               Fund and Blue Chip Income and
                            Fund -- 7 years (since the fund's        Investment professional for    Growth Fund
                            inception)                               46 years, all with Capital
                                                                     Research and Management
                                                                     Company or affiliate
----------------------------------------------------------------------------------------------------------------------------------
DONALD D. O'NEAL            Growth-Income Fund -- 3 years            Senior Vice                    Serves as an equity portfolio
PRESIDENT AND TRUSTEE                                                President -- Capital Research  counselor for Growth-Income
                                                                     Global Investors               Fund
                                                                     Investment professional for
                                                                     23 years, all with Capital
                                                                     Research and Management
                                                                     Company or affiliate
----------------------------------------------------------------------------------------------------------------------------------
ALAN N. BERRO               Asset Allocation Fund -- 9 years         Senior Vice                    Serves as an equity portfolio
SENIOR VICE PRESIDENT                                                President -- Capital World     counselor for Asset
                                                                     Investors                      Allocation Fund
                                                                     Investment professional for
                                                                     23 years in total; 17 years
                                                                     with Capital Research and
                                                                     Management Company or
                                                                     affiliate
----------------------------------------------------------------------------------------------------------------------------------
ABNER D. GOLDSTINE          Bond Fund -- 13 years (since the         Senior Vice                    Serves as a fixed-income
SENIOR VICE PRESIDENT       fund's inception)                        President -- Fixed Income,     portfolio counselor for Bond
                            High-Income Bond Fund -- 11 years        Capital Research and           Fund and High-Income Bond Fund
                                                                     Management Company
                                                                     Investment professional for
                                                                     56 years in total; 41 years
                                                                     with Capital Research and
                                                                     Management Company or
                                                                     affiliate
----------------------------------------------------------------------------------------------------------------------------------
JOHN H. SMET                U.S. Government/AAA-Rated                Senior Vice                    Serves as a fixed-income
SENIOR VICE PRESIDENT       Securities Fund -- 16 years              President -- Fixed Income,     portfolio counselor for U.S.
                                                                     Capital Research and           Government/AAA-Rated
                                                                     Management Company             Securities Fund
                                                                     Investment professional for
                                                                     26 years in total; 25 years
                                                                     with Capital Research and
                                                                     Management Company or
                                                                     affiliate
----------------------------------------------------------------------------------------------------------------------------------
CLAUDIA P. HUNTINGTON       Growth-Income Fund -- 15 years (plus     Senior Vice                    Serves as an equity portfolio
VICE PRESIDENT              5 years of prior experience as an        President -- Capital Research  counselor for Growth-Income
                            investment analyst for the fund)         Global Investors               Fund and Global Discovery Fund
                            Global Discovery Fund -- 7 years         Investment professional for
                            (since the fund's inception)             36 years in total; 33 years
                                                                     with Capital Research and
                                                                     Management Company or
                                                                     affiliate
----------------------------------------------------------------------------------------------------------------------------------
ROBERT W. LOVELACE          Global Growth Fund -- 11 years (since    Senior Vice                    Serves as an equity portfolio
VICE PRESIDENT              the fund's inception)                    President -- Capital World     counselor for Global Growth
                            New World Fund -- 9 years (since the     Investors                      Fund and New World Fund
                            fund's inception)                        Investment professional for
                                                                     23 years, all with Capital
                                                                     Research and Management
                                                                     Company or affiliate
----------------------------------------------------------------------------------------------------------------------------------
SUSAN M. TOLSON             High-Income Bond Fund -- 14 years        Senior Vice                    Serves as a fixed-income
VICE PRESIDENT              (plus 2 years of prior experience as an  President -- Fixed Income,     portfolio counselor for
                            investment analyst for the fund)         Capital Research and           High-Income Bond Fund, Asset
                            Asset Allocation Fund -- 9 years         Management Company             Allocation Fund and Global
                            Global Bond Fund -- 2 years (since the   Investment professional for    Bond Fund
                            fund's inception)                        20 years in total; 18 years
                                                                     with Capital Research and
                                                                     Management Company or
                                                                     affiliate
----------------------------------------------------------------------------------------------------------------------------------
DAVID C. BARCLAY            High-Income Bond Fund -- 15 years        Senior Vice                    Serves as a fixed-income
                            New World Fund -- 9 years (since the     President -- Fixed Income,     portfolio counselor for
                            fund's inception)                        Capital Research and           High-Income Bond Fund, New
                            Bond Fund -- 11 years                    Management Company             World Fund and Bond Fund
                                                                     Investment professional for
                                                                     27 years in total; 20 years
                                                                     with Capital Research and
                                                                     Management Company or
                                                                     affiliate
----------------------------------------------------------------------------------------------------------------------------------
DONNALISA BARNUM            Growth Fund -- 5 years                   Senior Vice                    Serves as an equity portfolio
                                                                     President -- Capital World     counselor for Growth Fund
                                                                     Investors
                                                                     Investment professional for
                                                                     27 years in total; 22 years
                                                                     with Capital Research and
                                                                     Management Company or
                                                                     affiliate
----------------------------------------------------------------------------------------------------------------------------------




 PORTFOLIO COUNSELOR FOR    PRIMARY TITLE WITH INVESTMENT
   THE SERIES/TITLE (IF      ADVISER (OR AFFILIATE) AND    PORTFOLIO COUNSELOR'S ROLE IN
       APPLICABLE)              INVESTMENT EXPERIENCE        MANAGEMENT OF THE FUND(S)
-----------------------------------------------------------------------------------------

JAMES K. DUNTON             Senior Vice                    Serves as an equity portfolio
VICE CHAIRMAN OF THE BOARD  President -- Capital Research  counselor for Growth-Income
                            Global Investors               Fund and Blue Chip Income and
                            Investment professional for    Growth Fund
                            46 years, all with Capital
                            Research and Management
                            Company or affiliate
-----------------------------------------------------------------------------------------
DONALD D. O'NEAL            Senior Vice                    Serves as an equity portfolio
PRESIDENT AND TRUSTEE       President -- Capital Research  counselor for Growth-Income
                            Global Investors               Fund
                            Investment professional for
                            23 years, all with Capital
                            Research and Management
                            Company or affiliate
-----------------------------------------------------------------------------------------
ALAN N. BERRO               Senior Vice                    Serves as an equity portfolio
SENIOR VICE PRESIDENT       President -- Capital World     counselor for Asset
                            Investors                      Allocation Fund
                            Investment professional for
                            23 years in total; 17 years
                            with Capital Research and
                            Management Company or
                            affiliate
-----------------------------------------------------------------------------------------
ABNER D. GOLDSTINE          Senior Vice                    Serves as a fixed-income
SENIOR VICE PRESIDENT       President -- Fixed Income,     portfolio counselor for Bond
                            Capital Research and           Fund and High-Income Bond Fund
                            Management Company
                            Investment professional for
                            56 years in total; 41 years
                            with Capital Research and
                            Management Company or
                            affiliate
-----------------------------------------------------------------------------------------
JOHN H. SMET                Senior Vice                    Serves as a fixed-income
SENIOR VICE PRESIDENT       President -- Fixed Income,     portfolio counselor for U.S.
                            Capital Research and           Government/AAA-Rated
                            Management Company             Securities Fund
                            Investment professional for
                            26 years in total; 25 years
                            with Capital Research and
                            Management Company or
                            affiliate
-----------------------------------------------------------------------------------------
CLAUDIA P. HUNTINGTON       Senior Vice                    Serves as an equity portfolio
VICE PRESIDENT              President -- Capital Research  counselor for Growth-Income
                            Global Investors               Fund and Global Discovery Fund
                            Investment professional for
                            36 years in total; 33 years
                            with Capital Research and
                            Management Company or
                            affiliate
-----------------------------------------------------------------------------------------
ROBERT W. LOVELACE          Senior Vice                    Serves as an equity portfolio
VICE PRESIDENT              President -- Capital World     counselor for Global Growth
                            Investors                      Fund and New World Fund
                            Investment professional for
                            23 years, all with Capital
                            Research and Management
                            Company or affiliate
-----------------------------------------------------------------------------------------
SUSAN M. TOLSON             Senior Vice                    Serves as a fixed-income
VICE PRESIDENT              President -- Fixed Income,     portfolio counselor for
                            Capital Research and           High-Income Bond Fund, Asset
                            Management Company             Allocation Fund and Global
                            Investment professional for    Bond Fund
                            20 years in total; 18 years
                            with Capital Research and
                            Management Company or
                            affiliate
-----------------------------------------------------------------------------------------
DAVID C. BARCLAY            Senior Vice                    Serves as a fixed-income
                            President -- Fixed Income,     portfolio counselor for
                            Capital Research and           High-Income Bond Fund, New
                            Management Company             World Fund and Bond Fund
                            Investment professional for
                            27 years in total; 20 years
                            with Capital Research and
                            Management Company or
                            affiliate
-----------------------------------------------------------------------------------------
DONNALISA BARNUM            Senior Vice                    Serves as an equity portfolio
                            President -- Capital World     counselor for Growth Fund
                            Investors
                            Investment professional for
                            27 years in total; 22 years
                            with Capital Research and
                            Management Company or
                            affiliate
-----------------------------------------------------------------------------------------



                                                                             ---
                               AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  51
                                                                             ---





 PORTFOLIO COUNSELOR FOR                                            PRIMARY TITLE WITH INVESTMENT
   THE SERIES/TITLE (IF         PORTFOLIO COUNSELOR EXPERIENCE       ADVISER (OR AFFILIATE) AND    PORTFOLIO COUNSELOR'S ROLE IN
       APPLICABLE)                     IN THE FUND(S)                   INVESTMENT EXPERIENCE        MANAGEMENT OF THE FUND(S)
---------------------------------------------------------------------------------------------------------------------------------

CHRISTOPHER D. BUCHBINDER   Blue Chip Income and Growth             Senior Vice                    Serves as an equity portfolio
                            Fund -- 1 year                          President -- Capital Research  counselor for Blue Chip
                                                                    Global Investors               Income and Growth Fund
                                                                    Investment professional for
                                                                    13 years, all with Capital
                                                                    Research and Management
                                                                    Company or affiliate
---------------------------------------------------------------------------------------------------------------------------------
GORDON CRAWFORD             Global Small Capitalization Fund -- 10  Senior Vice                    Serves as an equity portfolio
                            years (since the fund's inception)      President -- Capital Research  counselor for Global Small
                            Global Discovery Fund -- 3 years        Global Investors               Capitalization Fund and
                                                                    Investment professional for    Global Discovery Fund
                                                                    37 years, all with Capital
                                                                    Research and Management
                                                                    Company or affiliate
---------------------------------------------------------------------------------------------------------------------------------
MARK H. DALZELL             Bond Fund -- 3 years Global Bond        Senior Vice                    Serves as a fixed-income
                            Fund -- 2 years (since the fund's       President -- Fixed Income,     portfolio counselor for Bond
                            inception)                              Capital Research and           Fund and Global Bond Fund
                                                                    Management Company
                                                                    Investment professional for
                                                                    30 years in total; 20 years
                                                                    with Capital Research and
                                                                    Management Company or
                                                                    affiliate
---------------------------------------------------------------------------------------------------------------------------------
MARK E. DENNING             Global Small Capitalization Fund -- 10  Senior Vice                    Serves as an equity portfolio
                            years (since the fund's inception)      President -- Capital Research  counselor for Global Small
                            Global Discovery Fund -- 3 years        Global Investors               Capitalization Fund and
                                                                    Investment professional for    Global Discovery Fund
                                                                    26 years, all with Capital
                                                                    Research and Management
                                                                    Company or affiliate
---------------------------------------------------------------------------------------------------------------------------------
J. BLAIR FRANK              Global Small Capitalization Fund -- 6   Senior Vice                    Serves as an equity portfolio
                            years                                   President -- Capital Research  counselor for Global Small
                            Growth-Income Fund -- 2 years           Global Investors               Capitalization Fund and
                                                                    Investment professional for    Growth-Income Fund
                                                                    15 years in total; 14 years
                                                                    with Capital Research and
                                                                    Management Company or
                                                                    affiliate
---------------------------------------------------------------------------------------------------------------------------------
NICHOLAS J. GRACE           Global Growth Fund -- 6 years (plus 4   Senior Vice                    Serves as an equity portfolio
                            years of prior experience as an         President -- Capital World     counselor for Global Growth
                            investment analyst for the fund)        Investors                      Fund
                                                                    Investment professional for
                                                                    18 years in total; 15 years
                                                                    with Capital Research and
                                                                    Management Company or
                                                                    affiliate
---------------------------------------------------------------------------------------------------------------------------------
ALWYN W. HEONG              International Fund -- 12 years          Senior Vice                    Serves as an equity portfolio
                                                                    President -- Capital Research  counselor for International
                                                                    Global Investors               Fund
                                                                    Investment professional for
                                                                    20 years in total; 16 years
                                                                    with Capital Research and
                                                                    Management Company or
                                                                    affiliate
---------------------------------------------------------------------------------------------------------------------------------
DAVID A. HOAG               Bond Fund -- 1 year                     Senior Vice                    Serves as a fixed-income
                                                                    President -- Fixed Income,     portfolio counselor for Bond
                                                                    Capital Research and           Fund
                                                                    Management Company
                                                                    Investment Professional for
                                                                    20 years in total; 17 years
                                                                    with Capital Research and
                                                                    Management Company or
                                                                    affiliate
---------------------------------------------------------------------------------------------------------------------------------
THOMAS H. HOGH              Global Bond Fund -- 2 years (since the  Senior Vice                    Serves as a fixed-income
                            fund's inception)                       President -- Fixed Income,     portfolio counselor for
                            U.S. Government/AAA-Rated               Capital Research Company       Global Bond Fund, U.S.
                            Securities Fund -- 11 years             Investment professional for    Government/AAA-Rated
                            Bond Fund -- 1 year                     22 years in total; 18 years    Securities Fund and Bond Fund
                                                                    with Capital Research and
                                                                    Management Company or
                                                                    affiliate
---------------------------------------------------------------------------------------------------------------------------------
GREGG E. IRELAND            Global Growth and Income Fund -- 2      Senior Vice                    Serves as an equity portfolio
                            years (since the fund's inception)      President -- Capital World     counselor for Global Growth
                            Growth Fund -- 2 years                  Investors                      and Income Fund and Growth
                                                                    Investment professional for    Fund
                                                                    36 years, all with Capital
                                                                    Research and Management
                                                                    Company or affiliate
---------------------------------------------------------------------------------------------------------------------------------
CARL M. KAWAJA              Global Growth and Income Fund -- 2      Senior Vice                    Serves as an equity portfolio
                            years (since the fund's inception) New  President -- Capital World     counselor for Global Growth
                            World Fund -- 9 years (since the        Investors                      and Income Fund and New World
                            fund's inception)                       Investment professional for    Fund
                                                                    21 years in total; 17 years
                                                                    with Capital Research and
                                                                    Management Company or
                                                                    affiliate
---------------------------------------------------------------------------------------------------------------------------------
MICHAEL T. KERR             Growth Fund -- 3 years 	            Senior Vice                    Serves as an equity portfolio
                            				            President -- Capital World     counselor for Growth Fund
                                                                    Investors
                                                                    Investment professional for
                                                                    25 years in total; 23 years
                                                                    with Capital Research and
                                                                    Management Company or
                                                                    affiliate
---------------------------------------------------------------------------------------------------------------------------------
SUNG LEE                    International Fund -- 3 years           Senior Vice                    Serves as an equity portfolio
                                                                    President -- Capital Research  counselor for International
                                                                    Global Investors               Fund
                                                                    Investment professional for
                                                                    14 years, all with Capital
                                                                    Research and Management
                                                                    Company or affiliate
---------------------------------------------------------------------------------------------------------------------------------



----
52  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS
----






 PORTFOLIO COUNSELOR FOR                                             PRIMARY TITLE WITH INVESTMENT
   THE SERIES/TITLE (IF         PORTFOLIO COUNSELOR EXPERIENCE        ADVISER (OR AFFILIATE) AND    PORTFOLIO COUNSELOR'S ROLE IN
       APPLICABLE)                      IN THE FUND(S)                   INVESTMENT EXPERIENCE        MANAGEMENT OF THE FUND(S)
----------------------------------------------------------------------------------------------------------------------------------

JAMES B. LOVELACE           Blue Chip Income and Growth              Senior Vice                    Serves as an equity portfolio
                            Fund -- 1 year                           President -- Capital Research  counselor for Blue Chip
                                                                     Global Investors               Income and Growth Fund
                                                                     Investment professional for
                                                                     26 years, all with Capital
                                                                     Research and Management
                                                                     Company or affiliate
----------------------------------------------------------------------------------------------------------------------------------
JESPER LYCKEUS              International Fund -- 2 years (plus      Senior Vice                    Serves as an equity portfolio
                            8 years of prior experience as an        President -- Capital Research  counselor for International
                            investment analyst for the fund)         Global Investors               Fund and International Growth
                            International Growth and Income          Investment professional for    and Income Fund
                            Fund -- less than 1 year (since the      13 years in total; 12 years
                            fund's inception)                        with Capital Research and
                                                                     Management Company or
                                                                     affiliate
----------------------------------------------------------------------------------------------------------------------------------
MARK R. MACDONALD           U.S. Government/AAA-Rated                Senior Vice                    Serves as a fixed-income
                            Securities Fund -- 2 years               President -- Fixed Income,     portfolio counselor for U.S.
                                                                     Capital Research and           Government/ AAA-Rated
                                                                     Management Company             Securities Fund
                                                                     Investment professional for
                                                                     23 years in total; 14 years
                                                                     with Capital Research and
                                                                     Management Company or
                                                                     affiliate
----------------------------------------------------------------------------------------------------------------------------------
RONALD B. MORROW            Growth Fund -- 5 years (plus             Senior Vice                    Serves as an equity portfolio
                            6 years of prior experience as an        President -- Capital World     counselor for Growth Fund
                            investment analyst for the fund)         Investors
                                                                     Investment professional for
                                                                     40 years in total; 11 years
                                                                     with Capital Research and
                                                                     Management Company or
                                                                     affiliate
----------------------------------------------------------------------------------------------------------------------------------
JAMES R. MULALLY            Asset Allocation Fund -- 3 years         Senior Vice                    Serves as a fixed-income
                                                                     President -- Fixed Income,     portfolio counselor for Asset
                                                                     Capital Research and           Allocation Fund
                                                                     Management Company
                                                                     Investment professional for
                                                                     33 years in total; 28 years
                                                                     with Capital Research and
                                                                     Management Company or
                                                                     affiliate
----------------------------------------------------------------------------------------------------------------------------------
C. ROSS SAPPENFIELD         Growth-Income Fund -- 9 years            Senior Vice                    Serves as an equity portfolio
                            Blue Chip Income and Growth              President -- Capital Research  counselor for Growth-Income
                            Fund -- 7 years (since the fund's        Global Investors               Fund and Blue Chip Income and
                            inception)                               Investment professional for    Growth Fund
                                                                     16 years, all with Capital
                                                                     Research and Management
                                                                     Company or affiliate
----------------------------------------------------------------------------------------------------------------------------------
CHRISTOPHER M. THOMSEN      International Fund -- 3 years            Senior Vice                    Serves as an equity portfolio
                                                                     President -- Capital Research  counselor for International
                                                                     Global Investors               Fund
                                                                     Investment professional for
                                                                     11 years, all with Capital
                                                                     Research and Management
                                                                     Company or affiliate
----------------------------------------------------------------------------------------------------------------------------------
STEVEN T. WATSON            Global Growth Fund -- 6 years (plus      Senior Vice                    Serves as an equity portfolio
                            4 years of prior experience as an        President -- Capital World     counselor for Global Growth
                            investment analyst for the fund) Global  Investors                      Fund and Global Growth and
                            Growth and Income Fund -- 2 years        Investment professional for    Income Fund
                            (since the fund's inception)             21 years in total; 19 years
                                                                     with Capital Research and
                                                                     Management Company or
                                                                     affiliate
----------------------------------------------------------------------------------------------------------------------------------
PAUL A. WHITE               Global Growth Fund -- 4 years (plus      Senior Vice                    Serves as an equity portfolio
                            5 years of prior experience as an        President -- Capital World     counselor for Global Growth
                            investment analyst for the fund)         Investors                      Fund
                                                                     Investment professional for
                                                                     20 years in total; 10 years
                                                                     with Capital Research and
                                                                     Management Company or
                                                                     affiliate









 PORTFOLIO COUNSELOR FOR    PRIMARY TITLE WITH INVESTMENT
   THE SERIES/TITLE (IF      ADVISER (OR AFFILIATE) AND    PORTFOLIO COUNSELOR'S ROLE IN
       APPLICABLE)              INVESTMENT EXPERIENCE        MANAGEMENT OF THE FUND(S)
-----------------------------------------------------------------------------------------

JAMES B. LOVELACE           Senior Vice                    Serves as an equity portfolio
                            President -- Capital Research  counselor for Blue Chip
                            Global Investors               Income and Growth Fund
                            Investment professional for
                            26 years, all with Capital
                            Research and Management
                            Company or affiliate
-----------------------------------------------------------------------------------------
JESPER LYCKEUS              Senior Vice                    Serves as an equity portfolio
                            President -- Capital Research  counselor for International
                            Global Investors               Fund and International Growth
                            Investment professional for    and Income Fund
                            13 years in total; 12 years
                            with Capital Research and
                            Management Company or
                            affiliate
-----------------------------------------------------------------------------------------
MARK R. MACDONALD           Senior Vice                    Serves as a fixed-income
                            President -- Fixed Income,     portfolio counselor for U.S.
                            Capital Research and           Government/ AAA-Rated
                            Management Company             Securities Fund
                            Investment professional for
                            23 years in total; 14 years
                            with Capital Research and
                            Management Company or
                            affiliate
-----------------------------------------------------------------------------------------
RONALD B. MORROW            Senior Vice                    Serves as an equity portfolio
                            President -- Capital World     counselor for Growth Fund
                            Investors
                            Investment professional for
                            40 years in total; 11 years
                            with Capital Research and
                            Management Company or
                            affiliate
-----------------------------------------------------------------------------------------
JAMES R. MULALLY            Senior Vice                    Serves as a fixed-income
                            President -- Fixed Income,     portfolio counselor for Asset
                            Capital Research and           Allocation Fund
                            Management Company
                            Investment professional for
                            33 years in total; 28 years
                            with Capital Research and
                            Management Company or
                            affiliate
-----------------------------------------------------------------------------------------
C. ROSS SAPPENFIELD         Senior Vice                    Serves as an equity portfolio
                            President -- Capital Research  counselor for Growth-Income
                            Global Investors               Fund and Blue Chip Income and
                            Investment professional for    Growth Fund
                            16 years, all with Capital
                            Research and Management
                            Company or affiliate
-----------------------------------------------------------------------------------------
CHRISTOPHER M. THOMSEN      Senior Vice                    Serves as an equity portfolio
                            President -- Capital Research  counselor for International
                            Global Investors               Fund
                            Investment professional for
                            11 years, all with Capital
                            Research and Management
                            Company or affiliate
-----------------------------------------------------------------------------------------
STEVEN T. WATSON            Senior Vice                    Serves as an equity portfolio
                            President -- Capital World     counselor for Global Growth
                            Investors                      Fund and Global Growth and
                            Investment professional for    Income Fund
                            21 years in total; 19 years
                            with Capital Research and
                            Management Company or
                            affiliate
-----------------------------------------------------------------------------------------
PAUL A. WHITE               Senior Vice                    Serves as an equity portfolio
                            President -- Capital World     counselor for Global Growth
                            Investors                      Fund
                            Investment professional for
                            20 years in total; 10 years
                            with Capital Research and
                            Management Company or
                            affiliate




Additional information regarding the portfolio counselors' compensation,
holdings in other accounts and ownership of securities in American Funds
Insurance Series can be found in the statement of additional information.

PURCHASES AND REDEMPTIONS OF SHARES

Shares of the Series are currently offered only to insurance company separate
accounts as well as so-called "feeder funds" under master-feeder arrangements
sponsored by insurance companies. All such shares may be purchased or redeemed
by the separate accounts (or feeder funds) at net asset value without any sales
or redemption charges. Such purchases and redemptions are made promptly after
corresponding purchases and redemptions of units of the separate accounts (or
feeder funds).

FREQUENT TRADING OF FUND SHARES

The Series and American Funds Distributors, Inc., the Series' distributor,
reserve the right to reject any purchase order for any reason. The funds are
not designed to serve as a vehicle for frequent trading. Frequent trading of
fund shares may lead to increased costs to the funds and less efficient
management of the funds' portfolios, potentially resulting in dilution of the
value of the shares held by long-term shareholders. Accordingly, purchases,
including those that are part of exchange activity, that the Series or American
Funds Distributors, Inc. has determined could involve actual or potential harm
to a fund may be rejected.


                                                                             ---
                               AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  53
                                                                             ---


The Series, through its transfer agent, American Funds Service Company,
maintains surveillance procedures to detect frequent trading in fund shares.
Under these procedures, various analytics are used to evaluate factors that may
be indicative of frequent trading. For example, transactions in fund shares
that exceed certain monetary thresholds may be scrutinized. American Funds
Service Company also may review transactions that occur close in time to other
transactions in the same account or in multiple accounts under common ownership
or influence. Trading activity that is identified through these procedures or
as a result of any other information available to the funds will be evaluated
to determine whether such activity might constitute frequent trading. These
procedures may be modified from time to time as appropriate to improve the
detection of frequent trading, to facilitate monitoring for frequent trading in
particular retirement plans or other accounts, and to comply with applicable
laws.

In addition to the Series' broad ability to restrict potentially harmful
trading as described above, the Series' board of trustees has adopted a
"purchase blocking policy" under which any contract owner redeeming units
representing a beneficial interest in any fund other than Cash Management Fund
(including redemptions that are part of an exchange transaction) having a value
of $5,000 or more will be precluded from investing units of beneficial interest
in that fund (including investments that are part of an exchange transaction)
for 30 calendar days after the redemption transaction. Under this purchase
blocking policy, certain purchases will not be prevented and certain
redemptions will not trigger a purchase block, such as: systematic redemptions
and purchases where the entity maintaining the contract owner's account is able
to identify the transaction as a systematic redemption or purchase; purchases
and redemptions of units representing a beneficial interest in a fund having a
value of less than $5,000; retirement plan contributions, loans and
distributions (including hardship withdrawals) identified as such on the
retirement plan recordkeeper's system; and purchase transactions involving
transfers of assets, where the entity maintaining the contract owner's account
is able to identify the transaction as one of these types of transactions.

The Series reserves the right to waive the purchase blocking policy in those
instances where American Funds Service Company determines that its surveillance
procedures are adequate to detect frequent trading in fund shares.

American Funds Service Company may work with the insurance company separate
accounts to apply their procedures which American Funds Service Company
believes are reasonably designed to enforce the frequent trading policies of
the series. You should refer to disclosures provided by the insurance company
with which you have a contract to determine the specific trading restrictions
that apply to you.

If American Funds Service Company identifies any activity that may constitute
frequent trading, it reserves the right to contact the insurance company
separate account and request that the separate account either provide
information regarding an account owner's transactions or restrict the account
owner's trading. If American Funds Service Company is not satisfied that
insurance company separate account has taken appropriate action, American Funds
Service Company may terminate the separate account's ability to transact in
fund shares.

There is no guarantee that all instances of frequent trading in fund shares
will be prevented.

NOTWITHSTANDING THE SERIES' SURVEILLANCE PROCEDURES AND PURCHASE BLOCKING
POLICY, ALL TRANSACTIONS IN FUND SHARES REMAIN SUBJECT TO THE SERIES' AND
AMERICAN FUNDS DISTRIBUTORS, INC.'S RIGHT TO RESTRICT POTENTIALLY ABUSIVE
TRADING GENERALLY (INCLUDING THE TYPES OF TRANSACTIONS DESCRIBED ABOVE THAT
WILL NOT BE PREVENTED OR TRIGGER A BLOCK UNDER THE PURCHASE BLOCKING POLICY).
SEE THE STATEMENT OF ADDITIONAL INFORMATION FOR MORE INFORMATION ABOUT HOW
AMERICAN FUNDS SERVICE COMPANY MAY ADDRESS OTHER POTENTIALLY ABUSIVE TRADING
ACTIVITY IN THE SERIES.

VALUING SHARES

Each fund calculates its share price, also called net asset value, each day the
New York Stock Exchange is open as of approximately 4:00 p.m. New York time,
the normal close of regular trading. Assets are valued primarily on the basis
of market quotations. However, the funds have adopted procedures for making
"fair value" determinations if market quotations are not readily available or
are not considered reliable. For example, if events occur between the close of
markets outside the United States and the close of regular trading on the New
York Stock Exchange that, in the opinion of the investment adviser, materially
affect the value of any of the securities in the funds' portfolios that
principally trade in those international markets, those securities will be
valued in accordance with fair value procedures. Use of these procedures is
intended to result in more appropriate net asset values. In addition, such use
will reduce, if not eliminate, potential arbitrage opportunities otherwise
available to short-term investors.

Because certain of the funds may hold securities that are primarily listed on
foreign exchanges that trade on weekends or days when the funds do not price
their shares, the value of securities held in the funds may change on days when
you will not be able to purchase or redeem fund shares.


----
54  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS
----


Shares of the funds will be purchased or sold at the net asset value next
determined after receipt of requests from the appropriate insurance company.

PLANS OF DISTRIBUTION

The Series has adopted plans of distribution or "12b-1 plans" for Class 2 and
Class 3 shares. Under these plans, the Series may finance activities primarily
intended to sell shares, provided the categories of expenses are approved in
advance by the Series' board of trustees. The plans provide for annual expenses
of .25% for Class 2 shares and .18% for Class 3 shares. For these share
classes, amounts paid under the 12b-1 plans are used by insurance company
contract issuers to cover the expenses of certain contract owner services. The
12b-1 fees paid by the Series, as a percentage of average net assets, for the
previous fiscal year, are indicated above in the Annual Fund Operating Expenses
table for each fund. Since these fees are paid out of the Series' assets or
income on an ongoing basis, over time they will increase the cost and reduce
the return of an investment.

DISTRIBUTIONS AND TAXES

Each fund of the Series intends to qualify as a "regulated investment company"
under the Internal Revenue Code. In any fiscal year in which a fund so
qualifies and distributes to shareholders its investment company taxable income
and net realized capital gain, the fund itself is relieved of federal income
tax.

It is the Series' policy to distribute to the shareholders (the insurance
company separate accounts) all of its investment company taxable income and
capital gain for each fiscal year.

See the applicable contract prospectus for information regarding the federal
income tax treatment of the contracts and distributions to the separate
accounts.


                                                                             ---
                               AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  55
                                                                             ---


FINANCIAL HIGHLIGHTS/1/

The Financial Highlights table is intended to help you understand the funds'
results for the past five fiscal years. Certain information reflects financial
results for a single share of a particular class. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in a fund (assuming reinvestment of all dividends and capital gain
distributions). This information has been audited by PricewaterhouseCoopers
LLP, whose report, along with the funds' financial statements, is included in
the statement of additional information, which is available upon request
(except for the 6 months ended June 30, 2008). Figures shown do not reflect
insurance contract fees and expenses. If insurance contract fees and expenses
were reflected, results would be lower. The information for the six-month
periods presented have been derived from each funds' unaudited financial
statements and includes all adjustments that management considers necessary for
a fair presentation of such information for the periods presented.



                                 Income (loss) from investment operations/2/      Dividends and distributions
                                 ------------------------------------------- -------------------------------------

                                                 Net gains
                       Net asset    Net         (losses) on                  Dividends                    Total     Net asset
                        value,   investment   securities (both   Total from  (from net  Distributions   dividends    value,
Period                 beginning   income       realized and     investment  investment (from capital      and       end of
ended                  of period   (loss)       unrealized)      operations   income)      gains)     distributions  period


Global Discovery Fund
------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/              $   xx      $ xx           $  xx           $  xx       $  xx       $   xx        $   xx      $   xx
12/31/07                 13.05       .17            2.07            2.24        (.16)       (1.04)        (1.20)      14.09
12/31/06                 11.63       .15            1.89            2.04        (.13)        (.49)         (.62)      13.05
12/31/05                 10.79       .14            1.05            1.19        (.11)        (.24)         (.35)      11.63
12/31/04                  9.94       .08             .98            1.06        (.09)        (.12)         (.21)      10.79
12/31/03                  7.26       .05            2.67            2.72        (.04)          --          (.04)       9.94
CLASS 2
6/30/08/4/                  xx        xx              xx              xx          xx           xx            xx          xx
12/31/07                 13.00       .14            2.05            2.19        (.13)       (1.04)        (1.17)      14.02
12/31/06                 11.59       .11            1.89            2.00        (.10)        (.49)         (.59)      13.00
12/31/05                 10.76       .11            1.05            1.16        (.09)        (.24)         (.33)      11.59
12/31/04                  9.92       .06             .97            1.03        (.07)        (.12)         (.19)      10.76
12/31/03                  7.25       .02            2.67            2.69        (.02)          --          (.02)       9.92

Global Growth Fund
------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/              $   xx      $ xx           $  xx           $  xx       $  xx       $   xx        $   xx      $   xx
12/31/07                 23.44       .51            2.98            3.49        (.76)       (1.02)        (1.78)      25.15
12/31/06                 19.63       .41            3.62            4.03        (.22)          --          (.22)      23.44
12/31/05                 17.31       .28            2.19            2.47        (.15)          --          (.15)      19.63
12/31/04                 15.30       .18            1.92            2.10        (.09)          --          (.09)      17.31
12/31/03                 11.35       .12            3.91            4.03        (.08)          --          (.08)      15.30
CLASS 2
6/30/08/4/                  xx        xx              xx              xx          xx           xx            xx          xx
12/31/07                 23.29       .45            2.95            3.40        (.67)       (1.02)        (1.69)      25.00
12/31/06                 19.52       .36            3.59            3.95        (.18)          --          (.18)      23.29
12/31/05                 17.23       .23            2.18            2.41        (.12)          --          (.12)      19.52
12/31/04                 15.25       .14            1.91            2.05        (.07)          --          (.07)      17.23
12/31/03                 11.32       .09            3.89            3.98        (.05)          --          (.05)      15.25

Global Small Capitalization Fund
------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/              $   xx     $  xx           $  xx           $  xx       $  xx       $   xx        $   xx      $   xx
12/31/07                 24.87       .12            5.27            5.39        (.90)       (2.16)        (3.06)      27.20
12/31/06                 21.29       .19            4.74            4.93        (.14)       (1.21)        (1.35)      24.87
12/31/05                 17.14       .13            4.23            4.36        (.21)          --          (.21)      21.29
12/31/04                 14.15       .02            2.97            2.99          --           --            --       17.14
12/31/03                  9.27        --/5/         4.97            4.97        (.09)          --          (.09)      14.15
CLASS 2
6/30/08/4/                  xx        xx              xx              xx          xx           xx            xx          xx
12/31/07                 24.64       .05            5.22            5.27        (.80)       (2.16)        (2.96)      26.95
12/31/06                 21.12       .14            4.70            4.84        (.11)       (1.21)        (1.32)      24.64
12/31/05                 17.02       .09            4.19            4.28        (.18)          --          (.18)      21.12
12/31/04                 14.08      (.01)           2.95            2.94          --           --            --       17.02
12/31/03                  9.23      (.03)           4.95            4.92        (.07)          --          (.07)      14.08





                                              Ratio of   Ratio of    Ratio of
                                              expenses   expenses      net
                                 Net assets, to average to average    income
                                   end of    net assets net assets  (loss) to
Period                  Total    period (in    before     after      average
ended                  return/3/  millions)    waiver   waiver/3/  net assets/3/


Global Discovery Fund
--------------------------------------------------------------------------------
CLASS 1
6/30/08/4/                 xx%       $ xx         xx%        xx%         xx%
12/31/07                17.55          35        .60        .54        1.25
12/31/06                17.66          28        .62        .56        1.19
12/31/05                11.07          22        .61        .56        1.27
12/31/04                10.72          20        .61        .60         .81
12/31/03                37.41          17        .61        .61         .55
CLASS 2
6/30/08/4/                 xx          xx         xx         xx          xx
12/31/07                17.22         240        .85        .79         .98
12/31/06                17.41         151        .87        .81         .94
12/31/05                10.80          89        .86        .81        1.04
12/31/04                10.43          51        .86        .85         .60
12/31/03                37.11          24        .86        .86         .28

Global Growth Fund
-------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/                 xx%     $   xx         xx%        xx%         xx%
12/31/07                15.16         684        .55        .50        2.06
12/31/06                20.73         278        .58        .53        1.95
12/31/05                14.37         206        .62        .57        1.56
12/31/04                13.80         202        .65        .64        1.15
12/31/03                35.63         188        .70        .70         .94
CLASS 2
6/30/08/4/                 xx          xx         xx         xx          xx
12/31/07                14.85       5,180        .80        .75        1.84
12/31/06                20.43       4,015        .83        .78        1.71
12/31/05                14.07       2,617        .87        .82        1.30
12/31/04                13.49       1,796        .90        .89         .92
12/31/03                35.27       1,082        .95        .95         .68

Global Small Capitalization Fund
-------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/                 xx%     $   xx         xx%        xx%         xx%
12/31/07                21.73         369        .73        .66         .45
12/31/06                24.35         247        .77        .69         .82
12/31/05                25.66         231        .79        .73         .72
12/31/04                21.13         193        .81        .80         .15
12/31/03                53.92         163        .83        .83        (.03)
CLASS 2
6/30/08/4/                 xx          xx         xx         xx          xx
12/31/07                21.43       3,975        .98        .91         .20
12/31/06                24.05       2,927       1.02        .94         .61
12/31/05                25.35       1,977       1.04        .97         .49
12/31/04                20.88       1,198       1.06       1.05        (.07)
12/31/03                53.53         665       1.08       1.08        (.28)



----
56  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS
----




                                            Income (loss) from investment operations/2/      Dividends and distributions
                                            ------------------------------------------- -------------------------------------

                                                            Net gains
                                  Net asset    Net         (losses) on                  Dividends                    Total
                                   value,   investment   securities (both   Total from  (from net  Distributions   dividends
Period                            beginning   income       realized and     investment  investment (from capital      and
ended                             of period   (loss)       unrealized)      operations   income)      gains)     distributions

Growth Fund
-------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/                         $   xx      $ xx           $   xx          $   xx       $  xx       $   xx       $   xx
12/31/07                            64.51       .68             7.44            8.12        (.68)       (4.73)       (5.41)
12/31/06                            59.36       .70             5.46            6.16        (.63)        (.38)       (1.01)
12/31/05                            51.39       .46             8.00            8.46        (.49)          --         (.49)
12/31/04                            45.74       .32             5.51            5.83        (.18)          --         (.18)
12/31/03                            33.47       .16            12.26           12.42        (.15)          --         (.15)
CLASS 2
6/30/08/4/                             xx        xx               xx              xx          xx           xx           xx
12/31/07                            64.08       .50             7.39            7.89        (.52)       (4.73)       (5.25)
12/31/06                            58.98       .54             5.43            5.97        (.49)        (.38)        (.87)
12/31/05                            51.10       .34             7.92            8.26        (.38)          --         (.38)
12/31/04                            45.50       .23             5.45            5.68        (.08)          --         (.08)
12/31/03                            33.29       .06            12.19           12.25        (.04)          --         (.04)
CLASS 3
6/30/08/4/                             xx        xx               xx              xx          xx           xx           xx
12/31/07                            64.50       .55             7.45            8.00        (.56)       (4.73)       (5.29)
12/31/06                            59.34       .59             5.46            6.05        (.51)        (.38)        (.89)
12/31/05                            51.38       .37             7.98            8.35        (.39)          --         (.39)
12/31/04/6/                         47.74       .24             3.50            3.74        (.10)          --         (.10)
International Fund
-------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/                         $   xx      $ xx            $  xx           $  xx       $  xx       $   xx       $   xx
12/31/07                            22.01       .43             3.95            4.38        (.41)       (1.17)       (1.58)
12/31/06                            18.96       .41             3.21            3.62        (.38)        (.19)        (.57)
12/31/05                            15.82       .32             3.11            3.43        (.29)          --         (.29)
12/31/04                            13.41       .22             2.41            2.63        (.22)          --         (.22)
12/31/03                            10.07       .15             3.38            3.53        (.19)          --         (.19)
CLASS 2
6/30/08/4/                             xx        xx               xx              xx          xx           xx           xx
12/31/07                            21.94       .36             3.94            4.30        (.35)       (1.17)       (1.52)
12/31/06                            18.92       .35             3.20            3.55        (.34)        (.19)        (.53)
12/31/05                            15.79       .28             3.11            3.39        (.26)          --         (.26)
12/31/04                            13.39       .18             2.41            2.59        (.19)          --         (.19)
12/31/03                            10.05       .12             3.37            3.49        (.15)          --         (.15)
CLASS 3
6/30/08/4/                             xx        xx               xx              xx          xx           xx           xx
12/31/07                            22.00       .39             3.94            4.33        (.36)       (1.17)       (1.53)
12/31/06                            18.96       .37             3.20            3.57        (.34)        (.19)        (.53)
12/31/05                            15.82       .29             3.11            3.40        (.26)          --         (.26)
12/31/04/6/                         13.76       .20             2.05            2.25        (.19)          --         (.19)
New World Fund
-------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/                         $   xx      $ xx            $  xx           $  xx       $  xx       $   xx       $   xx
12/31/07                            21.56       .46             6.25            6.71        (.83)       (1.56)       (2.39)
12/31/06                            16.67       .41             4.95            5.36        (.32)        (.15)        (.47)
12/31/05                            13.96       .33             2.58            2.91        (.20)          --         (.20)
12/31/04                            11.99       .23             2.01            2.24        (.27)          --         (.27)
12/31/03                             8.76       .21             3.21            3.42        (.19)          --         (.19)
CLASS 2
6/30/08/4/                             xx        xx               xx              xx          xx           xx           xx
12/31/07                            21.40       .40             6.20            6.60        (.75)       (1.56)       (2.31)
12/31/06                            16.56       .36             4.92            5.28        (.29)        (.15)        (.44)
12/31/05                            13.89       .29             2.56            2.85        (.18)          --         (.18)
12/31/04                            11.94       .19             2.01            2.20        (.25)          --         (.25)
12/31/03                             8.73       .19             3.19            3.38        (.17)          --         (.17)
Blue Chip Income and Growth Fund
-------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/                         $   xx      $ xx            $  xx           $  xx      $   xx      $    xx       $   xx
12/31/07                            11.97       .24              .07             .31        (.36)        (.39)        (.75)
12/31/06                            10.91       .20             1.63            1.83        (.16)        (.61)        (.77)
12/31/05                            10.26       .18              .59             .77        (.12)          --         (.12)
12/31/04                             9.41       .15              .78             .93        (.08)          --         (.08)
12/31/03                             7.17       .13             2.11            2.24          --           --           --
CLASS 2
6/30/08/4/                             xx        xx               xx              xx          xx           xx           xx
12/31/07                            11.87       .21              .07             .28        (.31)        (.39)        (.70)
12/31/06                            10.83       .17             1.61            1.78        (.13)        (.61)        (.74)
12/31/05                            10.20       .15              .58             .73        (.10)          --         (.10)
12/31/04                             9.36       .13              .78             .91        (.07)          --         (.07)
12/31/03                             7.16       .11             2.09            2.20          --           --           --





                                                                   Ratio of   Ratio of    Ratio of
                                                                   expenses   expenses      net
                                  Net asset           Net assets, to average to average    income
                                   value,               end of    net assets net assets  (loss) to
Period                             end of    Total    period (in    before     after      average
ended                              period   return/3/  millions)    waiver   waiver/3/  net assets/3/

Growth Fund
----------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/                         $   xx       xx%     $   xx         xx%        xx%         xx%
12/31/07                            67.22    12.64       5,051        .33        .30        1.00
12/31/06                            64.51    10.48       3,503        .34        .31        1.14
12/31/05                            59.36    16.50       3,709        .35        .32         .87
12/31/04                            51.39    12.75       3,744        .36        .36         .68
12/31/03                            45.74    37.15       3,877        .39        .39         .41
CLASS 2
6/30/08/4/                             xx       xx          xx         xx         xx          xx
12/31/07                            66.72    12.35      25,359        .58        .55         .74
12/31/06                            64.08    10.22      23,122        .59        .56         .89
12/31/05                            58.98    16.19      18,343        .60        .57         .64
12/31/04                            51.10    12.50      12,055        .61        .61         .50
12/31/03                            45.50    36.80       7,107        .64        .64         .16
CLASS 3
6/30/08/4/                             xx       xx          xx         xx         xx          xx
12/31/07                            67.21    12.44         425        .51        .48         .81
12/31/06                            64.50    10.29         451        .52        .49         .95
12/31/05                            59.34    16.28         499        .53        .50         .69
12/31/04/6/                         51.38     7.85         516        .54/7/     .53/7/      .54/7/
International Fund
----------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/                         $   xx       xx%     $   xx         xx%        xx%         xx%
12/31/07                            24.81    20.30       1,708        .52        .47        1.82
12/31/06                            22.01    19.33       1,648        .54        .49        1.99
12/31/05                            18.96    21.75       1,599        .57        .52        1.92
12/31/04                            15.82    19.66       1,495        .60        .59        1.54
12/31/03                            13.41    35.12       1,431        .63        .63        1.40
CLASS 2
6/30/08/4/                             xx       xx          xx         xx         xx          xx
12/31/07                            24.72    20.02       9,719        .77        .72        1.55
12/31/06                            21.94    18.98       7,260        .79        .74        1.72
12/31/05                            18.92    21.50       4,790        .82        .77        1.64
12/31/04                            15.79    19.32       2,752        .84        .83        1.27
12/31/03                            13.39    34.85       1,385        .88        .88        1.08
CLASS 3
6/30/08/4/                             xx       xx          xx         xx         xx          xx
12/31/07                            24.80    20.10         123        .70        .65        1.64
12/31/06                            22.00    19.07         120        .72        .67        1.81
12/31/05                            18.96    21.54         116        .75        .70        1.74
12/31/04/6/                         15.82    16.45         115        .77/7/     .77/7/     1.45/7/
New World Fund
----------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/                         $   xx       xx%     $   xx         xx%        xx%         xx%
12/31/07                            25.88    32.53         261        .82        .74        1.92
12/31/06                            21.56    32.88         126        .88        .80        2.19
12/31/05                            16.67    21.10          88        .92        .85        2.22
12/31/04                            13.96    19.07          63        .93        .92        1.81
12/31/03                            11.99    39.56          47        .92        .92        2.15
CLASS 2
6/30/08/4/                             xx       xx          xx         xx         xx          xx
12/31/07                            25.69    32.21       1,875       1.07        .99        1.69
12/31/06                            21.40    32.59       1,175       1.13       1.05        1.93
12/31/05                            16.56    20.74         677       1.17       1.10        1.97
12/31/04                            13.89    18.80         373       1.18       1.17        1.57
12/31/03                            11.94    39.18         224       1.17       1.17        1.90
Blue Chip Income and Growth Fund
-----------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/                         $   xx       xx%       $ xx         xx%        xx%         xx%
12/31/07                            11.53     2.25         143        .42        .38        1.95
12/31/06                            11.97    17.73         159        .43        .39        1.75
12/31/05                            10.91     7.57         135        .45        .41        1.73
12/31/04                            10.26     9.94         129        .46        .46        1.60
12/31/03                             9.41    31.24         107        .52        .50        1.67
CLASS 2
6/30/08/4/                             xx       xx          xx         xx         xx          xx
12/31/07                            11.45     2.03       4,274        .67        .63        1.70
12/31/06                            11.87    17.42       3,937        .68        .64        1.50
12/31/05                            10.83     7.24       3,029        .70        .66        1.48
12/31/04                            10.20     9.74       2,349        .71        .70        1.37
12/31/03                             9.36    30.73       1,490        .76        .74        1.41



                                                                             ---
                               AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  57
                                                                             ---




                       Income (loss) from investment operations/2/      Dividends and distributions
                       ------------------------------------------- -------------------------------------

                                       Net gains
             Net asset    Net         (losses) on                  Dividends                    Total     Net asset
              value,   investment   securities (both   Total from  (from net  Distributions   dividends    value,
Period       beginning   income       realized and     investment  investment (from capital      and       end of    Total
ended        of period   (loss)       unrealized)      operations   income)      gains)     distributions  period   return/3/


Global Growth and Income Fund
------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/    $   xx      $ xx           $  xx           $  xx       $   xx      $    xx       $   xx      $   xx       xx%
12/31/07       10.98       .28            1.14            1.42         (.22)        (.40)        (.62)      11.78    13.04
12/31/06/8/    10.00       .14             .91            1.05         (.07)          --         (.07)      10.98    10.49
CLASS 2
6/30/08/4/        xx        xx              xx              xx           xx           xx           xx          xx       xx
12/31/07       10.97       .25            1.13            1.38         (.20)        (.40)        (.60)      11.75    12.67
12/31/06/8/    10.00       .11             .92            1.03         (.06)          --         (.06)      10.97    10.30

Growth-Income Fund
------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/    $   xx      $ xx           $  xx           $  xx        $  xx       $   xx       $   xx      $   xx       xx%
12/31/07       42.43       .80            1.51            2.31         (.77)       (1.45)       (2.22)      42.52     5.32
12/31/06       38.31       .77            5.03            5.80         (.72)        (.96)       (1.68)      42.43    15.51
12/31/05       36.81       .62            1.61            2.23         (.58)        (.15)        (.73)      38.31     6.08
12/31/04       33.61       .48            3.09            3.57         (.37)          --         (.37)      36.81    10.66
12/31/03       25.63       .42            7.96            8.38         (.40)          --         (.40)      33.61    32.76
CLASS 2
6/30/08/4/        xx        xx              xx              xx           xx           xx           xx          xx       xx
12/31/07       42.19       .68            1.50            2.18         (.66)       (1.45)       (2.11)      42.26     5.04
12/31/06       38.12       .67            4.99            5.66         (.63)        (.96)       (1.59)      42.19    15.20
12/31/05       36.64       .53            1.60            2.13         (.50)        (.15)        (.65)      38.12     5.83
12/31/04       33.48       .41            3.06            3.47         (.31)          --         (.31)      36.64    10.37
12/31/03       25.52       .34            7.92            8.26         (.30)          --         (.30)      33.48    32.43
CLASS 3
6/30/08/4/        xx        xx              xx              xx           xx           xx           xx          xx       xx
12/31/07       42.42       .73            1.50            2.23         (.69)       (1.45)       (2.14)      42.51     5.12
12/31/06       38.31       .70            5.01            5.71         (.64)        (.96)       (1.60)      42.42    15.30
12/31/05       36.80       .56            1.61            2.17         (.51)        (.15)        (.66)      38.31     5.88
12/31/04/6/    34.64       .41            2.07            2.48         (.32)          --         (.32)      36.80     7.18


Asset Allocation Fund
------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/    $   xx      $ xx           $  xx           $  xx        $  xx        $  xx       $   xx      $   xx       xx%
12/31/07       18.34       .51             .75            1.26         (.45)        (.64)       (1.09)      18.51     6.82
12/31/06       16.56       .47            1.97            2.44         (.43)        (.23)        (.66)      18.34    14.96
12/31/05       15.49       .41            1.05            1.46         (.39)          --         (.39)      16.56     9.45
12/31/04       14.58       .39             .84            1.23         (.32)          --         (.32)      15.49     8.50
12/31/03       12.23       .41            2.29            2.70         (.35)          --         (.35)      14.58    22.14
CLASS 2
6/30/08/4/        xx        xx              xx              xx           xx           xx           xx          xx       xx
12/31/07       18.23       .47             .74            1.21         (.41)        (.64)       (1.05)      18.39     6.55
12/31/06       16.47       .42            1.96            2.38         (.39)        (.23)        (.62)      18.23    14.66
12/31/05       15.42       .37            1.04            1.41         (.36)          --         (.36)      16.47     9.14
12/31/04       14.51       .36             .84            1.20         (.29)          --         (.29)      15.42     8.34
12/31/03       12.18       .37            2.27            2.64         (.31)          --         (.31)      14.51    21.74
CLASS 3
6/30/08/4/        xx        xx              xx              xx           xx           xx           xx          xx       xx
12/31/07       18.34       .48             .74            1.22         (.42)        (.64)       (1.06)      18.50     6.56
12/31/06       16.56       .44            1.97            2.41         (.40)        (.23)        (.63)      18.34    14.75
12/31/05       15.49       .38            1.05            1.43         (.36)          --         (.36)      16.56     9.26
12/31/04/6/    14.85       .36             .58             .94         (.30)          --         (.30)      15.49     6.38

Bond Fund
------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/    $   xx      $ xx           $  xx           $  xx        $  xx          $xx        $  xx      $   xx       xx%
12/31/07       11.64       .65            (.24)            .41         (.91)          --         (.91)      11.14     3.66
12/31/06       11.31       .63             .17             .80         (.47)          --         (.47)      11.64     7.31
12/31/05       11.57       .60            (.40)            .20         (.46)          --         (.46)      11.31     1.77
12/31/04       11.34       .56             .10             .66         (.43)          --         (.43)      11.57     6.04
12/31/03       10.41       .57             .78            1.35         (.42)          --         (.42)      11.34    13.07
CLASS 2
6/30/08/4/        xx        xx              xx              xx           xx           xx           xx          xx       xx
12/31/07       11.53       .61            (.24)            .37         (.87)          --         (.87)      11.03     3.33
12/31/06       11.22       .60             .16             .76         (.45)          --         (.45)      11.53     6.99
12/31/05       11.48       .57            (.39)            .18         (.44)          --         (.44)      11.22     1.59
12/31/04       11.27       .53             .09             .62         (.41)          --         (.41)      11.48     5.72
12/31/03       10.36       .53             .78            1.31         (.40)          --         (.40)      11.27    12.80





                          Ratio of   Ratio of    Ratio of
                          expenses   expenses      net
             Net assets, to average to average    income
               end of    net assets net assets  (loss) to
Period       period (in    before     after      average
ended         millions)    waiver   waiver/3/  net assets/3/


Global Growth and Income Fund
------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/      $   xx       xx%        xx%          xx%
12/31/07            79      .71        .58         2.37
12/31/06/8/         45      .72/7/     .65/7/      2.10/7/
CLASS 2
6/30/08/4/          xx       xx         xx           xx
12/31/07         1,997      .96        .83         2.11
12/31/06/8/        638      .97/7/     .90/7/      1.64/7/

Growth-Income Fund
-----------------------------------------------------------------------------------
CLASS 1
6/30/08/4/     $    xx       xx%        xx%          xx%
12/31/07         5,618      .27        .25         1.82
12/31/06         3,759      .28        .25         1.92
12/31/05         3,825      .29        .27         1.68
12/31/04         4,213      .31        .30         1.39
12/31/03         4,402      .34        .34         1.45
CLASS 2
6/30/08/4/          xx       xx         xx           xx
12/31/07        23,243      .52        .50         1.57
12/31/06        22,688      .53        .50         1.67
12/31/05        17,608      .54        .52         1.44
12/31/04        13,105      .56        .55         1.19
12/31/03         7,824      .59        .59         1.18
CLASS 3
6/30/08/4/          xx       xx         xx           xx
12/31/07           405      .45        .43         1.64
12/31/06           458      .46        .43         1.74
12/31/05           471      .47        .45         1.50
12/31/04/6/        537      .49/7/     .48/7/      1.24/7/


Asset Allocation Fund
-----------------------------------------------------------------------------------
CLASS 1
6/30/08/4/      $   xx       xx%        xx%          xx%
12/31/07         1,927      .32        .29         2.69
12/31/06         1,079      .33        .30         2.67
12/31/05           879      .35        .32         2.57
12/31/04           899      .38        .37         2.64
12/31/03           911      .42        .42         3.12
CLASS 2
6/30/08/4/          xx       xx         xx           xx
12/31/07         7,308      .57        .54         2.45
12/31/06         6,362      .58        .55         2.42
12/31/05         5,120      .60        .57         2.31
12/31/04         3,797      .62        .62         2.42
12/31/03         2,314      .67        .67         2.81
CLASS 3
6/30/08/4/          xx       xx         xx           xx
12/31/07            71      .50        .47         2.52
12/31/06            76      .51        .48         2.49
12/31/05            76      .53        .50         2.39
12/31/04/6/         81      .55/7/     .55/7/      2.50/7/

Bond Fund
-----------------------------------------------------------------------------------
CLASS 1
6/30/08/4/      $   xx       xx%        xx%          xx%
12/31/07           436      .41        .37         5.59
12/31/06           230      .43        .39         5.54
12/31/05           182      .44        .40         5.30
12/31/04           195      .45        .44         4.94
12/31/03           213      .47        .47         5.19
CLASS 2
6/30/08/4/          xx       xx         xx           xx
12/31/07         4,679      .66        .62         5.34
12/31/06         3,374      .68        .64         5.29
12/31/05         2,312      .69        .65         5.06
12/31/04         1,759      .70        .69         4.68
12/31/03         1,280      .72        .72         4.88



----
58  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS
----




                        Income (loss) from investment operations/2/      Dividends and distributions
                        ------------------------------------------- -------------------------------------

                                        Net gains
              Net asset    Net         (losses) on                  Dividends                    Total     Net asset
               value,   investment   securities (both   Total from  (from net  Distributions   dividends    value,
Period        beginning   income       realized and     investment  investment (from capital      and       end of    Total
ended         of period   (loss)       unrealized)      operations   income)      gains)     distributions  period   return/3/


Global Bond Fund
-------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/     $   xx      $ xx            $ xx            $ xx       $   xx        $xx          $  xx      $   xx       xx%
12/31/07        10.18       .49             .47             .96         (.31)        --           (.31)      10.83     9.54
12/31/06/9/     10.00       .10             .15             .25         (.07)        --           (.07)      10.18     2.52
CLASS 2
6/30/08/4/         xx        xx              xx              xx           xx         xx             xx          xx       xx
12/31/07        10.17       .47             .47             .94         (.30)        --           (.30)      10.81     9.23
12/31/06/10/    10.00       .06             .18             .24         (.07)        --           (.07)      10.17     1.99

High-Income Bond Fund
-------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/     $   xx      $ xx           $  xx           $  xx       $   xx        $xx         $   xx      $   xx       xx%
12/31/07        12.90       .95            (.72)            .23        (1.48)        --          (1.48)      11.65     1.62
12/31/06        12.41       .92             .37            1.29         (.80)        --           (.80)      12.90    10.89
12/31/05        12.89       .85            (.55)            .30         (.78)        --           (.78)      12.41     2.46
12/31/04        12.54       .84             .32            1.16         (.81)        --           (.81)      12.89     9.83
12/31/03        10.44       .90            2.12            3.02         (.92)        --           (.92)      12.54    29.79
CLASS 2
6/30/08/4/         xx        xx              xx              xx           xx         xx             xx          xx       xx
12/31/07        12.79       .91            (.72)            .19        (1.43)        --          (1.43)      11.55     1.33
12/31/06        12.32       .89             .36            1.25         (.78)        --           (.78)      12.79    10.59
12/31/05        12.81       .81            (.55)            .26         (.75)        --           (.75)      12.32     2.20
12/31/04        12.47       .81             .32            1.13         (.79)        --           (.79)      12.81     9.59
12/31/03        10.39       .86            2.12            2.98         (.90)        --           (.90)      12.47    29.51
CLASS 3
6/30/08/4/         xx        xx              xx              xx           xx         --             xx          xx       xx
12/31/07        12.88       .92            (.72)            .20        (1.43)        --          (1.43)      11.65     1.40
12/31/06        12.39       .90             .36            1.26         (.77)        --           (.77)      12.88    10.66
12/31/05        12.87       .82            (.55)            .27         (.75)        --           (.75)      12.39     2.25
12/31/04/6/     12.79       .78             .11             .89         (.81)        --           (.81)      12.87     7.52

U.S. Government/AAA-Rated Securities Fund
-------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/     $   xx      $ xx           $  xx            $ xx        $  xx        $xx          $  xx      $   xx       xx%
12/31/07        11.87       .58             .20             .78         (.92)        --           (.92)      11.73     6.83
12/31/06        11.91       .55            (.10)            .45         (.49)        --           (.49)      11.87     3.95
12/31/05        12.07       .48            (.16)            .32         (.48)        --           (.48)      11.91     2.70
12/31/04        12.24       .45            (.03)            .42         (.59)        --           (.59)      12.07     3.58
12/31/03        12.37       .46            (.15)            .31         (.44)        --           (.44)      12.24     2.51
CLASS 2
6/30/08/4/         xx        xx              xx              xx           xx         xx             xx          xx       xx
12/31/07        11.79       .54             .19             .73         (.87)        --           (.87)      11.65     6.49
12/31/06        11.83       .51            (.09)            .42         (.46)        --           (.46)      11.79     3.75
12/31/05        12.00       .45            (.16)            .29         (.46)        --           (.46)      11.83     2.41
12/31/04        12.17       .41            (.03)            .38         (.55)        --           (.55)      12.00     3.30
12/31/03        12.31       .42            (.14)            .28         (.42)        --           (.42)      12.17     2.28
CLASS 3
6/30/08/4/         xx        xx              xx              xx           xx         xx             xx          xx       xx
12/31/07        11.86       .55             .20             .75         (.87)        --           (.87)      11.74     6.63
12/31/06        11.89       .52            (.09)            .43         (.46)        --           (.46)      11.86     3.80
12/31/05        12.05       .46            (.16)            .30         (.46)        --           (.46)      11.89     2.50
12/31/04/6/     12.34       .41            (.11)            .30         (.59)        --           (.59)      12.05     2.58

Cash Management Fund
-------------------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/     $   xx      $ xx             $xx            $ xx        $  xx        $xx          $  xx      $   xx       xx%
12/31/07        11.62       .57              --/5/          .57         (.79)        --           (.79)      11.40     4.95
12/31/06        11.31       .54              --/5/          .54         (.23)        --           (.23)      11.62     4.81
12/31/05        11.09       .33              --/5/          .33         (.11)        --           (.11)      11.31     2.97
12/31/04        11.07       .11              --/5/          .11         (.09)        --           (.09)      11.09      .96
12/31/03        11.17       .07              --/5/          .07         (.17)        --           (.17)      11.07      .67
CLASS 2
6/30/08/4/         xx        xx              xx              xx           xx         xx             xx          xx       xx
12/31/07        11.56       .54              --/5/          .54         (.75)        --           (.75)      11.35     4.73
12/31/06        11.26       .51              --/5/          .51         (.21)        --           (.21)      11.56     4.59
12/31/05        11.05       .30              --/5/          .30         (.09)        --           (.09)      11.26     2.68
12/31/04        11.03       .08              --/5/          .08         (.06)        --           (.06)      11.05      .70
12/31/03        11.12       .05              --/5/          .05         (.14)        --           (.14)      11.03      .47
CLASS 3
6/30/08/4/         xx        xx              xx              xx           xx         xx             xx          xx       xx
12/31/07        11.60       .55              --/5/          .55         (.75)        --           (.75)      11.40     4.83
12/31/06        11.29       .52              --/5/          .52         (.21)        --           (.21)      11.60     4.64
12/31/05        11.07       .30              --/5/          .30         (.08)        --           (.08)      11.29     2.74
12/31/04/6/     11.07       .09              --/5/          .09         (.09)        --           (.09)      11.07      .78





                           Ratio of   Ratio of    Ratio of
                           expenses   expenses      net
              Net assets, to average to average    income
                end of    net assets net assets  (loss) to
Period        period (in    before     after      average
ended          millions)    waiver   waiver/3/  net assets/3/


Global Bond Fund
------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/       $ xx         xx%        xx%          xx%
12/31/07           28        .61        .55         4.61
12/31/06/9/        12        .15        .13         1.00
CLASS 2
6/30/08/4/         xx         xx         xx           xx
12/31/07          279        .86        .80         4.41
12/31/06/10/       15        .13        .12          .60

High-Income Bond Fund
------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/       $ xx         xx%        xx%          xx%
12/31/07          308        .48        .44         7.41
12/31/06          293        .49        .45         7.36
12/31/05          309        .50        .46         6.76
12/31/04          364        .50        .50         6.74
12/31/03          411        .51        .51         7.74
CLASS 2
6/30/08/4/         xx         xx         xx           xx
12/31/07          996        .73        .69         7.17
12/31/06          832        .74        .70         7.12
12/31/05          590        .75        .71         6.55
12/31/04          444        .75        .74         6.48
12/31/03          319        .76        .76         7.41
CLASS 3
6/30/08/4/         xx         xx         xx           xx
12/31/07           28        .66        .62         7.21
12/31/06           34        .67        .63         7.19
12/31/05           37        .68        .64         6.58
12/31/04/6/        46        .68/7/     .68/7/      6.57/7/

U.S. Government/AAA-Rated Securities Fund
-------------------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/       $ xx         xx%        xx%          xx%
12/31/07          211        .46        .41         4.83
12/31/06          218        .47        .42         4.64
12/31/05          252        .47        .43         3.99
12/31/04          286        .47        .46         3.68
12/31/03          373        .46        .46         3.71
CLASS 2
6/30/08/4/         xx         xx         xx           xx
12/31/07          597        .71        .66         4.58
12/31/06          402        .72        .67         4.40
12/31/05          341        .72        .68         3.75
12/31/04          285        .72        .71         3.42
12/31/03          273        .71        .71         3.43
CLASS 3
6/30/08/4/         xx         xx         xx           xx
12/31/07           29        .64        .59         4.65
12/31/06           32        .65        .60         4.45
12/31/05           39        .65        .61         3.81
12/31/04/6/        43        .65/7/     .65/7/      3.51/7/

Cash Management Fund
-------------------------------------------------------------------------------------------------------
CLASS 1
6/30/08/4/       $ xx         xx%        xx%          xx%
12/31/07          112        .33        .30         4.88
12/31/06           98        .33        .30         4.74
12/31/05           75        .33        .30         2.91
12/31/04           78        .37        .36          .96
12/31/03          103        .47        .47          .68
CLASS 2
6/30/08/4/         xx         xx         xx           xx
12/31/07          452        .58        .55         4.61
12/31/06          282        .58        .55         4.52
12/31/05          153        .58        .55         2.71
12/31/04          110        .61        .61          .76
12/31/03           99        .72        .72          .42
CLASS 3
6/30/08/4/         xx         xx         xx           xx
12/31/07           20        .51        .48         4.70
12/31/06           18        .51        .48         4.53
12/31/05           16        .51        .48         2.70
12/31/04/6/        20        .54/7/     .54/7/       .80/7/



                                                                             ---
                               AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS  59
                                                                             ---




                                                   Six months
                                                     ended        Year ended December 31
                                                    June 30,  ------------------------------
Portfolio turnover rate for all classes of shares   2008/4/   2007  2006    2005  2004  2003
-------------------------------------------------  ---------- ----  ----    ----  ----  ----

   Global Discovery Fund                               xx%      50%   31%     53%   28%   30%
   Global Growth Fund                                  xx       38    31      26    24    27
   Global Small Capitalization Fund                    xx       49    50      47    49    51
   Growth Fund                                         xx       40    35      29    30    34
   International Fund                                  xx       41    29      40    37    40
   New World Fund                                      xx       34    32      26    18    19
   Blue Chip Income and Growth Fund                    xx       27    21      33    13    12
   Global Growth and Income Fund                       xx       36     8/8/   --    --    --
   Growth-Income Fund                                  xx       24    25      20    21    21
   Asset Allocation Fund                               xx       29    38      23    20    20
   Bond Fund                                           xx       57    57      46    34    20
   Global Bond Fund                                    xx       85     7/9/   --    --    --
   High-Income Bond Fund                               xx       32    35      35    38    48
   U.S. Government/AAA-Rated Securities Fund           xx       91    76      86    68    63
   Cash Management Fund                                xx       --    --      --    --    --


/1/Based on operations for the periods shown (unless otherwise noted) and,
   accordingly, may not be representative of a full year.

/2/Based on average shares outstanding.

/3/This column reflects the impact, if any, of certain waivers by Capital
   Research and Management Company. During some of the periods shown, Capital
   Research and Management Company reduced fees for investment advisory
   services.

/4/Unaudited.

/5/Amount less than $.01.

/6/From January 16, 2004, when Class 3 shares were first issued.

/7/Annualized.

/8/From May 1, 2006, commencement of operations.

/9/From October 4, 2006, commencement of operations.

/10/From November 6, 2006, when Class 2 shares were first issued.


----
60  AMERICAN FUNDS INSURANCE SERIES / PROSPECTUS
----


[LOGO] American Funds(R)              The right choice for the long term(R)


Other fund information

Annual/Semi-annual report to shareholders
The shareholder reports contain additional information about the Series,
including financial statements, investment results, portfolio holdings, a
discussion of market conditions and the Series' investment strategies, and the
independent registered public accounting firm's report (in the annual report).

Statement of additional information (SAI) and codes of ethics
The current SAI, as amended from time to time, contains more detailed
information on all aspects of the Series, including the funds' financial
statements, and is incorporated by reference into this prospectus. This means
that the current SAI, for legal purposes, is part of this prospectus. The codes
of ethics describe the personal investing policies adopted by the Series, the
Series' investment adviser and its affiliated companies.

The current SAI and the codes of ethics are on file with the Securities and
Exchange Commission (SEC). These and other related materials about the Series
are available for review or to be copied at the SEC's Public Reference Room in
Washington, D.C. (202/942-8090) or on the EDGAR database on the SEC's website
at sec.gov or, after payment of a duplicating fee, via e-mail request to
publicinfo@sec.gov or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.

Because you cannot purchase shares of the Series directly, the Series does not
maintain an Internet website. However, the current SAI and annual/semi-annual
reports to shareholders may be available on the website of the company that
issued your insurance contract. You also may request a free copy of these
documents or the codes of ethics by calling American Funds at 800/421-4120 or
writing to the Secretary at 333 South Hope Street, Los Angeles, California
90071.

                            Litho in USA    Investment Company File No. 811-3857

The Capital Group Companies
American Funds      Capital Research and Management      Capital International
Capital Guardian      Capital Bank and Trust



<PAGE>


                        AMERICAN FUNDS INSURANCE SERIES

                                     Part B
                      Statement of Additional Information

                              October 1, 2008


This document is not a prospectus but should be read in conjunction with the
current prospectus of American Funds Insurance Series (the "Series") dated
October 1, 2008. You may obtain a prospectus from your financial adviser or by
writing to the Series at the following address:

                        American Funds Insurance Series
                              Attention: Secretary
                             333 South Hope Street
                         Los Angeles, California 90071
                                  213/486-9200

                               TABLE OF CONTENTS




Item                                                                  Page No.
----                                                                  --------

Certain investment limitations and guidelines . . . . . . . . . . .        2
Description of certain securities and investment techniques . . . .        8
Fundamental policies and investment restrictions. . . . . . . . . .       22
Management of the Series  . . . . . . . . . . . . . . . . . . . . .       27
Execution of portfolio transactions . . . . . . . . . . . . . . . .       46
Disclosure of portfolio holdings. . . . . . . . . . . . . . . . . .       51
Taxes and distributions . . . . . . . . . . . . . . . . . . . . . .       52
Price of shares . . . . . . . . . . . . . . . . . . . . . . . . . .       54
General information . . . . . . . . . . . . . . . . . . . . . . . .       56
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       59
Financial statements





                   American Funds Insurance Series -- Page 1
<PAGE>


                 CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES

The following limitations and guidelines are considered at the time of purchase,
under normal circumstances, and are based on a percentage of each fund's net
assets unless otherwise noted. This summary is not intended to reflect all of
the funds' investment limitations.


GLOBAL DISCOVERY FUND

     General

     .    The fund invests primarily in stocks of companies in the services and
          information areas of the global economy.

     .    The fund may invest up to 25% of its assets in companies outside the
          services and information area of the global economy. Under normal
          market conditions, the fund will invest in equity securities,
          including common and preferred stocks or other securities convertible
          into stocks.

     .    The fund may hold cash and cash equivalents, government and other debt
          securities of companies outside the services and information area.

     Investing outside the U.S.

     .    Although the fund currently expects to invest a majority of its assets
          in the United States, it may invest its assets on a global basis. The
          fund may invest in securities of issuers domiciled outside the United
          States, including securities denominated in currencies other than the
          U.S. dollar.

     Debt securities

     .    The fund may not invest in debt securities rated below Ca by Moody's
          Investors Service ("Moody's") and below CC by Standard & Poor's
          Corporation ("S&P") or in unrated securities determined to be of
          equivalent quality.

GLOBAL GROWTH FUND

     General

     .    The fund invests primarily in common stocks of companies located
          around the world.

     Debt securities

     .    The fund may invest up to 10% of its assets in straight debt
          securities (i.e., debt securities that do not have equity conversion
          or purchase rights) rated Baa1 or below by Moody's and BBB+ or below
          by S&P or in unrated securities that are determined to be of
          equivalent quality.


                   American Funds Insurance Series -- Page 2
<PAGE>


GLOBAL SMALL CAPITALIZATION FUND

     Equity securities

     .    Normally, the fund invests at least 80% of its assets in equity
          securities of companies with small market capitalizations. The
          investment adviser currently defines "small market capitalization"
          companies to be companies with market capitalizations of $3.5 billion
          or less. The investment adviser has periodically reevaluated and
          adjusted this definition and may continue to do so in the future.

     Debt securities

     .    The fund may invest up to 10% of its assets in straight debt
          securities rated Baa1 or below by Moody's and BBB+ or below by S&P, or
          unrated but determined to be of equivalent quality.

GROWTH FUND

     General

     .    The fund invests primarily in common stocks of companies that appear
          to offer superior opportunities for growth of capital.

     Investing outside the U.S.

     .    The fund may invest up to 15% of its assets in securities of issuers
          domiciled outside the United States and Canada.

     Debt securities

     .    The fund may invest up to 10% of its assets in straight debt
          securities rated Ba1 or below by Moody's and BB+ or below by S&P or in
          unrated securities that are determined to be of equivalent quality.
          These are known as high yield securities ("high yield").

INTERNATIONAL FUND

     General

     .    The fund invests primarily in common stocks of companies located
          outside the United States.

     Debt securities

     .    The fund may invest up to 5% of its assets in straight debt securities
          rated Baa1 or below by Moody's and BBB+ or below by S&P or in unrated
          securities that are determined to be of equivalent quality.


                   American Funds Insurance Series -- Page 3
<PAGE>


NEW WORLD FUND

     General

     .    The fund invests primarily in stocks of companies with significant
          exposure to countries with developing economies and/or markets.

     .    The fund will invest at least 35% of its assets in equity and debt
          securities of issuers primarily based in qualified countries which
          have developing economies and/or markets.

     Equity securities

     .    The fund may invest the balance of its assets in equity securities of
          any company regardless of where it is based, provided the adviser has
          determined that a significant portion of its assets or revenues
          (generally 20% or more) is attributable to developing countries.

     Debt securities

     .    The fund may invest up to 25% of its assets in straight debt
          securities of issuers primarily based in qualified countries which
          have developing economies and/or markets, or issuers that the fund's
          investment adviser determines have a significant portion of their
          assets or revenues (generally 20% or more) attributable to developing
          countries.

     .    The fund may invest up to 25% of its assets in straight debt
          securities rated high yield.

BLUE CHIP INCOME AND GROWTH FUND

     General

     .    The fund invests primarily in common stocks of larger, more
          established companies based in the United States.

     Equity securities

     .    The fund ordinarily will invest at least 90% of its equity assets in
          the stock of companies in business for five or more years (including
          predecessor companies); that pay regular dividends; whose debt
          securities are rated BBB- or above by S&P or unrated but determined to
          be of equivalent quality; and reflect a market capitalization of $4
          billion and above. The fund will not invest in private companies.

     Investing outside the U.S.

     .    The fund may invest up to 10% of its assets in equity securities of
          larger companies domiciled outside the United States, so long as they
          are listed or traded in the United States.


                   American Funds Insurance Series -- Page 4
<PAGE>


GLOBAL GROWTH AND INCOME FUND

     General

     .    The fund seeks to make your investment grow over time and provide you
          with current income by investing primarily in stocks of
          well-established companies located around the world.

     Investing outside the U.S.

     .    The fund may invest a majority of its assets outside the United
          States. For temporary defensive purposes, the fund may invest
          principally or entirely in securities that are denominated in U.S.
          dollars or whose issuers are domiciled in the United States.

     Debt securities

     .    The fund may invest up to 10% of its assets in straight debt
          securities rated Baa1 or below by Moody's and BBB+ or below by S&P or
          unrated but determined to be of equivalent quality.

     .    The fund may invest up to 5% of its assets in straight debt securities
          rated high yield.

GROWTH-INCOME FUND

     General

     .    The fund invests primarily in common stocks or other securities that
          demonstrate the potential for appreciation and/or dividends.

     Investing outside the U.S.

     .    The fund may invest up to 15% of its assets in securities of issuers
          domiciled outside the United States and not in the S&P 500.

     Debt securities

     .    The fund may invest up to 5% of its assets in straight debt securities
          rated high yield.

INTERNATIONAL GROWTH AND INCOME FUND

     General

     .    The fund may invest up to 20% of its assets in securities listed
          on U.S. securities exchanges; however, the fund has no current intention
          of investing more than 10% of its assets in such securities. Accordingly,
          the fund currently intends to invest at least 90% of its assets in
          securities of issuers domiciled outside of the United States and
          whose securities are primarily listed on exchanges outside of the
          United States. The fund will, however, hold cash and cash
          equivalents issued by U.S. issuers and treat them as falling within
          this category. The fund may invest a portion of its assets in companies
          located in developing countries.



                   American Funds Insurance Series -- Page 5
<PAGE>


ASSET ALLOCATION FUND

     General

     .    The fund will generally invest 40% to 80% of its assets in equity
          securities; 20% to 50% in debt securities; and 0% to 40% in money
          market instruments (including cash).

     Debt securities

     .    Up to 25% of the fund's debt assets may be invested in straight debt
          securities (i.e., not convertible into equity) rated high yield.

     Investing outside the U.S.

     .    The fund may invest up to 15% of its assets in equity securities of
          issuers domiciled outside the United States and not in the S&P 500.

     .    The fund may invest up to 5% of its assets in debt securities of
          issuers domiciled outside the United States.

BOND FUND

     General

     .    The fund will invest at least 80% of its assets in bonds. The fund may
          not purchase equity securities directly, other than certain
          convertible securities. The fund may retain up to 5% of its assets in
          common stock, warrants and rights received in conjunction with, or in
          exchange for, debt securities.

     .    The fund may invest up to 20% of its assets in preferred securities,
          including convertible and nonconvertible preferred securities.

     Debt securities

     .    For purposes of the above limits, bonds include any debt instrument
          including corporate bank loans and cash equivalents, and include
          nonvoting, nonconvertible preferred securities.

     .    The fund will invest at least 35% of its assets in debt securities
          (including cash and cash equivalents) rated A3 or better by Moody's or
          A- or better by S&P or in unrated securities that are determined to be
          of equivalent quality.

     .    The fund will invest at least 65% of its assets in debt securities
          (including cash and cash equivalents) that are rated Baa3 or better by
          Moody's or BBB- or better by S&P or in unrated securities that are
          determined to be of equivalent quality. These securities are known as
          investment grade securities ("investment grade").

     .    The fund may invest up to 35% of its assets in debt securities rated
          high yield.


                   American Funds Insurance Series -- Page 6
<PAGE>


     Investing outside the U.S.

     .    The fund may invest up to 20% of its assets in securities denominated
          in currencies other than the U.S. dollar. The fund may also invest in
          bonds of issuers domiciled outside the U.S. which are denominated in
          U.S. dollars.

GLOBAL BOND FUND

     Debt securities

     .    The fund will invest at least 80% of its assets in bonds (for purposes
          of this limit, bonds include any debt instrument including corporate
          bank loans and cash equivalents and may include certain preferred
          securities).

     .    Normally, the fund will invest substantially in debt securities rated
          investment grade.

     .    The fund may invest up to 35% of its assets in debt securities rated
          high yield.

HIGH-INCOME BOND FUND

     Debt securities

     .    The fund will invest at least 80% of its assets in bonds. For purposes
          of this limit, bonds include any debt instrument including corporate
          bank loans and cash equivalents, and may include certain preferred
          securities.

     .    The fund will invest at least 65% of its assets in debt securities
          rated Ba1 or below by Moody's or BB+ or below by S&P or in unrated
          securities that are determined to be of equivalent quality.

     Equity and other securities

     .    The fund may invest up to 20% of its assets in equity securities, such
          as common and preferred stocks and convertible securities.

     Maturity

     .    The fund generally will invest in securities with maturities in excess
          of three years.

     Investing outside the U.S.

     .    The fund may invest up to 25% of its assets in securities of issuers
          domiciled outside the United States.


                   American Funds Insurance Series -- Page 7
<PAGE>


U.S. GOVERNMENT/AAA-RATED SECURITIES FUND

     General

     .    The fund will invest at least 80% of its assets in securities
          guaranteed by the "full faith and credit" pledge of the U.S.
          government or debt securities that are rated Aaa by Moody's or AAA by
          S&P or unrated but determined to be of equivalent quality.

CASH MANAGEMENT FUND

     General

     .    The fund will invest in high quality money market instruments rated in
          the two highest quality categories by at least two nationally
          recognized statistical rating organizations.

     Maturity

     .    The fund may purchase securities that mature or may be redeemed in 13
          months or less (25 months or less if U.S. government securities), even
          if their original maturity is greater than one year.

     Investing outside the U.S.

     .    The fund may invest up to 45% of its assets in U.S. dollar-denominated
          securities issued by entities domiciled outside the United States or
          Canada or in securities with credit and liquidity support features
          provided by entities domiciled outside the United States or Canada.

          DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES

With respect to all funds, portfolio changes will be made without regard to the
length of time a particular investment may have been held.


EQUITY SECURITIES -- Certain funds are eligible to invest in equity securities.
Equity securities represent an ownership position in a company. Equity
securities held by the funds typically consist of common stocks. The prices of
equity securities fluctuate based on, among other things, events specific to
their issuers and market, economic and other conditions. For example, prices of
these securities can be affected by financial contracts held by the issuer or
third parties (such as derivatives) relating to the security or other assets or
indices.


There may be little trading in the secondary market for particular equity
securities, which may adversely affect the funds' ability to value accurately or
dispose of such equity securities. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the value and/or
liquidity of equity securities.


The growth-oriented, equity-type securities generally purchased by certain of
the funds may involve large price swings and potential for loss.


                   American Funds Insurance Series -- Page 8
<PAGE>



DEBT SECURITIES -- Debt securities are used by issuers to borrow money.
Generally, issuers pay investors periodic interest and repay the amount borrowed
either periodically during the life of the security and/or at maturity. Some
debt securities, such as zero coupon bonds, do not pay current interest, but are
purchased at a discount from their face values and their values accrete over
time to face value at maturity. The market prices of debt securities fluctuate
depending on such factors as interest rates, credit quality and maturity. In
general, market prices of debt securities decline when interest rates rise and
increase when interest rates fall.


Lower rated debt securities, rated Ba1 or below by Moody's and/or BB+ or below
by S&P or unrated but determined to be of equivalent quality, are described by
the rating agencies as speculative and involve greater risk of default or price
changes due to changes in the issuer's creditworthiness than higher rated debt
securities, or they may already be in default. The market prices of these
securities may fluctuate more than higher quality securities and may decline
significantly in periods of general economic difficulty. It may be more
difficult to dispose of, and to determine the value of, lower rated debt
securities.


Certain additional risk factors relating to debt securities are discussed below:


     SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES -- Debt securities may be
     sensitive to economic changes, political and corporate developments, and
     interest rate changes. In addition, during an economic downturn or
     substantial period of rising interest rates, issuers that are highly
     leveraged may experience increased financial stress that would adversely
     affect their ability to meet projected business goals, to obtain additional
     financing and to service their principal and interest payment obligations.
     Periods of economic change and uncertainty also can be expected to result
     in increased volatility of market prices and yields of certain debt
     securities. For example, prices of these securities can be affected by
     financial contracts held by the issuer or third parties (such as
     derivatives) relating to the security or other assets or indices.

     PAYMENT EXPECTATIONS -- Debt securities may contain redemption or call
     provisions. If an issuer exercises these provisions in a lower interest
     rate market, the funds would have to replace the security with a lower
     yielding security, resulting in decreased income to investors. If the
     issuer of a debt security defaults on its obligations to pay interest or
     principal or is the subject of bankruptcy proceedings, the funds may incur
     losses or expenses in seeking recovery of amounts owed to them.

     LIQUIDITY AND VALUATION -- There may be little trading in the secondary
     market for particular debt securities, which may affect adversely the
     funds' ability to value accurately or dispose of such debt securities.
     Adverse publicity and investor perceptions, whether or not based on
     fundamental analysis, may decrease the value and/or liquidity of debt
     securities.

The investment adviser attempts to reduce the risks described above through
diversification of the funds' portfolios and by credit analysis of each issuer,
as well as by monitoring broad economic trends and corporate and legislative
developments, but there can be no assurance that it will be successful in doing
so.


Credit ratings for debt securities provided by rating agencies reflect an
evaluation of the safety of principal and interest payments, not market value
risk. The rating of an issuer is a rating agency's view of past and future
potential developments related to the issuer and may not necessarily


                   American Funds Insurance Series -- Page 9
<PAGE>


reflect actual outcomes. There can be a lag between the time of developments
relating to an issuer and the time a rating is assigned and updated.


Bond rating agencies may assign modifiers (such as +/-) to ratings categories to
signify the relative position of a credit within the rating category. See the
Appendix for more information about credit ratings.


SECURITIES WITH EQUITY AND DEBT CHARACTERISTICS -- The funds may invest in
securities that have a combination of equity and debt characteristics. These
securities may at times behave more like equity than debt or vice versa. Some
types of convertible bonds, preferred stocks or other preferred securities
automatically convert into common stocks or other securities at a stated
conversion ratio and some may be subject to redemption at the option of the
issuer at a predetermined price. These securities, prior to conversion, may pay
a fixed rate of interest or a dividend. Because convertible securities have both
debt and equity characteristics, their values vary in response to many factors,
including the values of the securities into which they are convertible, general
market and economic conditions, and convertible market valuations, as well as
changes in interest rates, credit spreads and the credit quality of the issuer.


The prices and yields of nonconvertible preferred securities or preferred stocks
generally move with changes in interest rates and the issuer's credit quality,
similar to the factors affecting debt securities. Nonconvertible preferred
securities will be treated as debt for fund investment limit purposes.


INVESTING IN SMALLER CAPITALIZATION STOCKS -- Global Discovery Fund, Global
Growth Fund, Global Small Capitalization Fund, Growth Fund, International Fund,
New World Fund, Global Growth and Income Fund, Growth-Income Fund, International
Growth and Income Fund and Asset Allocation Fund may invest in the stocks of
smaller capitalization companies (typically companies with market
capitalizations of less than $3.5 billion at the time of purchase). The
investment adviser believes that the issuers of smaller capitalization stocks
often provide attractive investment opportunities. However, investing in smaller
capitalization stocks can involve greater risk than is customarily associated
with investing in stocks of larger, more established companies. For example,
smaller companies often have limited product lines, limited operating histories,
limited markets, or financial resources, may be dependent on one or a few key
persons for management, and can be more susceptible to losses. Also, their
securities may be thinly traded (and therefore have to be sold at a discount
from current prices or sold in small lots over an extended period of time), may
be followed by fewer investment research analysts and may be subject to wider
price swings, thus creating a greater chance of loss than securities of larger
capitalization companies. Because Global Small Capitalization Fund in particular
emphasizes the stocks of issuers with smaller market capitalizations (by U.S.
standards), it can be expected to have more difficulty obtaining information
about the issuers or valuing or disposing of its securities than if it were to
concentrate on larger capitalization stocks. The funds determine relative market
capitalizations using U.S. standards. Accordingly, the funds' investments in
certain countries outside the United States may have larger market
capitalizations relative to other companies within those countries.


INVESTING IN PRIVATE COMPANIES -- Global Discovery Fund, Global Growth Fund,
Global Small Capitalization Fund, Growth Fund, International Fund, New World
Fund, Global Growth and Income Fund, Growth-Income Fund, International Growth
and Income Fund, Asset Allocation Fund, Bond Fund, Global Bond Fund and
High-Income Bond Fund may invest in companies that have not publicly offered
their securities. Investing in private companies can involve greater risks


                   American Funds Insurance Series -- Page 10
<PAGE>



than those associated with investing in publicly traded companies. For example,
the securities of a private company may be subject to the risk that market
conditions, developments within the company, investor perception, or regulatory
decisions may delay or prevent the company from ultimately offering its
securities to the public. Furthermore, these investments are generally
considered to be illiquid until a company's public offering and are often
subject to additional contractual restrictions on resale that would prevent the
funds from selling their company shares for a period of time following the
public offering.


Investments in private companies can offer the funds significant growth
opportunities at attractive prices. However these investments can pose greater
risk, and, consequently, there is no guarantee that positive results can be
achieved in the future.


INVESTING IN VARIOUS COUNTRIES -- Global Discovery Fund, Global Growth Fund,
Global Small Capitalization Fund, Growth Fund, International Fund, New World
Fund, Blue Chip Income and Growth Fund, Global Growth and Income Fund,
Growth-Income Fund, International Growth and Income Fund, Asset Allocation Fund,
Bond Fund, Global Bond Fund and High-Income Bond Fund may invest in securities
of issuers domiciled outside the United States and which may be denominated in
currencies other than the U.S. dollar. In determining the domicile of an issuer,
the funds' investment adviser will consider the domicile determination of a
leading provider of global indexes, such as Morgan Stanley Capital
International, and may also take into account such factors as where the company
is legally organized and/or maintains principal corporate offices and/or
conducts its principal operations. Investing outside the United States may
involve additional risks caused by, among other things, currency controls and
fluctuating currency values; different accounting, auditing, financial reporting
and legal standards and practices in some countries; changing local, regional
and global economic, political and social conditions; expropriation; changes in
tax policy; greater market volatility; differing securities market structures;
higher transaction costs; and various administrative difficulties, such as
delays in clearing and settling portfolio transactions or in receiving payment
of dividends. However, in the opinion of the investment adviser, investing
outside the United States also can reduce certain portfolio risks due to greater
diversification opportunities.


The risks described above may be heightened in connection with investments in
developing countries. Although there is no universally accepted definition, the
investment adviser generally considers a developing country as a country that is
in the earlier stages of its industrialization cycle with a low per capita gross
domestic product ("GDP") and a low market capitalization to GDP ratio relative
to those in the United States and the European Union. Historically, the markets
of developing countries have been more volatile than the markets of developed
countries, reflecting the greater uncertainties of investing in less established
markets and economies. In particular, developing countries may have less stable
governments, may present the risks of nationalization of businesses,
restrictions on foreign ownership and prohibitions on the repatriation of assets
and may have less protection of property rights than more developed countries.
The economies of developing countries may be reliant on only a few industries,
may be highly vulnerable to changes in local or global trade conditions and may
suffer from high and volatile debt burdens or inflation rates. Local securities
markets may trade a small number of securities and may be unable to respond
effectively to increases in trading volume, potentially making prompt
liquidation of holdings difficult or impossible at times.


Additional costs could be incurred in connection with the funds' investment
activities outside the United States. Brokerage commissions may be higher
outside the United States, and the funds


                   American Funds Insurance Series -- Page 11
<PAGE>



will bear certain expenses in connection with their currency transactions.
Furthermore, increased custodian costs may be associated with maintaining assets
in certain jurisdictions.


U.S. Government/AAA-Rated Securities Fund and Cash Management Fund may purchase
obligations of corporations or governmental entities outside the United States,
provided they are U.S. dollar-denominated and highly liquid. Accordingly, while
the risks mentioned above are still present, they are present to a lesser
extent.


Certain risk factors related to developing countries are discussed below:


     CURRENCY FLUCTUATIONS -- Certain funds may invest in securities valued in
     currencies other than the U.S. dollar. Certain developing countries'
     currencies have experienced and may in the future experience significant
     declines against the U.S. dollar. For example, if the U.S. dollar
     appreciates against foreign currencies, the value of the funds' securities
     holdings would generally depreciate and vice versa. Consistent with their
     investment objectives, the funds can engage in certain currency
     transactions to hedge against currency fluctuations. See "Currency
     Transactions" below.

     GOVERNMENT REGULATION -- The political, economic and social structures of
     certain developing countries may be more volatile and less developed than
     those in the United States. Certain developing countries lack uniform
     accounting, auditing and financial reporting standards, have less
     governmental supervision of financial markets than in the United States,
     and do not honor legal rights enjoyed in the United States. Certain
     governments may be more unstable and present greater risks of
     nationalization or restrictions on foreign ownership of local companies.

     Repatriation of investment income, capital and the proceeds of sales by
     foreign investors may require governmental registration and/or approval in
     some developing market countries. While the funds will only invest in
     markets where these restrictions are considered acceptable, a country could
     impose new or additional repatriation restrictions after the funds'
     investment. If this happened, the funds' response might include, among
     other things, applying to the appropriate authorities for a waiver of the
     restrictions or engaging in transactions in other markets designed to
     offset the risks of decline in that country. Such restrictions will be
     considered in relation to the funds' liquidity needs and all other positive
     and negative factors. Further, some attractive equity securities may not be
     available to the funds because foreign shareholders hold the maximum amount
     legally permissible.

     While government involvement in the private sector varies in degree among
     developing countries, such involvement may in some cases include government
     ownership of companies in certain sectors, wage and price controls or
     imposition of trade barriers and other protectionist measures. With respect
     to any developing country, there is no guarantee that some future economic
     or political crisis will not lead to price controls, forced mergers of
     companies, expropriation or creation of government monopolies to the
     possible detriment of the funds' investments.

     LESS DEVELOPED SECURITIES MARKETS -- Developing countries may have less
     well-developed securities markets and exchanges. The securities markets
     have lower trading volumes than the securities markets of more developed
     countries. These markets may be unable to respond effectively to increases
     in trading volume. Consequently, these


                   American Funds Insurance Series -- Page 12
<PAGE>


     markets may be substantially less liquid than those of more developed
     countries and the securities of issuers located in these markets may have
     limited marketability. These factors may make prompt liquidation of
     substantial portfolio holdings difficult or impossible at times.

     SETTLEMENT RISKS -- Settlement systems in developing countries are
     generally less well organized than in developed markets. Supervisory
     authorities may also be unable to apply standards comparable with those in
     developed markets. Thus, there may be risks that settlement may be delayed
     and that cash or securities belonging to the funds may be in jeopardy
     because of failures of or defects in the systems. In particular, market
     practice may require that payment be made before receipt of the security
     being purchased or that delivery of a security be made before payment is
     received. In such cases, default by a broker or bank (the "counterparty")
     through whom the transaction is effected might cause the funds to suffer a
     loss. The funds will seek, where possible, to use counterparties whose
     financial status is such that this risk is reduced. However, there can be
     no certainty that the funds will be successful in eliminating this risk,
     particularly as counterparties operating in developing countries frequently
     lack the substance or financial resources of those in developed countries.
     There may also be a danger that, because of uncertainties in the operation
     of settlement systems in individual markets, competing claims may arise
     with respect to securities held by or to be transferred to the funds.

     INVESTOR INFORMATION -- The funds may encounter problems assessing
     investment opportunities in certain developing securities markets in light
     of limitations on available information and different accounting, auditing
     and financial reporting standards. In such circumstances, the investment
     adviser will seek alternative sources of information, and to the extent the
     investment adviser is not satisfied with the sufficiency of the information
     obtained with respect to a particular market or security, the funds will
     not invest in such market or security.

     TAXATION -- Taxation of dividends and capital gains received by
     non-residents varies among developing countries and, in some cases, is
     comparatively high. In addition, developing countries typically have less
     well-defined tax laws and procedures and such laws may permit retroactive
     taxation so that the funds could in the future become subject to local tax
     liability that they had not reasonably anticipated in conducting their
     investment activities or valuing their assets.

     LITIGATION -- The funds and their shareholders may encounter substantial
     difficulties in obtaining and enforcing judgments against resident
     individuals and companies domiciled outside the United States.

     FRAUDULENT SECURITIES -- Securities purchased by the funds may subsequently
     be found to be fraudulent or counterfeit, resulting in a loss to the funds.

CURRENCY TRANSACTIONS -- Global Discovery Fund, Global Growth Fund, Global Small
Capitalization Fund, Growth Fund, International Fund, New World Fund, Global
Growth and Income Fund, International Growth and Income Fund, Asset Allocation
Fund, Bond Fund, Global Bond Fund and High-Income Bond Fund can purchase and
sell currencies to facilitate securities transactions and enter into forward
currency contracts to protect against changes in currency exchange rates. Blue
Chip Income and Growth Fund and Growth-Income Fund do not currently


                   American Funds Insurance Series -- Page 13
<PAGE>



intend to engage in any such transactions other than purchasing and selling
currencies and foreign exchange contracts which will be used to facilitate
settlement of trades.


A forward currency contract is an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. For all funds except Bond Fund, Global Bond Fund and High-Income Bond
Fund forward currency contracts entered into by the funds will involve the
purchase or sale of one currency against the U.S. dollar. Bond Fund, Global Bond
Fund and High-Income Bond Fund may also enter into foreign currency contracts
not involving the U.S. dollar. While entering into forward currency transactions
could minimize the risk of loss due to a decline in the value of the hedged
currency, it could also limit any potential gain which might result from an
increase in the value of the currency. The funds will not generally attempt to
protect against all potential changes in exchange rates. The funds will
segregate liquid assets which will be marked to market daily to meet their
forward contract commitments to the extent required by the Securities and
Exchange Commission.


Bond Fund, Global Bond Fund and High-Income Bond Fund may use forward currency
contracts to purchase or sell a currency against another currency at a future
date and price as agreed upon by the parties. These funds may also enter into
exchange-traded futures contracts relating to foreign currencies in connection
with investments in securities of foreign issuers in anticipation of, or to
protect against, fluctuations in exchange rates. An exchange-traded futures
contract relating to foreign currency is similar to a forward foreign currency
contract but has a standardized size and exchange date.


In connection with these futures transactions, the Series has filed a notice of
eligibility with the Commodity Futures Trading Commission ("CFTC") that exempts
the Series from CFTC registration as a "commodity pool operator" as defined
under the Commodity Exchange Act. Pursuant to this notice, these funds will
observe certain CFTC guidelines with respect to its futures transactions that,
among other things, limit initial margin deposits in connection with the use of
futures contracts and related options for purposes other than "hedging" (as
defined by CFTC rules) up to 5% of a fund's net assets.


Bond Fund, Global Bond Fund and High-Income Bond Fund may attempt to accomplish
objectives similar to those involved in their use of currency contracts by
purchasing put or call options on currencies. A put option gives a fund, as
purchaser, the right (but not the obligation) to sell a specified amount of
currency at the exercise price until the expiration of the option. A call option
gives a fund, as purchaser, the right (but not the obligation) to purchase a
specified amount of currency at the exercise price until its expiration. A fund
might purchase a currency put option, for example, to protect itself during the
contract period against a decline in the U.S. dollar value of a currency in
which they hold or anticipate holding securities. If the currency's value should
decline against the U.S. dollar, the loss in currency value should be offset, in
whole or in part, by an increase in the value of the put. If the value of the
currency instead should rise against the U.S. dollar, any gain to the fund would
be reduced by the premium it had paid for the put option. A currency call option
might be purchased, for example, in anticipation of, or to protect against, a
rise in the value against the U.S. dollar of a currency in which the fund
anticipates purchasing securities.


Currency options may be either listed on an exchange or traded over-the-counter
("OTC options"). Listed options are third-party contracts (i.e., performance of
the obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation) and have


                   American Funds Insurance Series -- Page 14
<PAGE>


standardized strike (exercise) prices and expiration dates. OTC options are
two-party contracts with negotiated strike prices and expiration dates. Bond
Fund, Global Bond Fund and High-Income Bond Fund will not purchase an OTC option
unless the investment adviser believes that daily valuations for such options
are readily obtainable. OTC options differ from exchange-traded options in that
OTC options are transacted with dealers directly and not through a clearing
corporation which guarantees performance. Consequently, there is a risk of
non-performance by the dealer. Since no exchange is involved, OTC options are
valued on the basis of a quote provided by the dealer. In the case of OTC
options, there can be no assurance that a liquid secondary market will exist for
any particular option at any specific time.


Certain provisions of the Internal Revenue Code may limit the extent to which
the funds may enter into forward contracts. Such transactions may also affect,
for U.S. federal tax purposes, the character and timing of income, gain or loss
recognized by the funds.


FORWARD COMMITMENT, WHEN ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The funds
may enter into commitments to purchase or sell securities at a future date. When
a fund agrees to purchase such securities, it assumes the risk of any decline in
value of the security from the date of the agreement. If the other party to such
a transaction fails to deliver or pay for the securities, the fund could miss a
favorable price or yield opportunity, or could experience a loss.


The funds will not use these transactions for the purpose of leveraging and will
segregate liquid assets that will be marked to market daily in an amount
sufficient to meet their payment obligations in these transactions. Although
these transactions will not be entered into for leveraging purposes, to the
extent a fund's aggregate commitments in connection with these transactions
exceed its segregated assets, the fund temporarily could be in a leveraged
position (because it may have an amount greater than its net assets subject to
market risk). Should market values of the fund's portfolio securities decline
while the fund is in a leveraged position, greater depreciation of its net
assets would likely occur than if it were not in such a position. The funds will
not borrow money to settle these transactions and, therefore, will liquidate
other portfolio securities in advance of settlement if necessary to generate
additional cash to meet their obligations. After a transaction is entered into,
the funds may still dispose of or renegotiate the transaction. Additionally,
prior to receiving delivery of securities as part of a transaction, the funds
may sell such securities.


Asset Allocation Fund, Bond Fund, Global Bond Fund, High-Income Bond Fund and
U.S. Government/AAA-Rated Securities Fund may also enter into "roll"
transactions which involve the sale of mortgage-backed or other securities
together with a commitment to purchase similar, but not identical, securities at
a later date. The funds assume the risk of price and yield fluctuations during
the time of the commitment. The funds will segregate liquid assets which will be
marked to market daily in an amount sufficient to meet their payment obligations
in these transactions.


REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements under
which the funds buy a security and obtain a simultaneous commitment from the
seller to repurchase the security at a specified time and price. Repurchase
agreements permit the funds to maintain liquidity and earn income over periods
of time as short as overnight. The seller must maintain with the Series'
custodian collateral equal to at least 100% of the repurchase price, including
accrued interest, as monitored daily by the investment adviser. The funds will
only enter into repurchase agreements involving securities in which they could
otherwise invest and with selected banks and securities dealers whose financial
condition is monitored by the investment adviser. If the seller under the
repurchase agreement defaults, the funds may incur a loss if the


                   American Funds Insurance Series -- Page 15
<PAGE>



value of the collateral securing the repurchase agreement has declined and may
incur disposition costs in connection with liquidating the collateral. If
bankruptcy proceedings are commenced with respect to the seller, realization of
the collateral by the funds may be delayed or limited.


U.S. GOVERNMENT OBLIGATIONS -- U.S. government obligations are securities backed
by the full faith and credit of the U.S. government. U.S. government obligations
include the following types of securities:


     U.S. TREASURY SECURITIES -- U.S. Treasury securities include direct
     obligations of the U.S. Treasury, such as Treasury bills, notes and bonds.
     For these securities, the payment of principal and interest is
     unconditionally guaranteed by the U.S. government, and thus they are of the
     highest possible credit quality. Such securities are subject to variations
     in market value due to fluctuations in interest rates, but, if held to
     maturity, will be paid in full.

     FEDERAL AGENCY SECURITIES BACKED BY "FULL FAITH AND CREDIT" -- The
     securities of certain U.S. government agencies and government-sponsored
     entities are guaranteed as to the timely payment of principal and interest
     by the full faith and credit of the U.S. government. Such agencies and
     entities include the Government National Mortgage Association (Ginnie Mae),
     the Veterans Administration (VA), the Federal Housing Administration (FHA),
     the Export-Import Bank (Exim Bank), the Overseas Private Investment
     Corporation (OPIC), the Commodity Credit Corporation (CCC) and the Small
     Business Administration (SBA).

OTHER FEDERAL AGENCY OBLIGATIONS -- Additional federal agency securities are
neither direct obligations of, nor guaranteed by, the U.S. government. These
obligations include securities issued by certain U.S. government agencies and
government-sponsored entities. However, they generally involve some form of
federal sponsorship: some operate under a government charter; some are backed by
specific types of collateral; some are supported by the issuer's right to borrow
from the Treasury; and others are supported only by the credit of the issuing
government agency or entity. These agencies and entities include, but are not
limited to: Federal Home Loan Bank, Federal Home Loan Mortgage Corporation
(Freddie Mac), Federal National Mortgage Association (Fannie Mae), Tennessee
Valley Authority and Federal Farm Credit Bank System.


PASS-THROUGH SECURITIES -- The funds may invest in various debt obligations
backed by pools of mortgages or other assets including, but not limited to,
loans on single family residences, home equity loans, mortgages on commercial
buildings, credit card receivables and leases on airplanes or other equipment.
Principal and interest payments made on the underlying asset pools backing these
obligations are typically passed through to investors, net of any fees paid to
any insurer or any guarantor of the securities. Pass-through securities may have
either fixed or adjustable coupons. These securities include:


     MORTGAGE-BACKED SECURITIES -- These securities may be issued by U.S.
     government agencies and government-sponsored entities, such as Ginnie Mae,
     Fannie Mae and Freddie Mac, and by private entities. The payment of
     interest and principal on mortgage-backed obligations issued by U.S.
     government agencies may be guaranteed by the full faith and credit of the
     U.S. government (in the case of Ginnie Mae), or may be guaranteed by the
     issuer (in the case of Fannie Mae and Freddie Mac). However, these
     guarantees do not apply to the market prices and yields of these
     securities, which vary with changes in interest rates.


                   American Funds Insurance Series -- Page 16
<PAGE>


     Mortgage-backed securities issued by private entities are structured
     similarly to those issued by U.S. government agencies. However, these
     securities and the underlying mortgages are not guaranteed by any
     government agencies. These securities generally are structured with one or
     more types of credit enhancements such as insurance or letters of credit
     issued by private companies. Mortgage-backed securities generally permit
     borrowers to prepay their underlying mortgages. Prepayments can alter the
     effective maturity of these instruments.

     COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS) -- CMOs are also backed by a
     pool of mortgages or mortgage loans, which are divided into two or more
     separate bond issues. CMOs issued by U.S. government agencies are backed by
     agency mortgages. Payments of principal and interest are passed through to
     each bond issue at varying schedules resulting in bonds with different
     coupons, effective maturities and sensitivities to interest rates. Some
     CMOs may be structured in a way that when interest rates change, the impact
     of changing prepayment rates on the effective maturities of certain issues
     of these securities is magnified. CMOs may be less liquid or may exhibit
     greater price volatility than other types of mortgage or asset-backed
     securities.

     COMMERCIAL MORTGAGE-BACKED SECURITIES -- These securities are backed by
     mortgages on commercial property, such as hotels, office buildings, retail
     stores, hospitals and other commercial buildings. These securities may have
     a lower prepayment uncertainty than other mortgage-related securities
     because commercial mortgage loans generally prohibit or impose penalties on
     prepayments of principal. In addition, commercial mortgage-related
     securities often are structured with some form of credit enhancement to
     protect against potential losses on the underlying mortgage loans. Many of
     the risks of investing in commercial mortgage-backed securities reflect the
     risks of investing in the real estate securing the underlying mortgage
     loans, including the effects of local and other economic conditions on real
     estate markets, the ability of tenants to make rental payments and the
     ability of a property to attract and retain tenants. Commercial
     mortgage-backed securities may be less liquid or exhibit greater price
     volatility than other types of mortgage or asset-backed securities.

     ASSET-BACKED SECURITIES -- These securities are backed by other assets such
     as credit card, automobile or consumer loan receivables, retail installment
     loans or participations in pools of leases. Credit support for these
     securities may be based on the underlying assets and/or provided through
     credit enhancements by a third party. The values of these securities are
     sensitive to changes in the credit quality of the underlying collateral,
     the credit strength of the credit enhancement, changes in interest rates
     and at times the financial condition of the issuer. Some asset-backed
     securities also may receive prepayments that can change their effective
     maturities.

"IOs" and "POs" are issued in portions or tranches with varying maturities and
characteristics. Some tranches may only receive the interest paid on the
underlying mortgages (IOs) and others may only receive the principal payments
(POs). The values of IOs and POs are extremely sensitive to interest rate
fluctuations and prepayment rates, and IOs are also subject to the risk of early
repayment of the underlying mortgages that will substantially reduce or
eliminate interest payments.


WARRANTS AND RIGHTS -- The funds may purchase warrants, which may be issued
together with bonds or preferred stocks. Warrants generally entitle the holder
to buy a proportionate amount of


                   American Funds Insurance Series -- Page 17
<PAGE>



common stock at a specified price, usually higher than the current market price.
Warrants may be issued with an expiration date or in perpetuity. Rights are
similar to warrants except that they normally entitle the holder to purchase
common stock at a lower price than the current market price.


INFLATION-INDEXED BONDS -- Asset Allocation Fund, Bond Fund, Global Bond Fund,
High-Income Bond Fund and U.S. Government/AAA-Rated Securities Fund may invest
in inflation-indexed bonds issued by governments, their agencies or
instrumentalities and corporations.


The principal amount of an inflation-indexed bond is adjusted in response to
changes in the level of the consumer price index. Repayment of the original bond
principal upon maturity (as adjusted for inflation) is guaranteed in the case of
U.S. Treasury inflation-indexed bonds, and therefore the principal amount of
such bonds cannot be reduced below par even during a period of deflation.
However, the current market value of these bonds is not guaranteed and will
fluctuate, reflecting the rise and fall of yields. In certain jurisdictions
outside the United States the repayment of the original bond principal upon the
maturity of an inflation-indexed bond is not guaranteed, allowing for the amount
of the bond repaid at maturity to be less than par.


The interest rate for inflation-indexed bonds is fixed at issuance as a
percentage of this adjustable principal. Accordingly, the actual interest income
may both rise and fall as the principal amount of the bonds adjusts in response
to movements of the consumer price index. For example, typically interest income
would rise during a period of inflation and fall during a period of deflation.


REAL ESTATE INVESTMENT TRUSTS -- The funds may invest in securities issued by
real estate investment trusts (REITs), which primarily invest in real estate or
real estate-related loans. Equity REITs own real estate properties, while
mortgage REITs hold construction, development and/or long-term mortgage loans.
The values of REITs may be affected by changes in the value of the underlying
property of the trusts, the creditworthiness of the issuer, property taxes,
interest rates, tax laws and regulatory requirements, such as those relating to
the environment. Both types of REITs are dependent upon management skill and the
cash flows generated by their holdings, the real estate market in general and
the possibility of failing to qualify for any applicable pass-through tax
treatment or failing to maintain any applicable exemptive status afforded under
relevant laws.


CASH AND CASH EQUIVALENTS -- The funds may hold cash or invest in cash
equivalents. Cash equivalents include (a) commercial paper (for example,
short-term notes with maturities typically up to 12 months in length issued by
corporations, governmental bodies or bank/corporation sponsored conduits
(asset-backed commercial paper)) (b) short-term bank obligations (for example,
certificates of deposit, bankers' acceptances (time drafts on a commercial bank
where the bank accepts an irrevocable obligation to pay at maturity)) or bank
notes, (c) savings association and savings bank obligations (for example, bank
notes and certificates of deposit issued by savings banks or savings
associations), (d) securities of the U.S. government, its agencies or
instrumentalities that mature, or may be redeemed, in one year or less, and (e)
corporate bonds and notes that mature, or that may be redeemed, in one year or
less.


Cash Management Fund may only purchase commercial paper judged by the investment
adviser to be of suitable investment quality. This includes (a) commercial paper
that is rated in the two highest categories by at least two nationally
recognized statistical rating organizations (each, a "NRSRO"), or (b) other
commercial paper deemed on the basis of the issuer's creditworthiness to


                   American Funds Insurance Series -- Page 18
<PAGE>


be of a quality appropriate for Cash Management Fund. No more than 5% of Cash
Management Fund's assets may be invested in commercial paper rated in the second
tier (e.g., P-2/A-2) by any NRSRO; no more than the greater of 1% of Cash
Management Fund's assets or $1 million may be invested in such securities of any
one issuer. See the "Description of Commercial Paper Ratings" for a description
of the ratings.


Cash Management Fund may purchase corporate obligations that mature or that will
be redeemed in one year or less. These obligations originally may have been
issued with maturities in excess of one year. Cash Management Fund may invest
only in corporate bonds or notes of issuers having outstanding short-term
securities rated as described above in "Commercial Paper."


"Savings association obligations" include certificates of deposit
(interest-bearing time deposits) issued by savings banks or savings and loan
associations.


"Floating rate obligations" have a coupon rate that changes at least annually
and generally more frequently. The coupon rate is set in relation to money
market rates. The obligations, issued primarily by banks, other corporations,
governments and semi-governmental bodies, may have a maturity in excess of one
year. In some cases, the coupon rate may vary with changes in the yield on
Treasury bills or notes or with changes in LIBOR (London Interbank Offering
Rate). The investment adviser considers floating rate obligations to be liquid
investments because a number of securities dealers make active markets in these
securities.


RESTRICTED OR ILLIQUID SECURITIES -- The funds may purchase securities subject
to restrictions on resale. Restricted securities may only be sold pursuant to an
exemption from registration under the Securities Act of 1933 (the "1933 Act"),
or in a registered public offering. Where registration is required, the holder
of a registered security may be obligated to pay all or part of the registration
expense and a considerable period may elapse between the time it decides to seek
registration and the time it may be permitted to sell a security under an
effective registration statement. Difficulty in selling such securities may
result in a loss to the funds or cause them to incur additional administrative
costs.


Securities (including restricted securities) not actively traded will be
considered illiquid unless they have been specifically determined to be liquid
under procedures adopted by the Series' board of trustees, taking into account
factors such as the frequency and volume of trading, the commitment of dealers
to make markets and the availability of qualified investors, all of which can
change from time to time. The funds may incur certain additional costs in
disposing of illiquid securities.


LOAN ASSIGNMENTS AND PARTICIPATIONS -- The funds may invest in loans or other
forms of indebtedness that represent interests in amounts owed by corporations
or other borrowers (collectively "borrowers"). Loans may be originated by the
borrower in order to address its working capital needs, as a result of a
reorganization of the borrower's assets and liabilities (recapitalizations), to
merge with or acquire another company (mergers and acquisitions), to take
control of another company (leveraged buy-outs), to provide temporary financing
(bridge loans), or for other corporate purposes.


Some loans may be secured in whole or in part by assets or other collateral. The
greater the value of the assets securing the loan the more the lender is
protected against loss in the case of nonpayment of principal or interest. Some
borrowers may be highly leveraged which could make


                   American Funds Insurance Series -- Page 19
<PAGE>


loans made to them especially vulnerable to adverse changes in economic or
market conditions and may involve a greater risk of default.


The investment adviser generally makes investment decisions based on publicly
available information, but may rely on non-public information if necessary.
Borrowers may offer to provide lenders with material, non-public information
regarding a specific loan or the borrower in general. The investment adviser
generally chooses not to receive this information. As a result, the investment
adviser may be at a disadvantage with respect to other investors that may
receive such information. The investment adviser's decision not to receive
material, non-public information may impact the investment adviser's ability to
assess borrowers' requests for amendments or waivers to provisions in the loan
agreement. However, the investment adviser may on a case-by-case basis decide to
receive such information when it deems prudent to do so. In these situations the
investment adviser may be restricted from trading the loan or other debt and
equity securities of the borrower while it is in possession of such material,
non-public information, even if such loan or other security is declining in
value.


The funds normally acquire loan obligations through an assignment from another
lender, or they may acquire loan obligations by purchasing a participation
interest from a lender or other holder of the interest. When the funds purchase
assignments they acquire direct contractual rights against the borrower on the
loan. The funds acquire the right to receive principal and interest payments
directly from the borrower and to enforce their rights as a lender directly
against the borrower. However, because assignments are arranged through private
negotiations between potential assignees and potential assignors, the rights and
obligations acquired by a fund as the purchaser of an assignment may differ
from, and be more limited than, those held by the assigning lender.


Loan participations are loans or other direct debt instruments that are
interests in amounts owed by the borrower to another party. They may represent
amounts owed to lenders or lending syndicates, to suppliers of goods or
services, or to other parties. The funds will have the right to receive payments
of principal, interest and any fees to which they are entitled only from the
lender selling the participation and only upon receipt by the lender of the
payments from the borrower. In connection with purchasing participations, the
funds generally will have no right to enforce compliance by the borrower with
the terms of the loan agreement relating to the loan, nor any rights of set-off
against the borrower. In addition, the funds may not directly benefit from any
collateral supporting the loan in which they have purchased the participation
and the funds will have to rely on the agent bank or other financial
intermediary to apply appropriate credit remedies. As a result, the funds will
be subject to the credit risk of both the borrower and the lender that is
selling the participation. In the event of the insolvency of the lender selling
a participation, a fund may be treated as a general creditor of the lender and
may not benefit from any set-off between the lender and the borrower.


Investments in loan participations and assignments present the possibility that
the funds could be held liable as a co-lender under emerging legal theories of
lender liability. In addition, if the loan is foreclosed, the funds could be
part owner of any collateral and could bear the costs and liabilities of owning
and disposing of the collateral. The funds anticipate that loan participations
could be sold only to a limited number of institutional investors. In addition,
some loan participations and assignments may not be rated by major rating
agencies and may not be protected by the securities laws.


                   American Funds Insurance Series -- Page 20
<PAGE>



REINSURANCE RELATED NOTES AND BONDS -- High-Income Bond Fund may invest in
reinsurance related notes and bonds. These instruments, which are typically
issued by special purpose reinsurance companies, transfer an element of
insurance risk to the note or bond holders. For example, such a note or bond
could provide that the reinsurance company would not be required to repay all or
a portion of the principal value of the note or bond if losses due to a
catastrophic event under the policy (such as a major hurricane) exceed certain
dollar thresholds. Consequently, the fund may lose the entire amount of its
investment in such bonds or notes if such an event occurs and losses exceed
certain dollar thresholds. In this instance, investors would have no recourse
against the insurance company. These instruments may be issued with fixed or
variable interest rates and rated in a variety of credit quality categories by
the rating agencies.


REVERSE REPURCHASE AGREEMENTS -- Bond Fund, Global Bond Fund and U.S.
Government/ AAA-Rated Securities Fund are authorized to enter into reverse
repurchase agreements. A reverse repurchase agreement is the sale of a security
by a fund and its agreement to repurchase the security at a specified time and
price. Each fund will segregate liquid assets which will be marked to market
daily in an amount sufficient to cover its obligations under reverse repurchase
agreements with broker-dealers (no collateral is required on reverse repurchase
agreements with banks). Under the 1940 Act, reverse repurchase agreements may be
considered borrowing by a fund. The use of reverse repurchase agreements by a
fund creates leverage which increases the fund's investment risk. As a fund's
aggregate commitments under these reverse repurchase agreements increase, the
opportunity for leverage similarly increases. If the income and gains on
securities purchased with the proceeds of reverse repurchase agreements exceed
the costs of the agreements, a fund's earnings or net asset value will increase
faster than otherwise would be the case; conversely, if the income and gains
fail to exceed the costs, a fund's earnings or net asset value would decline
faster than otherwise would be the case. The funds do not currently intend to
engage in this investment practice over the next 12 months.


LOANS OF PORTFOLIO SECURITIES -- Asset Allocation Fund, Bond Fund, Global Bond
Fund, High-Income Bond Fund and U.S. Government/AAA-Rated Securities Fund are
authorized to lend portfolio securities to selected securities dealers or other
institutional investors whose financial condition is monitored by the investment
adviser. The borrower must maintain with the Series' custodian collateral
consisting of cash, cash equivalents or U.S. government securities equal to at
least 100% of the value of the borrowed securities, plus any accrued interest.
The investment adviser will monitor the adequacy of the collateral on a daily
basis. A fund may at any time call a loan of its portfolio securities and obtain
the return of the loaned securities. The fund will receive any interest paid on
the loaned securities and a fee or a portion of the interest earned on the
collateral. Each fund will limit its loans of portfolio securities to an
aggregate of 10% of the value of its total assets, measured at the time any such
loan is made. The funds do not currently intend to engage in this investment
practice over the next 12 months.


DIVERSIFICATION -- Global Bond Fund is a non-diversified investment company
which allows the fund to invest a greater percentage of its assets in any one
issuer. For the fund to be considered a "diversified" investment company under
the Investment Company Act of 1940, as amended, the fund with respect to 75% of
its total assets, would be required to limit its investment in any one issuer
(other than the U.S. government) to 5% of the market value of the total assets
of the fund or to 10% of the outstanding voting securities of such issuer.
However, such a limitation would reduce the extent to which the fund could
concentrate its investments in securities of governmental issuers outside the
United States, which are generally considered to be of higher


                   American Funds Insurance Series -- Page 21
<PAGE>



credit quality than are private issuers domiciled outside the United States.
Accordingly, such a limitation might increase the fund's investment risk.
Although the fund is non-diversified, it has no current intention of investing
more than 5% of its assets in securities of any one corporate issuer. In
addition, the fund intends to comply with the diversification and other
requirements of the U.S. Internal Revenue Code of 1986, as amended, applicable
to regulated investment companies so that the fund will not be subject to U.S.
taxes on the net investment income and net capital gains that it distributes to
its shareholders. (See "Taxes and Distributions".)

                        *     *     *     *     *     *

PORTFOLIO TURNOVER -- Portfolio changes will be made without regard to the
length of time particular investments may have been held. Short-term trading
profits are not the funds' objective, and changes in their investments are
generally accomplished gradually, though short-term transactions may
occasionally be made. High portfolio turnover involves correspondingly greater
transaction costs in the form of dealer spreads or brokerage commissions, and
may result in the realization of net capital gains, which are taxable when
distributed to shareholders.


Under certain market conditions, the investment policies of Asset Allocation
Fund, Bond Fund, High-Income Bond Fund, and U.S. Government/AAA-Rated Securities
Fund may result in higher portfolio turnover than those of the other funds,
although, other than Cash Management Fund, no fund's annual portfolio turnover
rate is expected to exceed 100%. A fund's portfolio turnover rate would equal
100% if each security in the fund's portfolio was replaced once per year. See
"Financial Highlights" in the prospectus for the funds' annual portfolio
turnover rates for each of the last five fiscal years.


                FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS

FUNDAMENTAL POLICIES -- The Series has adopted the following fundamental
policies and investment restrictions, which may not be changed without approval
by holders of a majority of its outstanding shares. Such majority is defined in
the Investment Company Act of 1940, as amended (the "1940 Act"), as the vote of
the lesser of (a) 67% or more of the outstanding voting securities present at a
shareholder meeting, if the holders of more than 50% of the outstanding voting
securities are present in person or by proxy, or (b) more than 50% of the
outstanding voting securities. All percentage limitations are considered at the
time securities are purchased and are based on a fund's net assets unless
otherwise indicated. None of the following investment restrictions involving a
maximum percentage of assets will be considered violated unless the excess
occurs immediately after, and is caused by, an acquisition by the applicable
fund.


INVESTMENT RESTRICTIONS OF GLOBAL DISCOVERY FUND, GLOBAL GROWTH FUND, GLOBAL
SMALL CAPITALIZATION FUND, GROWTH FUND, INTERNATIONAL FUND, NEW WORLD FUND, BLUE
CHIP INCOME AND GROWTH FUND, GLOBAL GROWTH AND INCOME FUND, GROWTH-INCOME FUND,
INTERNATIONAL GROWTH AND INCOME FUND, ASSET ALLOCATION FUND, BOND FUND, GLOBAL
BOND FUND AND HIGH-INCOME BOND FUND

Global Discovery Fund, Global Growth Fund, Global Small Capitalization Fund,
Growth Fund, International Fund, New World Fund, Blue Chip Income and Growth
Fund, Global Growth and Income Fund, Growth-Income Fund, International Growth
and Income Fund, Asset Allocation Fund, Bond Fund, Global Bond Fund and
High-Income Bond Fund may not:


                   American Funds Insurance Series -- Page 22
<PAGE>


1.   Invest more than 5% of the value of the total assets of the fund in the
securities of any one issuer, provided that this limitation shall apply only to
75% of the value of the fund's total assets and, provided further, that the
limitation shall not apply to obligations of the government of the U.S. under a
general Act of Congress. The short-term obligations of commercial banks are
excluded from this 5% limitation with respect to 25% of the fund's total assets.

2.   As to 75% of its total assets, purchase more than 10% of the outstanding
voting securities of an issuer.

3.   Invest more than 25% of the fund's total assets in the securities of
issuers in the same industry. Obligations of the U.S. government, its agencies
and instrumentalities, are not subject to this 25% limitation on industry
concentration. In addition, the fund may, if deemed advisable, invest more than
25% of its assets in the obligations of domestic commercial banks.

4.   Invest in real estate (including limited partnership interests, but
excluding securities of companies, such as real estate investment trusts, which
deal in real estate or interests therein).

5.   Purchase commodities or commodity contracts; except that Global Discovery
Fund, Global Small Capitalization Fund, International Fund, New World Fund,
International Growth and Income Fund, Asset Allocation Fund, Bond Fund, Global
Bond Fund and High-Income Bond Fund may engage in transactions involving
currencies (including forward or futures contracts and put and call options).


6.   Invest in companies for the purpose of exercising control or management.

7.   Make loans to others except for (a) the purchase of debt securities; (b)
entering into repurchase agreements; (c) the loaning of its portfolio
securities; and (d) entering into loan participations.

8.   Borrow money, except from banks for temporary purposes, and then in an
amount not in excess of 5% of the value of the fund's total assets. Moreover, in
the event that the asset coverage for such borrowings falls below 300%, the fund
will reduce, within three days, the amount of its borrowings in order to provide
for 300% asset coverage.

9.   Purchase securities on margin.

10.  Sell securities short, except to the extent that the fund contemporaneously
owns, or has the right to acquire at no additional cost, securities identical to
those sold short.

11.  Invest in puts, calls, straddles, spreads or any combination thereof;
except as described above in Investment Restriction number 5.

12.  Invest in securities of other investment companies, except as permitted by
the 1940 Act.

13.  Engage in underwriting of securities issued by others, except to the extent
it may be deemed to be acting as an underwriter in the purchase or resale of
portfolio securities.

Investment restriction numbers 1 and 2 do not apply to Global Bond Fund.


                   American Funds Insurance Series -- Page 23
<PAGE>


Notwithstanding investment restriction number 12, if deemed advisable by its
officers, compensation paid by the Series to its Trustees may be invested in
securities of these or other investment companies under a deferred compensation
plan adopted by Trustees pursuant to an exemptive order granted by the
Securities and Exchange Commission.


Notwithstanding investment restriction number 13, the funds may not engage in
the business of underwriting securities of other issuers, except to the extent
that the disposal of an investment position may technically constitute the fund
an underwriter as that term is defined under the Securities Act of 1933.


For purposes of investment restriction number 7, the investment adviser
considers investments in corporate loans to be purchases of debt securities.


NONFUNDAMENTAL POLICIES -- The following nonfundamental policies of Global
Discovery Fund, Global Growth Fund, Global Small Capitalization Fund, Growth
Fund, International Fund, New World Fund, Blue Chip Income and Growth Fund,
Growth-Income Fund, Global Growth and Income Fund, International Growth and
Income Fund, Asset Allocation Fund, Bond Fund, Global Bond Fund and High-Income
Bond Fund may be changed without shareholder approval:


1.   The fund may not invest more than 15% of its net assets in illiquid
securities.

2.   The fund may not issue senior securities, except as permitted by the 1940
Act.

INVESTMENT RESTRICTIONS OF U.S. GOVERNMENT/AAA-RATED SECURITIES FUND

U.S. Government/AAA-Rated Securities Fund may not:


1.   Purchase any security (other than securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities ("U.S. government
securities")) if, immediately after and as a result of such investment, more
than 5% of the value of the fund's total assets would be invested in securities
of the issuer.

2.   Invest 25% or more of the value of its total assets in the securities of
issuers conducting their principal business activities in the same industry,
except that this limitation shall not apply to U.S. government securities or
other securities to the extent they are backed by or represent interests in U.S.
government securities or U.S. government-guaranteed mortgages.

3.   Invest in companies for the purpose of exercising control or management.

4.   Invest in securities of other investment companies, except as permitted by
the 1940 Act.

5.   Buy or sell real estate or commodities or commodity contracts in the
ordinary course of its business; however, the fund may purchase or sell readily
marketable debt securities secured by real estate or interests therein or issued
by companies which invest in real estate or interests therein, including real
estate investment trusts.

6.   Engage in the business of underwriting securities of other issuers, except
to the extent that the disposal of an investment position may technically cause
it to be considered an underwriter as that term is defined under the Securities
Act of 1933.


                   American Funds Insurance Series -- Page 24
<PAGE>


7.   Make loans, except that the fund may: (a) purchase readily marketable debt
securities; (b) invest in repurchase agreements; (c) make loans of portfolio
securities; and (d) enter into loan participations. The fund will not invest in
repurchase agreements maturing in more than seven days if any such investment,
together with any illiquid securities (including securities which are subject to
legal or contractual restrictions on resale) held by the fund, exceeds 10% of
the value of its total assets.

8.   Sell securities short, except to the extent that the fund contemporaneously
owns or has the right to acquire at no additional cost, securities identical to
those sold short.

9.   Purchase securities on margin, except that the fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities.

10.  Borrow money, except from banks for temporary or emergency purposes not in
excess of 5% of the value of the fund's total assets, except that the fund may
enter into reverse repurchase agreements.

11.  Write, purchase or sell puts, calls or combinations thereof.

Notwithstanding investment restriction number 4, if deemed advisable by its
officers, compensation paid by the Series to its Trustees may be invested in
securities of these or other investment companies under a deferred compensation
plan adopted by Trustees pursuant to an exemptive order granted by the
Securities and Exchange Commission.


NONFUNDAMENTAL POLICIES -- The following nonfundamental policies of U.S.
Government/AAA-Rated Securities Fund may be changed without shareholder
approval:


1.   The fund may not invest more than 15% of its net assets in illiquid
securities.

2.   The fund may not issue senior securities, except as permitted by the 1940
Act.

INVESTMENT RESTRICTIONS OF CASH MANAGEMENT FUND

Cash Management Fund may not:


1.   Invest more than 5% of the value of the total assets of the fund in the
securities of any one issuer, provided that this limitation shall apply only to
75% of the value of the fund's total assets and, provided further, that the
limitation shall not apply to obligations of the government of the U.S. under a
general Act of Congress. The short-term obligations of commercial banks are
excluded from this 5% limitation with respect to 25% of the fund's total assets.

2.   As to 75% of its total assets, purchase more than 10% of the outstanding
voting class of securities of an issuer.

3.   Invest more than 25% of the fund's total assets in the securities of
issuers in the same industry. Obligations of the U.S. government, its agencies
and instrumentalities, are not subject to this 25% limitation on industry
concentration. In addition, the fund may, if deemed advisable, invest more than
25% of its assets in the obligations of domestic commercial banks.


                   American Funds Insurance Series -- Page 25
<PAGE>


4.   Enter into any repurchase agreement maturing in more than seven days or
invest in any other illiquid security if, as a result, more than 10% of the
fund's total assets would be so invested.

5.   Make loans to others except for the purchase of the debt securities listed
above. The fund may enter into repurchase agreements as described above.

6.   Borrow money, except from banks for temporary purposes, and then in an
amount not in excess of 5% of the value of the fund's total assets. Moreover, in
the event that the asset coverage for such borrowings falls below 300%, the fund
will reduce, within three days, the amount of its borrowings in order to provide
for 300% asset coverage.

7.   Sell securities short except to the extent that the fund contemporaneously
owns or has the right to acquire at no additional cost, securities identical to
those sold short.

8.   Invest in puts, calls, straddles, spreads or any combination thereof.

9.   Purchase or sell securities of other investment companies (except in
connection with a merger, consolidation, acquisition or reorganization), real
estate or commodities.

10.  Act as underwriter of securities issued by others, engage in distribution
of securities for others, or make investments in other companies for the purpose
of exercising control or management.

NONFUNDAMENTAL POLICIES -- The following nonfundamental policies of Cash
Management Fund may be changed without shareholder approval:


Notwithstanding investment restriction number 1 above, in order to comply with
Rule 2a-7 under the 1940 Act, Cash Management Fund has adopted a policy of
investing no more than 5% of its assets (measured at the time of purchase) in
the securities of any one issuer (other than the U.S. government); provided
however, that Cash Management Fund may invest, as to 25% of its assets, more
than 5% of its assets in certain high-quality securities (as defined in the
Rule) of a single issuer for a period of up to three business days. Investment
restriction number 9 above does not prevent the purchase by Cash Management Fund
of securities that have "put" or "stand-by" commitment features.


Notwithstanding investment restriction number 9 above, if deemed advisable by
its officers, compensation paid by the Series to its Trustees may be invested in
securities of these or other investment companies under a deferred compensation
plan adopted by Trustees pursuant to an exemptive order granted by the
Securities and Exchange Commission.


                   American Funds Insurance Series -- Page 26
<PAGE>


                            MANAGEMENT OF THE SERIES

BOARD OF TRUSTEES AND OFFICERS


"INDEPENDENT" TRUSTEES/1/



 NAME, AGE AND                                                         NUMBER OF
 POSITION WITH FUND                                                    BOARDS/3/
 (YEAR FIRST ELECTED/2/ AS A         PRINCIPAL OCCUPATION(S)            ON WHICH      OTHER DIRECTORSHIPS/4/
 TRUSTEE)                             DURING PAST FIVE YEARS         TRUSTEE SERVES       HELD BY TRUSTEE
--------------------------------------------------------------------------------------------------------------

 Lee A. Ault III, 72            Private investor and corporate              2         Anworth Mortgage Asset
 Chairman of the Board          director; former Chairman of the                      Corporation; Office
 (Independent and               Board, In-Q-Tel, Inc. (technology                     Depot, Inc.
 Non-Executive) (1999)          venture company funded principally
                                by the Central Intelligence
                                Agency); former Chairman of the
                                Board, President and CEO,
                                Telecredit, Inc. (payment
                                services)
--------------------------------------------------------------------------------------------------------------
 H. Frederick Christie, 75      Private investor; former President         21         AECOM Technology
 Trustee (1994)                 and CEO, The Mission Group                            Corporation;
                                (non-utility holding company,                         DineEquity, Inc.;
                                subsidiary of Southern California                     Ducommun Incorporated;
                                Edison Company)                                       Southwest Water Company


--------------------------------------------------------------------------------------------------------------
 Joe E. Davis, 74               Private investor; former Chairman           2         Anworth Mortgage Asset
 Trustee (1991)                 of the Board, Linear Corporation                      Corporation; Natural
                                (linear motor design and                              Alternatives
                                production)                                           International, Inc.
--------------------------------------------------------------------------------------------------------------
 Martin Fenton, 73              Chairman of the Board, Senior              18         None
 Trustee (1995)                 Resource Group LLC (development
                                and management of senior living
                                communities)
--------------------------------------------------------------------------------------------------------------
 Leonard R. Fuller, 62          President and CEO, Fuller                  16         None
 Trustee (1999)                 Consulting (financial management
                                consulting firm)
--------------------------------------------------------------------------------------------------------------
 W. Scott Hedrick, 62           Founding General Partner,                   2         Hot Topic, Inc.;
 Trustee (2007)                 InterWest Partners (venture                           Office Depot, Inc.
                                capital firm focused on
                                information technology and life
                                sciences); Lecturer, Stanford
                                Graduate School of Business
--------------------------------------------------------------------------------------------------------------
 Merit E. Janow, 50             Professor, Columbia University,             4         The NASDAQ Stock Market
 Trustee (2007)                 School of International and Public                    LLC; Trimble Navigation
                                Affairs; former Member, World                         Limited
                                Trade Organization Appellate Body

--------------------------------------------------------------------------------------------------------------
 Mary Myers Kauppila, 54        Private investor; Chairman of the           6         None
 Trustee (1994)                 Board and CEO, Ladera Management
                                Company (venture capital and
                                agriculture); former owner and
                                President, Energy Investment, Inc.

--------------------------------------------------------------------------------------------------------------
 Kirk P. Pendleton, 68          Chairman of the Board and CEO,              7         None
 Trustee (1996)                 Cairnwood, Inc. (venture capital
                                investment)
--------------------------------------------------------------------------------------------------------------




                   American Funds Insurance Series -- Page 27
<PAGE>


"INTERESTED" TRUSTEES/5,6/



                                    PRINCIPAL OCCUPATION(S)
                                    DURING PAST FIVE YEARS          NUMBER OF
 NAME,AGE AND                            AND POSITIONS              BOARDS/3/
 POSITION WITH FUND              HELD WITH AFFILIATED ENTITIES       ON WHICH      OTHER DIRECTORSHIPS/4/
 (YEAR FIRST ELECTED/2/ AS A     OR THE PRINCIPAL UNDERWRITER       TRUSTEE OR            HELD BY
 TRUSTEE)                                OF THE SERIES            OFFICER SERVES     TRUSTEE OR OFFICER
----------------------------------------------------------------------------------------------------------

 James K. Dunton, 70            Senior Vice President - Capital         2          None
 Vice Chairman of the Board     Research Global Investors,
 (1993)                         Capital Research and Management
                                Company; Director, Capital
                                Research and Management Company

----------------------------------------------------------------------------------------------------------
 Donald D. O'Neal, 48           Senior Vice President - Capital         3          None
 President and Trustee          Research Global Investors,
 (1998)                         Capital Research and Management
                                Company; Director, The Capital
                                Group Companies, Inc.*

----------------------------------------------------------------------------------------------------------



OTHER OFFICERS/6/



 NAME, AGE AND
 POSITION WITH FUND           PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
 (YEAR FIRST ELECTED/2/ AS      AND POSITIONS HELD WITH AFFILIATED ENTITIES
 AN OFFICER)                    OR THE PRINCIPAL UNDERWRITER OF THE SERIES
-------------------------------------------------------------------------------

 Michael J. Downer, 53      Senior Vice President, Fund Business Management
 Executive Vice President   Group, and Coordinator, Legal and Compliance -
 (1991)                     Capital Research and Management Company; Director,
                            American Funds Distributors, Inc.*; Director,
                            Capital Bank and Trust Company*
-------------------------------------------------------------------------------
 Alan N. Berro, 47          Senior Vice President - Capital World Investors,
 Senior Vice President      Capital Research and Management Company
 (1998)
-------------------------------------------------------------------------------
 Abner D. Goldstine, 78     Senior Vice President - Fixed Income, Capital
 Senior Vice President      Research and Management Company; Director, Capital
 (1993)                     Research and Management Company
-------------------------------------------------------------------------------
 John H. Smet, 51           Senior Vice President - Fixed Income, Capital
 Senior Vice President      Research and Management Company; Director, American
 (1994)                     Funds Distributors, Inc.*
-------------------------------------------------------------------------------
 Claudia P. Huntington,     Senior Vice President - Capital Research Global
 56                         Investors, Capital Research and Management Company;
 Vice President (1994)      Director, The Capital Group Companies, Inc.*
-------------------------------------------------------------------------------
 Robert W. Lovelace, 45     Senior Vice President - Capital World Investors,
 Vice President (1997)      Capital Research and Management Company; Director,
                            Capital Research and Management Company; Chairman
                            of the Board, Capital Research Company*
-------------------------------------------------------------------------------
 Susan M. Tolson, 46        Senior Vice President - Fixed Income, Capital
 Vice President (1999)      Research and Management Company
-------------------------------------------------------------------------------
 Steven I. Koszalka, 44     Assistant Vice President - Fund Business Management
 Secretary (2003)           Group, Capital Research and Management Company
-------------------------------------------------------------------------------
 David A. Pritchett, 42     Vice President - Fund Business Management Group,
 Treasurer (1999)           Capital Research and Management Company
-------------------------------------------------------------------------------
 Karl C. Grauman, 40        Vice President - Fund Business Management Group,
 Assistant Treasurer        Capital Research and Management Company
 (2006)
-------------------------------------------------------------------------------




                   American Funds Insurance Series -- Page 28
<PAGE>


* Company affiliated with Capital Research and Management Company.

1 The term "independent" trustee refers to a trustee who is not an "interested
 person" of the funds within the meaning of the 1940 Act.

2 Trustees and officers of the Series serve until their resignation, removal or
 retirement.
3 Funds managed by Capital Research and Management Company, including the
 American Funds; American Funds Target Date Retirement Series,(R)/ /Inc., which
 is composed of nine funds and is available through tax-deferred retirement
 plans and IRAs; and Endowments, which is composed of two portfolios and is
 available to certain nonprofit organizations.
4 This includes all directorships (other than those in the American Funds or
 other funds managed by Capital Research and Management Company) that are held
 by each trustee as a director of a public company or a registered investment
 company.
5 "Interested persons" of the funds within the meaning of the 1940 Act, on the
 basis of their affiliation with the Series' investment adviser, Capital
 Research and Management Company, or affiliated entities.
6 All of the trustees and officers listed are officers and/or directors/trustees
 of one or more of the other funds for which Capital Research and Management
 Company serves as investment adviser.

THE ADDRESS FOR ALL TRUSTEES AND OFFICERS OF THE SERIES IS 333 SOUTH HOPE
STREET, 55TH FLOOR, LOS ANGELES, CALIFORNIA 90071, ATTENTION: SECRETARY.


                   American Funds Insurance Series -- Page 29
<PAGE>



FUND SHARES OWNED BY TRUSTEES AS OF DECEMBER 31, 2007



                                                     AGGREGATE DOLLAR RANGE/1/
                                                             OF SHARES
                                                        OWNED IN ALL FUNDS
                                                     IN THE AMERICAN FUNDS/3/
                             DOLLAR RANGE/1/ OF           FAMILY OVERSEEN
          NAME              FUND SHARES OWNED/2/            BY TRUSTEE
-------------------------------------------------------------------------------

 "INDEPENDENT" TRUSTEES
-------------------------------------------------------------------------------
 Lee A. Ault III               Over $100,000               Over $100,000
-------------------------------------------------------------------------------
 H. Frederick Christie              None                   Over $100,000
-------------------------------------------------------------------------------
 Joe E. Davis                  Over $100,000               Over $100,000
-------------------------------------------------------------------------------
 Martin Fenton/4/            $50,001 - $100,000            Over $100,000
-------------------------------------------------------------------------------
 Leonard R. Fuller                  None                $50,001 - $100,000
-------------------------------------------------------------------------------
 W. Scott Hedrick                   None                       None
-------------------------------------------------------------------------------
 Merit E. Janow                     None                   Over $100,000
-------------------------------------------------------------------------------
 Mary Myers Kauppila                None                   Over $100,000
-------------------------------------------------------------------------------
 Kirk P. Pendleton              $1 - $10,000               Over $100,000
-------------------------------------------------------------------------------
 "INTERESTED" TRUSTEES
-------------------------------------------------------------------------------
 James K. Dunton                    None                   Over $100,000
-------------------------------------------------------------------------------
 Donald D. O'Neal                   None                   Over $100,000
-------------------------------------------------------------------------------



1 Ownership disclosure is made using the following ranges: None; $1 - $10,000;
 $10,001 - $50,000; $50,001 - $100,000; and Over $100,000. The amounts listed
 for "interested" trustees include shares owned through The Capital Group
 Companies, Inc. retirement plan and 401(k) plan.
2 An independent trustee may have exposure to the American Funds through an
 allocation of some or all of his or her nonqualified deferred compensation
 account.
3 Shares of the funds may only be owned by purchasing variable annuity and
 variable life insurance contracts. Each trustee's need for variable annuity or
 variable life contracts and the role those contracts would play in his or her
 comprehensive investment portfolio will vary and depend on a number of factors
 including tax, estate planning, life insurance, alternative retirement plans or
 other considerations.
4 Mr. Fenton's contract was purchased on March 7, 2008.

TRUSTEE COMPENSATION -- No compensation is paid by the Series to any officer or
trustee who is a director, officer or employee of the investment adviser or its
affiliates. The boards of funds advised by the investment adviser typically meet
either individually or jointly with the boards of one or more other such funds
with substantially overlapping board membership (in each case referred to as a
"board cluster"). The Series typically pays each independent trustee an annual
fee, which ranges from $39,500 to $80,000, based primarily on the total number
of board clusters on which that independent trustee serves.


In addition, the Series generally pays independent trustees attendance and other
fees for meetings of the board and its committees. The Board chair receives an
additional fee for this service.


                   American Funds Insurance Series -- Page 30
<PAGE>


Independent trustees also receive attendance fees for certain special joint
meetings and information sessions with directors and trustees of other groupings
of funds advised by the investment adviser. The Series and the other funds
served by each independent trustee each pay an equal portion of these attendance
fees.


No pension or retirement benefits are accrued as part of Series expenses.
Independent trustees may elect, on a voluntary basis, to defer all or a portion
of their fees through a deferred compensation plan in effect for the Series. The
Series also reimburses certain expenses of the independent trustees.


Trustee compensation paid during the fiscal year ended December 31, 2007



                                                     TOTAL COMPENSATION (INCLUDING
                                                         VOLUNTARILY DEFERRED
                                                           COMPENSATION/1/)
                         AGGREGATE COMPENSATION        FROM ALL FUNDS MANAGED BY
                         (INCLUDING VOLUNTARILY     CAPITAL RESEARCH AND MANAGEMENT
                        DEFERRED COMPENSATION/1/)    COMPANY OR ITS AFFILIATES/2/
         NAME                 FROM THE FUND
-----------------------------------------------------------------------------------

 Lee A. Ault III                $146,000                       $168,500
-----------------------------------------------------------------------------------
 H. Frederick                     66,452                        421,160
 Christie/3/
-----------------------------------------------------------------------------------
 Joe E. Davis                    129,500                        154,500
-----------------------------------------------------------------------------------
 Martin Fenton/3/                 78,587                        389,742
-----------------------------------------------------------------------------------
 Leonard R. Fuller/3/            101,256                        322,924
-----------------------------------------------------------------------------------
 W. Scott Hedrick                 83,250                         95,500
-----------------------------------------------------------------------------------
 Merit E. Janow                   21,750                        133,559
-----------------------------------------------------------------------------------
 Mary Myers                       95,500                        325,208
 Kauppila/3/
-----------------------------------------------------------------------------------
 Kirk P. Pendleton/3/             83,535                        289,083
-----------------------------------------------------------------------------------



1 Amounts may be deferred by eligible trustees under a nonqualified deferred
 compensation plan adopted by the Series in 1993. Deferred amounts accumulate at
 an earnings rate determined by the total return of one or more American Funds
 as designated by the trustees. Compensation shown in this table for the fiscal
 year ended December 31, 2007 does not include earnings on amounts deferred in
 previous fiscal years. See footnote 3 to this table for more information.
2 Funds managed by Capital Research and Management Company, including the
 American Funds; American Funds Target Date Retirement Series,(R)/ /Inc., which
 is composed of nine funds and is available through tax-deferred retirement
 plans and IRAs; and Endowments, which is composed of two portfolios and is
 available to certain nonprofit organizations.

3 Since the deferred compensation plan's adoption, the total amount of deferred
 compensation accrued by the Series (plus earnings thereon) through the 2007
 fiscal year for participating trustees is as follows: H. Frederick Christie
 ($435,932), Martin Fenton ($310,973), Leonard R. Fuller ($5,972), Mary Myers
 Kauppila ($1,192,490) and Kirk P. Pendleton ($949,187). Amounts deferred and
 accumulated earnings thereon are not funded and are general unsecured
 liabilities of the Series until paid to the trustees.

SERIES ORGANIZATION AND THE BOARD OF TRUSTEES -- The Series, an open-end
investment company, was organized as a Massachusetts business trust on September
13, 1983. All Series operations are supervised by its board of trustees, which
meets periodically and performs duties required by applicable state and federal
laws. Independent board members are paid certain fees for services rendered to
the Series as described above. They may elect to defer all or a portion of these
fees through a deferred compensation plan in effect for the Series.


                   American Funds Insurance Series -- Page 31
<PAGE>


Massachusetts common law provides that a trustee of a Massachusetts business
trust owes a fiduciary duty to the trust and must carry out his or her
responsibilities as a trustee in accordance with that fiduciary duty. Generally,
a trustee will satisfy his or her duties if he or she acts in good faith and
uses ordinary prudence.


The Series currently consists of separate funds which have separate assets and
liabilities, and invest in separate investment portfolios. The board of trustees
may create additional funds in the future. Income, direct liabilities and direct
operating expenses of a fund will be allocated directly to that fund and general
liabilities and expenses of the Series will be allocated among the funds in
proportion to the total net assets of each fund.


Each fund has three classes of shares - Class 1, Class 2 and Class 3. The shares
of each class represent an interest in the same investment portfolio. Each class
has equal rights as to voting, redemption, dividends and liquidation, except
that each class bears different distribution expenses and other expenses
properly attributable to the particular class as approved by the board of
trustees and set forth in the Series' amended and restated rule 18f-3 Plan.
Class 2 and Class 3 shareholders have exclusive voting rights with respect to
their respective rule 12b-1 Plans adopted in connection with the distribution of
Class 2 and Class 3 shares. Shares of each Class of the Series vote together on
matters that affect all classes in substantially the same manner. Each class
votes as a class on matters that affect that class alone.


The Series does not hold annual meetings of shareholders. However, significant
matters that require shareholder approval, such as certain elections of board
members or a change in a fundamental investment policy, will be presented to
shareholders at a meeting called for such purpose. Shareholders have one vote
per share owned. At the request of the holders of at least 10% of the shares,
the Series will hold a meeting at which any member of the board could be removed
by a majority vote.


The Series' declaration of trust and by-laws as well as separate indemnification
agreements that the Series has entered into with independent trustees provide in
effect that, subject to certain conditions, the Series will indemnify its
officers and trustees against liabilities or expenses actually and reasonably
incurred by them relating to their service to the fund. However, trustees are
not protected from liability by reason of their willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
their office.


COMMITTEES OF THE BOARD OF TRUSTEES -- The Series has an audit committee
comprised of H. Frederick Christie, Joe E. Davis, Martin Fenton, Leonard R.
Fuller and W. Scott Hedrick, none of whom is an "interested person" of the
Series within the meaning of the 1940 Act. The committee provides oversight
regarding the Series' accounting and financial reporting policies and practices,
its internal controls and the internal controls of the Series' principal service
providers. The committee acts as a liaison between the Series' independent
registered public accounting firm and the full board of trustees. Six audit
committee meetings were held during the 2007 fiscal year.


The Series has a contracts committee comprised of Lee A. Ault III, H. Frederick
Christie, Joe E. Davis, Martin Fenton, Leonard R. Fuller, W. Scott Hedrick,
Merit E. Janow, Mary Myers Kauppila and Kirk P. Pendleton, none of whom is an
"interested person" of the Series within the meaning of the 1940 Act. The
committee's principal function is to request, review and consider the
information deemed necessary to evaluate the terms of certain agreements between
the Series and its investment adviser or the investment adviser's affiliates,
such as the Investment


                   American Funds Insurance Series -- Page 32
<PAGE>



Advisory and Service Agreement and plan of distribution adopted pursuant to rule
12b-1 under the 1940 Act, that the Series may enter into, renew or continue, and
to make its recommendations to the full board of trustees on these matters. One
contracts committee meeting was held during the 2007 fiscal year.


The Series has a nominating committee comprised of Lee A. Ault III, Joe E.
Davis, Martin Fenton,  Mary Myers Kauppila and Kirk P. Pendleton, none of whom
is an "interested person" of the Series within the meaning of the 1940 Act. 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. The committee
also evaluates, selects and nominates independent trustee candidates to the full
board of trustees. While the committee normally is able to identify from its own
and other 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 Series, addressed to the Series' 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 committee. Four nominating committee
meetings were held during the 2007 fiscal year.


PROXY VOTING PROCEDURES AND PRINCIPLES -- The Series and its investment adviser
have adopted Proxy Voting Procedures and Principles (the "Principles") with
respect to voting proxies of securities held by the funds, other American Funds
and Endowments. The complete text of these principles is available on the
American Funds website at americanfunds.com. Certain American Funds have
established separate proxy voting committees that vote proxies or delegate to a
voting officer the authority to vote on behalf of those funds. Proxies for all
other funds (including the Series) are voted by a committee of the appropriate
equity investment division of the investment adviser under authority delegated
by those funds' boards. Therefore, if more than one fund invests in the same
company, they may vote differently on the same proposal.


All U.S. proxies are voted. Proxies for companies outside the U.S. also are
voted, provided there is sufficient time and information available. After a
proxy statement is received, the investment adviser prepares a summary of the
proposals contained in the proxy statement. A discussion of any potential
conflicts of interest also is included in the summary. For proxies of securities
managed by a particular investment division of the investment adviser, the
initial voting recommendation is made by one or more of the division's
investment analysts familiar with the company and industry. A second
recommendation is made by a proxy coordinator (an investment analyst with
experience in corporate governance and proxy voting matters) within the
appropriate investment division, based on knowledge of these Principles and
familiarity with proxy-related issues. The proxy summary and voting
recommendations are made available to the appropriate proxy voting committee for
a final voting decision.


The analyst and proxy coordinator making voting recommendations are responsible
for noting any potential material conflicts of interest. One example might be
where a director of one or more American Funds is also a director of a company
whose proxy is being voted. In such instances, proxy voting committee members
are alerted to the potential conflict. The proxy voting committee may then elect
to vote the proxy or seek a third-party recommendation or vote of an ad hoc
group of committee members.


                   American Funds Insurance Series -- Page 33
<PAGE>


The Principles, which have been in effect in substantially their current form
for many years, provide an important framework for analysis and decision-making
by all funds. However, they are not exhaustive and do not address all potential
issues. The Principles provide a certain amount of flexibility so that all
relevant facts and circumstances can be considered in connection with every
vote. As a result, each proxy received is voted on a case-by-case basis
considering the specific circumstances of each proposal. The voting process
reflects the funds' understanding of the company's business, its management and
its relationship with shareholders over time.


Information regarding how the fund voted proxies relating to portfolio
securities during the 12-month period ended June 30 of each year will be
available on or about September 1 of each year (a) without charge, upon request
by calling American Funds Service Company at 800/421-0180, (b) on the American
Funds website and (c) on the SEC's website at sec.gov.


The following summary sets forth the general positions of the American Funds,
Endowments, the Series and the investment adviser on various proposals. A copy
of the full Principles is available upon request, free of charge, by calling
American Funds Service Company or visiting the American Funds website.


     DIRECTOR MATTERS -- The election of a company's slate of nominees for
     director generally is supported. Votes may be withheld for some or all of
     the nominees if this is determined to be in the best interest of
     shareholders. Separation of the chairman and CEO positions also may be
     supported.

     GOVERNANCE PROVISIONS -- Typically, proposals to declassify a board (elect
     all directors annually) are supported based on the belief that this
     increases the directors' sense of accountability to shareholders. Proposals
     for cumulative voting generally are supported in order to promote
     management and board accountability and an opportunity for leadership
     change. Proposals designed to make director elections more meaningful,
     either by requiring a majority vote or by requiring any director receiving
     more withhold votes to tender his or her resignation, generally are
     supported.

     SHAREHOLDER RIGHTS -- Proposals to repeal an existing poison pill generally
     are supported. (There may be certain circumstances, however, when a proxy
     voting committee of a fund or an investment division of the investment
     adviser believes that a company needs to maintain anti-takeover
     protection.) Proposals to eliminate the right of shareholders to act by
     written consent or to take away a shareholder's right to call a special
     meeting typically are not supported.

     COMPENSATION AND BENEFIT PLANS -- Option plans are complicated, and many
     factors are considered in evaluating a plan. Each plan is evaluated based
     on protecting shareholder interests and a knowledge of the company and its
     management. Considerations include the pricing (or repricing) of options
     awarded under the plan and the impact of dilution on existing shareholders
     from past and future equity awards. Compensation packages should be
     structured to attract, motivate and retain existing employees and qualified
     directors; however, they should not be excessive.

     ROUTINE MATTERS -- The ratification of auditors, procedural matters
     relating to the annual meeting and changes to company name are examples of
     items considered routine. Such items generally are voted in favor of
     management's recommendations unless circumstances indicate otherwise.


                   American Funds Insurance Series -- Page 34
<PAGE>



PRINCIPAL FUND SHAREHOLDERS -- The following tables identify those investors who
own of record or are known by the funds to own beneficially 5% or more of any
class of a fund's shares as of the opening of business on September 1, 2008.
Unless otherwise indicated, the ownership percentages below represent ownership
of record rather than beneficial ownership.


GLOBAL DISCOVERY



                                                              OWNERSHIP
                    NAME AND ADDRESS                          PERCENTAGE
-----------------------------------------------------------------------------

 Information to come
-----------------------------------------------------------------------------



GLOBAL GROWTH



                                                              OWNERSHIP
                    NAME AND ADDRESS                          PERCENTAGE
-----------------------------------------------------------------------------

 Information to come
-----------------------------------------------------------------------------



GLOBAL SMALL CAPITALIZATION FUND



                                                              OWNERSHIP
                    NAME AND ADDRESS                          PERCENTAGE
-----------------------------------------------------------------------------

 Information to come
-----------------------------------------------------------------------------





GROWTH FUND



                                                              OWNERSHIP
                    NAME AND ADDRESS                          PERCENTAGE
-----------------------------------------------------------------------------

 Information to come
-----------------------------------------------------------------------------



INTERNATIONAL FUND



                                                              OWNERSHIP
                    NAME AND ADDRESS                          PERCENTAGE
-----------------------------------------------------------------------------

 Information to come
-----------------------------------------------------------------------------



NEW WORLD FUND



                                                              OWNERSHIP
                    NAME AND ADDRESS                          PERCENTAGE
-----------------------------------------------------------------------------

 Information to come
-----------------------------------------------------------------------------




                   American Funds Insurance Series -- Page 35
<PAGE>


BLUE CHIP INCOME AND GROWTH FUND



                                                              OWNERSHIP
                    NAME AND ADDRESS                          PERCENTAGE
-----------------------------------------------------------------------------

 Information to come
-----------------------------------------------------------------------------



GLOBAL GROWTH AND INCOME FUND



                                                              OWNERSHIP
                    NAME AND ADDRESS                          PERCENTAGE
-----------------------------------------------------------------------------

 Information to come
-----------------------------------------------------------------------------



GROWTH-INCOME FUND



                                                              OWNERSHIP
                    NAME AND ADDRESS                          PERCENTAGE
-----------------------------------------------------------------------------

 Information to come
-----------------------------------------------------------------------------



ASSET ALLOCATION FUND



                                                              OWNERSHIP
                    NAME AND ADDRESS                          PERCENTAGE
-----------------------------------------------------------------------------

 Information to come
-----------------------------------------------------------------------------



BOND FUND



                                                              OWNERSHIP
                    NAME AND ADDRESS                          PERCENTAGE
-----------------------------------------------------------------------------

 Information to come
-----------------------------------------------------------------------------



GLOBAL BOND FUND



                                                              OWNERSHIP
                    NAME AND ADDRESS                          PERCENTAGE
-----------------------------------------------------------------------------

 Information to come
-----------------------------------------------------------------------------



HIGH-INCOME BOND FUND



                                                              OWNERSHIP
                    NAME AND ADDRESS                          PERCENTAGE
-----------------------------------------------------------------------------

 Information to come
-----------------------------------------------------------------------------




                   American Funds Insurance Series -- Page 36
<PAGE>


U.S. GOVERNMENT/AAA-RATED SECURITIES FUND



                                                              OWNERSHIP
                    NAME AND ADDRESS                          PERCENTAGE
-----------------------------------------------------------------------------

 Information to come
-----------------------------------------------------------------------------



CASH MANAGEMENT FUND



                                                              OWNERSHIP
                    NAME AND ADDRESS                          PERCENTAGE
-----------------------------------------------------------------------------

 Information to come
-----------------------------------------------------------------------------



INVESTMENT ADVISER -- Capital Research and Management Company, the Series'
investment adviser, founded in 1931, maintains research facilities in the United
States and abroad (Los Angeles, San Francisco, New York, Washington, DC, London,
Geneva, Hong Kong, Singapore and Tokyo). These facilities are staffed with
experienced investment professionals. The investment adviser is located at 333
South Hope Street, Los Angeles, CA 90071 and 6455 Irvine Center Drive, Irvine,
CA 92618. It is a wholly owned subsidiary of The Capital Group Companies, Inc.,
a holding company for several investment management subsidiaries. Capital
Research and Management Company manages equity assets through two investment
divisions, Capital World Investors and Capital Research Global Investors, and
manages fixed-income assets through its Fixed Income division. Capital World
Investors and Capital Research Global Investors make investment decisions on an
independent basis.


The investment adviser has adopted policies and procedures that address issues
that may arise as a result of an investment professional's management of the
funds and other funds and accounts. Potential issues could involve allocation of
investment opportunities and trades among funds and accounts, use of information
regarding the timing of fund trades, investment professional compensation and
voting relating to portfolio securities. The investment adviser believes that
its policies and procedures are reasonably designed to address these issues.


COMPENSATION OF INVESTMENT PROFESSIONALS -- As described in the prospectus, the
investment adviser uses a system of multiple portfolio counselors in managing
fund assets. In addition, Capital Research and Management Company's investment
analysts may make investment decisions with respect to a portion of a fund's
portfolio within their research coverage.


Portfolio counselors and investment analysts are paid competitive salaries by
Capital Research and Management Company. In addition, they may receive bonuses
based on their individual portfolio results. Investment professionals also may
participate in profit-sharing plans. The relative mix of compensation
represented by bonuses, salary and profit-sharing plans will vary depending on
the individual's portfolio results, contributions to the organization and other
factors.


To encourage a long-term focus, bonuses based on investment results are
calculated by comparing pretax total investment returns to relevant benchmarks
over the most recent year, a four-year rolling average and an eight-year rolling
average with much greater weight placed on the four-year and eight-year rolling
averages. For portfolio counselors, benchmarks may include measures of the
marketplaces in which the fund invests and measures of the results of


                   American Funds Insurance Series -- Page 37
<PAGE>



comparable mutual funds. For investment analysts, benchmarks may include
relevant market measures and appropriate industry or sector indexes reflecting
their areas of expertise. Capital Research and Management Company makes periodic
subjective assessments of analysts' contributions to the investment process and
this is an element of their overall compensation. The investment results of the
funds' portfolio counselors may be measured against one or more of the following
benchmarks, depending on his or her investment focus:


     Global Discovery Fund -- Lipper Multi-Cap Growth Funds Index, Global
     Service and Information Index, Non-U.S. Service and Information Index;

     Global Growth Fund -- MSCI World Index, Lipper Global Funds Index;

     Global Small Capitalization Fund -- S&P/Citigroup World Smallcap Index;
     S&P/Citigroup World ex US Smallcap Index; S&P/Citigroup US Smallcap Index;
     Lipper Small Cap Growth Funds Index; Lipper International Small Cap Funds
     Index;

     Growth Fund -- S&P 500, Lipper Growth Funds Index;

     International Fund -- MSCI All Country World Index ex-USA, Lipper
     International Funds Index;

     New World Fund -- MSCI All Country World Index, Lipper Global Funds Index,
     Lipper Emerging Markets Funds Index, JP Morgan Emerging Markets Bond Index
     Global, MSCI Emerging Markets Index;

     Blue Chip Income and Growth Fund -- S&P 500, Lipper Growth & Income Funds
     Index;

     Global Growth and Income Fund -- MSCI World Index, Lipper Global Funds
     Index;

     Growth-Income Fund -- S&P 500, Lipper Growth & Income Funds Index;

     International Growth and Income Fund -- MSCI World Index (ex-U.S.);

     Asset Allocation Fund -- S&P 500, Lipper Growth & Income Funds Index,
     Lehman Brothers U.S. Aggregate Index, Credit Suisse First Boston High Yield
     Bond Index, Lipper High Current Yield Bond Funds Average;

     Bond Fund -- Lehman Brothers U.S. Aggregate Index, Credit Suisse First
     Boston High Yield Bond Index, Lipper High Current Yield Bond Funds Average;

     Global Bond Fund -- Lehman Brothers Global Aggregate Bond Index, Lehman
     Brothers US Corporate High Yield Index 2% Issuer Cap;

     High-Income Bond Fund -- Credit Suisse First Boston High Yield Bond Index,
     Lipper High Current Yield Bond Funds Index; and

     U.S. Government/AAA Rated Securities Fund -- Citigroup Treasury/Government
     Sponsored/Mortgage Index.


                   American Funds Insurance Series -- Page 38
<PAGE>


PORTFOLIO COUNSELOR FUND HOLDINGS AND MANAGEMENT OF OTHER ACCOUNTS -- Shares of
the funds may only be owned by purchasing variable annuity and variable life
insurance contracts. Each portfolio counselor's need for variable annuity or
variable life contracts and the role those contracts would play in his or her
comprehensive investment portfolio will vary and depend on a number of factors
including tax, estate planning, life insurance, alternative retirement plans or
other considerations. The following portfolio counselor owns shares (through a
variable insurance contract) in the dollar range noted: Robert W. Lovelace,
Global Growth Fund, $10,001 - $50,000; Global Small Capitalization Fund, $1 -
$10,000; Growth-Income Fund $1 - $10,000. The other portfolio counselors have
determined that variable insurance or annuity contracts do not meet their
current needs. Consequently, they do not hold shares of the funds.


Portfolio counselors may also manage assets in other funds advised by Capital
Research and Management Company or its affiliates. Other managed accounts as of
the end of American Funds Insurance Series' most recently completed fiscal year
are listed as follows:





                              NUMBER             NUMBER
                             OF OTHER           OF OTHER           NUMBER
                            REGISTERED           POOLED           OF OTHER
                            INVESTMENT         INVESTMENT         ACCOUNTS
                         COMPANIES (RICS)   VEHICLES (PIVS)       IN WHICH
                             IN WHICH           IN WHICH         PORTFOLIO
                            PORTFOLIO          PORTFOLIO         COUNSELOR
                            COUNSELOR          COUNSELOR        IS A MANAGER
                           IS A MANAGER       IS A MANAGER       (ASSETS OF
      PORTFOLIO          (ASSETS OF RICS    (ASSETS OF PIVS    OTHER ACCOUNTS
      COUNSELOR          IN BILLIONS)/1/    IN BILLIONS)/2/   IN BILLIONS)/3/
--------------------------------------------------------------------------------

 James K. Dunton            2       $102.4        None              None
--------------------------------------------------------------------------------
 Donald D. O'Neal           2       $282.8      1      $0.06        None
--------------------------------------------------------------------------------
 Alan N. Berro              3       $144.7        None              None
--------------------------------------------------------------------------------
 Abner D. Goldstine         4       $136.5        None              None
--------------------------------------------------------------------------------
 John H. Smet               7       $194.0        None            3       $2.42
--------------------------------------------------------------------------------
 Claudia P.                 3       $ 62.8        None              None
 Huntington
--------------------------------------------------------------------------------
 Robert W. Lovelace         2       $ 79.8      1      $1.09        None
--------------------------------------------------------------------------------
 Susan M. Tolson            3       $ 55.2        None            2       $0.58
--------------------------------------------------------------------------------
 David C. Barclay           4       $154.9      4      $1.41     19       $5.93
--------------------------------------------------------------------------------
 Donnalisa Barnum           1       $193.5        None              None
--------------------------------------------------------------------------------
 Christopher D.                None               None              None
 Buchbinder
--------------------------------------------------------------------------------
 Gordon Crawford            3       $229.0        None              None
--------------------------------------------------------------------------------
 Mark H. Dalzell            2       $ 42.3      2      $0.29    19/4/     $5.93
--------------------------------------------------------------------------------
 Mark E. Denning            5       $292.0      1      $0.12        None
--------------------------------------------------------------------------------
 J. Blair Frank             2       $219.1        None              None
--------------------------------------------------------------------------------
 Nicholas J. Grace          2       $125.6        None              None
--------------------------------------------------------------------------------
 Alwyn W. Heong             3       $256.5        None              None
--------------------------------------------------------------------------------
 David A. Hoag              3       $116.9        None              None
--------------------------------------------------------------------------------
 Thomas H. Hogh             3       $ 14.6      1      $0.29      3       $0.31
--------------------------------------------------------------------------------
 Gregg E. Ireland           3       $368.6        None              None
--------------------------------------------------------------------------------
 Carl M. Kawaja             4       $317.7      1      $1.09        None
--------------------------------------------------------------------------------
 Michael T. Kerr            2       $243.9        None              None
--------------------------------------------------------------------------------
 Sung Lee                   1       $124.0        None              None
--------------------------------------------------------------------------------
 James B. Lovelace          4       $222.2        None              None
--------------------------------------------------------------------------------
 Jesper Lyckeus                None             1      $0.12        None
--------------------------------------------------------------------------------
 Mark R. Macdonald          4       $150.4        None              None
--------------------------------------------------------------------------------
 Ronald B. Morrow           2       $243.9        None              None
--------------------------------------------------------------------------------
 James R. Mulally           2       $ 67.2      3      $0.77      7       $1.79
--------------------------------------------------------------------------------
 C. Ross Sappenfield        2       $116.6      1      $0.06        None
--------------------------------------------------------------------------------
 Christopher M.                None               None              None
 Thomsen
--------------------------------------------------------------------------------
 Steven T. Watson           2       $148.8        None              None
--------------------------------------------------------------------------------
 Paul A. White                 None               None              None
--------------------------------------------------------------------------------




                   American Funds Insurance Series -- Page 39
<PAGE>



1 Indicates fund(s) where the portfolio counselor also has significant
 responsibilities for the day to day management of the fund(s). Assets noted are
 the total net assets of the registered investment companies and are not
 indicative of the total assets managed by the individual, which is a
 substantially lower amount. No fund has an advisory fee that is based on the
 performance of the fund.
2 Represents funds advised or sub-advised by Capital Research and Management
 Company and sold outside the United States and/ or fixed-income assets in
 institutional accounts managed by investment adviser subsidiaries of Capital
 Group International, Inc., an affiliate of Capital Research and Management
 Company. Assets noted are the total net assets of the funds or accounts and are
 not indicative of the total assets managed by the individual, which is a
 substantially lower amount.

3 Reflects other professionally managed accounts held at companies affiliated
 with Capital Research and Management Company. Personal brokerage accounts of
 portfolio counselors and their families are not reflected.
4 The advisory fee of one of these accounts (representing $0.31 billion in total
 assets) is based partially on its investment results.

INVESTMENT ADVISORY AND SERVICE AGREEMENTS -- The Investment Advisory and
Service Agreements (the "Agreements") between the Series and the investment
adviser will continue in effect until December 31, 2008, unless sooner
terminated, and may be renewed from year to


                   American Funds Insurance Series -- Page 40
<PAGE>



year thereafter, provided that any such renewal has been specifically approved
at least annually by (a) the Board of trustees, or by the vote of a majority (as
defined in the 1940 Act) of the outstanding voting securities of the applicable
Series, and (b) the vote of a majority of trustees who are not parties to the
Agreements or interested persons (as defined in the 1940 Act) of any such party,
cast in person at a meeting called for the purpose of voting on such approval.
The Agreements provide that the investment adviser has no liability to the
Series for its acts or omissions in the performance of its obligations to the
Series not involving willful misconduct, bad faith, gross negligence or reckless
disregard of its obligations under the Agreements. The Agreements also provide
that either party has the right to terminate them, without penalty, upon 60
days' written notice to the other party, and that the Agreements automatically
terminate in the event of their assignment (as defined in the 1940 Act).


As compensation for its services, the investment adviser receives a monthly fee
that is accrued daily, calculated at the annual rates of:


Global Discovery Fund: 0.58% on the first $500 million of net assets, plus 0.48%
on net assets greater than $500 million but not exceeding $1.0 billion, plus
0.44% on net assets in excess of $1.0 billion;


Global Growth Fund: 0.69% on the first $600 million of net assets, plus 0.59% on
net assets greater than $600 million but not exceeding $1.2 billion, plus 0.53%
on net assets greater than $1.2 billion but not exceeding $2.0 billion, plus
0.50% on net assets greater than $2.0 billion but not exceeding $3.0 billion,
plus 0.48% on net assets greater than $3.0 billion but not exceeding $5.0
billion; plus 0.46% on net assets in excess of $5.0 billion;


Global Small Capitalization Fund: 0.80% on the first $600 million of net assets,
plus 0.74% on net assets greater than $600 million but not exceeding $1.0
billion, plus 0.70% on net assets greater than $1.0 billion but not exceeding
$2.0 billion, plus 0.67% on net assets greater than $2.0 billion but not
exceeding $3.0 billion, plus 0.65% on net assets in excess of $3.0 billion;


Growth Fund: 0.50% on the first $600 million of net assets, plus 0.45% on net
assets greater than $600 million but not exceeding $1.0 billion, plus 0.42% on
net assets greater than $1.0 billion but not exceeding $2.0 billion, plus 0.37%
on net assets greater than $2.0 billion but not exceeding $3.0 billion, plus
0.35% on net assets greater than $3.0 billion but not exceeding $5.0 billion,
plus 0.33% on net assets greater than $5.0 billion but not exceeding $8.0
billion, plus 0.315% on net assets greater than $8.0 billion but not exceeding
$13.0 billion, plus 0.30% on net assets greater than $13.0 billion but not
exceeding $21.0 billion, plus 0.29% on net assets greater than $21.0 billion but
not exceeding $27.0 billion, plus 0.285% on net assets in excess of $27.0
billion;


International Fund: 0.69% on the first $500 million of net assets, plus 0.59% on
net assets greater than $500 million but not exceeding $1.0 billion, plus 0.53%
on net assets greater than $1.0 billion but not exceeding $1.5 billion, plus
0.50% on net assets greater than $1.5 billion but not exceeding $2.5 billion,
plus 0.48% on net assets greater than $2.5 billion but not exceeding $4.0
billion, plus 0.47% on net assets greater than $4.0 billion but not exceeding
$6.5 billion, plus 0.46% on net assets greater than $6.5 billion but not
exceeding $10.5 billion, plus 0.45% on net assets greater than $10.5 billion but
not exceeding $17.0 billion, plus 0.44% on net assets greater than $17.0 billion
but not exceeding $21.0 billion, plus 0.43% on net assets in excess of $21.0
billion;


                   American Funds Insurance Series -- Page 41
<PAGE>


New World Fund: 0.85% on the first $500 million of net assets, plus 0.77% on net
assets greater than $500 million but not exceeding $1.0 billion, plus 0.71% on
net assets greater than $1.0 billion but not exceeding $1.5 billion, plus 0.66%
on net assets in excess of $1.5 billion;


Blue Chip Income and Growth Fund: 0.50% on the first $600 million of net assets,
plus 0.45% on net assets greater than $600 million but not exceeding $1.5
billion, plus 0.40% on net assets greater than $1.5 billion but not exceeding
$2.5 billion, plus 0.38% on net assets greater than $2.5 billion but not
exceeding $4.0 billion, plus 0.37% on net assets in excess of $4.0 billion;


Global Growth and Income Fund: 0.69% on the first $600 million of net assets,
plus 0.59% on net assets greater than $600 million but not exceeding $1.2
billion, plus 0.53% on net assets greater than $1.2 billion but not exceeding $2
billion, plus 0.50% on net assets in excess of $2 billion;


Growth-Income Fund: 0.50% on the first $600 million of net assets, plus 0.45% on
net assets greater than $600 million but not exceeding $1.5 billion, plus 0.40%
on net assets greater than $1.5 billion but not exceeding $2.5 billion, plus
0.32% on net assets greater than $2.5 billion but not exceeding $4.0 billion,
plus 0.285% on net assets greater than $4.0 billion but not exceeding $6.5
billion, plus 0.256% on net assets greater than $6.5 billion but not exceeding
$10.5 billion, plus 0.242% on net assets greater than $10.5 billion but not
exceeding $13.0 billion, plus 0.235% on net assets greater than $13.0 billion
but not exceeding $17.0 billion, plus 0.23% on net assets greater than $17.0
billion but not exceeding $21.0 billion, plus 0.225% on net assets greater than
$21.0 billion but not exceeding $27.0 billion, plus 0.222% on net assets in
excess of $27.0 billion;


International Growth and Income Fund: 0.69% on the first $500 million of net
assets, plus 0.59% on net assets greater than $500 million but not exceeding
$1.0 billion, plus 0.53% on net assets greater than $1.0 billion;


Asset Allocation Fund: 0.50% on the first $600 million of net assets, plus 0.42%
on net assets greater than $600 million but not exceeding $1.2 billion, plus
0.36% on net assets greater than $1.2 billion but not exceeding $2.0 billion,
plus 0.32% on net assets greater than $2.0 billion but not exceeding $3.0
billion, plus 0.28% on net assets greater than $3.0 billion but not exceeding
$5.0 billion, plus 0.26% on net assets greater than $5.0 billion but not
exceeding $8.0 billion, plus 0.25% on net assets in excess of $8.0 billion;


Bond Fund: 0.48% on the first $600 million of net assets, plus 0.44% on net
assets greater than $600 million but not exceeding $1.0 billion, plus 0.40% on
net assets greater than $1.0 billion but not exceeding $2.0 billion, plus 0.38%
on net assets greater than $2.0 billion but not exceeding $3.0 billion, plus
0.36% on net assets greater than $3.0 billion but not exceeding $5.0 billion;
plus 0.34% on net assets in excess of $5.0 billion;


Global Bond Fund: 0.57% on all assets;


High-Income Bond Fund: 0.50% on the first $600 million of net assets, plus 0.46%
on net assets greater than $600 million but not exceeding $1.0 billion, plus
0.44% on net assets greater than $1.0 billion but not exceeding $2.0 billion,
plus 0.42% on net assets in excess of $2.0 billion;


U.S. Government/AAA-Rated Securities Fund: 0.46% on the first $600 million of
net assets, plus 0.40% on net assets greater than $600 million but not exceeding
$1.0 billion, plus 0.36% on net assets greater than $1.0 billion but not
exceeding $2.0 billion, plus 0.34% on net assets in excess of $2.0 billion; and


                   American Funds Insurance Series -- Page 42
<PAGE>


Cash Management Fund: 0.32% on all assets.


In addition to providing investment advisory services, the investment adviser
furnishes the services and pays the compensation and travel expenses of
qualified persons to perform the executive and related administrative functions
of the Series, and provides necessary office space, office equipment and
utilities, and general purpose accounting forms, supplies and postage used at
the office of the Series relating to the services furnished by the investment
adviser. Subject to the expense agreement described below, the Series will pay
all expenses not expressly assumed by the investment adviser, including, but not
limited to: registration and filing fees of federal and state agencies; blue sky
expenses (if any); expenses of shareholders' meetings; the expense of reports to
existing shareholders; expenses of printing proxies and prospectuses; insurance
premiums; legal and auditing fees; dividend disbursement expenses; the expense
of the issuance, transfer and redemption of its shares; custodian fees; printing
and preparation of registration statements; taxes; compensation, fees and
expenses paid to trustees unaffiliated with the investment adviser; association
dues; and costs of stationary and forms prepared exclusively for the Series.


The Agreements provide for an advisory fee reduction to the extent that the
annual ordinary net operating expenses of each fund, except International Fund,
exceed 1 1/2% of the first $30 million of the average month-end total net assets
of the fund and 1% of the average month-end total net assets in excess thereof.
For International Fund, the advisory fee will be reduced to the extent that its
annual ordinary net operating expenses exceed 1 1/2% of its average month-end
total net assets. Expenses which are not subject to this limitation are
interest, taxes and extraordinary items, such as litigation. Expenditures,
including costs incurred in connection with the purchase or sale of portfolio
securities, which are capitalized in accordance with generally accepted
accounting principles applicable to investment companies, are accounted for as
capital items and not as expenses.


The investment adviser's total fees for the fiscal years ended December 31,
2007, 2006 and 2005 were:



                                                FISCAL YEAR ENDED
                                     ------------------------------------------
                                         2007          2006           2005
-------------------------------------------------------------------------------

GLOBAL DISCOVERY FUND                 $ 1,306,000   $   807,000    $   489,000
-------------------------------------------------------------------------------
GLOBAL GROWTH FUND                     26,735,000    19,040,000     13,520,000
-------------------------------------------------------------------------------
GLOBAL SMALL CAPITALIZATION FUND       27,298,000    19,734,000     12,798,000
-------------------------------------------------------------------------------
GROWTH FUND                            93,790,000    79,939,000     62,832,000
-------------------------------------------------------------------------------
INTERNATIONAL FUND                     50,363,000    38,670,000     26,526,000
-------------------------------------------------------------------------------
NEW WORLD FUND                         12,656,000     8,208,000      4,781,000
-------------------------------------------------------------------------------
BLUE CHIP INCOME AND GROWTH FUND       18,332,000    15,099,000     12,104,000
-------------------------------------------------------------------------------
GLOBAL GROWTH AND INCOME FUND           9,447,000     1,296,000            N/A
-------------------------------------------------------------------------------
GROWTH-INCOME FUND                     75,627,000    64,732,000     54,602,000
-------------------------------------------------------------------------------
ASSET ALLOCATION FUND                  26,249,000    21,637,000     18,137,000
-------------------------------------------------------------------------------
BOND FUND                              17,355,000    12,346,000      9,293,000
-------------------------------------------------------------------------------
GLOBAL BOND FUND                          776,000        21,000            N/A
-------------------------------------------------------------------------------
HIGH-INCOME BOND FUND                   6,066,000     4,946,000      4,280,000
-------------------------------------------------------------------------------
U.S. GOVERNMENT/AAA-RATED               3,222,000     2,884,000      2,842,000
SECURITIES FUND
-------------------------------------------------------------------------------
CASH MANAGEMENT FUND                    1,566,000     1,068,000        777,000
-------------------------------------------------------------------------------




                   American Funds Insurance Series -- Page 43
<PAGE>


For the period from September 1, 2004 through March 31, 2005, the investment
adviser agreed to waive 5% of the management fees that it was otherwise entitled
to receive under the Agreements. Beginning April 1, 2005, this waiver increased
to 10% of the management fees that it is otherwise entitled to receive and will
continue at this level until further review. As a result of this waiver,
management fees will be reduced similarly for all funds.


Additionally, during the year ended December 31, 2007, the investment adviser
voluntarily reduced management fees to the rates provided by amended Agreements
for Global Growth Fund, Global Growth and Income Fund, and Bond Fund. During the
year ended December 31, 2006, the investment adviser voluntarily reduced
management fees to the rates provided by amended Agreements for Global Small
Capitalization Fund and Global Growth and Income Fund.


For the periods ended December 31, 2007, 2006 and 2005, management fees were
reduced by the following as a result of these waivers:





                                                  WAIVER REDUCTION
-------------------------------------------------------------------------------
                                           2007         2006          2005
-------------------------------------------------------------------------------

 GLOBAL DISCOVERY FUND                   $  131,000  $   81,000     $   44,000
-------------------------------------------------------------------------------
 GLOBAL GROWTH FUND                       2,714,000   1,904,000      1,201,000
-------------------------------------------------------------------------------
 GLOBAL SMALL CAPITALIZATION FUND         2,730,000   1,973,000      1,142,000
-------------------------------------------------------------------------------
 GROWTH FUND                              9,379,000   7,994,000      5,598,000
-------------------------------------------------------------------------------
 INTERNATIONAL FUND                       5,036,000   3,867,000      2,361,000
-------------------------------------------------------------------------------
 NEW WORLD FUND                           1,266,000     821,000        429,000
-------------------------------------------------------------------------------
 BLUE CHIP INCOME AND GROWTH FUND         1,833,000  $1,510,000      1,073,000
-------------------------------------------------------------------------------
 GLOBAL GROWTH AND INCOME FUND            1,786,000     132,000            N/A
-------------------------------------------------------------------------------
 GROWTH-INCOME FUND                       7,563,000   6,473,000      4,833,000
-------------------------------------------------------------------------------
 ASSET ALLOCATION FUND                    2,625,000   2,164,000      1,606,000
-------------------------------------------------------------------------------
 BOND FUND                                1,736,000   1,235,000        823,000
-------------------------------------------------------------------------------
 GLOBAL BOND FUND                            78,000       2,000            N/A
-------------------------------------------------------------------------------
 HIGH-INCOME BOND FUND                      607,000     495,000        376,000
-------------------------------------------------------------------------------
 U.S. GOVERNMENT/AAA-RATED SECURITIES       322,000     288,000        250,000
 FUND
-------------------------------------------------------------------------------
 CASH MANAGEMENT FUND                       157,000     107,000         69,000
-------------------------------------------------------------------------------





                   American Funds Insurance Series -- Page 44
<PAGE>


PLANS OF DISTRIBUTION - The Series has adopted Plans of Distribution (the
"Plans") for its Class 2 and Class 3 shares, pursuant to rule 12b-1 under the
1940 Act. As required by rule 12b-1, the Plans have been approved by a majority
of the entire board of trustees, and separately by a majority of the trustees
who are not "interested persons" of the Series and who have no direct or
indirect financial interest in the operation of the Plans. Potential benefits of
the Plans to the Series include improved shareholder services, benefits to the
investment process from growth or stability of assets and maintenance of a
financially healthy management organization. The selection and nomination of
trustees who are not "interested persons" of the Series is committed to the
discretion of the trustees who are not "interested persons" during the existence
of the Plans. The Plans are reviewed quarterly and must be renewed annually by
the board of trustees.


Under the Plans, the Series will pay to insurance company contract issuers 0.25%
of each fund's average net assets annually (Class 2 shares) or 0.18% of each
fund's average net assets annually (Class 3 shares) to finance any distribution
activity which is primarily intended to benefit the Class 2 and Class 3 shares
of the Series, respectively, provided that the board of trustees of the Series
has approved the categories of expenses for which payment is being made.
Payments made pursuant to the Plans will be used by insurance company contract
issuers to pay a continuing annual service fee to dealers on the value of all
variable annuity and variable life contract payments for account-related
services provided to existing shareholders. During the fiscal year ended
December 31, 2007, the Series incurred distribution expenses for Class 2 shares
of $212,094,000 and Class 3 shares of $2,104,000, payable to certain life
insurance companies under the Plan. Accrued and unpaid distribution expenses
were $19,158,000 for Class 2 shares and $170,000 for Class 3 shares.


                   American Funds Insurance Series -- Page 45
<PAGE>


COMPENSATION TO INSURANCE COMPANIES -- American Funds Distributors, Inc., at its
expense, currently makes payments to certain of the insurance companies listed
below that use the Series as the underlying investment in insurance contracts.
These payments generally cover expenses associated with education and training
meetings sponsored by American Funds Distributors, Inc. for insurance company
sales forces.


     AEGON, N.V.
     AIG SunAmerica Life Assurance Company
     Hartford Life Insurance Company
     ING Life Insurance and Annuity Company
     Jefferson Pilot Financial Insurance Company/Jefferson Pilot LifeAmerica
     Insurance Company
     John Hancock Life Insurance Company (U.S.A.)
     The Lincoln National Life Insurance Company
     Massachusetts Mutual Life Insurance Company
     Merrill Lynch Life Insurance Company
     Metropolitan Life Insurance Company
     Nationwide Mutual Insurance Company
     New York Life Insurance and Annuity Corporation
     Pacific Life Insurance Company
     Travelers Insurance Company

American Funds Distributors, Inc. receives a marketing expense allowance from
certain of the insurance companies listed above. These payments generally cover
expenses associated with the education and training efforts that American Funds
Distributors, Inc. provides to each insurance company sales force. Payments are
up to 0.16% of sales in a given calendar year.


                      EXECUTION OF PORTFOLIO TRANSACTIONS

The investment adviser places orders with broker-dealers for the Series'
portfolio transactions. Purchases and sales of equity securities on a securities
exchange or an over-the-counter market are effected through broker-dealers who
receive commissions for their services. Generally, commissions relating to
securities traded on foreign exchanges will be higher than commissions relating
to securities traded on U.S. exchanges and may not be subject to negotiation.
Equity securities may also be purchased from underwriters at prices that include
underwriting fees. Purchases and sales of fixed-income securities are generally
made with an issuer or a primary market-maker acting as principal with no stated
brokerage commission. The price paid to an underwriter for fixed-income
securities includes underwriting fees. Prices for fixed-income securities in
secondary trades usually include undisclosed compensation to the market-maker
reflecting the spread between the bid and ask prices for the securities.


In selecting broker-dealers, the investment adviser strives to obtain "best
execution" (the most favorable total price reasonably attainable under the
circumstances) for the Series' portfolio transactions, taking into account a
variety of factors. These factors include the size and type of transaction, the
nature and character of the markets for the security to be purchased or sold,
the cost, quality and reliability of the executions and the broker-dealer's
ability to offer liquidity and anonymity. The investment adviser considers these
factors, which involve qualitative judgments, when selecting broker-dealers and
execution venues for fund portfolio transactions. The investment adviser views
best execution as a process that should be evaluated over time as part of an
overall relationship with particular broker-dealer firms rather than on a
trade-by-trade basis.


                   American Funds Insurance Series -- Page 46
<PAGE>



The Series does not consider the investment adviser as having an obligation to
obtain the lowest commission rate available for a portfolio transaction to the
exclusion of price, service and qualitative considerations.


The investment adviser may execute portfolio transactions with broker-dealers
who provide certain brokerage and/or investment research services to it, but
only when in the investment adviser's judgment the broker-dealer is capable of
providing best execution for that transaction. The receipt of these services
permits the investment adviser to supplement its own research and analysis and
makes available the views of, and information from, individuals and the research
staffs of other firms. Such views and information may be provided in the form of
written reports, telephone contacts and meetings with securities analysts. These
services may include, among other things, reports and other communications with
respect to individual companies, industries, countries and regions, economic,
political and legal developments, as well as scheduling meetings with corporate
executives and seminars and conferences related to relevant subject matters. The
investment adviser considers these services to be supplemental to its own
internal research efforts and therefore the receipt of investment research from
broker-dealers does not tend to reduce the expenses involved in the investment
adviser's research efforts. If broker-dealers were to discontinue providing such
services it is unlikely the investment adviser would attempt to replicate them
on its own, in part because they would then no longer provide an independent,
supplemental viewpoint. Nonetheless, if it were to attempt to do so, the
investment adviser would incur substantial additional costs. Research services
that the investment adviser receives from broker-dealers may be used by the
investment adviser in servicing the Series and other funds and accounts that it
advises; however, not all such services will necessarily benefit the Series.


The investment adviser may pay commissions in excess of what other
broker-dealers might have charged - including on an execution-only basis - for
certain portfolio transactions in recognition of brokerage and/or investment
research services provided by a broker-dealer. In this regard, the investment
adviser has adopted a brokerage allocation procedure consistent with the
requirements of Section 28(e) of the U.S. Securities Exchange Act of 1934.
Section 28(e) permits an investment adviser to cause an account to pay a higher
commission to a broker-dealer that provides certain brokerage and/or investment
research services to the investment adviser, if the investment adviser makes a
good faith determination that such commissions are reasonable in relation to the
value of the services provided by such broker-dealer to the investment adviser
in terms of that particular transaction or the investment adviser's overall
responsibility to the Series and other accounts that it advises. Certain
brokerage and/or investment research services may not necessarily benefit all
accounts paying commissions to each such broker-dealer; therefore, the
investment adviser assesses the reasonableness of commissions in light of the
total brokerage and investment research services provided by each particular
broker-dealer.


In accordance with its internal brokerage allocation procedure, each equity
investment division of the investment adviser periodically assesses the
brokerage and investment research services provided by each broker-dealer from
which it receives such services. Using its judgment, each equity investment
division of the investment adviser then creates lists with suggested levels of
commissions for particular broker-dealers and provides those lists to its
trading desks. Neither the investment adviser nor the Series incurs any
obligation to any broker-dealer to pay for research by generating trading
commissions. The actual level of business received by any broker-dealer may be
less than the suggested level of commissions and can, and often does, exceed the
suggested level in the normal course of business. As part of its ongoing
relationships with broker-dealers, the investment adviser routinely meets with
firms, typically at the firm's


                   American Funds Insurance Series -- Page 47
<PAGE>



request, to discuss the level and quality of the brokerage and research services
provided, as well as the perceived value and cost of such services. In valuing
the brokerage and investment research services the investment adviser receives
from broker-dealers for its good faith determination of reasonableness, the
investment adviser does not attribute a dollar value to such services, but
rather takes various factors into consideration, including the quantity, quality
and usefulness of the services to the investment adviser.


The investment adviser seeks, on an ongoing basis, to determine what the
reasonable levels of commission rates are in the marketplace. The investment
adviser takes various considerations into account when evaluating such
reasonableness, including, (a) rates quoted by broker-dealers, (b) the size of a
particular transaction in terms of the number of shares and dollar amount, (c)
the complexity of a particular transaction, (d) the nature and character of the
markets on which a particular trade takes place, (e) the ability of a
broker-dealer to provide anonymity while executing trades, (f) the ability of a
broker-dealer to execute large trades while minimizing market impact, (g) the
extent to which a broker-dealer has put its own capital at risk, (h) the level
and type of business done with a particular broker-dealer over a period of time,
(i) historical commission rates, and (j) commission rates that other
institutional investors are paying.


When executing portfolio transactions in the same equity security for the funds
and accounts, or portions of funds and accounts, over which the investment
adviser, through its equity investment divisions, has investment discretion,
each of the investment divisions will normally aggregate its respective
purchases or sales and execute them as part of the same transaction or series of
transactions. When executing portfolio transactions in the same fixed-income
security for the Series and the other funds or accounts over which it or one of
its affiliated companies has investment discretion, the investment adviser will
normally aggregate such purchases or sales and execute them as part of the same
transaction or series of transactions. The objective of aggregating purchases
and sales of a security is to allocate executions in an equitable manner among
the funds and other accounts that have concurrently authorized a transaction in
such security.


The investment adviser may place orders for the Series' portfolio transactions
with broker-dealers who have sold shares in the funds managed by the investment
adviser or its affiliated companies; however, it does not consider whether a
broker-dealer has sold shares of the funds managed by the investment adviser or
its affiliated companies when placing any such orders for the Series' portfolio
transactions.


Brokerage commissions paid on portfolio transactions for the fiscal years ended
December 31, 2007, 2006, and 2005 were:



                                                      FISCAL YEAR ENDED
                                           ------------------------------------------
                                               2007          2006           2005
-------------------------------------------------------------------------------------

GLOBAL DISCOVERY FUND                       $   289,000   $   123,000    $   132,000
-------------------------------------------------------------------------------------
GLOBAL GROWTH FUND                            5,634,000     3,182,000      2,106,000
-------------------------------------------------------------------------------------
GLOBAL SMALL CAPITALIZATION FUND             10,960,000     8,618,000      7,430,000
-------------------------------------------------------------------------------------
GROWTH FUND                                  17,743,000    19,084,000     17,310,000
-------------------------------------------------------------------------------------
INTERNATIONAL FUND                           12,576,000     7,618,000      6,821,000
-------------------------------------------------------------------------------------
NEW WORLD FUND                                3,086,000     2,181,000      1,193,000
-------------------------------------------------------------------------------------
BLUE CHIP INCOME AND GROWTH FUND              2,186,000     1,381,000      1,881,000
-------------------------------------------------------------------------------------
GLOBAL GROWTH AND INCOME FUND                 2,304,000       912,000            N/A
-------------------------------------------------------------------------------------
GROWTH-INCOME FUND                           15,842,000    10,703,000     10,782,000
-------------------------------------------------------------------------------------
ASSET ALLOCATION FUND                         4,541,000     5,351,000      4,634,000
-------------------------------------------------------------------------------------
BOND FUND                                     4,738,000     3,159,000      2,112,000
-------------------------------------------------------------------------------------
GLOBAL BOND FUND                                117,000         7,000            N/A
-------------------------------------------------------------------------------------
HIGH-INCOME BOND FUND                         2,523,000     2,358,000      1,475,000
-------------------------------------------------------------------------------------
U.S. GOVERNMENT/AAA-RATED SECURITIES FUND        57,000        80,000        102,000
-------------------------------------------------------------------------------------




                   American Funds Insurance Series -- Page 48
<PAGE>



The volume of trading activity by Global Discovery Fund, Global Growth Fund,
Global Small Capitalization Fund, International Fund, New World Fund, Blue Chip
Income and Growth Fund, Growth-Income Fund, Bond Fund and High-Income Bond Fund
increased during the year, resulting in an increase in brokerage commissions and
concessions paid on portfolio transactions. The volume of securities transacted
by Growth Fund and U.S. Government/AAA-Rated Securities Fund in new
issues/underwritten offerings decreased during the year, resulting in a decrease
in concessions paid on portfolio transactions. The securities transacted by
Asset Allocation Fund tended to have lower concessions per par than in the prior
year. Prior year brokerage commissions and concessions for Global Growth and
Income Fund and Global Bond Fund were not representative of a full year.


The Series is required to disclose information regarding investments in the
securities of its "regular" broker-dealers (or parent companies of their regular
broker-dealers) that derive more than 15% of its revenue from broker-dealer,
underwriter or investment adviser activities. A regular broker-dealer is (a) one
of the 10 broker-dealers that received from the Series the largest amount of
brokerage commissions by participating, directly or indirectly, in the Series'
portfolio transactions during the Series' most recent fiscal year; (b) one of
the 10 broker-dealers that engaged as principal in the largest dollar amount of
portfolio transactions of the Series during the Series' most recent fiscal year;
or (c) one of the 10 broker-dealers that sold the largest amount of securities
of the Series during the Series' most recent fiscal year.


At the end of the Series' most recent fiscal year, the Series' regular
broker-dealers included Citigroup Global Markets Inc., Credit Suisse Group,
Goldman Sachs & Co., J.P. Morgan


                   American Funds Insurance Series -- Page 49
<PAGE>



Securities Inc., Lehman Brothers, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co., Incorporated and UBS Financial Services Inc.
As of the Series' fiscal year-end, the following funds held equity and/or debt
securities of an affiliated company of such regular broker-dealers:





                           AFFILIATED COMPANY OF     TYPE OF
                           REGULAR BROKER-DEALER    SECURITY        AMOUNT
-------------------------------------------------------------------------------

Global Discovery Fund       Citigroup Inc.           equity       $  3,489,000
                           ----------------------------------------------------
                           JPMorgan Chase & Co.      equity          1,746,000
-------------------------------------------------------------------------------
Global Growth Fund         Citigroup Inc.            equity         14,720,000
                           ----------------------------------------------------
                           UBS AG                     debt          24,937,000
-------------------------------------------------------------------------------
Global Small               UBS AG                     debt          14,992,000
Capitalization Fund
-------------------------------------------------------------------------------
Growth Fund                Citigroup Inc.            equity        103,040,000
                           ----------------------------------------------------
                           J.P. Morgan Chase &        debt          99,182,000
                           Co.
-------------------------------------------------------------------------------
International Fund         Credit Suisse Group       equity         86,473,000
-------------------------------------------------------------------------------
New World Fund             Citigroup Inc.            equity          1,237,000
-------------------------------------------------------------------------------
Growth-Income Fund         Citigroup Inc.            equity        422,905,000
                           ----------------------------------------------------
                           JPMorgan Chase & Co.      equity        181,056,000
                           ----------------------------------------------------
                           JPMorgan Chase & Co.       debt          49,447,000
                           ----------------------------------------------------
                           Credit Suisse Group       equity         17,742,000
-------------------------------------------------------------------------------
Global Growth and Income   Citigroup Inc.            equity         30,912,000
Fund
-------------------------------------------------------------------------------
High-Income Bond Fund      Morgan Stanley             debt           1,023,000
-------------------------------------------------------------------------------
Blue Chip Income and       Citigroup Inc.            equity        135,718,000
Growth Fund
                           ----------------------------------------------------
                           JPMorgan Chase & Co.      equity         78,570,000
-------------------------------------------------------------------------------
Asset Allocation Fund      Citigroup Inc.            equity         50,048,000
                           ----------------------------------------------------
                           JPMorgan Chase & Co.      equity         65,475,000
                           ----------------------------------------------------
                           Citigroup Inc.             debt           3,087,000
                           ----------------------------------------------------
                           JPMorgan Chase & Co.       debt           3,568,000
                           ----------------------------------------------------
                           Merrill Lynch & Co.,       debt           3,676,000
                           Inc.
                           ----------------------------------------------------
                           Goldman Sachs Group,       debt           3,440,000
                           Inc.
                           ----------------------------------------------------
                           Lehman Brothers            debt           5,707,000
                           Holdings, Inc.
-------------------------------------------------------------------------------
Bond Fund                  Citigroup Inc.             debt           8,103,000
                           ----------------------------------------------------
                           J.P. Morgan Chase &        debt          48,277,000
                           Co.
                           ----------------------------------------------------
                           Merrill Lynch & Co.,       debt           6,618,000
                           Inc.
                           ----------------------------------------------------
                           Goldman Sachs Group,       debt           4,511,000
                           Inc.
                           ----------------------------------------------------
                           Morgan Stanley             debt           1,535,000
                           ----------------------------------------------------
                           Lehman Brothers            debt           6,426,000
                           Holdings, Inc.
-------------------------------------------------------------------------------
Global Bond Fund           Goldman Sachs Group,       debt             914,000
                           Inc.
                           ----------------------------------------------------
                           Lehman Brothers            debt             649,000
                           Holdings Inc.
                           ----------------------------------------------------
                           Merrill Lynch & Co.,       debt             713,000
                           Inc.
-------------------------------------------------------------------------------





                   American Funds Insurance Series -- Page 50
<PAGE>


                        DISCLOSURE OF PORTFOLIO HOLDINGS

The Series' investment adviser, on behalf of the funds, has adopted policies and
procedures with respect to the disclosure of information about the funds'
portfolio securities. These policies and procedures have been reviewed by the
Series' board of trustees and compliance will be periodically assessed by the
board in connection with reporting from the Series' chief compliance officer.


Under these policies and procedures, each fund's complete list of portfolio
holdings available for public disclosure, dated as of the end of each calendar
quarter, is permitted to be provided to shareholders no earlier than the tenth
day after such calendar quarter. In addition, each fund's list of top 10 equity
portfolio holdings measured by percentage of net assets invested, dated as of
the end of each calendar month, is permitted to be provided to shareholders no
earlier than the tenth day after such month. Such portfolio holdings information
may then be disclosed to any person pursuant to an ongoing arrangement to
disclose portfolio holdings information to such person no earlier than one day
after the day on which the information is made available to fund shareholders.
Currently, this information is being provided to Lipper, Inc. Morningstar,
Standard & Poor's Fund Services, Overlap, Value Line, Bloomberg, Vickers Stock
Research, Thomson Financial Research, Russell/Mellon Analytical Services and RBC
Dain Rauscher. The Series' custodian, outside counsel and auditor, each of which
require such information for legitimate business and fund oversight purposes,
may receive such information earlier.


Affiliated persons of the Series as described above who receive portfolio
holdings information are subject to restrictions and limitations on the use and
handling of such information pursuant to a Code of Ethics, including
requirements to maintain the confidentiality of such information, preclear
securities trades and report securities transactions activity, as applicable.
Third party service providers of the Series receiving such information are
subject to confidentiality obligations. When portfolio holdings information is
disclosed other than through the American Funds website to persons not
affiliated with the Series, such persons may be bound by agreements (including
confidentiality agreements) that restrict and limit their use of the


                   American Funds Insurance Series -- Page 51
<PAGE>


information to legitimate business uses only, and that include the duty not to
trade on the information. Neither the Series nor its investment adviser or any
affiliate thereof receives compensation or other consideration in connection
with the disclosure of information about portfolio securities.


Subject to Board policies, the authority to disclose a fund's portfolio
holdings, and to establish policies with respect to such disclosure, resides
with the appropriate investment-related committees of the Series' investment
adviser. In exercising their authority, the committees determine whether
disclosure of information about the funds' portfolio securities is appropriate
and in the best interest of Series shareholders. The investment adviser has
implemented policies and procedures to address conflicts of interest that may
arise from the disclosure of fund holdings. For example, the Code of Ethics
specifically requires, among other things, the safeguarding of information about
fund holdings and contains prohibitions designed to prevent the personal use of
confidential, proprietary investment information in a way that would conflict
with fund transactions. In addition, the investment adviser believes that its
current policy of not selling portfolio holdings information and not disclosing
such information to unaffiliated third parties (other than to Series service
providers for legitimate business and Series oversight purposes) until such
holdings have been provided to fund shareholders, helps reduce potential
conflicts of interest between Series shareholders and the investment adviser and
its affiliates.


                            TAXES AND DISTRIBUTIONS

FUND TAXATION -- Each fund has elected to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code (the "Code"). A
regulated investment company qualifying under Subchapter M of the Code is
required to distribute to its shareholders at least 90% of its investment
company taxable income (including the excess of net short-term capital gain over
net long-term capital losses) and generally is not subject to federal income tax
to the extent that it distributes annually 100% of its investment company
taxable income and net realized capital gains in the manner required under the
Code. Each fund intends to distribute annually all of its investment company
taxable income and net realized capital gains and therefore does not expect to
pay federal income tax, although in certain circumstances, a fund may determine
that it is in the interest of shareholders to distribute less than that amount.


To be treated as a regulated investment company under Subchapter M of the Code,
each fund must also (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, net income from certain
publicly traded partnerships and gains from the sale or other disposition of
securities or foreign currencies, or other income (including, but not limited
to, gains from options, futures or forward contracts) derived with respect to
the business of investing in such securities or currencies, and (b) diversify
its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the
market value of its assets is represented by cash, U.S. government securities
and securities of other regulated investment companies, and other securities
(for purposes of this calculation, generally limited in respect of any one
issuer, to an amount not greater than 5% of the market value of the fund's
assets and 10% of the outstanding voting securities of such issuer) and (ii) not
more than 25% of the value of its assets is invested in the securities of (other
than U.S. government securities or the securities of other regulated investment
companies) any one issuer; two or more issuers which the fund controls and which
are determined to be engaged in the same or similar trades or businesses; or the
securities of certain publicly traded partnerships.


                   American Funds Insurance Series -- Page 52
<PAGE>


In addition to the asset diversification and other requirements for
qualification as a regulated investment company, the funds are subject to
another set of asset diversification requirements applicable to insurance
company separate accounts and their underlying funding vehicles. To satisfy
these diversification requirements, as of the end of each calendar quarter or
within 30 days thereafter, a fund must (a) be qualified as a "regulated
investment company"; and (b) have either (i) no more than 55% of the total value
of its assets in cash and cash equivalents, government securities and securities
of other regulated investment companies; or (ii) no more than 55% of its total
assets represented by any one investment, no more than 70% by any two
investments, no more than 80% by any three investments, and no more than 90% by
any four investments. For this purpose all securities of the same issuer are
considered a single investment, and each agency or instrumentality of the U.S.
government is treated as a separate issuer of securities. The Series intends to
comply with these regulations. If a fund should fail to comply with these
regulations, Contracts invested in that fund will not be treated as annuity,
endowment or life insurance contracts under the Code.


     DIVIDENDS -- Each fund intends to follow the practice of distributing
     substantially all of its investment company taxable income. Investment
     company taxable income generally includes dividends, interest, net
     short-term capital gains in excess of net long-term capital losses, and
     certain foreign currency gains, if any, less expenses and certain foreign
     currency losses.

     Under the Code, gains or losses attributable to fluctuations in exchange
     rates that occur between the time the funds accrue receivables or
     liabilities denominated in a foreign currency and the time the funds
     actually collect such receivables, or pay such liabilities, generally are
     treated as ordinary income or ordinary loss. Similarly, on disposition of
     debt securities denominated in a foreign currency and on disposition of
     certain futures contracts, forward contracts and options, gains or losses
     attributable to fluctuations in the value of foreign currency between the
     date of acquisition of the security or contract and the date of disposition
     are also treated as ordinary gain or loss. These gains or losses, referred
     to under the Code as Section 988 gains or losses, may increase or decrease
     the amount of a fund's investment company taxable income to be distributed
     to its shareholders as ordinary income.


     If a fund invests in stock of certain passive foreign investment companies,
     the fund may be subject to U.S. federal income taxation on a portion of any
     "excess distribution" with respect to, or gain from the disposition of,
     such stock. The tax would be determined by allocating such distribution or
     gain ratably to each day of the fund's holding period for the stock. The
     distribution or gain so allocated to any taxable year of the fund, other
     than the taxable year of the excess distribution or disposition, would be
     taxed to the fund at the highest ordinary income rate in effect for such
     year, and the tax would be further increased by an interest charge to
     reflect the value of the tax deferral deemed to have resulted from the
     ownership of the foreign company's stock. Any amount of distribution or
     gain allocated to the taxable year of the distribution or disposition would
     be included in the fund's investment company taxable income and,
     accordingly, would not be taxable to the fund to the extent distributed by
     the fund as a dividend to its shareholders.


     To avoid such tax and interest, each fund intends to elect to treat these
     securities as sold on the last day of its fiscal year and recognize any
     gains for tax purposes at that time. Under this election, deductions for
     losses are allowable only to the extent of any prior recognized gains, and
     both gains and losses will be treated as ordinary income or loss.


                   American Funds Insurance Series -- Page 53
<PAGE>


     The funds will be required to distribute any resulting income, even though
     they have not sold the security and received cash to pay such
     distributions. Upon disposition of these securities, any gain recognized is
     treated as ordinary income and loss is treated as ordinary loss to the
     extent of any prior recognized gain.


     A portion of the difference between the issue price of zero coupon
     securities and their face value (original issue discount) is considered to
     be income to the funds each year, even though the funds will not receive
     cash interest payments from these securities. This original issue discount
     (imputed income) will comprise a part of the investment company taxable
     income of the funds that must be distributed to shareholders in order to
     maintain the qualification of the funds as regulated investment companies
     and to avoid federal income taxation at the level of the funds.


     The price of a bond purchased after its original issuance may reflect
     market discount which, depending on the particular circumstances, may
     affect the tax character and amount of income required to be recognized by
     a fund holding the bond. In determining whether a bond is purchased with
     market discount, certain de minimis rules apply.


     Dividend and interest income received by the funds from sources outside the
     United States may be subject to withholding and other taxes imposed by such
     foreign jurisdictions. Tax conventions between certain countries and the
     United States, however, may reduce or eliminate these foreign taxes. Some
     foreign countries impose taxes on capital gains with respect to investments
     by foreign investors.


     CAPITAL GAIN DISTRIBUTIONS -- The funds also intend to follow the practice
     of distributing the entire excess of net realized long-term capital gains
     over net realized short-term capital losses. Net capital gains for a fiscal
     year are computed by taking into account any capital loss carryforward of
     the funds.

See the applicable Contract prospectus for information regarding the federal
income tax treatment of the Contracts and distributions to the separate
accounts.


                                PRICE OF SHARES

Shares are purchased at the offering price or sold at the net asset value price
next determined after the purchase or sell order is received and accepted by the
Series or its designee. Orders received by the Series or authorized designee
after the time of the determination of the net asset value will be entered at
the next calculated offering price.


The price you pay for shares, the offering price, is based on the net asset
value per share which is calculated once daily as of approximately 4:00 p.m. New
York time, which is the normal close of trading on the New York Stock Exchange,
each day the Exchange is open. If, for example, the Exchange closes at 1:00
p.m., the fund's share price would still be determined as of 4:00 p.m. New York
time. The Exchange is currently closed on weekends and on the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas
Day. Each share class of a fund has a separately calculated net asset value (and
share price).


                   American Funds Insurance Series -- Page 54
<PAGE>


All portfolio securities of funds managed by Capital Research and Management
Company (other than money market funds) are valued, and the net asset values per
share for each share class are determined, as follows:


1.    Equity securities, including depositary receipts, 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, in circumstances where the investment adviser deems it
appropriate to do so, such securities will be valued at the mean quoted bid and
asked prices or at prices for securities of comparable maturity, quality and
type. Securities with both fixed-income and equity characteristics, or equity
securities traded principally among fixed-income dealers, are valued in the
manner described above for either equity or fixed-income securities, depending
on which method is deemed most appropriate by the investment adviser.

Securities with original maturities of one year or less having 60 days or less
to maturity are amortized to maturity based on their cost if acquired within 60
days of maturity, or if already held on the 60th day, based on the value
determined on the 61st day. Forward currency contracts are valued at the mean of
representative quoted bid and asked prices.


Assets or liabilities initially expressed in terms of non-U.S. currencies are
translated prior to the next determination of the net asset value of each fund's
shares into U.S. dollars at the prevailing market rates.


Securities and assets for which representative market quotations are not readily
available or are considered unreliable are valued at fair value as determined in
good faith under policies approved by the Series' board. Subject to board
oversight, the Series' board has delegated the obligation to make fair valuation
determinations to a valuation committee established by the Series' investment
adviser. The board receives regular reports describing fair-valued securities
and the valuation methods used.


The valuation committee has adopted guidelines and procedures (consistent with
SEC rules and guidance) to ensure that certain basic principles and factors are
considered when making all fair value determinations. As a general principle,
securities lacking readily available market quotations are valued in good faith
by the valuation committee based upon what a fund might reasonably expect to
receive upon their current sale. The valuation committee considers all
indications of value available to it in determining the "fair value" to be
assigned to a particular security, including, without limitation, 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. The
valuation committee employs additional fair value procedures to address issues
related to equity holdings of applicable fund portfolios outside the United
States. Securities owned by these funds trade in markets that open and close at
different times, reflecting time zone differences. If significant events occur
after the close of a market (and before these fund's net asset values are next
determined) which affect the value of portfolio securities, appropriate
adjustments from closing market prices may be made to reflect these


                   American Funds Insurance Series -- Page 55
<PAGE>



events. Events of this type could include, for example, earthquakes and other
natural disasters or significant price changes in other markets (e.g., U.S.
stock markets).


2.   Each class of shares represents interests in the same portfolio of
investments and is identical in all respects to each other class, except for
differences relating to distribution, service and other charges and expenses,
certain voting rights, differences relating to eligible investors, the
designation of each class of shares, conversion features and exchange
privileges. Expenses attributable to a fund, but not to a particular class of
shares, are borne by each class pro rata based on relative aggregate net assets
of the classes. Expenses directly attributable to a class of shares are borne by
that class of shares. Liabilities, including accruals of taxes and other expense
items attributable to particular share classes, are deducted from total assets
attributable to such share classes.

3.   Net assets so obtained for each share class are then divided by the total
number of shares outstanding of that share class, and the result, rounded to the
nearer cent, is the net asset value per share for that share class.

                              GENERAL INFORMATION

CUSTODIAN OF ASSETS -- Securities and cash owned by all funds, including
proceeds from the sale of shares of the funds and of securities in the funds'
portfolios, are held by State Street Bank and Trust Company, One Lincoln Street,
Boston, MA 02111, as Custodian. Non-U.S. securities may be held by the Custodian
in non-U.S. banks or securities depositories or foreign branches of U.S. banks.


TRANSFER AGENT -- American Funds Service Company, a wholly owned subsidiary of
the investment adviser, maintains the records of each insurance company's
separate account, processes purchases and redemptions of the funds' shares, acts
as dividend and capital gain distribution disbursing agent, and performs other
related shareholder service functions. The principal office of American Funds
Service Company is located at 6455 Irvine Center Drive, Irvine, CA 92618.
American Funds Service Company was paid a fee of $9,000 for Class 1 shares,
$51,000 for Class 2 shares and $1,000 for Class 3 shares for the 2007 fiscal
year.


INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -- PricewaterhouseCoopers LLP, 350
South Grand Avenue, Los Angeles, CA 90071, serves as the Series' independent
registered public accounting firm providing audit services, preparation of tax
returns and review of certain documents to be filed with the Securities and
Exchange Commission. The financial statements included in this statement of
additional information from the annual report have been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as
stated in their report appearing herein. Such financial statements have been so
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing. The selection of the Series' independent
registered public accounting firm is reviewed and determined annually by the
board of trustees.


INDEPENDENT LEGAL COUNSEL -- Paul, Hastings, Janofsky & Walker LLP, 55 Second
Street, 24th Floor, San Francisco, CA 94105, serves as independent legal counsel
("counsel") for the Series and for trustees who are not interested persons (as
defined by the 1940 Act) of the Series. Certain legal matters in connection with
the shares of beneficial interest offered by the prospectus have been passed
upon for the Series by Paul, Hastings, Janofsky & Walker LLP. A determination
with respect to the independence of the Series' counsel will be made at least



                   American Funds Insurance Series -- Page 56
<PAGE>



annually by the independent trustees of the Series, as prescribed by the 1940
Act and the related rules.


PROSPECTUSES AND REPORTS TO SHAREHOLDERS -- The Series' fiscal year ends on
December 31. Contract owners are provided updated prospectuses annually and at
least semiannually with reports showing the funds' investment portfolios or
summary investment portfolios, financial statements and other information. The
Series' annual financial statements are audited by the independent registered
public accounting firm of PricewaterhouseCoopers LLP.


Shareholders may also elect to receive updated prospectuses, annual reports and
semi-annual reports electronically by signing up for electronic delivery on our
website americanfunds.com. Upon opting in to the electronic delivery of updated
prospectuses and other reports, a shareholder will no longer automatically
receive such documents in paper form by mail. A shareholder who elects
electronic delivery is able to cancel this service at any time and return to
receiving updated prospectuses and other reports in paper form by mail.


PERSONAL INVESTING POLICY -- The Series, Capital Research and Management Company
and its affiliated companies have adopted codes of ethics which allow for
personal investments, including securities in which the Series may invest from
time to time. This policy includes: a ban on acquisitions of securities pursuant
to an initial public offering; restrictions on acquisitions of private placement
securities; pre-clearance and reporting requirements; review of duplicate
confirmation statements; annual recertification of compliance with codes of
ethics; blackout periods on personal investing for certain investment personnel;
a ban on short-term trading profits for investment personnel; limitations on
service as a director of publicly traded companies; and disclosure of personal
securities transactions.


SHAREHOLDER AND TRUSTEE RESPONSIBILITY -- Under the laws of certain states,
including Massachusetts, where the Series was organized, and California, where
the Series' principal office is located, shareholders of a Massachusetts
business trust may, under certain circumstances, be held personally liable as
partners for the obligations of the Series. However, the risk of a shareholder
incurring any financial loss on account of shareholder liability is limited to
circumstances in which the Series itself would be unable to meet its
obligations. The Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Series and provides that
notice of the disclaimer may be given in each agreement, obligation, or
instrument which is entered into or executed by the Series or Trustees. The
Declaration of Trust provides for indemnification out of Series property of any
shareholder personally liable for the obligations of the Series and also
provides for the Series to reimburse such shareholder for all legal and other
expenses reasonably incurred in connection with any such claim or liability.


Under the Declaration of Trust, the Trustees or officers are not liable for
actions or failure to act; however, they are not protected from liability by
reason of their willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office. The Series will
provide indemnification to its Trustees and officers as authorized by its
by-laws and by the 1940 Act and the rules and regulations thereunder.


LEGAL PROCEEDINGS -- On February 16, 2005, the NASD (now the Financial Industry
Regulatory Authority, or FINRA) filed an administrative complaint against
American Funds Distributors, Inc. The complaint alleges violations of certain
NASD rules by American Funds Distributors, Inc. with respect to the selection of
broker-dealer firms that buy and sell securities for mutual fund


                   American Funds Insurance Series -- Page 57
<PAGE>



investment portfolios. The complaint seeks sanctions, restitution and
disgorgement. On August 30, 2006, a FINRA Hearing Panel ruled against American
Funds Distributors, Inc. and imposed a $5 million fine. On April 30, 2008,
FINRA's National Adjudicatory Council affirmed the decision by FINRA's Hearing
Panel. American Funds Distributors, Inc. has appealed this decision to the
Securities and Exchange Commission.


The investment adviser and American Funds Distributors, Inc. believes that the
likelihood that this matter could have a material adverse effect on the funds or
on the ability of the investment adviser or American Funds Distributors, Inc. to
perform their contracts with the funds is remote. In addition, class action
lawsuits have been filed in the U.S. District Court, Central District of
California, relating to this and other matters. Although most of the claims in
the suit were dismissed with prejudice, an amended complaint relating to
management fees has been filed. The investment adviser believes that these suits
are without merit and will defend itself vigorously.


REGISTRATION STATEMENT -- A registration statement has been filed with the
Securities and Exchange Commission under the Securities Act of 1933 and the 1940
Act with respect to the Series. The prospectus and this statement of additional
information do not contain all information set forth in the registration
statement, its amendments and exhibits, to which reference is made for further
information concerning the Series. Statements contained in the prospectus and
this statement of additional information as to the content of the Contracts
issued through the separate accounts and other legal instruments are summaries.
For a complete statement of the terms thereof, reference is made to the
registration statements of the separate accounts and Contracts as filed with the
Securities and Exchange Commission.


AUTHORIZED SHARES -- The Series was organized as a Massachusetts business trust
which permits each fund of the Series to issue an unlimited number of shares of
beneficial interest of one or more classes.


                   American Funds Insurance Series -- Page 58
<PAGE>


                                    APPENDIX

The following descriptions of debt security ratings are based on information
provided by Moody's Investors Service and Standard & Poor's Corporation.


                          DESCRIPTION OF BOND RATINGS

MOODY'S
LONG-TERM RATING DEFINITIONS

Aaa
Obligations rated Aaa are judged to be of the highest quality, with minimal
credit risk.


Aa
Obligations rated Aa are judged to be of high quality and are subject to very
low credit risk.


A
Obligations rated A are considered upper-medium grade and are subject to low
credit risk.


Baa
Obligations rated Baa are subject to moderate credit risk. They are considered
medium-grade and as such may possess certain speculative characteristics.


Ba
Obligations rated Ba are judged to have speculative elements and are subject to
substantial credit risk.


B
Obligations rated B are considered speculative and are subject to high credit
risk.


Caa
Obligations rated Caa are judged to be of poor standing and are subject to very
high credit risk.


Ca
Obligations rated Ca are highly speculative and are likely in, or very near,
default, with some prospect of recovery of principal and interest.


C
Obligations rated C are the lowest rated class of bonds and are typically in
default, with little prospect for recovery of principal or interest.


NOTE: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating
classification from Aa through Caa. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.


                   American Funds Insurance Series -- Page 59
<PAGE>


STANDARD & POOR'S
LONG-TERM ISSUE CREDIT RATINGS

AAA
An obligation rated AAA has the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.


AA
An obligation rated AA differs from the highest-rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.


A
An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.


BBB
An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.


BB, B, CCC, CC, AND C
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.


BB
An obligation rated BB is less vulnerable to nonpayment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.


B
An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.


CCC
An obligation rated CCC is currently vulnerable to nonpayment and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial, or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.


CC
An obligation rated CC is currently highly vulnerable to nonpayment.


                   American Funds Insurance Series -- Page 60
<PAGE>


C
The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.


D
An obligation rated D is in payment default. The D rating category is used when
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless Standard & Poor's believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.


PLUS (+) OR MINUS (-)
The ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.


                    DESCRIPTION OF COMMERCIAL PAPER RATINGS

MOODY'S
COMMERCIAL PAPER RATINGS (HIGHEST THREE RATINGS)

P-1
Issuers (or supporting institutions) rated Prime-1 have a superior ability to
repay short-term debt obligations.


P-2
Issuers (or supporting institutions) rated Prime-2 have a strong ability to
repay short-term debt obligations.


P-3
Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to
repay short-term obligations.


STANDARD & POOR'S
COMMERCIAL PAPER RATINGS (HIGHEST THREE RATINGS)

A-1
A short-term obligation rated A-1 is rated in the highest category by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is strong. Within this category, certain obligations are designated
with a plus sign (+). This indicates that the obligor's capacity to meet its
financial commitment on these obligations is extremely strong.


A-2
A short-term obligation rated A-2 is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.


A-3
A short-term obligation rated A-3 exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.


                   American Funds Insurance Series -- Page 61

....

[logo – American Funds®]

American Funds Insurance Series®

Global Discovery Fund

Investment portfolio

December 31, 2007

Common stocks — 86.10%	Shares			Market value (000)
SOFTWARE & SERVICES — 9.34%
Yahoo! Inc.1		260,000		$	6,048
Google Inc., Class A1		7,500			5,186
Global Payments Inc.		80,000			3,722
Microsoft Corp.		83,300			2,965
United Internet AG2		108,000			2,599
SAP AG2		35,000			1,806
Oracle Corp.1		74,000			1,671
eBay Inc.1		50,000			1,659
					25,656
BANKS — 8.63%
Banco Bradesco SA, preferred nominative		96,336			3,084
HDFC Bank Ltd.2		70,000			3,056
People’s United Financial, Inc.		150,000			2,670
Raiffeisen International Bank-Holding AG2		14,083			2,119
BOC Hong Kong (Holdings) Ltd.2		760,000			2,100
Hudson City Bancorp, Inc.		125,000			1,877
HSBC Holdings PLC (Hong Kong)2		110,000			1,839
Erste Bank der oesterreichischen Sparkassen AG2		25,000			1,774
BNP Paribas SA2		11,110			1,193
Grupo Financiero Banorte, SAB de CV, Series O		280,000			1,157
Banco Bilbao Vizcaya Argentaria, SA2		45,600			1,118
Banco Santander, SA2		29,558			638
Siam City Bank PCL2		1,045,000			460
Mizuho Financial Group, Inc.2		75			356
Malayan Banking Bhd.2		76,500			265
					23,706
MEDIA — 7.05%
Time Warner Inc.		245,000			4,045
British Sky Broadcasting Group PLC2		305,000			3,726
CTC Media, Inc.1		70,000			2,114
E. W. Scripps Co., Class A		44,200			1,990
Comcast Corp., Class A1		90,000			1,643
Vivendi SA2		36,000			1,638
XM Satellite Radio Holdings Inc., Class A1		125,000			1,530
Walt Disney Co.		38,000			1,227
Grupo Televisa, SAB, ordinary participation certificates (ADR)		44,000			1,046
Next Media Ltd.2		1,157,000			409
					19,368
INSURANCE — 6.51%
American International Group, Inc.		144,000			8,395
Berkshire Hathaway Inc., Class A1		35			4,956
Sampo Oyj, Class A2		125,000			3,264
Genworth Financial, Inc., Class A		50,000			1,273
					17,888
TELECOMMUNICATION SERVICES — 6.29%
Millicom International Cellular SA1		40,000			4,718
MTN Group Ltd.2		217,000			4,067
OJSC Mobile TeleSystems (ADR)		20,000			2,036
Singapore Telecommunications Ltd.2		730,000			2,004
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk, Class B2		1,574,000			1,702
Philippine Long Distance Telephone Co.2		9,100			698
Philippine Long Distance Telephone Co. (ADR)		9,100			689
Vodafone Group PLC2		259,875			965
LG Telecom Ltd.2		38,855			408
					17,287
HEALTH CARE EQUIPMENT & SERVICES — 5.67%
American Medical Systems Holdings, Inc.1		369,000			5,336
Inverness Medical Innovations, Inc.1		45,000			2,528
Varian Medical Systems, Inc.1		38,000			1,982
Beckman Coulter, Inc.		20,300			1,478
Express Scripts, Inc.1		20,000			1,460
St. Jude Medical, Inc.1		26,500			1,077
Smith & Nephew PLC2		85,200			976
Medtronic, Inc.		15,000			754
					15,591
TECHNOLOGY HARDWARE & EQUIPMENT — 5.44%
Apple Inc.1		25,000			4,952
Delta Electronics, Inc.2		525,000			1,784
EMC Corp.1		95,136			1,763
Seagate Technology		65,000			1,658
HOYA Corp.2		45,000			1,436
Cisco Systems, Inc.1		50,000			1,353
Advantech Co., Ltd.2		410,214			931
Wintek Corp.2		421,368			573
Acer Inc.2		260,895			507
					14,957
UTILITIES — 5.22%
Xinao Gas Holdings Ltd.2		2,610,000			5,165
Veolia Environnement2		54,700			4,961
Hong Kong and China Gas Co. Ltd.2		715,000			2,179
RWE AG2		14,500			2,029
					14,334
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 5.21%
Novo Nordisk A/S, Class B2		46,000			3,000
Millennium Pharmaceuticals, Inc.1		170,000			2,547
Forest Laboratories, Inc.1		50,000			1,822
Roche Holding AG2		10,000			1,720
Bristol-Myers Squibb Co.		60,000			1,591
Chugai Pharmaceutical Co., Ltd.2		100,000			1,429
Richter Gedeon NYRT2		5,500			1,311
UCB SA2		19,654			885
					14,305
RETAILING — 3.85%
Lowe’s Companies, Inc.		125,000			2,828
Best Buy Co., Inc.		38,900			2,048
Target Corp.		40,000			2,000
O’Reilly Automotive, Inc.1		48,900			1,586
Tractor Supply Co.1		30,000			1,078
Takashimaya Co., Ltd.2		46,000			554
Liberty Media Holding Corp., Liberty Interactive, Series A1		25,600			488
					10,582
FOOD & STAPLES RETAILING — 2.94%
Walgreen Co.		100,000			3,808
Whole Foods Market, Inc.		45,000			1,836
Costco Wholesale Corp.		16,000			1,116
Koninklijke Ahold NV1,2		64,800			898
Wal-Mart de México, SAB de CV, Series V		118,600			410
					8,068
DIVERSIFIED FINANCIALS — 2.64%
Citigroup Inc.		118,500			3,489
State Street Corp.		25,000			2,030
JPMorgan Chase & Co.		40,000			1,746
					7,265
TRANSPORTATION — 2.26%
Ryanair Holdings PLC (ADR)1		136,400			5,380
Nippon Express Co., Ltd.2		139,000			711
Grupo Aeroportuario del Pacífico, SAB de CV, Class B (ADR)		2,700			120
					6,211
COMMERCIAL SERVICES & SUPPLIES — 1.84%
Wirecard AG1,2		158,000			2,625
Monster Worldwide, Inc.1		75,000			2,430
					5,055
ENERGY — 1.79%
Schlumberger Ltd.		50,000			4,919
CONSUMER SERVICES — 1.58%
Las Vegas Sands Corp.1		35,000			3,607
OPAP (Greek Organization of Football Prognostics) SA2		18,490			737
					4,344
CONSUMER DURABLES & APPAREL — 1.49%
China Dongxiang (Group) Co., Ltd.1,2		3,000,000			2,210
GEOX SpA2		47,550			948
Burberry Group PLC2		84,000			942
					4,100
MATERIALS — 1.42%
Bayer AG, non-registered shares2		43,000			3,915
CAPITAL GOODS — 1.27%
Boart Longyear Ltd.1,2,3		1,269,230			2,600
Boart Longyear Ltd.1,2		430,770			883
					3,483
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.05%
Intel Corp.		65,000			1,733
Siliconware Precision Industries Co., Ltd.2		603,611			1,075
Sunplus Technology Co. Ltd.2		59,595			88
					2,896
REAL ESTATE — 0.11%
AEON Mall Co., Ltd.2		11,000			289
MISCELLANEOUS — 4.50%
Other common stocks in initial period of acquisition					12,377
Total common stocks (cost: $197,136,000)					236,596
Convertible securities — 0.32%
MISCELLANEOUS — 0.32%
Other convertible securities in initial period of acquisition					885
Total convertible securities (cost: $995,000)					885
	Principal amount
Short-term securities — 14.66%		(000	)
United Parcel Service Inc. 4.15%–4.40% due 2/1–3/11/20084	$	6,200			6,161
Fannie Mae 4.22%-4.29% due 1/18-1/23/2008		6,000			5,985
Federal Home Loan Bank 4.29%–4.34% due 1/9–1/16/2008		4,900			4,893
NetJets Inc. 4.47% due 2/7/20084		4,000			3,978
John Deere Capital Corp. 4.50%–4.55% due 1/22–1/23/20084		3,700			3,689
Variable Funding Capital Corp. 5.30% due 1/17/20084		3,600			3,591
Hewlett-Packard Co. 4.24% due 1/14/20084		3,100			3,095
Harley-Davidson Funding Corp. 4.50% due 1/8/20084		3,000			2,997
Lowe’s Co.s, Inc. 4.28% due 1/4/2008		2,800			2,799
CAFCO, LLC 5.30% due 1/9/20084		1,700			1,698
General Electric Capital Corp. 4.15% due 1/2/2008		1,400			1,400
Total short-term securities (cost: $40,293,000)					40,286
Total investment securities (cost: $238,424,000)					277,767
Other assets less liabilities					(2,963	)
Net assets				$	274,804

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

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

2 Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities, including those in “Miscellaneous,” was $92,974,000.

3 Purchased in a transaction exempt from registration under the Securities Act of 1933. This security (acquired 4/4/2007 at a cost of $1,922,000) may be subject to legal or contractual restrictions on resale.

4 Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $25,209,000, which represented 9.17% of the net assets of the fund.

ADR = American Depositary Receipts

Global Growth Fund

Investment portfolio

December 31, 2007

Common stocks — 81.11%	Shares			Market value (000)
INFORMATION TECHNOLOGY — 11.99%
Microsoft Corp.		3,542,000		$	126,095
Samsung Electronics Co., Ltd.1		121,440			71,397
International Business Machines Corp.		600,000			64,860
Oracle Corp.2		2,000,000			45,160
Cisco Systems, Inc.2		1,346,500			36,449
STMicroelectronics NV1		2,564,000			36,447
Nokia Corp.1		682,000			26,221
ASML Holding NV (New York registered)2		686,044			21,466
ASML Holding NV1,2		111,111			3,487
Hon Hai Precision Industry Co., Ltd.1		3,862,692			23,871
Citizen Holdings Co., Ltd.1		2,275,000			22,121
Google Inc., Class A2		30,000			20,744
Advanced Micro Devices, Inc.2		2,600,000			19,500
Motorola, Inc.		1,175,000			18,847
Nortel Networks Corp.2		1,200,000			18,108
Yahoo! Inc.2		725,000			16,864
MoneyGram International, Inc.		975,000			14,986
Taiwan Semiconductor Manufacturing Co. Ltd. (ADR)		713,468			7,106
Taiwan Semiconductor Manufacturing Co. Ltd.1		3,604,633			6,859
Hynix Semiconductor Inc.1,2		507,000			13,888
Tyco Electronics Ltd.		366,250			13,599
Venture Corp. Ltd.1		1,300,000			11,390
Altera Corp.		550,000			10,626
Murata Manufacturing Co., Ltd.1		175,000			10,179
Rohm Co., Ltd.1		98,000			8,531
Texas Instruments Inc.		250,000			8,350
Dell Inc.2		300,000			7,353
Elpida Memory, Inc.1,2		210,000			7,249
livedoor holdings Co., Ltd.1,2		64,000			5,443
Chartered Semiconductor Manufacturing Ltd1,2		6,009,000			4,013
KLA-Tencor Corp.		37,921			1,826
					703,035
CONSUMER DISCRETIONARY — 10.17%
GOME Electrical Appliances Holding Ltd.1		21,686,000			54,847
Carnival Corp., units		925,000			41,153
Lowe’s Companies, Inc.		1,615,000			36,531
Virgin Media Inc.2		2,014,000			34,520
News Corp., Class A		1,583,407			32,444
Esprit Holdings Ltd.1		2,100,500			30,870
Kohl’s Corp.2		625,000			28,625
Yue Yuen Industrial (Holdings) Ltd.1		7,300,000			26,113
Liberty Media Holding Corp., Liberty Interactive, Series A2		1,210,000			23,087
H & M Hennes & Mauritz AB, Class B1		376,000			22,728
Burberry Group PLC1		1,870,000			20,980
adidas AG1		278,000			20,668
Aristocrat Leisure Ltd.1		1,949,756			19,157
Target Corp.		370,000			18,500
Honda Motor Co., Ltd.1		535,200			17,697
OPAP (Greek Organization of Football Prognostics) SA1		443,510			17,681
Viacom Inc., Class B2		352,000			15,460
Yamaha Corp.1		600,000			13,694
Aisin Seiki Co., Ltd.1		316,000			13,140
Toyota Motor Corp.1		242,500			13,054
Best Buy Co., Inc.		235,000			12,373
Kesa Electricals PLC1		2,473,400			11,361
Grupo Televisa, SAB, ordinary participation certificates (ADR)		460,000			10,934
Nikon Corp.1		301,000			10,269
Suzuki Motor Corp.1		313,000			9,415
Hyundai Motor Co.1		119,973			9,146
Cie. Financière Richemont AG, Class A, units1		115,000			7,836
Harman International Industries, Inc.		100,000			7,371
DSG International PLC1		3,466,929			6,744
Carnival PLC1		107,500			4,703
Limited Brands, Inc.		200,000			3,786
SET India Ltd.1,2,3		16,148			1,677
					596,564
FINANCIALS — 9.85%
Allianz SE1		242,000			51,686
Macquarie Group Ltd.1		745,000			49,319
ICICI Bank Ltd.1		837,300			26,209
ICICI Bank Ltd. (ADR)		308,750			18,988
Mizuho Financial Group, Inc.1		9,000			42,702
Société Générale1		260,700			37,203
Banco Santander, SA1		1,461,914			31,537
AEON Credit Service (Asia) Co. Ltd.1		2,000,000			29,571
Kookmin Bank1		366,310			26,931
Sumitomo Mitsui Financial Group, Inc.1		3,500			26,047
Industrial and Commercial Bank of China Ltd., Class H1		34,500,000			24,522
Marsh & McLennan Companies, Inc.		800,000			21,176
AFLAC Inc.		336,000			21,044
Erste Bank der oesterreichischen Sparkassen AG1		288,480			20,474
Bumiputra-Commerce Holdings Bhd.1		5,675,000			18,709
Türkiye Is Bankasi AS, Class C1		2,405,000			15,078
Citigroup Inc.		500,000			14,720
ING Groep NV, depository receipts1		347,422			13,541
Chuo Mitsui Trust Holdings, Inc.1		1,730,000			13,410
St.George Bank Ltd.1		355,000			9,775
AXA SA1		238,000			9,462
UniCredito Italiano SpA1		1,125,000			9,347
Lloyds TSB Group PLC1		1,000,000			9,293
Westfield Group1		458,603			8,393
HSBC Holdings PLC (United Kingdom)1		500,000			8,359
Countrywide Financial Corp.		795,000			7,107
Bank of Nova Scotia		140,000			7,092
BOC Hong Kong (Holdings) Ltd.1		2,216,000			6,124
					577,819
INDUSTRIALS — 9.49%
General Electric Co.		2,475,455			91,765
Deutsche Post AG1		2,084,700			71,146
KBR, Inc.2		1,455,000			56,454
Suzlon Energy Ltd.1		858,834			42,186
Siemens AG1		213,000			33,390
Tata Engineering and Locomotive Co. Ltd.1		1,535,000			28,826
Ryanair Holdings PLC (ADR)2		703,100			27,730
ALSTOM SA1		106,400			22,577
Illinois Tool Works Inc.		410,000			21,951
Randstad Holding NV1		517,000			20,498
United Technologies Corp.		245,000			18,752
Macquarie Infrastructure Group1		6,055,468			16,026
European Aeronautic Defence and Space Co. EADS NV1		500,000			15,850
Tyco International Ltd.		366,250			14,522
Bidvest Group Ltd.1		754,500			13,302
Michael Page International PLC1		1,995,000			11,320
Asahi Glass Co., Ltd.1		826,000			10,955
ABB Ltd1		355,000			10,222
FANUC LTD1		100,000			9,757
Finmeccanica SpA1		235,000			7,438
Cie. de Saint-Gobain1		69,000			6,530
United Parcel Service, Inc., Class B		75,000			5,304
					556,501
HEALTH CARE — 7.92%
Novo Nordisk A/S, Class B1		1,455,200			94,901
Roche Holding AG1		293,500			50,491
UnitedHealth Group Inc.		850,000			49,470
Smith & Nephew PLC1		4,019,300			46,054
CIGNA Corp.		555,000			29,820
Pfizer Inc		1,100,000			25,003
Aetna Inc.		400,000			23,092
UCB SA1		490,020			22,068
Pharmaceutical Product Development, Inc.		544,350			21,975
Mentor Corp.		460,000			17,986
Shire PLC (ADR)		250,000			17,237
Stryker Corp.		200,000			14,944
ResMed Inc2		267,000			14,026
Intuitive Surgical, Inc.2		35,700			11,585
Rhön-Klinikum AG, non-registered shares1		301,600			9,419
Merck & Co., Inc.		150,000			8,716
AstraZeneca PLC (Sweden)1		91,005			3,884
AstraZeneca PLC (United Kingdom)1		57,000			2,441
Chugai Pharmaceutical Co., Ltd.1		87,000			1,243
					464,355
TELECOMMUNICATION SERVICES — 7.27%
Koninklijke KPN NV1		5,525,830			99,790
Vodafone Group PLC (ADR)		800,000			29,856
Vodafone Group PLC1		7,131,250			26,489
NTT DoCoMo, Inc.1		32,058			53,123
América Móvil, SAB de CV, Series L (ADR)		585,000			35,913
Sprint Nextel Corp., Series 1		2,501,750			32,848
SOFTBANK CORP.1		1,594,600			32,827
Telekom Austria AG, non-registered shares1		1,033,200			28,591
Telefónica, SA1		680,799			21,969
KDDI Corp.1		2,517			18,692
Qwest Communications International Inc.2		2,000,000			14,020
AT&T Inc.		300,000			12,468
Telekomunikacja Polska SA1		896,900			8,154
France Télécom SA1		185,000			6,629
MTN Group Ltd.1		250,000			4,685
					426,054
CONSUMER STAPLES — 6.51%
Unilever NV, depository receipts1		1,184,000			43,286
Avon Products, Inc.		945,800			37,387
Cosan Ltd., Class A2		2,600,000			32,760
PepsiCo, Inc.		337,000			25,578
Coca-Cola Co.		360,000			22,093
Cia. de Bebidas das Américas — AmBev, preferred nominative (ADR)		246,000			17,473
Cia. de Bebidas das Américas — AmBev, ordinary nominative (ADR)		44,000			2,992
IOI Corp. Bhd.1		7,980,000			18,550
Parmalat Spa1		4,790,000			18,490
Woolworths Ltd.1		608,483			18,040
Koninklijke Ahold NV1,2		1,126,600			15,620
Wal-Mart Stores, Inc.		300,000			14,259
SABMiller PLC1		500,000			14,021
Tesco PLC1		1,430,000			13,458
Groupe Danone SA1		145,000			12,936
C&C Group PLC1		2,000,000			11,934
METRO AG1		127,500			10,626
Seven & I Holdings Co., Ltd.1		350,000			10,180
Procter & Gamble Co.		135,000			9,912
Altria Group, Inc.		125,000			9,447
Nestlé SA1		20,000			9,153
Wal-Mart de México, SAB de CV, Series V (ADR)		200,000			6,970
Kimberly-Clark de México, SAB de CV, Class A		1,540,000			6,754
					381,919
MATERIALS — 6.04%
JSC Uralkali (GDR)1,2		1,149,568			42,342
JSC Uralkali (GDR)1,2,4		444,915			16,387
K+S AG1		112,000			26,377
Freeport-McMoRan Copper & Gold Inc.		255,000			26,122
Newmont Mining Corp.		500,000			24,415
Bayer AG, non-registered shares1		250,000			22,760
UPM-Kymmene Corp.1		1,090,000			21,807
Nitto Denko Corp.1		396,400			20,932
Akzo Nobel NV1		258,000			20,515
Barrick Gold Corp.		408,594			17,198
Aracruz Celulose SA, Class B, preferred nominative (ADR)		217,000			16,134
Weyerhaeuser Co.		200,000			14,748
OAO Severstal (GDR)1		574,600			13,255
Sigma-Aldrich Corp.		239,649			13,085
Potash Corp. of Saskatchewan Inc.		85,000			12,237
First Quantum Minerals Ltd.		132,900			11,390
Gold Fields Ltd.1		763,100			10,952
Holcim Ltd.1		100,000			10,612
Alcoa Inc.		183,100			6,692
Norsk Hydro ASA1		425,000			6,008
					353,968
ENERGY — 5.33%
Reliance Industries Ltd.1		567,000			41,468
Royal Dutch Shell PLC, Class B1		574,666			23,954
Royal Dutch Shell PLC, Class B (ADR)		139,643			11,590
Petróleo Brasileiro SA — Petrobras, ordinary nominative (ADR)		200,000			23,048
Petróleo Brasileiro SA — Petrobras, preferred nominative (ADR)		125,000			12,027
Canadian Natural Resources, Ltd.		466,700			34,126
TOTAL SA1		390,000			32,318
Schlumberger Ltd.		260,000			25,576
Baker Hughes Inc.		250,000			20,275
Oil & Natural Gas Corp. Ltd.1		577,500			18,027
SK Energy Co., Ltd.1		88,706			17,067
OAO Gazprom (ADR)1		300,000			16,894
Imperial Oil Ltd.		257,928			14,193
StatoilHydro ASA1		366,435			11,329
ENI SpA1		300,000			10,915
					312,807
UTILITIES — 4.13%
Public Power Corp. SA1		926,700			48,561
Veolia Environnement1		425,900			38,623
SUEZ SA1		550,000			37,227
E.ON AG1		142,800			30,276
British Energy Group plc1		2,700,000			29,207
NTPC Ltd.1		4,395,649			27,905
CLP Holdings Ltd.1		2,430,000			16,521
RWE AG1		100,000			13,992
					242,312
MISCELLANEOUS — 2.41%
Other common stocks in initial period of acquisition					141,117
Total common stocks (cost: $3,710,926,000)					4,756,451
	Principal amount
Short-term securities — 19.17%		(000	)
Federal Home Loan Bank 4.20%–4.34% due 1/11–2/13/2008	$	76,600			76,309
Dexia Delaware LLC 4.79%–4.815% due 1/4–1/10/2008		56,857			56,821
Freddie Mac 4.22%–4.25% due 1/24–1/31/2008		54,800			54,612
Royal Bank of Scotland PLC 4.53%–5.06% due 2/4–3/28/2008		55,000			54,497
BASF AG 4.35%–4.52% due 1/24–2/12/20084		54,500			54,254
Rabobank USA Financial Corp. 5.06% due 1/10/2008		50,000			49,930
Danske Corp. 4.81% due 1/14/20084		50,000			49,906
Lloyds Bank PLC 4.67% due 1/16/2008		50,000			49,892
American Honda Finance Corp. 4.48%–4.50% due 1/15–1/30/2008		49,800			49,621
Swedish Export Credit Corp. 4.30%–4.50% due 2/14–3/12/20085		44,700			44,363
Electricité de France 4.40%–4.82% due 1/8–3/3/2008		41,400			41,188
Westpac Banking Corp. 4.86% due 3/13/20084		40,000			39,623
ING (U.S.) Funding LLC 4.73%–5.15% due 1/9–1/29/2008		37,900			37,780
AstraZeneca PLC 4.65% due 3/4/20084		38,000			37,689
Eksportfinans ASA 4.56% due 1/9/20084		34,700			34,659
Barclays U.S. Funding Corp. 5.105%–5.20% due 2/7–2/12/2008		32,000			31,813
Nestlé Capital Corp. 4.22% due 1/17/20084		20,000			19,960
Alcon Capital Corp. 4.55% due 1/23/20084		11,000			10,966
Allied Irish Banks North America Inc. 5.04% due 2/12/20084		30,500			30,319
International Bank for Reconstruction and Development 4.28%–4.30% due 1/22–1/28/2008		29,800			29,721
BMW U.S. Capital LLC 4.21%–4.22% due 1/25–1/30/20084		28,000			27,907
GlaxoSmithKline Finance PLC 4.55% due 1/18/20084		27,400			27,338
Bank of Ireland 4.78% due 2/22/20084		25,400			25,221
UBS Finance (Delaware) LLC 5.045% due 1/18/2008		25,000			24,937
BP Capital Markets PLC 4.46% due 2/13/20084		25,000			24,849
Export Development Canada 4.30% due 2/8/2008		24,400			24,264
BNP Paribas Finance Inc. 5.138% due 1/7/2008		21,100			21,079
Toronto-Dominion Holdings USA Inc. 5.075% due 1/11/20084		20,000			19,971
HBOS Treasury Services PLC 4.72% due 1/22/2008		20,000			19,939
General Electric Capital Corp. 4.15% due 1/2/2008		12,700			12,697
Variable Funding Capital Corp. 5.30% due 1/17/20084		12,500			12,469
Canadian Imperial Holdings Inc. 4.665% due 1/3/2008		10,000			9,996
Unilever Capital Corp. 4.22% due 1/24/20084		10,000			9,972
E.I. duPont de Nemours and Co. 4.19% due 1/31/20084		9,400			9,366
Total short-term securities (cost: $1,124,017,000)					1,123,928
Total investment securities (cost: $4,834,943,000)					5,880,379
Other assets less liabilities					(16,282	)
Net assets				$	5,864,097

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

1 Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities, including those in “Miscellaneous,” was $2,869,052,000.

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

3 Purchased in a transaction exempt from registration under the Securities Act of 1933. This security (acquired 9/6/2000-4/18/2002 at a cost of $6,378,000) may be subject to legal or contractual restrictions on resale.

4 Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $450,856,000, which represented 7.69% of the net assets of the fund.

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

ADR = American Depositary Receipts

GDR = Global Depositary Receipts

Global Small Capitalization Fund

Investment portfolio

December 31, 2007

Common stocks — 86.00%	Shares			Market value (000)
CONSUMER DISCRETIONARY — 16.36%
Jumbo SA1,2		3,436,686		$	124,117
Fourlis1		2,010,385			79,315
Pantaloon Retail (India) Ltd.1		2,520,750			52,969
Schibsted ASA1		741,000			31,655
Integrated Distribution Services Group Ltd.1		9,458,000			28,713
Lions Gate Entertainment Corp.3		2,750,000			25,905
Blue Nile, Inc.3		353,600			24,066
Life Time Fitness, Inc.3		465,000			23,101
Rambler Media Ltd.1,3		718,400			21,552
Hürriyet Gazetecilik ve Matbaacilik AS1,3		6,760,336			20,782
CKE Restaurants, Inc.		1,350,000			17,820
Central European Media Enterprises Ltd., Class A3		153,500			17,803
GEOX SpA1		695,750			13,870
Cheil Industries Inc.1		240,000			13,235
CTC Media, Inc.3		425,000			12,835
CarMax, Inc.3		620,000			12,245
OSIM International Ltd.1,2		28,920,000			11,995
Saks Inc.		550,000			11,418
Banyan Tree Holdings Ltd.1		8,000,000			11,342
Cheil Communications Inc.1		37,100			11,162
Cyrela Brazil Realty SA, ordinary nominative		820,000			11,155
Bob Evans Farms, Inc.		350,000			9,425
Pinnacle Entertainment, Inc.3		400,000			9,424
Gafisa SA, ordinary nominative		500,000			9,328
Café de Coral Holdings Ltd.1		3,800,000			9,326
Rightmove PLC1		957,552			8,776
Tractor Supply Co.3		228,700			8,219
Titan Industries Ltd.1		169,900			6,706
Austar United Communications Ltd.1,3		4,539,430			6,291
Land & Houses PCL1		23,500,000			6,279
Billabong International Ltd.1		380,000			4,932
New Oriental Education & Technology Group Inc. (ADR)3		56,905			4,586
Denny’s Corp.3		1,200,000			4,500
Nien Made Enterprise Co., Ltd.1		3,622,274			4,342
Children’s Place Retail Stores, Inc.3		150,000			3,889
Amtek Auto Ltd.1		360,000			3,882
Galaxy Entertainment Group Ltd.1,3		4,000,000			3,738
Ten Alps PLC1,3		2,600,000			2,941
Ruby Tuesday, Inc.		300,000			2,925
Largan Precision Co., Ltd.1		214,200			2,821
Timberland Co., Class A3		150,000			2,712
Riken Corp.1		525,000			2,708
Entertainment Rights PLC1,3		8,500,000			2,602
Kimball International, Inc., Class B		175,000			2,398
Next Media Ltd.1		6,324,000			2,238
Ekornes ASA1		112,800			1,983
Bloomsbury Publishing PLC1		625,000			1,873
Kuoni Reisen Holding AG, Class B1		3,437			1,775
Restoration Hardware, Inc.3		192,000			1,261
Golden Land Property Development PCL, nonvoting depositary receipt1,3		5,265,943			1,188
Gaming VC Holdings SA1		200,000			377
Mobil Travel Guide1,3,4		219,739			55
					710,555
INDUSTRIALS — 13.90%
International Container Terminal Services, Inc.1		47,285,000			51,817
Kumho Industrial Co., Ltd.1		830,000			49,402
Samsung Engineering Co., Ltd.1		420,550			41,499
UAP Holding Corp.		910,000			35,126
GS Engineering & Construction Corp.1		175,000			28,702
Koninklijke BAM Groep NV1		1,167,000			27,425
Sintex Industries Ltd.1		1,900,000			27,347
Sungkwang Bend Co., Ltd.1		748,934			21,500
JVM Co., Ltd.1		316,500			19,044
Lonrho PLC1,2,3		20,224,000			18,473
Michaniki SA1		2,299,000			18,372
Corrections Corporation of America3		600,000			17,706
ALL — América Latina Logística, units		1,228,000			15,904
Hyunjin Materials Co., Ltd.1		325,000			13,721
J&P-AVAX SA1		1,406,000			13,174
Container Corp. of India Ltd.1		240,763			11,722
IJM Corp. Bhd.1		4,165,000			10,795
Georg Fischer Ltd1,3		15,550			9,513
Danieli & C. Officine Meccaniche SpA1		400,000			9,449
MISUMI Group Inc.1		537,000			9,388
Aboitiz Equity Ventures, Inc.1		48,700,000			8,103
Goodpack Ltd.1		4,940,000			7,683
NCI Building Systems, Inc.3		258,000			7,428
NEPES Corp.1,3		906,163			7,264
Obrascon Huarte Lain Brasil SA, ordinary nominative		522,000			6,599
ELLINIKI TECHNODOMIKI TEB SA1		460,000			6,563
SIA Engineering Co. Ltd.1		1,929,000			5,983
JetBlue Airways Corp.3		1,000,000			5,900
Mine Safety Appliances Co.		110,000			5,706
I. Kloukinas — I. Lappas SA1		403,000			5,224
Trakya Cam Sanayii AS1		2,113,152			5,063
MSC Industrial Direct Co., Inc., Class A		125,000			5,059
BayWa AG1		101,450			5,030
Aker American Shipping ASA1,3		188,000			4,346
Aalberts Industries NV1		210,000			4,133
Daekyung Machinery & Engineering Co., Ltd.1,3		80,000			4,048
Herman Miller, Inc.		122,500			3,968
Northgate PLC1		259,246			3,928
Latécoère SA1		150,801			3,839
Rollins, Inc.		180,000			3,456
Nabtesco Corp.1		188,000			2,998
S1 Corp.1		50,000			2,995
Kaba Holding AG1		9,500			2,966
PRONEXUS INC.1		318,000			2,869
BELIMO Holding AG1		2,500			2,825
sia Abrasives Holding AG1		7,892			2,778
Emeco Holdings Ltd.1		2,810,000			2,622
GfK AG1		62,500			2,499
Wabash National Corp.		325,000			2,499
Uponor Oyj1		95,000			2,370
Permasteelisa SpA1		120,000			2,359
Houston Wire & Cable Co.		160,000			2,262
Geberit AG1		16,500			2,247
G-Shank Enterprise Co., Ltd.1		1,748,880			2,039
Watsco, Inc.		45,000			1,654
United Stationers Inc.3		28,000			1,294
Hopewell Highway Infrastructure Ltd.1		1,454,000			1,246
Aker Philadelphia Shipyard ASA1,3,4		110,800			1,163
Dalian Port (PDA) Co. Ltd., Class H1		1,300,000			979
Beacon Roofing Supply, Inc.3		115,000			968
Ballast Nedam NV, depository receipts1		19,119			787
					603,821
MATERIALS — 11.42%
KazakhGold Group Ltd. (GDR)1,3,5		1,500,000			38,625
KazakhGold Group Ltd. (GDR)1,3		164,402			4,233
Central African Mining & Exploration Co. PLC1,3		49,705,000			37,726
AMG Advanced Metallurgical Group NV1,3		454,000			33,745
Major Drilling Group International Inc.3		475,000			29,957
SSCP Co., Ltd.1,3		865,000			29,050
African Minerals Ltd.1,2,3		6,905,000			19,550
African Minerals Ltd.1,2,3,4		2,480,000			7,022
European Goldfields Ltd.1,3		4,691,100			25,409
Tata Chemicals Ltd.1		1,992,000			20,796
Kenmare Resources PLC1,3		15,842,759			16,618
Gindalbie Metals Ltd.1,3		15,648,885			16,322
Oxus Gold PLC1,3		18,084,300			15,437
Macarthur Coal Ltd.1		1,610,000			13,773
Gem Diamonds Ltd.1,3		690,000			13,102
Lynas Corp. Ltd.1,3		14,582,300			12,435
Allied Gold Ltd.1,2,3		19,548,500			12,406
Rusoro Mining Ltd.1,3,4		4,500,000			6,582
Rusoro Mining Ltd.3		1,666,667			2,687
Rusoro Mining Ltd.3,4		1,511,765			2,437
Jaguar Mining Inc.3,4		952,500			11,602
Banro Corp.3		891,100			10,234
FUCHS PETROLUB AG1		91,000			8,339
Kemira Oyj1		382,337			7,965
Mineral Deposits Ltd.1,3		4,731,343			5,583
Mineral Deposits Ltd. (CAD denominated)3		2,100,000			2,327
Claymont Steel Holdings, Inc.3		312,500			7,297
Gammon Gold Inc.3		814,900			6,535
Nikanor PLC1,3		525,859			6,502
Anadolu Cam Sanayii AS1		2,712,694			6,449
Yamana Gold Inc.		475,000			6,168
Mwana Africa PLC1,3		7,000,000			5,950
Samling Global Ltd.1		28,860,000			5,743
Cleveland-Cliffs Inc		55,700			5,615
Gemfields Resources PLC1,2,3,4		4,816,000			3,296
Gemfields Resources PLC1,2,3		2,000,000			1,369
Caledon Resources PLC1,3,4		5,300,000			3,836
Caledon Resources PLC1,3		985,000			713
Gladstone Pacific Nickel Ltd.1,3		1,394,000			4,093
Taiwan Cement Corp.1		2,681,826			3,685
Mangalam Cement Ltd.1		560,000			2,632
Uruguay Mineral Exploration Inc.		700,000			2,433
Nihon Parkerizing Co., Ltd.1		175,000			2,323
Marshalls PLC1		475,000			2,256
PT Sumalindo Lestari Jaya, Tbk1,3		6,530,000			2,244
Madalena Ventures Inc.3		4,265,000			2,148
J.K. Cement Ltd.1		380,000			2,090
Hard Creek Nickel Corp.3,4		1,997,100			1,891
Zoloto Resources Ltd.3		1,395,200			1,518
Midwest Corp. Ltd.1,3		334,588			1,405
Chaarat Gold Holdings Ltd.1,3,4		1,710,000			1,357
Energem Resources Inc.3		4,065,000			1,229
Lafarge Malayan Cement Bhd.1		393,060			694
Murchison Metals Ltd.1,3		227,027			684
					496,117
INFORMATION TECHNOLOGY — 10.87%
Kingboard Chemical Holdings Ltd.1		11,482,000			67,977
Novell, Inc.3		9,468,800			65,051
Infotech Enterprises Ltd.1		2,469,799			19,599
CNET Networks, Inc.3		2,125,000			19,423
Delta Electronics (Thailand) PCL1		23,250,000			14,996
Tessera Technologies, Inc.3		360,000			14,976
Mentor Graphics Corp.3		1,155,000			12,451
Xchanging PLC1,3		2,187,120			12,094
Verifone Holdings, Inc.3		515,000			11,974
Varian Semiconductor Equipment Associates, Inc.3		290,000			10,730
TradeDoubler AB1		496,000			10,580
Kingboard Laminates Holdings Ltd.1		15,393,509			10,249
CyberSource Corp.3		575,000			10,218
DTS, Inc.3		364,095			9,310
Moneysupermarket.com Group PLC1,3		3,015,000			8,297
Internet Capital Group, Inc.3		700,000			8,218
HSW International, Inc.1,3,4		1,739,753			7,740
Wistron Corp.1		4,027,620			7,435
Semtech Corp.3		470,000			7,294
NCsoft Corp.1,3		140,500			7,268
Min Aik Technology Co., Ltd.1		5,434,415			6,814
LoopNet, Inc.3		480,700			6,754
Wintek Corp.1		4,576,747			6,228
Simmtech Co., Ltd.1		715,000			5,983
Hana Microelectronics PCL1		9,370,000			5,980
Verigy Ltd.3		220,000			5,977
SEEK Ltd.1		828,409			5,777
TIBCO Software Inc.3		715,000			5,770
SupportSoft, Inc.3		1,225,000			5,451
Tripod Technology Corp.1		1,459,200			5,238
Stratasys, Inc.3		200,000			5,168
AAC Acoustic Technologies Holdings Inc.1,3		3,500,000			4,684
Applied Micro Circuits Corp.3		525,000			4,589
austriamicrosystems AG, non-registered shares1,3		99,868			4,523
CallWave, Inc.2,3		1,348,700			4,181
Red Hat, Inc.3		200,000			4,168
Cogent, Inc.3		365,000			4,070
PMC-Sierra, Inc.3		610,000			3,989
Intermec, Inc.3		190,000			3,859
Advantech Co., Ltd.1		1,677,784			3,807
Spark Networks, Inc.3		694,478			3,465
Solera Holdings, Inc.3		130,000			3,221
Virtusa Corp.3		180,000			3,119
Japan Aviation Electronics Industry, Ltd.1		205,000			2,986
Renishaw PLC1		205,000			2,526
DFI, Inc.1		987,560			2,487
Delta Networks, Inc.1,3		7,000,000			2,311
Venture Corp. Ltd.1		258,000			2,260
Fairchild Semiconductor International, Inc.3		153,100			2,209
Cyntec Co., Ltd.1		1,415,069			2,073
King Yuan Electronics Co., Ltd.1		3,478,399			1,685
Ono Sokki Co., Ltd.1		287,000			1,650
i2 Technologies, Inc.3		95,294			1,201
Sanken Electric Co., Ltd.1		165,000			876
Redington (India) Ltd.1		47,671			518
3PAR Inc.3		24,300			311
KEC Holdings Co. Ltd.1,3		74,999			170
Avid Technology, Inc.3		4,922			140
Infoteria Corp.1,3		123			35
					472,133
HEALTH CARE — 8.07%
Applera Corp., Celera group3		1,940,000			30,788
ArthroCare Corp.3		632,000			30,368
Beckman Coulter, Inc.		365,000			26,572
Volcano Corp.3		1,625,000			20,329
Laboratorios Almirall, SA1,3		830,000			18,080
Gerresheimer AG, non-registered shares1,3		292,500			16,226
NuVasive, Inc.3		401,300			15,859
Cochlear Ltd.1		228,389			14,976
EGIS NYRT1		126,600			13,665
Apollo Hospitals Enterprise Ltd.1		1,000,000			13,267
Sirona Dental Systems, Inc.3		390,000			13,057
Integra LifeSciences Holdings Corp.3		250,000			10,482
DiaSorin SpA1,3		525,600			10,077
Eclipsys Corp.3		350,000			8,859
Greatbatch, Inc.3		405,200			8,100
Vital Images, Inc.3		415,000			7,499
Top Glove Corp. Bhd.1		3,625,000			7,094
Array BioPharma Inc.3		790,000			6,652
Arpida Ltd.1,3		369,967			6,592
Vital Signs, Inc.		122,599			6,267
American Medical Systems Holdings, Inc.3		390,000			5,639
A&D Pharma Holdings NV (GDR)1		242,000			5,476
Phase Forward Inc.3		200,000			4,350
ICU Medical, Inc.3		115,000			4,141
Introgen Therapeutics, Inc.3		1,379,153			4,041
Laboratorios Farmacéuticos ROVI, SA1,3		255,000			4,002
Haemonetics Corp.3		60,400			3,806
Invacare Corp.		140,000			3,528
Ondine Biopharma Corp.2,3,4		2,620,000			2,613
Ondine Biopharma Corp. (GBP denominated)1,2,3,4		490,000			467
Ondine Biopharma Corp.2,3		400,000			399
Conceptus, Inc.3		176,600			3,398
Mentor Corp.		86,800			3,394
Exelixis, Inc.3		385,000			3,323
QRxPharma Ltd.1,3		3,000,000			2,919
AS ONE Corp.1		115,000			2,702
Grifols, SA1		112,400			2,503
WuXi PharmaTech (Cayman) Inc. (ADR)3		69,500			2,032
Sosei Co. Ltd.1,3		1,300			1,780
Ipca Laboratories Ltd.1		95,000			1,640
Arcadia Resources, Inc.3,4		1,250,000			1,275
Gyrus Group PLC1,3		99,000			1,210
BIOLASE Technology, Inc.3		356,900			842
athenahealth, Inc.3		10,000			360
					350,649
FINANCIALS — 6.94%
Orco Property Group SA1		225,549			26,765
Dolphin Capital Investors Ltd.1,3		8,178,820			22,278
Banco Daycoval SA, preferred nominative		1,835,700			17,593
Chimera Investment Corp.		941,100			16,827
HDFC Bank Ltd.1		305,300			13,328
Daegu Bank, Ltd.1		790,000			12,966
Banco Pine SA, preferred nominative		1,200,000			12,007
National Bank of Pakistan1		2,932,500			11,065
East West Bancorp, Inc.		450,000			10,903
Azimut Holding SpA1		760,000			9,730
Pusan Bank1		575,000			9,554
Asya Katilim Bankasi AS, Class B1,3		1,014,680			9,542
Central Pattana PCL1		11,818,000			8,775
Union Bank of the Philippines1		7,758,200			8,103
Russian Real Estate Investment Co. AB, Series B1,3		180,321			8,095
Hargreaves Lansdown PLC1,3		2,108,000			7,520
Cathay Real Estate Development Co. Ltd.1		15,228,000			7,040
Banco Macro SA, Class B (ADR)		282,200			6,982
Union Bank of India1		1,250,000			6,519
Jeonbuk Bank1		656,435			6,254
S P Setia Bhd.1		2,517,000			3,779
S P Setia Bhd.1,3		1,258,500			1,839
Hung Poo Real Estate Development Corp.1		7,565,910			5,539
Robinsons Land Corp., Class B1		13,811,700			5,483
TISCO Bank PCL1		5,990,000			5,289
Banco Cruzeiro do Sol SA, preferred nominative		747,100			4,976
Paraná Banco SA, preferred nominative		1,001,280			4,897
RAB Capital PLC1		2,400,000			4,161
eHealth, Inc.3		100,000			3,211
Sumitomo Real Estate Sales Co., Ltd.1		70,000			3,141
Farglory Land Development Co., Ltd.1		1,231,000			3,024
Gruppo MutuiOnline SpA1,3		475,000			3,021
Interhyp AG1		42,000			3,011
United Bankshares, Inc.		105,000			2,942
CapitaCommercial Trust Management Ltd.1		1,658,000			2,820
TICON Industrial Connection PCL1		4,585,000			2,818
Public Service Properties Investments Ltd.1		1,222,000			2,618
Pirelli & C. Real Estate S.p.A.1		57,500			2,097
Banco ABC Brasil SA, preferred nominative		274,300			1,827
Eastern Property Holdings Ltd.1		14,166			1,232
Cyrela Commercial Properties SA, ordinary nominative3		164,000			1,107
Banco Patagonia SA, Class B (BDR)3		29,000			632
IndyMac Bancorp, Inc.		50,000			297
					301,607
ENERGY — 6.36%
Oilexco Inc. (GBP denominated)1,3,4		1,900,000			26,759
Oilexco Inc. (GBP denominated)1,3		1,755,000			24,717
Oilexco Inc.3,4		985,000			13,079
Oilexco Inc.3		803,900			10,674
Quicksilver Resources Inc.3		456,450			27,200
Heritage Oil Corp.3		456,300			24,125
OPTI Canada Inc.3		1,231,100			20,589
Regal Petroleum PLC1,3		5,055,500			15,119
First Calgary Petroleums Ltd.3		3,655,000			10,642
First Calgary Petroleums Ltd. (GBP denominated)1,3		760,000			2,164
Ithaca Energy Inc. (GBP denominated)1,3,4		2,121,500			6,682
Ithaca Energy Inc.3		1,300,000			4,126
Denison Mines Corp.3		1,200,000			10,748
Synenco Energy Inc., Class A3		1,200,000			10,203
Core Laboratories NV3		80,000			9,978
Southern Pacific Resource Corp.2,3		5,950,000			9,531
Serica Energy PLC1,3		4,667,000			8,630
Timan Oil & Gas PLC1,3		5,335,000			5,946
GS Holdings Corp.1		92,000			5,635
KNM Group Bhd.1		2,400,000			5,542
Bankers Petroleum Ltd.3,4		3,000,000			2,629
Bankers Petroleum Ltd.3		2,086,000			1,828
White Nile Ltd.1,3		4,780,000			3,742
BowLeven PLC1,3		580,926			3,682
Mart Resources, Inc.3,4		3,875,625			1,757
Mart Resources, Inc.1,3,4		4,000,000			1,722
Alpha Natural Resources, Inc.3		94,000			3,053
Coalcorp Mining Inc.3		1,285,715			2,759
Sound Oil PLC1,3		30,000,000			1,800
Bordeaux Energy Inc.3,4		3,780,000			514
Caspian Energy Inc.3		1,000,000			332
Equator Exploration Ltd.1,3		2,000,000			287
Wah Seong Corp. Bhd.1		69,700			83
					276,277
UTILITIES — 3.83%
Xinao Gas Holdings Ltd.1		32,539,000			64,389
Manila Electric Co.1		21,037,280			41,643
EDF Energies Nouvelles SA1		283,400			19,656
First Philippine Holdings Corp.1		8,150,000			14,355
PNOC Energy Development Corp.1		77,650,000			12,261
Glow Energy PCL1		8,385,000			8,272
Ratchaburi Electricity Generating Holding PCL1		2,850,000			3,840
Electricity Generating PCL1		550,000			1,829
					166,245
CONSUMER STAPLES — 2.27%
Andersons, Inc.		400,000			17,920
Hite Brewery Co., Ltd.1		100,000			15,182
Hain Celestial Group, Inc.3		415,000			13,280
PT Indofood Sukses Makmur Tbk1		45,800,000			12,426
Bare Escentuals, Inc.3		350,000			8,488
China Mengniu Dairy Co.1		2,108,000			7,709
CP ALL PCL1		23,580,000			7,555
Universal Robina Corp.1		15,765,000			5,331
Crown Confectionery Co., Ltd.1		37,988			3,866
Chattem, Inc.3		45,000			3,399
China Huiyuan Juice Group Ltd.1,3		2,116,500			2,201
Drogasil SA, ordinary nominative		146,100			1,179
					98,536
TELECOMMUNICATION SERVICES — 1.14%
LG Telecom Ltd.1		1,750,000			18,354
Time Warner Telecom Inc., Class A3		500,000			10,145
True Corp. PCL1,3		54,000,000			9,208
Telemig Celular Participações SA, preferred nominative (ADR)		80,000			4,492
Telemig Celular Participações SA, preferred nominative		163,735			4,465
StarHub Ltd1		1,372,250			2,667
					49,331
MISCELLANEOUS — 4.84%
Other common stocks in initial period of acquisition					210,119
Total common stocks (cost: $2,814,445,000)					3,735,390
Rights & warrants — 0.05%
INDUSTRIALS — 0.04%
Kumho Industrial Co., Ltd., rights, expire 20081,3		99,600			1,447
Goodpack Ltd., warrants, expire 20093		617,500			215
					1,662
MATERIALS — 0.01%
Rusoro Mining Ltd., warrants, expire 20121,3,4		4,500,000			409
Rusoro Mining Ltd., warrants, expire 20111,3		833,334			87
Rusoro Mining Ltd., warrants, expire 20121,3,4		755,882			23
Madalena Ventures Inc., warrants, expire 20081,3		2,132,500			69
Hard Creek Nickel Corp., warrants, expire 20081,3,4		998,550			39
					627
ENERGY — 0.00%
Bordeaux Energy Inc., warrants, expire 20081,3,4		3,780,000			115
Mart Resources, Inc., warrants, expire 20081,3,4		1,937,812			—
					115
Total rights & warrants (cost: $2,835,000)					2,404
	Shares or
Convertible securities — 0.31%	principal amount
ENERGY — 0.22%
First Calgary Petroleums Ltd. 9.00% convertible debentures 20121	$	7,000,000			7,000
High Arctic Energy Services Inc. 12.00% convertible debentures 20121,4	C$2,300,000				2,317
					9,317
MATERIALS — 0.09%
Caledon Resources PLC 8.50% convertible loan notes 2010	£	2,000,000			3,968
INFORMATION TECHNOLOGY — 0.00%
Socratic Technologies, Inc., Series A, convertible preferred1,3,4		125,000			—
Total convertible securities (cost: $14,020,000)					13,285
	Principal amount			Market value
Short-term securities — 13.70%		(000	)		(000	)
Federal Home Loan Bank 4.29%–4.35% due 1/16–2/6/2008	$	53,500		$	53,324
Freddie Mac 4.25%–4.28% due 1/3–1/29/2008		46,800			46,697
BASF AG 4.45%–4.77% due 1/14–1/25/20085		37,000			36,905
Eksportfinans ASA 4.53%–4.58% due 1/23–2/14/20085		35,000			34,828
Swedish Export Credit Corp. 4.52%–4.62% due 1/15–1/31/2008		32,700			32,622
Electricité de France 4.48% due 2/27/20086		15,500			15,384
Electricité de France 4.82% due 1/8/2008		13,000			12,986
Alcon Capital Corp. 4.20% due 2/12/20085		15,000			14,911
Nestlé Capital Corp. 4.75% due 2/7/20085		11,400			11,338
KfW International Finance Inc. 4.44% due 1/15/20085		26,200			26,151
Westpac Banking Corp. 4.65%–4.66% due 1/8–1/25/20085		25,050			25,000
Canadian Wheat Board 4.30% due 1/11/2008		25,000			24,967
AstraZeneca PLC 4.57% due 1/25/20085		25,000			24,915
Bank of Ireland 4.78% due 1/25–2/22/20085		24,300			24,183
Lloyds Bank PLC 4.70% due 1/22/2008		20,000			19,939
CAFCO, LLC 4.71% due 1/7/20085		19,100			19,081
ING (U.S.) Funding LLC 5.15% due 1/7/2008		19,000			18,981
Danske Corp. 4.65% due 2/29/20085		16,300			16,173
HBOS Treasury Services PLC 4.55%–4.80% due 1/22–3/25/2008		15,900			15,759
U.S. Treasury Bills 3.15% due 5/1/2008		15,800			15,630
UBS Finance (Delaware) LLC 5.05% due 1/4/2008		15,000			14,992
Fannie Mae 4.31% due 1/14/2008		13,400			13,380
Abbey National N.A. LLC 4.87% due 1/22/2008		12,400			12,362
Swedbank Mortgage AB 4.80% due 1/11/2008		10,200			10,185
Park Avenue Receivables Co., LLC 4.25% due 1/2/20085		10,000			9,998
Bank of America Corp. 4.595% due 1/30/2008		10,000			9,957
BP Capital Markets PLC 4.20% due 2/14/20085		8,800			8,754
Procter & Gamble International Funding S.C.A. 4.48% due 2/8/20085		8,700			8,652
Variable Funding Capital Corp. 4.78% due 1/10/20085		7,100			7,090
BMW U.S. Capital LLC 4.21% due 1/22/20085		5,000			4,987
Export Development Canada 4.32% due 1/28/2008		5,000			4,983
Total short-term securities (cost: $595,166,000)					595,114
Total investment securities (cost: $3,426,466,000)					4,346,193
Other assets less liabilities					(2,505	)
Net assets				$	4,343,688

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

1 Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities, including those in “Miscellaneous,” was $2,375,410,000.

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

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

4 Purchased in a transaction exempt from registration under the Securities Act of 1933. May be subject to legal or contractual restrictions on resale. Further details on these holdings appear below.

 

	Acquisition date(s)	Cost (000)		Market value (000)		Percent of net assets
Oilexco Inc. (GBP denominated)	12/15/2005	$	6,195	$	26,759		.62	%
Oilexco Inc.	12/22/2005–3/7/2007		2,762		13,079		.30
Jaguar Mining Inc.	3/22/2006		4,293		11,602		.27
Rusoro Mining Ltd.	10/29/2007		9,865		6,582		.15
Rusoro Mining Ltd.	2/23/2007		4,844		2,437		.06
Rusoro Mining Ltd., warrants, expire 2012	10/29/2007		1,477		409		.01
Rusoro Mining Ltd., warrants, expire 2012	2/23/2007		256		23		.00
HSW International, Inc.	10/2/2007–12/17/2007		9,076		7,740		.18
African Minerals Ltd.	12/12/2006		5,606		7,022		.16
Ithaca Energy Inc. (GBP denominated)	5/26/2006		3,941		6,682		.15
Caledon Resources PLC	11/20/2006		4,019		3,836		.09
Mart Resources, Inc.	1/16/2007		1,990		1,757		.04
Mart Resources, Inc.	9/7/2007		1,519		1,722		.04
Mart Resources, Inc., warrants, expire 2008	1/16/2007		—		—		.00
Gemfields Resources PLC	11/7/2005–12/20/2006		3,781		3,296		.08
Ondine Biopharma Corp.	6/23/2004–10/25/2006		4,110		2,613		.06
Ondine Biopharma Corp. (GBP denominated)	5/18/2005		766		467		.01
Bankers Petroleum Ltd.	3/8/2005		2,806		2,629		.06
High Arctic Energy Services Inc. 12.00% convertible debentures 2012	11/19/2007		2,370		2,317		.05
Hard Creek Nickel Corp.	5/22/2007		3,436		1,891		.04
Hard Creek Nickel Corp., warrants, expire 2008	5/22/2007		609		39		.00
Chaarat Gold Holdings Ltd.	10/30/2007		2,121		1,357		.03
Arcadia Resources, Inc.	12/29/2006		2,500		1,275		.03
Aker Philadelphia Shipyard ASA	12/5/2007		1,161		1,163		.03
Bordeaux Energy Inc.	2/6/2007		1,586		514		.01
Bordeaux Energy Inc., warrants, expire 2008	2/6/2007		493		115		.00
Mobil Travel Guide	12/17/2007		55		55		.00
Socratic Technologies, Inc., Series A, convertible preferred	6/9/2000		625		—		.00
Total restricted securities		$	82,262	$	107,381		2.47	%

5 Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $311,591,000, which represented 7.17% of the net assets of the fund.

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

ADR = American Depositary Receipts

BDR = Brazilian Depositary Receipts

CAD = Canadian Dollar

GBP = British Pound

GDR = Global Depositary Receipts

Growth Fund

Investment portfolio

December 31, 2007

Common stocks — 92.97%	Shares			Market value (000)
INFORMATION TECHNOLOGY — 18.22%
Google Inc., Class A1		1,535,000		$	1,061,422
Microsoft Corp.		24,125,000			858,850
Nokia Corp. (ADR)		10,408,000			399,563
Nokia Corp.2		6,184,000			237,761
Cisco Systems, Inc.1		14,750,000			399,282
Oracle Corp.1		14,927,800			337,070
Fidelity National Information Services, Inc.		6,650,000			276,574
Samsung Electronics Co., Ltd.2		410,000			241,046
Red Hat, Inc.1,3		11,511,000			239,889
International Business Machines Corp.		1,600,000			172,960
Yahoo! Inc.1		6,750,000			157,005
Maxim Integrated Products, Inc.		5,845,000			154,776
Iron Mountain Inc.1		4,150,000			153,633
Trimble Navigation Ltd.1		4,500,000			136,080
Paychex, Inc.		3,170,000			114,817
Linear Technology Corp.		2,895,000			92,148
Digital River, Inc.1,3		2,430,000			80,360
QUALCOMM Inc.		2,000,000			78,700
Advanced Micro Devices, Inc.1		7,003,100			52,523
Kyocera Corp.2		500,000			43,755
THQ Inc.1		1,470,900			41,465
EMC Corp.1		2,000,000			37,060
Nortel Networks Corp.1		2,455,000			37,046
Dell Inc.1		1,500,000			36,765
Motorola, Inc.		2,291,400			36,754
Texas Instruments Inc.		1,080,000			36,072
Hon Hai Precision Industry Co., Ltd.2		5,643,554			34,877
KLA-Tencor Corp.		555,000			26,729
Taiwan Semiconductor Manufacturing Co. Ltd. (ADR)		1,383,128			13,776
Xilinx, Inc.		500,000			10,935
DataPath, Inc.1,2,3,4		2,819,968			9,870
Altera Corp.		500,000			9,660
					5,619,223
CONSUMER DISCRETIONARY — 15.74%
Best Buy Co., Inc.		7,920,000			416,988
Johnson Controls, Inc.		10,949,100			394,606
MGM Mirage, Inc.1		4,680,600			393,264
Lowe’s Companies, Inc.		17,326,000			391,914
Target Corp.		7,690,000			384,500
Kohl’s Corp.1		8,160,000			373,728
Chipotle Mexican Grill, Inc., Class B1,3		1,195,200			147,069
Chipotle Mexican Grill, Inc., Class A1,3		920,000			135,304
Garmin Ltd.		2,540,000			246,380
International Game Technology		5,156,000			226,503
TomTom NV1,2		2,800,000			208,955
News Corp., Class A		9,490,000			194,450
Liberty Media Holding Corp., Liberty Interactive, Series A1		7,620,000			145,390
Shaw Communications Inc., Class B, nonvoting		6,000,000			142,080
Penn National Gaming, Inc.1		2,100,000			125,055
CarMax, Inc.1		6,280,000			124,030
Time Warner Inc.		7,000,000			115,570
Starbucks Corp.1		4,993,000			102,207
Williams-Sonoma, Inc.		3,460,000			89,614
Harrah’s Entertainment, Inc.		839,000			74,461
Fortune Brands Inc.		1,000,000			72,360
Magna International Inc., Class A		725,000			58,312
Harman International Industries, Inc.		780,000			57,494
Blue Nile, Inc.1,3		824,000			56,081
Saks Inc.1		2,040,000			42,350
Toyota Motor Corp.2		765,000			41,182
Apollo Group, Inc., Class A1		500,000			35,075
Weight Watchers International, Inc.		500,000			22,590
Limited Brands, Inc.		1,087,457			20,586
Getty Images, Inc.1		551,700			15,999
					4,854,097
ENERGY — 14.02%
Schlumberger Ltd.		5,584,600			549,357
Suncor Energy Inc.		3,942,898			428,650
Canadian Natural Resources, Ltd.		4,625,700			338,236
Devon Energy Corp.		3,409,072			303,101
Petróleo Brasileiro SA — Petrobras, ordinary nominative (ADR)		2,130,000			245,461
Tenaris SA (ADR)		5,245,000			234,609
Murphy Oil Corp.		2,698,800			228,966
EOG Resources, Inc.		2,215,000			197,689
Peabody Energy Corp.		2,653,000			163,531
Petro-Canada		3,005,300			161,225
Noble Energy, Inc.		1,900,000			151,088
Core Laboratories NV1,3		1,197,700			149,377
Newfield Exploration Co.1		1,917,200			101,036
OPTI Canada Inc.1		5,680,000			94,991
Arch Coal, Inc.		2,000,000			89,860
Denbury Resources Inc.1		2,800,000			83,300
ConocoPhillips		937,820			82,810
Baker Hughes Inc.		1,000,000			81,100
Cameco Corp.		1,947,500			77,530
OAO Gazprom (ADR)2		1,300,000			73,205
BG Group PLC2		3,050,000			69,985
Quicksilver Resources Inc.1		1,120,000			66,741
Anadarko Petroleum Corp.		1,000,000			65,690
Rosetta Resources Inc.1,3,4		2,980,000			59,093
Transocean Inc.1		382,261			54,721
Exxon Mobil Corp.		550,000			51,530
CNX Gas Corp.1		1,500,000			47,925
Caltex Australia Ltd.2		1,484,030			25,060
Saipem SpA, Class S2		593,700			23,570
Energy XXI (Bermuda) Ltd.1,2,5		2,390,758			11,117
Patriot Coal Corp.1		265,300			11,074
					4,321,628
HEALTH CARE — 9.41%
Roche Holding AG2		2,465,000			424,057
Gilead Sciences, Inc.1		6,600,000			303,666
Stryker Corp.		2,990,000			223,413
Charles River Laboratories International, Inc.1		2,855,000			187,859
Shire PLC (ADR)		2,700,000			186,165
Medtronic, Inc.		3,175,000			159,607
Henry Schein, Inc.1		2,500,000			153,500
UnitedHealth Group Inc.		2,495,000			145,209
Schering-Plough Corp.		4,586,000			122,171
Endo Pharmaceuticals Holdings Inc.1		4,500,000			120,015
Patterson Companies, Inc.1		3,500,000			118,825
Hospira, Inc.1		2,200,000			93,808
Boston Scientific Corp.1		6,800,000			79,084
C. R. Bard, Inc.		800,000			75,840
PDL BioPharma, Inc.1		4,000,000			70,080
Amgen Inc.1		1,500,000			69,660
Mentor Corp.		1,500,000			58,650
Onyx Pharmaceuticals, Inc.1		1,000,000			55,620
Eli Lilly and Co.		970,000			51,788
WellPoint, Inc.1		500,000			43,865
McKesson Corp.		665,000			43,564
Cardinal Health, Inc.		700,000			40,425
Aveta, Inc.1,2,4		3,918,000			25,075
Forest Laboratories, Inc.1		573,200			20,893
Allergan, Inc.		320,000			20,557
APP Pharmaceuticals, Inc.1		667,900			6,859
					2,900,255
MATERIALS — 7.64%
Newmont Mining Corp.		9,305,000			454,363
Barrick Gold Corp.		10,500,000			441,525
Potash Corp. of Saskatchewan Inc.		2,000,000			287,920
Freeport-McMoRan Copper & Gold Inc.		2,704,500			277,049
K+S AG2		735,000			173,096
Rio Tinto PLC2		1,464,233			152,888
Gold Fields Ltd.2		10,000,000			143,527
Newcrest Mining Ltd.2		2,746,666			79,067
Newcrest Mining Ltd.2		961,333			27,673
USX Corp.		700,000			84,637
Minerals Technologies Inc.3		1,000,000			66,950
E.I. du Pont de Nemours and Co.		1,500,000			66,135
CRH PLC2		1,758,577			60,969
Sealed Air Corp.		1,132,500			26,206
Georgia Gulf Corp.3		2,224,000			14,723
					2,356,728
FINANCIALS — 7.52%
Berkshire Hathaway Inc., Class A1		4,011			567,958
Fannie Mae		6,440,000			257,471
White Mountains Insurance Group, Ltd.		309,500			159,098
Freddie Mac		4,572,700			155,792
Wells Fargo & Co.		4,700,000			141,893
Bank of Ireland2		9,096,177			134,654
Marsh & McLennan Companies, Inc.		4,963,200			131,376
Citigroup Inc.		3,500,000			103,040
Zions Bancorporation		2,061,501			96,251
T. Rowe Price Group, Inc.		1,500,000			91,320
Countrywide Financial Corp.		7,740,000			69,196
AMP Ltd.2		7,860,210			68,318
SunTrust Banks, Inc.		935,000			58,428
American International Group, Inc.		1,000,000			58,300
Onex Corp.		1,532,800			54,033
East West Bancorp, Inc.		2,200,000			53,306
American Express Co.		1,000,000			52,020
AFLAC Inc.		650,000			40,709
PMI Group, Inc.		2,000,000			26,560
					2,319,723
INDUSTRIALS — 7.35%
Boeing Co.		3,465,000			303,049
General Electric Co.		7,370,000			273,206
KBR, Inc.1		5,397,130			209,409
FedEx Corp.		2,080,000			185,473
Lockheed Martin Corp.		1,150,000			121,049
Caterpillar Inc.		1,600,000			116,096
General Dynamics Corp.		1,300,000			115,687
Panalpina Welttransport (Holding) AG2		650,000			112,079
Roper Industries, Inc.		1,540,000			96,312
Joy Global Inc.		1,400,000			92,148
Northrop Grumman Corp.		1,150,000			90,436
UAL Corp.1		2,000,000			71,320
Illinois Tool Works Inc.		1,249,200			66,882
Robert Half International Inc.		2,000,000			54,080
Allied Waste Industries, Inc.1		4,500,000			49,590
Actuant Corp., Class A		1,300,000			44,213
Kingspan Group PLC2		2,800,000			42,137
MSC Industrial Direct Co., Inc., Class A		1,000,000			40,470
United Parcel Service, Inc., Class B		500,000			35,360
Southwest Airlines Co.		2,400,000			29,280
Continental Airlines, Inc., Class B1		1,250,000			27,812
Tyco International Ltd.		649,125			25,738
Grafton Group PLC, units1,2		2,800,000			21,972
AMR Corp.1		1,084,257			15,212
Raytheon Co.		246,000			14,932
ChoicePoint Inc.1		313,500			11,418
Mitsubishi Heavy Industries, Ltd.2		435,000			1,862
					2,267,222
CONSUMER STAPLES — 7.18%
Altria Group, Inc.		9,895,000			747,864
Coca-Cola Co.		5,295,000			324,954
Bunge Ltd.		2,348,100			273,342
PepsiCo, Inc.		3,145,000			238,705
Walgreen Co.		4,395,000			167,362
Bare Escentuals, Inc.1,3		5,850,000			141,863
SYSCO Corp.		2,000,000			62,420
Constellation Brands, Inc., Class A1		2,624,000			62,031
Wm. Wrigley Jr. Co.		1,027,500			60,160
Diageo PLC2		2,650,000			56,534
Cosan Ltd., Class A1		3,800,000			47,880
Avon Products, Inc.		775,000			30,636
					2,213,751
TELECOMMUNICATION SERVICES — 2.49%
Sprint Nextel Corp., Series 1		31,956,100			419,583
Qwest Communications International Inc.1		35,000,000			245,350
Telephone and Data Systems, Inc., Special Common Shares		1,190,000			68,544
KDDI Corp.2		4,490			33,344
					766,821
UTILITIES — 0.93%
Reliant Energy, Inc.1		5,696,500			149,476
KGen Power Corp.1,2,3,4		3,166,128			50,658
NRG Energy, Inc.1		1,000,000			43,340
Dynegy Inc., Class A1		6,000,000			42,840
					286,314
MISCELLANEOUS — 2.47%
Other common stocks in initial period of acquisition					761,429
Total common stocks (cost: $22,836,048,000)					28,667,191
	Principal amount
Short-term securities — 7.20%		(000	)
Fannie Mae 4.13%–4.65% due 1/4–4/1/2008	$	249,769			248,547
Federal Home Loan Bank 4.225%–4.56% due 1/2–3/19/2008		245,900			244,706
Freddie Mac 4.14%–4.25% due 1/22–4/18/2008		209,049			207,286
Coca-Cola Co. 4.22%–4.71% due 1/8–2/20/20085		151,843			151,137
JPMorgan Chase & Co. 4.95%–5.06% due 2/6–3/24/2008		100,000			99,182
Jupiter Securitization Co., LLC 4.77%–6.00% due 1/4–1/10/20085		45,000			44,947
Procter & Gamble International Funding S.C.A. 4.22%–4.76% due 1/9–3/7/20085		137,800			136,996
Hewlett-Packard Co. 4.24%–4.55% due 1/7–1/16/20085		134,200			134,015
IBM Capital Inc. 4.20% due 3/10/20085		42,866			42,477
IBM Corp. 4.21%–4.41% due 1/11–1/15/20085		79,000			78,881
Bank of America Corp. 5.0%–5.015% due 1/14–1/16/2008		95,850			95,663
United Parcel Service Inc. 4.15%–4.46% due 2/1–3/26/20085		83,000			82,354
General Electric Capital Corp. 4.15% due 1/2/2008		50,000			49,989
Edison Asset Securitization LLC 4.61% due 1/23/20085		29,300			29,201
U.S. Treasury Bills 3.0%–4.021% due 1/3–5/1/2008		61,000			60,674
Medtronic Inc. 4.22%–4.58% due 1/15–1/18/20085		55,900			55,785
NetJets Inc. 4.47% due 1/24–2/7/20085		56,000			55,718
International Lease Finance Corp. 4.69%–4.85% due 1/3–1/14/2008		50,800			50,757
FCAR Owner Trust I 5.55% due 1/28/2008		50,000			49,784
Kimberly-Clark Corp. 4.20%–4.47% due 1/11–1/29/20085		43,800			43,690
Variable Funding Capital Corp. 5.40% due 1/17/20085		40,000			39,898
Johnson & Johnson 4.20% due 1/10/20085		38,400			38,355
Anheuser-Busch Cos. Inc. 4.18% due 2/20/20085		30,000			29,791
Harvard University 4.40% due 1/8/2008		25,000			24,976
Honeywell International Inc. 4.45% due 1/8/20085		25,000			24,975
Wells Fargo & Co. 4.30% due 1/18/2008		25,000			24,946
CAFCO, LLC 5.3% due 1/9/20085		16,700			16,678
Wal-Mart Stores Inc. 4.73% due 1/23/20085		15,100			15,053
Becton, Dickinson and Co. 4.52% due 1/24/2008		15,000			14,955
Paccar Financial Corp. 4.75% due 1/14/2008		13,200			13,176
Harley-Davidson Funding Corp. 4.50% due 2/27/20085		10,000			9,924
Caterpillar Financial Services Corp. 4.2% due 1/15/2008		5,600			5,590
Total short-term securities (cost: $2,220,006,000)					2,220,106
Total investment securities (cost: $25,056,054,000)					30,887,297
Other assets less liabilities					(51,936	)
Net assets				$	30,835,361

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

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

2 Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities, including those in “Miscellaneous,” was $2,791,992,000.

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

4 Purchased in a transaction exempt from registration under the Securities Act of 1933. May be subject to legal or contractual restrictions on resale. Further details on these holdings appear below.

	Acquisition date(s)	Cost (000)		Market value (000)		Percent of net assets
Rosetta Resources Inc.	6/28/2005–12/2/2005	$	49,745	$	59,093		.19	%
KGen Power Corp.	12/19/2006		44,326		50,658		.16
Aveta, Inc.	12/21/2005		52,893		25,075		.08
DataPath, Inc.	6/23/2006		31,020		9,870		.03
Total restricted securities		$	177,984	$	144,696		.46	%

5 Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $1,040,992,000, which represented 3.38% of the net assets of the fund.

ADR = American Depositary Receipts

International Fund

Investment portfolio

December 31, 2007

Common stocks — 91.49%	Shares			Market value (000)
FINANCIALS — 17.35%
Erste Bank der oesterreichischen Sparkassen AG1		2,622,647		$	186,130
Unibanco-União de Bancos Brasileiros SA, units (GDR)		1,083,000			151,230
Banco Santander, SA1		5,700,000			122,963
Kookmin Bank1		1,613,500			118,625
Banco Bilbao Vizcaya Argentaria, SA1		4,626,000			113,453
OTP Bank PLC1		2,035,000			102,349
Hana Financial Holdings1		1,736,092			94,005
AXA SA1		2,281,611			90,712
Credit Suisse Group1		1,440,000			86,473
UniCredito Italiano SpA1		10,292,000			85,514
ICICI Bank Ltd.1		2,303,900			72,115
Sun Hung Kai Properties Ltd.1		3,347,000			70,409
Sumitomo Mitsui Financial Group, Inc.1		9,285			69,100
ORIX Corp.1		387,500			64,809
BNP Paribas SA1		496,000			53,239
ING Groep NV, depository receipts1		1,306,534			50,922
Fortis SA/NV1		1,950,000			50,809
JSC Kazkommertsbank (GDR)1,2		3,143,100			42,804
JSC Kazkommertsbank (GDR)1,2,3		326,000			4,440
Sumitomo Realty & Development Co., Ltd.1		1,493,000			36,727
Shinhan Financial Group Co., Ltd.1		634,670			36,425
Macquarie Group Ltd.1		530,000			35,086
Hypo Real Estate Holding AG1		661,900			34,384
GuangZhou R&F Properties Co., Ltd., Class H1		9,460,000			33,299
HSBC Holdings PLC (United Kingdom)1		767,460			12,831
HSBC Holdings PLC (Hong Kong)1		650,000			10,868
Commerzbank U.S. Finance, Inc.1		600,000			22,677
Mizuho Financial Group, Inc.1		4,650			22,063
AMP Ltd.1		2,535,799			22,040
Türkiye Halk Bankasi AS1,2		2,095,000			21,815
Société Générale1		149,750			21,370
DnB NOR ASA1		1,217,800			18,468
Shui On Land Ltd.1		16,000,000			18,424
Admiral Group PLC1		787,000			17,113
Sampo Oyj, Class A1		390,000			10,185
					2,003,876
HEALTH CARE — 11.90%
Roche Holding AG1		2,314,268			398,126
Novo Nordisk A/S, Class B1		4,984,200			325,045
Merck KGaA1		972,655			124,762
Novartis AG1		1,850,000			100,656
Richter Gedeon NYRT1		307,000			73,182
Zentiva NV1		1,112,000			59,513
Chugai Pharmaceutical Co., Ltd.1		3,967,800			56,690
Teva Pharmaceutical Industries Ltd. (ADR)		1,150,000			53,452
EGIS NYRT1		389,200			42,010
OJSC Pharmstandard (GDR)1,2		1,106,500			30,208
OJSC Pharmstandard (GDR)1,2,3		307,300			8,389
Smith & Nephew PLC1		2,393,000			27,420
Straumann Holding AG1		90,950			24,944
UCB SA1		552,000			24,859
Shionogi & Co., Ltd.1		757,000			13,350
Nobel Biocare Holding AG1		43,393			11,464
					1,374,070
MATERIALS — 10.46%
Bayer AG, non-registered shares1		6,138,023			558,808
Nitto Denko Corp.1		3,092,600			163,303
Linde AG1		981,856			129,126
JSC Uralkali (GDR)1,2		1,780,760			65,590
JSC Uralkali (GDR)1,2,3		521,427			19,205
CRH PLC1		1,978,397			68,590
Barrick Gold Corp.		1,067,683			44,940
Yamana Gold Inc.		3,190,000			41,426
L’Air Liquide, non-registered shares1		231,428			34,240
Siam Cement PCL1		4,020,000			27,780
BlueScope Steel Ltd.1		3,300,000			27,760
JSR Corp.1		1,043,500			26,997
					1,207,765
TELECOMMUNICATION SERVICES — 9.18%
MTN Group Ltd.1		14,702,800			275,550
Koninklijke KPN NV1		8,923,300			161,144
Singapore Telecommunications Ltd.1		45,300,330			124,378
América Móvil, SAB de CV, Series L (ADR)		1,732,500			106,358
Telenor ASA1,2		4,470,000			105,660
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk, Class B1		83,725,000			90,561
Philippine Long Distance Telephone Co.1		809,800			62,143
Philippine Long Distance Telephone Co. (ADR)		340,000			25,745
Total Access Communication PCL1,2		25,500,000			28,964
Telefónica, SA1		785,000			25,332
Vodafone Group PLC1		6,011,250			22,329
Telekom Austria AG, non-registered shares1		583,453			16,145
KDDI Corp.1		2,130			15,818
Bayan Telecommunications Corp., Class A1,2,4		43,010			0
Bayan Telecommunications Corp., Class B1,2,4		14,199			0
					1,060,127
INFORMATION TECHNOLOGY — 9.12%
Samsung Electronics Co., Ltd.1		342,814			201,547
Hon Hai Precision Industry Co., Ltd.1		19,082,865			117,931
Nokia Corp.1		2,500,000			96,120
Lite-On Technology Corp.1		53,475,000			92,686
Murata Manufacturing Co., Ltd.1		1,285,000			74,742
AU Optronics Corp.1		37,431,503			72,349
Taiwan Semiconductor Manufacturing Co. Ltd.1		27,444,695			52,220
Taiwan Semiconductor Manufacturing Co. Ltd. (ADR)		1,888,714			18,812
Rohm Co., Ltd.1		592,100			51,542
HOYA Corp.1		1,533,600			48,951
Delta Electronics, Inc.1		14,377,900			48,870
Mediatek Incorporation1		3,455,760			44,490
Hirose Electric Co., Ltd.1		371,300			43,023
Hynix Semiconductor Inc.1,2		1,005,000			27,529
Catcher Technology Co., Ltd.1		3,681,800			21,284
Toshiba Corp.1		2,280,000			17,004
Foxconn Technology Co., Ltd.1		2,038,950			16,458
Chartered Semiconductor Manufacturing Ltd1,2		10,872,000			7,261
					1,052,819
CONSUMER DISCRETIONARY — 7.56%
Industria de Diseno Textil, SA1		1,668,000			101,268
Vivendi SA1		2,008,400			91,383
Lotte Shopping Co.1		199,500			87,368
Continental AG1		605,000			78,340
Renault SA1		552,000			77,339
China Dongxiang (Group) Co., Ltd.1,2		102,534,000			75,534
Sony Corp.1		1,225,000			66,487
William Hill PLC1		3,802,965			39,309
Techtronic Industries Co. Ltd.1		39,690,000			39,233
Esprit Holdings Ltd.1		2,497,500			36,704
Land & Houses PCL1		135,000,000			36,071
JCDecaux SA1		835,000			32,668
Kingfisher PLC1		9,530,000			27,350
Honda Motor Co., Ltd.1		691,000			22,848
Carnival PLC1		485,000			21,219
OPAP (Greek Organization of Football Prognostics) SA1		429,330			17,115
Kesa Electricals PLC1		3,173,300			14,575
SET India Ltd.1,2,4		82,217			8,540
					873,351
ENERGY — 5.90%
OAO Gazprom (ADR)1		2,655,000			149,508
Reliance Industries Ltd.1		1,987,000			145,319
Royal Dutch Shell PLC, Class B1		2,460,219			102,549
Royal Dutch Shell PLC, Class A1		522,000			21,909
Oil & Natural Gas Corp. Ltd.1		3,901,276			121,782
Canadian Natural Resources, Ltd.		1,000,000			73,121
ENI SpA1		1,250,000			45,479
PetroChina Co. Ltd., Class H1		12,300,000			21,705
					681,372
CONSUMER STAPLES — 5.41%
Nestlé SA1		504,580			230,910
L’Oréal SA1		1,205,500			171,832
Shinsegae Co., Ltd.1		86,000			66,279
SABMiller PLC1		1,626,234			45,602
Groupe Danone SA1		424,800			37,897
Wal-Mart de México, SAB de CV, Series V		6,180,240			21,351
Tesco PLC1		2,263,260			21,299
Koninklijke Ahold NV1,2		1,308,000			18,135
InBev1		148,100			12,200
					625,505
INDUSTRIALS — 4.95%
Samsung Engineering Co., Ltd.1		1,455,000			143,576
Siemens AG1		771,000			120,861
Ryanair Holdings PLC (ADR)2		2,982,200			117,618
SMC Corp.1		688,000			81,895
Toll Holdings Ltd.1		5,178,065			51,798
Fraport AG1		447,900			35,111
FANUC LTD1		130,100			12,694
Mitsui & Co., Ltd.1		404,000			8,573
					572,126
UTILITIES — 4.73%
E.ON AG1		1,299,500			275,512
Veolia Environnement1		1,977,064			179,290
RWE AG1		654,000			91,510
					546,312
MISCELLANEOUS — 4.93%
Other common stocks in initial period of acquisition					569,442
Total common stocks (cost: $7,827,902,000)					10,566,765
	Principal amount
Short-term securities — 8.34%		(000	)
Swedish Export Credit Corp. 4.30%–4.62% due 1/17–3/31/2008	$	80,400			79,732
Danske Corp. 4.67%–4.79% due 1/15–1/29/20083		75,000			74,796
GlaxoSmithKline Finance PLC 4.56%–4.65% due 2/1–4/28/20083		71,800			71,330
American Honda Finance Corp. 4.48%–4.50% due 1/16–2/4/2008		66,800			66,585
BASF AG 4.35%–4.52% due 1/24–2/12/20083		66,400			66,088
AstraZeneca PLC 4.20%–4.80% due 1/17–4/7/20083		53,900			53,498
Fannie Mae 4.25%–4.29% due 1/29–2/22/2008		50,200			49,971
KfW International Finance Inc. 4.45% due 1/22/20083		50,000			49,848
National Australia Funding (Delaware) Inc. 5.01% due 1/14/20083		41,300			41,219
Barclays U.S. Funding Corp. 5.20% due 2/7/2008		38,300			38,089
HBOS Treasury Services PLC 4.95%–5.00% due 1/16–2/29/2008		36,100			35,895
Freddie Mac 4.22% due 1/30/2008		35,400			35,275
BNP Paribas Finance Inc. 5.015%–5.138% due 1/7–3/11/2008		35,300			35,064
Westpac Banking Corp. 4.65% due 1/25/20083		30,000			29,897
Toyota Motor Credit Corp. 4.78% due 1/4/2008		28,200			28,185
ING (U.S.) Funding LLC 5.15% due 1/9/2008		23,500			23,470
Dexia Delaware LLC 4.72% due 1/4/2008		22,800			22,788
Barton Capital LLC 4.88% due 1/10/20083		20,500			20,471
Canadian Imperial Holdings Inc. 4.665% due 1/3/2008		20,000			19,992
Calyon North America Inc. 5.09% due 1/8/2008		20,000			19,977
Electricité de France 4.53% due 2/27/2008		20,000			19,850
Eksportfinans ASA 4.59% due 2/11/20083		19,800			19,684
General Electric Capital Corp. 4.15% due 1/2/2008		19,200			19,196
Federal Home Loan Bank 4.34%–4.45% due 1/25/2008		19,050			19,000
Bank of Ireland 4.60% due 4/1/20083		9,700			9,586
Harley-Davidson Funding Corp. 4.48% due 2/21/20083,5		8,500			8,440
International Bank for Reconstruction and Development 4.30% due 1/28/2008		5,600			5,581
Total short-term securities (cost: $963,650,000)					963,507
Total investment securities (cost: $8,791,552,000)					11,530,272
Other assets less liabilities					19,926
Net assets				$	11,550,198

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

1 Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities, including those in “Miscellaneous,” was $9,909,192,000.

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

3 Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in  transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $476,891,000, which represented 4.13% of the net assets of the fund.

4 Purchased in a transaction exempt from registration under the Securities Act of 1933. May be subject to legal or contractual restrictions on resale. Further details on these holdings appear below.

	Acquisition dates	Cost (000)		Market value (000)		Percent of net assets
SET India Ltd.	9/6/2000–4/18/2002	$	32,519	$	8,540		.07	%
Bayan Telecommunications Holdings Corp., Class A	2/11/1998–8/31/1998		104		0		.00
Bayan Telecommunications Holdings Corp., Class B	2/11/1998–8/31/1998		34		0		.00
Total restricted securities		$	32,657	$	8,540		.07	%

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

ADR = American Depositary Receipts

GDR = Global Depositary Receipts

New World Fund

Investment portfolio

December 31, 2007

Common stocks — 81.33%	Shares			Market value (000)
FINANCIALS — 13.08%
Bank Muscat (SAOG) (GDR)1		1,257,637		$	27,982
PT Bank Rakyat Indonesia (Persero) Tbk1		28,261,150			22,058
Banco Santander, SA1		782,000			16,870
Asya Katilim Bankasi AS, Class B1,2		1,600,000			15,047
Piraeus Bank SA1		359,937			14,000
National Bank of Greece SA1		195,700			13,461
Unibanco-União de Bancos Brasileiros SA, units (GDR)		96,000			13,406
Banco do Estado do Rio Grande do Sul SA, preferred nominative, Series B		2,100,000			12,973
ICICI Bank Ltd.1		302,174			9,458
ICICI Bank Ltd. (ADR)		30,500			1,876
Banco Itaú Holding Financeira SA, preferred nominative		417,600			10,681
Türkiye Is Bankasi AS, Class C1		1,550,000			9,718
Bancolombia SA (ADR)		252,000			8,573
Kotak Mahindra Bank Ltd.1		259,943			8,553
Housing Development Finance Corp. Ltd.1		113,600			8,226
Brascan Residential Properties SA, ordinary nominative		1,260,300			7,793
JSC Sistema-Hals (GDR)1,2		675,875			6,356
JSC Sistema-Hals (GDR)1,2,3		138,253			1,300
Industrial and Commercial Bank of China Ltd., Class H1		10,550,000			7,499
Grupo Financiero Banorte, SAB de CV, Series O		1,800,000			7,438
Bumiputra-Commerce Holdings Bhd.1		2,250,000			7,418
Itaúsa — Investimentos Itaú SA, preferred nominative		1,092,735			7,218
Krung Thai Bank PCL1		19,756,000			5,881
Allied Irish Banks, PLC1		250,000			5,736
Bank Pekao SA1		60,000			5,472
FirstRand Ltd.1		1,756,500			5,115
Erste Bank der oesterreichischen Sparkassen AG1		58,424			4,146
Bank Hapoalim BM1		830,000			4,128
Türkiye Garanti Bankasi AS1		385,000			3,449
Bank of the Philippine Islands1		2,213,539			3,273
Orco Property Group SA1		25,200			2,990
Citigroup Inc.		42,000			1,237
China Construction Bank Corp., Class H1		500			—
					279,331
INDUSTRIALS — 12.01%
Suzlon Energy Ltd.1		623,600			30,631
Murray & Roberts Holdings Ltd.1		2,014,000			30,030
Enka Insaat ve Sanayi AS1		1,260,356			22,113
Schneider Electric SA1		142,050			18,966
Chiyoda Corp.1		1,525,000			17,433
Boart Longyear Ltd.1,2		8,049,394			16,493
STX Engine Co., Ltd.1		237,510			16,255
Siemens AG1		74,000			11,600
Wienerberger AG1		194,000			10,701
Orascom Construction Industries Co. (GDR)1		50,600			10,597
ABB Ltd1		352,000			10,136
Container Corp. of India Ltd.1		189,900			9,246
United Technologies Corp.		100,000			7,654
Caterpillar Inc.		93,500			6,784
Embraer — Empresa Brasileira de Aeronáutica SA, ordinary nominative (ADR)		105,000			4,787
FedEx Corp.		50,000			4,458
Daelim Industrial Co., Ltd.1		21,484			4,035
Bidvest Group Ltd.1		225,000			3,967
Italian-Thai Development PCL1,2		15,221,100			3,689
Asahi Glass Co., Ltd.1		272,000			3,607
Hyundai Engineering & Construction Co., Ltd.1,2		38,000			3,536
GS Engineering & Construction Corp.1		20,700			3,395
Daewoo Engineering & Construction Co., Ltd.1		93,504			2,435
Intertek Group PLC1		117,000			2,286
Doosan Heavy Industries and Construction Co., Ltd.1		13,000			1,751
					256,585
CONSUMER STAPLES — 10.59%
Tesco PLC1		3,616,218			34,032
IOI Corp. Bhd.1		12,003,250			27,903
Alliance Global Group, Inc.1,2		115,948,000			15,778
Nestlé SA1		31,500			14,415
Fomento Económico Mexicano, SAB de CV (ADR)		341,900			13,050
Coca-Cola Co.		207,000			12,704
Wal-Mart de México, SAB de CV, Series V (ADR)		258,000			8,991
Wal-Mart de México, SAB de CV, Series V		420,000			1,451
PepsiCo, Inc.		120,000			9,108
Migros Türk TAS1		429,926			8,393
Avon Products, Inc.		210,200			8,309
China Yurun Food Group Ltd.1		4,899,000			8,049
Grupo Nacional de Chocolates SA		935,000			7,649
X5 Retail Group NV (GDR)1,2,3		198,800			7,240
Bunge Ltd.		60,100			6,996
SABMiller PLC1		238,500			6,688
Olam International Ltd.1		3,030,000			5,960
Poslovni sistem Mercator, dd1		11,274			5,517
Cia. de Bebidas das Américas — AmBev, preferred nominative (ADR)		60,000			4,262
Cia. de Bebidas das Américas — AmBev, ordinary nominative (ADR)		12,000			816
Groupe Danone SA1		50,000			4,461
Unilever NV, depository receipts1		117,000			4,277
Diageo PLC1		190,000			4,053
Procter & Gamble Co.		55,000			4,038
Kimberly-Clark de México, SAB de CV, Class A		480,000			2,105
Scottish & Newcastle PLC1		1,411			21
					226,266
CONSUMER DISCRETIONARY — 8.26%
Toyota Motor Corp.1		331,100			17,824
GOME Electrical Appliances Holding Ltd.1		6,440,000			16,287
Central European Media Enterprises Ltd., Class A2		136,600			15,843
Kuoni Reisen Holding AG, Class B1		27,250			14,070
Grupo Clarín SA, Class B (GDR)1,2,3		540,900			9,790
Grupo Clarín SA, Class B (GDR)1,2		127,300			2,304
Honda Motor Co., Ltd.1		353,800			11,699
Melco PBL Entertainment (Macau) Ltd. (ADR)2		760,000			8,786
Desarrolladora Homex, SA de CV (ADR)2		160,000			7,912
Swatch Group Ltd1		80,000			4,671
Swatch Group Ltd, non-registered shares1		10,450			3,129
Yue Yuen Industrial (Holdings) Ltd.1		2,160,000			7,726
Agora SA1		340,000			7,596
Nitori Co., Ltd.1		138,000			6,569
Naspers Ltd., Class N1		254,700			5,999
C C Land Holdings Ltd.1		3,960,000			5,711
Gafisa SA, ordinary nominative		300,000			5,597
Grupo Televisa, SAB, ordinary participation certificates (ADR)		215,000			5,111
Truworths International Ltd.1		1,282,000			5,066
TVN SA1		500,000			5,053
Las Vegas Sands Corp.2		40,000			4,122
Li & Fung Ltd.1		886,600			3,543
Stockmann Oyj, Class B1		48,000			2,064
					176,472
ENERGY — 8.06%
Petróleo Brasileiro SA — Petrobras, ordinary nominative (ADR)		247,600			28,533
Petróleo Brasileiro SA — Petrobras, preferred nominative (ADR)		106,000			10,199
OAO Gazprom (ADR)1		417,500			23,510
Oil & Natural Gas Corp. Ltd.1		719,453			22,459
Saipem SpA, Class S1		466,000			18,500
Oil and Gas Development Co. Ltd.1		4,530,000			8,781
Eurasia Drilling Co. Ltd. (GDR)1,2,3		254,800			6,880
Eurasia Drilling Co. Ltd. (GDR)1,2		49,500			1,337
TOTAL SA1		60,000			4,972
TOTAL SA (ADR)		32,500			2,684
Tenaris SA (ADR)		150,000			6,709
OAO TMK (GDR)1,3		142,826			6,416
Reliance Industries Ltd.1		80,000			5,851
Noble Energy, Inc.		70,000			5,566
Sterling Energy PLC1,2		19,010,000			5,308
Chevron Corp.		45,000			4,200
Nexen Inc.		127,384			4,120
Cameco Corp.		100,000			3,987
Smith International, Inc.		30,000			2,216
					172,228
TELECOMMUNICATION SERVICES — 6.54%
Vodafone Group PLC1		7,965,000			29,586
Cellcom Israel Ltd.		724,714			23,017
América Móvil, SAB de CV, Series L (ADR)		310,000			19,031
Telekomunikacja Polska SA1		2,030,000			18,456
Partner Communications Co. Ltd.1		721,500			15,915
Partner Communications Co. Ltd. (ADR)		10,000			221
China Unicom Ltd.1		5,038,000			11,377
TIM Participações SA, ordinary nominative		825,000			3,896
Telekom Austria AG, non-registered shares1		220,000			6,088
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk, Class B1		5,440,000			5,884
Telefónica, SA1		161,000			5,195
HT — Hrvatske telekomunikacije dd (GDR)1,2,3		13,471			929
					139,595
MATERIALS — 6.38%
JSC Uralkali (GDR)1,2		702,141			25,862
JSC Uralkali (GDR)1,2,3		197,033			7,257
Votorantim Celulose e Papel SA, preferred nominative (ADR)		820,000			24,444
Taiwan Cement Corp.1		9,492,777			13,045
Freeport-McMoRan Copper & Gold Inc.		97,500			9,988
Israel Chemicals Ltd.1		715,000			9,084
Cia. Vale do Rio Doce, Class A, preferred nominative		252,000			7,189
Sigma-Aldrich Corp.		110,000			6,006
Aracruz Celulose SA, Class B, preferred nominative (ADR)		78,000			5,799
Mondi PLC1		650,450			5,438
BHP Billiton PLC1		142,664			4,380
ACC Ltd.1		145,000			3,750
Holcim Ltd.1		31,500			3,342
CEMEX, SAB de CV, ordinary participation certificates, units (ADR)		118,809			3,071
OAO Severstal (GDR)1		114,900			2,651
AngloGold Ashanti Ltd.1		49,500			2,124
Harmony Gold Mining Co. Ltd.1,2		200,000			2,063
Sealed Air Corp.		32,400			750
Mondi Ltd.1		3,500			33
					136,276
INFORMATION TECHNOLOGY — 6.38%
Nokia Corp.1		578,600			22,246
Nokia Corp. (ADR)		522,900			20,074
Samsung Electronics Co., Ltd.1		27,100			15,933
Hon Hai Precision Industry Co., Ltd.1		2,325,249			14,370
Acer Inc.1		6,112,960			11,868
Kingboard Chemical Holdings Ltd.1		1,859,000			11,006
Euronet Worldwide, Inc.2,4		250,000			7,500
Euronet Worldwide, Inc.2		42,285			1,268
HOYA Corp.1		234,400			7,482
Cisco Systems, Inc.2		210,000			5,685
Redecard SA, ordinary nominative		347,100			5,619
Net 1 UEPS Technologies, Inc.2		166,600			4,891
Venture Corp. Ltd.1		440,000			3,855
NetEase.com, Inc. (ADR)2		120,000			2,275
MoneyGram International, Inc.		135,000			2,075
Kingboard Laminates Holdings Ltd.1		84,500			56
					136,203
HEALTH CARE — 3.12%
Krka, dd, Novo mesto1		168,640			30,597
Novo Nordisk A/S, Class B1		350,320			22,846
Zentiva NV1		119,000			6,369
Teva Pharmaceutical Industries Ltd. (ADR)		110,000			5,113
Richter Gedeon NYRT1		7,400			1,764
					66,689
UTILITIES — 2.03%
NTPC Ltd.1		2,457,000			15,598
AES Corp.2		600,000			12,834
CLP Holdings Ltd.1		887,000			6,030
Veolia Environnement1		55,125			4,999
Cheung Kong Infrastructure Holdings Ltd.1		1,066,000			3,968
					43,429
MISCELLANEOUS — 4.88%
Other common stocks in initial period of acquisition					104,152
Total common stocks (cost: $1,139,190,000)					1,737,226
	Principal amount			Market value
Bonds, notes & other debt instruments — 5.73%		(000	)		(000	)
BONDS & NOTES OF GOVERNMENTS OUTSIDE THE U.S. — 5.29%
Brazil (Federal Republic of) Global 9.25% 2010	$	2,200		$	2,447
Brazilian Treasury Bill 6.00% 20101,5	BRL6,529				3,532
Brazilian Treasury Bill 9.418% 20111,5		853			456
Brazil (Federal Republic of) 10.00% 20141		4,600			2,273
Brazilian Treasury Bill 6.00% 20151,5		4,015			2,067
Brazil (Federal Republic of) Global 12.50% 2016		1,500			923
Brazil (Federal Republic of) 10.00% 20171		8,500			4,027
Brazil (Federal Republic of) Global 8.00% 20186	$	2,434			2,730
Brazil (Federal Republic of) Global 8.875% 2019		1,000			1,240
Brazil (Federal Republic of) Global 8.875% 2024		100			128
Brazil (Federal Republic of) Global 10.125% 2027		1,425			2,059
Brazil (Federal Republic of) Global 11.00% 2040		2,375			3,176
Brazilian Treasury Bill 6.00% 20451,5	BRL3,346				1,731
United Mexican States Government Global 5.943% 20097	$	1,250			1,254
United Mexican States Government Global 10.375% 2009		397			423
United Mexican States Government Global 9.875% 2010		4,125			4,575
United Mexican States Government Global 6.375% 2013		3,875			4,131
United Mexican States Government, Series MI10, 8.00% 2013	MXN 7,671				704
United Mexican States Government, Series MI10, 9.50% 2014		25,500			2,513
United Mexican States Government, Series M10, 8.00% 2015		20,000			1,815
Turkey (Republic of) Treasury Bill 0% 20081	TRY1,230				968
Turkey (Republic of) 14.00% 20111		6,900			5,588
Turkey (Republic of) 10.00% 20121,5		3,120			2,786
Turkey (Republic of) 16.00% 20121		2,000			1,702
Turkey (Republic of) 7.00% 2016	$	2,000			2,125
Colombia (Republic of) Global 11.75% 2010	COP6,000,000				3,098
Colombia (Republic of) Global 10.00% 2012	$	2,100			2,452
Colombia (Republic of) Global 10.75% 2013		1,360			1,676
Colombia (Republic of) Global 8.25% 2014		400			458
Colombia (Republic of) Global 12.00% 2015	COP2,780,000				1,544
Colombia (Republic of) Global 11.75% 2020	$	315			470
Colombia (Republic of) Global 8.125% 2024		500			599
Colombia (Republic of) Global 7.375% 2037		474			529
Argentina (Republic of) 3.368% 20121,6,7		2,000			1,110
Argentina (Republic of) 2.00% 20141,5,6	ARS 1,318				305
Argentina (Republic of) 5.83% 20331,5,6,8		22,988			5,399
Argentina (Republic of) GDP-Linked 2035		43,865			1,233
Argentina (Republic of) 0.63% 20381,5,6		13,392			1,226
Russian Federation 8.25% 20106	$	4,000			4,157
Russian Federation 8.25% 20103,6		314			327
Russian Federation 7.50% 20303,6		3,372			3,844
Russian Federation 7.50% 20306		743			846
Philippines (Republic of) 8.375% 2009		1,665			1,732
Philippines (Republic of) 9.875% 2019		2,200			2,893
Philippines (Republic of) 7.75% 2031		2,735			3,169
Peru (Republic of) 8.375% 2016		4,453			5,243
Peru (Republic of) 7.35% 2025		500			573
Peru (Republic of) 6.55% 2037		782			819
Panama (Republic of) Global 9.625% 2011		219			247
Panama (Republic of) Global 9.375% 2012		790			924
Panama (Republic of) Global 7.125% 2026		890			983
Panama (Republic of) Global 8.875% 2027		300			392
Panama (Republic of) Global 9.375% 2029		450			618
Panama (Republic of) Global 6.70% 20366		1,824			1,933
Dominican Republic 9.50% 20116		307			327
Dominican Republic 9.04% 2018		437			501
Dominican Republic 8.625% 20273,6		2,150			2,505
Egypt (Arab Republic of) Treasury Bill 0% 20081	EGP6,700				1,204
Egypt (Arab Republic of) Treasury Bill 0% 20081		3,100			546
Egypt (Arab Republic of) 8.75% 20121		5,000			933
Egypt (Arab Republic of) 11.625% 20141		2,679			561
Hungarian Government 6.00% 2011	HUF200,000				1,103
South Africa (Republic of), Series 197, 7.676% 20231,5	ZAR5,094				1,033
Venezuela (Republic of) Global 8.50% 2014	$	55			53
Venezuela (Republic of) Global 9.25% 2027		170			170
					113,108
MATERIALS — 0.12%
C10 Capital (SPV) Ltd. 6.722% (undated)3,7		1,150			1,062
Vale Overseas Ltd. 6.25% 2017		800			806
Freeport-McMoRan Copper & Gold Inc. 8.25% 2015		225			239
Freeport-McMoRan Copper & Gold Inc. 8.375% 2017		395			425
					2,532
ENERGY — 0.12%
Pemex Project Funding Master Trust 6.625% 2035		1,800			1,906
Gaz Capital SA 6.51% 20223		600			572
					2,478
UTILITIES — 0.10%
AES Panamá, SA 6.35% 20163		1,100			1,087
Enersis SA 7.375% 2014		650			697
AES Gener SA 7.50% 2014		400			423
					2,207
FINANCIALS — 0.04%
Kazkommerts International BV 8.00% 2015		1,000			835
TELECOMMUNICATION SERVICES — 0.04%
Orascom Telecom 7.875% 20143		850			807
INDUSTRIALS — 0.02%
TFM, SA de CV 9.375% 2012		400			421
Total bonds, notes & other debt instruments (cost: $112,103,000)					122,388
Short-term securities — 12.88%
Toronto-Dominion Holdings USA Inc. 5.055% due 1/16/20083		26,600			26,540
American Honda Finance Corp. 4.49%–4.51% due 1/11–1/25/2008		26,300			26,228
GlaxoSmithKline Finance PLC 4.55% due 1/18/20083		22,600			22,548
Fannie Mae 4.25%–4.29% due 2/8–2/22/2008		21,900			21,777
Royal Bank of Scotland PLC 5.06% due 2/4/2008		19,800			19,702
Federal Home Loan Bank 4.26%–4.30% due 1/11–2/6/2008		19,300			19,227
National Australia Bank Ltd. 5.01% due 1/14/20083		18,700			18,664
Export Development Canada 4.30% due 2/8/2008		18,700			18,596
Eksportfinans ASA 4.59% due 2/11/20083		16,100			16,006
Dexia Delaware LLC 4.95% due 2/8/2008		14,600			14,522
General Electric Capital Corp. 4.15% due 1/2/2008		14,500			14,497
BNP Paribas Finance Inc. 5.138% due 1/7/2008		13,700			13,686
Electricité de France 4.82% due 1/8/2008		11,300			11,288
Lloyds Bank PLC 4.67% due 1/16/2008		10,000			9,979
BASF AG 4.35% due 2/12/20083		8,200			8,157
BP Capital Markets PLC 4.20% due 2/14/20083,9		8,000			7,958
HBOS Treasury Services PLC 4.72% due 1/22/2008		5,800			5,782
Total short-term securities (cost: $275,183,000)					275,157
Total investment securities (cost: $1,526,476,000)					2,134,771
Other assets less liabilities					1,200
Net assets				$	2,135,971

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

1 Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities, including those in “Miscellaneous,” was $1,209,833,000.

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

3 Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $149,889,000, which represented 7.02% of the net assets of the fund.

4 Purchased in a transaction exempt from registration under the Securities Act of 1933. This security (acquired 3/8/2007 at a cost of $6,250,000) may be subject to legal or contractual restrictions on resale.

5 Index-linked bond whose principal amount moves with a government retail price index.

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

7 Coupon rate may change periodically.

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

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

ADR = American Depositary Receipts

GDR = Global Depositary Receipts

Blue Chip Income and Growth Fund

Investment portfolio

December 31, 2007

Common stocks — 92.51%	Shares			Market value (000)
INFORMATION TECHNOLOGY — 19.54%
Microsoft Corp.		5,250,000		$	186,900
Hewlett-Packard Co.		3,175,000			160,274
International Business Machines Corp.		1,000,000			108,100
Nokia Corp. (ADR)		2,675,000			102,693
Oracle Corp.1		4,200,000			94,836
Intel Corp.		1,800,000			47,988
Cisco Systems, Inc.1		1,650,000			44,665
Texas Instruments Inc.		882,116			29,463
Linear Technology Corp.		550,000			17,506
Yahoo! Inc.1		600,000			13,956
Automatic Data Processing, Inc.		250,000			11,133
Applied Materials, Inc.		600,000			10,656
Maxim Integrated Products, Inc.		400,000			10,592
QUALCOMM Inc.		200,000			7,870
Taiwan Semiconductor Manufacturing Co. Ltd. (ADR)		770,000			7,669
Tyco Electronics Ltd.		175,000			6,498
Analog Devices, Inc.		70,000			2,219
					863,018
FINANCIALS — 15.85%
Bank of America Corp.		3,334,200			137,569
Citigroup Inc.		4,610,000			135,718
Fannie Mae		2,500,800			99,982
American International Group, Inc.		1,540,000			89,782
JPMorgan Chase & Co.		1,800,000			78,570
Capital One Financial Corp.		875,000			41,353
Freddie Mac		1,169,100			39,831
Bank of New York Mellon Corp.		415,096			20,240
HSBC Holdings PLC (ADR)		225,000			18,835
Wachovia Corp.		400,000			15,212
Banco Santander, SA (ADR)		600,000			12,924
Washington Mutual, Inc.		750,000			10,208
					700,224
HEALTH CARE — 15.31%
Aetna Inc.		2,500,000			144,325
UnitedHealth Group Inc.		1,900,000			110,580
Eli Lilly and Co.		1,125,000			60,064
Merck & Co., Inc.		1,000,000			58,110
Abbott Laboratories		1,000,000			56,150
Amgen Inc.1		1,075,000			49,923
Cardinal Health, Inc.		810,000			46,777
Pfizer Inc		1,900,000			43,187
AstraZeneca PLC (ADR)		975,000			41,749
Bristol-Myers Squibb Co.		1,125,000			29,835
Medtronic, Inc.		550,000			27,649
Covidien Ltd.		175,000			7,751
					676,100
INDUSTRIALS — 10.72%
General Electric Co.		5,500,000			203,885
United Technologies Corp.		760,000			58,170
United Parcel Service, Inc., Class B		750,000			53,040
Illinois Tool Works Inc.		650,000			34,801
Norfolk Southern Corp.		592,800			29,901
Emerson Electric Co.		500,000			28,330
Avery Dennison Corp.		350,000			18,599
Waste Management, Inc.		500,000			16,335
Southwest Airlines Co.		1,000,000			12,200
Pitney Bowes Inc.		300,000			11,412
Tyco International Ltd.		175,000			6,939
					473,612
CONSUMER STAPLES — 9.75%
Wal-Mart Stores, Inc.		3,600,000			171,108
Walgreen Co.		2,055,000			78,254
PepsiCo, Inc.		650,000			49,335
Kimberly-Clark Corp.		555,000			38,484
Kellogg Co.		592,000			31,039
ConAgra Foods, Inc.		1,200,000			28,548
Avon Products, Inc.		400,000			15,812
General Mills, Inc.		250,000			14,250
H.J. Heinz Co.		80,000			3,734
					430,564
CONSUMER DISCRETIONARY — 8.55%
Lowe’s Companies, Inc.		6,740,000			152,459
Target Corp.		1,100,000			55,000
Harley-Davidson, Inc.		860,000			40,171
Leggett & Platt, Inc.		2,000,000			34,880
Carnival Corp., units		650,000			28,918
Mattel, Inc.		1,150,000			21,896
Royal Caribbean Cruises Ltd.		500,000			21,220
Time Warner Inc.		900,000			14,859
Home Depot, Inc.		300,000			8,082
					377,485
ENERGY — 5.70%
Schlumberger Ltd.		1,140,000			112,142
Royal Dutch Shell PLC, Class A (ADR)		500,000			42,100
ConocoPhillips		300,000			26,490
Marathon Oil Corp.		332,700			20,248
Exxon Mobil Corp.		200,000			18,738
EOG Resources, Inc.		200,000			17,850
Devon Energy Corp.		120,000			10,669
Spectra Energy Corp		130,000			3,357
					251,594
TELECOMMUNICATION SERVICES — 3.47%
AT&T Inc.		2,581,250			107,277
Embarq Corp.		390,000			19,317
Sprint Nextel Corp., Series 1		1,350,000			17,725
Verizon Communications Inc.		200,000			8,738
					153,057
MATERIALS — 0.99%
Air Products and Chemicals, Inc.		200,000			19,726
E.I. du Pont de Nemours and Co.		350,000			15,432
Newmont Mining Corp.		180,000			8,789
					43,947
UTILITIES — 0.90%
FPL Group, Inc.		400,000			27,112
Xcel Energy Inc.		250,000			5,642
Duke Energy Corp.		260,000			5,244
FirstEnergy Corp.		25,901			1,874
					39,872
MISCELLANEOUS — 1.73%
Other common stocks in initial period of acquisition					76,565
Total common stocks (cost: $3,600,908,000)					4,086,038
Convertible securities — 0.12%
MISCELLANEOUS — 0.12%
Other convertible securities in initial period of acquisition					5,520
Total convertible securities (cost: $5,843,000)					5,520
	Principal amount
Short-term securities — 7.30%		(000	)
Procter & Gamble International Funding S.C.A. 4.22%–4.76% due 1/14–1/25/20082	$	51,000			50,881
Federal Home Loan Bank 3.15%–4.29% due 1/2–2/15/2008		46,700			46,584
Coca-Cola Co. 4.18%–4.52% due 1/8–3/7/20082		29,500			29,320
NetJets Inc. 4.22%–4.47% due 1/9–1/11/20082		26,900			26,869
Becton, Dickinson and Co. 4.48%–4.52% due 1/10–1/24/2008		22,500			22,445
Variable Funding Capital Corp. 4.65% due 1/8/20082		20,000			19,977
Freddie Mac 4.25% due 1/22/2008		18,500			18,452
Medtronic Inc. 4.22% due 1/11/20082		14,100			14,082
Brown-Forman Corp. 4.27% due 1/11/20082		13,175			13,158
Paccar Financial Corp. 4.48%–4.49% due 2/7–2/15/2008		10,100			10,042
Wells Fargo & Co. 4.30% due 1/18/2008		10,000			9,979
Eaton Corp. 4.25% due 2/25/20082		9,000			8,933
Johnson & Johnson 4.20% due 1/10/20082		8,400			8,390
Fannie Mae 4.22% due 1/23/2008		8,100			8,078
United Parcel Service Inc. 4.15% due 3/11/20082		7,500			7,431
Private Export Funding Corp. 4.21% due 3/25/20082		7,000			6,922
Tennessee Valley Authority 4.22% due 1/3/2008		5,700			5,698
Kimberly-Clark Worldwide Inc. 4.48% due 1/10/20082		5,700			5,693
International Lease Finance Corp. 4.69% due 1/3/2008		5,100			5,098
John Deere Capital Corp. 4.50% due 1/22/20082		4,300			4,287
Total short-term securities (cost: $322,362,000)					322,319
Total investment securities (cost: $3,929,113,000)					4,413,877
Other assets less liabilities					3,030
Net assets				$	4,416,907

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

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

2 Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $195,943,000, which represented 4.44% of the net assets of the fund.

ADR = American Depositary Receipts

Global Growth and Income Fund

Investment portfolio

December 31, 2007

Common stocks — 77.05%	Shares			Market value (000)
FINANCIALS — 15.89%
Citigroup Inc.		1,050,000		$	30,912
Mitsubishi UFJ Financial Group, Inc.1		3,000,000			27,927
Sumitomo Mitsui Financial Group, Inc.1		3,750			27,908
AEON Credit Service (Asia) Co. Ltd.1		1,400,000			20,700
Berkshire Hathaway Inc., Class B2		3,720			17,618
Korea Exchange Bank1		1,025,000			15,843
Industrial and Commercial Bank of China Ltd., Class H1		18,910,000			13,441
Urban Corp.1		1,000,000			13,305
National Bank of Greece SA1		185,000			12,725
Banco Santander, SA1		570,000			12,296
Mizuho Financial Group, Inc.1		2,500			11,862
Grupo Financiero Banorte, SAB de CV, Series O		2,665,000			11,012
BOC Hong Kong (Holdings) Ltd.1		3,510,000			9,700
Macquarie International Infrastructure Fund Ltd.1		14,000,000			9,567
Wachovia Corp.		250,000			9,508
Cathay Financial Holding Co., Ltd.1		4,236,624			8,767
AXA SA1		213,222			8,477
Fairfax Financial Holdings Ltd.		27,000			7,807
Saizen Real Estate Investment Trust1,2		12,274,000			7,593
Fubon Financial Holding Co., Ltd.1		8,000,000			7,059
Westfield Group1		370,000			6,771
Allco Commercial REIT1		10,937,800			6,770
AEON Mall Co., Ltd.1		250,000			6,563
ING Groep NV, depository receipts1		160,000			6,236
FirstRand Ltd.1		1,650,000			4,805
Countrywide Financial Corp.		530,000			4,738
Onex Corp.		89,000			3,137
iStar Financial, Inc.		110,000			2,866
Fannie Mae		50,000			1,999
Cambridge Industrial Trust1		3,998,000			1,961
					329,873
MATERIALS — 13.81%
Yamana Gold Inc.		4,000,000			51,944
Newmont Mining Corp.		800,000			39,064
MeadWestvaco Corp.		1,150,000			35,995
Barrick Gold Corp.		650,000			27,333
Freeport-McMoRan Copper & Gold Inc.		250,000			25,610
Newcrest Mining Ltd.1		675,000			19,431
Evraz Group SA (GDR)1		220,000			17,040
Bayer AG, non-registered shares1		166,000			15,113
Impala Platinum Holdings Ltd.1		410,000			14,153
Anglo American PLC1		220,575			13,369
Sterlite Industries (India) Ltd.1,2		400,000			10,444
Gold Fields Ltd.1		500,000			7,176
Nitto Denko Corp.1		100,000			5,281
UPM-Kymmene Oyj1		218,200			4,365
Mondi PLC1		33,125			277
Mondi Ltd.1		13,250			125
					286,720
INFORMATION TECHNOLOGY — 12.86%
Microsoft Corp.		2,560,000			91,136
International Business Machines Corp.		425,000			45,943
Google Inc., Class A2		24,300			16,803
Yahoo! Inc.2		667,000			15,514
STMicroelectronics NV1		1,000,000			14,215
EMC Corp.2		747,000			13,842
Nokia Corp.1		353,400			13,587
Trend Micro Inc.1		329,000			11,795
Lite-On Technology Corp.1		6,000,749			10,401
High Tech Computer Corp.1		552,500			10,111
Cisco Systems, Inc.2		201,180			5,446
Hynix Semiconductor Inc.1,2		180,000			4,931
Tyco Electronics Ltd.		100,000			3,713
Hon Hai Precision Industry Co., Ltd.1		491,280			3,036
Taiwan Semiconductor Manufacturing Co. Ltd. (ADR)		270,103			2,690
Advanced Micro Devices, Inc.2		350,000			2,625
Quanta Computer Inc.1		902,996			1,277
					267,065
CONSUMER DISCRETIONARY — 7.93%
Saks Inc.2		1,200,000			24,912
Macquarie Communications Infrastructure Group1,3		2,000,000			9,489
Macquarie Communications Infrastructure Group1		1,554,291			7,375
McDonald’s Corp.		200,000			11,782
Toyota Motor Corp.1		192,000			10,336
Fiat Group Automobiles SpA1		375,000			9,621
Lowe’s Companies, Inc.		400,000			9,048
News Corp., Class A		425,000			8,708
Honda Motor Co., Ltd.1		231,000			7,638
NOK Corp.1		358,300			7,554
SEGA SAMMY HOLDINGS INC.1		600,000			7,492
Carphone Warehouse Group PLC1		1,060,000			7,206
Yue Yuen Industrial (Holdings) Ltd.1		2,000,000			7,154
Kohl’s Corp.2		150,000			6,870
Ford Motor Co.2		880,000			5,922
Virgin Media Inc.2		300,000			5,142
General Motors Corp.		205,000			5,102
Target Corp.		76,500			3,825
Haseko Corp.1,2		1,605,000			2,757
Time Warner Inc.		150,000			2,477
Industria de Diseno Textil, SA1		35,150			2,134
Pioneer Corp.1		133,000			1,198
Yamaha Corp.1		40,000			913
					164,655
INDUSTRIALS — 7.90%
Schneider Electric SA1		168,000			22,431
General Electric Co.		600,000			22,242
European Aeronautic Defence and Space Co. EADS NV1		700,000			22,189
ALSTOM SA1		100,000			21,219
Nippon Express Co., Ltd.1		3,000,000			15,342
Ryanair Holdings PLC (ADR)2		313,000			12,345
Enka Insaat ve Sanayi AS1		619,301			10,866
Siemens AG1		63,500			9,954
Outotec Oyj1		165,000			8,925
Rickmers Maritime1		8,750,000			6,974
Toll Holdings Ltd.1		600,000			6,002
Tyco International Ltd.		100,000			3,965
Asciano Ltd., units1		270,904			1,656
					164,110
TELECOMMUNICATION SERVICES — 6.52%
Vodafone Group PLC1		11,632,000			43,207
Vodafone Group PLC (ADR)		100,000			3,732
Koninklijke KPN NV1		1,000,000			18,059
Verizon Communications Inc.		400,000			17,476
Telekomunikacja Polska SA1		1,750,000			15,910
Hutchison Telecommunications International Ltd.1		9,000,000			13,533
Chunghwa Telecom Co., Ltd. (ADR)4		625,000			13,194
AT&T Inc.		150,000			6,234
France Télécom SA1		110,700			3,967
					135,312
CONSUMER STAPLES — 3.81%
Koninklijke Ahold NV1,2		1,380,000			19,134
Shoppers Drug Mart Corp.		306,500			16,446
Diageo PLC1		450,000			9,600
Tesco PLC1		805,000			7,576
Seven & I Holdings Co., Ltd.1		250,000			7,271
C&C Group PLC1		1,000,000			5,967
Altria Group, Inc.		50,000			3,779
AEON CO., LTD.1		230,000			3,358
Coca-Cola Co.		50,000			3,068
SABMiller PLC1		100,000			2,804
Scottish & Newcastle PLC1		4,900			72
					79,075
ENERGY — 3.65%
Oil and Gas Development Co. Ltd.1		11,576,000			22,439
OAO Gazprom (ADR)1		350,000			19,709
Saipem SpA, Class S1		392,000			15,562
Chevron Corp.		75,000			7,000
OAO TMK (GDR)1		86,500			3,886
OAO TMK (GDR)1,5		54,359			2,442
Royal Dutch Shell PLC, Class A (ADR)		55,000			4,631
					75,669
HEALTH CARE — 2.79%
Roche Holding AG1		75,850			13,049
Merck & Co., Inc.		210,000			12,203
Elan Corp., PLC (ADR)2		540,000			11,869
UnitedHealth Group Inc.		200,000			11,640
Novo Nordisk A/S, Class B1		140,000			9,130
					57,891
UTILITIES — 1.89%
SUEZ SA1		200,000			13,537
E.ON AG1		57,000			12,085
AES Corp.2		535,700			11,458
Hongkong Electric Holdings Ltd.1		200,000			1,146
CLP Holdings Ltd.1		150,000			1,020
					39,246
Total common stocks (cost: $1,505,280,000)					1,599,616
	Principal amount			Market value
Convertible securities — 0.23%		(000	)		(000	)
FINANCIALS — 0.23%
Countrywide Financial Corp., Series A, 1.74% convertible debentures 20375,6	$	6,000,000		$	4,709
Total convertible securities (cost: $5,311,000)					4,709
Bonds, notes & other debt instruments — 0.71%
BONDS & NOTES OF GOVERNMENTS OUTSIDE THE U.S. — 0.59%
Brazil (Federal Republic of) 10.00% 20141	BRL 9,200				4,545
Brazil (Federal Republic of) 10.00% 20171		16,500			7,818
					12,363
CONSUMER STAPLES — 0.12%
Spectrum Brands, Inc., Term Loan B, 8.896% 20136,7	$	2,411			2,344
Spectrum Brands, Inc., Term Loan B, Letter of Credit, 5.086% 20136,7		125			122
					2,466
Total bonds, notes & other debt instruments (cost: $15,786,000)					14,829
Short-term securities — 21.97%
Federal Home Loan Bank 4.20%–4.34% due 1/25–2/13/2008		39,800			39,619
Lloyds Bank PLC 4.67% due 1/16/2008		32,800			32,730
Fannie Mae 4.25%–4.29% due 2/8–2/22/2008		28,600			28,445
Dexia Delaware LLC 4.95% due 2/8/2008		25,100			24,965
American Honda Finance Corp. 4.48% due 2/4/2008		23,200			23,083
Freddie Mac 4.22%–4.25% due 1/24–1/30/2008		23,000			22,927
Eksportfinans ASA 4.59% due 2/11/20085		22,500			22,368
National Australia Funding (Delaware) Inc. 4.56% due 1/18/20085		20,700			20,653
Swedish Export Credit Corp. 4.77% due 1/17/2008		20,000			19,954
Royal Bank of Scotland PLC 4.70% due 2/20/2008		20,000			19,861
Calyon North America Inc. 5.09% due 1/8/2008		19,500			19,478
Unilever Capital Corp. 4.23% due 1/11/20085		19,100			19,075
GlaxoSmithKline Finance PLC 4.62%–4.65% due 2/1/20085		19,000			18,922
Toronto-Dominion Holdings USA Inc. 4.62% due 1/3/20085		17,700			17,693
Westpac Banking Corp. 4.68% due 1/25/20085		16,900			16,842
Jupiter Securitization Co., LLC 6.00% due 1/10/20085		16,000			15,973
International Bank for Reconstruction and Development 4.30% due 1/28/2008		15,300			15,249
General Electric Capital Corp. 4.15% due 1/2/2008		15,100			15,097
BNP Paribas Finance Inc. 5.138% due 1/7/2008		14,500			14,486
ING (U.S.) Funding LLC 5.15% due 1/9/2008		14,000			13,982
Barclays U.S. Funding Corp. 5.20% due 2/7/2008		13,300			13,227
Canadian Imperial Holdings Inc. 4.665% due 1/3/2008		10,000			9,996
BASF AG 4.35% due 2/12/20085		7,800			7,759
Toyota Motor Credit Corp. 4.49% due 3/19/2008		3,785			3,746
Total short-term securities (cost: $456,169,000)					456,130
Total investment securities (cost: $1,982,546,000)					2,075,284
Other assets less liabilities					829
Net assets				$	2,076,113

1 Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities was $899,654,000.

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

3 Purchased in a transaction exempt from registration under the Securities Act of 1933. This security (acquired 4/23/2007 at a cost of $10,154,000) may be subject to legal or contractual restrictions on resale.

4 This security has been authorized but has not yet been issued.

5 Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $146,436,000, which represented 7.05% of the net assets of the fund.

6 Coupon rate may change periodically.

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

ADR = American Depositary Receipts

GDR = Global Depositary Receipts

Growth-Income Fund

Investment portfolio

December 31, 2007

Common stocks — 89.74%	Shares			Market value (000)
INFORMATION TECHNOLOGY — 21.37%
Oracle Corp.1		38,805,000		$	876,217
Microsoft Corp.		18,705,000			665,898
Cisco Systems, Inc.1		16,840,000			455,859
Intel Corp.		16,175,000			431,226
International Business Machines Corp.		3,725,000			402,672
Nokia Corp.2		8,330,000			320,270
Nokia Corp. (ADR)		930,000			35,703
Hewlett-Packard Co.		7,050,000			355,884
Google Inc., Class A1		476,800			329,698
Yahoo! Inc.1		12,860,000			299,124
Flextronics International Ltd.1		22,585,336			272,379
Texas Instruments Inc.		4,600,000			153,640
Samsung Electronics Co., Ltd.2		245,000			144,040
Motorola, Inc.		8,612,500			138,144
Taiwan Semiconductor Manufacturing Co. Ltd.2		71,082,875			135,251
Linear Technology Corp.		3,500,000			111,405
Seagate Technology		3,900,000			99,450
Maxim Integrated Products, Inc.		3,389,000			89,741
Xilinx, Inc.		4,000,000			87,480
MEMC Electronic Materials, Inc.1		986,800			87,322
HOYA Corp.2		2,550,000			81,394
Symantec Corp.1		4,600,000			74,244
Micron Technology, Inc.1		9,600,000			69,600
Automatic Data Processing, Inc.		1,455,000			64,791
EMC Corp.1		3,469,600			64,292
Lexmark International, Inc., Class A1		1,800,000			62,748
Dell Inc.1		2,400,000			58,824
Analog Devices, Inc.		1,750,000			55,475
KLA-Tencor Corp.		1,000,000			48,160
Telefonaktiebolaget LM Ericsson, Class B2		20,000,000			46,766
Applied Materials, Inc.		2,000,000			35,520
SAP AG2		500,000			25,795
Microchip Technology Inc.		820,000			25,764
Tyco Electronics Ltd.		578,750			21,489
Advanced Micro Devices, Inc.1		2,000,000			15,000
Western Union Co.		400,000			9,712
Sanmina-SCI Corp.1		2,250,000			4,095
					6,255,072
FINANCIALS — 12.41%
American International Group, Inc.		9,800,000			571,340
Bank of America Corp.		12,075,000			498,214
Fannie Mae		10,588,500			423,328
Citigroup Inc.		14,365,000			422,905
JPMorgan Chase & Co.		4,147,900			181,056
HSBC Holdings PLC (ADR)		1,086,050			90,913
HSBC Holdings PLC (Hong Kong)2		5,350,000			89,455
Bank of New York Mellon Corp.		3,372,655			164,451
SLM Corp.		8,087,500			162,882
Capital One Financial Corp.		3,350,000			158,321
State Street Corp.		1,600,000			129,920
Freddie Mac		3,666,450			124,916
Genworth Financial, Inc., Class A		4,800,000			122,160
Banco Santander, SA2		3,750,000			80,897
Marsh & McLennan Companies, Inc.		2,955,000			78,219
Countrywide Financial Corp.		8,500,000			75,990
XL Capital Ltd., Class A		1,380,000			69,428
Wachovia Corp.		1,330,419			50,596
Washington Mutual, Inc.		2,440,550			33,216
Allstate Corp.		635,000			33,166
Wells Fargo & Co.		920,000			27,775
MGIC Investment Corp.		1,055,000			23,664
Credit Suisse Group2		295,454			17,742
					3,630,554
HEALTH CARE — 12.37%
Aetna Inc.		5,700,000			329,061
Abbott Laboratories		5,140,000			288,611
Roche Holding AG2		1,647,460			283,414
Cardinal Health, Inc.		4,450,000			256,988
Bristol-Myers Squibb Co.		9,260,000			245,575
Amgen Inc.1		4,662,200			216,513
Merck & Co., Inc.		3,500,000			203,385
Medtronic, Inc.		4,000,000			201,080
UnitedHealth Group Inc.		3,000,000			174,600
CIGNA Corp.		3,000,000			161,190
Schering-Plough Corp.		5,294,800			141,053
Novo Nordisk A/S, Class B2		2,000,000			130,430
Medco Health Solutions, Inc.1		1,268,341			128,610
Pfizer Inc		5,260,000			119,560
St. Jude Medical, Inc.1		2,860,000			116,230
Biogen Idec Inc.1		1,800,000			102,456
Eli Lilly and Co.		1,850,000			98,771
Genentech, Inc.1		1,410,000			94,569
WellPoint, Inc.1		1,000,000			87,730
Covidien Ltd.		1,786,325			79,116
Millennium Pharmaceuticals, Inc.1		5,000,000			74,900
AstraZeneca PLC (ADR)		678,400			29,049
AstraZeneca PLC (Sweden)2		242,000			10,328
Boston Scientific Corp.1		2,768,324			32,196
Johnson & Johnson		200,000			13,340
					3,618,755
CONSUMER DISCRETIONARY — 8.97%
Lowe’s Companies, Inc.		17,210,000			389,290
Time Warner Inc.		17,550,000			289,751
Target Corp.		5,760,700			288,035
Best Buy Co., Inc.		4,009,700			211,111
News Corp., Class A		9,515,200			194,966
Carnival Corp., units		3,906,300			173,791
Magna International Inc., Class A		1,878,400			151,080
Carnival PLC2		2,750,000			120,314
Royal Caribbean Cruises Ltd.		2,470,000			104,827
Vivendi SA2		2,300,000			104,651
Walt Disney Co.		3,000,000			96,840
D.R. Horton, Inc.		6,950,000			91,532
Harley-Davidson, Inc.		1,950,000			91,084
XM Satellite Radio Holdings Inc., Class A1		5,100,000			62,424
VF Corp.		800,000			54,928
Gentex Corp.		3,000,000			53,310
Mattel, Inc.		1,400,000			26,656
Ross Stores, Inc.		1,000,000			25,570
Expedia, Inc.1		786,100			24,856
SEGA SAMMY HOLDINGS INC.2		1,880,000			23,473
Kohl’s Corp.1		428,800			19,639
Home Depot, Inc.		600,000			16,164
Toyota Motor Corp.2		200,000			10,766
					2,625,058
INDUSTRIALS — 8.86%
General Electric Co.		16,050,000			594,973
United Technologies Corp.		4,075,000			311,900
United Parcel Service, Inc., Class B		3,800,000			268,736
Avery Dennison Corp.		3,635,000			193,164
General Dynamics Corp.		2,100,000			186,879
Norfolk Southern Corp.		3,326,500			167,789
3M Co.		1,700,000			143,344
Southwest Airlines Co.		10,945,000			133,529
FANUC LTD2		1,000,000			97,570
Tyco International Ltd.		2,236,325			88,670
Emerson Electric Co.		1,400,000			79,324
Waste Management, Inc.		2,150,000			70,241
Ingersoll-Rand Co. Ltd., Class A		1,426,200			66,275
Lockheed Martin Corp.		600,000			63,156
Pitney Bowes Inc.		1,552,200			59,046
Illinois Tool Works Inc.		780,800			41,804
Allied Waste Industries, Inc.1		2,536,800			27,956
					2,594,356
ENERGY — 8.59%
Schlumberger Ltd.		5,525,000			543,494
Royal Dutch Shell PLC, Class A (ADR)		2,000,000			168,400
Royal Dutch Shell PLC, Class B (ADR)		1,445,391			119,967
Royal Dutch Shell PLC, Class B2		139,816			5,828
Marathon Oil Corp.		4,125,000			251,048
Chevron Corp.		2,563,200			239,223
Halliburton Co.		6,030,000			228,597
Baker Hughes Inc.		2,565,000			208,022
ConocoPhillips		2,225,000			196,468
Murphy Oil Corp.		1,500,000			127,260
Devon Energy Corp.		1,340,000			119,139
Exxon Mobil Corp.		1,150,000			107,744
BP PLC2		7,500,000			91,413
EOG Resources, Inc.		700,000			62,475
Smith International, Inc.		500,000			36,925
Spectra Energy Corp		332,500			8,585
					2,514,588
CONSUMER STAPLES — 6.62%
PepsiCo, Inc.		4,850,000			368,115
Molson Coors Brewing Co., Class B		4,430,000			228,677
Altria Group, Inc.		2,725,000			205,956
Avon Products, Inc.		4,802,400			189,839
Wal-Mart Stores, Inc.		3,820,000			181,565
Walgreen Co.		3,318,800			126,380
L’Oréal SA2		780,000			111,181
Wm. Wrigley Jr. Co.		1,800,000			105,390
Nestlé SA2		230,000			105,254
Kraft Foods Inc., Class A		3,025,000			98,706
Sara Lee Corp.		5,000,000			80,300
Kellogg Co.		1,378,300			72,264
ConAgra Foods, Inc.		1,800,000			42,822
Kimberly-Clark Corp.		280,000			19,415
					1,935,864
MATERIALS — 3.57%
Air Products and Chemicals, Inc.		2,660,000			262,356
USX Corp.		1,225,000			148,115
Dow Chemical Co.		1,900,000			74,898
Mosaic Co.1		757,531			71,465
Monsanto Co.		633,000			70,700
Barrick Gold Corp.		1,590,000			66,859
International Paper Co.		1,950,000			63,141
E.I. du Pont de Nemours and Co.		1,300,000			57,317
Weyerhaeuser Co.		750,000			55,305
Newmont Mining Corp.		1,125,000			54,934
Syngenta AG2		175,000			44,345
JSC Uralkali (GDR)1,2		721,606			26,578
JSC Uralkali (GDR)1,2,3		250,003			9,208
Sealed Air Corp.		1,420,000			32,859
MeadWestvaco Corp.		258,200			8,082
					1,046,162
TELECOMMUNICATION SERVICES — 2.97%
Telephone and Data Systems, Inc.		2,850,700			178,454
Telephone and Data Systems, Inc., Special Common Shares		2,300,900			132,532
Sprint Nextel Corp., Series 1		15,800,000			207,454
Qwest Communications International Inc.1		25,710,200			180,228
AT&T Inc.		2,450,000			101,822
Verizon Communications Inc.		1,500,000			65,535
Embarq Corp.		57,500			2,848
					868,873
UTILITIES — 1.57%
Exelon Corp.		1,935,000			157,973
Dominion Resources, Inc.		2,500,000			118,625
Public Service Enterprise Group Inc.		800,000			78,592
FirstEnergy Corp.		650,000			47,021
FPL Group, Inc.		600,000			40,668
Duke Energy Corp.		665,000			13,413
American Electric Power Co., Inc.		67,900			3,162
					459,454
MISCELLANEOUS — 2.44%
Other common stocks in initial period of acquisition					713,815
Total common stocks (cost: $21,599,712,000)					26,262,551
	Shares or			Market value
Convertible securities — 0.18%	principal amount				(000	)
CONSUMER DISCRETIONARY — 0.09%
Ford Motor Co. 4.25% convertible notes 2036	$	25,000,000		$	24,969
MISCELLANEOUS — 0.09%
Other convertible securities in initial period of acquisition					27,672
Total convertible securities (cost: $57,872,000)					52,641
	Principal amount
Bonds, notes & other debt instruments — 0.04%		(000	)
CONSUMER DISCRETIONARY — 0.04%
XM Satellite Radio Inc. and XM Satellite Radio Holdings Inc. 9.75% 2014	$	13,300			12,934
Total bonds, notes & other debt instruments (cost: $12,602,000)					12,934
Short-term securities — 9.85%
Federal Home Loan Bank 4.15%–4.63% due 1/4–6/20/2008		361,157			359,386
Fannie Mae 4.13%–4.29% due 1/18–4/1/2008		220,850			219,289
United Parcel Service Inc. 4.15%–4.50% due 2/1–3/31/20083		205,900			204,149
Coca-Cola Co. 4.18%–4.52% due 1/8–3/7/20083		191,700			190,567
Freddie Mac 4.14%–4.25% due 1/30–5/5/2008		179,400			177,457
IBM International Group Capital LLC 4.35%–4.52% due 1/10–2/26/20083		97,000			96,656
IBM Capital Inc. 4.20% due 3/10/20083		52,700			52,222
IBM Corp. 4.21% due 1/15/20083		20,000			19,965
Procter & Gamble International Funding S.C.A. 4.22%–4.76% due 1/9–2/20/20083		137,100			136,588
Procter & Gamble Co. 4.47% due 2/8/20083		25,000			24,861
Bank of America Corp. 4.695%–5.00% due 1/16–2/26/2008		147,600			146,786
U.S. Treasury Bills 3.00%–4.021% due 1/3–6/19/2008		133,800			132,846
Jupiter Securitization Co., LLC 4.77%–6.00% due 1/4–1/10/20083		65,000			64,936
JPMorgan Chase & Co. 4.95% due 3/24/2008		50,000			49,447
Hewlett-Packard Co. 4.25%–4.55% due 1/8–1/16/20083		109,600			109,470
Edison Asset Securitization LLC 4.61%–4.91% due 1/23–1/24/20083		96,200			95,866
Wal-Mart Stores Inc. 4.68%–4.72% due 1/8–1/29/20083		70,000			69,797
International Lease Finance Corp. 4.69%–4.85% due 1/3–2/4/2008		67,100			66,955
Variable Funding Capital Corp. 4.65%–5.08% due 1/8–1/9/20083		65,000			64,921
CAFCO, LLC 4.71%–5.30% due 1/7–1/9/20083		60,900			60,831
Medtronic Inc. 4.25%–4.58% due 1/18–1/29/20083		55,600			55,421
NetJets Inc. 4.19%–4.47% due 1/11–2/25/20083		52,800			52,546
FCAR Owner Trust I 5.55% due 1/28/2008		50,000			49,784
Private Export Funding Corp. 4.42%–4.75% due 1/8–1/25/20083		46,600			46,493
Paccar Financial Corp. 4.73% due 1/10/2008		42,500			42,444
Honeywell International Inc. 4.45% due 1/24–1/29/20083		41,800			41,646
Walgreen & Co. 4.46% due 1/15/2008		40,000			39,926
Federal Farm Credit Banks 4.15%–4.21% due 1/2–1/8/2008		39,400			39,377
Harley-Davidson Funding Corp. 4.50%–4.68% due 1/8–2/27/20083		38,830			38,657
Prudential Funding, LLC 4.30% due 2/5/2008		28,025			27,904
Harvard University 4.40% due 2/13/2008		20,000			19,873
Anheuser-Busch Cos. Inc. 4.18% due 2/20/20083		20,000			19,861
Becton, Dickinson and Co. 4.48% due 1/10/2008		17,500			17,478
E.I. duPont de Nemours and Co. 4.19% due 1/31/20083		15,600			15,544
Estée Lauder Companies Inc. 4.51% due 1/18/20083		15,000			14,966
Yale University 4.60% due 1/8/2008		11,000			10,989
Johnson & Johnson 4.20% due 1/10/20083		5,200			5,194
Total short-term securities (cost: $2,881,366,000)					2,881,098
Total investment securities (cost: $24,551,552,000)					29,209,224
Other assets less liabilities					56,591
Net assets				$	29,265,815

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

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

2 Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities, including those in “Miscellaneous,” was $2,237,377,000.

3 Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $1,490,365,000, which represented 5.09% of the net assets of the fund.

ADR = American Depositary Receipts

GDR = Global Depositary Receipts

Asset Allocation Fund

Investment portfolio

December 31, 2007

Common stocks — 63.68%	Shares			Market value  (000)
ENERGY — 10.85%
Suncor Energy Inc.		1,969,798		$	214,146
Schlumberger Ltd.		2,059,800			202,623
Chevron Corp.		1,584,328			147,865
Petro-Canada		2,150,000			115,341
Marathon Oil Corp.		1,200,000			73,032
Rosetta Resources Inc.1,2,3		2,970,000			58,895
Arch Coal, Inc.		1,000,000			44,930
Cameco Corp.		1,015,600			40,487
Pioneer Natural Resources Co.		580,000			28,327
CONSOL Energy Inc.		395,000			28,250
Murphy Oil Corp.		200,000			16,968
Baker Hughes Inc.		200,000			16,220
EOG Resources, Inc.		150,000			13,387
Energy XXI (Bermuda) Ltd.1,4,5		1,108,618			5,155
CNX Gas Corp.1,5		125,000			3,994
					1,009,620
INFORMATION TECHNOLOGY — 8.38%
Nokia Corp. (ADR)		3,360,000			128,990
Microsoft Corp.		3,050,000			108,580
International Business Machines Corp.		800,000			86,480
Cisco Systems, Inc.1		3,000,000			81,210
Hewlett-Packard Co.		1,500,000			75,720
Oracle Corp.1		3,000,000			67,740
Intel Corp.		2,500,000			66,650
Avnet, Inc.1		1,400,000			48,958
Yahoo! Inc.1		1,500,000			34,890
Kyocera Corp.4		380,000			33,254
Nortel Networks Corp.1		1,100,000			16,599
Google Inc., Class A1		20,000			13,830
VeriSign, Inc.1		350,000			13,163
DataPath, Inc.1,2,4		1,189,763			4,164
					780,228
HEALTH CARE — 8.22%
Medtronic, Inc.		2,250,000			113,107
Wyeth		2,100,000			92,799
Johnson & Johnson		1,300,000			86,710
United Therapeutics Corp.1		750,000			73,238
Abbott Laboratories		1,300,000			72,995
Endo Pharmaceuticals Holdings Inc.1		2,500,000			66,675
Eli Lilly and Co.		1,200,000			64,068
Bristol-Myers Squibb Co.		2,000,000			53,040
Roche Holding AG4		271,780			46,755
Amgen Inc.1		750,000			34,830
Shire PLC (ADR)		500,000			34,475
Schering-Plough Corp.		1,000,000			26,640
					765,332
FINANCIALS — 7.30%
Fannie Mae		5,120,000			204,698
JPMorgan Chase & Co.		1,500,000			65,475
Bank of New York Mellon Corp.		1,200,000			58,512
Bank of America Corp.		1,250,000			51,575
Citigroup Inc.		1,700,000			50,048
Freddie Mac		1,450,000			49,402
AMP Ltd.4		4,925,210			42,808
Allied Irish Banks, PLC4		1,815,000			41,646
T. Rowe Price Group, Inc.		600,000			36,528
Wells Fargo & Co.		1,000,000			30,190
Marshall & Ilsley Corp.		999,999			26,480
Berkshire Hathaway Inc., Class A1		120			16,992
XL Capital Ltd., Class A		100,000			5,031
					679,385
INDUSTRIALS — 6.16%
Boeing Co.		1,750,000			153,055
Deere & Co.		1,280,000			119,194
General Electric Co.		2,250,000			83,408
Raytheon Co.		1,040,000			63,128
Mitsubishi Corp.4		2,000,000			54,485
UAL Corp.1		1,002,469			35,748
ITT Corp.		300,000			19,812
AMR Corp.1		1,000,000			14,030
Grafton Group PLC, units4		1,760,000			13,811
FedEx Corp.		125,000			11,146
DigitalGlobe Inc.1,2,4		1,225,858			4,903
					572,720
CONSUMER DISCRETIONARY — 5.90%
Lowe’s Companies, Inc.		4,110,000			92,968
Best Buy Co., Inc.		1,705,350			89,787
Johnson Controls, Inc.		2,400,000			86,496
Target Corp.		1,150,000			57,500
Saks Inc.1		2,000,000			41,520
Kohl’s Corp.1		900,000			41,220
Pinnacle Entertainment, Inc.1		1,575,000			37,107
Fortune Brands Inc.		500,000			36,180
Penn National Gaming, Inc.1		495,000			29,477
Magna International Inc., Class A		320,000			25,738
Toyota Motor Corp.4		200,000			10,766
					548,759
MATERIALS — 5.24%
BHP Billiton Ltd.4		4,615,000			161,646
Newmont Mining Corp.		2,365,000			115,483
Rio Tinto PLC4		727,572			75,969
Alcoa Inc.		1,500,000			54,825
E.I. du Pont de Nemours and Co.		1,000,000			44,090
Weyerhaeuser Co.		480,000			35,395
					487,408
CONSUMER STAPLES — 3.98%
Altria Group, Inc.		2,300,000			173,834
Coca-Cola Co.		1,550,000			95,124
PepsiCo, Inc.		1,000,000			75,900
C&C Group PLC4		4,327,519			25,823
					370,681
TELECOMMUNICATION SERVICES — 3.74%
Sprint Nextel Corp., Series 1		11,100,000			145,743
Vodafone Group PLC4		20,000,000			74,289
Verizon Communications Inc.		1,200,000			52,428
Telephone and Data Systems, Inc., Special Common Shares		575,000			33,120
KDDI Corp.4		3,400			25,249
AT&T Inc.		400,000			16,624
American Tower Corp., Class A1		7,045			300
COLT Telecom Group SA1,4		51,200			167
					347,920
UTILITIES — 1.15%
Reliant Energy, Inc.1		3,250,000			85,280
KGen Power Corp.1,2,4		1,339,516			21,432
					106,712
MISCELLANEOUS — 2.76%
Other common stocks in initial period of acquisition					256,901
Total common stocks (cost: $4,699,189,000)					5,925,666
Preferred stocks — 0.13%
FINANCIALS — 0.13%
MUFG Capital Finance 1 Ltd. 6.346% noncumulative6		4,925,000			4,672
Sumitomo Mitsui Banking Corp. 6.078%5,6		2,600,000			2,408
Shinsei Finance II (Cayman) Ltd. 7.16% noncumulative5,6		1,755,000			1,486
National Bank of Canada, Series A, 8.35% exchangeable depositary shares		60,000			1,306
IBJ Preferred Capital Co. LLC, Series A, 8.79% noncumulative5,6		1,025,000			1,034
Fuji JGB Investment LLC, Series A, 9.87% noncumulative5,6		150,000			152
XL Capital Ltd., Series E, 6.50% (undated)6		1,000,000			876
Total preferred stocks (cost: $12,731,000)					11,934
Rights & warrants — 0.00%
TELECOMMUNICATION SERVICES — 0.00%
GT Group Telecom Inc., warrants, expire 20101,4,5		2,250			0
Total rights & warrants (cost: $117,000)					0
	Principal amount
Bonds, notes & other debt instruments — 21.70%		(000	)
MORTGAGE-BACKED OBLIGATIONS7— 6.25%
Fannie Mae 7.00% 2009	$	9			9
Fannie Mae 4.89% 2012		10,000			10,021
Fannie Mae 4.00% 2015		5,786			5,712
Fannie Mae 5.50% 2017		2,396			2,449
Fannie Mae 5.00% 2018		6,306			6,349
Fannie Mae 5.50% 2020		11,752			11,924
Fannie Mae 6.00% 2021		595			609
Fannie Mae 6.00% 2021		472			483
Fannie Mae, Series 2003-48, Class TJ, 4.50% 2022		4,387			4,319
Fannie Mae 6.00% 2026		3,766			3,836
Fannie Mae 5.50% 2033		8,988			8,992
Fannie Mae 5.50% 2033		5,459			5,460
Fannie Mae 4.50% 2035		18,226			17,271
Fannie Mae, Series 2006-43, Class JO, principal only, 0% 2036		907			686
Fannie Mae 6.00% 2036		18,954			19,253
Fannie Mae, Series 2006-49, Class PA, 6.00% 2036		3,206			3,301
Fannie Mae 5.50% 2037		17,272			17,247
Fannie Mae 6.00% 2037		42,841			43,515
Fannie Mae 6.00% 20374		4,736			4,759
Fannie Mae 6.50% 2037		2,187			2,229
Fannie Mae, Series 2001-T10, Class A-1, 7.00% 2041		774			808
Fannie Mae 7.00% 2047		4,238			4,358
Fannie Mae 7.00% 2047		1,260			1,296
Freddie Mac 6.50% 2016		800			824
Freddie Mac 5.00% 2018		2,204			2,214
Freddie Mac 6.00% 2026		21,263			21,669
Freddie Mac, Series T-041, Class 3-A, 7.50% 2032		801			849
Freddie Mac, Series 3233, Class PA, 6.00% 2036		5,881			6,059
Freddie Mac, Series 3312, Class PA, 5.50% 2037		5,853			5,893
Freddie Mac 6.00% 2037		29,375			29,818
Freddie Mac 6.00% 2037		1,437			1,458
Freddie Mac 6.00% 2038		23,000			23,334
Wells Fargo Mortgage-backed Securities Trust, Series 2003-13, Class A-1, 4.50% 2018		13,485			12,897
Wells Fargo Mortgage-backed Securities Trust, Series 2003-16, Class II-A-1, 4.50% 2018		3,432			3,281
Wells Fargo Mortgage-backed Securities Trust, Series 2006-1, Class A-3, 5.00% 2021		6,471			6,302
Wells Fargo Mortgage-backed Securities Trust, Series 2003-3, Class II-A-1, 5.25% 2033		6,213			6,102
Wells Fargo Mortgage-backed Securities Trust, Series 2006-AR15, Class A-1, 5.657% 20366		6,142			6,043
Countrywide Alternative Loan Trust, Series 2005-6CB, Class 2-A-1, 5.00% 2020		5,499			5,263
Countrywide Alternative Loan Trust, Series 2005-46CB, Class A-8, 5.50% 2035		9,466			9,438
Countrywide Alternative Loan Trust, Series 2005-50CB, Class 3-A-1, 6.00% 2035		4,043			3,926
Countrywide Alternative Loan Trust, Series 2007-HY4, Class 3-A-1, 5.876% 20476		15,187			14,780
Residential Accredit Loans, Inc., Series 2004-QS6, Class A-1, 5.00% 20194		3,377			3,328
Residential Accredit Loans, Inc., Series 2005-QR1, Class A, 6.00% 20344		7,518			7,292
Residential Accredit Loans, Inc., Series 2006-QA1, Class A-III-1, 6.25% 20366		4,861			4,813
Residential Accredit Loans, Inc., Series 2007-QS9, Class A-33, 6.50% 2037		3,008			3,020
Residential Accredit Loans, Inc., Series 2007-QS11, Class A-1, 7.00% 2037		3,923			3,946
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-4, Class 5-A-1, 5.922% 20366		13,557			13,453
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-2, Class 5-A-1, 6.00% 20366		6,122			6,010
Banc of America Commercial Mortgage Inc., Series 2004-5, Class A-3, 4.561% 2041		16,190			15,851
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CIBC12, Class A-3B, 5.317% 20376		12,000			12,035
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2006-LDP7, Class A-4, 5.875% 20456		2,625			2,721
CS First Boston Mortgage Securities Corp., Series 2005-7, Class III-A-1, 5.00% 20204		1,903			1,849
CS First Boston Mortgage Securities Corp., Series 2001-CKN5, Class A-4, 5.435% 2034		3,225			3,269
CS First Boston Mortgage Securities Corp., Series 2004-5, Class IV-A-1, 6.00% 2034		1,644			1,625
CS First Boston Mortgage Securities Corp., Series 2001-CF2, Class A-3, 6.238% 2034		135			135
CS First Boston Mortgage Securities Corp., Series 2001-CP4, Class A-4, 6.18% 2035		2,000			2,086
CS First Boston Mortgage Securities Corp., Series 2001-CK6, Class A-3, 6.387% 2036		5,000			5,219
Wachovia Bank Commercial Mortgage Trust, Series 2005-C17, Class A-4, 5.083% 20426		4,000			3,949
Wachovia Bank Commercial Mortgage Trust, Series 2005-C22, Class A-4, 5.266% 20446		10,000			9,924
Wells Fargo Alternative Loan Trust, Series 2007-PA3, Class III-A-1, 6.25% 2037		9,695			9,600
Wells Fargo Alternative Loan Trust, Series 2007-PA3, Class IV-A-1, 6.50% 2037		3,880			3,895
Bear Stearns Commercial Mortgage Securities Inc., Series 2005-PWR9, Class A-2, 4.735% 2042		5,910			5,872
Bear Stearns Commercial Mortgage Securities Inc., Series 2005-PWR9, Class A-3, 4.868% 2042		7,000			6,872
American Tower Trust I, Series 2007-1A, Class A-FX, 5.42% 20374,5		3,125			3,031
American Tower Trust I, Series 2007-1A, Class B, 5.537% 20374,5		2,125			2,037
American Tower Trust I, Series 2007-1A, Class D, 5.957% 20374,5		1,875			1,735
American Tower Trust I, Series 2007-1A, Class E, 6.249% 20374,5		2,725			2,510
American Tower Trust I, Series 2007-1A, Class F, 6.639% 20374,5		2,950			2,681
Bear Stearns Asset-backed Securities I Trust, Series 2005-AC3, Class II-A-1, 5.25% 2020		8,103			8,054
CHL Mortgage Pass-Through Trust, Series 2005-HYB8, Class 4-A-1, 5.617% 20356		6,696			6,474
CHL Mortgage Pass-Through Trust, Series 2006-HYB5, Class 3-A-1B, 5.928% 20366		750			738
Salomon Brothers Commercial Mortgage Trust, Series 2000-C3, Class B, 6.758% 2033		1,000			1,043
Salomon Brothers Commercial Mortgage Trust, Series 2001-C1, Class A-3, 6.428% 2035		5,000			5,217
Crown Castle Towers LLC, Series 2005-1, Class D, 5.612% 20355		3,800			3,764
Crown Castle Towers LLC, Series 2006-1, Class F, 6.650% 20364,5		1,800			1,721
Crown Castle Towers LLC, Series 2006-1, Class G, 6.795% 20364,5		700			662
Washington Mutual Mortgage, WMALT Series 2005-1, Class 5-A-1, 6.00% 2035		6,218			6,039
Merrill Lynch Mortgage Trust, Series 2002-MW1, Class A-3, 5.403% 2034		4,000			4,036
Merrill Lynch Mortgage Trust, Series 2005-LC1, Class A-2, 5.202% 20446		2,000			2,003
IndyMac INDX Mortgage Loan Trust, Series 2006-AR5, Class 2-A-1, 5.844% 20366		2,569			2,519
IndyMac INDX Mortgage Loan Trust, Series 2006-AR11, Class 6-A-1, 5.883% 20364,6		3,378			3,349
American Home Mortgage Assets Trust, Series 2007-3, Class II-2A-1, 6.25% 20376		5,908			5,859
Commercial Mortgage Trust, Series 2003-LNB1, Class A-2, 4.084% 2038		6,000			5,773
Tower Ventures, LLC, Series 2006-1, Class A-2, 5.45% 20364,5		4,000			3,981
Tower Ventures, LLC, Series 2006-1, Class F, 7.036% 20364,5		1,460			1,422
SBA CMBS Trust, Series 2005-1, Class B, 5.565% 20354,5		4,000			3,993
SBA CMBS Trust, Series 2006-1A, Class F, 6.709% 20364,5		335			316
SBA CMBS Trust, Series 2006-1A, Class G, 6.904% 20364,5		335			312
SBA CMBS Trust, Series 2006-1A, Class H, 7.389% 20364,5		335			316
SBA CMBS Trust, Series 2006-1A, Class J, 7.825% 20364,5		335			313
Citigroup-Deutsche Bank Commercial Mortgage Trust, Series 2006-CD3, Class A-5, 5.617% 2048		5,000			5,063
GE Commercial Mortgage Corp., Series 2005-C4, Class A-3A, 5.333% 20456		5,000			5,029
MASTR Alternative Loan Trust, Series 2004-2, Class 2-A-1, 6.00% 2034		3,975			3,861
GE Capital Commercial Mortgage Corp., Series 2002-1, Class A-3, 6.269% 2035		3,338			3,518
GSR Mortgage Loan Trust, Series 2004-6F, Class IVA-1, 5.00% 2019		1,677			1,633
GSR Mortgage Loan Trust, Series 2004-15F, Class 5A-1, 5.50% 2020		1,774			1,752
Residential Asset Securitization Trust, Series 2005-A8CB, Class A-11, 6.00% 2035		3,363			3,271
Lehman Mortgage Trust, Series 2007-7, Class 6-A4, 7.00% 20374		2,826			2,825
Greenwich Capital Commercial Funding Corp., Series 2002-C1, Class A-2, 4.112% 2017		2,675			2,639
Bear Stearns ARM Trust, Series 2003-9, Class III-A-2, 4.964% 20346		2,061			2,025
L.A. Arena Funding, LLC, Series 1, Class A, 7.656% 20265		1,770			1,836
Morgan Stanley Capital I, Inc., Series 1998-HF2, Class A-2, 6.48% 2030		1,771			1,774
Banc of America Mortgage Securities, Inc., Series 2003-G, Class 2-A-1, 4.088% 20336		1,291			1,301
GMAC Commercial Mortgage Securities, Inc., Series 1999-C3, Class C, 7.786% 2036		1,000			1,040
Chase Commercial Mortgage Securities Corp., Series 2000-1, Class A-2, 7.757% 2032		989			1,030
Citigroup Commercial Mortgage Trust, Series 2004-C2, Class A-1, 3.787% 2041		1,006			996
Structured Asset Securities Corp., Series 1998-RF2, Class A, 8.516% 20275,6		457			456
DLJ Mortgage Acceptance Corp., Series 1998-CF1, Class A-1B, 6.41% 2031		61			61
Government National Mortgage Assn. 8.50% 2021		44			49
					581,857
BONDS & NOTES OF U.S. GOVERNMENT & GOVERNMENT AGENCIES — 5.59%
U.S. Treasury 3.375% 2008		6,500			6,501
U.S. Treasury 3.625% 2009		7,000			7,054
U.S. Treasury 4.50% 2009		6,000			6,107
U.S. Treasury 3.875% 2010		164,000			167,549
U.S. Treasury 2.00% 20124,8		7,207			7,474
U.S. Treasury 4.875% 2012		91,000			96,510
U.S. Treasury 7.25% 2016		2,000			2,459
U.S. Treasury 9.25% 2016		2,000			2,731
U.S. Treasury 8.875% 2017		5,000			6,879
U.S. Treasury 7.875% 2021		12,000			16,138
U.S. Treasury 6.625% 2027		35,000			44,423
U.S. Treasury 5.25% 2029		5,125			5,641
U.S. Treasury 4.50% 2036		35,000			35,191
Fannie Mae 5.25% 2012		30,000			31,254
Fannie Mae 6.25% 2029		5,375			6,309
Fannie Mae 7.25% 2030		7,000			9,207
Freddie Mac 4.875% 2008		1,170			1,175
Freddie Mac 5.25% 2011		30,000			31,410
Federal Home Loan Bank 5.125% 2013		13,000			13,682
Federal Home Loan Bank 5.625% 2016		17,375			18,328
Federal Agricultural Mortgage Corp. 4.25% 2008		3,000			2,999
CoBank ACB 5.591% 20224,5,6		1,750			1,579
					520,600
FINANCIALS — 2.06%
Citigroup Inc. 6.125% 2017		3,000			3,087
Citigroup Capital XXI 8.30% 2057		5,825			6,100
Washington Mutual, Inc. 5.25% 2017		2,000			1,671
Washington Mutual Preferred Funding I Ltd., Series A-1, 6.534% (undated)4,5,6		5,100			2,958
Washington Mutual Preferred Funding III Ltd. 6.895% (undated)5,6		7,100			4,193
Lazard Group LLC 7.125% 2015		4,880			4,973
Lazard Group LLC 6.85% 2017		2,275			2,251
Countrywide Home Loans, Inc., Series L, 3.25% 2008		725			655
Countrywide Home Loans, Inc., Series M, 4.125% 2009		2,840			2,084
Countrywide Financial Corp., Series A, 4.50% 2010		150			109
Countrywide Financial Corp., Series B, 5.80% 2012		5,700			4,168
Residential Capital Corp. 7.875% 2010		6,550			4,225
General Motors Acceptance Corp. 6.75% 2014		3,105			2,508
JPMorgan Chase & Co. 6.00% 2018		3,500			3,568
JPMorgan Chase Capital XVIII, Series R, 6.95% 2066		2,560			2,439
Lehman Brothers Holdings Inc. 6.50% 2017		1,250			1,267
Lehman Brothers Holdings Inc. 6.75% 2017		4,300			4,440
Prudential Financial, Inc., Series D, 5.50% 2016		2,000			1,987
Prudential Holdings, LLC, Series C, 8.695% 20235,7		3,000			3,711
TuranAlem Finance BV 8.50% 2015		4,750			4,192
TuranAlem Finance BV 8.25% 20375		1,750			1,496
HBOS PLC, Series B, 5.92% (undated)5,6		6,500			5,678
Royal Bank of Scotland Group PLC 6.99% (undated)5,6		5,500			5,493
UniCredito Italiano SpA 5.584% 20175		3,500			3,470
HVB Funding Trust III 9.00% 20315		1,600			1,811
Wachovia Bank NA 6.60% 2038		4,875			4,915
Barclays Bank PLC 7.434% (undated)5,6		4,640			4,830
Developers Diversified Realty Corp. 3.875% 2009		3,000			2,932
Developers Diversified Realty Corp. 5.50% 2015		2,000			1,871
International Lease Finance Corp. 4.35% 2008		1,500			1,490
American General Finance Corp., Series J, 6.50% 2017		3,000			2,930
SLM Corp., Series A, 5.00% 20154		5,000			4,250
BNP Paribas 7.195% (undated)5,6		4,000			3,956
BOI Capital Funding (No. 2) LP 5.571% (undated)5,6		4,500			3,893
Monumental Global Funding III 5.443% 20145,6		4,000			3,887
Hospitality Properties Trust 6.70% 2018		3,830			3,789
CIT Group Inc. 7.625% 2012		3,650			3,703
Merrill Lynch & Co., Inc., Series C, 6.40% 2017		1,000			1,018
Merrill Lynch & Co., Inc. 6.11% 2037		3,000			2,658
Realogy Corp., Term Loan B, 8.24% 20136,7		627			551
Realogy Corp., Term Loan B, Letter of Credit, 8.24% 20136,7		169			148
Realogy Corp. 10.50% 20145		2,275			1,706
Realogy Corp. 11.00% 20145,9		1,725			1,203
Charles Schwab Corp., Series A, 6.375% 2017		2,000			2,061
Schwab Capital Trust I 7.50% 2037		1,500			1,512
AXA SA 6.379% (undated)5,6		4,000			3,458
Goldman Sachs Group, Inc. 6.75% 2037		3,500			3,440
Westfield Capital Corp. Ltd., WT Finance (Australia) Pty Ltd. and WEA Finance LLC 4.375% 20105		3,500			3,417
iStar Financial, Inc. 6.05% 2015		4,000			3,394
E*TRADE Financial Corp. 8.00% 2011		1,575			1,374
E*TRADE Financial Corp. 7.875% 2015		2,560			1,965
Wells Fargo & Co. 5.625% 2017		3,250			3,258
QBE Capital Funding II LP 6.797% (undated)5,6		3,250			3,117
HSBK (Europe) BV 7.25% 20175		2,295			2,002
HSBK (Europe) BV 7.25% 2017		1,250			1,091
Allstate Corp., Series B, 6.125% 2067		3,070			2,967
Liberty Mutual Group Inc. 6.50% 20355		1,335			1,222
Liberty Mutual Group Inc. 7.50% 20365		1,750			1,713
ZFS Finance (USA) Trust V 6.50% 20675		3,000			2,774
Fifth Third Capital Trust IV 6.50% 2067		3,000			2,725
Ford Motor Credit Co. 7.375% 2009		650			612
Ford Motor Credit Co. 7.375% 2011		2,000			1,792
Kimco Realty Corp. 5.70% 2017		2,495			2,333
Capmark Financial Group, Inc. 5.875% 20125		2,600			2,060
Northern Rock PLC 5.60% (undated)4,5,6		200			115
Northern Rock PLC 6.594% (undated)4,5,6		3,200			1,840
Glen Meadow Pass Through Trust 6.505% 20674,5		2,000			1,917
Sumitomo Mitsui Banking Corp. 5.625% (undated)5,6		1,780			1,665
CNA Financial Corp. 7.25% 2023		1,550			1,596
PNC Funding Corp., Series II, 6.113% (undated)4,5,6		1,800			1,521
Simon Property Group, LP 5.875% 2017		1,500			1,440
Ambac Financial Group, Inc. 6.15% 2087		1,765			1,293
Rouse Co. 6.75% 20135		1,225			1,144
Assurant, Inc. 5.625% 2014		1,150			1,127
Brandywine Operating Partnership, LP 5.75% 2012		1,000			991
ProLogis 5.625% 2015		525			503
Plum Creek Timberlands, LP 5.875% 2015		125			123
					191,826
CONSUMER DISCRETIONARY — 1.90%
CCO Holdings, LLC and CCO Holdings Capital Corp. 8.75% 2013		5,825			5,592
Charter Communications Operating, LLC, Term Loan Facilities B, 6.99% 20146,7		3,050			2,855
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 8.375% 20145		1,150			1,118
CCH I, LLC and CCH I Capital Corp. 11.00% 2015		4,865			3,989
Univision Communications, Inc., Second Lien Term Loan, 7.345% 20096,7		1,000			980
Univision Communications, Inc., First Lien Term Loan B, 7.21% 20146,7		1,410			1,288
Univision Communications Inc. 9.75% 20155,9		8,680			7,953
CanWest Media Inc., Series B, 8.00% 2012		5,102			4,840
CanWest MediaWorks Inc. 9.25% 20155		500			492
TL Acquisitions, Inc., Term Loan B, 7.60% 20146,7		2,594			2,459
Thomson Learning 0%/13.25% 20155,10		940			748
Thomson Learning 10.50% 20155		2,150			2,077
Sun Media Corp. 7.625% 2013		2,000			1,958
Quebecor Media Inc. 7.75% 20165		2,075			2,002
Quebecor Media Inc. 7.75% 2016		1,325			1,279
Michaels Stores, Inc., Term Loan B, 7.625% 20136,7		995			918
Michaels Stores, Inc. 10.00% 2014		3,575			3,414
Michaels Stores, Inc. 11.375% 2016		850			784
Boyd Gaming Corp. 7.75% 2012		1,000			1,018
Boyd Gaming Corp. 6.75% 2014		1,100			1,053
Boyd Gaming Corp. 7.125% 2016		2,725			2,589
American Media Operations, Inc., Series B, 10.25% 2009		3,700			3,061
American Media Operations, Inc. 8.875% 2011		1,839			1,513
Hanesbrands Inc., Series B, 8.204% 20146		4,585			4,562
Comcast Corp. 6.95% 2037		4,000			4,331
Cox Communications, Inc. 7.875% 2009		4,000			4,186
Cablevision Systems Corp., Series B, 8.00% 2012		4,050			3,949
Tenneco Automotive Inc. 8.625% 2014		3,865			3,817
Ford Motor Co. 6.50% 2018		3,007			2,229
Ford Motor Co. 8.875% 2022		1,925			1,540
Pulte Homes, Inc. 4.875% 2009		3,000			2,793
Pulte Homes, Inc. 7.875% 2011		1,000			967
Centex Corp. 5.25% 2015		3,285			2,786
Centex Corp. 6.50% 2016		1,090			970
AOL Time Warner Inc. 7.625% 2031		3,125			3,468
Radio One, Inc., Series B, 8.875% 2011		2,810			2,638
Radio One, Inc. 6.375% 2013		950			790
Allison Transmission Holdings, Inc. 11.25% 20155,9		3,850			3,417
Dex Media, Inc., Series B, 8.00% 2013		1,750			1,654
R.H. Donnelley Corp. 8.875% 20175		1,795			1,669
Pinnacle Entertainment, Inc. 7.50% 20155		3,500			3,194
Seneca Gaming Corp. 7.25% 2012		2,100			2,126
Seneca Gaming Corp., Series B, 7.25% 2012		950			962
McGraw-Hill Companies, Inc. 5.375% 2012		3,000			3,058
Neiman Marcus Group, Inc. 9.00% 20159		2,900			3,005
Education Management LLC and Education Management Finance Corp. 8.75% 2014		450			454
Education Management LLC and Education Management Finance Corp. 10.25% 2016		2,345			2,427
Young Broadcasting Inc. 10.00% 2011		3,367			2,647
Riddell Bell Holdings Inc. 8.375% 2012		2,925			2,647
William Lyon Homes, Inc. 10.75% 2013		3,200			1,936
William Lyon Homes, Inc. 7.50% 2014		1,000			605
MGM MIRAGE 6.75% 2013		1,645			1,604
MGM MIRAGE 6.625% 2015		925			872
Sally Holdings LLC and Sally Capital Inc. 9.25% 2014		2,450			2,438
Idearc Inc. 8.00% 2016		2,625			2,422
Circus and Eldorado Joint Venture and Silver Legacy Resort Casino 10.125% 2012		2,295			2,381
AMC Entertainment Inc., Series B, 11.00% 2016		2,250			2,379
Morris Publishing Group, LLC and Morris Publishing Finance Co., Series B, 7.00% 2013		3,250			2,377
K. Hovnanian Enterprises, Inc. 8.875% 2012		1,470			845
K. Hovnanian Enterprises, Inc. 7.75% 2013		2,200			1,243
K. Hovnanian Enterprises, Inc. 6.50% 2014		250			176
NTL Cable PLC 8.75% 2014		2,250			2,244
WDAC Intermediate Corp. 8.375% 20145		1,675			1,675
WDAC Intermediate Corp. 8.50% 2014	€	375			515
LBI Media, Inc. 8.50% 20175	$	2,230			2,160
Vidéotron Ltée 6.875% 2014		1,225			1,205
Vidéotron Ltée 6.375% 2015		1,000			944
Atlantic Broadband Finance, LLC and Atlantic Broadband Finance, Inc. 9.375% 2014		2,300			2,139
Toys “R” Us, Inc. 7.625% 2011		2,505			2,123
DaimlerChrysler North America Holding Corp. 7.20% 2009		1,000			1,032
DaimlerChrysler North America Holding Corp. 7.75% 2011		1,000			1,075
Grupo Posadas, SA de CV 8.75% 20115		2,000			2,055
Mediacom Broadband LLC and Mediacom Broadband Corp. 8.50% 2015		2,250			2,005
Warner Music Group 7.375% 2014		2,500			1,938
Burlington Coat Factory Warehouse Corp. 11.125% 2014		2,250			1,817
Standard Pacific Corp. 5.125% 2009		1,002			797
Standard Pacific Corp. 6.50% 2010		923			632
Standard Pacific Corp. 6.25% 2014		60			40
Standard Pacific Corp. 7.00% 2015		310			206
iesy Repository GmbH 10.125% 2015	€	1,000			1,529
Toll Brothers Finance Corp. 5.95% 2013	$	500			462
Toll Brothers, Inc. 4.95% 2014		800			709
Toll Brothers, Inc. 5.15% 2015		315			286
Liberty Media Corp. 8.25% 2030		1,375			1,326
DaimlerChrysler Financial Services Americas LLC, First Lien Term Loan, 9.00% 20126,7		264			255
DaimlerChrysler Financial Services Americas LLC, Second Lien Term Loan, 11.50% 20136,7		1,050			933
News America Inc. 5.30% 2014		1,165			1,161
TRW Automotive Inc. 7.00% 20145		1,250			1,156
Claire’s Stores, Inc., Term Loan, 7.595% 20146,7		1,343			1,140
Local T.V. Finance LLC 9.25% 20155,9		1,170			1,123
Limited Brands, Inc. 6.90% 2017		640			619
Meritage Homes Corp. 6.25% 2015		825			578
Delphi Corp. 6.50% 201311		985			576
Carmike Cinemas, Inc., Term Loan B, 8.65% 20126,7		422			413
Cooper-Standard Automotive Inc. 7.00% 2012		375			327
Stoneridge, Inc. 11.50% 2012		2			2
					176,741
INDUSTRIALS — 0.94%
Nielsen Finance LLC, Term Loan B, 7.146% 20136,7		1,570			1,496
Nielsen Finance LLC and Nielsen Finance Co. 10.00% 2014		3,500			3,596
Nielsen Finance LLC and Nielsen Finance Co. 0%/12.50% 201610		6,050			4,280
DRS Technologies, Inc. 6.875% 2013		3,050			3,050
DRS Technologies, Inc. 6.625% 2016		850			844
DRS Technologies, Inc. 7.625% 2018		1,025			1,043
DAE Aviation Holdings, Inc. and Standard Aero Ltd., Term Loan B1, 8.58% 20146,7		852			847
DAE Aviation Holdings, Inc. and Standard Aero Ltd., Term Loan B2, 8.60% 20146,7		645			641
DAE Aviation Holdings, Inc. 11.25% 20155		3,200			3,392
Hawker Beechcraft 8.50% 20155		525			526
Hawker Beechcraft 8.875% 20155,9		3,865			3,836
Hawker Beechcraft 9.75% 20175		350			349
General Electric Co. 5.25% 2017		4,500			4,499
US Investigations Services 10.50% 20155		3,100			2,852
US Investigations Services 11.75% 20165		1,735			1,518
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class B, 7.156% 20115,7		3,566			3,745
ARAMARK Corp., Term Loan B, 6.83% 20146,7		2,446			2,332
ARAMARK Corp., Term Loan B, Letter of Credit, 6.83% 20146,7		175			167
ARAMARK Corp. 8.50% 2015		1,125			1,145
THL Buildco, Inc. 8.50% 2014		4,480			3,606
DynCorp International and DIV Capital Corp., Series A, 9.50% 2013		3,278			3,430
TransDigm Inc. 7.75% 2014		3,125			3,188
Northwest Airlines, Inc., Term Loan B, 8.33% 20136,7		1,030			959
Northwest Airlines, Inc., Term Loan A, 6.58% 20186,7		2,244			2,177
Raytheon Co. 4.85% 2011		3,000			3,010
Atlas Copco AB 5.60% 20175		2,750			2,756
Accuride Corp. 8.50% 2015		3,340			2,722
TFM, SA de CV 9.375% 2012		2,500			2,631
Allied Waste North America, Inc., Series B, 7.375% 2014		2,415			2,421
Hertz Corp. 10.50% 2016		2,125			2,210
Caterpillar Financial Services Corp., Series F, 4.85% 2012		2,125			2,131
Waste Management, Inc. 6.875% 2009		2,000			2,054
USG Corp. 6.30% 2016		2,000			1,810
Continental Airlines, Inc., Series 1997-4, Class A, 6.90% 20197		704			715
Continental Airlines, Inc., Series 2000-1, Class B, 8.388% 20227		1,070			1,065
Ashtead Group PLC 8.625% 20155		1,050			924
Ashtead Capital, Inc. 9.00% 20165		900			801
Navios Maritime Holdings Inc. 9.50% 2014		1,600			1,644
BNSF Funding Trust I 6.613% 2055		1,115			1,044
ACIH, Inc. 0%/11.50% 20125,10		1,815			1,044
United Air Lines, Inc., Series 2001-1, Class A-2, 6.201% 20107		109			109
United Air Lines, Inc., Series 2001-1, Class A-3, 6.602% 20157		251			251
United Air Lines, Inc., Series 1996-A2, 7.87% 20194,7,11		1,680			588
RSC Holdings III, LLC, Second Lien Term Loan B, 8.75% 20136,7		895			835
Union Pacific Corp. 5.75% 2017		805			803
Goodman Global Holdings, Inc., Series B, 7.875% 2012		765			792
Alion Science and Technology Corp. 10.25% 2015		840			720
American Airlines, Inc., Series 2001-1, Class B, 7.377% 20197		635			582
					87,180
TELECOMMUNICATION SERVICES — 0.86%
American Tower Corp. 7.125% 2012		7,840			8,095
American Tower Corp. 7.50% 2012		250			259
American Tower Corp. 7.00% 20175		3,875			3,914
SBC Communications Inc. 4.125% 2009		2,250			2,237
BellSouth Corp. 4.20% 2009		3,000			2,983
SBC Communications Inc. 5.10% 2014		1,125			1,115
AT&T Corp 8.00% 2031		2,000			2,463
Nextel Communications, Inc., Series F, 5.95% 2014		2,800			2,635
Sprint Capital Corp. 6.875% 2028		2,225			2,116
Sprint Capital Corp. 8.75% 2032		2,500			2,826
Centennial Communications Corp. and Centennial Cellular Operating Co. LLC 10.125% 2013		1,475			1,556
Centennial Communications Corp. 10.981% 20136		1,000			1,028
Centennial Communications Corp., Centennial Cellular Operating Co. LLC and
Centennial Puerto Rico Operations Corp. 8.125% 2014		3,600			3,564
Triton PCS, Inc. 8.50% 2013		5,800			6,032
Rural Cellular Corp. 10.661% 20126		1,300			1,333
Rural Cellular Corp. 8.124% 20136		4,250			4,335
Verizon Communications Inc. 5.50% 2017		5,050			5,083
Telecom Italia Capital SA 7.20% 2036		4,000			4,424
Intelsat (Bermuda), Ltd. 8.25% 2013		1,855			1,874
Intelsat Corp. 9.00% 2016		1,750			1,772
British Telecommunications PLC 5.95% 2018		3,500			3,534
Vodafone Group PLC 6.15% 2037		3,500			3,468
Hawaiian Telcom Communications, Inc. 9.75% 2013		2,545			2,539
Hawaiian Telcom Communications, Inc. 10.318% 20136		175			177
Hawaiian Telcom Communications, Inc., Term Loan C, 7.08% 20146,7		607			575
Windstream Corp. 8.125% 2013		2,225			2,314
Windstream Corp. 8.625% 2016		150			158
Level 3 Financing, Inc. 9.25% 2014		2,625			2,389
Millicom International Cellular SA 10.00% 2013		2,010			2,151
Cricket Communications, Inc. 9.375% 2014		1,710			1,612
MetroPCS Wireless, Inc. 9.25% 2014		1,500			1,418
					79,979
ASSET-BACKED OBLIGATIONS7— 0.78%
Advanta Business Card Master Trust, Series 2005-A2, Class A-2, 5.079% 20136		9,860			9,823
Rental Car Finance Corp., Series 2005-1, Class A-2, XLCA insured, 4.59% 20115		6,860			6,845
Washington Mutual Master Note Trust, Series 2007-A4A, Class A-4, 5.20% 20144,5		6,600			6,596
GMAC Mortgage Loan Trust, Series 2006-HE3, Class A-5, FGIC insured, 5.809% 20364,6		2,000			1,500
GMAC Mortgage Loan Trust, Series 2007-HE2, Class A-3, FGIC insured, 6.193% 20374,6		4,250			3,798
AmeriCredit Automobile Receivables Trust, Series 2007-C-M, Class A-4-A, MBIA insured, 5.55% 20144		2,500			2,406
AmeriCredit Automobile Receivables Trust, Series 2007-D-F, Class A-4-A, FSA insured, 5.56% 2014		2,750			2,769
Ameriquest Mortgage Securities Inc., Series 2003-12, Class M-1, 5.615% 20344,6		5,000			4,500
New Century Home Equity Loan Trust, Series 2006-2, Class A-2-b, 5.025% 20366		4,000			3,739
Drive Auto Receivables Trust, Series 2006-2, Class A-3, MBIA insured, 5.33% 20145		3,250			3,198
Prestige Auto Receivables Trust, Series 2007-1, Class A-3, FSA insured, 5.58% 20145		3,000			3,043
GE SeaCo Finance SRL, Series 2004-1, Class A, AMBAC insured, 5.328% 20194,5,6		3,167			3,024
CWABS Asset-backed Certificates Trust, Series 2006-14, Class 2-A-2, 5.015% 20374,6		2,875			2,839
CarMax Auto Owner Trust, Series 2007-2, Class A-3, 5.23% 2011		2,750			2,743
Home Equity Mortgage Trust, Series 2006-3, Class A-1, 5.594% 20364,6		996			647
Home Equity Mortgage Trust, Series 2006-5, Class A-1, 5.50% 20374,6		2,774			1,581
Residential Funding Mortgage Securities II, Inc., Series 2007-HSA2, Class A-1F, MBIA insured, 8.47% 20376		1,861			1,853
RAMP Trust, Series 2003-RS11, Class A-I-7, 4.828% 20334		1,942			1,757
Securitized Asset-backed Receivables LLC Trust, Series 2006-NC3, Class A-2B, 5.015% 20366		2,065			1,744
Origen Manufactured Housing Contract Trust, Series 2004-B, Class A-4, 5.46% 2035		1,800			1,621
First Investors Auto Owner Trust, Series 2005-A, Class A-2, MBIA insured, 4.23% 20125		1,498			1,486
PG&E Energy Recovery Funding LLC, Series 2005-1, Class A-2, 3.87% 2011		1,472			1,463
CPS Auto Receivables Trust, Series 2004-B, Class A-2, XLCA insured, 3.56% 20115		738			732
CPS Auto Receivables Trust, Series 2006-A, Class 1-A-4, FSA insured, 5.33% 20125		700			707
MASTR Asset-backed Securities Trust, Series 2006-AB1, Class A-4, 5.719% 20366		750			679
GSAA Home Equity Trust, Series 2006-7, Class AF-5A, 6.205% 20464,6		750			673
Impac CMB Grantor Trust, Series 2004-6, Class 1-A-1, 5.265% 20346		381			368
					72,134
ENERGY — 0.73%
Williams Partners L.P. and Williams Partners Finance Corp. 7.25% 2017		675			699
Transcontinental Gas Pipe Line Corp. 7.25% 2026		1,575			1,681
Williams Companies, Inc. 8.75% 2032		8,695			10,673
Enterprise Products Operating LP 6.875% 2033		4,025			4,218
Enterprise Products Operating LP 8.375% 2066		235			241
Enterprise Products Operating LP 7.034% 2068		5,440			4,940
Kinder Morgan Energy Partners LP 6.00% 2017		6,285			6,296
Canadian Natural Resources Ltd. 5.70% 2017		6,000			5,974
Ras Laffan Liquefied Natural Gas III 5.838% 20275,7		5,000			4,733
K N Energy, Inc. 7.25% 2028		4,450			4,198
Husky Energy Inc. 6.80% 2037		3,375			3,559
Gaz Capital SA, Series 9, 6.51% 2022		3,625			3,455
Drummond Co., Inc. 7.375% 20165		3,600			3,357
Petroplus Finance Ltd. 6.75% 20145		1,750			1,638
Petroplus Finance Ltd. 7.00% 20175		1,550			1,426
TransCanada PipeLines Ltd. 6.35% 2067		3,230			3,033
EOG Resources, Inc. 5.875% 2017		2,125			2,183
Overseas Shipholding Group, Inc. 8.25% 2013		2,125			2,168
TEPPCO Partners LP 7.00% 2067		1,400			1,283
Newfield Exploration Co. 6.625% 2014		1,225			1,219
International Coal Group, Inc. 10.25% 2014		1,250			1,200
					68,174
HEALTH CARE — 0.59%
Tenet Healthcare Corp. 6.375% 2011		2,185			1,999
Tenet Healthcare Corp. 7.375% 2013		2,090			1,839
Tenet Healthcare Corp. 9.875% 2014		2,550			2,442
Tenet Healthcare Corp. 9.25% 2015		2,265			2,106
Cardinal Health, Inc. 6.30% 20165		7,250			7,443
HealthSouth Corp. 10.75% 2016		5,750			6,038
Bausch & Lomb Inc. 9.875% 20155		5,475			5,571
VWR International, Inc. 10.25% 20155,9		4,025			3,854
HCA Inc., Term Loan B, 7.09% 20136,7		2,624			2,528
HCA Inc. 9.625% 20169		875			928
PTS Acquisition Corp. 9.50% 20155,9		3,460			3,226
AstraZeneca PLC 5.40% 2012		2,750			2,846
Warner Chilcott Corp. 8.75% 2015		2,496			2,583
Team Finance LLC and Health Finance Corp. 11.25% 2013		2,300			2,450
Hospira, Inc. 5.55% 2012		2,395			2,438
Mylan Inc., Term Loan B, 8.313% 20146,7		1,875			1,859
AMR HoldCo, Inc. and EmCare HoldCo, Inc. 10.00% 2015		1,705			1,807
Viant Holdings Inc. 10.125% 20175		1,621			1,491
Surgical Care Affiliates, Inc. 8.875% 20155,9		800			732
Accellent Inc. 10.50% 2013		565			477
					54,657
INFORMATION TECHNOLOGY — 0.56%
NXP BV and NXP Funding LLC 7.993% 20136		600			554
NXP BV and NXP Funding LLC 7.875% 2014		1,650			1,576
NXP BV and NXP Funding LLC 9.50% 2015		6,665			6,123
First Data Corp., Term Loan B2, 7.634% 20146,7		5,486			5,222
Sanmina-SCI Corp. 8.125% 2016		5,500			4,902
Electronic Data Systems Corp., Series B, 6.50% 2013		3,500			3,543
Electronic Data Systems Corp. 7.45% 2029		1,135			1,168
Hughes Communications, Inc. 9.50% 2014		4,550			4,630
Ceridian Corp. 11.25% 20155		3,900			3,627
SunGard Data Systems Inc. 9.125% 2013		3,380			3,456
Freescale Semiconductor, Inc. 9.125% 20149		3,975			3,399
Sensata Technologies BV 8.00% 2014		3,010			2,844
Serena Software, Inc. 10.375% 2016		2,730			2,703
Celestica Inc. 7.875% 2011		1,655			1,601
Celestica Inc. 7.625% 2013		1,145			1,073
Iron Mountain Inc. 7.75% 2015		1,590			1,626
Iron Mountain Inc. 6.625% 2016		980			932
Cisco Systems, Inc. 5.25% 2011		2,375			2,437
MagnaChip Semiconductor SA and MagnaChip Semiconductor Finance Co. 8.00% 2014		740			559
					51,975
UTILITIES — 0.45%
Edison Mission Energy 7.50% 2013		3,725			3,837
Edison Mission Energy 7.75% 2016		1,150			1,190
Midwest Generation, LLC, Series B, 8.56% 20167		3,214			3,431
Edison Mission Energy 7.00% 2017		600			593
Edison Mission Energy 7.20% 2019		650			642
Edison Mission Energy 7.625% 2027		2,325			2,197
Intergen Power 9.00% 20175		5,850			6,186
NRG Energy, Inc. 7.25% 2014		2,250			2,199
NRG Energy, Inc. 7.375% 2016		2,125			2,077
MidAmerican Energy Holdings Co. 6.50% 2037		3,000			3,143
Texas Competitive Electric Holding Co. LLC 10.25% 20155		1,775			1,766
Texas Competitive Electric Holding Co. LLC 10.25% 20155		1,025			1,020
Abu Dhabi National Energy Co. PJSC (TAQA) 5.875% 20165		2,500			2,452
Virginia Electric and Power Co., Series B, 5.95% 2017		1,750			1,807
Sierra Pacific Power Co., General and Refunding Mortgage Notes, Series H, 6.25% 2012		1,125			1,160
Sierra Pacific Resources 8.625% 2014		550			590
AES Corp. 9.375% 2010		112			118
AES Corp. 8.75% 20135		1,371			1,438
Pacific Gas and Electric Co., First Mortgage Bonds, 3.60% 2009		1,500			1,484
Scottish Power PLC 5.375% 2015		1,500			1,449
Appalachian Power Co., Series M, 5.55% 2011		1,375			1,392
Tri-State Generation and Transmission Assn. Inc., Pass Through Trust, Series 2003-A, 6.04% 20185,7		1,315			1,332
PSEG Energy Holdings Inc. 8.625% 2008		725			730
					42,233
MATERIALS — 0.44%
C8 Capital (SPV) Ltd. 6.64% (undated)5,6		2,000			1,902
C10 Capital (SPV) Ltd. 6.722% (undated)5,6		5,585			5,157
United States Steel Corp. 7.00% 2018		3,375			3,358
Jefferson Smurfit Corp. (U.S.) 8.25% 2012		910			901
Stone Container Corp. 8.375% 2012		500			499
Jefferson Smurfit Corp. (U.S.) 7.50% 2013		1,450			1,396
Berry Plastics Holding Corp. 10.25% 2016		3,175			2,794
Plastipak Holdings, Inc. 8.50% 20155		2,750			2,764
Nalco Co. 7.75% 2011		2,615			2,661
Freeport-McMoRan Copper & Gold Inc. 8.25% 2015		2,440			2,593
Metals USA Holdings Corp. 11.231% 20125,6,9		2,225			1,836
Metals USA, Inc. 11.125% 2015		700			728
AEP Industries Inc. 7.875% 2013		2,440			2,336
Building Materials Corp. of America 7.75% 2014		2,950			2,272
Georgia Gulf Corp. 9.50% 2014		2,330			1,870
Georgia Gulf Corp. 10.75% 2016		545			368
Boise Cascade, LLC and Boise Cascade Finance Corp. 7.125% 2014		2,180			2,120
Stora Enso Oyj 7.25% 20365		2,000			2,003
Georgia-Pacific Corp. 8.125% 2011		650			663
Georgia-Pacific Corp. 9.50% 2011		940			992
Rockwood Specialties Group, Inc. 7.50% 2014		1,165			1,159
Owens-Illinois, Inc. 7.35% 2008		750			754
					41,126
CONSUMER STAPLES — 0.39%
Constellation Brands, Inc. 8.375% 2014		1,275			1,285
Constellation Brands, Inc. 7.25% 20175		5,895			5,482
Yankee Candle Co., Inc., Series B, 8.50% 2015		2,425			2,246
Yankee Candle Co., Inc., Series B, 9.75% 2017		2,400			2,208
Stater Bros. Holdings Inc. 8.125% 2012		3,425			3,399
Albertson’s, Inc. 8.00% 2031		2,500			2,549
CVS Caremark Corp. 6.943% 20305,7		2,500			2,514
Vitamin Shoppe Industries Inc. 12.369% 20124,6		2,380			2,475
Kraft Foods Inc. 6.875% 2038		2,375			2,474
Dole Food Co., Inc. 7.25% 2010		1,125			1,029
Dole Food Co., Inc. 8.875% 2011		1,195			1,111
Rite Aid Corp. 6.125% 20085		2,125			2,077
JBS SA 10.50% 2016		2,025			1,969
Delhaize Group 6.50% 2017		1,750			1,793
Elizabeth Arden, Inc. 7.75% 2014		1,680			1,655
Duane Reade Inc. 9.75% 2011		1,445			1,311
Cervecería Nacional Dominicana, C. por A. 8.00% 20145		1,000			1,018
					36,595
BONDS & NOTES OF GOVERNMENTS OUTSIDE THE U.S. — 0.16%
United Mexican States Government, Series MI10, 9.50% 2014	MXN55,000				5,421
Turkey (Republic of) Treasury Bill 0% 20084	TRY1,875				1,476
Turkey (Republic of) 10.00% 20124,8		1,633			1,463
Turkey (Republic of) 16.00% 20124		1,650			1,404
Indonesia (Republic of) 11.00% 2020	IDR 8,750,000				970
Indonesia (Republic of) 12.80% 2021		10,405,000			1,290
Indonesia (Republic of) 12.90% 2022		2,241,000			279
Colombia (Republic of) Global 12.00% 2015	COP1,990,000				1,105
Colombia (Republic of) Global 9.85% 2027		1,300,000			645
Egypt (Arab Republic of) Treasury Bill 0% 20084	EGP2,900				524
					14,577
Total bonds, notes & other debt instruments (cost: $2,035,280,000)					2,019,654
	Principal amount			Market value
Short-term securities — 14.47%		(000	)		(000	)
Federal Home Loan Bank 4.20%–4.36% due 1/2–4/16/2008	$	122,300		$	121,926
Procter & Gamble International Funding S.C.A. 4.25%–4.50% due 1/15–3/7/20085		111,400			110,816
Paccar Financial Corp. 4.49%–4.70% due 1/18–2/7/2008		84,700			84,355
Coca-Cola Co. 4.46%–4.47% due 1/11–2/15/20085		84,200			83,941
Freddie Mac 4.25% due 1/31–2/8/2008		62,400			62,127
Honeywell International Inc. 4.42%–4.46% due 1/22–1/25/20085		54,850			54,678
Hewlett-Packard Co. 4.55% due 1/4/20085		50,000			49,975
United Parcel Service Inc. 4.17%–4.36% due 2/5–3/31/20085,12		48,100			47,681
Private Export Funding Corp. 4.50%–4.74% due 1/16–2/13/20085		47,700			47,499
International Lease Finance Corp. 4.38%–4.73% due 1/17–1/31/2008		47,200			47,044
Medtronic Inc. 4.22% due 1/15–1/22/20085		42,200			42,111
IBM Corp. 4.21%–4.44% due 1/16–1/29/20085		29,400			29,312
IBM International Group Capital LLC 4.67% due 1/18/20085		12,000			11,971
Fannie Mae 4.27% due 3/12/2008		40,900			40,580
HSBC Finance Corp. 4.63%–4.70% due 2/7–2/14/2008		39,200			38,981
Anheuser-Busch Cos. Inc. 4.18% due 1/31–2/1/20085		35,000			34,871
Caterpillar Financial Services Corp. 4.20%–4.47% due 1/24–2/20/2008		34,300			34,135
Union Bank of California, N.A. 4.70% due 1/7/2008		32,700			32,699
NetJets Inc. 4.22%–4.47% due 1/9–2/1/20085		30,300			30,198
Harley-Davidson Funding Corp. 4.45%–4.48% due 2/1–2/20/20085		29,800			29,622
Estée Lauder Companies Inc. 4.46%–4.47% due 1/14–1/29/20085		25,000			24,953
Walgreen & Co. 4.23% due 1/30/2008		25,000			24,912
Harvard University 4.10% due 2/12/2008		25,000			24,844
Eaton Corp. 4.25% due 2/27/20085		25,000			24,811
Wells Fargo & Co. 4.30% due 1/18/2008		24,600			24,547
Wal-Mart Stores Inc. 4.45% due 2/11/20085		22,950			22,815
E.I. duPont de Nemours and Co. 4.20% due 1/10/20085		22,100			22,074
Johnson & Johnson 4.15% due 1/24/20085		20,000			19,945
John Deere Capital Corp. 4.54% due 2/6/20085		20,000			19,894
Bank of America Corp. 4.695% due 2/25/2008		18,400			18,266
Brown-Forman Corp. 4.27% due 1/11/20085		15,000			14,980
General Electric Capital Corp. 4.15% due 1/2/2008		13,400			13,397
Becton, Dickinson and Co. 4.50% due 1/11/2008		12,900			12,882
Park Avenue Receivables Co., LLC 4.70% due 1/9/20085		12,679			12,663
Ciesco LLC 4.62% due 1/17/20085		11,500			11,472
Kimberly-Clark Worldwide Inc. 4.44% due 1/14/20085		10,000			9,983
Scripps (E.W.) Co. 4.77% due 1/15/20085		5,000			4,990
FCAR Owner Trust I 6.15% due 1/10/2008		4,900			4,892
Total short-term securities (cost: $1,347,076,000)					1,346,842
Total investment securities (cost: $8,094,393,000)					9,304,096
Other assets less liabilities					2,014
Net assets				$	9,306,110

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

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

2 Purchased in a transaction exempt from registration under the Securities Act of 1933. May be subject to legal or contractual restrictions on resale. Further details on these holdings appear below.

	Acquisition date(s)	Cost (000)		Market Value (000)		Percent of net assets
Rosetta Resources Inc.	6/28–11/9/2005	$	48,481	$	58,895		.63	%
KGen Power Corp.	12/19/2006		18,753		21,432		.23
DigitalGlobe Inc.	4/14/1999–7/31/2003		1,000		4,903		.05
DataPath, Inc.	6/23/2006		13,087		4,164		.05
Total restricted securities		$	81,321	$	89,394		.96	%

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

4 Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities, including those in “Miscellaneous,” was $850,964,000.

5 Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $1,042,572,000, which represented 11.20% of the net assets of the fund.

6 Coupon rate may change periodically.

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

8 Index-linked bond whose principal amount moves with a government retail price index.

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

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

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

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

ADR = American Depositary Receipts

Bond Fund

Investment portfolio

December 31, 2007

Bonds, notes & other debt instruments — 85.59%	Principal amount (000)			Market value (000)
MORTGAGE-BACKED OBLIGATIONS1— 19.94%
Freddie Mac 4.00% 2015	$	1,732		$	1,674
Freddie Mac 5.00% 2035		5,513			5,379
Freddie Mac 5.00% 2035		5,321			5,192
Freddie Mac 5.50% 2035		2,635			2,629
Freddie Mac 5.50% 2035		2,592			2,586
Freddie Mac, Series 3061, Class PN, 5.50% 2035		1,855			1,882
Freddie Mac, Series 3146, Class PO, principal only, 0% 20362		3,163			2,374
Freddie Mac, Series 3156, Class PO, principal only, 0% 20362		2,743			2,097
Freddie Mac, Series 3257, Class PA, 5.50% 2036		7,291			7,384
Freddie Mac 5.50% 2037		7,011			6,995
Freddie Mac, Series 3318, Class JT, 5.50% 2037		5,385			5,420
Freddie Mac 5.735% 20373		5,720			5,820
Freddie Mac 5.887% 20373		1,740			1,765
Freddie Mac 6.00% 2037		74,998			76,108
Freddie Mac 6.00% 2037		73,500			74,588
Freddie Mac 6.00% 2037		54,000			54,815
Freddie Mac 6.00% 2037		33,467			33,968
Freddie Mac 6.00% 2037		13,682			13,885
Freddie Mac 6.00% 2037		8,766			8,895
Freddie Mac 6.00% 2037		7,405			7,515
Freddie Mac 7.00% 2037		4,382			4,512
Freddie Mac 7.00% 2037		4,309			4,436
Freddie Mac 7.00% 2037		1,779			1,831
Freddie Mac 7.00% 2037		1,197			1,232
Freddie Mac 6.00% 2038		54,000			54,785
Fannie Mae, Series 2000-T5, Class B, 7.30% 2010		12,250			13,157
Fannie Mae, Series 2001-T11, Class B, 5.503% 2011		5,000			5,157
Fannie Mae, Series 2001-T6B, 6.088% 2011		6,750			7,064
Fannie Mae 10.00% 2018		9			10
Fannie Mae 5.50% 2021		1,667			1,691
Fannie Mae 6.00% 2021		737			754
Fannie Mae, Series 2001-4, Class GA, 10.244% 20253		125			140
Fannie Mae 6.00% 2026		3,345			3,407
Fannie Mae 5.50% 2027		10,544			10,586
Fannie Mae 6.00% 2027		22,417			22,833
Fannie Mae, Series 2002-W3, Class A-5, 7.50% 2028		157			167
Fannie Mae 7.50% 2031		26			28
Fannie Mae, Series 2001-20, Class C, 12.016% 20313		68			78
Fannie Mae 5.50% 2033		16,315			16,322
Fannie Mae 4.50% 2035		4,225			4,004
Fannie Mae 5.00% 2035		2,880			2,812
Fannie Mae 5.50% 2035		1,363			1,362
Fannie Mae 5.50% 2036		4,192			4,186
Fannie Mae 6.00% 2036		9,396			9,544
Fannie Mae 5.386% 20373		10,000			10,051
Fannie Mae 5.50% 2037		20,000			19,709
Fannie Mae 6.00% 2037		13,526			13,739
Fannie Mae 6.00% 2037		13,187			13,397
Fannie Mae 6.00% 2037		4,190			4,225
Fannie Mae 6.201% 20373		15,593			15,885
Fannie Mae 6.50% 2037		4,374			4,458
Fannie Mae 6.50% 2037		4,322			4,411
Fannie Mae 6.50% 2037		2,982			3,066
Fannie Mae 7.00% 2037		13,761			14,321
Fannie Mae 7.00% 2037		7,899			8,136
Fannie Mae 7.00% 2037		5,258			5,416
Fannie Mae 7.00% 2037		4,803			4,948
Fannie Mae 7.00% 2037		3,473			3,577
Fannie Mae 7.00% 2037		1,454			1,513
Fannie Mae 7.00% 20382		3,900			4,017
Fannie Mae, Series 2001-T10, Class A-1, 7.00% 2041		116			121
Fannie Mae, Series 2001-50, Class BA, 7.00% 2041		106			113
Fannie Mae, Series 2002-W1, Class 2A, 7.50% 2042		152			161
Wells Fargo Alternative Loan Trust, Series 2007-PA4, Class III-A-1, 6.091% 20373		19,323			19,197
Wells Fargo Alternative Loan Trust, Series 2007-PA3, Class III-A-1, 6.25% 2037		4,848			4,800
Wells Fargo Alternative Loan Trust, Series 2007-PA3, Class IV-A-1, 6.50% 2037		10,185			10,225
Wells Fargo Alternative Loan Trust, Series 2007-PA3, Class V-A-1, 7.00% 2037		5,266			5,336
CS First Boston Mortgage Securities Corp., Series 2006-2R, Class A-PO, principal only, 0% 20362,4		2,249			1,628
CS First Boston Mortgage Securities Corp., Series 2001-CK6, Class A-3, 6.387% 2036		3,000			3,131
CS First Boston Mortgage Securities Corp., Series 2004-C5, Class A-1A, 3.883% 2037		360			358
CS First Boston Mortgage Securities Corp., Series 2004-C5, Class A-3, 4.499% 2037		2,000			1,952
CS First Boston Mortgage Securities Corp., Series 2004-C1, Class E, 5.015% 20372,4		5,000			4,711
CS First Boston Mortgage Securities Corp., Series 2002-CKN2, Class A-3, 6.133% 2037		1,680			1,762
CS First Boston Mortgage Securities Corp., Series 2007-5, Class 1-A-9, 7.00% 2037		6,674			6,746
CS First Boston Mortgage Securities Corp., Series 2005-C1, Class A-3, 4.813% 2038		4,000			3,930
CS First Boston Mortgage Securities Corp., Series 2005-C6, Class A-3, 5.23% 20403		7,000			6,943
CS First Boston Mortgage Securities Corp., Series 1998-C1, Class A-1B, 6.48% 2040		556			557
Countrywide Alternative Loan Trust, Series 2005-J8, Class 2-A-1, 5.00% 2020		4,487			4,291
Countrywide Alternative Loan Trust, Series 2005-40CB, Class A-1, 5.50% 2035		2,193			2,138
Countrywide Alternative Loan Trust, Series 2005-46CB, Class A-8, 5.50% 2035		1,887			1,882
Countrywide Alternative Loan Trust, Series 2005-64CB, Class 1-A-7, 5.50% 2035		1,811			1,776
Countrywide Alternative Loan Trust, Series 2005-21CB, Class A-9, 5.50% 2035		1,483			1,477
Countrywide Alternative Loan Trust, Series 2005-62, Class 2-A-1, 5.863% 20352,3		1,429			1,386
Countrywide Alternative Loan Trust, Series 2005-21CB, Class A-17, 6.00% 2035		3,305			3,271
Countrywide Alternative Loan Trust, Series 2004-36CB, Class 1-A-1, 6.00% 20352		2,627			2,561
Countrywide Alternative Loan Trust, Series 2006-6CB, Class 1-A-1, 5.50% 20362		2,639			2,563
Countrywide Alternative Loan Trust, Series 2006-16CB, Class A-2, 6.00% 2036		2,108			2,092
Countrywide Alternative Loan Trust, Series 2007-HY4, Class 3-A-1, 5.876% 20473		3,574			3,478
Countrywide Alternative Loan Trust, Series 2007-HY4, Class 4-A-1, 5.967% 20473		1,466			1,416
Residential Accredit Loans, Inc., Series 2005-QR1, Class A, 6.00% 20342		2,255			2,188
Residential Accredit Loans, Inc., Series 2006-QS1, Class A-3, 5.75% 2036		868			867
Residential Accredit Loans, Inc., Series 2007-QS9, Class A-33, 6.50% 2037		7,220			7,248
Residential Accredit Loans, Inc., Series 2007-QS7, Class II-A-1, 6.75% 2037		4,937			4,926
Residential Accredit Loans, Inc., Series 2007-QS11, Class A-1, 7.00% 2037		9,004			9,057
IndyMac IMSC Mortgage Loan Trust, Series 2007-F3, Class 2-A-1, 6.50% 2037		8,486			8,540
IndyMac IMSC Mortgage Loan Trust, Series 2007-F2, Class 2-A-1, 6.50% 2037		3,078			3,094
IndyMac IMSC Mortgage Loan Trust, Series 2007-F3, Class 3-A-1, 7.00% 2037		8,371			8,483
Wells Fargo Mortgage-backed Securities Trust, Series 2005-1, Class I-A-1, 4.75% 2020		12,373			11,942
Wells Fargo Mortgage-backed Securities Trust, Series 2003-3, Class II-A-1, 5.25% 2033		2,301			2,260
Wells Fargo Mortgage-backed Securities Trust, Series 2006-AR15, Class A-1, 5.657% 20363		3,263			3,210
SBA CMBS Trust, Series 2005-1, Class A, 5.369% 20352,4		1,750			1,767
SBA CMBS Trust, Series 2005-1, Class D, 6.219% 20352,4		3,000			2,931
SBA CMBS Trust, Series 2006-1A, Class A, 5.314% 20364		3,000			3,001
SBA CMBS Trust, Series 2006-1A, Class F, 6.709% 20362,4		4,500			4,242
SBA CMBS Trust, Series 2006-1A, Class G, 6.904% 20362,4		3,000			2,793
American Tower Trust I, Series 2007-1A, Class A-FX, 5.42% 20372,4		2,000			1,940
American Tower Trust I, Series 2007-1A, Class C, 5.615% 20374		2,000			1,883
American Tower Trust I, Series 2007-1A, Class D, 5.957% 20372,4		4,000			3,701
American Tower Trust I, Series 2007-1A, Class E, 6.249% 20372,4		6,500			5,986
CHL Mortgage Pass-Through Trust, Series 2003-50, Class A-1, 5.00% 2018		4,693			4,569
CHL Mortgage Pass-Through Trust, Series 2004-J7, Class 3-A-1, 5.00% 2019		7,780			7,575
Crown Castle Towers LLC, Series 2005-1, Class A-FX, 4.643% 20354		3,000			2,999
Crown Castle Towers LLC, Series 2005-1, Class D, 5.612% 20354		6,300			6,241
Crown Castle Towers LLC, Series 2006-1, Class E, 6.065% 20362,4		1,000			952
Crown Castle Towers LLC, Series 2006-1, Class F, 6.650% 20362,4		1,300			1,243
Crown Castle Towers LLC, Series 2006-1, Class G, 6.795% 20362,4		500			473
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CIBC12, Class A-3B, 5.317% 20373		4,000			4,012
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2003-LN1, Class H, 5.507% 20372,3,4		2,000			1,596
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP4, Class A-2, 4.79% 2042		2,540			2,525
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP1, Class A-2, 4.625% 2046		3,500			3,473
Wachovia Bank Commercial Mortgage Trust, Series 2002-C1, Class A-2, 5.681% 2034		312			313
Wachovia Bank Commercial Mortgage Trust, Series 2005-C17, Class A-2, 4.782% 2042		4,000			3,983
Wachovia Bank Commercial Mortgage Trust, Series 2005-C17, Class A-4, 5.083% 20423		3,250			3,209
Wachovia Bank Commercial Mortgage Trust, Series 2006-C23, Class A-PB, 5.446% 2045		4,000			4,045
Lehman Mortgage Trust, Series 2007-6, Class 2-A1, 6.902% 20373		5,659			5,749
Lehman Mortgage Trust, Series 2007-7, Class 6-A4, 7.00% 20372		2,119			2,119
Lehman Mortgage Trust, Series 2007-8, Class 3-A1, 7.25% 2037		2,157			2,215
American Home Mortgage Assets Trust, Series 2007-3, Class II-2A-1, 6.25% 20373		9,846			9,763
ABN AMRO Mortgage Corp., Series 2002-10, Class II-A-1, 5.00% 2018		9,526			9,105
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-S8, Class A-2, 5.00% 2018		3,336			3,248
WaMu Mortgage Pass-Through Certificates Trust, Series 2007-HY5, Class 3-A1, 5.825% 20372,3		4,246			4,246
WaMu Mortgage Pass-Through Certificates Trust, Series 2005-AR15, Class A-1-A, 5.125% 20453		1,416			1,338
GSR Mortgage Loan Trust, Series 2004-15F, Class 5A-1, 5.50% 2020		7,427			7,336
Commercial Mortgage Trust, Series 2000-C1, Class E, 8.132% 2033		2,500			2,697
Commercial Mortgage Trust, Series 2003-LNB1, Class A-2, 4.084% 2038		4,000			3,849
Chase Mortgage Finance Trust, Series 2003-S9, Class A-1, 5.00% 2018		6,524			6,353
Tower Ventures, LLC, Series 2006-1, Class C, 5.707% 20364		500			500
Tower Ventures, LLC, Series 2006-1, Class D, 6.052% 20362,4		6,000			5,843
Bear Stearns ALT-A Trust, Series 2006-2, Class II-4-A-1, 5.93% 20363		6,535			6,307
Morgan Stanley Mortgage Loan Trust, Series 2004-3, Class 4-A, 5.684% 20343		1,738			1,679
Morgan Stanley Mortgage Loan Trust, Series 2007-11AR, Class 2-A-1, 6.64% 20373		4,298			4,293
Hilton Hotel Pool Trust, Series 2000-HLTA, Class F, 7.75% 20154		5,000			5,448
Merrill Lynch Mortgage Trust, Series 2005-CIP1, Class A-3-A, 4.949% 20383		2,000			1,967
Merrill Lynch Mortgage Trust, Series 2006-C1, Class A-3, 5.659% 20393		3,160			3,207
IndyMac INDX Mortgage Loan Trust, Series 2006-AR5, Class 2-A-1, 5.844% 20363		5,235			5,133
Bear Stearns Commercial Mortgage Securities Inc., Series 2002-PBW1, Class A-1, 3.97% 2035		1,093			1,082
Bear Stearns Commercial Mortgage Securities Inc., Series 2001-TOP2, Class A-2, 6.48% 2035		750			787
Bear Stearns Commercial Mortgage Securities Inc., Series 2005-PWR9, Class A-2, 4.735% 2042		3,000			2,981
CitiMortgage Alternative Loan Trust, Series 2005-A1, Class IIA-1, 5.00% 2020		4,829			4,778
Structured Adjustable Rate Mortgage Loan Trust, Series 2007-6, Class 3-A-1, 5.91% 20373		1,565			1,533
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-12, Class 2-A1, 5.963% 20373		3,244			3,193
First Horizon Alternative Mortgage Securities Trust, Series 2005-FA8, Class I-A-14, 5.50% 2035		1,403			1,396
First Horizon Alternative Mortgage Securities Trust, Series 2005-FA11, Class I-A-5, 5.75% 2036		3,258			3,231
CSAB Mortgage-backed Trust, Series 2007-1, Class 4-A-8, 7.00% 2037		4,355			4,411
Bear Stearns ARM Trust, Series 2003-3, Class III-A-1, 5.12% 20333		638			630
Bear Stearns ARM Trust, Series 2003-9, Class III-A-2, 4.964% 20343		824			810
Bear Stearns ARM Trust, Series 2005-10, Class A-3, 4.65% 20352,3		3,000			2,854
Nykredit 4.00% 2035	DKr23,218				4,021
GE Commercial Mortgage Corp., Series 2006-C1, Class A-4, 5.339% 20443	$	1,000			999
GE Commercial Mortgage Corp., Series 2005-C4, Class A-3A, 5.333% 20453		3,000			3,017
GMAC Commercial Mortgage Securities, Inc., Series 2001-C1, Class A-2, 6.465% 2034		3,743			3,883
Thornburg Mortgage Securities Trust, Series 2006-5, Class A-1, 4.985% 20462,3		3,912			3,731
Banc of America Commercial Mortgage Inc., Series 2001-1, Class A-2, 6.503% 2036		882			921
Banc of America Commercial Mortgage Inc., Series 2005-1, Class A-4, 4.871% 20423		2,550			2,543
Northern Rock PLC 5.625% 20174		3,000			3,047
Structured Asset Securities Corp., Series 2003-29, Class 1-A-1, 4.75% 2018		2,718			2,622
Structured Asset Securities Corp., Series 1998-RF2, Class A, 8.516% 20273,4		81			80
Chase Commercial Mortgage Securities Corp., Series 1998-2, Class A-2, 6.39% 2030		660			665
Chase Commercial Mortgage Securities Corp., Series 1998-1, Class A-2, 6.56% 2030		487			487
Chase Commercial Mortgage Securities Corp., Series 2000-1, Class A-2, 7.757% 2032		1,332			1,387
L.A. Arena Funding, LLC, Series 1, Class A, 7.656% 20264		2,321			2,408
GS Mortgage Securities Corp. II, Series 1998-C1, Class E, 7.101% 20303		1,250			1,265
GS Mortgage Securities Corp. II, Series 1998-C1, Class D, 7.101% 20303		1,000			1,012
Residential Asset Securitization Trust, Series 2004-A6, Class A-1, 5.00% 2019		1,470			1,458
Merrill Lynch Mortgage Investors, Inc., Series 1999-C1, Class A-2, 7.56% 2031		1,294			1,336
Salomon Brothers Commercial Mortgage Trust, Series 2000-C3, Class A-2, 6.592% 2033		1,250			1,300
Morgan Stanley Dean Witter Capital I Trust, Series 2001-TOP5, Class A-3, 6.16% 2035		1,003			1,018
Chase Manhattan Bank-First Union National Bank, Commercial Mortgage Trust, Series 1999-1, Class B, 7.619% 2031		750			782
HarborView Mortgage Loan Trust, Series 2005-15, Class 2-A1A2, 5.749% 20453		722			696
Morgan Stanley Capital I, Inc., Series 1998-HF2, Class A-2, 6.48% 2030		590			591
First Union National Bank Commercial Mortgage Trust, Series 2002-C1, Class A-1, 5.585% 2034		532			538
LB-UBS Commercial Mortgage Trust, Series 2000-C3, Class A-2, 7.95% 2025		492			520
DLJ Commercial Mortgage Corp., Series 1999-CG1, Class A-1B, 6.46% 2032		466			472
					1,020,087
FINANCIALS — 14.52%
Residential Capital, LLC 5.646% 20083		3,750			3,225
Residential Capital Corp. 7.814% 20093		5,000			3,575
Residential Capital Corp. 8.544% 20093,4		5,445			2,709
Residential Capital Corp. 7.875% 20103		21,385			13,793
General Motors Acceptance Corp. 7.25% 2011		7,795			6,837
General Motors Acceptance Corp. 6.625% 2012		5,000			4,160
General Motors Acceptance Corp. 6.875% 2012		7,000			5,871
General Motors Acceptance Corp. 7.00% 2012		2,200			1,868
Residential Capital, LLC 8.00% 20123		2,860			1,773
General Motors Acceptance Corp. 6.75% 2014		1,500			1,211
General Motors Acceptance Corp. 7.324% 20143		5,000			4,017
Washington Mutual, Inc. 5.184% 20123		6,850			5,832
Washington Mutual Bank 5.369% 20133		4,265			3,580
Washington Mutual Bank, FA 5.65% 2014		1,000			884
Washington Mutual Bank, FA, Series 16, 5.125% 2015		7,000			5,937
Washington Mutual, Inc. 7.25% 2017		2,000			1,764
Washington Mutual Preferred Funding I Ltd., Series A-1, 6.534% (undated)2,3,4		14,000			8,120
Washington Mutual Preferred Funding II Ltd. 6.665% (undated)3,4		11,800			6,972
Washington Mutual Preferred Funding III Ltd. 6.895% (undated)3,4		3,900			2,303
Washington Mutual Preferred Funding IV Ltd. 9.75% (undated)3,4		13,800			11,056
AIG SunAmerica Global Financing VII 5.85% 20084		1,000			1,003
American General Finance Corp., Series J, 5.185% 20113		5,000			4,938
International Lease Finance Corp., Series R, 5.40% 2012		2,500			2,523
International Lease Finance Corp., Series R, 5.625% 2013		6,875			6,899
American General Finance Corp., Series I, 5.85% 2013		2,500			2,475
International Lease Finance Corp., Series R, 5.65% 2014		2,500			2,544
American General Finance Corp., Series J, 6.50% 2017		1,750			1,709
American General Finance Corp., Series J, 6.90% 2017		5,685			5,701
American International Group, Inc., Series G, 5.85% 2018		1,650			1,664
ILFC E-Capital Trust II 6.25% 20653,4		6,365			6,092
American International Group, Inc., Series A-1, 6.25% 20873		2,835			2,544
Citigroup Inc. 4.125% 2010		3,000			2,958
Citigroup Inc. 6.125% 2017		5,000			5,145
Citigroup Capital XXI 8.30% 2057		17,745			18,582
Ford Motor Credit Co. 9.75% 20103		9,250			8,831
Ford Motor Credit Co. 7.25% 2011		2,425			2,102
Ford Motor Credit Co. 7.993% 20123		6,670			5,607
Ford Motor Credit Co. 8.00% 2016		8,275			7,039
J.P. Morgan Chase & Co. 4.875% 2014		770			752
J.P. Morgan Chase & Co. 4.891% 20153		5,300			5,107
JPMorgan Chase Bank NA 6.00% 2017		2,250			2,292
JPMorgan Chase & Co. 6.00% 2018		2,000			2,039
JPMorgan Chase Capital XXI, Series U, 5.844% 20373		7,500			5,918
JPMorgan Chase Capital XXV, Series Y, 6.80% 2037		2,300			2,218
JPMorgan Chase Capital XX, Series T, 6.55% 2066		2,500			2,263
Santander Issuances, SA Unipersonal 5.805% 20163,4		7,300			7,456
Santander Perpetual, SA Unipersonal 4.375% (undated)3	€	2,065			2,694
Santander Perpetual, SA Unipersonal 6.671% (undated)3,4	$	4,700			4,721
Abbey National PLC 6.70% (undated)3		5,600			5,479
Bayerische Hypo- und Vereinsbank AG 6.00% 2014	€	1,635			2,423
UniCredito Italiano SpA 5.584% 20173,4	$	9,480			9,399
UniCredito Italiano SpA 6.00% 20174		6,700			6,646
Barclays Bank PLC 5.926% (undated)3,4		1,445			1,347
Barclays Bank PLC 6.86% callable perpetual core tier one notes (undated)2,3,4		1,245			1,201
Barclays Bank PLC 7.434% (undated)3,4		14,400			14,990
Royal Bank of Scotland Group PLC 6.99% (undated)3,4		17,440			17,418
Countrywide Home Loans, Inc. 5.875% 20082	£	740			1,233
Countrywide Home Loans, Inc., Series M, 4.125% 2009	$	7,710			5,658
Countrywide Home Loans, Inc., Series K, 5.625% 2009		795			607
Countrywide Home Loans, Inc., Series H, 6.25% 2009		975			759
Countrywide Financial Corp., Series A, 4.50% 2010		1,365			992
Countrywide Home Loans, Inc., Series L, 4.00% 2011		883			638
Countrywide Financial Corp., Series B, 5.315% 20122,3		5,000			3,562
Countrywide Financial Corp., Series B, 5.80% 2012		5,425			3,967
HSBK (Europe) BV 7.75% 2013		3,125			2,984
HSBK (Europe) BV 7.75% 20134		505			482
HSBK (Europe) BV 7.25% 20174		13,760			12,006
Capmark Financial Group, Inc. 5.529% 20103,4		6,750			5,445
Capmark Financial Group, Inc. 5.875% 20124		6,000			4,754
Capmark Financial Group, Inc. 6.30% 20174		6,550			4,891
CIT Group Inc. 6.875% 2009		2,500			2,519
CIT Group Inc. 5.291% 20113		5,000			4,411
CIT Group Inc. 5.40% 2013		4,000			3,638
CIT Group Inc. 6.10% 20673		4,625			3,364
Bank of America Corp. 5.75% 2017		6,500			6,527
Bank of America Corp. 6.50% 2037		7,300			7,400
Sumitomo Mitsui Banking Corp. 4.375% 20143	€	1,645			2,357
Sumitomo Mitsui Banking Corp. 5.625% (undated)3,4	$	10,670			9,978
Allstate Corp., Series B, 6.125% 20673		9,710			9,385
Allstate Corp., Series A, 6.50% 20673		3,000			2,801
Catlin Insurance Ltd. 7.249% (undated)3,4		13,110			12,006
CNA Financial Corp. 6.60% 2008		1,736			1,755
CNA Financial Corp. 5.85% 2014		625			627
CNA Financial Corp. 6.50% 2016		5,540			5,664
CNA Financial Corp. 7.25% 2023		3,000			3,089
PNC Funding Corp. 5.16% 20143		5,000			4,867
PNC Funding Corp., Series II, 6.113% (undated)2,3,4		2,500			2,113
PNC Funding Corp., Series I, 6.517% (undated)2,3,4		4,700			4,112
Realogy Corp., Term Loan B, 8.24% 20131,3		392			345
Realogy Corp., Term Loan B, Letter of Credit, 8.24% 20131,3		106			93
Realogy Corp. 10.50% 20144		7,280			5,460
Realogy Corp. 11.00% 20144,5		5,000			3,488
Realogy Corp. 12.375% 20154		2,500			1,581
Fifth Third Capital Trust IV 6.50% 20673		11,900			10,810
Wells Fargo & Co. 5.25% 2012		5,000			5,089
Wells Fargo Bank, National Assn. 4.75% 2015		3,000			2,870
Wells Fargo & Co. 5.625% 2017		2,500			2,506
Liberty Mutual Group Inc. 6.50% 20354		435			398
Liberty Mutual Group Inc. 7.50% 20364		4,875			4,771
Liberty Mutual Group Inc., Series A, 7.80% 20874		4,995			4,455
Hospitality Properties Trust 6.75% 2013		1,500			1,545
Hospitality Properties Trust 6.30% 2016		1,300			1,276
Hospitality Properties Trust 5.625% 2017		5,155			4,779
Hospitality Properties Trust 6.70% 2018		1,750			1,731
HBOS PLC 5.375% (undated)3,4		7,750			7,074
HBOS PLC, Series B, 5.92% (undated)3,4		2,500			2,184
Lincoln National Corp. 5.65% 2012		3,250			3,339
Lincoln National Corp. 7.00% 20663		5,620			5,651
Host Marriott, LP, Series M, 7.00% 2012		4,050			4,070
Host Marriott, LP, Series K, 7.125% 2013		1,500			1,519
Host Hotels & Resorts, LP, Series S, 6.875% 2014		3,000			3,000
TuranAlem Finance BV 7.75% 20134		1,000			865
TuranAlem Finance BV 8.50% 2015		2,750			2,427
TuranAlem Finance BV 8.50% 20154		875			772
TuranAlem Finance BV 8.25% 20374		5,000			4,275
Hartford Financial Services Group, Inc. 5.95% 2036		1,115			1,060
Glen Meadow Pass Through Trust 6.505% 20672,3,4		7,550			7,237
Resona Bank, Ltd. 3.75% 20153	€	1,015			1,419
Resona Bank, Ltd. 4.125% (undated)3		970			1,281
Resona Bank, Ltd. 5.85% (undated)3,4	$	5,865			5,461
Standard Chartered Bank 6.40% 20174		1,400			1,424
Standard Chartered PLC 6.409% (undated)3,4		7,400			6,713
American Express Centurion Bank 6.00% 2017		2,500			2,519
American Express Co. 6.15% 2017		1,500			1,542
American Express Co. 6.80% 20663		4,000			4,062
Rouse Co. 3.625% 2009		1,140			1,092
Rouse Co. 7.20% 2012		2,360			2,259
Rouse Co. 6.75% 20134		4,500			4,203
Kimco Realty Corp. 6.00% 2012		500			505
Kimco Realty Corp., Series C, 4.82% 2014		2,500			2,327
Kimco Realty Corp. 5.70% 2017		5,000			4,675
AXA SA 6.379% (undated)3,4		3,360			2,904
AXA SA 6.463% (undated)3,4		5,000			4,511
WT Finance (Australia) Pty Ltd., Westfield Europe Finance PLC, and WEA Finance LLC 3.625% 2012	€	1,595			2,125
Westfield Group 5.40% 20124	$	5,000			4,995
HSBC Holdings PLC 6.50% 2037		6,960			6,768
Mizuho Capital Investment (USD) 1 Ltd. 6.686% noncumulative preferred (undated)3,4		7,200			6,747
Merrill Lynch & Co., Inc. 6.11% 2037		7,470			6,618
ZFS Finance (USA) Trust II 6.45% 20653,4		5,000			4,667
ZFS Finance (USA) Trust V 6.50% 20673,4		2,000			1,850
Lehman Brothers Holdings Inc. 6.50% 2017		6,340			6,426
Genworth Financial, Inc. 6.15% 20663		6,500			5,915
iStar Financial, Inc. 7.00% 2008		950			948
iStar Financial, Inc. 5.375% 2010		3,500			3,242
iStar Financial, Inc. 6.00% 2010		750			683
iStar Financial, Inc., Series B, 5.125% 2011		1,000			892
Lloyds TSB Group PLC 6.267% (undated)3,4		6,200			5,634
XL Capital Ltd. 6.25% 2027		1,250			1,147
Mangrove Bay Pass Through Trust 6.102% 20333,4		390			351
Twin Reefs Asset Trust (XLFA), Series B, 6.243% (undated)3,4		2,500			1,630
Wachovia Bank NA 6.60% 2038		5,000			5,042
E*TRADE Financial Corp. 8.00% 2011		3,075			2,683
E*TRADE Financial Corp. 7.375% 2013		2,000			1,550
E*TRADE Financial Corp. 7.875% 2015		1,050			806
Charles Schwab Corp., Series A, 6.375% 2017		3,000			3,091
Schwab Capital Trust I 7.50% 20373		1,740			1,754
Kazkommerts International BV 7.00% 20094		500			470
Kazkommerts International BV 7.875% 20144		800			686
Kazkommerts International BV 8.00% 2015		1,300			1,086
Kazkommerts International BV 8.00% 20154		1,250			1,044
Kazkommerts International BV, Series 4, 7.50% 2016		2,000			1,547
Nationwide Financial Services, Inc. 6.75% 20673		5,155			4,763
Goldman Sachs Group, Inc. 6.75% 2037		4,590			4,511
BNP Paribas 7.195% (undated)3,4		4,500			4,450
Capital One Financial Corp. 6.15% 2016		5,000			4,444
Development Bank of Singapore Ltd. 7.875% 20094		4,000			4,204
Downey Financial Corp. 6.50% 2014		4,500			4,097
Silicon Valley Bank 5.70% 20122		4,000			3,931
UnumProvident Corp. 5.859% 2009		2,000			2,037
UnumProvident Finance Co. PLC 6.85% 20154		1,500			1,557
North Front Pass Through Trust 5.81% 20243,4		3,125			2,994
Nationwide Mutual Insurance Co. 7.875% 20334		515			589
Northern Rock PLC 5.60% (undated)2,3,4		1,800			1,035
Northern Rock PLC 6.594% (undated)2,3,4		4,400			2,530
Simon Property Group, LP 4.875% 2010		1,000			1,002
Simon Property Group, LP 5.375% 2011		2,500			2,470
Chubb Corp. 6.375% 20373		3,505			3,425
Prudential Financial, Inc., Series D, 6.00% 2017		1,670			1,666
Prudential Holdings, LLC, Series C, 8.695% 20231,4		1,250			1,546
BBVA International SA Unipersonal 5.919% (undated)3,4		3,600			3,157
Lazard Group LLC 7.125% 2015		3,010			3,067
ERP Operating LP 4.75% 2009		1,000			987
ERP Operating LP 6.625% 2012		2,000			2,078
US Bank National Assn. 4.40% 2008		3,000			2,988
Assured Guaranty US Holdings Inc., Series A, 6.40% 20663		3,000			2,823
ORIX Corp. 5.48% 2011		2,580			2,582
ProLogis 5.50% 2012		2,500			2,494
United Dominion Realty Trust, Inc., Series E, 4.50% 2008		500			500
United Dominion Realty Trust, Inc. 6.50% 2009		1,000			1,017
United Dominion Realty Trust, Inc. 5.00% 2012		1,000			975
Banco Mercantil del Norte, SA 6.135% 20164		1,550			1,541
Banco Mercantil del Norte, SA 6.862% 20214		900			890
ACE INA Holdings Inc. 5.875% 2014		1,080			1,108
ACE INA Holdings Inc. 6.70% 2036		1,155			1,175
Shinsei Bank, Ltd. 3.75% 20163	€	1,030			1,376
Shinsei Bank, Ltd. 3.75% 20163		675			902
New York Life Global Funding 3.875% 20094	$	2,250			2,238
Protective Life Insurance Co., Series 2005-C, 4.85% 2010		2,250			2,234
Rodamco Europe Finance BV, Series 5, 3.75% 2012	€	1,600			2,168
MetLife, Inc. 5.50% 2014	$	2,044			2,059
John Hancock Global Funding II, Series 2004-A, 3.50% 20094		2,000			1,973
Developers Diversified Realty Corp. 3.875% 2009		1,000			977
Developers Diversified Realty Corp. 4.625% 2010		1,000			975
Loews Corp. 6.00% 2035		1,800			1,683
Morgan Stanley 10.09% 20172	BRL3,000				1,535
Banco Santander-Chile 5.375% 20144	$	1,500			1,503
City National Corp. 5.125% 20132		1,500			1,429
QBE Capital Funding II LP 6.797% (undated)3,4		1,415			1,357
SLM Corp., Series A, 5.40% 2011		1,210			1,104
Ambac Financial Group, Inc. 6.15% 20873		1,430			1,047
Chohung Bank 4.50% 20142,3		1,030			1,013
Chevy Chase Bank, FSB 6.875% 2013		1,000			958
Assurant, Inc. 5.625% 2014		765			750
Zions Bancorporation 5.50% 2015		740			695
BCI U.S. Funding Trust I 8.01% noncumulative preferred (undated)3,4		500			510
Advanta Capital Trust I, Series B, 8.99% 2026		500			358
Plum Creek Timberlands, LP 5.875% 2015		185			183
					742,421
BONDS & NOTES OF U.S. GOVERNMENT & GOVERNMENT AGENCIES — 11.99%
U.S. Treasury 4.375% 2008		7,000			7,009
U.S. Treasury 5.50% 2009		5,862			6,053
U.S. Treasury 3.00% 20122,6		21,961			23,805
U.S. Treasury 4.25% 2012		41,825			43,282
U.S. Treasury 3.875% 2013		50,000			50,984
U.S. Treasury 4.25% 2013		5,000			5,180
U.S. Treasury 4.50% 2016		27,370			28,480
U.S. Treasury 5.125% 2016		59,000			63,854
U.S. Treasury 7.50% 2016		10,000			12,551
U.S. Treasury 9.25% 2016		11,000			15,019
U.S. Treasury 2.375% 20172,6		15,540			16,416
U.S. Treasury 4.625% 2017		41,800			43,691
U.S. Treasury 8.50% 2020		34,000			47,292
U.S. Treasury 6.00% 2026		4,000			4,734
U.S. Treasury 4.50% 2036		23,114			23,240
U.S. Treasury 4.75% 2037		3,305			3,459
Freddie Mac 5.75% 2008		13,240			13,294
Freddie Mac 5.25% 2011		30,500			31,933
Freddie Mac: 5.75% 2012		40,000			42,747
Federal Home Loan Bank 5.125% 2008		7,820			7,830
Federal Home Loan Bank 5.25% 2008		44,385			44,420
Federal Home Loan Bank 5.625% 2016		10,000			10,548
Fannie Mae 1.75% 2008	¥	640,000			5,741
Fannie Mae 5.50% 2011	$	5,000			5,266
Fannie Mae 5.25% 2012		26,000			27,087
Fannie Mae 4.625% 2013		20,000			20,231
United States Agency for International Development, Republic of Egypt 4.45% 2015		5,000			4,982
CoBank ACB 5.591% 20222,3,4		4,250			3,836
Small Business Administration, Series 2001-20J, 5.76% 20211		428			442
					613,406
BONDS & NOTES OF GOVERNMENTS & GOVERNMENT AGENCIES OUTSIDE THE U.S. — 9.75%
Japanese Government 0.90% 2008	¥	1,142,400			10,260
Japanese Government 1.80% 2008		1,173,050			10,556
Japanese Government 1.30% 2011		1,114,000			10,122
Japanese Government 1.50% 2014		720,000			6,585
Japanese Government 1.70% 2016		4,070,450			37,387
Japanese Government 2.30% 2035		654,900			5,816
Spanish Government 2.90% 2008	€	10,450			15,098
Spanish Government 6.00% 2008		10,125			14,803
Spanish Government 6.15% 2013		10,620			16,876
Hungarian Government 6.00% 2011	HUF 857,860				4,730
Hungarian Government 7.25% 2012		2,578,860			14,810
Hungarian Government 6.75% 2017		3,379,570			19,072
Swedish Government 5.00% 2009	SKr189,325				29,544
Swedish Government 5.00% 2020		39,290			6,445
South Korean Government 5.00% 2011	KRW11,613,590				12,148
South Korean Government 4.25% 2014		3,978,800			3,903
South Korean Government 5.25% 2015		17,265,710			17,908
Israeli Government 7.50% 20142	ILS35,117				9,785
Israeli Government 6.50% 20162		70,755			18,729
Israeli Government 5.50% 20172		19,200			4,731
Singapore (Republic of) 4.375% 2009	S$14,160				10,093
Singapore (Republic of) 3.125% 2011		14,955			10,765
Singapore (Republic of) 3.75% 2016		13,160			9,902
United Kingdom 5.00% 2008	£	1,135			2,252
United Kingdom 4.75% 2015		9,596			19,343
United Kingdom 4.75% 2020		1,340			2,717
United Kingdom 4.75% 2038		2,970			6,343
Polish Government, Series 608, 5.75% 2008	PLN24,070				9,762
Polish Government 6.00% 2009		31,800			12,863
Polish Government 5.25% 2017		6,640			2,563
Queensland Treasury Corp. 6.00% 2015	A$23,470				19,525
Queensland Treasury Corp. 6.00% 2017		4,610			3,815
Malaysian Government 3.869% 2010	MYR27,435				8,371
Malaysian Government 3.718% 2012		17,800			5,382
Malaysian Government 4.262% 2016		20,900			6,393
Canadian Government 3.75% 2008	C$10,150				10,214
Canadian Government 5.50% 2010		6,900			7,223
Canadian Government 4.25% 20262,6		1,274			1,746
United Mexican States Government Global 9.875% 2010	$	1,000			1,109
United Mexican States Government 9.00% 2012	MXN35,000				3,342
United Mexican States Government Global 6.375% 2013	$	1,260			1,343
United Mexican States Government, Series MI10, 9.50% 2014	MXN30,900				3,046
United Mexican States Government, Series M20, 10.00% 2024		93,400			9,971
Brazil (Federal Republic of) 10.00% 20142	BRL22,915				11,321
French Government O.A.T. Eurobond 4.75% 2035	€	6,540			9,669
Aries Vermögensverwaltungs GmbH, Series C, 9.60% 2014	$	5,750			7,373
German Government 3.50% 2016	€	1,665			2,305
German Government, Series 6, 4.00% 2016		3,290			4,706
KfW 6.25% 2012	A$8,000				6,718
Belgium (Kingdom of), Series 40, 5.50% 2017	€	3,050			4,816
Panama (Republic of) Global 7.125% 2026	$	390			431
Panama (Republic of) Global 9.375% 2029		500			686
Panama (Republic of) Global 6.70% 20361		3,450			3,657
Argentina (Republic of) 3.368% 20121,2,3		4,000			2,219
Argentina (Republic of) 5.83% 20331,2,5,6	ARS9,498				2,231
Russian Federation 8.25% 20101	$	1,945			2,021
Russian Federation 8.25% 20101,4		1,111			1,155
Dominican Republic 9.04% 20181,4		1,093			1,251
El Salvador (Republic of) 7.65% 20354		580			671
					498,621
CONSUMER DISCRETIONARY — 8.32%
General Motors Corp. 7.20% 2011		5,875			5,420
General Motors Corp. 7.125% 2013		12,440			10,823
General Motors Corp. 7.25% 2013	€	1,000			1,299
General Motors Corp. 8.80% 2021	$	19,360			16,359
General Motors Corp. 9.40% 2021		1,000			893
General Motors Corp. 8.375% 2033		1,000			810
Charter Communications Holdings, LLC and Charter Communications Holdings Capital Corp. 11.75% 2011		1,225			955
Charter Communications Holdings, LLC and Charter Communications Holdings Capital Corp. 13.50% 2011		425			353
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 8.00% 20124		6,200			6,014
CCO Holdings, LLC and CCO Holdings Capital Corp. 8.75% 2013		4,425			4,248
Charter Communications Operating, LLC, Term Loan Facilities B, 6.99% 20141,3		11,500			10,765
CCH I, LLC and CCH I Capital Corp. 11.00% 2015		4,000			3,280
Tele-Communications, Inc. 9.80% 2012		2,000			2,312
Comcast Corp. 5.85% 2015		6,275			6,330
Comcast Corp. 6.30% 2017		3,380			3,513
Comcast Corp. 6.95% 2037		8,730			9,453
News America Inc. 4.75% 2010		2,000			1,990
News America Holdings Inc. 9.25% 2013		2,500			2,925
News America Holdings Inc. 8.25% 2018		4,885			5,719
News America Inc. 6.65% 20374		5,400			5,588
News America Inc. 6.75% 2038		1,000			1,095
AOL Time Warner Inc. 6.875% 2012		1,250			1,317
AOL Time Warner Inc. 7.625% 2031		10,635			11,803
Time Warner Inc. 6.50% 2036		3,410			3,329
Univision Communications, Inc., Second Lien Term Loan, 7.345% 20091,3		725			710
Univision Communications Inc. 7.85% 2011		1,500			1,502
Univision Communications, Inc., First Lien Term Loan B, 7.21% 20141,3		3,800			3,471
Univision Communications Inc. 9.75% 20154,5		11,725			10,743
Federated Retail Holdings, Inc. 5.35% 2012		5,056			4,931
Federated Retail Holdings, Inc. 5.90% 2016		9,780			9,226
J.C. Penney Co., Inc. 8.00% 2010		6,655			6,932
J.C. Penney Co., Inc. 9.00% 2012		2,485			2,797
J.C. Penney Corp., Inc. 5.75% 2018		2,940			2,767
K. Hovnanian Enterprises, Inc. 6.00% 2010		3,225			2,096
K. Hovnanian Enterprises, Inc. 6.50% 2014		545			384
K. Hovnanian Enterprises, Inc. 6.25% 2015		2,980			2,056
K. Hovnanian Enterprises, Inc. 6.25% 2016		2,190			1,500
K. Hovnanian Enterprises, Inc. 7.50% 2016		2,780			1,960
K. Hovnanian Enterprises, Inc. 8.625% 2017		5,625			4,134
Michaels Stores, Inc., Term Loan B, 7.625% 20131,3		2,239			2,066
Michaels Stores, Inc. 10.00% 2014		8,950			8,547
Michaels Stores, Inc. 0%/13.00% 20167		750			415
Michaels Stores, Inc. 11.375% 2016		750			692
MGM MIRAGE 6.00% 2009		4,750			4,750
MGM MIRAGE 6.75% 2012		4,000			3,915
MGM MIRAGE 6.75% 2013		1,250			1,219
MGM MIRAGE 5.875% 2014		1,700			1,564
D.R. Horton, Inc. 8.00% 2009		2,700			2,625
D.R. Horton, Inc. 7.875% 2011		1,100			1,043
D.R. Horton, Inc. 5.25% 2015		4,980			3,961
D.R. Horton, Inc. 5.625% 2016		600			498
D.R. Horton, Inc. 6.50% 2016		1,245			1,082
CanWest Media Inc., Series B, 8.00% 2012		8,253			7,830
Dex Media West LLC, Dex Media West Finance Co., Series B, 8.50% 2010		750			764
Dex Media, Inc., Series B, 0%/9.00% 20137		1,400			1,281
Dex Media, Inc., Series B, 0%/9.00% 20137		1,250			1,144
R.H. Donnelley Corp., Series A-1, 6.875% 2013		425			382
Dex Media, Inc., Series B, 8.00% 2013		1,250			1,181
R.H. Donnelley Corp., Series A-3, 8.875% 2016		1,200			1,128
R.H. Donnelley Corp. 8.875% 20174		2,000			1,860
Clear Channel Communications, Inc. 4.625% 2008		875			875
Chancellor Media Corp. of Los Angeles 8.00% 2008		4,250			4,394
Clear Channel Communications, Inc. 5.75% 2013		1,575			1,306
Clear Channel Communications, Inc. 5.50% 2014		1,425			1,088
Edcon Pty Ltd. 8.198% 20143	€	6,000			7,358
Radio One, Inc., Series B, 8.875% 2011	$	6,600			6,196
Radio One, Inc. 6.375% 2013		1,300			1,081
Mohegan Tribal Gaming Authority 6.375% 2009		5,250			5,276
Mohegan Tribal Gaming Authority 7.125% 2014		1,750			1,702
Idearc Inc. 8.00% 2016		7,450			6,873
Cox Communications, Inc. 7.875% 2009		1,500			1,570
Cox Communications, Inc. 4.625% 2010		1,750			1,737
Cox Communications, Inc. 5.45% 2014		3,500			3,435
Allison Transmission Holdings, Inc., Term Loan B, 8.00% 20141,3		5,000			4,672
Allison Transmission Holdings, Inc. 11.00% 20154		2,250			2,059
DaimlerChrysler North America Holding Corp. 8.00% 2010		3,000			3,202
DaimlerChrysler North America Holding Corp. 7.75% 2011		3,250			3,495
Standard Pacific Corp. 5.125% 2009		2,000			1,590
Standard Pacific Corp. 6.875% 2011		300			202
Standard Pacific Corp. 7.75% 2013		4,500			3,015
Standard Pacific Corp. 6.25% 2014		1,345			894
Standard Pacific Corp. 7.00% 2015		1,340			891
Claire’s Stores, Inc., Term Loan, 7.595% 20141,3		6,348			5,388
Claire’s Stores, Inc. 9.25% 20154		1,675			1,164
Liberty Media Corp. 7.75% 2009		1,750			1,795
Liberty Media Corp. 7.875% 2009		2,200			2,245
Liberty Media Corp. 8.25% 2030		2,375			2,291
Beazer Homes USA, Inc. 8.625% 2011		5,000			3,875
Beazer Homes USA, Inc. 8.125% 2016		3,145			2,359
Delphi Automotive Systems Corp. 6.50% 20098		7,500			4,537
Delphi Corp. 6.50% 20138		480			281
Delphi Automotive Systems Corp. 6.55% 20068		500			300
Delphi Automotive Systems Corp. 7.125% 20298		1,750			1,076
Wynn Las Vegas, LLC and Wynn Las Vegas Capital Corp. 6.625% 2014		6,200			6,122
CSC Holdings, Inc., Series B, 8.125% 2009		3,750			3,820
CSC Holdings, Inc., Series B, 7.625% 2011		1,000			1,003
Cablevision Systems Corp., Series B, 8.00% 2012		1,000			975
Ford Motor Co., Term Loan B, 8.00% 20131,3		5,224			4,845
Ford Motor Co. 6.50% 2018		555			411
Ford Motor Co. 8.875% 2022		315			252
NTL Cable PLC 8.75% 2014		2,675			2,668
NTL Cable PLC 8.75% 2014	€	1,000			1,431
NTL Cable PLC 9.75% 2014	£	700			1,344
Centex Corp. 5.70% 2014	$	890			791
Centex Corp. 5.25% 2015		2,340			1,984
Centex Corp. 6.50% 2016		2,840			2,528
Time Warner Cable Inc. 5.40% 2012		5,000			5,015
Marriott International, Inc., Series J, 5.625% 2013		5,000			4,998
Harrah’s Operating Co., Inc. 5.50% 2010		4,500			4,187
Harrah’s Operating Co., Inc. 5.625% 2015		1,000			731
KB Home 5.875% 2015		1,630			1,414
KB Home 6.25% 2015		3,735			3,268
Thomson Learning 10.50% 20154		4,500			4,348
Royal Caribbean Cruises Ltd. 8.00% 2010		1,375			1,428
Royal Caribbean Cruises Ltd. 8.75% 2011		2,675			2,803
Grupo Posadas, SA de CV 8.75% 20114		4,000			4,110
Toys “R” Us, Inc. 7.625% 2011		4,580			3,882
Seminole Tribe of Florida 5.798% 20131,4		1,575			1,611
Seminole Tribe of Florida 7.804% 20201,2,4		1,500			1,572
Toll Brothers, Inc. 4.95% 2014		765			678
Toll Brothers, Inc. 5.15% 2015		2,435			2,213
Visteon Corp. 8.25% 2010		1,500			1,335
Visteon Corp. 7.00% 2014		2,000			1,510
Kabel Deutschland GmbH 10.625% 2014		2,625			2,769
American Media Operations, Inc. 8.875% 2011		3,030			2,579
American Media Operations, Inc. 8.875% 2011		110			94
DaimlerChrysler Financial Services Americas LLC, First Lien Term Loan, 9.00% 20121,3		2,638			2,544
Vidéotron Ltée 6.875% 2014		1,625			1,599
Vidéotron Ltée 6.375% 2015		1,000			944
DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. 8.375% 2013		2,275			2,377
Boyd Gaming Corp. 7.75% 2012		1,350			1,374
Boyd Gaming Corp. 6.75% 2014		1,000			957
Viacom Inc. 6.25% 2016		2,040			2,056
Viacom Inc. 6.875% 2036		260			262
MDC Holdings, Inc. 5.50% 2013		2,385			2,284
Staples, Inc. 7.375% 2012		2,000			2,160
Young Broadcasting Inc. 10.00% 2011		2,716			2,135
Dillard’s, Inc. 6.625% 2008		700			699
Dillard Department Stores, Inc. 9.125% 2011		1,400			1,427
Tenneco Automotive Inc. 8.625% 2014		2,000			1,975
Neiman Marcus Group, Inc. 9.00% 20155		1,900			1,969
Cinemark USA, Inc., Term Loan B, 6.64% 20131,3		836			794
Cinemark, Inc. 0%/9.75% 20147		1,000			936
Limited Brands, Inc. 6.90% 2017		1,760			1,703
Dollar General Corp. 10.625% 20154		1,050			969
Dollar General Corp. 11.875% 20174,5		950			722
Goodyear Tire & Rubber Co. 8.663% 20093		1,375			1,392
Quebecor Media Inc. 7.75% 2016		1,325			1,279
Thomson Corp. 6.20% 2012		1,035			1,081
YUM! Brands, Inc. 7.70% 2012		1,000			1,079
Regal Cinemas Corp., Series B, 9.375% 20122		1,000			1,028
William Lyon Homes, Inc. 7.625% 2012		1,500			900
Carnival Corp. 6.15% 2008		750			752
Education Management LLC and Education Management Finance Corp. 8.75% 2014		650			656
AMC Entertainment Inc. 8.00% 2014		675			638
					425,381
INDUSTRIALS — 4.07%
Continental Airlines, Inc., Series 2001-1, Class A-2, 6.503% 20111		1,000			1,009
Continental Airlines, Inc., Series 2000-2, Class A-2, 7.487% 20121		3,570			3,610
Continental Airlines, Inc., Series 1998-1, Class B, 6.748% 20181		277			267
Continental Airlines, Inc., Series 1997-4B, Class B, 6.90% 20181		1,446			1,388
Continental Airlines, Inc., Series 1998-1, Class A, 6.648% 20191		2,162			2,173
Continental Airlines, Inc., Series 1997-4, Class A, 6.90% 20191		3,351			3,402
Continental Airlines, Inc., Series 1999-1, Class A, 6.545% 20201		1,204			1,212
Continental Airlines, Inc., Series 1999-2, Class B, 7.566% 20211		3,927			3,809
Continental Airlines, Inc., Series 2001-1, Class A-1, 6.703% 20221		634			636
Continental Airlines, Inc., Series 2007-1, Class B, 6.903% 20221		1,325			1,259
Continental Airlines, Inc., Series 2000-2, Class A-1, 7.707% 20221		2,691			2,812
Continental Airlines, Inc., Series 2000-1, Class A-1, 8.048% 20221		2,545			2,711
Delta Air Lines, Inc., Series 2000-1, Class A-1, 7.379% 20111		539			542
Delta Air Lines, Inc., Series 2000-1, Class A-2, 7.57% 20121		8,627			8,723
Delta Air Lines, Inc., Series 2000-1, Class B, 7.92% 20121		1,000			976
Delta Air Lines, Inc., Series 2002-1, Class C, 7.779% 20131		280			274
Delta Air Lines, Inc., Series 2002-1, Class G-2, MBIA insured, 6.417% 20141		10,798			11,054
Delta Air Lines, Inc., Series 2002-1, Class G-1, MBIA insured, 6.718% 20241		1,703			1,757
DAE Aviation Holdings, Inc. and Standard Aero Ltd., Term Loan B1, 8.58% 20141,3		5,677			5,645
DAE Aviation Holdings, Inc. and Standard Aero Ltd., Term Loan B2, 8.60% 20141,3		4,298			4,274
DAE Aviation Holdings, Inc. 11.25% 20154		8,255			8,750
American Airlines, Inc., Series 2001-1, Class A-2, 6.817% 20121		1,310			1,271
American Airlines, Inc., Series 2001-2, Class A-1, 6.978% 20121		1,559			1,578
American Airlines, Inc., Series 2001-2, Class B, 8.608% 20121		1,850			1,869
American Airlines, Inc., Series 2001-2, Class A-2, 7.858% 20131		8,535			8,970
AMR Corp. 9.00% 2016		1,500			1,436
American Airlines, Inc., Series 2001-1, Class B, 7.377% 20191		935			856
AMR Corp. 10.20% 2020		1,345			1,261
AMR Corp. 10.00% 20212		1,200			1,095
United Air Lines, Inc., Series 2001-1, Class A-2, 6.201% 20101		453			451
United Air Lines, Inc., Series 2000-2, Class B, 7.811% 20111,8		3,633			4,287
United Air Lines, Inc., Series 2000-2, Class A-2, 7.186% 20121		3,736			3,747
United Air Lines, Inc., Series 2001-1, Class A-1, 6.071% 20141		436			438
United Air Lines, Inc., Term Loan B, 7.125% 20141,3		717			673
United Air Lines, Inc., Series 2001-1, Class A-3, 6.602% 20151		644			645
United Air Lines, Inc., 1991 Equipment Trust Certificates, Series A, 10.11% 20061,2,8		230			—
United Air Lines, Inc., Series 2007-1, Class A, 6.636% 20241,2		3,970			3,728
General Electric Co. 5.00% 2013		1,250			1,267
General Electric Co. 5.25% 2017		1,500			1,500
General Electric Capital Corp., Series A, 5.625% 2017		2,250			2,313
General Electric Capital Corp., Series A, 5.145% 20183		1,000			968
General Electric Capital Corp., Series A, 5.258% 20262,3		6,400			6,125
Allied Waste North America, Inc., Series B, 6.50% 2010		2,250			2,261
Allied Waste North America, Inc., Series B, 5.75% 2011		1,000			985
Allied Waste North America, Inc., Series B, 6.125% 2014		2,750			2,657
Allied Waste North America, Inc., Series B, 7.375% 2014		1,000			1,002
Allied Waste North America, Inc. 7.25% 2015		2,000			2,000
Allied Waste North America, Inc. 6.875% 2017		2,000			1,960
Northwest Airlines, Inc., Term Loan A, 6.58% 20181,3		9,550			9,264
Nielsen Finance LLC and Nielsen Finance Co. 10.00% 2014		5,300			5,446
Nielsen Finance LLC and Nielsen Finance Co. 0%/12.50% 20167		4,200			2,972
Hutchison Whampoa International Ltd. 7.00% 20114		500			528
Hutchison Whampoa International Ltd. 6.50% 20134		6,750			7,104
Kansas City Southern Railway Co. 9.50% 2008		1,850			1,896
Kansas City Southern Railway Co. 7.50% 2009		4,200			4,226
Tyco International Group SA 6.125% 2008		2,375			2,396
Tyco International Group SA 7.00% 2028		620			658
Tyco International Group SA 6.875% 2029		2,380			2,417
Ashtead Group PLC 8.625% 20154		1,000			880
Ashtead Capital, Inc. 9.00% 20164		4,500			4,005
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class B, 7.156% 20111,4		1,632			1,714
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class G, MBIA insured, 6.664% 20131,4		1,816			1,870
John Deere Capital Corp., Series D, 4.375% 2008		1,500			1,498
John Deere Capital Corp. 5.40% 2011		2,000			2,049
TFM, SA de CV 9.375% 2012		3,150			3,315
RBS Global, Inc. and Rexnord LLC 9.50% 2014		3,250			3,234
ARAMARK Corp., Term Loan B, 6.83% 20141,3		1,202			1,146
ARAMARK Corp., Term Loan B, Letter of Credit, 6.83% 20141,3		86			82
ARAMARK Corp. 8.411% 20153		200			196
ARAMARK Corp. 8.50% 2015		1,775			1,806
Atrium Companies, Inc., Term Loan B, 8.46% 20121,3		3,465			3,224
Terex Corp. 7.375% 2014		3,000			3,053
THL Buildco, Inc. 8.50% 2014		3,225			2,596
US Investigations Services 11.75% 20164		2,955			2,586
DynCorp International and DIV Capital Corp., Series A, 9.50% 2013		2,325			2,433
American Standard Inc. 7.625% 2010		2,300			2,416
Atlas Copco AB 5.60% 20174		2,340			2,345
CSX Corp. 5.75% 2013		2,300			2,331
USG Corp. 6.30% 2016		2,000			1,810
Waste Management, Inc. 7.375% 2010		650			687
WMX Technologies, Inc. 7.10% 2026		500			541
Union Pacific Corp. 5.75% 2017		1,080			1,078
Volvo Treasury AB 5.00% 2017	€	590			816
RSC Holdings III, LLC, Second Lien Term Loan B, 8.75% 20131,3	$	696			649
BNSF Funding Trust I 6.613% 20553		685			641
Southern Capital Corp. Pass Through Trust, Series 2002-1, Class G, MBIA insured, 5.70% 20231,4		479			501
					208,035
TELECOMMUNICATION SERVICES — 3.81%
Nextel Communications, Inc., Series E, 6.875% 2013		16,720			16,485
Nextel Communications, Inc., Series D, 7.375% 2015		17,740			17,481
Sprint Capital Corp. 6.875% 2028		1,000			951
Sprint Capital Corp. 8.75% 2032		4,350			4,917
AT&T Corp. 7.30% 20113		1,850			2,006
AT&T Wireless Services, Inc. 7.875% 2011		1,890			2,048
SBC Communications Inc. 5.10% 2014		2,700			2,676
SBC Communications Inc. 5.625% 2016		6,750			6,838
SBC Communications Inc. 6.45% 2034		2,130			2,202
AT&T Inc. 6.30% 2038		3,800			3,874
U S WEST Capital Funding, Inc. 6.375% 2008		100			100
Qwest Capital Funding, Inc. 7.90% 2010		4,295			4,359
Qwest Capital Funding, Inc. 7.25% 2011		6,475			6,410
Qwest Communications International Inc. 7.25% 2011		4,000			4,020
Qwest Corp. 8.875% 2012		1,250			1,344
Qwest Capital Funding, Inc. 7.625% 2021		350			317
U S WEST Capital Funding, Inc. 6.875% 2028		700			595
British Telecommunications PLC 5.15% 2013		4,000			3,996
British Telecommunications PLC 5.95% 2018		7,500			7,574
Verizon Communications Inc. 5.50% 2017		8,885			8,942
Verizon Global Funding Corp. 7.75% 2030		1,900			2,235
American Tower Corp. 7.125% 2012		5,250			5,421
American Tower Corp. 7.50% 2012		4,500			4,658
Intelsat, Ltd. 6.50% 2013		3,000			2,198
Intelsat (Bermuda), Ltd. 8.25% 2013		1,775			1,793
Intelsat (Bermuda), Ltd. 0%/9.25% 20157		1,200			987
Intelsat Corp. 9.00% 2016		2,500			2,531
Intelsat (Bermuda), Ltd. 9.25% 2016		2,000			2,020
Valor Telecommunications Enterprises, LLC and Valor Telecommunications Enterprises Finance Corp. 7.75% 2015		1,700			1,797
Windstream Corp. 8.625% 2016		5,800			6,119
Cricket Communications, Inc. 9.375% 2014		4,880			4,599
Cricket Communications, Inc. 9.375% 20144		2,700			2,545
France Télécom 7.75% 20113		6,500			6,991
Rogers Wireless Inc. 7.25% 2012		3,825			4,150
Rogers Wireless Inc. 7.50% 2015		1,975			2,163
Hawaiian Telcom Communications, Inc. 9.75% 2013		2,870			2,863
Hawaiian Telcom Communications, Inc. 10.318% 20133		2,195			2,222
Hawaiian Telcom Communications, Inc., Series B, 12.50% 2015		1,125			1,167
Rural Cellular Corp. 8.124% 20133		5,500			5,610
Sogerim SA 7.25% 20113	€	905			1,387
Telecom Italia Capital SA 5.25% 2015	$	4,000			3,903
Embarq Corp. 6.738% 2013		5,000			5,178
Telefónica Emisiones, SAU 5.984% 2011		5,000			5,147
Centennial Communications Corp. and Centennial Cellular Operating Co. LLC 10.125% 2013		1,000			1,055
Centennial Communications Corp. 10.981% 20133		500			514
Centennial Communications Corp., Centennial Cellular Operating Co. LLC
and Centennial Puerto Rico Operations Corp. 8.125% 20143		2,700			2,673
Cincinnati Bell Inc. 7.25% 2013		3,750			3,778
Triton PCS, Inc. 8.50% 2013		3,250			3,380
NTELOS Inc., Term Loan B, 7.10% 20111,3		2,432			2,403
Level 3 Financing, Inc. 9.25% 2014		2,500			2,275
Digicel Group Ltd. 8.875% 20154		2,000			1,835
Deutsche Telekom International Finance BV 8.125% 20123	€	835			1,341
Singapore Telecommunications Ltd. 6.375% 20114	$	750			795
					194,868
ENERGY — 2.62%
Williams Companies, Inc. 6.375% 20104		1,000			1,016
Williams Companies, Inc. 7.125% 2011		500			531
Williams Partners L.P. and Williams Partners Finance Corp. 7.50% 2011		2,950			3,098
Williams Companies, Inc. 8.125% 2012		6,180			6,759
Williams Partners L.P. and Williams Partners Finance Corp. 7.25% 2017		2,500			2,588
Williams Companies, Inc. 8.75% 2032		2,400			2,946
TransCanada PipeLines Ltd. 6.35% 20673		14,250			13,379
Gaz Capital SA 6.51% 20224		8,940			8,522
Gaz Capital SA, Series 9, 6.51% 2022		1,750			1,668
Gaz Capital SA 7.288% 20374		3,000			3,043
Ras Laffan Liquefied Natural Gas Co. Ltd. 3.437% 20091,4		2,673			2,670
Ras Laffan Liquefied Natural Gas Co. Ltd. 3.437% 20091		37			37
Ras Laffan Liquefied Natural Gas Co. Ltd. 8.294% 20141		675			756
Ras Laffan Liquefied Natural Gas Co. Ltd. 8.294% 20141,4		360			403
Ras Laffan Liquefied Natural Gas II 5.298% 20201,4		7,500			7,296
Tengizchevroil Finance Co. S.àr.l., Series A, 6.124% 20141,4		7,250			6,870
Tengizchevroil Finance Co. S.àr.l., Series A, 6.124% 20141		4,000			3,790
Southern Natural Gas Co. 5.90% 20174		2,510			2,481
El Paso Natural Gas Co. 5.95% 2017		1,500			1,488
Tennessee Gas Pipeline Co. 7.00% 2028		2,000			2,029
Southern Natural Gas Co. 8.00% 2032		750			839
Enterprise Products Operating LP, Series B, 5.00% 2015		1,055			1,009
Enterprise Products Operating LP 8.375% 20663		4,195			4,302
Enterprise Products Operating LP 7.034% 20683		805			731
LUKOIL International Finance BV 6.656% 20224		6,100			5,711
Transocean Inc. 6.00% 2018		4,665			4,661
Qatar Petroleum 5.579% 20111,4		4,278			4,418
TEPPCO Partners LP 7.00% 20673		4,700			4,308
Kinder Morgan Inc., Term Loan B, 6.35% 20141,3		2,418			2,408
K N Energy, Inc. 7.25% 2028		1,500			1,415
Teekay Shipping Corp. 8.875% 2011		3,350			3,530
Kinder Morgan Energy Partners LP 6.75% 2011		2,000			2,100
Kinder Morgan Energy Partners LP 6.00% 2017		380			381
Kinder Morgan Energy Partners LP 6.50% 2037		900			892
Delek & Avner-Yam Tethys Ltd. 5.326% 20131,4		3,132			3,158
Petroleum Export Ltd., Class A-3, 5.265% 20111,4		3,133			3,099
Drummond Co., Inc. 7.375% 20164		2,545			2,373
Overseas Shipholding Group, Inc. 8.25% 2013		2,250			2,295
Newfield Exploration Co. 6.625% 2014		1,000			995
Newfield Exploration Co. 6.625% 2016		1,250			1,231
Polar Tankers, Inc. 5.951% 20371,4		2,250			2,187
Pemex Project Funding Master Trust 6.625% 2035		2,000			2,118
XTO Energy Inc. 6.25% 2017		2,000			2,102
Sunoco, Inc. 5.75% 2017		2,000			1,991
Premcor Refining Group Inc. 6.75% 2011		1,250			1,328
Premcor Refining Group Inc. 9.50% 2013		400			420
Encore Acquisition Co. 6.00% 2015		1,825			1,652
Gulfstream Natural Gas 6.19% 20254		1,220			1,188
					134,212
ASSET-BACKED OBLIGATIONS1— 2.57%
Honda Auto Receivables Owner Trust, Series 2006-3, Class A-4, 5.11% 2012		4,750			4,763
Honda Auto Receivables Owner Trust, Series 2006-2, Class A-4, 5.28% 2012		3,500			3,525
Honda Auto Receivables Owner Trust, Series 2007-2, Class A-4, 5.57% 2013		6,750			6,910
Chase Issuance Trust, Series 2005-7, Class A, 4.55% 2013		2,250			2,268
Chase Issuance Trust, Series 2007-A9, Class A, 5.058% 20143		11,500			11,373
Washington Mutual Master Note Trust, Series 2007-A4A, Class A-4, 5.20% 20142,4		7,445			7,441
Washington Mutual Master Note Trust, Series 2006-A2A, Class A, 5.078% 20153,4		5,000			4,881
Triad Automobile Receivables Trust, Series 2007-A, Class A-3, FSA insured, 5.28% 2012		9,340			9,363
MBNA Credit Card Master Note Trust, Series 2005-6, Class A, 4.50% 2013		5,250			5,288
MBNA Credit Card Master Note Trust, Series 2002-1, Class C, 6.80% 2014		2,500			2,540
Residential Funding Mortgage Securities II, Inc., Series 2007-HSA2, Class A-1F, MBIA insured, 8.47% 20373		7,338			7,308
ARG Funding Corp., Series 2005-1, Class A-1, MBIA insured, 4.02% 20094		2,000			1,998
ARG Funding Corp., Series 2005-2, Class A-4, AMBAC insured, 4.84% 20112,4		5,000			4,687
CPS Auto Receivables Trust, Series 2005-D, Class A-2, FSA insured, 5.06% 20124		3,000			3,015
CPS Auto Receivables Trust, Series 2007-TFC, Class A-2, XLCA insured, 5.25% 20134		3,617			3,608
Carrington Mortgage Loan Trust, Series 2006-NC2, Class A-2, 4.955% 20363		5,000			4,725
Carrington Mortgage Loan Trust, Series 2006-NC5, Class A-5, 4.925% 20373		1,186			1,124
Susquehanna Auto Lease Trust, Series 2007-1, Class A-3, 5.25% 20104		4,500			4,541
ABFC Trust, Series 2006-HE1, Class A-2C, 5.025% 20372,3		5,000			4,025
GMAC Mortgage Loan Trust, Series 2007-HE2, Class A-3, FGIC insured, 6.193% 20372,3		4,500			4,021
Drive Auto Receivables Trust, Series 2006-1, Class A-4, FSA insured, 5.54% 20134		4,000			4,006
Long Beach Acceptance Auto Receivables Trust, Series 2006-B, Class A-4, FSA insured, 5.18% 2013		3,750			3,795
Capital One Multi-asset Execution Trust, Series 2006-10, Class A, 5.15% 2014		3,320			3,403
CWHEQ Home Equity Loan Trust, Series 2007-S1, Class A-6, MBIA insured, 5.693% 20362,3		4,000			3,328
PG&E Energy Recovery Funding LLC, Series 2005-1, Class A-3, 4.14% 2012		3,000			2,981
AmeriCredit Automobile Receivables Trust, Series 2006-B-G, Class A-4, FGIC insured, 5.21% 2013		2,795			2,797
Capital Auto Receivables Asset Trust, Series 2004-2, Class A-4, 3.75% 2009		2,750			2,731
Hertz Vehicle Financing LLC, Rental Car Asset-backed Notes, Series 2005-2, Class A-6, AMBAC insured, 5.08% 20112,4		2,000			1,895
Drivetime Auto Owner Trust, Series 2005-A, Class A-3, MBIA insured, 4.302% 20094		1,547			1,545
Credit-Based Asset Servicing and Securitization LLC, Series 2007-CB4, Class A-2B, 5.723% 20373		1,500			1,386
Merrill Lynch Mortgage Investors, Inc., Series 2006-RM1, Class A-2B, 5.45% 20372,3		1,360			1,246
Vanderbilt Mortgage and Finance, Inc., Series 2001-A, Class B-1, 8.20% 2020		1,229			1,233
Conseco Finance Home Loan Trust, Series 1999-G, Class B-2, 10.96% 20292		1,560			1,225
Securitized Asset-backed Receivables LLC Trust, Series 2006-HE2, Class A-2C, 5.015% 20363		1,350			1,098
Home Equity Mortgage Trust, Series 2006-6, Class 2A-1, 4.965% 20372,3		2,031			914
Cendant Timeshare Receivables Funding, LLC, Series 2005-1, Class A-1, FGIC insured, 4.67% 20174		512			503
					131,490
MATERIALS — 1.94%
Abitibi-Consolidated Co. of Canada 5.25% 2008		500			481
Abitibi-Consolidated Finance LP 7.875% 2009		2,812			2,692
Abitibi-Consolidated Inc. 7.75% 2011		1,850			1,452
Abitibi-Consolidated Co. of Canada 8.491% 20113		1,650			1,312
Abitibi-Consolidated Co. of Canada 6.00% 2013		460			316
Abitibi-Consolidated Co. of Canada 8.375% 2015		7,215			5,393
Jefferson Smurfit Corp. (U.S.) 8.25% 2012		2,000			1,980
Stone Container Corp. 8.375% 2012		2,250			2,244
Jefferson Smurfit Corp. (U.S.) 7.50% 2013		2,800			2,695
Smurfit-Stone Container Enterprises, Inc. 8.00% 2017		2,835			2,753
C5 Capital (SPV) Ltd. 6.196% (undated)3,4		5,000			4,950
C10 Capital (SPV) Ltd. 6.722% (undated)3,4		4,500			4,155
Boise Cascade, LLC and Boise Cascade Finance Corp. 7.125% 2014		8,275			8,047
Stora Enso Oyj 6.404% 20164		1,780			1,757
Stora Enso Oyj 7.25% 20364		4,950			4,957
Freeport-McMoRan Copper & Gold Inc. 8.25% 2015		1,675			1,780
Freeport-McMoRan Copper & Gold Inc. 8.375% 2017		2,975			3,198
Bayer AG 5.00% (undated)3	€	3,780			4,904
Alcoa Inc. 5.55% 2017	$	4,700			4,568
UPM-Kymmene Corp. 5.625% 20144		4,500			4,257
Owens-Brockway Glass Container Inc. 8.875% 2009		2,197			2,208
Owens-Brockway Glass Container Inc. 6.75% 2014	€	1,250			1,770
NewPage Corp. 10.00% 20124	$	3,500			3,535
Graphic Packaging International, Inc. 8.50% 2011		3,475			3,458
Algoma Steel Inc. 9.875% 20154		3,000			2,475
Norske Skogindustrier ASA 7.625% 20114		2,500			2,400
Neenah Paper, Inc. 7.375% 2014		2,325			2,186
Rockwood Specialties Group, Inc. 7.625% 2014	€	1,500			2,157
Plastipak Holdings, Inc. 8.50% 20154	$	2,000			2,010
Domtar Corp. 5.375% 2013		500			454
Domtar Corp. 7.125% 2015		1,500			1,478
Airgas, Inc. 6.25% 2014		2,000			1,920
JSG Funding PLC 7.75% 2015		2,000			1,910
Graham Packaging Co., LP and GPC Capital Corp. 9.875% 2014		2,000			1,850
Georgia-Pacific Corp. 8.125% 2011		500			510
Georgia-Pacific Corp., First Lien Term Loan B, 6.896% 20121,3		1,005			958
Ainsworth Lumber Co. Ltd. 7.25% 2012		375			228
Ainsworth Lumber Co. Ltd. 6.75% 2014		2,000			1,215
Building Materials Corp. of America 7.75% 2014		1,850			1,425
Allegheny Technologies, Inc. 8.375% 2011		500			535
International Paper Co. 5.85% 2012		520			529
					99,102
HEALTH CARE — 1.86%
HealthSouth Corp. 10.829% 20143		8,180			8,364
HealthSouth Corp. 10.75% 2016		6,715			7,051
HCA Inc., Term Loan B, 7.09% 20131,3		12,870			12,403
HCA Inc. 9.125% 2014		580			605
HCA Inc. 9.25% 2016		680			716
HCA Inc. 9.625% 20165		680			721
Schering-Plough Corp. 5.375% 2014	€	1,020			1,464
Schering-Plough Corp. 6.00% 2017	$	4,840			5,024
Schering-Plough Corp. 6.55% 2037		3,000			3,189
Coventry Health Care, Inc. 6.30% 2014		7,800			7,994
VWR International, Inc. 10.25% 20153,4,5		7,320			7,009
Tenet Healthcare Corp. 6.375% 2011		700			640
Tenet Healthcare Corp. 9.875% 2014		4,100			3,926
Tenet Healthcare Corp. 9.25% 2015		2,150			1,999
PTS Acquisition Corp. 9.50% 20154,5		5,295			4,937
AstraZeneca PLC 5.40% 2012		4,500			4,657
UnitedHealth Group Inc. 6.00% 20174		4,500			4,553
WellPoint, Inc. 5.25% 2016		625			606
WellPoint, Inc. 5.875% 2017		3,000			3,026
Viant Holdings Inc. 10.125% 20174		3,390			3,119
Mylan Inc., Term Loan B, 8.313% 20141,3		2,600			2,578
Amgen Inc. 4.00% 2009		2,500			2,483
Elan Finance PLC and Elan Finance Corp. 9.249% 20133		2,440			2,367
Surgical Care Affiliates, Inc. 10.00% 20174		2,500			2,287
Humana Inc. 6.45% 2016		1,500			1,514
Cardinal Health, Inc. 6.30% 20164		1,235			1,268
Warner Chilcott Corp. 8.75% 2015		650			673
					95,173
INFORMATION TECHNOLOGY — 1.64%
NXP BV and NXP Funding LLC 7.993% 20133		8,025			7,413
NXP BV and NXP Funding LLC 7.875% 2014		5,600			5,348
NXP BV and NXP Funding LLC 9.50% 2015		12,000			11,025
Western Union Co. 5.055% 20083		4,000			3,992
Western Union Co. 5.93% 2016		6,000			5,997
Celestica Inc. 7.875% 2011		6,750			6,531
Celestica Inc. 7.625% 2013		3,450			3,234
Sanmina-SCI Corp. 7.741% 20143,4		2,000			1,938
Sanmina-SCI Corp. 8.125% 2016		7,425			6,618
Freescale Semiconductor, Inc., Term Loan B, 6.975% 20131,3		1,293			1,201
Freescale Semiconductor, Inc. 8.875% 2014		5,000			4,487
SunGard Data Systems Inc. 9.125% 2013		5,500			5,624
First Data Corp., Term Loan B2, 7.634% 20141,3		4,988			4,747
National Semiconductor Corp. 6.15% 2012		4,500			4,592
Ceridian Corp. 11.25% 20154		3,900			3,627
Jabil Circuit, Inc. 5.875% 2010		3,060			3,098
Xerox Corp. 7.125% 2010		2,500			2,621
Electronic Data Systems Corp., Series B, 6.50% 20133		1,500			1,518
Exodus Communications, Inc. 11.625% 20102,8		377			—
					83,611
UTILITIES — 1.61%
Edison Mission Energy 7.75% 2016		6,000			6,210
Midwest Generation, LLC, Series B, 8.56% 20161		1,586			1,693
Edison Mission Energy 7.00% 2017		4,050			3,999
Edison Mission Energy 7.20% 2019		5,250			5,184
Edison Mission Energy 7.625% 2027		4,500			4,253
AES Corp. 9.50% 2009		695			723
AES Corp. 9.375% 2010		4,769			5,031
AES Corp. 8.75% 20134		3,958			4,151
AES Red Oak, LLC, Series A, 8.54% 20191		856			921
AES Ironwood, LLC 8.857% 20251		1,102			1,213
AES Red Oak, LLC, Series B, 9.20% 20291		2,500			2,788
ISA Capital do Brasil SA 7.875% 20124		625			639
ISA Capital do Brasil SA 8.80% 20174		6,500			6,711
Abu Dhabi National Energy Co. PJSC (TAQA) 5.875% 20164		3,920			3,845
Abu Dhabi National Energy Co. PJSC (TAQA) 6.50% 20364		2,000			1,932
NRG Energy, Inc. 7.25% 2014		725			709
NRG Energy, Inc. 7.375% 2016		4,675			4,570
National Grid PLC 6.30% 2016		2,315			2,367
National Grid Transco PLC 4.375% 2020	€	1,290			1,621
Veolia Environnement 6.125% 2033		2,740			3,857
MidAmerican Energy Holdings Co., Series D, 5.00% 2014	$	2,200			2,142
MidAmerican Energy Holdings Co. 6.125% 2036		1,500			1,501
Constellation Energy Group, Inc. 6.125% 2009		1,800			1,836
Constellation Energy Group, Inc. 4.55% 2015		1,080			997
Cilcorp Inc. 8.70% 2009		1,000			1,056
Union Electric Co. 5.25% 2012		1,495			1,518
Texas Competitive Electric Holding Co. LLC 10.25% 20154		2,500			2,488
SP PowerAssets Ltd. 3.80% 20084		2,000			1,987
Nevada Power Co., General and Refunding Mortgage Notes, Series L, 5.875% 2015		150			150
Nevada Power Co., General and Refunding Mortgage Notes, Series M, 5.95% 2016		1,450			1,445
Mirant Americas Generation, Inc. 8.30% 2011		1,400			1,411
Exelon Generation Co., LLC 6.95% 2011		1,300			1,357
Scottish Power PLC 5.375% 2015		1,230			1,188
Israel Electric Corp. Ltd. 7.70% 20184		500			578
PSEG Energy Holdings Inc. 8.625% 2008		408			411
Duke Energy Corp., First and Refunding Mortgage Bonds, 5.30% 2015		100			100
					82,582
CONSUMER STAPLES — 0.88%
Tesco PLC 5.50% 20174		6,955			6,950
Tesco PLC 5.50% 2033	£	330			641
Tesco PLC 6.15% 20374	$	5,000			4,901
CVS Caremark Corp. 6.943% 20301,4		7,575			7,619
SUPERVALU INC., Term Loan B, 6.396% 20121,3		1,971			1,934
SUPERVALU INC. 7.50% 2012		585			608
Albertson’s, Inc. 7.25% 2013		2,410			2,476
Albertson’s, Inc. 8.00% 2031		2,000			2,039
Tyson Foods, Inc. 6.85% 20163		4,305			4,439
Kroger Co. 6.40% 2017		4,130			4,327
Stater Bros. Holdings Inc. 8.125% 2012		2,550			2,531
Stater Bros. Holdings Inc. 7.75% 2015		1,425			1,382
Spectrum Brands, Inc. 7.375% 2015		2,600			1,937
Safeway Inc. 6.35% 2017		1,600			1,671
Kraft Foods Inc. 6.125% 2018		1,575			1,590
					45,045
MUNICIPALS — 0.07%
State of North Carolina, Eastern Municipal Power Agency, Power System Revenue Refunding Bonds, Federally Taxable,
Series 2003-E, 5.55% 2014		1,625			1,624
State of South Dakota, Educational Enhancement Funding Corp., Tobacco Settlement Asset-backed Bonds,
Series 2002-A, Class A, 6.72% 2025		1,445			1,341
State of Wisconsin, Badger Tobacco Asset Securitization Corp., Tobacco Settlement Asset-backed Bonds, 6.125% 2027		395			409
State of Louisiana, Tobacco Settlement Financing Corp., Tobacco Settlement Asset-backed Bonds,
Series 2001-A, Class A, 6.36% 2025		322			312
					3,686
Total bonds, notes & other debt instruments (cost: $4,438,947,000)					4,377,720
Convertible securities — 0.28%	Principal amount
CONSUMER DISCRETIONARY — 0.16%
Beazer Homes USA, Inc. 4.625% convertible notes 2024	$	8,640,000			6,102
Amazon.com, Inc. 6.875% PEACS convertible notes 2010	€	1,518,000			2,272
					8,374
FINANCIALS — 0.12%
Countrywide Financial Corp., Series A, 1.743% convertible debentures 20373,4	$	7,500,000			5,886
Total convertible securities (cost: $14,410,000)					14,260
Preferred stocks — 3.00%	Shares
FINANCIALS — 2.92%
Fannie Mae, Series S, 8.25% noncumulative9		768,000			19,594
Fannie Mae, Series O, 7.00%3,4		135,855			6,296
MUFG Capital Finance 1 Ltd. 6.346% noncumulative3		20,148,000			19,114
Tokai Preferred Capital Co. LLC, Series A, 9.98% noncumulative3,4		3,025,000			3,065
Freddie Mac, Series Z, 8.375%9		618,440			16,311
Sumitomo Mitsui Banking Corp. 6.078%3,4		16,008,000			14,827
IBJ Preferred Capital Co. LLC, Series A, 8.79% noncumulative3,4		5,555,000			5,605
Fuji JGB Investment LLC, Series A, 9.87% noncumulative3,4		3,230,000			3,260
Mizuho Capital Investment (EUR) 1 Ltd. 5.02%3		800,000			1,075
Chuo Mitsui Trust and Banking Co., Ltd. 5.506%3,4		10,090,000			9,291
Shinsei Finance II (Cayman) Ltd. 7.16% noncumulative3,4		10,800,000			9,143
HSBC Capital Funding LP, Series 1, 9.547% noncumulative step-up3,4		6,030,000			6,594
Royal Bank of Scotland Group PLC 5.512% noncumulative trust3		5,000,000			4,603
RBS Capital Trust I 4.709% noncumulative trust3		1,500,000			1,351
IndyMac Bancorp, Inc., Series A, 8.50% noncumulative4		520,000			4,940
Banco Santander Central Hispano, SA 6.50%10		200,000			4,175
Commerzbank Capital Funding Trust I, Class B, 5.012% noncumulative3		3,100,000			4,010
ING Capital Funding Trust III 8.439% noncumulative3		2,700,000			2,862
Deutsche Bank Capital Funding Trust I 7.872%3,4		2,500,000			2,611
Wachovia Capital Trust III 5.80%3		2,450,000			2,191
XL Capital Ltd., Series E, 6.50%3		2,226			1,950
Swire Pacific Capital Ltd. 8.84% cumulative guaranteed perpetual capital securities4		65,000			1,916
Barclays Bank PLC 4.75%3		1,560,000			1,809
BNP Paribas Capital Trust 9.003% noncumulative trust3,4		850,000			910
DBS Capital Funding Corp., Series A, 7.657% noncumulative guaranteed preference shares3,4		750,000			802
Resona Preferred Global Securities (Cayman) Ltd. 7.191%3,4		600,000			596
National Bank of Canada, Series A, 8.35% exchangeable depositary shares		20,000			435
					149,336
MISCELLANEOUS — 0.08%
Other preferred stocks in initial period of acquisition					4,293
Total preferred stocks (cost: $164,923,000)					153,629
Common stocks — 0.30%
UTILITIES — 0.05%
Drax Group PLC		200,094			2,402
TELECOMMUNICATION SERVICES — 0.05%
American Tower Corp., Class A9		42,271			1,801
Sprint Nextel Corp., Series 1		33,726			443
Embarq Corp.		1,686			83
XO Holdings, Inc.9		1,134			2
					2,329
INDUSTRIALS — 0.02%
DigitalGlobe Inc.2,9,10		306,464			1,226
UAL Corp.9		1,580			56
					1,282
INFORMATION TECHNOLOGY — 0.00%
ZiLOG, Inc.9		32,500			113
HEALTH CARE — 0.00%
Clarent Hospital Corp.2,9		16,114			3
MISCELLANEOUS — 0.18%
Other common stocks in initial period of acquisition					9,075
Total common stocks (cost: $16,235,000)					15,204
				Market value
Rights & warrants — 0.00%	Shares				(000	)
TELECOMMUNICATION SERVICES — 0.00%
XO Holdings, Inc., Series A, warrants, expire 20109		2,273		$	1
XO Holdings, Inc., Series B, warrants, expire 20109		1,704			—
XO Holdings, Inc., Series C, warrants, expire 20109		1,704			—
GT Group Telecom Inc., warrants, expire 20102,4,9		1,000			—
Total rights & warrants (cost: $52,000)					1
	Principal amount
Short-term securities — 13.04%		(000	)
Wells Fargo & Co. 4.30% due 1/14–1/18/2008	$	81,400			81,242
U.S. Treasury Bills 3.20%–4.05% due 4/3–5/22/200811		65,700			65,044
Procter & Gamble International Funding S.C.A. 4.47%–4.74% due 1/4–3/4/20084,11		54,800			54,618
Federal Home Loan Bank 4.25%–4.61% due 1/4–1/22/200811		54,233			54,147
Freddie Mac 4.0947%–4.62% due 3/10–12/8/200811		53,000			52,130
Caterpillar Financial Services Corp. 4.20%–4.47% due 1/24–2/19/200811		50,800			50,575
Coca-Cola Co. 4.47% due 1/15/20084,11		49,000			48,909
IBM International Group Capital LLC 4.47% due 2/15/20084		25,000			24,841
IBM Corp. 4.40% due 1/11/20084		23,000			22,969
JPMorgan Chase & Co. 5.05% due 1/4/200811		40,400			40,379
United Parcel Service Inc. 4.38%–4.53% due 1/3–3/19/20084,11		37,900			37,688
International Bank for Reconstruction and Development 4.33% due 1/22/2008		30,500			30,430
Wal-Mart Stores Inc. 4.73% due 1/29/20084		29,500			29,379
Harley-Davidson Funding Corp. 4.75% due 1/17/20084		20,000			19,954
Edison Asset Securitization LLC 4.61% due 1/23/20084		14,500			14,450
Hewlett-Packard Co. 4.52% due 1/2/20084,11		14,000			13,996
Medtronic Inc. 4.22% due 1/22/20084		9,700			9,675
International Lease Finance Corp. 4.69% due 1/3/2008		9,200			9,197
Paccar Financial Corp. 4.72% due 1/3/2008		7,100			7,097
Total short-term securities (cost: $666,635,000)					666,720
Total investment securities (cost: $5,301,202,000)					5,227,534
Other assets less liabilities					(112,935	)
Net assets				$	5,114,599

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

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

2 Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities, including those in “Miscellaneous,” was $247,371,000.

3 Coupon rate may change periodically.

4 Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $979,499,000, which represented 19.15% of the net assets of the fund.

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

6 Index-linked bond whose principal amount moves with a government retail price index.

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

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

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

10 Purchased in a transaction exempt from registration under the Securities Act of 1933. May be subject to legal or contractual restriction on resale. Further details on these holdings appear below.

	Acquisition date(s)	Cost (000)		Market value (000)		Percent of net assets
Banco Santander Central Hispano, SA 6.50%	1/11/2007	$	5,000	$	4,175		.08	%
DigitalGlobe Inc.	4/14/1999–7/31/2003		250		1,226		.02
Total restricted securities		$	5,250	$	5,401		.10	%

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

Global Bond Fund

Investment portfolio

December 31, 2007

Bonds, notes & other debt instruments — 87.05%	Principal amount  (000)			Market value (000)
EUROS — 20.08%
German Government 5.25% 2008	€	920		US$ 1,343
German Government 4.50% 2009		2,500			3,669
German Government 3.75% 2013		1,650			2,361
German Government 4.50% 2013		3,975			5,900
German Government 4.25% 2014		2,880			4,212
German Government, Series 6, 4.00% 2016		7,125			10,192
German Government 4.25% 2017		7,425			10,791
German Government, Series 7, 4.00% 2018		2,085			2,964
German Government 6.25% 2024		275			478
German Government 4.75% 2034		1,225			1,822
Spanish Government 2.90% 2008		2,125			3,070
Spanish Government 4.20% 2013		640			934
Spanish Government 6.15% 2013		1,694			2,692
Netherlands Government Eurobond 5.00% 2012		100			151
Netherlands Government Eurobond 4.25% 2013		620			907
Netherlands Government Eurobond 7.50% 2023		400			769
Netherlands Government Eurobond 4.00% 2037		300			393
French Government O.A.T. Eurobond 4.75% 2035		914			1,351
Bayer AG 5.00% (undated)1		790			1,025
Pfizer Inc. 4.75% 2014		700			1,014
National Grid Transco PLC 4.375% 2020		500			628
Merrill Lynch & Co., Inc. 4.625% 2018		525			624
Schering-Plough Corp. 5.375% 2014		350			502
Shinsei Bank, Ltd. 3.75% 20161		250			334
Shinsei Bank, Ltd. 3.75% 20161		100			134
Sumitomo Mitsui Banking Corp. 4.375% (undated)1		350			433
Vodafone Group PLC 4.75% 2016		300			418
UniCredito Italiano SpA 3.95% 2016		300			380
UPM-Kymmene Corp. 6.125% 2012		200			294
Veolia Environnement 4.875% 2013		150			214
Veolia Environnement 6.125% 2033		55			77
Resona Bank, Ltd 4.125% (undated)1		200			264
Croatian Government 5.00% 2014		165			238
Saint-Gobain Nederland BV 5.00% 2014		150			210
Rodamco Europe Finance BV, Series 5, 3.75% 2012		145			196
Santander Perpetual, SA Unipersonal 4.375% (undated)1		150			196
Metro Finance BV 4.625% 2011		125			179
WT Finance (Australia) Pty Ltd., Westfield Europe Finance PLC, and WEA Finance LLC 3.625% 2012		120			160
Northern Rock PLC, Series 7, 4.125% 20172		100			132
PLD International Finance LLC 4.375% 2011		50			68
					61,719
JAPANESE YEN — 6.89%
Japanese Government 0.90% 2008	¥	208,900		US$ 1,876
Japanese Government 1.80% 2008		89,000			801
Japanese Government 1.30% 2011		320,650			2,914
Japanese Government 0.50% 2013		163,000			1,416
Japanese Government 1.50% 2014		823,550			7,532
Japanese Government 1.70% 2016		589,250			5,412
Japanese Government 1.70% 2017		50,000			457
Japanese Government 2.30% 2035		87,400			776
					21,184
BRITISH POUNDS — 3.25%
United Kingdom 5.00% 2008	£	115			228
United Kingdom 5.25% 2012		475			973
United Kingdom 5.00% 2014		1,025			2,091
United Kingdom 4.75% 2015		755			1,522
United Kingdom 4.00% 2016		1,920			3,674
United Kingdom 8.00% 2021		275			732
United Kingdom 4.75% 2038		310			662
Countrywide Home Loans, Inc. 5.875% 20083		60			100
					9,982
ISRAELI SHEKELS — 2.84%
Israeli Government 7.50% 20143	ILS 8,693				2,422
Israeli Government 6.50% 20163		19,180			5,077
Israeli Government 5.50% 20173		5,029			1,239
					8,738
AUSTRALIAN DOLLARS — 2.83%
Queensland Treasury Corp. 6.00% 2015	A$5,785				4,812
New South Wales Treasury Corp. 5.50% 2014		1,975			1,599
KfW 6.25% 2012		1,850			1,554
European Investment Bank 6.125% 2017		900			742
					8,707
SWEDISH KRONOR — 2.79%
Swedish Government 5.00% 2009	SKr17,290				2,698
Swedish Government 5.25% 2011		5,610			896
Swedish Government 4.00% 20122		8,000			1,201
Swedish Government 5.00% 2020		8,770			1,439
Nordea Hypotek AB 4.00% 20122		8,000			1,199
Stadshypotek AB 6.00% 20122		7,000			1,144
					8,577
MALAYSIAN RINGGIT — 1.83%
Malaysian Government 3.869% 2010	MYR3,050				931
Malaysian Government 3.718% 2012		8,060			2,437
Malaysian Government 4.262% 2016		6,910			2,114
Malaysian Government 3.814% 2017		520			154
					5,636
SINGAPORE DOLLARS — 1.78%
Singapore (Republic of) 4.375% 2009	S$2,590				1,846
Singapore (Republic of) 3.125% 2011		3,820			2,750
Singapore (Republic of) 3.75% 2016		1,160			873
					5,469
SOUTH KOREAN WON — 1.69%
South Korean Government 5.00% 2011	KRW1,090,000				1,140
South Korean Government 5.25% 2015		1,566,430			1,625
South Korean Government 5.00% 2016		2,390,000			2,431
					5,196
POLISH ZLOTY — 1.60%
Polish Government, Series 608, 5.75% 2008	PLN1,560			US$ 633
Polish Government 6.00% 2009		3,290			1,331
Polish Government 5.75% 2010		6,750			2,711
Polish Government 5.25% 2017		650			251
					4,926
HUNGARIAN FORINT — 1.59%
Hungarian Government 7.25% 2012	HUF449,050				2,579
Hungarian Government 6.75% 2017		407,250			2,298
					4,877
EGYPTIAN POUNDS — 1.37%
Egypt (Arab Republic of) Treasury Bill 0% 20083	EGP4,750				850
Egypt (Arab Republic of) Treasury Bill 0% 20083		4,000			713
Egypt (Arab Republic of) Treasury Bill 0% 20083		3,000			528
Egypt (Arab Republic of) Treasury Bill 0% 20083		1,525			269
Egypt (Arab Republic of) Treasury Bill 0% 20083		1,000			180
Egypt (Arab Republic of) Treasury Bill 0% 20083		550			99
Egypt (Arab Republic of) Treasury Bill 0% 20083		125			22
Egypt (Arab Republic of) 11.50% 20113		1,125			224
Egypt (Arab Republic of) 8.75% 20123		2,250			420
Egypt (Arab Republic of) 8.85% 20133		5,000			921
					4,226
MEXICAN PESOS — 1.28%
United Mexican States Government 9.00% 2012	MXN20,000				1,910
United Mexican States Government, Series MI10, 9.50% 2014		16,500			1,626
United Mexican States Government, Series M20, 10.00% 2024		3,800			406
					3,942
DANISH KRONER — 1.26%
Nykredit 5.00% 20382	DKr14,702				2,729
Nykredit 6.00% 20382,3		3,000			583
Nordea Kredit 5.00% 20382		2,988			556
					3,868
INDONESIAN RUPIAH — 1.07%
Indonesia (Republic of) 12.50% 2013	IDR 9,672,000				1,160
Indonesia (Republic of) 11.00% 2020		3,100,000			344
Indonesia (Republic of) 12.80% 2021		14,400,000			1,786
Indonesia (Republic of) 11.00% 2025		100,000			11
					3,301
TURKISH LIRE — 1.04%
Turkey (Republic of) Treasury Bill 0% 20083	TRY2,110				1,661
Turkey (Republic of) 10.00% 20123,4		629			562
Turkey (Republic of) 16.00% 20123		790			672
European Investment Bank 0% 2016		1,000			311
					3,206
BRAZILIAN REAIS — 1.01%
Brazil (Federal Republic of) 10.00% 20143	BRL2,600				1,284
Brazilian Treasury Bill 6.00% 20153,4		1,673			861
Brazil (Federal Republic of) 10.00% 20173		2,000			948
					3,093
CANADIAN DOLLARS — 0.53%
Canadian Government 3.75% 2008	C$ 460				463
Canadian Government 5.50% 2010		70			73
Canadian Government 4.50% 2015		1,050			1,095
					1,631
ARGENTINE PESOS — 0.23%
Argentina (Republic of) 5.83% 20332,3,4,5	ARS3,008			US$ 706
COLOMBIAN PESOS — 0.17%
Colombia (Republic of) Global 11.75% 2010	COP 17,000				9
Colombia (Republic of) Global 12.00% 2015		139,000			77
Colombia (Republic of) Global 9.85% 2027		882,000			438
					524
DOMINICAN PESOS — 0.07%
Cervecería Nacional Dominicana, C. por A. 16.00% 20123	DOP6,557				198
U.S. DOLLARS — 31.85%
U.S. Treasury 5.50% 2009	US$2,190				2,261
U.S. Treasury 4.25% 2011		1,090			1,127
U.S. Treasury 4.25% 20126		1,750			1,811
U.S. Treasury 4.875% 20126		5,642			5,984
U.S. Treasury 4.50% 20166		3,750			3,902
U.S. Treasury 5.125% 20166		6,175			6,683
U.S. Treasury 4.625% 20176		4,010			4,191
Freddie Mac 5.75% 2008		500			502
Freddie Mac, Series 3213, Class OG, principal only, 0% 20362		94			72
Freddie Mac, Series 3292, Class BO, principal only, 0% 20372,3,6		720			555
Freddie Mac 5.50% 20372,6		1,961			1,957
Freddie Mac 6.00% 20372,6		2,710			2,752
Freddie Mac 6.00% 20372,6		1,247			1,266
Freddie Mac 6.00% 20372		455			462
Freddie Mac 6.00% 20372		285			290
Freddie Mac 6.00% 20372		280			284
Fannie Mae 4.50% 20352		426			403
Fannie Mae, Series 2006-96, Class MO, principal only, 0% 20362,3		406			324
Fannie Mae 6.00% 20362		331			336
Fannie Mae 6.50% 20362		460			470
Fannie Mae 5.50% 20372		297			293
Fannie Mae 5.50% 20372		244			241
Fannie Mae 6.00% 20372,6		1,379			1,401
Fannie Mae 6.50% 20372		248			255
Fannie Mae 7.00% 20372		121			126
Federal Home Loan Bank 4.875% 2008		910			911
Federal Home Loan Bank 5.125% 2008		895			896
IndyMac IMSC Mortgage Loan Trust, Series 2007-F3, Class 2-A-1, 6.50% 20372		380			382
IndyMac IMSC Mortgage Loan Trust, Series 2007-F2, Class 2-A-1, 6.50% 20372,6		209			210
IndyMac IMSC Mortgage Loan Trust, Series 2007-F3, Class 3-A-1, 7.00% 20372		751			761
Comcast Corp. 6.30% 2017		670			696
Comcast Corp. 6.95% 2037		570			617
Nextel Communications, Inc., Series E, 6.875% 2013		285			281
Nextel Communications, Inc., Series F, 5.95% 2014		175			165
Sprint Capital Corp. 6.875% 2028		300			285
Sprint Capital Corp. 8.75% 2032		500			565
Washington Mutual Bank, FA, Series 16, 5.125% 2015		250			212
Washington Mutual, Inc. 7.25% 2017		500			441
Washington Mutual Preferred Funding I Ltd., Series A-1, 6.534% (undated)1,3,7		100			58
Washington Mutual Preferred Funding III Ltd. 6.895% (undated)1,7		300			177
Washington Mutual Preferred Funding IV Ltd. 9.75% (undated)1,7		300			240
Chase Issuance Trust, Series 2007-A9, Class A, 5.058% 20141,2		1,000			989
American General Finance Corp., Series J, 6.90% 2017		175			175
American International Group, Inc., Series G, 5.85% 2018		620			625
American International Group, Inc., Series A-1, 6.25% 20871		130			117
Goldman Sachs Group, Inc. 6.75% 2037		930			914
CSAB Mortgage-backed Trust, Series 2007-1, Class 4-A-8, 7.00% 20372		899			911
Gaz Capital SA 6.51% 20227		590			562
Gaz Capital SA, Series 9, 6.51% 2022		250			238
Gaz Capital SA 7.288% 20377		100			101
Barclays Bank PLC 5.926% (undated)1,7		160			149
Barclays Bank PLC 6.86% callable perpetual core tier one notes (undated)1,3,7		160			154
Barclays Bank PLC 7.434% (undated)1,7		495			515
Santander Perpetual, SA Unipersonal 6.671% (undated)1,7		800			804
Citigroup Capital XXI 8.30% 2057		760			796
Standard Chartered Bank 6.40% 20177		400			407
Standard Chartered PLC 6.409% (undated)1,7		400			363
Charles Schwab Corp., Series A, 6.375% 2017		125			129
Schwab Capital Trust I 7.50% 20371		630			635
Triad Automobile Receivables Trust, Series 2007-A, Class A-3, FSA insured, 5.28% 20122		720			722
HSBK (Europe) BV 7.75% 2013		235			224
HSBK (Europe) BV 7.25% 20177		305			266
HSBK (Europe) BV 7.25% 2017		265			231
Lehman Brothers Holdings Inc. 6.50% 2017		640			649
Nielsen Finance LLC, Term Loan B, 7.146% 20131,2		50			48
Nielsen Finance LLC and Nielsen Finance Co. 10.00% 2014		200			205
Nielsen Finance LLC and Nielsen Finance Co. 0%/12.50% 20168		530			375
CS First Boston Mortgage Securities Corp., Series 2004-C5, Class A-3, 4.499% 20372		100			98
CS First Boston Mortgage Securities Corp., Series 2007-5, Class 1-A-9, 7.00% 20372		320			324
CS First Boston Mortgage Securities Corp., Series 2005-C1, Class A-3, 4.813% 20382		200			197
American Tower Trust I, Series 2007-1A, Class A-FX, 5.42% 20372,3,6,7		550			533
American Tower Trust I, Series 2007-1A, Class E, 6.249% 20372,3,7		25			23
American Tower Trust I, Series 2007-1A, Class F, 6.639% 20372,3,7		40			36
Capmark Financial Group, Inc. 5.875% 20127		670			531
Capmark Financial Group, Inc. 6.30% 20177		50			37
CCH II, LLC and CCH II Capital Corp. 10.25% 2010		75			74
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 8.00% 20127		200			194
CCO Holdings, LLC and CCO Holdings Capital Corp. 8.75% 2013		40			38
Charter Communications Operating, LLC, Term Loan Facilities B, 6.99% 20141,2		75			70
CCH I, LLC and CCH I Capital Corp. 11.00% 2015		230			189
Tenet Healthcare Corp. 6.375% 2011		50			46
Tenet Healthcare Corp. 7.375% 2013		80			70
Tenet Healthcare Corp. 9.875% 2014		420			402
Tenet Healthcare Corp. 9.25% 2015		50			46
CVS Caremark Corp. 6.943% 20302,7		560			563
Univision Communications, Inc., Second Lien Term Loan, 7.345% 20091,2		25			24
Univision Communications Inc. 7.85% 2011		25			25
Univision Communications, Inc., First Lien Term Loan B, 7.21% 20141,2		70			64
Univision Communications Inc. 9.75% 20155,7		470			431
TransCanada PipeLines Ltd. 6.35% 20671		570			535
Merrill Lynch Mortgage Investors, Inc., Series 2006-A1, Class II-A-1, 6.141% 20361,2,3		401			375
Merrill Lynch Mortgage Investors, Inc., Series 2006-RM1, Class A-2B, 5.45% 20371,2,3		160			147
British Telecommunications PLC 5.95% 2018		500			505
Wells Fargo & Co. 5.625% 2017		500			501
GE Commercial Mortgage Corp., Series 2006-C1, Class A-4, 5.339% 20441,2		500			500
Royal Bank of Scotland Group PLC 6.99% (undated)1,7		500			499
Wells Fargo Mortgage-backed Securities Trust, Series 2004-7, Class II-A-1, 4.50% 20192		275			263
Wells Fargo Mortgage-backed Securities Trust, Series 2005-1, Class I-A-1, 4.75% 20202		242			234
Home Equity Mortgage Trust, Series 2006-2, Class 1A-1, 5.367% 20361,2,3		359			251
Home Equity Mortgage Trust, Series 2006-5, Class A-1, 5.50% 20371,2,3		416			237
Turkey (Republic of) 7.25% 20156		450			484
Countrywide Home Loans, Inc., Series M, 4.125% 2009		75			55
Countrywide Financial Corp., Series B, 5.80% 2012		585			428
Tengizchevroil Finance Co. S.àr.l., Series A, 6.124% 20142,7		250			237
Tengizchevroil Finance Co. S.àr.l., Series A, 6.124% 20142		250			237
TuranAlem Finance BV, Series 8, 8.25% 2037		400			342
TuranAlem Finance BV 8.25% 20377		150			128
NXP BV and NXP Funding LLC 7.993% 20131		175			162
NXP BV and NXP Funding LLC 9.50% 2015		300			276
Intergen Power 9.00% 20177		400			423
United Air Lines, Inc., Series 2000-2, Class A-2, 7.186% 20122		26			26
United Air Lines, Inc., Series 2007-1, Class A, 6.636% 20242,3		420			394
Hospitality Properties Trust 5.625% 2017		225			209
Hospitality Properties Trust 6.70% 2018		210			208
Continental Airlines, Inc., Series 1999-1, Class A, 6.545% 20202		58			58
Continental Airlines, Inc., Series 1999-2, Class B, 7.566% 20212		85			83
Continental Airlines, Inc., Series 2000-2, Class A-1, 7.707% 20222		74			78
Continental Airlines, Inc., Series 2000-1, Class A-1, 8.048% 20222		182			194
Atlas Copco AB 5.60% 20177		400			401
AOL Time Warner Inc. 7.625% 2031		145			161
Time Warner Inc. 6.50% 2036		240			234
Schering-Plough Corp. 6.00% 2017		380			394
AstraZeneca PLC 5.40% 2012		380			393
Argentina (Republic of) 3.368% 20121,2,3		600			333
Argentina (Republic of) GDP-Linked 2035		435			50
American Tower Corp. 7.125% 2012		50			52
American Tower Corp. 7.00% 20177		325			328
LUKOIL International Finance BV 6.356% 2017		300			286
LUKOIL International Finance BV 6.656% 20227		100			94
Edison Mission Energy 7.50% 2013		25			26
Edison Mission Energy 7.75% 2016		50			52
Midwest Generation, LLC, Series B, 8.56% 20162		79			85
Edison Mission Energy 7.20% 2019		100			99
Edison Mission Energy 7.625% 2027		125			118
GSR Mortgage Loan Trust, Series 2004-15F, Class 5A-1, 5.50% 20202		383			378
C10 Capital (SPV) Ltd. 6.722% (undated)1,7		400			369
Stora Enso Oyj 6.404% 20167		185			183
Stora Enso Oyj 7.25% 20367		180			180
Sunoco, Inc. 5.75% 2017		350			348
TL Acquisitions, Inc., Term Loan B, 7.60% 20141,2		75			71
Thomson Learning 10.50% 20157		260			251
Thomson Learning 0%/13.25% 20157,8		30			24
Residential Accredit Loans, Inc., Series 2003-QS16, Class A-1, 5.00% 20182,3		39			39
Residential Accredit Loans, Inc., Series 2007-QS11, Class A-1, 7.00% 20372		304			306
Constellation Brands, Inc. 8.375% 2014		75			76
Constellation Brands, Inc. 7.25% 20177		285			265
Safeway Inc. 6.35% 2017		310			324
Liberty Mutual Group Inc. 6.50% 20357		30			27
Liberty Mutual Group Inc. 7.50% 20367		120			117
Liberty Mutual Group Inc., Series A, 7.80% 20877		200			178
CanWest Media Inc., Series B, 8.00% 2012		260			247
CanWest MediaWorks Inc. 9.25% 20157		75			74
Ford Motor Credit Co. 7.375% 2009		25			24
Ford Motor Credit Co. 7.375% 2011		175			157
Ford Motor Co. 9.50% 2011		50			47
Ford Motor Co., Term Loan B, 8.00% 20131,2		50			46
Ford Motor Co. 6.50% 2018		60			44
J.C. Penney Corp., Inc. 5.75% 2018		330			311
Kraft Foods Inc. 6.125% 2018		300			303
Bank of America Corp. 5.75% 2017		300			301
General Electric Co. 5.25% 2017		300			300
Structured Asset Securities Corp., Series 2003-29, Class 1-A-1, 4.75% 20182		309			299
Williams Partners L.P. and Williams Partners Finance Corp. 7.50% 2011		100			105
Williams Companies, Inc. 8.125% 2012		50			55
Williams Companies, Inc. 8.75% 2032		110			135
Lehman Mortgage Trust, Series 2007-7, Class 6-A4, 7.00% 20372,3		132			132
Lehman Mortgage Trust, Series 2007-8, Class 3-A1, 7.25% 20372		157			161
Bausch & Lomb Inc. 9.875% 20157		275			280
Verizon Communications Inc. 5.50% 2017		270			272
SunGard Data Systems Inc. 3.75% 2009		250			244
SunGard Data Systems Inc. 9.125% 2013		26			27
Residential Funding Mortgage Securities II, Inc., Series 2007-HSA2, Class A-1F, MBIA insured, 8.47% 20371,2		268			267
Michaels Stores, Inc. 10.00% 2014		185			177
Michaels Stores, Inc. 11.375% 2016		50			46
Michaels Stores, Inc. 0%/13.00% 20168		75			42
National Grid PLC 6.30% 2016		250			256
Kansas City Southern Railway Co. 7.50% 2009		250			252
Allison Transmission Holdings, Inc. 11.00% 20157		225			206
Allison Transmission Holdings, Inc. 11.25% 20155,7		50			44
Washington Mutual Master Note Trust, Series 2007-A4A, Class A-4, 5.20% 20142,3,7		250			250
Prudential Financial, Inc., Series D, 6.00% 2017		250			249
Banc of America Commercial Mortgage Inc., Series 2005-1, Class A-4, 4.871% 20421,2		250			249
Corporación Andina de Fomento 5.75% 2017		250			248
Allied Waste North America, Inc., Series B, 5.75% 2011		200			197
Allied Waste North America, Inc., Series B, 6.125% 2014		50			48
Mizuho Capital Investment (USD) 1 Ltd. 6.686% noncumulative preferred (undated)1,7		260			244
Commercial Mortgage Trust, Series 2003-LNB1, Class A-2, 4.084% 20382		250			241
Hawker Beechcraft 8.50% 20157		125			125
Hawker Beechcraft 8.875% 20155,7		90			89
Hawker Beechcraft 9.75% 20177		25			25
Chubb Corp. 6.375% 20371		245			239
BBVA International SA Unipersonal 5.919% (undated)1,7		270			237
Quebecor Media Inc. 7.75% 20167		150			145
Quebecor Media Inc. 7.75% 2016		95			92
Lincoln National Corp. 7.00% 20661		235			236
Resona Bank, Ltd. 5.85% (undated)1,7		250			233
Credit-Based Asset Servicing and Securitization LLC, Series 2007-CB4, Class A-2B, 5.723% 20371,2		250			231
Overseas Shipholding Group, Inc. 8.25% 2013		225			229
Skandinaviska Enskilda Banken AB 5.471% (undated)1,7		250			226
WaMu Mortgage Pass-Through Certificates Trust, Series 2006-AR18, Class 1-A1, 5.347% 20371,2		227			225
US Investigations Serivces 10.50% 20157		200			184
US Investigations Serivces 11.75% 20167		45			39
SLM Corp., Series A, 5.40% 2011		240			219
E*TRADE Financial Corp. 8.00% 2011		250			218
Radio One, Inc., Series B, 8.875% 2011		125			117
Radio One, Inc. 6.375% 2013		115			96
Coventry Health Care, Inc. 6.30% 2014		200			205
ARAMARK Corp., Term Loan B, 6.83% 20141,2		21			20
ARAMARK Corp., Term Loan B, Letter of Credit, 6.83% 20141,2		1			1
ARAMARK Corp. 8.50% 2015		180			183
Nationwide Financial Services, Inc. 6.75% 20671		220			203
Tenneco Automotive Inc. 8.625% 2014		205			202
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CIBC12, Class A-3B, 5.317% 20371,2		200			201
AXA SA 6.379% (undated)1,7		230			199
HCA Inc., Term Loan B, 7.09% 20131,2		204			196
Cablevision Systems Corp., Series B, 8.00% 2012		200			195
Freescale Semiconductor, Inc., Term Loan B, 6.975% 20131,2		25			23
Freescale Semiconductor, Inc. 9.125% 20145		200			171
Glen Meadow Pass Through Trust 6.505% 20671,3,7		200			192
ORIX Corp. 5.48% 2011		185			185
Scottish Power PLC 5.375% 2015		185			179
Ashtead Group PLC 8.625% 20157		200			176
HSBC Holdings PLC 6.50% 2037		180			175
DAE Aviation Holdings, Inc. and Standard Aero Ltd., Term Loan B1, 8.58% 20141,2		43			42
DAE Aviation Holdings, Inc. and Standard Aero Ltd., Term Loan B2, 8.60% 20141,2		32			32
DAE Aviation Holdings, Inc. 11.25% 20157		90			95
First Data Corp., Term Loan B2, 7.634% 20141,2		175			166
Federated Retail Holdings, Inc. 5.35% 2012		85			83
Federated Retail Holdings, Inc. 5.90% 2016		85			80
Pinnacle Entertainment, Inc. 7.50% 20157		175			160
Chohung Bank 4.50% 20141,3,7		160			157
Gabonese Republic 8.20% 20176,7		150			156
Jefferson Smurfit Corp. (U.S.) 8.25% 2012		20			20
Stone Container Corp. 8.375% 2012		125			125
Jefferson Smurfit Corp. (U.S.) 7.50% 2013		10			10
Enterprise Products Operating LP 8.375% 20661		50			51
Enterprise Products Operating LP 7.034% 20681		110			100
Westfield Capital Corp. Ltd., WT Finance (Australia) Pty Ltd. and WEA Finance LLC 5.125% 20147		160			150
Texas Competitive Electric Holding Co. LLC 10.25% 20157		75			75
Texas Competitive Electric Holding Co. LLC 10.25% 20157		75			75
American Media Operations, Inc., Series B, 10.25% 2009		165			141
American Media Operations, Inc., Series B, 10.25% 2009		6			5
D.R. Horton, Inc. 5.25% 2015		15			12
D.R. Horton, Inc. 5.625% 2016		35			29
D.R. Horton, Inc. 6.50% 2016		120			104
Metals USA Holdings Corp. 11.231% 20121,5,7		50			41
Metals USA, Inc. 11.125% 2015		100			104
Carrington Mortgage Loan Trust, Series 2006-NC5, Class A-5, 4.925% 20371,2		153			145
Allstate Corp., Series B, 6.125% 20671		150			145
Idearc Inc. 8.00% 2016		155			143
Securitized Asset-backed Receivables LLC Trust, Series 2006-HE2, Class A-2C, 5.015% 20361,2		175			142
NRG Energy, Inc. 7.25% 2014		145			142
K N Energy, Inc. 7.25% 2028		150			142
Kinder Morgan Energy Partners LP 6.00% 2017		140			140
Toys “R” Us, Inc. 7.625% 2011		165			140
Hanesbrands Inc., Series B, 8.204% 20141		140			139
Kroger Co. 6.40% 2017		130			136
Hertz Corp. 10.50% 2016		125			130
Sanmina-SCI Corp. 6.75% 2013		30			26
Sanmina-SCI Corp. 8.125% 2016		115			102
Abu Dhabi National Energy Co. PJSC (TAQA) 5.875% 20167		130			127
LBI Media, Inc. 8.50% 20177		130			126
Nalco Co. 7.75% 2011		75			76
Nalco Co. 8.875% 2013		25			26
Nalco Finance Holdings LLC and Nalco Finance Holdings Inc. 0%/9.00% 20148		25			23
Centex Corp. 6.50% 2016		140			125
Sally Holdings LLC and Sally Capital Inc. 9.25% 2014		125			124
Stater Bros. Holdings Inc. 8.125% 2012		125			124
Serena Software, Inc. 10.375% 2016		125			124
Centennial Communications Corp. 10.00% 2013		75			78
Centennial Communications Corp. 10.981% 20131		40			41
Fifth Third Capital Trust IV 6.50% 20671		130			118
Young Broadcasting Inc. 10.00% 2011		150			118
Drummond Co., Inc. 7.375% 20167		125			117
Ceridian Corp. 11.25% 20157		125			116
Residential Capital Corp. 7.875% 20101		50			32
Residential Capital, LLC 8.00% 20121		70			43
General Motors Acceptance Corp. 6.75% 2014		50			40
Realogy Corp., Term Loan B, 8.24% 20131,2		20			17
Realogy Corp., Term Loan B, Letter of Credit, 8.24% 20131,2		5			5
Realogy Corp. 10.50% 20147		100			75
Realogy Corp. 11.00% 20145,7		25			17
HVB Funding Trust I 8.741% 20317		100			111
Catlin Insurance Ltd. 7.249% (undated)1,7		120			110
Development Bank of Singapore Ltd. 7.125% 20117		100			106
Structured Adjustable Rate Mortgage Loan Trust, Series 2007-6, Class 3-A-1, 5.91% 20371,2		106			103
AMC Entertainment Inc. 8.00% 2014		25			24
AMC Entertainment Inc., Series B, 11.00% 2016		75			79
Rural Cellular Corp. 8.124% 20131		100			102
Albertson’s, Inc. 8.00% 2031		100			102
AEP Texas Central Transitioning Funding II LLC, Senior Secured Transition Bonds, Series A, Class A-2, 4.98% 20132		100			102
R.H. Donnelley Corp., Series A-1, 6.875% 2013		40			36
R.H. Donnelley Corp. 8.875% 20177		70			65
THL Buildco, Inc. 8.50% 2014		125			101
Mylan Inc., Term Loan B, 8.313% 20141,2		100			99
SBC Communications Inc. 5.10% 2014		100			99
Southern Natural Gas Co. 5.90% 20177		100			99
Countrywide Alternative Loan Trust, Series 2007-HY4, Class 4-A-1, 5.967% 20471,2		101			97
JBS SA 10.50% 2016		100			97
Celestica Inc. 7.875% 2011		90			87
Celestica Inc. 7.625% 2013		10			9
Hawaiian Telcom Communications, Inc. 9.75% 2013		25			25
Hawaiian Telcom Communications, Inc., Term Loan C, 7.08% 20141,2		20			19
Hawaiian Telcom Communications, Inc., Series B, 12.50% 2015		50			52
Petroplus Finance Ltd. 6.75% 20147		100			94
Sumitomo Mitsui Banking Corp. 5.625% (undated)1,7		100			94
TRW Automotive Inc. 7.00% 20147		100			92
Viacom Inc. 6.25% 2016		90			91
Merrill Lynch & Co., Inc. 6.11% 2037		100			89
PTS Acquisition Corp. 9.50% 20155,7		95			89
Morris Publishing Group, LLC and Morris Publishing Finance Co., Series B, 7.00% 2013		120			88
DRS Technologies, Inc. 6.875% 2013		60			60
DRS Technologies, Inc. 7.625% 2018		25			25
Banco Mercantil del Norte, SA 6.135% 20167		85			84
Boyd Gaming Corp. 7.75% 2012		10			10
Boyd Gaming Corp. 6.75% 2014		25			24
Boyd Gaming Corp. 7.125% 2016		50			47
Merrill Lynch Mortgage Trust, Series 2006-C1, Class A-3, 5.659% 20391,2		80			81
Burlington Coat Factory Warehouse Corp. 11.125% 2014		100			81
American Airlines, Inc., Series 2001-2, Class A-2, 7.858% 2013		75			79
HealthSouth Corp. 10.75% 2016		75			79
K. Hovnanian Enterprises, Inc. 8.875% 2012		20			11
K. Hovnanian Enterprises, Inc. 7.75% 2013		25			14
K. Hovnanian Enterprises, Inc. 6.50% 2014		50			35
K. Hovnanian Enterprises, Inc. 6.25% 2016		25			17
Telecom Italia Capital SA 7.20% 2036		70			77
Duane Reade Inc. 9.75% 2011		85			77
Navios Maritime Holdings Inc. 9.50% 2014		75			77
Ambac Financial Group, Inc. 6.15% 20871		105			77
Intelsat (Bermuda), Ltd. 8.625% 2015		50			50
Intelsat (Bermuda), Ltd. 11.25% 2016		25			26
Standard Pacific Corp. 5.125% 2009		25			20
Standard Pacific Corp. 6.50% 2010		75			51
Standard Pacific Corp. 7.00% 2015		5			3
Georgia-Pacific Corp. 8.125% 2011		35			36
Georgia-Pacific Corp. 9.50% 2011		35			37
VWR International, Inc. 10.25% 20151,5,7		75			72
Education Management LLC and Education Management Finance Corp. 8.75% 2014		50			50
Education Management LLC and Education Management Finance Corp. 10.25% 2016		20			21
MetroPCS Wireless, Inc. 9.25% 2014		75			71
TEPPCO Partners LP 7.00% 20671		75			69
Surgical Care Affiliates, Inc. 8.875% 20155,7		50			46
Surgical Care Affiliates, Inc. 10.00% 20177		25			23
Mediacom Broadband LLC and Mediacom Broadband Corp. 8.50% 2015		75			67
Warner Music Group 7.375% 2014		85			66
Level 3 Financing, Inc. 9.25% 2014		70			64
AEP Industries Inc. 7.875% 2013		65			62
Local T.V. Finance LLC 9.25% 20155,7		60			58
Northern Rock PLC 6.594% (undated)1,3,7		100			57
Windstream Corp. 8.625% 2016		50			53
Lafarge 6.15% 2011		50			51
Atlantic Broadband Finance, LLC and Atlantic Broadband Finance, Inc. 9.375% 2014		55			51
TransDigm Inc. 7.75% 2014		50			51
Hughes Communications, Inc. 9.50% 2014		50			51
Lazard Group LLC 6.85% 2017		50			49
Elizabeth Arden, Inc. 7.75% 2014		50			49
Mandalay Resort Group 6.375% 2011		25			25
MGM MIRAGE 6.75% 2013		25			24
Smithfield Foods, Inc. 7.75% 2017		50			49
Yankee Candle Co., Inc., Series B, 8.50% 2015		45			42
Tyson Foods, Inc. 6.85% 20161		40			41
Accuride Corp. 8.50% 2015		50			41
Freeport-McMoRan Copper & Gold Inc. 8.25% 2015		35			37
Neiman Marcus Group, Inc. 9.00% 20155		35			36
Qwest Capital Funding, Inc. 7.25% 2011		25			25
U S WEST Communications, Inc. 6.875% 2033		10			9
Liberty Media Corp. 8.25% 2030		35			34
Crown Castle Towers LLC, Series 2006-1, Class F, 6.650% 20362,3,7		35			33
William Lyon Homes, Inc. 10.75% 2013		25			15
William Lyon Homes, Inc. 7.50% 2014		25			15
Universal Hospital Services, Inc. 8.288% 20151		20			20
Universal Hospital Services, Inc. 8.50% 20155		10			10
DaimlerChrysler Financial Services Americas LLC, First Lien Term Loan, 9.00% 20121,2		5			5
DaimlerChrysler Financial Services Americas LLC, Second Lien Term Loan, 11.50% 20131,2		25			22
Team Finance LLC and Health Finance Corp. 11.25% 2013		25			27
Berry Plastics Holding Corp. 10.25% 2016		30			26
DynCorp International and DIV Capital Corp., Series A, 9.50% 2013		25			26
Alion Science and Technology Corp. 10.25% 2015		30			26
Seneca Gaming Corp., Series B, 7.25% 2012		25			25
Esterline Technologies Corp. 6.625% 2017		25			25
Wynn Las Vegas, LLC and Wynn Las Vegas Capital Corp. 6.625% 2014		25			25
Goodyear Tire & Rubber Co. 8.625% 2011		23			24
Cooper-Standard Automotive Inc. 7.00% 2012		25			22
Claire’s Stores, Inc., Term Loan, 7.595% 20141,2		25			21
Warner Chilcott Corp. 8.75% 2015		20			21
Boise Cascade, LLC and Boise Cascade Finance Corp. 7.125% 2014		20			19
Building Materials Corp. of America 7.75% 2014		25			19
Sensata Technologies BV 8.00% 20141		20			19
Northwest Airlines, Inc., Term Loan B, 8.33% 20131,2		9			9
Northwest Airlines, Inc., Term Loan A, 6.58% 20181,2		10			9
Toll Brothers, Inc. 4.95% 2014		15			13
Toll Brothers, Inc. 5.15% 2015		5			5
Meritage Homes Corp. 6.25% 2015		25			18
Georgia Gulf Corp. 9.50% 2014		20			16
Goodman Global Holdings, Inc., Series B, 7.875% 2012		15			16
Viant Holdings Inc. 10.125% 20177		15			14
Dole Food Co., Inc. 8.875% 2011		10			9
Riddell Bell Holdings Inc. 8.375% 2012		10			9
MagnaChip Semiconductor SA and MagnaChip Semiconductor Finance Co. 8.00% 2014		10			8
ACIH, Inc. 11.50% 20127		10			6
					97,903
Total bonds, notes & other debt instruments (cost: $263,190,000)					267,609
Preferred stocks — 1.57%	Shares
EUROS — 0.75%
Commerzbank Capital Funding Trust I, Class B, 5.012% noncumulative1		750,000			970
Barclays Bank PLC 4.75%1		620,000			719
Allied Irish Banks, PLC 4.781%1		525,000			624
					2,313
U.S. DOLLARS — 0.30%
MUFG Capital Finance 1 Ltd. 6.346% noncumulative1		600,000			569
Sumitomo Mitsui Banking Corp. 6.078%1,7		226,000			209
XL Capital Ltd., Series E, 6.50%1		155			136
					914
BRITISH POUNDS — 0.06%
Sumitomo Mitsui Banking Corp. 6.164%1		100,000			179
MISCELLANEOUS — 0.46%
Other preferred stocks in initial period of acquisition					1,409
Total preferred stocks (cost: $4,787,000)					4,815
	Principal amount
Short-term securities — 8.93%		(000	)
BP Capital Markets PLC 4.20% due 2/14/20086,7	US$5,100				5,073
Liberty Street Funding Corp. 6.25% due 1/2/20087		2,400			2,399
ING (U.S.) Funding LLC 5.15% due 1/9/2008		2,400			2,397
American Honda Finance Corp. 4.50% due 1/3/20086		2,300			2,299
BASF AG 4.52% due 1/24/20086,7		2,200			2,193
HBOS Treasury Services PLC 4.80% due 1/15/20086		2,040			2,036
Fannie Mae 4.24% due 1/22/2008		2,000			1,995
Electricité de France 4.30% due 3/10/20086		1,800			1,784
Coca-Cola Co. 4.20% due 1/9/20087		1,600			1,598
General Electric Capital Corp. 4.15% due 1/2/2008		1,300			1,300
Danske Corp. 4.82% due 1/17/20087		1,300			1,297
Calyon North America Inc. 4.50% due 2/21/20086		1,177			1,169
Variable Funding Capital Corp. 5.30% due 1/17/20087		900			898
Bank of Ireland 4.90% due 1/28/20087		600			598
National Australia Funding (Delaware) Inc. 4.55% due 1/11/20087		400			399
Total short-term securities (cost: $27,437,000)					27,435
Total investment securities (cost: $295,414,000)					299,859
Other assets less liabilities					7,541
Net assets				US$307,400

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

1 Coupon rate may change periodically.

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

3 Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities was $24,819,000.

4 Index-linked bond whose principal amount moves with a government retail price index.

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

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

7 Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $30,220,000, which represented 9.83% of the net assets of the fund.

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

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

High-Income Bond Fund

Investment portfolio

December 31, 2007

Bonds, notes & other debt instruments — 84.64%	Principal amount (000)			Market value (000)
CONSUMER DISCRETIONARY — 23.71%
CCH II, LLC and CCH II Capital Corp. 10.25% 2010	$	1,167		$	1,149
Charter Communications Holdings, LLC and Charter Communications Holdings Capital Corp. 13.50% 2011		1,050			872
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 8.00% 20121		2,875			2,789
Charter Communications Holdings, LLC and Charter Communications Holdings Capital Corp. 12.125% 2012		1,000			740
CCO Holdings, LLC and CCO Holdings Capital Corp. 8.75% 2013		6,208			5,960
Charter Communications Operating, LLC, Term Loan Facilities B, 6.99% 20142,3,4		8,225			7,699
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 8.375% 20141		1,025			997
CCH I, LLC and CCH I Capital Corp. 11.00% 2015		6,975			5,719
Univision Communications, Inc., Second Lien Term Loan, 7.345% 20092,3,4		500			490
Univision Communications, Inc., First Lien Term Loan B, 7.21% 20142,3,4		4,850			4,430
Univision Communications Inc. 9.75% 20151,5		13,990			12,818
General Motors Corp. 7.20% 2011		1,485			1,370
General Motors Corp. 7.125% 2013		4,020			3,497
General Motors Corp. 7.25% 2013	€	400			520
General Motors Corp. 7.70% 2016	$	900			765
General Motors Corp. 8.80% 2021		7,957			6,724
General Motors Corp. 8.25% 2023		250			200
General Motors Corp. 8.375% 2033		700			567
Michaels Stores, Inc., Term Loan B, 7.625% 20132,3,4		2,239			2,067
Michaels Stores, Inc. 10.00% 2014		7,575			7,234
Michaels Stores, Inc. 0%/13.00% 20166		575			318
Michaels Stores, Inc. 11.375% 2016		1,800			1,661
Dex Media West LLC, Dex Media West Finance Co., Series B, 8.50% 2010		800			815
Dex Media, Inc., Series B, 0%/9.00% 20136		250			229
Dex Media, Inc., Series B, 0%/9.00% 20136		250			229
R.H. Donnelley Corp., Series A-2, 6.875% 2013		1,275			1,147
R.H. Donnelley Corp., Series A-1, 6.875% 2013		225			202
Dex Media, Inc., Series B, 8.00% 2013		2,575			2,433
R.H. Donnelley Corp., Series A-3, 8.875% 2016		1,675			1,574
R.H. Donnelley Corp. 8.875% 20171		4,785			4,450
TL Acquisitions, Inc., Term Loan B, 7.60% 20142,3,4		2,943			2,790
Thomson Learning 0%/13.25% 20151,6		1,620			1,290
Thomson Learning 10.50% 20151		4,650			4,493
Allison Transmission Holdings, Inc. 11.00% 20151		1,000			915
Allison Transmission Holdings, Inc. 11.25% 20151,5		8,050			7,144
Sun Media Corp. 7.625% 2013		1,500			1,468
Quebecor Media Inc. 7.75% 20161		3,450			3,329
Quebecor Media Inc. 7.75% 2016		3,350			3,233
K. Hovnanian Enterprises, Inc. 6.00% 2010		3,000			1,950
K. Hovnanian Enterprises, Inc. 8.875% 2012		1,030			592
K. Hovnanian Enterprises, Inc. 6.375% 2014		1,075			758
K. Hovnanian Enterprises, Inc. 6.50% 2014		495			349
K. Hovnanian Enterprises, Inc. 6.25% 2015		920			635
K. Hovnanian Enterprises, Inc. 6.25% 2016		1,575			1,079
K. Hovnanian Enterprises, Inc. 7.50% 2016		2,990			2,108
K. Hovnanian Enterprises, Inc. 8.625% 2017		695			511
CanWest Media Inc., Series B, 8.00% 2012		7,076			6,713
CanWest MediaWorks Inc. 9.25% 20151		750			738
Mirage Resorts, Inc. 6.75% 2008		500			502
MGM MIRAGE 6.00% 2009		1,000			1,000
MGM MIRAGE 6.75% 2012		1,050			1,028
MGM MIRAGE 6.75% 2013		3,130			3,052
MGM MIRAGE 6.625% 2015		1,550			1,461
American Media Operations, Inc., Series B, 10.25% 2009		4,375			3,746
American Media Operations, Inc., Series B, 10.25% 2009		159			136
American Media Operations, Inc. 8.875% 2011		3,480			2,962
American Media Operations, Inc. 8.875% 2011		127			108
Ford Capital BV 9.50% 2010		200			189
Ford Motor Co., Term Loan B, 8.00% 20132,3,4		1,990			1,846
Ford Motor Co. 6.50% 2018		5,614			4,161
Ford Motor Co. 8.875% 2022		785			628
CSC Holdings, Inc., Series B, 8.125% 2009		3,650			3,718
Cablevision Systems Corp., Series B, 8.00% 2012		2,690			2,623
Tenneco Automotive Inc., Series B, 10.25% 2013		772			826
Tenneco Automotive Inc. 8.625% 2014		3,535			3,491
Tenneco Automotive Inc. 8.125% 20151		1,750			1,741
Idearc Inc. 8.00% 2016		6,400			5,904
Young Broadcasting Inc. 10.00% 2011		7,467			5,871
Toys “R” Us, Inc. 7.625% 2011		5,455			4,623
Toys “R” Us-Delaware, Inc., Term Loan B, 9.155% 20122,3,4		1,244			1,205
Education Management LLC and Education Management Finance Corp. 8.75% 2014		1,350			1,362
Education Management LLC and Education Management Finance Corp. 10.25% 2016		3,995			4,135
Cinemark USA, Inc., Term Loan B, 6.64% 20132,3,4		3,123			2,966
Cinemark, Inc. 0%/9.75% 20146		2,625			2,458
Pinnacle Entertainment, Inc. 7.50% 20151		5,500			5,019
NTL Cable PLC 8.75% 2014		3,590			3,581
NTL Cable PLC 8.75% 2014	€	500			715
NTL Cable PLC 9.75% 2014	£	300			576
Burlington Coat Factory Warehouse Corp. 11.125% 2014	$	5,675			4,583
Radio One, Inc., Series B, 8.875% 2011		4,000			3,755
Radio One, Inc. 6.375% 2013		900			748
Boyd Gaming Corp. 7.75% 2012		1,300			1,323
Boyd Gaming Corp. 6.75% 2014		1,550			1,484
Boyd Gaming Corp. 7.125% 2016		1,725			1,639
Claire’s Stores, Inc., Term Loan, 7.595% 20142,3,4		4,169			3,538
Claire’s Stores, Inc. 9.25% 20151		1,250			869
Morris Publishing Group, LLC and Morris Publishing Finance Co., Series B, 7.00% 2013		6,000			4,387
Local T.V. Finance LLC 9.25% 20151,5		4,485			4,306
Bon-Ton Department Stores, Inc. 10.25% 2014		5,400			4,104
LBI Media, Inc. 8.50% 20171		4,210			4,078
Standard Pacific Corp. 5.125% 2009		1,675			1,332
Standard Pacific Corp. 6.50% 2010		675			462
Standard Pacific Corp. 6.875% 2011		300			202
Standard Pacific Corp. 6.25% 2014		700			465
Standard Pacific Corp. 7.00% 2015		1,935			1,287
Grupo Posadas, SA de CV 8.75% 20111		3,450			3,545
Kabel Deutschland GmbH 10.625% 2014		3,350			3,534
Beazer Homes USA, Inc. 8.125% 2016		4,350			3,262
Neiman Marcus Group, Inc. 9.00% 20155		3,095			3,207
Hanesbrands Inc., Series B, 8.204% 20142		3,215			3,199
Wynn Las Vegas, LLC and Wynn Las Vegas Capital Corp. 6.625% 2014		3,225			3,185
Vidéotron Ltée 6.875% 2014		1,995			1,963
Vidéotron Ltée 6.375% 2015		1,220			1,151
Edcon Pty Ltd. 8.198% 20142	€	2,500			3,066
Delphi Automotive Systems Corp. 6.50% 20097	$	3,500			2,117
Delphi Corp. 6.50% 20137		555			325
Delphi Automotive Systems Corp. 6.55% 20067		250			150
Delphi Automotive Systems Corp. 7.125% 20297		750			461
Viacom Inc. 5.75% 2011		3,000			3,040
Liberty Media Corp. 7.875% 2009		1,000			1,020
Liberty Media Corp. 8.25% 2030		2,000			1,929
Circus and Eldorado Joint Venture and Silver Legacy Resort Casino 10.125% 2012		2,750			2,853
iesy Repository GmbH 10.125% 2015	€	500			765
iesy Repository GmbH 10.375% 20151	$	2,000			2,050
DaimlerChrysler Financial Services Americas LLC, First Lien Term Loan, 9.00% 20122,3,4		1,077			1,039
DaimlerChrysler Financial Services Americas LLC, Second Lien Term Loan, 11.50% 20132,3,4		1,775			1,577
Mohegan Tribal Gaming Authority 6.375% 2009		1,695			1,703
Mohegan Tribal Gaming Authority 6.125% 2013		250			246
Mohegan Tribal Gaming Authority 7.125% 2014		575			559
Atlantic Broadband Finance, LLC and Atlantic Broadband Finance, Inc. 9.375% 2014		2,675			2,488
AMC Entertainment Inc. 8.00% 2014		500			473
AMC Entertainment Inc., Series B, 11.00% 2016		1,750			1,851
KB Home 5.875% 2015		685			594
KB Home 6.25% 2015		1,810			1,584
Seneca Gaming Corp., Series B, 7.25% 2012		2,125			2,152
Riddell Bell Holdings Inc. 8.375% 2012		2,200			1,991
Goodyear Tire & Rubber Co. 8.663% 20092		675			683
Goodyear Tire & Rubber Co. 8.625% 2011		1,142			1,196
Sealy Mattress Co. 8.25% 2014		1,950			1,872
Sally Holdings LLC and Sally Capital Inc. 9.25% 2014		1,850			1,841
WDAC Intermediate Corp. 8.375% 20141		1,450			1,450
WDAC Intermediate Corp. 8.50% 2014	€	250			344
Visteon Corp. 8.25% 2010	$	2,000			1,780
William Lyon Homes, Inc. 10.75% 2013		1,750			1,059
William Lyon Homes, Inc. 7.50% 2014		1,125			681
Warner Music Group 7.375% 2014		2,000			1,550
Dollarama Group LP and Dollarama Corp. 8.875% 2012		1,500			1,538
J.C. Penney Co., Inc. 8.00% 2010		750			781
J.C. Penney Co., Inc. 9.00% 2012		495			557
Mediacom Broadband LLC and Mediacom Broadband Corp. 8.50% 2015		1,500			1,337
D.R. Horton, Inc. 8.00% 2009		875			851
D.R. Horton, Inc. 7.875% 2011		300			285
D.R. Horton, Inc. 6.875% 2013		200			179
Meritage Corp. 7.00% 2014		500			360
Meritage Homes Corp. 6.25% 2015		1,300			910
Royal Caribbean Cruises Ltd. 8.00% 2010		875			909
Royal Caribbean Cruises Ltd. 8.75% 2011		275			288
DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. 8.375% 2013		1,021			1,067
Dillard’s, Inc. 6.625% 2008		700			699
Dillard Department Stores, Inc. 9.125% 2011		350			357
Clear Channel Communications, Inc. 5.75% 2013		695			576
Clear Channel Communications, Inc. 5.50% 2014		605			462
Regal Cinemas Corp., Series B, 9.375% 20128		1,000			1,028
Gaylord Entertainment Co. 8.00% 2013		500			500
Gaylord Entertainment Co. 6.75% 2014		500			474
TRW Automotive Inc. 7.00% 20141		1,000			925
Dollar General Corp. 10.625% 20151		425			392
Dollar General Corp. 11.875% 20171,5		375			285
Warnaco, Inc. 8.875% 2013		500			510
Harrah’s Operating Co., Inc. 5.625% 2015		400			292
Carmike Cinemas, Inc., Term Loan B, 8.65% 20122,3,4		289			283
Cooper-Standard Automotive Inc. 7.00% 2012		250			218
Ryland Group, Inc. 5.375% 2008		167			166
KAC Acquisition Corp. 8.00% 20261,5,8		84			84
Stoneridge, Inc. 11.50% 2012		10			10
					315,813
INDUSTRIALS — 11.87%
Nielsen Finance LLC, Term Loan B, 7.146% 20132,3,4		249			237
Nielsen Finance LLC and Nielsen Finance Co. 10.00% 2014		7,600			7,809
Nielsen Finance LLC and Nielsen Finance Co. 0%/12.50% 20166		9,965			7,050
DAE Aviation Holdings, Inc. and Standard Aero Ltd., Term Loan B1, 8.58% 20142,3,4		3,463			3,443
DAE Aviation Holdings, Inc. and Standard Aero Ltd., Term Loan B2, 8.60% 20142,3,4		2,622			2,607
DAE Aviation Holdings, Inc. 11.25% 20151		6,845			7,256
Calair LLC and Calair Capital Corp. 8.125% 2008		1,000			1,005
Continental Airlines, Inc. 8.75% 2011		1,250			1,184
Continental Airlines, Inc., Series 1998-1, Class B, 6.748% 20183		553			535
Continental Airlines, Inc., Series 1997-4, Class A, 6.90% 20193		721			732
Continental Airlines, Inc., Series 2000-2, Class B, 8.307% 20193		1,400			1,394
Continental Airlines, Inc., Series 1999-1, Class A, 6.545% 20203		733			738
Continental Airlines, Inc., Series 2003-ERJ3, Class A, 7.875% 20203		2,800			2,667
Continental Airlines, Inc., Series 2001-1, Class A-1, 6.703% 20223		1,712			1,717
Continental Airlines, Inc., Series 2000-2, Class A-1, 7.707% 20223		986			1,031
Continental Airlines, Inc., Series 2000-1, Class B, 8.388% 20223		874			870
American Airlines, Inc., Series 1999-1, Class B, 7.324% 20113		1,855			1,834
American Airlines, Inc., Series 2001-1, Class A-2, 6.817% 20123		2,000			1,940
American Airlines, Inc., Series 2001-2, Class A-2, 7.858% 20133		1,440			1,513
American Airlines, Inc., Series 2001-1, Class B, 7.377% 20193		3,409			3,123
AMR Corp. 10.00% 20218		1,000			913
Hawker Beechcraft 8.50% 20151		725			727
Hawker Beechcraft 8.875% 20151,5		8,110			8,049
Hawker Beechcraft 9.75% 20171		250			249
Allied Waste North America, Inc., Series B, 6.50% 2010		1,000			1,005
Allied Waste North America, Inc., Series B, 5.75% 2011		1,500			1,477
Allied Waste North America, Inc. 7.875% 2013		400			411
Allied Waste North America, Inc., Series B, 6.125% 2014		1,750			1,691
Allied Waste North America, Inc., Series B, 7.375% 2014		3,100			3,108
Allied Waste North America, Inc. 7.25% 2015		100			100
Allied Waste North America, Inc. 6.875% 2017		700			686
Delta Air Lines, Inc., Term Loan A, 6.84% 20122,3,4		2,000			1,890
Delta Air Lines, Inc., Series 2000-1, Class A-2, 7.57% 20123		2,500			2,528
Delta Air Lines, Inc., Second Lien Term Loan B, 8.082% 20142,3,4		2,985			2,854
DRS Technologies, Inc. 6.875% 2013		3,575			3,575
DRS Technologies, Inc. 6.625% 2016		2,000			1,985
DRS Technologies, Inc. 7.625% 2018		875			890
NTK Holdings Inc. 0%/10.75% 20143,6		5,250			3,098
THL Buildco, Inc. 8.50% 2014		3,935			3,168
ARAMARK Corp., Term Loan B, 6.83% 20142,3,4		2,301			2,194
ARAMARK Corp., Term Loan B, Letter of Credit, 6.83% 20142,3,4		164			157
ARAMARK Corp. 8.411% 20152		100			98
ARAMARK Corp. 8.50% 2015		3,375			3,434
US Investigations Services, Inc., Term Loan B, 7.91% 20152,3,4		997			944
US Investigations Services 10.50% 20151		2,925			2,691
US Investigations Services 11.75% 20161		2,500			2,188
Northwest Airlines, Inc., Term Loan B, 8.33% 20132,3,4		2,283			2,197
Northwest Airlines, Inc., Term Loan A, 6.58% 20182,3,4		3,572			3,465
Ashtead Group PLC 8.625% 20151		2,050			1,804
Ashtead Capital, Inc. 9.00% 20161		4,125			3,671
United Air Lines, Inc., Series 2000-2, Class A-2, 7.186% 20123		1,520			1,525
United Air Lines, Inc., Series 2001-1, Class A-1, 6.071% 20143		651			653
United Air Lines, Inc., Term Loan B, 7.125% 20142,3,4		1,434			1,345
United Air Lines, Inc., Series 2001-1, Class A-3, 6.602% 20153		1,127			1,128
United Air Lines, Inc., Series 2007-1, Class B, 7.336% 20211,3,8		500			463
DynCorp International and DIV Capital Corp., Series A, 9.50% 2013		4,319			4,519
Alion Science and Technology Corp. 10.25% 2015		5,190			4,450
TransDigm Inc. 7.75% 2014		4,075			4,157
Goodman Global Holdings, Inc., Series B, 7.875% 2012		2,945			3,048
Goodman Global Holdings, Inc., Series B, 7.991% 20122		359			358
Kansas City Southern Railway Co. 9.50% 2008		685			702
Kansas City Southern Railway Co. 7.50% 2009		2,365			2,380
RBS Global, Inc. and Rexnord LLC 9.50% 2014		2,575			2,562
RBS Global, Inc. and Rexnord LLC 8.875% 2016		500			478
Sequa Corp., Term Loan B, 8.08% 20142,3,4		3,000			2,948
TFM, SA de CV 9.375% 2012		2,150			2,263
Atrium Companies, Inc., Term Loan B, 8.46% 20122,3,4		1,485			1,382
ACIH, Inc. 11.50% 20121		1,225			704
Esterline Technologies Corp. 6.625% 2017		2,000			1,990
Accuride Corp. 8.50% 2015		2,390			1,948
RSC Holdings III, LLC, Second Lien Term Loan B, 8.75% 20132,3,4		1,753			1,635
United Rentals (North America), Inc., Series B, 6.50% 2012		1,750			1,597
Hertz Corp. 10.50% 2016		1,275			1,326
Navios Maritime Holdings Inc. 9.50% 2014		1,175			1,207
FTI Consulting, Inc. 7.625% 2013		1,000			1,030
Terex Corp. 7.375% 2014		1,000			1,018
Quebecor World Inc. 8.75% 20161		1,000			741
H&E Equipment Services, Inc. 8.375% 2016		685			637
					158,126
FINANCIALS — 7.82%
Residential Capital, LLC 5.646% 20082		1,250			1,075
Residential Capital Corp. 8.544% 20091,2		2,750			1,368
Residential Capital Corp. 7.875% 20102		4,675			3,015
General Motors Acceptance Corp. 7.25% 2011		2,197			1,927
General Motors Acceptance Corp. 6.625% 2012		500			416
General Motors Acceptance Corp. 6.875% 2012		300			252
General Motors Acceptance Corp. 7.00% 2012		1,450			1,231
Residential Capital, LLC 8.00% 20122		990			614
General Motors Acceptance Corp. 6.75% 2014		2,565			2,071
General Motors Acceptance Corp. 7.324% 20142		1,650			1,326
General Motors Acceptance Corp. 8.00% 2031		480			404
Ford Motor Credit Co. 5.80% 2009		1,000			949
Ford Motor Credit Co. 7.375% 2009		475			447
Ford Motor Credit Co. 7.875% 2010		2,125			1,962
Ford Motor Credit Co. 9.75% 20102		750			716
Ford Motor Credit Co. 7.375% 2011		1,425			1,277
Ford Motor Credit Co. 9.875% 2011		2,000			1,893
Ford Motor Credit Co. 7.993% 20122		3,300			2,774
Realogy Corp., Term Loan B, 8.24% 20132,3,4		1,254			1,103
Realogy Corp., Term Loan B, Letter of Credit, 8.24% 20132,3,4		338			297
Realogy Corp. 10.50% 20141		5,375			4,031
Realogy Corp. 11.00% 20141,5		5,100			3,557
Realogy Corp. 12.375% 20151		1,000			633
Washington Mutual Bank, FA 5.65% 2014		1,000			884
Washington Mutual Preferred Funding I Ltd., Series A-1, 6.534% (undated)1,2,8		7,600			4,408
Washington Mutual Preferred Funding III Ltd. 6.895% (undated)1,2		2,000			1,181
Washington Mutual Preferred Funding IV Ltd. 9.75% (undated)1,2		2,500			2,003
TuranAlem Finance BV 7.875% 2010		1,500			1,406
TuranAlem Finance BV 7.75% 20131		2,000			1,730
TuranAlem Finance BV 8.50% 2015		500			441
TuranAlem Finance BV 8.50% 20151		260			229
TuranAlem Finance BV 8.25% 20371		3,710			3,172
Citigroup Capital XXI 8.30% 2057		5,625			5,890
Host Marriott, LP, Series M, 7.00% 2012		2,970			2,985
Host Marriott, LP, Series K, 7.125% 2013		1,125			1,139
Host Hotels & Resorts, LP, Series S, 6.875% 2014		1,150			1,150
Countrywide Home Loans, Inc., Series L, 3.25% 2008		375			339
Countrywide Home Loans, Inc., Series M, 4.125% 2009		1,475			1,082
Countrywide Home Loans, Inc., Series K, 5.625% 2009		1,775			1,355
Countrywide Financial Corp., Series A, 4.50% 2010		390			284
Countrywide Home Loans, Inc., Series L, 4.00% 2011		1,460			1,055
Countrywide Financial Corp., Series B, 5.80% 2012		1,165			852
E*TRADE Financial Corp. 8.00% 2011		1,725			1,505
E*TRADE Financial Corp. 7.375% 2013		225			174
E*TRADE Financial Corp. 7.875% 2015		3,935			3,020
HSBK (Europe) BV 7.75% 2013		1,690			1,614
HSBK (Europe) BV 7.75% 20131		270			258
HSBK (Europe) BV 7.25% 20171		2,400			2,094
CIT Group Inc. 7.625% 2012		3,600			3,653
Rouse Co. 3.625% 2009		615			589
Rouse Co. 7.20% 2012		1,495			1,431
Rouse Co. 6.75% 20131		1,575			1,471
Capmark Financial Group, Inc. 5.529% 20101,2		1,250			1,008
Capmark Financial Group, Inc. 5.875% 20121		2,300			1,822
Catlin Insurance Ltd. 7.249% (undated)1,2		2,500			2,289
Lazard Group LLC 7.125% 2015		1,190			1,213
Lazard Group LLC 6.85% 2017		975			965
HSBC Finance Corp. 5.00% 2015		2,265			2,164
Northern Rock PLC 5.60% (undated)1,2,8		600			345
Northern Rock PLC 6.594% (undated)1,2,8		3,050			1,754
ILFC E-Capital Trust II 6.25% 20651,2		2,000			1,914
Kazkommerts International BV 8.50% 2013		500			455
Kazkommerts International BV 8.00% 2015		600			501
Kazkommerts International BV, Series 4, 7.50% 2016		1,000			774
Liberty Mutual Group Inc., Series A, 7.80% 20871		1,500			1,338
Downey Financial Corp. 6.50% 2014		1,250			1,138
SLM Corp., Series A, 5.388% 20142		1,200			1,027
Morgan Stanley 10.09% 20178	BRL2,000				1,023
Schwab Capital Trust I 7.50% 20372	$	1,000			1,008
PNC Funding Corp., Series I, 6.517% (undated)1,2,8		1,000			875
UnumProvident Finance Co. PLC 6.85% 20151		800			830
iStar Financial, Inc., Series B, 4.875% 2009		500			483
Chevy Chase Bank, FSB 6.875% 2013		500			479
					104,137
TELECOMMUNICATION SERVICES — 7.81%
Intelsat, Ltd. 6.50% 2013		2,000			1,465
Intelsat (Bermuda), Ltd. 8.25% 2013		2,765			2,793
Intelsat (Bermuda), Ltd. 0%/9.25% 20156		1,100			905
Intelsat (Bermuda), Ltd. 8.625% 2015		1,685			1,702
Intelsat Corp. 9.00% 2016		2,200			2,227
Intelsat (Bermuda), Ltd. 9.25% 2016		2,100			2,121
Intelsat (Bermuda), Ltd. 11.25% 2016		500			519
American Tower Corp. 7.125% 2012		8,115			8,379
American Tower Corp. 7.50% 2012		1,925			1,992
Windstream Corp. 8.125% 2013		4,225			4,394
Valor Telecommunications Enterprises, LLC and Valor Telecommunications Enterprises Finance Corp. 7.75% 2015		1,775			1,876
Windstream Corp. 8.625% 2016		1,875			1,978
Windstream Corp. 7.00% 2019		1,000			958
Centennial Communications Corp. 10.00% 2013		250			261
Centennial Communications Corp. and Centennial Cellular Operating Co. LLC 10.125% 2013		1,695			1,788
Centennial Communications Corp. 10.981% 20132		2,950			3,031
Centennial Communications Corp., Centennial Cellular Operating Co. LLC and
Centennial Puerto Rico Operations Corp. 8.125% 20142		3,450			3,416
Hawaiian Telcom Communications, Inc. 9.75% 2013		3,135			3,127
Hawaiian Telcom Communications, Inc. 10.318% 20132		1,725			1,747
Hawaiian Telcom Communications, Inc., Term Loan C, 7.08% 20142,3,4		3,216			3,047
Hawaiian Telcom Communications, Inc., Series B, 12.50% 2015		425			441
U S WEST Capital Funding, Inc. 6.375% 2008		250			250
Qwest Capital Funding, Inc. 7.90% 2010		1,660			1,685
Qwest Capital Funding, Inc. 7.25% 2011		2,050			2,030
Qwest Communications International Inc. 7.25% 2011		600			603
Qwest Communications International Inc., Series B, 7.50% 2014		2,500			2,506
U S WEST Capital Funding, Inc. 6.875% 2028		1,200			1,020
Triton PCS, Inc. 8.50% 2013		6,625			6,890
MetroPCS Wireless, Inc. 9.25% 2014		7,250			6,851
Rural Cellular Corp. 10.661% 20122		850			871
Rural Cellular Corp. 8.124% 20132		5,675			5,789
Nextel Communications, Inc., Series E, 6.875% 2013		550			542
Nextel Communications, Inc., Series D, 7.375% 2015		5,175			5,099
Cricket Communications, Inc. 9.375% 2014		4,605			4,340
Cricket Communications, Inc. 9.375% 20141		1,000			943
Rogers Wireless Inc. 7.25% 2012		600			651
Rogers Wireless Inc. 7.50% 2015		2,675			2,929
Cincinnati Bell Inc. 7.25% 2013		3,200			3,224
Level 3 Financing, Inc. 9.25% 2014		3,000			2,730
Digicel Group Ltd. 8.875% 20151		2,250			2,064
Orascom Telecom 7.875% 20141		1,500			1,425
Millicom International Cellular SA 10.00% 2013		1,320			1,412
France Télécom 7.75% 20112		1,000			1,076
NTELOS Inc., Term Loan B, 7.10% 20112,3,4		973			961
					104,058
INFORMATION TECHNOLOGY — 6.60%
NXP BV and NXP Funding LLC 7.993% 20132		3,550			3,279
NXP BV and NXP Funding LLC 7.875% 2014		4,825			4,608
NXP BV and NXP Funding LLC 9.50% 2015		12,145			11,158
Hughes Communications, Inc. 9.50% 2014		9,150			9,310
Sanmina-SCI Corp. 7.741% 20141,2		1,000			969
Sanmina-SCI Corp. 8.125% 2016		9,350			8,333
First Data Corp., Term Loan B2, 7.634% 20142,3,4		8,978			8,545
SunGard Data Systems Inc. 9.125% 2013		6,984			7,141
Celestica Inc. 7.875% 2011		4,600			4,451
Celestica Inc. 7.625% 2013		2,250			2,109
Serena Software, Inc. 10.375% 2016		5,975			5,915
Freescale Semiconductor, Inc., Term Loan B, 6.975% 20132,3,4		1,318			1,224
Freescale Semiconductor, Inc. 8.875% 2014		1,900			1,705
Freescale Semiconductor, Inc. 9.125% 20145		3,350			2,864
Ceridian Corp. 11.25% 20151		5,150			4,790
Sensata Technologies BV 8.00% 20142		4,870			4,602
Xerox Corp. 7.125% 2010		1,250			1,310
Xerox Corp. 7.625% 2013		1,000			1,044
Nortel Networks Ltd. 9.493% 20111,2		1,250			1,225
Iron Mountain Inc. 7.75% 2015		1,060			1,084
Electronic Data Systems Corp., Series B, 6.50% 20132		1,000			1,012
Jabil Circuit, Inc. 5.875% 2010		875			886
MagnaChip Semiconductor SA and MagnaChip Semiconductor Finance Co. 8.00% 2014		520			393
					87,957
MATERIALS — 5.96%
Jefferson Smurfit Corp. (U.S.) 8.25% 2012		525			520
Stone Container Corp. 8.375% 2012		1,430			1,426
Jefferson Smurfit Corp. (U.S.) 7.50% 2013		3,650			3,513
Smurfit-Stone Container Enterprises, Inc. 8.00% 2017		2,770			2,690
Nalco Co. 7.75% 2011		4,340			4,416
Nalco Co. 8.875% 2013		500			524
Nalco Finance Holdings LLC and Nalco Finance Holdings Inc. 0%/9.00% 20146		1,900			1,757
Georgia Gulf Corp. 9.50% 2014		7,135			5,726
Georgia Gulf Corp. 10.75% 2016		1,140			769
Freeport-McMoRan Copper & Gold Inc. 8.25% 2015		3,545			3,767
Freeport-McMoRan Copper & Gold Inc. 8.375% 2017		1,390			1,494
Abitibi-Consolidated Co. of Canada 5.25% 2008		700			674
Abitibi-Consolidated Finance LP 7.875% 2009		767			734
Abitibi-Consolidated Inc. 8.55% 2010		680			598
Abitibi-Consolidated Inc. 7.75% 2011		525			412
Abitibi-Consolidated Co. of Canada 8.491% 20112		475			378
Abitibi-Consolidated Co. of Canada 6.00% 2013		460			316
Abitibi-Consolidated Co. of Canada 8.375% 2015		2,715			2,029
Plastipak Holdings, Inc. 8.50% 20151		4,585			4,608
Building Materials Corp. of America 7.75% 2014		5,675			4,370
Boise Cascade, LLC and Boise Cascade Finance Corp. 7.125% 2014		4,425			4,303
Algoma Steel Inc., Term Loan B, 7.33% 20132,3,4		709			675
Algoma Steel Inc. 9.875% 20151		2,500			2,063
Domtar Corp. 7.125% 2015		2,550			2,512
Rockwood Specialties Group, Inc. 7.50% 2014		1,500			1,493
Rockwood Specialties Group, Inc. 7.625% 2014	€	700			1,007
Graphic Packaging International, Inc. 8.50% 2011	$	2,450			2,438
Owens-Brockway Glass Container Inc. 8.875% 2009		391			393
Owens-Illinois, Inc. 7.50% 2010		1,275			1,297
Owens-Brockway Glass Container Inc. 6.75% 2014	€	375			531
Associated Materials Inc. 9.75% 2012	$	1,200			1,230
AMH Holdings, Inc. 0%/11.25% 20146		1,250			806
Berry Plastics Holding Corp. 10.25% 2016		2,075			1,826
Metals USA Holdings Corp. 11.231% 20121,2,5		1,550			1,279
Metals USA, Inc. 11.125% 2015		500			520
Georgia-Pacific Corp. 8.125% 2011		485			495
Georgia-Pacific Corp. 9.50% 2011		680			717
Georgia-Pacific Corp., First Lien Term Loan B, 6.896% 20122,3,4		588			561
FMG Finance Pty Ltd. 10.625% 20161		1,500			1,725
Ryerson Inc. 12.574% 20141,2		1,375			1,327
Ryerson Inc. 12.00% 20151		275			273
AEP Industries Inc. 7.875% 2013		1,665			1,594
C10 Capital (SPV) Ltd. 6.722% (undated)1,2		1,275			1,177
Neenah Paper, Inc. 7.375% 2014		1,200			1,128
Vale Overseas Ltd. 6.25% 2017		1,000			1,008
JSG Funding PLC 7.75% 2015		1,000			955
MacDermid 9.50% 20171		1,000			945
Momentive Performance Materials Inc. 9.75% 20141		1,000			925
Graham Packaging Co., LP and GPC Capital Corp. 9.875% 2014		1,000			925
Allegheny Technologies, Inc. 8.375% 2011		750			803
Airgas, Inc. 6.25% 2014		750			720
Ainsworth Lumber Co. Ltd. 7.25% 2012		175			106
Ainsworth Lumber Co. Ltd. 6.75% 2014		900			547
Witco Corp. 6.875% 2026		505			409
					79,434
HEALTH CARE — 5.29%
HCA Inc., Term Loan B, 7.09% 20132,3,4		9,566			9,219
HCA Inc. 9.125% 2014		495			516
HCA Inc. 9.25% 2016		1,015			1,068
HCA Inc. 9.625% 20165		890			944
HealthSouth Corp. 10.829% 20142		1,640			1,677
HealthSouth Corp. 10.75% 2016		8,005			8,405
Tenet Healthcare Corp. 6.375% 2011		1,770			1,620
Tenet Healthcare Corp. 7.375% 2013		1,825			1,606
Tenet Healthcare Corp. 9.875% 2014		4,725			4,524
Tenet Healthcare Corp. 9.25% 2015		880			818
VWR International, Inc. 10.25% 20151,2,5		6,310			6,042
Warner Chilcott Corp. 8.75% 2015		5,187			5,369
PTS Acquisition Corp. 9.50% 20151,5		5,345			4,984
Elan Finance PLC and Elan Finance Corp. 8.875% 2013		2,500			2,475
Elan Finance PLC and Elan Finance Corp. 9.249% 20132		1,720			1,669
Bausch & Lomb Inc. 9.875% 20151		3,955			4,024
Surgical Care Affiliates, Inc. 8.875% 20151,5		1,950			1,784
Surgical Care Affiliates, Inc. 10.00% 20171		1,825			1,670
Mylan Inc., Term Loan B, 8.313% 20142,3,4		3,370			3,342
Universal Hospital Services, Inc. 8.288% 20152		440			442
Universal Hospital Services, Inc. 8.50% 20155		2,085			2,116
Viant Holdings Inc. 10.125% 20171		2,583			2,376
Team Finance LLC and Health Finance Corp. 11.25% 2013		1,485			1,582
AMR HoldCo, Inc. and EmCare HoldCo, Inc. 10.00% 2015		1,175			1,246
Accellent Inc. 10.50% 2013		1,075			908
					70,426
ENERGY — 5.04%
Williams Companies, Inc. 6.375% 20101		1,000			1,016
Williams Companies, Inc. 7.231% 20101,2		1,500			1,526
Williams Partners L.P. and Williams Partners Finance Corp. 7.50% 2011		3,825			4,016
Williams Companies, Inc. 8.125% 2012		1,900			2,078
Williams Partners L.P. and Williams Partners Finance Corp. 7.25% 2017		2,525			2,613
Williams Companies, Inc. 7.875% 2021		250			279
Transcontinental Gas Pipe Line Corp. 7.25% 2026		975			1,041
Williams Companies, Inc. 8.75% 2032		6,825			8,378
Enterprise Products Operating LP 8.375% 20662		3,750			3,845
Enterprise Products Operating LP 7.034% 20682		5,675			5,153
Kinder Morgan Inc., Term Loan B, 6.35% 20142,3,4		967			963
Kinder Morgan Finance Co. ULC 5.70% 2016		1,000			910
K N Energy, Inc. 7.25% 2028		3,625			3,420
Drummond Co., Inc. 7.375% 20161		5,070			4,728
Petroplus Finance Ltd. 6.75% 20141		2,900			2,715
Petroplus Finance Ltd. 7.00% 20171		2,000			1,840
Gaz Capital SA 7.288% 20371		4,000			4,057
Teekay Shipping Corp. 8.875% 2011		3,650			3,846
Forest Oil Corp. 7.25% 20191		3,000			3,030
TEPPCO Partners LP 7.00% 20672		3,260			2,988
Newfield Exploration Co. 7.625% 2011		500			521
Newfield Exploration Co. 6.625% 2014		1,325			1,318
Newfield Exploration Co. 6.625% 2016		825			813
Premcor Refining Group Inc. 6.75% 2011		1,150			1,222
Premcor Refining Group Inc. 9.50% 2013		625			656
Massey Energy Co. 6.875% 2013		1,500			1,421
Sabine Pass LNG, LP 7.25% 2013		1,000			960
Encore Acquisition Co. 6.00% 2015		1,000			905
Whiting Petroleum Corp. 7.25% 2013		500			495
Peabody Energy Corp. 5.875% 2016		500			473
					67,226
UTILITIES — 4.34%
Edison Mission Energy 7.50% 2013		4,700			4,841
Edison Mission Energy 7.75% 2016		2,200			2,277
Midwest Generation, LLC, Series B, 8.56% 20163		2,108			2,250
Edison Mission Energy 7.00% 2017		5,525			5,456
Edison Mission Energy 7.20% 2019		5,725			5,653
Edison Mission Energy 7.625% 2027		2,425			2,292
AES Corp. 9.50% 2009		396			412
AES Corp. 9.375% 2010		1,497			1,579
AES Corp. 8.75% 20131		2,820			2,957
AES Gener SA 7.50% 2014		750			793
AES Corp. 7.75% 20151		1,500			1,519
AES Corp. 8.00% 20171		1,000			1,027
AES Red Oak, LLC, Series A, 8.54% 20193		428			460
NRG Energy, Inc. 7.25% 2014		2,125			2,077
NRG Energy, Inc. 7.375% 2016		4,775			4,668
Texas Competitive Electric Holding Co. LLC 10.25% 20151		4,050			4,030
Texas Competitive Electric Holding Co. LLC 10.25% 20151		800			796
Intergen Power 9.00% 20171		4,100			4,336
ISA Capital do Brasil SA 7.875% 20121		2,225			2,275
ISA Capital do Brasil SA 8.80% 20171		800			826
Cilcorp Inc. 8.70% 2009		2,000			2,112
Sierra Pacific Resources 8.625% 2014		875			939
Nevada Power Co., General and Refunding Mortgage Notes, Series L, 5.875% 2015		275			275
Nevada Power Co., General and Refunding Mortgage Notes, Series M, 5.95% 2016		500			498
FPL Energy National Wind Portfolio, LLC 6.125% 20191,3		1,309			1,335
PSEG Energy Holdings Inc. 8.625% 2008		1,176			1,184
Mirant Americas Generation, Inc. 8.30% 2011		950			957
					57,824
CONSUMER STAPLES — 2.86%
SUPERVALU INC., Term Loan B, 6.396% 20122,3,4		986			967
SUPERVALU INC. 7.50% 2012		340			353
Albertson’s, Inc. 7.25% 2013		1,260			1,295
Albertson’s, Inc. 8.00% 2031		3,575			3,645
Stater Bros. Holdings Inc. 8.125% 2012		4,900			4,863
Stater Bros. Holdings Inc. 7.75% 2015		400			388
Dole Food Co., Inc. 7.25% 2010		1,275			1,167
Dole Food Co., Inc. 8.875% 2011		4,358			4,053
Constellation Brands, Inc. 8.375% 2014		1,250			1,260
Constellation Brands, Inc. 7.25% 20171		3,770			3,506
Smithfield Foods, Inc. 7.75% 2017		3,525			3,428
Yankee Candle Co., Inc., Series B, 8.50% 2015		1,725			1,598
Yankee Candle Co., Inc., Series B, 9.75% 2017		1,750			1,610
Vitamin Shoppe Industries Inc. 12.369% 20122,8		3,030			3,151
JBS SA 10.50% 2016		2,425			2,358
Elizabeth Arden, Inc. 7.75% 2014		1,165			1,148
Spectrum Brands, Inc. 7.375% 2015		1,250			931
Duane Reade Inc. 9.75% 2011		1,015			921
Rite Aid Corp. 6.125% 20081		750			733
Cervecería Nacional Dominicana, C. por A. 8.00% 20141		698			710
					38,085
MORTGAGE-BACKED OBLIGATIONS3— 1.70%
American Tower Trust I, Series 2007-1A, Class E, 6.249% 20371,8		1,750			1,612
American Tower Trust I, Series 2007-1A, Class F, 6.639% 20371,8		6,050			5,499
Tower Ventures, LLC, Series 2006-1, Class F, 7.036% 20361,8		5,970			5,816
Crown Castle Towers LLC, Series 2006-1, Class F, 6.650% 20361,8		4,600			4,397
Crown Castle Towers LLC, Series 2006-1, Class G, 6.795% 20361,8		700			662
SBA CMBS Trust, Series 2006-1A, Class F, 6.709% 20361,8		235			222
SBA CMBS Trust, Series 2006-1A, Class G, 6.904% 20361,8		2,235			2,081
SBA CMBS Trust, Series 2006-1A, Class H, 7.389% 20361,8		1,235			1,164
SBA CMBS Trust, Series 2006-1A, Class J, 7.825% 20361,8		1,235			1,152
					22,605
BONDS & NOTES OF GOVERNMENTS OUTSIDE THE U.S. — 1.44%
United Mexican States Government, Series MI10, 9.50% 2014	MXN37,500				3,696
Turkey (Republic of) Treasury Bill 0% 20088	TRY1,350				1,063
Turkey (Republic of) 12.375% 2009	$	250			279
Turkey (Republic of) 10.00% 20128,9	TRY1,170				1,045
Turkey (Republic of) 16.00% 20128		1,175			1,000
Argentina (Republic of) 3.368% 20122,3,8	$	1,625			901
Argentina (Republic of) 5.83% 20333,5,8,9	ARS7,123				1,673
Argentina (Republic of) GDP-Linked 2035		5,935			167
Colombia (Republic of) Global 10.75% 2013	$	500			616
Colombia (Republic of) Global 12.00% 2015	COP2,180,000				1,211
Colombia (Republic of) Global 9.85% 2027		900,000			447
Panama (Republic of) Global 7.125% 2026	$	310			343
Panama (Republic of) Global 9.375% 2029		130			178
Panama (Republic of) Global 6.70% 20363		1,522			1,613
Brazilian Treasury Bill 6.00% 20458,9	BRL3,297				1,731
Indonesia (Republic of) 11.00% 2025	IDR14,490,000				1,579
Egypt (Arab Republic of) Treasury Bill 0% 20088	EGP2,450				435
Egypt (Arab Republic of) Treasury Bill 0% 20088		2,050			371
Egypt (Arab Republic of) 11.50% 20118		125			25
Dominican Republic 9.04% 20181,3	$	683			782
					19,155
U.S. GOVERNMENT BONDS & NOTES — 0.18%
U.S. Treasury 6.00% 2026		2,000			2,367
MUNICIPALS — 0.02%
State of Wisconsin, Badger Tobacco Asset Securitization Corp., Tobacco Settlement Asset-backed Bonds, 6.125% 2027		225			233
Total bonds, notes & other debt instruments (cost: $1,184,478,000)					1,127,446
	Shares or			Market value
Convertible securities — 0.77%	principal amount				(000	)
CONSUMER DISCRETIONARY — 0.29%
Amazon.com, Inc. 6.875% PEACS convertible notes 2010	€	2,593,000			3,880
UTILITIES — 0.15%
AES Trust VII 6.00% convertible preferred 2008		40,000			1,990
FINANCIALS — 0.15%
Countrywide Financial Corp., Series A, 1.743% convertible debentures 20371,2	$	2,500,000		$	1,962
MISCELLANEOUS — 0.18%
Other convertible securities in initial period of acquisition					2,373
Total convertible securities (cost: $8,639,000)					10,205
Preferred stocks — 1.77%	Shares
FINANCIALS — 1.50%
Swire Pacific Capital Ltd. 8.84% cumulative guaranteed perpetual capital securities1		160,000			4,715
Shinsei Finance II (Cayman) Ltd. 7.16% noncumulative1,2		5,370,000			4,546
Fuji JGB Investment LLC, Series A, 9.87% noncumulative1,2		2,900,000			2,927
IBJ Preferred Capital Co. LLC, Series A, 8.79% noncumulative1,2		875,000			883
Tokai Preferred Capital Co. LLC, Series A, 9.98% noncumulative1,2		2,909,000			2,948
IndyMac Bancorp, Inc., Series A, 8.50% noncumulative1		246,000			2,337
Fannie Mae, Series O, 7.00%1,2		20,000			927
Sumitomo Mitsui Banking Corp. 6.078%1,2		500,000			463
SB Treasury Co. LLC, Series A, 9.40% noncumulative1,2		205,000			209
					19,955
MISCELLANEOUS — 0.27%
Other preferred stocks in initial period of acquisition					3,623
Total preferred stocks (cost: $24,943,000)					23,578
Common stocks — 1.99%
INDUSTRIALS — 1.11%
DigitalGlobe Inc.8,10,11		3,677,578			14,710
UTILITIES — 0.30%
Drax Group PLC		334,565			4,016
TELECOMMUNICATION SERVICES — 0.16%
Sprint Nextel Corp., Series 1		127,382			1,673
Embarq Corp.		6,369			316
American Tower Corp., Class A10		3,522			150
XO Holdings, Inc.10		651			1
					2,140
INFORMATION TECHNOLOGY — 0.05%
ZiLOG, Inc.10		153,000			531
HSW International, Inc.8,10,11		7,452			33
HSW International, Inc.8,10,11		7,452			33
HSW International, Inc.8,10,11		7,452			33
					630
CONSUMER DISCRETIONARY — 0.01%
Radio One, Inc., Class D, nonvoting10		34,000			80
Radio One, Inc., Class A10		17,000			40
ACME Communications, Inc.10		13,100			36
Mobil Travel Guide8,10,11		7,285			2
					158
HEALTH CARE — 0.00%
Clarent Hospital Corp.8,10		80,522			16
MISCELLANEOUS — 0.36%
Other common stocks in initial period of acquisition					4,779
Total common stocks (cost: $16,516,000)					26,449
Rights & warrants — 0.00%
TELECOMMUNICATION SERVICES — 0.00%
XO Holdings, Inc., Series A, warrants, expire 201010		1,305			—
XO Holdings, Inc., Series B, warrants, expire 201010		978			—
XO Holdings, Inc., Series C, warrants, expire 201010		978			—
KMC Telecom Holdings, Inc., warrants, expire 20081,8,10		9,500			—
GT Group Telecom Inc., warrants, expire 20101,8,10		4,000			—
Total rights & warrants (cost: $428,000)					—
	Principal amount
Short-term securities — 8.70%		(000	)
Federal Home Loan Bank 4.20%–4.61% due 1/4–4/16/200812	$	25,100			24,940
Hewlett-Packard Co. 4.24% due 1/14/20081		17,300			17,271
Caterpillar Financial Services Corp. 4.47% due 1/24/2008		16,800			16,744
Wal-Mart Stores Inc. 4.73% due 1/29/20081		16,200			16,133
Ranger Funding Co. LLC 5.02% due 1/25/20081		13,150			13,102
Procter & Gamble International Funding S.C.A. 4.74% due 1/4/20081		6,800			6,796
General Electric Capital Corp. 4.15% due 1/2/2008		5,100			5,099
Fannie Mae 4.23% due 3/12/200812		4,900			4,862
IBM Corp. 4.24% due 1/17/20081		4,200			4,192
Kimberly-Clark Worldwide Inc. 4.47% due 1/11/20081		3,800			3,795
Coca-Cola Co. 4.47% due 1/17/20081		3,000			2,994
Total short-term securities (cost: $115,931,000)					115,928
Total investment securities (cost: $1,350,935,000)					1,303,606
Other assets less liabilities					28,373
Net assets				$	1,331,979

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

1 Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $329,727,000, which represented 24.75% of the net assets of the fund.

2 Coupon rate may change periodically.

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

4 Loan participations and assignments; the total value of all such loans was $88,132,000, which represented 6.62% of the net assets of the fund.

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

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

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

8 Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities, including those in “Miscellaneous,” was $59,720,000.

9 Index-linked bond whose principal amount moves with a government retail price index.

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

11 Purchased in a transaction exempt from registration under the Securities Act of 1933. May be subject to legal or contractual restriction on resale. Further details on these holdings appear below.

	Acquisition date(s)	Cost (000)		Market value (000)		Percent of net assets
DigitalGlobe Inc.	4/14/1999-7/31/2003	$	3,000	$	14,710		1.11	%
HSW International, Inc.	12/17/2007		69		99		.01
Mobil Travel Guide	12/17/2007		2		2		.00
Total restricted securities		$	3,071	$	14,811		1.12	%

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

U.S. Government/AAA-Rated Securities Fund

Investment portfolio

December 31, 2007

Bonds, notes and other debt instruments — 92.68%	Principal amount (000)		Market value (000)
MORTGAGE-BACKED OBLIGATIONS — 52.43%
Federal agency mortgage-backed obligations1— 37.51%
Fannie Mae, Series 2003-T1, Class B, 4.491% 2012	$	6,750	$	6,755
Fannie Mae 12.00% 2015		53		60
Fannie Mae 5.50% 2017		2,371		2,423
Fannie Mae 9.00% 2018		22		24
Fannie Mae 10.00% 2018		92		104
Fannie Mae, Series 2001-4, Class GB, 10.185% 20182		349		393
Fannie Mae 6.00% 2021		309		316
Fannie Mae 6.00% 2021		132		135
Fannie Mae, Series 2003-48, Class TJ, 4.50% 2022		1,756		1,729
Fannie Mae, Series 2001-4, Class GA, 10.244% 20252		136		152
Fannie Mae, Series 2001-4, Class NA, 11.897% 20252		361		404
Fannie Mae 6.00% 2026		837		853
Fannie Mae 6.00% 2027		7,699		7,842
Fannie Mae 8.50% 2027		78		84
Fannie Mae 8.50% 2027		73		79
Fannie Mae, Series 2002-W3, Class A-5, 7.50% 2028		589		625
Fannie Mae, Series 2002-W7, Class A-5, 7.50% 2029		439		469
Fannie Mae 7.50% 2029		37		40
Fannie Mae 7.50% 2029		29		31
Fannie Mae 7.50% 2031		215		227
Fannie Mae 7.50% 2031		64		69
Fannie Mae 7.50% 2031		20		21
Fannie Mae 7.50% 2031		11		12
Fannie Mae, Series 2001-20, Class C, 12.016% 20312		228		258
Fannie Mae 5.50% 2033		15,965		15,972
Fannie Mae 5.50% 2033		3,699		3,700
Fannie Mae 5.50% 2034		2,065		2,064
Fannie Mae 4.481% 20352		1,863		1,863
Fannie Mae 4.50% 2035		11,027		10,449
Fannie Mae 4.50% 2035		2,183		2,069
Fannie Mae, Series 2005-29, Class AK, 4.50% 2035		1,607		1,575
Fannie Mae 4.50% 2035		1,192		1,130
Fannie Mae 5.50% 2035		12,265		12,259
Fannie Mae 5.50% 2035		1,797		1,798
Fannie Mae 6.50% 2035		1,185		1,224
Fannie Mae, Series 2006-56, Class OG, principal only, 0% 2036		1,829		1,381
Fannie Mae, Series 2006-96, Class MO, principal only, 0% 20363		1,353		1,079
Fannie Mae 5.50% 2036		5,208		5,138
Fannie Mae 5.50% 2036		3,820		3,814
Fannie Mae 5.534% 20362		2,938		2,980
Fannie Mae 6.00% 2036		2,027		2,059
Fannie Mae 6.00% 2036		40		41
Fannie Mae 6.50% 2036		4,134		4,220
Fannie Mae 5.424% 20372		5,292		5,339
Fannie Mae, Series 2007-33, Class HE, 5.50% 2037		4,561		4,595
Fannie Mae 5.50% 2037		2,571		2,536
Fannie Mae, Series 2007-40, Class PT, 5.50% 2037		1,937		1,963
Fannie Mae 5.50% 2037		1,830		1,805
Fannie Mae 5.684% 20372		1,250		1,266
Fannie Mae 5.869% 20372		2,028		2,070
Fannie Mae 6.00% 2037		2,983		3,030
Fannie Mae 6.00% 2037		2,157		2,191
Fannie Mae, Series 2007-24, Class P, 6.00% 2037		1,921		1,978
Fannie Mae 6.00% 20373		1,753		1,761
Fannie Mae 6.00% 2037		739		751
Fannie Mae 6.06% 20372		1,384		1,410
Fannie Mae 6.356% 20372		5,000		5,107
Fannie Mae 6.50% 2037		7,150		7,351
Fannie Mae 6.50% 2037		5,250		5,352
Fannie Mae 6.50% 2037		5,103		5,202
Fannie Mae 6.50% 2037		2,933		3,019
Fannie Mae 6.50% 2037		1,934		1,974
Fannie Mae 7.00% 2037		8,617		8,876
Fannie Mae 7.00% 20373		5,250		5,407
Fannie Mae 7.00% 2037		1,998		2,058
Fannie Mae 7.00% 2037		1,885		1,962
Fannie Mae 7.00% 2037		1,766		1,819
Fannie Mae 7.00% 20373		1,657		1,707
Fannie Mae 7.00% 2037		1,520		1,582
Fannie Mae, Series 1999-T2, Class A-1, 7.50% 2039		464		489
Fannie Mae, Series 2001-T10, Class A-1, 7.00% 2041		445		465
Fannie Mae, Series 2001-50, Class BA, 7.00% 2041		422		451
Fannie Mae, Series 2002-W1, Class 2A, 7.50% 2042		76		81
Fannie Mae 6.496% 20472		4,921		5,017
Freddie Mac 7.00% 2008		11		11
Freddie Mac 8.25% 2008		1		1
Freddie Mac 8.00% 2012		12		12
Freddie Mac 7.00% 2015		58		61
Freddie Mac, Series 2356, Class GD, 6.00% 2016		1,997		2,047
Freddie Mac 8.00% 2017		95		101
Freddie Mac 8.50% 2018		1		1
Freddie Mac 11.00% 2018		37		42
Freddie Mac, Series 1567, Class A, 4.365% 20232		376		357
Freddie Mac 6.00% 2026		7,594		7,739
Freddie Mac 6.00% 2027		14,682		14,962
Freddie Mac 8.50% 2027		34		38
Freddie Mac 9.00% 2030		218		242
Freddie Mac 4.645% 20352		3,499		3,495
Freddie Mac, Series 3061, Class PN, 5.50% 2035		618		627
Freddie Mac, Series 3213, Class OG, principal only, 0% 2036		1,876		1,434
Freddie Mac, Series 3171, Class MO, principal only, 0% 20363		1,828		1,404
Freddie Mac, Series 3257, Class PA, 5.50% 2036		1,871		1,895
Freddie Mac 6.00% 2036		5,246		5,324
Freddie Mac, Series 3233, Class PA, 6.00% 2036		1,810		1,864
Freddie Mac 5.50% 2037		9,364		9,342
Freddie Mac, Series 3312, Class PA, 5.50% 2037		7,804		7,857
Freddie Mac 5.50% 2037		4,943		4,931
Freddie Mac 5.50% 2037		3,429		3,421
Freddie Mac 5.50% 2037		2,997		2,990
Freddie Mac 5.50% 2037		745		743
Freddie Mac 5.686% 20372		2,000		2,016
Freddie Mac 5.99% 20372		1,326		1,344
Freddie Mac 6.00% 2037		15,750		15,983
Freddie Mac 6.00% 2037		7,405		7,515
Freddie Mac 6.00% 2037		6,331		6,424
Freddie Mac 6.00% 2037		4,883		4,958
Freddie Mac 6.00% 2037		3,478		3,532
Freddie Mac 6.00% 2037		2,739		2,781
Freddie Mac 6.00% 2037		1,950		1,980
Freddie Mac 6.00% 2037		1,132		1,149
Freddie Mac 6.056% 20372		1,058		1,076
Freddie Mac 6.36% 20372		2,431		2,476
Freddie Mac 6.424% 20372		1,744		1,776
Freddie Mac 6.00% 2038		3,000		3,044
Government National Mortgage Assn. 9.50% 2009		84		86
Government National Mortgage Assn. 9.50% 2020		63		71
Government National Mortgage Assn. 8.50% 2021		99		110
Government National Mortgage Assn. 8.50% 2022		91		101
Government National Mortgage Assn. 8.50% 2022		21		24
Government National Mortgage Assn. 8.50% 2022		14		15
Government National Mortgage Assn. 8.50% 2023		158		175
				314,111
Commercial mortgage-backed securities1— 7.72%
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2002-C2, Class A-1, 4.326% 2034		775		762
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2004-CIBC10, Class A-3, 4.184% 2037		1,000		988
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CIBC11, Class A-2, 5.016% 2037		1,000		999
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2003-ML1, Class A-1, 3.972% 2039		1,166		1,154
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2003-PM1, Class A-2, 4.262% 2040		2,000		1,987
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP4, Class A-2, 4.79% 2042		1,000		994
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP3, Class A-4A, 4.936% 20422		1,000		962
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2006-CIBC14, Class A-4, 5.481% 20442		1,500		1,505
GE Commercial Mortgage Corp., Series 2005-C2, Class A-4, 4.978% 20432		2,500		2,452
GE Commercial Mortgage Corp., Series 2006-C1, Class A-4, 5.339% 20442		1,750		1,749
GE Commercial Mortgage Corp., Series 2006-C1, Class A-AB, 5.339% 20442		600		601
American Tower Trust I, Series 2007-1A, Class A-FX, 5.42% 20373,4		4,500		4,365
Banc of America Commercial Mortgage Inc., Series 2001-1, Class A-2, 6.503% 2036		2,557		2,670
Banc of America Commercial Mortgage Inc., Series 2005-5, Class A-3B, 5.228% 20452		1,500		1,497
CS First Boston Mortgage Securities Corp., Series 2001-CK6, Class A-3, 6.387% 2036		1,000		1,044
CS First Boston Mortgage Securities Corp., Series 2005-C5, Class A-AB, 5.10% 20382		1,000		990
CS First Boston Mortgage Securities Corp., Series 2006-C1, Class A-AB, 5.555% 20392		500		508
CS First Boston Mortgage Securities Corp., Series 2005-C6, Class A-3, 5.23% 20402		1,000		992
CS First Boston Mortgage Securities Corp., Series 2005-C6, Class A-M, 5.23% 20402		565		547
Morgan Stanley Capital I, Inc., Series 1998-HF2, Class A-2, 6.48% 2030		3,826		3,832
Wachovia Bank Commercial Mortgage Trust, Series 2005-C16, Class A-PB, 4.692% 2041		1,000		983
Wachovia Bank Commercial Mortgage Trust, Series 2005-C17, Class A-2, 4.782% 2042		1,250		1,245
Wachovia Bank Commercial Mortgage Trust, Series 2005-C20, Class A-7, 5.118% 20422		500		486
Wachovia Bank Commercial Mortgage Trust, Series 2006-C23, Class A-PB, 5.446% 2045		1,000		1,011
Chase Commercial Mortgage Securities Corp., Series 1998-2, Class A-2, 6.39% 2030		2,861		2,880
Chase Commercial Mortgage Securities Corp., Series 2000-2, Class A-1, 7.543% 2032		451		455
Commercial Mortgage Trust, Series 2003-LNB1, Class A-2, 4.084% 2038		2,000		1,924
Commercial Mortgage Trust, Series 2004-LNB2, Class A-2, 3.60% 2039		1,000		988
Bear Stearns Commercial Mortgage Securities Trust, Series 2006-PWR13, Class A-4, 5.54% 2041		2,600		2,622
Fannie Mae, Series 1998-M6, Class A-2, 6.32% 2008		106		106
Fannie Mae, Series 2000-T5, Class B, 7.30% 2010		2,000		2,148
Crown Castle Towers LLC, Series 2005-1, Class A-FX, 4.643% 20354		2,000		2,000
Bear Stearns Commercial Mortgage Securities Inc., Series 2001-TOP2, Class A-1, 6.08% 2035		286		290
Bear Stearns Commercial Mortgage Securities Inc., Series 2004-PWR6, Class A-4, 4.521% 2041		1,750		1,706
GMAC Commercial Mortgage Securities, Inc., Series 2001-C1, Class A-2, 6.465% 2034		1,248		1,294
GMAC Commercial Mortgage Securities, Inc., Series 2005-C1, Class A-M, 4.754% 2043		500		483
Salomon Brothers Commercial Mortgage Trust, Series 2000-C3, Class A-1, 6.341% 2033		66		66
Salomon Brothers Commercial Mortgage Trust, Series 2001-C1, Class A-3, 6.428% 2035		1,550		1,617
Tower Ventures, LLC, Series 2006-1, Class A1-FX, 5.361% 20363,4		1,650		1,643
DLJ Commercial Mortgage Corp., Series 1998-CF2, Class A-1B, 6.24% 2031		1,119		1,125
DLJ Commercial Mortgage Corp., Series 1999-CG1, Class A-1B, 6.46% 2032		466		472
LB-UBS Commercial Mortgage Trust, Series 2001-C7, Class A-3, 5.642% 2025		455		461
LB-UBS Commercial Mortgage Trust, Series 2000-C3, Class A-2, 7.95% 2025		492		520
LB-UBS Commercial Mortgage Trust, Series 2002-C4, Class A-2, 4.023% 2026		601		596
Morgan Stanley Capital I Trust, Series 2006-IQ11, Class A-4, 5.773% 20422		1,500		1,537
Morgan Stanley Dean Witter Capital I Trust, Series 2001-TOP5, Class A-3, 6.16% 2035		1,204		1,221
Greenwich Capital Commercial Funding Corp., Series 2005-GG5, Class A-4-1, 5.243% 20372		1,000		999
ML-CFC Commercial Mortgage Trust, Series 2006-4, Class A-3, 5.172% 20492		1,000		982
Citigroup Commercial Mortgage Trust, Series 2004-C2, Class A-1, 3.787% 2041		805		797
First Union National Bank Commercial Mortgage Trust, Series 2002-C1, Class A-1, 5.585% 2034		651		659
SBA CMBS Trust, Series 2005-1, Class A, 5.369% 20353,4		600		606
GE Capital Commercial Mortgage Corp., Series 2001-1, Class A-1, 6.079% 2033		146		149
				64,669
Collateralized mortgage-backed obligations (privately originated)1— 7.20%
Countrywide Alternative Loan Trust, Series 2005-J8, Class 2-A-1, 5.00% 2020		1,435		1,372
Countrywide Alternative Loan Trust, Series 2005-40CB, Class A-1, 5.50% 2035		731		713
Countrywide Alternative Loan Trust, Series 2005-46CB, Class A-8, 5.50% 2035		629		627
Countrywide Alternative Loan Trust, Series 2005-62, Class 2-A-1, 5.863% 20352,3		1,429		1,386
Countrywide Alternative Loan Trust, Series 2005-21CB, Class A-17, 6.00% 2035		992		981
Countrywide Alternative Loan Trust, Series 2006-16CB, Class A-2, 6.00% 2036		1,331		1,321
Countrywide Alternative Loan Trust, Series 2006-24CB, Class A-1, 6.00% 2036		713		704
Countrywide Alternative Loan Trust, Series 2007-HY4, Class 3-A-1, 5.876% 20472		2,037		1,983
Countrywide Alternative Loan Trust, Series 2007-HY4, Class 4-A-1, 5.967% 20472		2,748		2,655
CHL Mortgage Pass-Through Trust, Series 2003-50, Class A-1, 5.00% 2018		1,896		1,846
CHL Mortgage Pass-Through Trust, Series 2004-J7, Class 3-A-1, 5.00% 2019		4,004		3,898
CHL Mortgage Pass-Through Trust, Series 2004-J6, Class 3-A-1, 5.00% 2019		2,966		2,889
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-2, Class 5-A-1, 6.00% 20362		2,104		2,066
Structured Adjustable Rate Mortgage Loan Trust, Series 2007-6, Class 3-A-1, 5.91% 20372		1,921		1,881
Structured Adjustable Rate Mortgage Loan Trust, Series 2007-8, Class 2-A3, 5.999% 20372,3		4,664		4,635
Structured Asset Securities Corp., Series 2003-29, Class 1-A-1, 4.75% 2018		3,998		3,858
Structured Asset Securities Corp., Series 1998-RF2, Class A, 8.516% 20272,4		475		474
Structured Asset Securities Corp., Series 1998-RF1, Class A, 8.744% 20272,4		737		736
Structured Asset Securities Corp., Series 1999-RF1, Class A, 7.826% 20282,4		384		387
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-S12, Class A-3, 5.00% 2018		901		877
WaMu Mortgage Pass-Through Certificates Trust, Series 2006-AR18, Class 1-A1, 5.347% 20372		1,158		1,145
WaMu Mortgage Pass-Through Certificates Trust, Series 2007-HY5, Class 3-A1, 5.825% 20372,3		944		943
WaMu Mortgage Pass-Through Certificates Trust, Series 2005-AR15, Class A-1-A, 5.125% 20452		477		450
Residential Accredit Loans, Inc., Series 2003-QS16, Class A-1, 5.00% 20183		1,552		1,529
Residential Accredit Loans, Inc., Series 2005-QR1, Class A, 6.00% 20343		626		608
Residential Accredit Loans, Inc., Series 2007-QS11, Class A-1, 7.00% 2037		981		987
Wells Fargo Mortgage-backed Securities Trust, Series 2004-2, Class A-1, 5.00% 2019		343		334
Wells Fargo Mortgage-backed Securities Trust, Series 2006-1, Class A-3, 5.00% 2021		1,416		1,379
Wells Fargo Mortgage-backed Securities Trust, Series 2003-3, Class II-A-1, 5.25% 2033		690		678
CS First Boston Mortgage Securities Corp., Series 2003-29, Class V-A-1, 7.00% 2033		118		118
CS First Boston Mortgage Securities Corp., Series 2006-2R, Class A-PO, principal only, 0% 20363,4		2,744		1,986
Citigroup Mortgage Loan Trust, Inc., Series 2003-1, Class I-A1, 4.75% 20183		1,516		1,481
Citigroup Mortgage Loan Trust, Inc., Series 2003-UST1, Class A-3, 5.00% 2018		472		470
Chase Mortgage Finance Trust, Series 2003-S10, Class A-1, 4.75% 2018		1,982		1,912
Bear Stearns ARM Trust, Series 2005-10, Class A-3, 4.65% 20352,3		2,000		1,903
Residential Asset Securitization Trust, Series 2004-A6, Class A-1, 5.00% 2019		1,779		1,764
Merrill Lynch Mortgage Investors, Inc., Series 2006-A1, Class II-A-1, 6.141% 20362,3		1,773		1,657
American Home Mortgage Assets Trust, Series 2007-3, Class II-2A-1, 6.25% 20372		1,421		1,409
GSR Mortgage Loan Trust, Series 2004-10F, Class 1-A-5, 4.50% 2019		1,311		1,261
Ocwen Residential MBS Corp., Series 1998-R1, Class AWAC, 5.672% 20402,4		1,106		1,033
Citicorp Mortgage Securities, Inc., Series 2003-10, Class A-1, 4.50% 2018		1,017		973
Banc of America Alternative Loan Trust, Series 2005-6, Class 2-CB-2, 6.00% 2035		687		667
Washington Mutual Mortgage, WMALT Series 2005-AR1, Class A-1-A, 5.125% 20352,3		303		288
				60,264
Total mortgage-backed obligations				439,044
U.S. TREASURY BONDS & NOTES — 25.28%
U.S. Treasury 2.375% 20113,5,6		1,579		1,647
U.S. Treasury 4.625% 2011		12,250		12,847
U.S. Treasury 3.00% 20123,5		11,620		12,595
U.S. Treasury 4.25% 20126		4,500		4,657
U.S. Treasury 4.625% 20126		8,000		8,396
U.S. Treasury 4.25% 2013		37,994		39,365
U.S. Treasury 4.00% 2014		2,500		2,554
U.S. Treasury 4.25% 2014		5,000		5,169
U.S. Treasury 11.25% 2015		7,500		10,959
U.S. Treasury 5.125% 2016		19,250		20,834
U.S. Treasury 8.875% 2017		13,690		18,833
U.S. Treasury 8.125% 2019		13,695		18,462
U.S. Treasury 8.50% 2020		12,600		17,526
U.S. Treasury 7.875% 20216		3,750		5,043
U.S. Treasury 7.125% 2023		7,500		9,676
U.S. Treasury 5.375% 2031		3,000		3,381
U.S. Treasury 4.50% 2036		19,600		19,707
				211,651
ASSET-BACKED OBLIGATIONS1— 8.01%
CPS Auto Receivables Trust, Series 2006-C, Class A-4, XLCA insured, 5.14% 20134		6,125		6,156
CPS Auto Receivables Trust, Series 2007-B, Class A-4, FSA insured, 5.60% 20144		1,650		1,647
CPS Auto Receivables Trust, Series 2007-C, Class A-4, FSA insured, 5.92% 20144		1,000		978
PG&E Energy Recovery Funding LLC, Series 2005-1, Class A-3, 4.14% 2012		1,000		994
PG&E Energy Recovery Funding LLC, Series 2005-2, Class A-2, 5.03% 2014		5,570		5,643
CarMax Auto Owner Trust, Series 2007-2, Class A-4, 5.27% 2012		5,000		4,977
Drive Auto Receivables Trust, Series 2005-2, Class A-3, MBIA insured, 4.26% 20124		750		748
Drive Auto Receivables Trust, Series 2006-1, Class A-4, FSA insured, 5.54% 20134		4,000		4,006
UPFC Auto Receivables Trust, Series 2005-B, Class A-3, XLCA insured, 4.98% 2011		3,507		3,502
UPFC Auto Receivables Trust, Series 2006-B, Class A-3, AMBAC insured, 5.01% 2012		1,000		1,000
West Penn Funding LLC, Transition Bonds, Series 2005-A, Class A-1, 4.46% 20104		3,944		3,950
Long Beach Acceptance Auto Receivables Trust, Series 2004-A, Class A-2, FSA insured, 2.841% 20102		740		728
Long Beach Acceptance Auto Receivables Trust, Series 2005-B, Class A-4, FSA insured, 4.522% 2012		3,000		2,994
Residential Funding Mortgage Securities II, Inc., Series 2007-HSA3, Class A-I-3, MBIA insured, 6.03% 20372,3		1,500		1,125
Residential Funding Mortgage Securities II, Inc., Series 2007-HSA2, Class A-1F, MBIA insured, 8.47% 20372		1,488		1,482
GMAC Mortgage Loan Trust, Series 2007-HE2, Class A-3, FGIC insured, 6.193% 20372,3		2,626		2,347
Countryplace Manufactured Housing Contract, Series 2005-1, Class A-3, AMBAC insured, 4.80% 20353,4		2,650		2,271
PSE&G Transition Funding II LLC, Series 2005-1, Class A-2, 4.34% 2014		2,125		2,128
Prestige Auto Receivables Trust, Series 2007-1, Class A-3, FSA insured, 5.58% 20144		2,000		2,028
Spirit Master Funding LLC, Net-Lease Mortgage Notes, Series 2005-1, Class A-1, AMBAC insured, 5.05% 20233,4		2,229		1,889
CWABS Asset-backed Certificates Trust, Series 2007-9, Class 2-A-3, 5.045% 20472		2,150		1,854
Massachusetts RRB Special Purpose Trust, Series 2005-1, Class A-4, 4.40% 2015		1,850		1,830
MBNA Credit Card Master Note Trust, Series 2005-6, Class A, 4.50% 2013		1,500		1,511
Washington Mutual Master Note Trust, Series 2007-A4A, Class A-4, 5.20% 20143,4		1,500		1,499
AEP Texas Central Transitioning Funding II LLC, Senior Secured Transition Bonds, Series A, Class A-3, 5.09% 2015		1,450		1,458
WFS Financial Owner Trust, Series 2004-1, Class A-4, 2.81% 2011		1,101		1,100
RAMP Trust, Series 2004-RS9, Class A-I-4, AMBAC insured, 4.767% 2032		1,048		1,036
Honda Auto Receivables Owner Trust, Series 2006-2, Class A-4, 5.28% 2012		1,000		1,007
AmeriCredit Automobile Receivables Trust, Series 2006-B-G, Class A-4, FGIC insured, 5.21% 2013		1,000		1,001
Triad Automobile Receivables Trust, Series 2006-C, Class A-3, AMBAC insured, 5.26% 2011		1,000		1,000
Argent Securities Trust, Series 2006-W3, Class A-2C, 5.045% 20362		1,000		850
Hertz Vehicle Financing LLC, Rental Car Asset-backed Notes, Series 2005-1, Class A-5, MBIA insured, 5.08% 20113,4		750		714
ARG Funding Corp., Series 2005-1, Class A-3, MBIA insured, 4.29% 20113,4		750		705
AMRESCO Residential Securities Corp. Mortgage Loan Trust, Series 1997-2, Class A-7, 7.57% 2027		501		493
Saxon Asset Securities Trust, Series 2002-2, Class AF-5, 6.49% 20312,3		555		431
				67,082
FEDERAL AGENCY BONDS & NOTES — 6.35%
Freddie Mac 4.50% 2014		5,500		5,615
Freddie Mac 5.25% 2016		5,000		5,277
Freddie Mac 5.50% 2016		5,000		5,363
Freddie Mac 5.50% 2017		3,500		3,750
Fannie Mae 6.00% 2011		13,750		14,718
Small Business Administration, Series SBIC-PS 2006-10A, Participating Securities, 5.408% 2016		5,292		5,315
Small Business Administration, Series 2001-20K, 5.34% 20211		827		845
Small Business Administration, Series 2001-20J, 5.76% 20211		643		663
Small Business Administration, Series 2001-20F, 6.44% 20211		1,763		1,849
Small Business Administration, Series 2003-20B, 4.84% 20231		2,577		2,585
Federal Agricultural Mortgage Corp. 4.875% 20114		2,000		2,060
Federal Agricultural Mortgage Corp. 5.125% 20174		1,250		1,298
United States Agency for International Development, Republic of Egypt 4.45% 2015		1,000		996
United States Agency for International Development, State of Israel, Class 1-A, 5.50% 2023		2,000		2,158
United States Government-Guaranteed Ship Financing Obligations, Rowan Companies, Inc. (Title XI) 5.88% 20121		611		642
				53,134
INDUSTRIALS — 0.40%
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class G, MBIA insured, 6.664% 20131,4		2,198		2,264
Southern Capital Corp. Pass Through Trust, Series 2002-1, Class G, MBIA insured, 5.70% 20231,4		1,078		1,127
				3,391
UTILITIES — 0.18%
Chilquinta Energia Finance Co. LLC, MBIA insured, 6.47% 20084		1,500		1,502
ENERGY — 0.03%
Petroleum Export Ltd., Class A-1, MBIA insured, 4.623% 20101,4		278		273
Total bonds, notes and other debt instruments (cost: $763,025,000)				776,077
Short-term securities — 8.72%
Federal Home Loan Bank 4.20% due 4/16/2008		18,545		18,322
Procter & Gamble International Funding S.C.A. 4.25% due 1/22/20084		13,400		13,365
E.I. duPont de Nemours and Co. 4.20% due 1/11/20084		10,000		9,987
Walgreen & Co. 4.20% due 1/4/2008		9,000		8,996
General Electric Capital Corp. 4.15% due 1/2/2008		8,900		8,898
Hewlett-Packard Co. 4.52% due 1/2/20084		8,000		7,998
Estée Lauder Companies Inc. 4.24% due 1/3/20084		5,500		5,498
Total short-term securities (cost: $73,056,000)				73,064
Total investment securities (cost: $836,081,000)				849,141
Other assets less liabilities				(11,750	)
Net assets			$	837,391

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

2 Coupon rate may change periodically.

3 Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities was $59,611,000.

4 Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $85,193,000, which represented 10.17% of the net assets of the fund.

5 Index-linked bond whose principal amount moves with a government retail price index.

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

Cash Management Fund

Investment portfolio

December 31, 2007

Short-term securities — 99.69%	Principal amount (000)		Market value (000)
CORPORATE SHORT-TERM NOTES — 86.44%
Nestlé Capital Corp. 4.15% due 2/13/20081	$	20,500	$	20,396
Toronto-Dominion Holdings USA Inc. 4.73%–4.83% due 1/8–1/31/20081		20,100		20,045
BMW U.S. Capital LLC 4.45% due 1/3/20081		20,000		19,993
American Honda Finance Corp. 4.50% due 1/9/2008		20,000		19,977
Wells Fargo & Co. 4.30% due 1/11/2008		20,000		19,974
Brown-Forman Corp. 4.25% due 1/18/20081		20,000		19,957
KfW International Finance Inc. 4.30% due 1/24/20081		20,000		19,943
Eksportfinans ASA 4.58% due 1/23/20081		20,000		19,937
IBM International Group Capital LLC 4.47% due 1/30/20081		20,000		19,915
Chevron Funding Corp. 4.27%–4.28% due 2/5–2/6/2008		20,000		19,913
Hewlett-Packard Co. 4.52%–4.55% due 1/2–1/4/20081		18,700		18,691
HBOS Treasury Services PLC 4.85%–5.15% due 1/15-–2/4/2008		17,400		17,326
Procter & Gamble International Funding S.C.A. 4.20%–4.22% due 1/25–1/28/20081		16,500		16,448
Bank of America Corp. 4.93% due 1/25/2008		16,400		16,344
Anheuser-Busch Cos. Inc. 4.18% due 2/1/20081		16,000		15,940
Honeywell International Inc. 4.47% due 1/10/20081		15,000		14,981
Sheffield Receivables Corp. 4.88% due 1/7/20081		7,900		7,892
Barclays U.S. Funding Corp. 4.60% due 1/30/2008		6,500		6,472
Canadian Wheat Board 4.22% due 1/15/2008		13,600		13,576
Walgreen & Co. 4.40% due 1/14/2008		13,000		12,978
Coca-Cola Co. 4.47% due 1/17/20081		13,000		12,972
GlaxoSmithKline Finance PLC 4.55% due 1/22/20081		13,000		12,961
Medtronic Inc. 4.22% due 1/17–1/22/20081		12,900		12,870
PepsiCo Inc. 4.15% due 1/14/20081		12,600		12,580
Caterpillar Financial Services Corp. 4.20%–4.47% due 1/7–1/8/2008		11,900		11,889
United Parcel Service Inc. 4.36% due 1/24/20081		11,800		11,766
Westpac Banking Corp. 5.10% due 1/14/20081		11,700		11,677
Old Line Funding, LLC 4.85% due 1/16/20081		11,700		11,673
Dexia Delaware LLC 4.77% due 1/10/2008		11,600		11,585
Johnson & Johnson 4.20% due 1/9/20081		10,000		9,989
CAFCO, LLC 5.30% due 1/8/20081		9,500		9,489
Bank of Ireland 4.86% due 1/28/20081		8,590		8,556
International Lease Finance Corp. 4.69% due 1/3/2008		8,000		7,997
Lowe’s Co.s, Inc. 4.28% due 1/4/2008		6,400		6,397
Unilever Capital Corp. 4.23% due 1/25/20081		5,181		5,166
ANZ National (International) Ltd. 4.50% due 2/1/20081		5,000		4,980
Kimberly-Clark Worldwide Inc. 4.45% due 1/7/20081		1,900		1,898
				505,143
FEDERAL AGENCY DISCOUNT NOTES — 13.25%
Federal Home Loan Bank 4.215% due 2/8/2008		31,000		30,858
Fannie Mae 4.27%–4.29% due 1/18–2/8/2008		25,900		25,833
Freddie Mac 4.21%–4.25% due 1/31–2/7/2008		18,000		17,929
International Bank for Reconstruction and Development 4.33% due 1/22/2008		2,800		2,794
				77,414
Total investment securities (cost: $582,578,000)				582,557
Other assets less liabilities				1,807
Net assets			$	584,364

1 Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $340,715,000, which represented 58.31% of the net assets of the fund.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so you may lose money.

Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in each fund’s prospectus, which can be obtained from your financial professional and should be read carefully before investing.

American Funds Insurance Series serves as the underlying investment for multiple insurance products, including variable annuity contracts and variable life insurance policies. The funds can only be purchased through insurance products. This material is not an offer of the funds.

MFGEFP-995-0208O-S10882

Global Discovery Fund

Summary investment portfolio, December 31, 2007

Largets individual equity securities	Percent of net assets
American International Group		3.06
Yahoo		2.20
Ryanair Holdings		1.96
American Medical Systems Holdings		1.94
Google		1.89
Xinao Gas Holdings		1.88
Veolia Environement		1.81
Berkshire Hathaway		1.80
Apple		1.80
Schlumberger		1.79

Common stocks  - 86.10%	Shares		Market value (000)			Percent of net assets
Software & services  - 9.34%
Yahoo! Inc. (1)		260,000	$	6,048			2.20	%
Google Inc., Class A (1)		7,500		5,186			1.89
Global Payments Inc.		80,000		3,722			1.35
Microsoft Corp.		83,300		2,965			1.08
United Internet AG (2)		108,000		2,599			.95
Other securities				5,136			1.87
				25,656			9.34
Banks  - 8.63%
Banco Bradesco SA, preferred nominative		96,336		3,084			1.12
HDFC Bank Ltd. (2)		70,000		3,056			1.11
People's United Financial, Inc.		150,000		2,670			.97
Raiffeisen International Bank-Holding AG (2)		14,083		2,119			.77
BOC Hong Kong (Holdings) Ltd. (2)		760,000		2,100			.77
Other securities				10,677			3.89
				23,706			8.63
Media  - 7.05%
Time Warner Inc.		245,000		4,045			1.47
British Sky Broadcasting Group PLC (2)		305,000		3,726			1.35
CTC Media, Inc. (1)		70,000		2,114			.77
Other securities				9,483			3.46
				19,368			7.05
Insurance  - 6.51%
American International Group, Inc.		144,000		8,395			3.06
Berkshire Hathaway Inc., Class A (1)		35		4,956			1.80
Sampo Oyj, Class A (2)		125,000		3,264			1.19
Other securities				1,273			.46
				17,888			6.51
Telecommunication services  - 6.29%
Millicom International Cellular SA (1)		40,000		4,718			1.72
MTN Group Ltd. (2)		217,000		4,067			1.48
OJSC Mobile TeleSystems (ADR)		20,000		2,036			.74
Other securities				6,466			2.35
				17,287			6.29
Health care equipment & services  - 5.67%
American Medical Systems Holdings, Inc. (1)		369,000		5,336			1.94
Inverness Medical Innovations, Inc. (1)		45,000		2,528			.92
Other securities				7,727			2.81
				15,591			5.67
Technology hardware & equipment  - 5.44%
Apple Inc. (1)		25,000		4,952			1.80
Other securities				10,005			3.64
				14,957			5.44
Utilities  - 5.22%
Xinao Gas Holdings Ltd. (2)		2,610,000		5,165			1.88
Veolia Environnement (2)		54,700		4,961			1.81
Hong Kong and China Gas Co. Ltd. (2)		715,000		2,179			.79
Other securities				2,029			.74
				14,334			5.22
Pharmaceuticals, biotechnology & life sciences  - 5.21%
Novo Nordisk A/S, Class B (2)		46,000		3,000			1.09
Millennium Pharmaceuticals, Inc. (1)		170,000		2,547			.93
Other securities				8,758			3.19
				14,305			5.21
Retailing  - 3.85%
Lowe's Companies, Inc.		125,000		2,828			1.03
Best Buy Co., Inc.		38,900		2,048			.74
Other securities				5,706			2.08
				10,582			3.85
Food & staples retailing  - 2.94%
Walgreen Co.		100,000		3,808			1.38
Other securities				4,260			1.56
				8,068			2.94
Diversified financials  - 2.64%
Citigroup Inc.		118,500		3,489			1.27
State Street Corp.		25,000		2,030			.74
Other securities				1,746			.63
				7,265			2.64
Transportation  - 2.26%
Ryanair Holdings PLC (ADR) (1)		136,400		5,380			1.96
Other securities				831			.30
				6,211			2.26
Commercial services & supplies  - 1.84%
Wirecard AG (1)  (2)		158,000		2,625			.96
Monster Worldwide, Inc. (1)		75,000		2,430			.88
				5,055			1.84
Energy  - 1.79%
Schlumberger Ltd.		50,000		4,919			1.79
				4,919			1.79
Consumer services  - 1.58%
Las Vegas Sands Corp. (1)		35,000		3,607			1.31
Other securities				737			.27
				4,344			1.58
Consumer durables & apparel  - 1.49%
China Dongxiang (Group) Co., Ltd. (1)  (2)		3,000,000		2,210			.80
Other securities				1,890			.69
				4,100			1.49
Materials  - 1.42%
Bayer AG, non-registered shares (2)		43,000		3,915			1.42
				3,915			1.42
Capital goods  - 1.27%
Boart Longyear Ltd. (1)  (2)  (3)		1,269,230		2,600
Boart Longyear Ltd. (1)  (2)		430,770		883			1.27
				3,483			1.27
Other - 1.16%
Other securities				3,185			1.16
Miscellaneous  -  4.50%
Other common stocks in initial period of acquisition				12,377			4.50
Total common stocks (cost: $197,136,000)				236,596			86.10
Convertible securities  - 0.32%
Miscellaneous  -  0.32%
Other convertible securities in initial period of acquisition			$	885			0.32	%
Total convertible securities (cost: $995,000)				885			.32
Short-term securities  - 14.66%
United Parcel Service Inc. 4.15%-4.40% due 2/1-3/11/2008 (4)	$	6,200		6,161			2.24
Fannie Mae 4.22%-4.29% due 1/18-1/23/2008		6,000		5,985			2.18
Federal Home Loan Bank 4.29%-4.34% due 1/9-1/16/2008		4,900		4,893			1.78
NetJets Inc. 4.47% due 2/7/2008 (4)		4,000		3,978			1.45
John Deere Capital Corp. 4.50%-4.55% due 1/22-1/23/2008 (4)		3,700		3,689			1.34
Variable Funding Capital Corp. 5.30% due 1/17/2008 (4)		3,600		3,591			1.31
Hewlett-Packard Co. 4.24% due 1/14/2008 (4)		3,100		3,095			1.12
Harley-Davidson Funding Corp. 4.50% due 1/8/2008 (4)		3,000		2,997			1.09
Lowe's Co.s, Inc. 4.28% due 1/4/2008		2,800		2,799			1.02
CAFCO, LLC 5.30% due 1/9/2008 (4)		1,700		1,698			.62
Other securities				1,400			.51
Total short-term securities (cost: $40,293,000)				40,286			14.66
Total investment securities (cost: $238,424,000)				277,767			101.08
Other assets less liabilities				(2,963	)		(1.08	)
Net assets			$	274,804			100.00	%

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

 "Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

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

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

(2) Valued under fair value procedures adopted by authority of the board of trustees.  The total value of all such securities, including those in "Miscellaneous" and "Other securities," was $92,974,000.

(3) Purchased in a transaction exempt from registration under the Securities Act of 1933.  This security (acquired 4/4/07 at a cost of $1,922,000) may be subject to legal or contractual restrictions on resale.

(4) Purchased in a transaction exempt from registration under the Securities Act of 1933.  May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers.  The total value of all such securities, including those in "Other securities," was $25,209,000, which represented 9.17% of the net assets of the fund.

ADR = American Depositary Receipts

See Notes to Financial Statements

GLOBAL GROWTH FUND

Summary investment portfolio, December 31, 2007

Largets individual equity securities	Percent of net assets
Microsoft		2.15	%
Koninklijke KPN		1.70
Novo Nordisk		1.62
General Electric		1.57
Samsung Electronics		1.22
Deutsche Post		1.21
IBM		1.11
Uralkali		1.00
KBR		.96
Vodafone		.96

Common stocks  - 81.11%	Shares		Market value (000)			Percent of net assets
Information technology  - 11.99%
Microsoft Corp.		3,542,000	$	126,095			2.15	%
Samsung Electronics Co., Ltd. (1)		121,440		71,397			1.22
International Business Machines Corp.		600,000		64,860			1.11
Oracle Corp. (2)		2,000,000		45,160			.77
Cisco Systems, Inc. (2)		1,346,500		36,449			.62
STMicroelectronics NV (1)		2,564,000		36,447			.62
Other securities				322,627			5.50
				703,035			11.99
Consumer discretionary  - 10.17%
GOME Electrical Appliances Holding Ltd. (1)		21,686,000		54,847			.94
Carnival Corp., units		925,000		41,153			.70
Lowe's Companies, Inc.		1,615,000		36,531			.62
Honda Motor Co., Ltd. (1)		535,200		17,697			.30
Other securities				446,336			7.61
				596,564			10.17
Financials  - 9.85%
Allianz SE (1)		242,000		51,686			.88
Macquarie Group Ltd. (1)		745,000		49,319			.84
ICICI Bank Ltd. (1)		837,300		26,209
ICICI Bank Ltd. (ADR)		308,750		18,988			.77
Mizuho Financial Group, Inc. (1)		9,000		42,702			.73
Société Générale (1)		260,700		37,203			.63
Lloyds TSB Group PLC (1)		1,000,000		9,293			.16
Other securities				342,419			5.84
				577,819			9.85
Industrials  - 9.49%
General Electric Co.		2,475,455		91,765			1.57
Deutsche Post AG (1)		2,084,700		71,146			1.21
KBR, Inc. (2)		1,455,000		56,454			.96
Suzlon Energy Ltd. (1)		858,834		42,186			.72
Other securities				294,950			5.03
				556,501			9.49
Health care  - 7.92%
Novo Nordisk A/S, Class B (1)		1,455,200		94,901			1.62
Roche Holding AG (1)		293,500		50,491			.86
UnitedHealth Group Inc.		850,000		49,470			.84
Smith & Nephew PLC (1)		4,019,300		46,054			.79
Other securities				223,439			3.81
				464,355			7.92
Telecommunication services  - 7.27%
Koninklijke KPN NV (1)		5,525,830		99,790			1.70
Vodafone Group PLC (ADR)		800,000		29,856
Vodafone Group PLC (1)		7,131,250		26,489			.96
NTT DoCoMo, Inc. (1)		32,058		53,123			.91
América Móvil, SAB de CV, Series L (ADR)		585,000		35,913			.61
Other securities				180,883			3.09
				426,054			7.27
Consumer staples  - 6.51%
Unilever NV, depository receipts (1)		1,184,000		43,286			.74
Avon Products, Inc.		945,800		37,387			.64
Other securities				301,246			5.13
				381,919			6.51
Materials  - 6.04%
JSC Uralkali (GDR) (1)  (2)		1,149,568		42,342
JSC Uralkali (GDR) (1)  (2)  (3)		444,915		16,387			1.00
Other securities				295,239			5.04
				353,968			6.04
Energy  - 5.33%
Reliance Industries Ltd. (1)		567,000		41,468			.71
Royal Dutch Shell PLC, Class B (1)		574,666		23,954
Royal Dutch Shell PLC, Class B (ADR)		139,643		11,590			.60
Other securities				235,795			4.02
				312,807			5.33
Utilities  - 4.13%
Public Power Corp. SA (1)		926,700		48,561			.83
Veolia Environnement (1)		425,900		38,623			.66
SUEZ SA (1)		550,000		37,227			.63
Other securities				117,901			2.01
				242,312			4.13
Miscellaneous  -  2.41%
Other common stocks in initial period of acquisition				141,117			2.41
Total common stocks (cost: $3,710,926,000)				4,756,451			81.11
Short-term securities  - 19.17%	Principal amount (000)		Market value (000)			Percent of net assets
Federal Home Loan Bank 4.20%-4.34% due 1/11-2/13/2008	$	76,600		76,309			1.30
Dexia Delaware LLC 4.79%-4.815% due 1/4-1/10/2008		56,857		56,821			.97
Freddie Mac 4.22%-4.25% due 1/24-1/31/2008		54,800		54,612			.93
Royal Bank of Scotland PLC 4.53%-5.06% due 2/4-3/28/2008		55,000		54,497			.93
BASF AG 4.35%-4.52% due 1/24-2/12/2008 (3)		54,500		54,254			.93
Rabobank USA Financial Corp. 5.06% due 1/10/2008		50,000		49,930			.85
Danske Corp. 4.81% due 1/14/2008 (3)		50,000		49,906			.85
Lloyds Bank PLC 4.67% due 1/16/2008		50,000		49,892			.85
American Honda Finance Corp. 4.48%-4.50% due 1/15-1/30/2008		49,800		49,621			.85
Swedish Export Credit Corp. 4.30%-4.50% due 2/14-3/12/2008 (4)		44,700		44,363			.76
Electricité de France 4.40%-4.82% due 1/8-3/3/2008		41,400		41,188			.70
Westpac Banking Corp. 4.86% due 3/13/2008 (3)		40,000		39,623			.68
ING (U.S.) Funding LLC 4.73%-5.15% due 1/9-1/29/2008		37,900		37,780			.64
AstraZeneca PLC 4.65% due 3/4/2008 (3)		38,000		37,689			.64
Eksportfinans ASA 4.56% due 1/9/2008 (3)		34,700		34,659			.59
General Electric Capital Corp. 4.15% due 1/2/2008		12,700		12,697			.22
Other securities				380,087			6.48
Total short-term securities (cost: $1,124,017,000)				1,123,928			19.17
Total investment securities (cost: $4,834,943,000)				5,880,379			100.28
Other assets less liabilities				(16,282	)		(.28	)
Net assets			$	5,864,097			100.00	%

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

 "Other securities" includes all issues that are not disclosed separately in the summary investment portfolio, including securities purchased in transactions exempt from registration under the Securities Act of 1933 which may be subject to legal or contractual restrictions on resale.  The total value of all such restricted securities was $1,677,000, which represented .03% of the net assets of the fund.

Investments in affiliates

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

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

on such holdings and related transactions during the year ended December 31, 2007, appear below.

	Beginning shares		Additions		Reductions		Ending shares		Dividend income (000)		Market value of affiliate at 12/31/07 (000)
WestJet Airlines Ltd. (5)		750,000		-		750,000		-		-		-

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

(1) Valued under fair value procedures adopted by authority of the board of trustees.  The total value of all such securities, including those in "Miscellaneous" and "Other securities," was $2,869,052,000.

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

(3) Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities, including those in "Other securities," was $450,856,000, which represented 7.69% of the net assets of the fund.

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

(5) Unaffiliated issuer at 12/31/2007.

ADR = American Depositary Receipts

GDR = Global Depositary Receipts

See Notes to Financial Statements

Global Small Capitalization Fund

Summary investment portfolio, December 31, 2007

Largest individual equity securities	Percent of net assets
Jumbo		2.86	%
Fourlis		1.83
Oilexco		1.73
Kingboard Chemical Holdings		1.56
Novell		1.50
Xinao Gas Holdings		1.48
Pantaloon Retail		1.22
International Container Terminal Services		1.19
Kumho Industrial		1.17
KazakhGold Group		.99

Common stocks  - 86.00%	Shares		Market value (000)			Percent of net assets
Consumer discretionary  - 16.36%
Jumbo SA (1) (2)		3,436,686	$	124,117			2.86	%
Fourlis (1)		2,010,385		79,315			1.83
Pantaloon Retail (India) Ltd. (1)		2,520,750		52,969			1.22
Schibsted ASA (1)		741,000		31,655			.73
Integrated Distribution Services Group Ltd. (1)		9,458,000		28,713			.66
Lions Gate Entertainment Corp. (3)		2,750,000		25,905			.60
Blue Nile, Inc. (3)		353,600		24,066			.55
Life Time Fitness, Inc. (3)		465,000		23,101			.53
Rambler Media Ltd. (1) (3)		718,400		21,552			.50
Hürriyet Gazetecilik ve Matbaacilik AS (1) (3)		6,760,336		20,782			.48
Other securities				278,380			6.40
				710,555			16.36
Industrials  - 13.90%
International Container Terminal Services, Inc. (1)		47,285,000		51,817			1.19
Kumho Industrial Co., Ltd. (1)		830,000		49,402			1.14
Samsung Engineering Co., Ltd. (1)		420,550		41,499			.96
UAP Holding Corp.		910,000		35,126			.81
GS Engineering & Construction Corp. (1)		175,000		28,702			.66
Koninklijke BAM Groep NV (1)		1,167,000		27,425			.63
Sintex Industries Ltd. (1)		1,900,000		27,347			.63
Sungkwang Bend Co., Ltd. (1)		748,934		21,500			.49
Other securities				321,003			7.39
				603,821			13.90
Materials  - 11.42%
KazakhGold Group Ltd. (GDR) (1) (3) (4)		1,500,000		38,625
KazakhGold Group Ltd. (GDR) (1) (3)		164,402		4,233			.99
Central African Mining & Exploration Co. PLC (1) (3)		49,705,000		37,726			.87
AMG Advanced Metallurgical Group NV (1) (3)		454,000		33,745			.78
Major Drilling Group International Inc. (3)		475,000		29,957			.69
SSCP Co., Ltd. (1) (3)		865,000		29,050			.67
African Minerals Ltd. (1) (2) (3)		6,905,000		19,550
African Minerals Ltd.  (1) (2) (3) (5)		2,480,000		7,022			.61
European Goldfields Ltd. (1) (3)		4,691,100		25,409			.58
Tata Chemicals Ltd. (1)		1,992,000		20,796			.48
Other securities				250,004			5.75
				496,117			11.42
Information technology  - 10.87%
Kingboard Chemical Holdings Ltd. (1)		11,482,000		67,977			1.56
Novell, Inc. (3)		9,468,800		65,051			1.50
Other securities				339,105			7.81
				472,133			10.87
Health care  - 8.07%
Applera Corp., Celera group (3)		1,940,000		30,788			.71
ArthroCare Corp. (3)		632,000		30,368			.70
Beckman Coulter, Inc.		365,000		26,572			.61
Other securities				262,921			6.05
				350,649			8.07
Financials  - 6.94%
Orco Property Group SA (1)		225,549		26,765			.62
Dolphin Capital Investors Ltd. (1) (3)		8,178,820		22,278			.51
Other securities				252,564			5.81
				301,607			6.94
Energy  - 6.36%
Oilexco Inc. (GBP denominated)  (1) (3) (5)		1,900,000		26,759
Oilexco Inc. (GBP denominated) (1) (3)		1,755,000		24,717
Oilexco Inc. (3) (5)		985,000		13,079
Oilexco Inc. (3)		803,900		10,674			1.73
Quicksilver Resources Inc. (3)		456,450		27,200			.63
Heritage Oil Corp. (3)		456,300		24,125			.56
OPTI Canada Inc. (3)		1,231,100		20,589			.47
Other securities				129,134			2.97
				276,277			6.36
Utilities  - 3.83%
Xinao Gas Holdings Ltd. (1)		32,539,000		64,389			1.48
Manila Electric Co.  (1)		21,037,280		41,643			.96
Other securities				60,213			1.39
				166,245			3.83
Consumer staples - 2.27%
Other securities				98,536			2.27
Telecommunication services - 1.14%
Other securities				49,331			1.14
Miscellaneous  -  4.84%
Other common stocks in initial period of acquisition				210,119			4.84
Total common stocks (cost: $2,814,445,000)				3,735,390			86.00
Rights & warrants  - 0.05%	Shares		Market value (000)			Percent of net assets
Other - 0.05%
Kumho Industrial Co., Ltd., rights, expire 2008 (1) (3)		99,600		1,447			.03
Other securities				957			.02
Total rights & warrants (cost: $2,835,000)				2,404			.05
Convertible securities  - 0.31%
Other - 0.31%
Other securities				13,285			.31
Total convertible securities (cost: $14,020,000)				13,285			.31
Short-term securities  - 13.70%	Principal amount (000)
Federal Home Loan Bank 4.29%-4.35% due 1/16-2/6/2008	$	53,500		53,324			1.23
Freddie Mac 4.25%-4.28% due 1/3-1/29/2008		46,800		46,697			1.08
BASF AG 4.45%-4.77% due 1/14-1/25/2008 (4)		37,000		36,905			.85
Eksportfinans ASA 4.53%-4.58% due 1/23-2/14/2008 (4)		35,000		34,828			.80
Swedish Export Credit Corp. 4.52%-4.62% due 1/15-1/31/2008		32,700		32,622			.75
Electricité de France 4.48%-4.82% due 1/8-2/27/2008 (6)		28,500		28,370			.65
Alcon Capital Corp. 4.20% due 2/12/2008 (4)		15,000		14,911
Nestlé Capital Corp. 4.75% due 2/7/2008 (4)		11,400		11,338			.60
KfW International Finance Inc. 4.44% due 1/15/2008 (4)		26,200		26,151			.60
Westpac Banking Corp. 4.65%-4.66% due 1/8-1/25/2008 (4)		25,050		25,000			.58
Canadian Wheat Board 4.30% due 1/11/2008		25,000		24,967			.58
AstraZeneca PLC 4.57% due 1/25/2008 (4)		25,000		24,915			.57
Bank of Ireland 4.78% due 1/25-2/22/2008 (4)		24,300		24,183			.56
Other securities				210,903			4.85
Total short-term securities (cost: $595,166,000)				595,114			13.70
Total investment securities (cost: $3,426,466,000)				4,346,193			100.06
Other assets less liabilities				(2,505	)		(0.06	)
Net assets			$	4,343,688			100.00	%

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

 "Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

Investments in affiliates

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

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

The fund's affiliated holdings listed below are either shown in the preceding summary investment portfolio

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

details on these holdings and related transactions during the year ended December 31, 2007, appear below.

	Beginning shares		Additions		Reductions		Ending shares		Dividend income (000)		Market value of affiliates at 12/31/07 (000)
Jumbo SA (1)		1,381,940		2,054,746		-		3,436,686	$	1,578	$	124,117
African Minerals Ltd. (1) (3)		5,805,000		1,100,000		-		6,905,000		-		19,550
African Minerals Ltd.  (1) (3) (5)		2,480,000		-		-		2,480,000		-		7,022
Lonrho PLC (1) (3)		10,715,000		9,509,000		-		20,224,000		-		18,473
Allied Gold Ltd. (1) (3)		-		19,548,500		-		19,548,500		-		12,406
OSIM International Ltd. (1)		1,245,000		27,675,000		-		28,920,000		282		11,995
Southern Pacific Resource Corp. (3)		-		5,950,000				5,950,000		-		9,531
Gemfields Resources PLC (1) (3) (5)		4,816,000		-		-		4,816,000		-		3,296
Gemfields Resources PLC (1) (3)		2,000,000		-		-		2,000,000		-		1,369
CallWave, Inc. (3)		1,348,700		-		-		1,348,700		-		4,181
Ondine Biopharma Corp. (3) (5)		2,620,000		-		-		2,620,000		-		2,613
Ondine Biopharma Corp. (GBP denominated) (1) (3) (5)		490,000		-		-		490,000		-		467
Ondine Biopharma Corp. (3)		400,000		-		-		400,000		-		399
Bordeaux Energy Inc. (3) (5) (7)		-		3,780,000		-		3,780,000		-		-
Bordeaux Energy Inc., warrants, expire 2008 (1) (3) (5) (7)		-		3,780,000		-		3,780,000		-		-
Claymont Steel Holdings, Inc. (3) (7) (8)		825,500		314,500		827,500		312,500		-		-
Jaguar Mining Inc. (3) (5) (7)		1,905,000		-		952,500		952,500		-		-
Jaguar Mining Inc. (7)		1,043,000		-		1,043,000		-		-		-
Min Aik Technology Co., Ltd. (1) (7)		5,586,000		480,415		632,000		5,434,415		438		-
Oxus Gold PLC (1) (3) (7)		14,905,000		3,179,300		-		18,084,300		-		-
TaeWoong Co., Ltd. (7)		942,997		-		942,997		-		-		-
									$	2,298	$	215,419

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

(1) Valued under fair value procedures adopted by authority of the board of trustees.  The total value of all such securities, including those in "Miscellaneous" and "Other securities," was $2,375,410,000.

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

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

(4) Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities, including those in "Other securities," was $311,591,000, which represented 7.17% of the net assets of the fund.

(5) Purchased in a transaction exempt from registration under the Securities Act of 1933.  May be subject to legal or contractual restrictions on resale.  Further details on these holdings appear below.

	Acquisition date(s)	Cost  (000)		Market value (000)		Percent of net assets
Oilexco Inc. (GBP denominated)	12/15/2005	$	6,195	$	26,759		.62	%
Oilexco Inc.	12/22/2005 - 3/7/2007		2,762		13,079		.30
Jaguar Mining Inc.	3/22/2006		4,293		11,602		.27
African Minerals Ltd.	12/12/2006		5,606		7,022		.16
Gemfields Resources PLC	11/7/2005 - 12/20/2006		3,781		3,296		.08
Ondine Biopharma Corp.	6/23/2004 - 10/25/2006		4,110		2,613		.06
Ondine Biopharma Corp. (GBP denominated)	5/18/2005		766		467		.01
Bordeaux Energy Inc.	2/6/2007		1,586		514		.01
Bordeaux Energy Inc., warrants, expire 2008	2/6/2007		493		115		.00
Other restricted securities			52,670		41,914		.96
Total restricted securities		$	82,262	$	107,381		2.47	%

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

(7) Unaffiliated issuer at 12/31/2007.

(8) This security was in its initial period of acquisition at 12/31/2006 and was not publicly disclosed.

GBP = British Pounds

GDR = Global Depositary Receipts

See Notes to Financial Statements

Growth Fund

Summary investment portfolio, December 31, 2007

Largest individual equity securities	Percent of net assets
Google		3.44	%
Microsoft		2.79
Altria Group		2.43
Nokia		2.07
Berkshire Hathaway		1.84
Schlumberger		1.78
Newmont Mining		1.47
Barrick Gold		1.43
Suncor		1.39
Roche		1.38

Common stocks  - 92.97%	Shares		Market value (000)			Percent of net assets
Information technology  - 18.22%
Google Inc., Class A (1)		1,535,000	$	1,061,422			3.44	%
Microsoft Corp.		24,125,000		858,850			2.79
Nokia Corp. (ADR)		10,408,000		399,563
Nokia Corp. (2)		6,184,000		237,761			2.07
Cisco Systems, Inc. (1)		14,750,000		399,282			1.29
Oracle Corp. (1)		14,927,800		337,070			1.09
Fidelity National Information Services, Inc.		6,650,000		276,574			.90
Samsung Electronics Co., Ltd. (2)		410,000		241,046			.78
Red Hat, Inc. (1)  (3)		11,511,000		239,889			.78
Other securities				1,567,766			5.08
				5,619,223			18.22
Consumer discretionary  - 15.74%
Best Buy Co., Inc.		7,920,000		416,988			1.35
Johnson Controls, Inc.		10,949,100		394,606			1.28
MGM Mirage, Inc. (1)		4,680,600		393,264			1.28
Lowe's Companies, Inc.		17,326,000		391,914			1.27
Target Corp.		7,690,000		384,500			1.25
Kohl's Corp. (1)		8,160,000		373,728			1.21
Garmin Ltd.		2,540,000		246,380			.80
International Game Technology		5,156,000		226,503			.73
TomTom NV (1)  (2)		2,800,000		208,955			.68
News Corp., Class A		9,490,000		194,450			.63
Other securities				1,622,809			5.26
				4,854,097			15.74
Energy  - 14.02%
Schlumberger Ltd.		5,584,600		549,357			1.78
Suncor Energy Inc.		3,942,898		428,650			1.39
Canadian Natural Resources, Ltd.		4,625,700		338,236			1.10
Devon Energy Corp.		3,409,072		303,101			.98
Petróleo Brasileiro SA - Petrobras, ordinary nominative (ADR)		2,130,000		245,461			.80
Tenaris SA (ADR)		5,245,000		234,609			.76
Murphy Oil Corp.		2,698,800		228,966			.74
EOG Resources, Inc.		2,215,000		197,689			.64
Other securities				1,795,559			5.83
				4,321,628			14.02
Health care  - 9.41%
Roche Holding AG (2)		2,465,000		424,057			1.38
Gilead Sciences, Inc. (1)		6,600,000		303,666			.99
Stryker Corp.		2,990,000		223,413			.72
Charles River Laboratories International, Inc. (1)		2,855,000		187,859			.61
Shire PLC (ADR)		2,700,000		186,165			.60
Other securities				1,575,095			5.11
				2,900,255			9.41
Materials  - 7.64%
Newmont Mining Corp.		9,305,000		454,363			1.47
Barrick Gold Corp.		10,500,000		441,525			1.43
Potash Corp. of Saskatchewan Inc.		2,000,000		287,920			.93
Freeport-McMoRan Copper & Gold Inc.		2,704,500		277,049			.90
K+S AG (2)		735,000		173,096			.56
Other securities				722,775			2.35
				2,356,728			7.64
Financials  - 7.52%
Berkshire Hathaway Inc., Class A (1)		4,011		567,958			1.84
Fannie Mae		6,440,000		257,471			.83
Freddie Mac		4,572,700		155,792			.51
Other securities				1,338,502			4.34
				2,319,723			7.52
Industrials  - 7.35%
Boeing Co.		3,465,000		303,049			.98
General Electric Co.		7,370,000		273,206			.89
KBR, Inc. (1)		5,397,130		209,409			.68
FedEx Corp.		2,080,000		185,473			.60
Other securities				1,296,085			4.20
				2,267,222			7.35
Consumer staples  - 7.18%
Altria Group, Inc.		9,895,000		747,864			2.43
Coca-Cola Co.		5,295,000		324,954			1.05
Bunge Ltd.		2,348,100		273,342			.89
PepsiCo, Inc.		3,145,000		238,705			.77
Other securities				628,886			2.04
				2,213,751			7.18
Telecommunication services  - 2.49%
Sprint Nextel Corp., Series 1		31,956,100		419,583			1.36
Qwest Communications International Inc. (1)		35,000,000		245,350			.80
Other securities				101,888			.33
				766,821			2.49
Utilities - 0.93%
Other securities				286,314			.93
Miscellaneous  -  2.47%
Other common stocks in initial period of acquisition				761,429			2.47
Total common stocks (cost: $22,836,048,000)				28,667,191			92.97
Short-term securities  - 7.20%
Fannie Mae 4.13%-4.65% due 1/4-4/1/2008	$	249,769		248,547			.81
Federal Home Loan Bank 4.225%-4.56% due 1/2-3/19/2008		245,900		244,706			.79
Freddie Mac 4.14%-4.25% due 1/22-4/18/2008		209,049		207,286			.67
Coca-Cola Co. 4.22%-4.71% due 1/8-2/20/2008 (4)		151,843		151,137			.49
General Electric Capital Corp. 4.15% due 1/2/2008		50,000		49,989
Edison Asset Securitization LLC 4.61% due 1/23/2008 (4)		29,300		29,201			.26
NetJets Inc. 4.47% due 1/24-2/7/2008 (4)		56,000		55,718			.18
Other securities				1,233,522			4.00
				2,220,106			7.20
Total short-term securities (cost: $2,220,006,000)				2,220,106			7.20
Total investment securities (cost: $25,056,054,000)				30,887,297			100.17
Other assets less liabilities				(51,936	)		(.17	)
Net assets			$	30,835,361			100.00	%

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

"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

Investments in affiliates

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

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

listed below are either shown in the preceding summary investment portfolio or included in the market value of "Other

securities" under their respective industry sectors. Further details on these holdings and related transactions during the year

ended December 31, 2007, appear below.

	Beginning shares		Additions		Reductions		Ending shares		Dividend income (000)		Market value of affiliates at 12/31/07 (000)
Chipotle Mexican Grill, Inc., Class B (1)		208,100		987,100		-		1,195,200	$	-	$	147,069
Chipotle Mexican Grill, Inc., Class A (1)		595,000		325,000		-		920,000		-		135,304
Red Hat, Inc. (1)		1,185,000		10,326,000		-		11,511,000		-		239,889
Core Laboratories NV (1)		1,197,700		-		-		1,197,700		-		149,377
Bare Escentuals, Inc. (1)		-		5,850,000		-		5,850,000		-		141,863
Digital River, Inc. (1)		-		2,430,000		-		2,430,000		-		80,360
Minerals Technologies Inc.		-		1,000,000		-		1,000,000		150		66,950
Rosetta Resources Inc. (1) (5)		2,980,000		-		-		2,980,000		-		59,093
Blue Nile, Inc. (1)		-		824,000		-		824,000		-		56,081
KGen Power Corp. (1) (2) (5)		3,166,128		-		-		3,166,128		-		50,658
Georgia Gulf Corp.		1,360,000		864,000		-		2,224,000		712		14,723
DataPath, Inc. (1) (2) (5)		2,819,968		-		-		2,819,968		-		9,870
NAVTEQ Corp. (6)		5,700,000		30,000		5,730,000		-		-		-
									$	862	$	1,151,237

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

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

(2) Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities, including those in "Miscellaneous" and "Other securities," was $2,791,992,000.

(3) Represents an affiliated company as defined under the Investment Company Act of 1940.

(4) Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities, including those in "Other securities," was $1,040,992,000, which represented 3.38% of the net assets of the fund.

(5) Purchased in a transaction exempt from registration under the Securities Act of 1933. May be subject to legal or contractual restrictions on resale.  Further details on these holdings appear below.

	Acquisition date(s)	Cost (000)		Market value (000)		Percent of net assets
Rosetta Resources Inc.	6/28/2005-12/2/2005	$	49,745	$	59,093		.19	%
KGen Power Corp.	12/19/2006		44,326		50,658		.16
DataPath, Inc.	6/23/2006		31,020		9,870		.03
Other restricted security			52,893		25,075		.08
Total restricted securities		$	177,984	$	144,696		.46	%

(6) Unaffiliated issuer at 12/31/2007.

ADR = American Depositary Receipts

See Notes to Financial Statements

International Fund

Summary investment portfolio, December 31, 2007

Largest individual equity securities	Percent of net assets
Bayer		4.84
Roche		3.45
Novo Nordisk		2.81
MTN Group		2.39
E.ON		2.39
Nestlé		2.00
Samsung Electronics		1.74
Erste Bank		1.61
Veolia Environnement		1.55
L'Oréal		1.49

Common stocks  - 91.49%	Shares		Market value (000)		Percent of net assets
Financials  - 17.35%
Erste Bank der oesterreichischen Sparkassen AG (1)		2,622,647	$	186,130		1.61	%
Unibanco-União de Bancos Brasileiros SA, units (GDR)		1,083,000		151,230		1.31
Banco Santander, SA (1)		5,700,000		122,963		1.06
Kookmin Bank (1)		1,613,500		118,625		1.03
Banco Bilbao Vizcaya Argentaria, SA (1)		4,626,000		113,453		.98
OTP Bank PLC (1)		2,035,000		102,349		.89
Hana Financial Holdings (1)		1,736,092		94,005		.81
AXA SA (1)		2,281,611		90,712		.79
Credit Suisse Group (1)		1,440,000		86,473		.75
UniCredito Italiano SpA (1)		10,292,000		85,514		.74
Other securities				852,422		7.38
				2,003,876		17.35
Health care  - 11.90%
Roche Holding AG (1)		2,314,268		398,126		3.45
Novo Nordisk A/S, Class B (1)		4,984,200		325,045		2.81
Merck KGaA (1)		972,655		124,762		1.08
Novartis AG (1)		1,850,000		100,656		.87
Other securities				425,481		3.69
				1,374,070		11.90
Materials  - 10.46%
Bayer AG, non-registered shares (1)		6,138,023		558,808		4.84
Nitto Denko Corp. (1)		3,092,600		163,303		1.41
Linde AG (1)		981,856		129,126		1.12
JSC Uralkali (GDR) (1)  (2)		1,780,760		65,590
JSC Uralkali (GDR) (1)  (2)  (3)		521,427		19,205		.74
Other securities				271,733		2.35
				1,207,765		10.46
Telecommunication services  - 9.18%
MTN Group Ltd. (1)		14,702,800		275,550		2.39
Koninklijke KPN NV (1)		8,923,300		161,144		1.40
Singapore Telecommunications Ltd. (1)		45,300,330		124,378		1.08
América Móvil, SAB de CV, Series L (ADR)		1,732,500		106,358		.92
Telenor ASA (1)  (2)		4,470,000		105,660		.91
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk, Class B (1)		83,725,000		90,561		.78
Philippine Long Distance Telephone Co. (1)		809,800		62,143
Philippine Long Distance Telephone Co. (ADR)		340,000		25,745		.76
Other securities				108,588		.94
				1,060,127		9.18
Information technology  - 9.12%
Samsung Electronics Co., Ltd. (1)		342,814		201,547		1.74
Hon Hai Precision Industry Co., Ltd. (1)		19,082,865		117,931		1.02
Nokia Corp. (1)		2,500,000		96,120		.83
Lite-On Technology Corp. (1)		53,475,000		92,686		.80
Other securities				544,535		4.73
				1,052,819		9.12
Consumer discretionary  - 7.56%
Industria de Diseno Textil, SA (1)		1,668,000		101,268		.88
Vivendi SA (1)		2,008,400		91,383		.79
Lotte Shopping Co. (1)		199,500		87,368		.76
Continental AG (1)		605,000		78,340		.68
Renault SA (1)		552,000		77,339		.67
China Dongxiang (Group) Co., Ltd. (1)  (2)		102,534,000		75,534		.65
Other securities				362,119		3.13
				873,351		7.56
Energy  - 5.90%
OAO Gazprom (ADR) (1)		2,655,000		149,508		1.30
Reliance Industries Ltd. (1)		1,987,000		145,319		1.26
Royal Dutch Shell PLC, Class B (1)		2,460,219		102,549
Royal Dutch Shell PLC, Class A (1)		522,000		21,909		1.08
Oil & Natural Gas Corp. Ltd. (1)		3,901,276		121,782		1.05
Other securities				140,305		1.21
				681,372		5.90
Consumer staples  - 5.41%
Nestlé SA (1)		504,580		230,910		2.00
L'Oréal SA (1)		1,205,500		171,832		1.49
Other securities				222,763		1.92
				625,505		5.41
Industrials  - 4.95%
Samsung Engineering Co., Ltd. (1)		1,455,000		143,576		1.24
Siemens AG (1)		771,000		120,861		1.05
Ryanair Holdings PLC (ADR) (2)		2,982,200		117,618		1.02
SMC Corp. (1)		688,000		81,895		.71
Other securities				108,176		.93
				572,126		4.95
Utilities  - 4.73%
E.ON AG (1)		1,299,500		275,512		2.39
Veolia Environnement (1)		1,977,064		179,290		1.55
RWE AG (1)		654,000		91,510		.79
				546,312		4.73
Miscellaneous -  4.93%
Other common stocks in initial period of acquisition				569,442		4.93
Total common stocks (cost: $7,827,902,000)				10,566,765		91.49
Short-term securities  - 8.34%	Principal amount (000)		Market value (000)		Percent of net assets
Swedish Export Credit Corp. 4.30%-4.62% due 1/17-3/31/2008	$	80,400		79,732		.69
Danske Corp. 4.67%-4.79% due 1/15-1/29/2008 (3)		75,000		74,796		.65
Other securities				808,979		7.00
Total short-term securities (cost: $963,650,000)				963,507		8.34
Total investment securities (cost: $8,791,552,000)				11,530,272		99.83
Other assets less liabilities				19,926		.17
Net assets			$	11,550,198		100.00	%

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

“Other securities” includes all issues that are not disclosed separately in the summary investment portfolio, including securities purchased in transactions exempt from registration under the Securities Act of 1933 which may be subject to legal or contractual restrictions on resale.  The total value of all such restricted securities was $8,540,000, which represented .07% of the net assets of the fund.

Investments in affiliates

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

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

on such holdings and related transactions during the year ended December 31, 2007, appear below.

	Beginning shares		Additions		Reductions		Ending shares		Dividend income (000)		Market value of affiliate at 12/31/07 (000)
Samsung Engineering Co. (4)		1,592,000		408,000		545,000		1,455,000	$	1,131	$	-

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

(1) Valued under fair value procedures adopted by authority of the board of trustees.  The total value of all such securities, including those in "Miscellaneous" and "Other securities," was $9,909,192,000.

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

(3) Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities, including those in "Other securities," was $476,891,000, which represented 4.13% of the net assets of the fund.

(4) Unaffiliated issuer at 12/31/2007.

ADR = American Depositary Receipts

GDR = Global Depositary Receipts

See Notes to Financial Statements

New World Fund

Summary investment portfolio, December 31, 2007

Largest individual equity portfolio	Percent of net assets
Nokia		1.98	%
Petróleo Brasileiro - Petrobras		1.81
Tesco		1.59
Uralkali		1.55
Suzlon Energy		1.43
Krka		1.43
Murray & Roberts Holdings		1.41
Vodafone		1.39
BankMuscat		1.31
IOI		1.30

Common stocks  - 81.33%	Shares		Market value (000)		Percent of net assets
Financials  - 13.08%
BankMuscat (SAOG) (GDR) (1)		1,257,637	$	27,982		1.31	%
PT Bank Rakyat Indonesia (Persero) Tbk (1)		28,261,150		22,058		1.03
Banco Santander, SA (1)		782,000		16,870		.79
Asya Katilim Bankasi AS, Class B (1)  (2)		1,600,000		15,047		.70
Piraeus Bank SA (1)		359,937		14,000		.66
National Bank of Greece SA (1)		195,700		13,461		.63
Other securities				169,913		7.96
				279,331		13.08
Industrials  - 12.01%
Suzlon Energy Ltd. (1)		623,600		30,631		1.43
Murray & Roberts Holdings Ltd. (1)		2,014,000		30,030		1.41
Enka Insaat ve Sanayi AS (1)		1,260,356		22,113		1.03
Schneider Electric SA (1)		142,050		18,966		.89
Chiyoda Corp. (1)		1,525,000		17,433		.82
Boart Longyear Ltd. (1)  (2)		8,049,394		16,493		.77
STX Engine Co., Ltd. (1)		237,510		16,255		.76
Other securities				104,664		4.90
				256,585		12.01
Consumer staples  - 10.59%
Tesco PLC (1)		3,616,218		34,032		1.59
IOI Corp. Bhd. (1)		12,003,250		27,903		1.30
Alliance Global Group, Inc. (1)  (2)		115,948,000		15,778		.74
Nestlé SA (1)		31,500		14,415		.67
Other securities				134,138		6.29
				226,266		10.59
Consumer discretionary  - 8.26%
Toyota Motor Corp. (1)		331,100		17,824		.83
GOME Electrical Appliances Holding Ltd. (1)		6,440,000		16,287		.76
Central European Media Enterprises Ltd., Class A (2)		136,600		15,843		.74
Kuoni Reisen Holding AG, Class B (1)		27,250		14,070		.66
Honda Motor Co., Ltd. (1)		353,800		11,699		.55
Other securities				100,749		4.72
				176,472		8.26
Energy  - 8.06%
Petróleo Brasileiro SA - Petrobras, ordinary nominative (ADR)		247,600		28,533
Petróleo Brasileiro SA - Petrobras, preferred nominative (ADR)		106,000		10,199		1.81
OAO Gazprom (ADR) (1)		417,500		23,510		1.10
Oil & Natural Gas Corp. Ltd. (1)		719,453		22,459		1.05
Saipem SpA, Class S (1)		466,000		18,500		.87
Other securities				69,027		3.23
				172,228		8.06
Telecommunication services  - 6.54%
Vodafone Group PLC (1)		7,965,000		29,586		1.39
Cellcom Israel Ltd.		724,714		23,017		1.08
América Móvil, SAB de CV, Series L (ADR)		310,000		19,031		.89
Telekomunikacja Polska SA (1)		2,030,000		18,456		.86
Partner Communications Co. Ltd. (1)		721,500		15,915
Partner Communications Co. Ltd. (ADR)		10,000		221		.76
Other securities				33,369		1.56
				139,595		6.54
Materials  - 6.38%
JSC Uralkali (GDR) (1)  (2)		702,141		25,862
JSC Uralkali (GDR) (1)  (2)  (3)		197,033		7,257		1.55
Votorantim Celulose e Papel SA, preferred nominative (ADR)		820,000		24,444		1.14
Other securities				78,713		3.69
				136,276		6.38
Information technology  - 6.38%
Nokia Corp. (1)		578,600		22,246
Nokia Corp. (ADR)		522,900		20,074		1.98
Samsung Electronics Co., Ltd. (1)		27,100		15,933		.75
Hon Hai Precision Industry Co., Ltd. (1)		2,325,249		14,370		.67
Other securities				63,580		2.98
				136,203		6.38
Health care  - 3.12%
Krka, dd, Novo mesto (1)		168,640		30,597		1.43
Novo Nordisk A/S, Class B (1)		350,320		22,846		1.07
Other securities				13,246		.62
				66,689		3.12
Utilities  - 2.03%
NTPC Ltd. (1)		2,457,000		15,598		.73
Other securities				27,831		1.30
				43,429		2.03
Miscellaneous  -  4.88%
Other common stocks in initial period of acquisition				104,152		4.88
Total common stocks (cost: $1,139,190,000)				1,737,226		81.33
Bonds, notes & other debt instruments  - 5.73%	Principal amount (000)		Market value (000)		Percent of net assets
Bonds & notes of governments outside the U.S.  - 5.29%
Brazil (Federal Republic of) Global:
!12.50% 2016	BRL 1,500			923
!8.00%-11.00% 2010-2040 (4)	$	9,534		11,780
Brazilian Treasury Bill 6.00%-9.418% 2010-2045 (1) (5)	BRL 14,743			7,786
Brazil (Federal Republic of) 10.00% 2014-2017 (1)		13,100		6,300		1.25
Other securities				86,319		4.04
				113,108		5.29
Other  - 0.44%
Gaz Capital SA 6.51% 2022 (3)	$	600		572		.03
Other securities				8,708		.41
				9,280		.44
Total bonds, notes & other debt instruments (cost: $112,103,000)				122,388		5.73
Short-term securities  - 12.88%
Toronto-Dominion Holdings USA Inc. 5.055% due 1/16/2008 (3)		26,600		26,540		1.24
American Honda Finance Corp. 4.49%-4.51% due 1/11-1/25/2008		26,300		26,228		1.23
GlaxoSmithKline Finance PLC 4.55% due 1/18/2008 (3)		22,600		22,548		1.06
Fannie Mae 4.25%-4.29% due 2/8-2/22/2008		21,900		21,777		1.02
Royal Bank of Scotland PLC 5.06% due 2/4/2008		19,800		19,702		.92
Federal Home Loan Bank 4.26%-4.30% due 1/11-2/6/2008		19,300		19,227		.90
National Australia Bank Ltd. 5.01% due 1/14/2008 (3)		18,700		18,664		.87
Export Development Canada 4.30% due 2/8/2008		18,700		18,596		.87
Eksportfinans ASA 4.59% due 2/11/2008 (3)		16,100		16,006		.75
Dexia Delaware LLC 4.95% due 2/8/2008		14,600		14,522		.68
General Electric Capital Corp. 4.15% due 1/2/2008		14,500		14,497		.68
BNP Paribas Finance Inc. 5.138% due 1/7/2008		13,700		13,686		.64
Other securities				43,164		2.02
Total short-term securities (cost: $275,183,000)				275,157		12.88
Total investment securities (cost: $1,526,476,000)				2,134,771		99.94
Other assets less liabilities				1,200		.06
Net assets			$	2,135,971		100.00	%

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

 "Other securities" includes all issues that are not disclosed separately in the summary investment portfolio, including securities purchased in transactions exempt from registration under the Securities Act of 1933 which may be subject to legal or contractual restrictions on resale.  The total value of all such restricted securities was $7,500,000, which represented .35% of the net assets of the fund.

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

(1) Valued under fair value procedures adopted by authority of the board of trustees.  The total value of all such securities, including those in "Miscellaneous" and "Other securities," was $1,209,833,000.

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

(3) Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities, including those in "Other securities," was $149,889,000, which represented 7.02% of the net assets of the fund.

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

(5) Index-linked bond whose principal amount moves with a government retail price index.

ADR = American Depositary Receipts

GDR = Global Depositary Receipts

See Notes to Financial Statements

Blue Chip Income and Growth Fund

Summary investment portfolio, December 31, 2007

Largest individual equity securities	Percent of net assets
General Electric		4.61
Microsoft		4.23
Wal-Mart Stores		3.87
Hewlett-Packard		3.63
Lowe's		3.45
Aetna		3.27
Bank of America		3.12
Citigroup		3.07
Schlumberger		2.54
UnitedHealth Group		2.50

	Shares		Market value (000)		Percent of net assets
Common stocks  - 92.51%
Information technology  - 19.54%
Microsoft Corp.		5,250,000	$	186,900		4.23	%
Hewlett-Packard Co.		3,175,000		160,274		3.63
International Business Machines Corp.		1,000,000		108,100		2.45
Nokia Corp. (ADR)		2,675,000		102,693		2.32
Oracle Corp. (1)		4,200,000		94,836		2.15
Intel Corp.		1,800,000		47,988		1.09
Cisco Systems, Inc. (1)		1,650,000		44,665		1.01
Texas Instruments Inc.		882,116		29,463		.67
Other securities				88,099		1.99
				863,018		19.54
Financials  - 15.85%
Bank of America Corp.		3,334,200		137,569		3.12
Citigroup Inc.		4,610,000		135,718		3.07
Fannie Mae		2,500,800		99,982		2.26
American International Group, Inc.		1,540,000		89,782		2.03
JPMorgan Chase & Co.		1,800,000		78,570		1.78
Capital One Financial Corp.		875,000		41,353		.94
Freddie Mac		1,169,100		39,831		.90
Other securities				77,419		1.75
				700,224		15.85
Health care  - 15.31%
Aetna Inc.		2,500,000		144,325		3.27
UnitedHealth Group Inc.		1,900,000		110,580		2.50
Eli Lilly and Co.		1,125,000		60,064		1.36
Merck & Co., Inc.		1,000,000		58,110		1.32
Abbott Laboratories		1,000,000		56,150		1.27
Amgen Inc. (1)		1,075,000		49,923		1.13
Cardinal Health, Inc.		810,000		46,777		1.06
Pfizer Inc		1,900,000		43,187		.98
AstraZeneca PLC (ADR)		975,000		41,749		.94
Bristol-Myers Squibb Co.		1,125,000		29,835		.67
Medtronic, Inc.		550,000		27,649		.63
Other securities				7,751		.18
				676,100		15.31
Industrials  - 10.72%
General Electric Co.		5,500,000		203,885		4.61
United Technologies Corp.		760,000		58,170		1.32
United Parcel Service, Inc., Class B		750,000		53,040		1.20
Illinois Tool Works Inc.		650,000		34,801		.79
Norfolk Southern Corp.		592,800		29,901		.68
Emerson Electric Co.		500,000		28,330		.64
Other securities				65,485		1.48
				473,612		10.72
Consumer staples  - 9.75%
Wal-Mart Stores, Inc.		3,600,000		171,108		3.87
Walgreen Co.		2,055,000		78,254		1.77
PepsiCo, Inc.		650,000		49,335		1.12
Kimberly-Clark Corp.		555,000		38,484		.87
Kellogg Co.		592,000		31,039		.70
ConAgra Foods, Inc.		1,200,000		28,548		.65
Other securities				33,796		.77
				430,564		9.75
Consumer discretionary  - 8.55%
Lowe's Companies, Inc.		6,740,000		152,459		3.45
Target Corp.		1,100,000		55,000		1.25
Harley-Davidson, Inc.		860,000		40,171		.91
Leggett & Platt, Inc.		2,000,000		34,880		.79
Carnival Corp., units		650,000		28,918		.65
Other securities				66,057		1.50
				377,485		8.55
Energy  - 5.70%
Schlumberger Ltd.		1,140,000		112,142		2.54
Royal Dutch Shell PLC, Class A (ADR)		500,000		42,100		.95
Other securities				97,352		2.21
				251,594		5.70
Telecommunication services  - 3.47%
AT&T Inc.		2,581,250		107,277		2.43
Other securities				45,780		1.04
				153,057		3.47
Materials - 0.99%
Other securities				43,947		.99
Utilities  - 0.90%
FPL Group, Inc.		400,000		27,112		.61
Other securities				12,760		.29
				39,872		.90
Miscellaneous  -  1.73%
Other common stocks in initial period of acquisition				76,565		1.73
Total common stocks (cost: $3,600,908,000)				4,086,038		92.51
Convertible securities  - 0.12%
Miscellaneous  -  0.12%
Other convertible securities in initial period of acquisition				5,520		.12
Total convertible securities (cost: $5,843,000)				5,520		.12
Short-term securities  - 7.30%
Procter & Gamble International Funding S.C.A. 4.22%-4.76% due 1/14-1/25/2008 (2)	$	51,000		50,881		1.15
Federal Home Loan Bank 3.15%-4.29% due 1/2-2/15/2008		46,700		46,584		1.06
Coca-Cola Co. 4.18%-4.52% due 1/8-3/7/2008 (2)		29,500		29,320		.66
Freddie Mac 4.25% due 1/22/2008		18,500		18,452		.42
Fannie Mae 4.22% due 1/23/2008		8,100		8,078		.18
United Parcel Service Inc. 4.15% due 3/11/2008 (2)		7,500		7,431		.17
Kimberly-Clark Worldwide Inc. 4.48% due 1/10/2008 (2)		5,700		5,693		.13
International Lease Finance Corp. 4.69% due 1/3/2008		5,100		5,098		.12
Other securities				150,782		3.41
Total short-term securities (cost: $322,362,000)				322,319		7.30
Total investment securities (cost: $3,929,113,000)				4,413,877		99.93
Other assets less liabilities				3,030		.07
Net assets			$	4,416,907		100.00	%

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

"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

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

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

(2) Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities, including those in "Other securities," was $195,943,000, which represented 4.44% of the net assets of the fund.

ADR = American Depositary Receipts

See Notes to Financial Statements

Global Growth and Income Fund

Summary investment portfolio, December 31, 2007

Largest individual equity securities	Percent of net assets
Microsoft		4.39	%
Yamana Gold		2.50
Vodafone		2.26
IBM		2.21
Newmont Mining		1.88
MeadWestvaco		1.73
Citigroup		1.49
MUFG		1.34
Sumitomo Mitsui Financial Group		1.34
Barrick Gold		1.32

	Shares			Market			Percent
				value			of net
Common stocks  - 77.05%					(000	)	assets
Financials  - 15.89%
Citigroup Inc.		1,050,000		$	30,912			1.49	%
Mitsubishi UFJ Financial Group, Inc. (1)		3,000,000			27,927			1.34
Sumitomo Mitsui Financial Group, Inc. (1)		3,750			27,908			1.34
AEON Credit Service (Asia) Co. Ltd. (1)		1,400,000			20,700			1.00
Berkshire Hathaway Inc., Class B (2)		3,720			17,618			.85
Korea Exchange Bank (1)		1,025,000			15,843			.76
Fannie Mae		50,000			1,999			.10
Other securities					186,966			9.01
					329,873			15.89
Materials  - 13.81%
Yamana Gold Inc.		4,000,000			51,944			2.50
Newmont Mining Corp.		800,000			39,064			1.88
MeadWestvaco Corp.		1,150,000			35,995			1.73
Barrick Gold Corp.		650,000			27,333			1.32
Freeport-McMoRan Copper & Gold Inc.		250,000			25,610			1.23
Newcrest Mining Ltd. (1)		675,000			19,431			.94
Evraz Group SA (GDR) (1)		220,000			17,040			.82
Other securities					70,303			3.39
					286,720			13.81
Information technology  - 12.86%
Microsoft Corp.		2,560,000			91,136			4.39
International Business Machines Corp.		425,000			45,943			2.21
Google Inc., Class A (2)		24,300			16,803			.81
Yahoo! Inc. (2)		667,000			15,514			.75
Other securities					97,669			4.70
					267,065			12.86
Consumer discretionary  - 7.93%
Saks Inc. (2)		1,200,000			24,912			1.20
Macquarie Communications Infrastructure Group (1)  (3)		2,000,000			9,489
Macquarie Communications Infrastructure Group (1)		1,554,291			7,375			.81
Honda Motor Co., Ltd. (1)		231,000			7,638			.37
Other securities					115,241			5.55
					164,655			7.93
Industrials  - 7.90%
Schneider Electric SA (1)		168,000			22,431			1.08
General Electric Co.		600,000			22,242			1.07
European Aeronautic Defence and Space Co. EADS NV (1)		700,000			22,189			1.07
ALSTOM SA (1)		100,000			21,219			1.02
Nippon Express Co., Ltd. (1)		3,000,000			15,342			.74
Other securities					60,687			2.92
					164,110			7.90
Telecommunication services  - 6.52%
Vodafone Group PLC (1)		11,632,000			43,207
Vodafone Group PLC (ADR)		100,000			3,732			2.26
Koninklijke KPN NV (1)		1,000,000			18,059			.87
Verizon Communications Inc.		400,000			17,476			.84
Telekomunikacja Polska SA (1)		1,750,000			15,910			.77
Other securities					36,928			1.78
					135,312			6.52
Consumer staples  - 3.81%
Koninklijke Ahold NV (1)  (2)		1,380,000			19,134			.92
Shoppers Drug Mart Corp.		306,500			16,446			.79
Other securities					43,495			2.10
					79,075			3.81
Energy  - 3.65%
Oil and Gas Development Co. Ltd. (1)		11,576,000			22,439			1.08
OAO Gazprom (ADR) (1)		350,000			19,709			.95
Saipem SpA, Class S (1)		392,000			15,562			.75
Other securities					17,959			.87
					75,669			3.65
Health care  -  2.79%
Other securities
					57,891			2.79
Utilities  -  1.89%
Other securities
					39,246			1.89
Total common stocks (cost: $1,505,280,000)					1,599,616			77.05
Convertible securities  - 0.23%
Other - 0.23%
Other securities					4,709			.23
Total convertible securities (cost: $5,311,000)					4,709			.23
Bonds, notes & other debt instruments  - 0.71%
Other - 0.71%
Other securities					14,829			.71
Total bonds, notes & other debt instruments (cost: $15,786,000)					14,829			.71
	Principal
	amount
Short-term securities  - 21.97%		(000	)
Federal Home Loan Bank 4.20%-4.34% due 1/25-2/13/2008	$	39,800			39,619			1.91
Lloyds Bank PLC 4.67% due 1/16/2008		32,800			32,730			1.58
Fannie Mae 4.25%-4.29% due 2/8-2/22/2008		28,600			28,445			1.37
Dexia Delaware LLC 4.95% due 2/8/2008		25,100			24,965			1.20
American Honda Finance Corp. 4.48% due 2/4/2008		23,200			23,083			1.11
Freddie Mac 4.22%-4.25% due 1/24-1/30/2008		23,000			22,927			1.10
Eksportfinans ASA 4.59% due 2/11/2008 (4)		22,500			22,368			1.08
National Australia Funding (Delaware) Inc. 4.56% due 1/18/2008 (4)		20,700			20,653			1.00
Swedish Export Credit Corp. 4.77% due 1/17/2008		20,000			19,954			.96
Royal Bank of Scotland PLC 4.70% due 2/20/2008		20,000			19,861			.96
Calyon North America Inc. 5.09% due 1/8/2008		19,500			19,478			.94
Unilever Capital Corp. 4.23% due 1/11/2008 (4)		19,100			19,075			.92
GlaxoSmithKline Finance PLC 4.62%-4.65% due 2/1/2008 (4)		19,000			18,922			.91
Toronto-Dominion Holdings USA Inc. 4.62% due 1/3/2008 (4)		17,700			17,693			.85
Westpac Banking Corp. 4.68% due 1/25/2008 (4)		16,900			16,842			.81
Jupiter Securitization Co., LLC 6.00% due 1/10/2008 (4)		16,000			15,973			.77
International Bank for Reconstruction and Development 4.30% due 1/28/2008		15,300			15,249			.73
General Electric Capital Corp. 4.15% due 1/2/2008		15,100			15,097			.73
Other securities					63,196			3.04
Total short-term securities (cost: $456,169,000)					456,130			21.97
Total investment securities (cost: $1,982,546,000)					2,075,284			99.96
Other assets less liabilities					829			.04
Net assets				$	2,076,113			100.00	%

 "Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

The following footnotes apply to either the individual securities noted or one or more of the securities aggregated

and listed as a single line item.

(1) Valued under fair value procedures adopted by authority of the board of trustees.

  The total value of all such securities, including those in "Other securities," was $899,654,000.

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

(3) Purchased in a transaction exempt from registration under the Securities Act of 1933.

  This security (acquired 4/23/2007 at a cost of $10,154,000) may be subject to legal

  or contractual restrictions on resale.

(4) Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States

  in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities,

  including those in "Other securities," was $146,436,000, which represented

  7.05% of the net assets of the fund.

ADR = American Depositary Receipts

GDR = Global Depositary Receipts

See Notes to Financial Statements

Growth - Income Fund

Summary investment portfolio, December 31, 2007

Largest individual equity securities	Percent of net assets
Oracle		2.99
Microsoft		2.28
General Electric		2.03
American International Group		1.95
Schlumberger		1.86
Bank of America		1.70
Cisco Systems		1.56
Intel		1.47
Fannie Mae		1.45
Citigroup		1.45

Common stocks  - 89.74%	Shares		Market value (000)		Percent of net assets
Information technology  - 21.37%
Oracle Corp. (1)		38,805,000	$	876,217		2.99	%
Microsoft Corp.		18,705,000		665,898		2.28
Cisco Systems, Inc. (1)		16,840,000		455,859		1.56
Intel Corp.		16,175,000		431,226		1.47
International Business Machines Corp.		3,725,000		402,672		1.38
Nokia Corp. (2)		8,330,000		320,270
Nokia Corp. (ADR)		930,000		35,703		1.22
Hewlett-Packard Co.		7,050,000		355,884		1.22
Google Inc., Class A (1)		476,800		329,698		1.13
Yahoo! Inc. (1)		12,860,000		299,124		1.02
Flextronics International Ltd. (1)		22,585,336		272,379		.93
Other securities				1,810,142		6.17
				6,255,072		21.37
Financials  - 12.41%
American International Group, Inc.		9,800,000		571,340		1.95
Bank of America Corp.		12,075,000		498,214		1.70
Fannie Mae		10,588,500		423,328		1.45
Citigroup Inc.		14,365,000		422,905		1.45
JPMorgan Chase & Co.		4,147,900		181,056		.62
Freddie Mac		3,666,450		124,916		.43
Other securities				1,408,795		4.81
				3,630,554		12.41
Health care  - 12.37%
Aetna Inc.		5,700,000		329,061		1.12
Abbott Laboratories		5,140,000		288,611		.99
Roche Holding AG (2)		1,647,460		283,414		.97
Cardinal Health, Inc.		4,450,000		256,988		.88
Bristol-Myers Squibb Co.		9,260,000		245,575		.84
Amgen Inc. (1)		4,662,200		216,513		.74
Merck & Co., Inc.		3,500,000		203,385		.69
Medtronic, Inc.		4,000,000		201,080		.69
Other securities				1,594,128		5.45
				3,618,755		12.37
Consumer discretionary  - 8.97%
Lowe's Companies, Inc.		17,210,000		389,290		1.33
Time Warner Inc.		17,550,000		289,751		.99
Target Corp.		5,760,700		288,035		.98
Best Buy Co., Inc.		4,009,700		211,111		.72
News Corp., Class A		9,515,200		194,966		.67
Other securities				1,251,905		4.28
				2,625,058		8.97
Industrials  - 8.86%
General Electric Co.		16,050,000		594,973		2.03
United Technologies Corp.		4,075,000		311,900		1.07
United Parcel Service, Inc., Class B		3,800,000		268,736		.92
Avery Dennison Corp.		3,635,000		193,164		.66
General Dynamics Corp.		2,100,000		186,879		.64
Other securities				1,038,704		3.54
				2,594,356		8.86
Energy  - 8.59%
Schlumberger Ltd.		5,525,000		543,494		1.86
Royal Dutch Shell PLC, Class A (ADR)		2,000,000		168,400
Royal Dutch Shell PLC, Class B (ADR)		1,445,391		119,967
Royal Dutch Shell PLC, Class B (2)		139,816		5,828		1.00
Marathon Oil Corp.		4,125,000		251,048		.86
Chevron Corp.		2,563,200		239,223		.82
Halliburton Co.		6,030,000		228,597		.78
Baker Hughes Inc.		2,565,000		208,022		.71
ConocoPhillips		2,225,000		196,468		.67
Other securities				553,541		1.89
				2,514,588		8.59
Consumer staples  - 6.62%
PepsiCo, Inc.		4,850,000		368,115		1.26
Molson Coors Brewing Co., Class B		4,430,000		228,677		.78
Altria Group, Inc.		2,725,000		205,956		.70
Avon Products, Inc.		4,802,400		189,839		.65
Wal-Mart Stores, Inc.		3,820,000		181,565		.62
Other securities				761,712		2.61
				1,935,864		6.62
Materials  - 3.57%
Air Products and Chemicals, Inc.		2,660,000		262,356		.90
Other securities				783,806		2.67
				1,046,162		3.57
Telecommunication services  - 2.97%
Telephone and Data Systems, Inc.		2,850,700		178,454
Telephone and Data Systems, Inc., Special Common Shares		2,300,900		132,532		1.06
Sprint Nextel Corp., Series 1		15,800,000		207,454		.71
Other securities				350,433		1.20
				868,873		2.97
Utilities - 1.57%
Other securities				459,454		1.57
Miscellaneous -  2.44%
Other common stocks in initial period of acquisition				713,815		2.44
Total common stocks (cost: $21,599,712,000)				26,262,551		89.74
Convertible securities  - 0.18%
Other - 0.09%
Other securities				24,969		.09
Miscellaneous -  0.09%
Other convertible securities in initial period of acquisition				27,672		.09
Total convertible securities (cost: $57,872,000)				52,641		.18
Bonds, notes & other debt instruments - 0.04%
Other - 0.04%
Other securities				12,934		.04
Total bonds, notes & other debt instruments (cost: $12,602,000)				12,934		.04
Short-term securities  - 9.85%	Principal amount (000)
Federal Home Loan Bank 4.15%-4.63% due 1/4-6/20/2008	$	361,157		359,386		1.23
Fannie Mae 4.13%-4.29% due 1/18-4/1/2008		220,850		219,289		.75
United Parcel Service Inc. 4.15%-4.50% due 2/1-3/31/2008 (3)		205,900		204,149		.70
Coca-Cola Co. 4.18%-4.52% due 1/8-3/7/2008 (3)		191,700		190,567		.65
Freddie Mac 4.14%-4.25% due 1/30-5/5/2008		179,400		177,457		.61
IBM International Group Capital LLC 4.35%-4.52% due 1/10-2/26/2008 (3)		97,000		96,656
IBM Capital Inc. 4.20% due 3/10/2008 (3)		52,700		52,222
IBM Corp. 4.21% due 1/15/2008 (3)		20,000		19,965		.58
Bank of America Corp. 4.695%-5.00% due 1/16-2/26/2008		147,600		146,786		.50
Jupiter Securitization Co., LLC 4.77%-6.00% due 1/4-1/10/2008 (3)		65,000		64,936
JPMorgan Chase & Co. 4.95% due 3/24/2008		50,000		49,447		.39
Hewlett-Packard Co. 4.25%-4.55% due 1/8-1/16/2008 (3)		109,600		109,470		.37
Edison Asset Securitization LLC 4.61%-4.91% due 1/23-1/24/2008 (3)		96,200		95,866		.33
International Lease Finance Corp. 4.69%-4.85% due 1/3-2/4/2008		67,100		66,955		.23
CAFCO, LLC 4.71%-5.30% due 1/7-1/9/2008 (3)		60,900		60,831		.21
Other securities				967,116		3.30
Total short-term securities (cost: $2,881,366,000)				2,881,098		9.85
Total investment securities (cost: $24,551,552,000)				29,209,224		99.81
Other assets less liabilities				56,591		.19
Net assets			$	29,265,815		100.00	%

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

 "Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

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

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

(2) Valued under fair value procedures adopted by authority of the board of trustees.  The total value of all such securities, including those in "Miscellaneous" and "Other securities," was $2,237,377,000.

(3) Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities, including those in "Other securities," was $1,490,365,000, which represented 5.09% of the net assets of the fund.

ADR = American Depositary Receipts

See Notes to Financial Statements

Asset Allocation Fund

Summary investment portfolio, December 31, 2007

Largest individual equity securities	Percent of net assets
Suncor Energy		2.30	%
Fannie Mae		2.20
Schlumberger		2.18
Altria Group		1.87
BHP Billiton		1.74
Boeing		1.64
Chevron		1.59
Sprint Nextel		1.57
Nokia		1.39
Deere		1.28

	Shares	Market	Percent
		value	of net
Common stocks  - 63.68%		(000)	assets
Energy  - 10.85%
Suncor Energy Inc.	1,969,798	$214,146	2.30%
Schlumberger Ltd.	2,059,800	202,623	2.18
Chevron Corp.	1,584,328	147,865	1.59
Petro-Canada	2,150,000	115,341	1.24
Marathon Oil Corp.	1,200,000	73,032	.79
Rosetta Resources Inc. (1) (2) (3)	2,970,000	58,895	.63
Other securities		197,718	2.12
		1,009,620	10.85
Information technology  - 8.38%
Nokia Corp. (ADR)	3,360,000	128,990	1.39
Microsoft Corp.	3,050,000	108,580	1.17
International Business Machines Corp.	800,000	86,480	.93
Cisco Systems, Inc. (1)	3,000,000	81,210	.87
Hewlett-Packard Co.	1,500,000	75,720	.81
Oracle Corp. (1)	3,000,000	67,740	.73
Intel Corp.	2,500,000	66,650	.71
Other securities		164,858	1.77
		780,228	8.38
Health care  - 8.22%
Medtronic, Inc.	2,250,000	113,107	1.21
Wyeth	2,100,000	92,799	1.00
Johnson & Johnson	1,300,000	86,710	.93
United Therapeutics Corp. (1)	750,000	73,238	.79
Abbott Laboratories	1,300,000	72,995	.78
Endo Pharmaceuticals Holdings Inc. (1)	2,500,000	66,675	.72
Eli Lilly and Co.	1,200,000	64,068	.69
Other securities		195,740	2.10
		765,332	8.22
Financials  - 7.30%
Fannie Mae	5,120,000	204,698	2.20
JPMorgan Chase & Co.	1,500,000	65,475	.70
Bank of New York Mellon Corp.	1,200,000	58,512	.63
Freddie Mac	1,450,000	49,402	.53
Other securities		301,298	3.24
		679,385	7.30
Industrials  - 6.16%
Boeing Co.	1,750,000	153,055	1.64
Deere & Co.	1,280,000	119,194	1.28
General Electric Co.	2,250,000	83,408	.90
Raytheon Co.	1,040,000	63,128	.68
Mitsubishi Corp. (4)	2,000,000	54,485	.59
Other securities		99,450	1.07
		572,720	6.16
Consumer discretionary  - 5.90%
Lowe's Companies, Inc.	4,110,000	92,968	1.00
Best Buy Co., Inc.	1,705,350	89,787	.96
Johnson Controls, Inc.	2,400,000	86,496	.93
Target Corp.	1,150,000	57,500	.62
Other securities		222,008	2.39
		548,759	5.90
Materials  - 5.24%
BHP Billiton Ltd. (4)	4,615,000	161,646	1.74
Newmont Mining Corp.	2,365,000	115,483	1.24
Rio Tinto PLC (4)	727,572	75,969	.82
Alcoa Inc.	1,500,000	54,825	.59
Other securities		79,485	.85
		487,408	5.24
Consumer staples  - 3.98%
Altria Group, Inc.	2,300,000	173,834	1.87
Coca-Cola Co.	1,550,000	95,124	1.02
PepsiCo, Inc.	1,000,000	75,900	.81
Other securities		25,823	.28
		370,681	3.98
Telecommunication services  - 3.74%
Sprint Nextel Corp., Series 1	11,100,000	145,743	1.57
Vodafone Group PLC (4)	20,000,000	74,289	.80
Other securities		127,888	1.37
		347,920	3.74
Utilities  - 1.15%
Reliant Energy, Inc. (1)	3,250,000	85,280	.92
Other securities		21,432	.23
		106,712	1.15
MISCELLANEOUS  -  2.76%
Other common stocks in initial period of acquisition		256,901	2.76
Total common stocks (cost: $4,699,189,000)		5,925,666	63.68
		Market	Percent
		value	of net
Preferred stocks  - 0.13%		(000)	assets
Other - 0.13%
Other securities		11,934	.13
Total preferred stocks (cost: $12,731,000)		11,934	.13
Rights & warrants  - 0.00%
Other - 0.00%
Other securities		0	.00
Total rights & warrants (cost: $117,000)		0	.00
	Principal
	amount
Bonds, notes & other debt instruments - 21.70%	(000)
Mortgage-backed obligations (5) - 6.25%
Fannie Mae 0%-7.00% 2009-2047 (4)	$                          174,517	174,886	1.88
Freddie Mac 5.00%-7.50% 2016-2038	90,614	92,118	.99
Other securities		314,853	3.38
		581,857	6.25
Bonds & notes of U.S. government & government agencies - 5.59%
U.S. Treasury:
2.00%-9.25% 2008-2036 (4) (6)	122,832	140,598
3.875% 2010	164,000	167,549
4.875% 2012	91,000	96,510	4.35
Fannie Mae 5.25 %-7.25% 2012-2030	42,375	46,770	.50
Freddie Mac 4.875%-5.25% 2008-2011	31,170	32,585	.35
Federal Home Loan Bank 5.125%-5.625% 2013-2016	30,375	32,010	.34
Other securities		4,578	.05
		520,600	5.59
Financials  - 2.06%
Other securities		191,826	2.06
Consumer Discretionary  - 1.90%
Other securities		176,741	1.90
Industrials  - 0.94%
General Electric Co. 5.25% 2017	4,500	4,499	.05
Other securities		82,681	.89
		87,180	.94
Telecommunication services  - 0.86%
Sprint Capital Corp. 6.875%-8.75% 2028-2032	7,525	4,942
Nextel Communications, Inc. Series F, 5.95% 2014	2,800	2,635	.08
Other securities		72,402	.78
		79,979	.86
Other - 4.10%
Other securities		381,471	4.10
Total bonds, notes & other debt instruments (cost: $2,035,280,000)		2,019,654	21.70
	Principal
	amount
Short-term securities  - 14.47%	(000)
Federal Home Loan Bank 4.20%-4.36% due 1/2-4/16/2008	$                          122,300	121,926	1.31
Procter & Gamble International Funding S.C.A. 4.25%-4.50% due 1/15-3/7/2008 (7)	111,400	110,816	1.19
Paccar Financial Corp. 4.49%-4.70% due 1/18-2/7/2008	84,700	84,355	.91
Coca-Cola Co. 4.46%-4.47% due 1/11-2/15/2008 (7)	84,200	83,941	.90
Freddie Mac 4.25% due 1/31-2/8/2008	62,400	62,127	.67
Honeywell International Inc. 4.46% due 1/22-1/25/2008 (7)	54,850	54,678	.59
Hewlett-Packard Co. 4.55% due 1/4/2008 (7)	50,000	49,975	.54
Medtronic Inc. 4.22% due 1/15-1/22/2008 (7)	42,200	42,111	.45
IBM Corp. 4.21%-4.44% due 1/16-1/29/2008 (7)	29,400	29,312
IBM International Group Capital LLC 4.67% due 1/18/2008 (7)	12,000	11,971	.44
Fannie Mae 4.27% due 3/12/2008	40,900	40,580	.44
Johnson & Johnson 4.15% due 1/24/2008 (7)	20,000	19,945	.21
John Deere Capital Corp. 4.54% due 2/6/2008 (7)	20,000	19,894	.21
General Electric Capital Corp. 4.15% due 1/2/2008	13,400	13,397	.14
Other securities		601,814	6.47
Total short-term securities (cost: $1,347,076,000)		1,346,842	14.47
Total investment securities (cost: $8,094,393,000)		9,304,096	99.98
Other assets less liabilities		2,014	.02
Net assets		$9,306,110	100.00%

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

 "Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

Investments in affiliates

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

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

holding listed below is shown in the preceding summary investment portfolio.  Further details on such holdings and related

transactions during the year ended December 31, 2007, appear below.

	Beginning shares		Additions		Reductions		Ending shares		Dividend income (000)		Market value of affiliate at 12/31/2007 (000)
Rosetta Resources, Inc.(1) (2)		2,970,000		-		-		2,970,000		-	$	58,895

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

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

(2) Purchased in a transaction exempt from registration under the Securities Act of 1933. This security (acquired

6/28-11/9/2005 with a cost of $48,481,000) may be subject to legal or contractual restrictions on resale.

The total value of all such securities, including those in "Other securities", was $89,394,000,

which represented .96% of the net assets of the fund.

(3) Represents an affiliated company as defined under the Investment Company Act of 1940.

(4) Valued under fair value procedures adopted by authority of the board of trustees.

The total value of all such securities, including those in "Miscellaneous" and "Other securities," was $850,964,000.

(5) Principal payments may be made periodically.

    Therefore, the effective maturity date may be

    earlier than the stated maturity date.

(6) Index-linked bond whose principal amount moves with a government

    retail price index.

(7) Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities, including those in "Other securities" in the summary investment portfolio, was $1,042,572,000, which represented 11.20% of the net assets of the fund.

ADR = American Depositary Receipts

See Notes to Financial Statements

Bond Fund

Summary investment portfolio, December 31, 2007

Largest individual equity securities	Percent of net assets
Freddie Mac		9.62
U.S. Treasury		7.72
Fannie Mae		6.24
Japan Government		1.58
Federal Home Loan Bank		1.23
General Motors Acceptance		.96
Spain Government		.91
Washington Mutual		.91
Sprint Nextel		.79
Wells Fargo Alternative Loan Trust		.77

Bonds, notes & other debt instruments  - 85.59%	Principal amount (000)	Market value  (000)	Percent of  net assets
Mortgage-backed obligations (1)  - 19.94%
Freddie Mac:
6.00% 2037	$                74,998	$                        76,108
6.00% 2037	73,500	74,588
6.00% 2037	54,000	54,815
6.00% 2037	33,467	33,968
6.00% 2038	54,000	54,785
0%-7.00% 2015-2037 (2) (3)	94,221	93,503	7.58%
Fannie Mae:
6.00% 2027	22,417	22,833
5.50% 2037	20,000	19,709
4.50%-12.016% 2010-2042 (2) (3)	188,145	192,024	4.59
Wells Fargo Alternative Loan Trust, Series 2007-PA4, Class III-A-1, 6.091% 2037 (3)	19,323	19,197	.37
Other securities		378,557	7.40
		1,020,087	19.94
Financials  - 14.52%
JPMorgan Chase Capital XXI, Series U, 5.844% 2037 (3)	7,500	5,918
J.P. Morgan Chase & Co. 4.875%-4.891% 2014-2015 (3)	6,070	5,859
JPMorgan Chase Bank NA 6.00% 2017	2,250	2,292
JPMorgan Chase Capital XX, Series T, 6.55% 2066	2,500	2,263
JPMorgan Chase Capital XXV, Series Y, 6.80% 2037	2,300	2,218
JPMorgan Chase & Co. 6.00% 2018	2,000	2,039	.40
Citigroup Capital XXI 8.30% 2057	17,745	18,582	.36
Royal Bank of Scotland Group PLC 6.99% (undated)  (3)  (4)	17,440	17,418	.34
Wells Fargo & Co. 5.25%-5.625% 2012-2017	7,500	7,595
Wells Fargo Bank, National Assn. 4.75% 2015	3,000	2,870	.21
Other securities		675,367	13.21
		742,421	14.52
Bonds & notes of U.S. government & government agencies - 11.99%
U.S. Treasury:
3.00% 2012 (2) (5)	21,961	23,805
4.25% 2012	41,825	43,282
3.875% 2013	50,000	50,984
4.50% 2016	27,370	28,480
5.125% 2016	59,000	63,854
2.375% 2017 (2) (5)	15,540	16,416
4.625% 2017	41,800	43,691
8.50% 2020	34,000	47,292
4.50% 2036	23,114	23,240
4.25%-9.25% 2008-2037	46,167	54,005	7.72
Freddie Mac:
5.75% 2008	13,240	13,294
5.25% 2011	30,500	31,933
5.75% 2012	40,000	42,747	1.72
Federal Home Loan Bank:
5.25% 2008	44,385	44,420
5.125%-5.625% 2008-2016	17,820	18,378	1.23
Fannie Mae:
1.75% 2008	¥              640,000	5,741
5.50% 2011	$                  5,000	5,266
5.25% 2012	26,000	27,087
4.625% 2013	20,000	20,231	1.14
Other securities		9,260	.18
		613,406	11.99
Bonds & notes of government & government agencies outside the U.S. - 9.75%
Japanese Government:
1.70% 2016	¥           4,070,450	37,387
0.90%-2.30% 2008-2035	4,804,350	43,339	1.58
Swedish Government 5.00% 2009	SKr          189,325	29,544	.58
Queensland Treasury Corp. 6.00% 2015	A$             23,470	19,525	.38
United Kingdom 4.75% 2015	£                 9,596	19,343	.38
Hungarian Government 6.75% 2017	HUF      3,379,570	19,072	.37
Israeli Government 6.50% 2016  (2)	ILS            70,755	18,729	.37
South Korean Government 5.25% 2015	KRW   17,265,710	17,908	.35
Spanish Government 6.15% 2013	€                10,620	16,876	.33
Other securities		276,898	5.41
		498,621	9.75
Consumer discretionary  - 8.32%
General Motors Corp. 8.80% 2021	$                19,360	16,359	.32
Other securities		409,022	8.00
		425,381	8.32
Industrials  - 4.07%
Other securities		208,035	4.07
Telecommunication services  - 3.81%
Nextel Communications, Inc.:
Series E, 6.875% 2013	16,720	16,485
Series D, 7.375% 2015	17,740	17,481	.66
Other securities		160,902	3.15
		194,868	3.81
Energy  - 2.62%
Other securities		134,212	2.62
Asset-backed obligations  - 2.57%
Other securities		131,490	2.57
Materials  - 1.94%
Other securities		99,102	1.94
Health care  - 1.86%
Other securities		95,173	1.86
Information technology  - 1.64%
Other securities		83,611	1.64
Utilities  - 1.61%
Other securities		82,582	1.61
Other - 0.95%
Other securities		48,731	.95
Total bonds, notes & other debt instruments (cost: $4,438,947,000)		4,377,720	85.59
Convertible securities  - 0.28%
Other - 0.28%
Other securities		14,260	.28
Total convertible securities (cost: $14,410,000)		14,260	.28
	Shares
Preferred stocks  - 3.00%
Financials  - 2.92%
Fannie Mae:
Series S, 8.25% noncumulative (6)	768,000	19,594
Series O, 7.00% (3)  (4)	135,855	6,296	.51
MUFG Capital Finance 1 Ltd. 6.346% noncumulative (3)	20,148,000	19,114	.37
Freddie Mac, Series Z, 8.375% (6)	618,440	16,311	.32
Other securities		88,021	1.72
		149,336	2.92
Miscellaneous  -  0.08%
Other preferred stocks in initial period of acquisition		4,293	.08
Total preferred stocks (cost: $164,923,000)		153,629	3.00
Common stocks  - 0.30%
Other - 0.12%
Other securities		6,129	.12
Miscellaneous  -  0.18%
Other common stocks in initial period of acquisition		9,075	.18
Total common stocks (cost: $16,235,000)		15,204	.30
Rights & warrants  - 0.00%
Other - 0.00%
Other securities		1	.00
Total rights & warrants (cost: $52,000)		1	.00
Short-term securities  - 13.04%	Principal amount (000)
Wells Fargo & Co. 4.30% due 1/14-1/18/2008	$                81,400	81,242	1.59
U.S. Treasury Bills 3.20%-4.05% due 4/3-5/22/2008 (7)	65,700	65,044	1.27
Procter & Gamble International Funding S.C.A. 4.47%-4.74% due 1/4-3/4/2008 (4) (7)	54,800	54,618	1.07
Federal Home Loan Bank 4.25%-4.61% due 1/4-1/22/2008 (7)	54,233	54,147	1.06
Freddie Mac 4.0947%-4.62% due 3/10-12/8/2008 (7)	53,000	52,130	1.02
Caterpillar Financial Services Corp. 4.20%-4.47% due 1/24-2/19/2008 (7)	50,800	50,575	.99
Coca-Cola Co. 4.47% due 1/15/2008 (4)  (7)	49,000	48,909	.96
IBM International Group Capital LLC 4.47% due 2/15/2008 (4)	25,000	24,841
IBM Corp. 4.40% due 1/11/2008 (4)	23,000	22,969	.93
JPMorgan Chase & Co. 5.05% due 1/4/2008  (7)	40,400	40,379	.79
United Parcel Service Inc. 4.38%-4.53% due 1/3-3/19/2008 (4)  (7)	37,900	37,688	.74
International Bank for Reconstruction and Development 4.33% due 1/22/2008	30,500	30,430	.60
Wal-Mart Stores Inc. 4.73% due 1/29/2008 (4)	29,500	29,379	.57
Harley-Davidson Funding Corp. 4.75% due 1/17/2008 (4)	20,000	19,954	.39
Other securities		54,415	1.06
Total short-term securities (cost: $666,635,000)		666,720	13.04
Total investment securities (cost: $5,301,202,000)		5,227,534	102.21
Other assets less liabilities		(112,935)	(2.21)
Net assets		$5,114,599	100.00%

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

 "Other securities" includes all issues that are not disclosed separately in the summary investment portfolio, including securities purchased in transactions exempt from registration under the Securities Act of 1933 which may be subject to legal or contractual restrictions on resale.  The total value of all such restricted securities was $5,401,000, which represented .10% of the net assets of the fund.

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

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

(2) Valued under fair value procedures adopted by authority of the board of trustees.  The total value of all such securities, including those in "Miscellaneous" and "Other securities," was $247,371,000.

(3) Coupon rate may change periodically.

(4) Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities, including those in "Other securities," was $979,499,000, which represented 19.15% of the net assets of the fund.

(5) Index-linked bond whose principal amount moves with a government retail price index.

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

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

See Notes to Financial Statements

Global Bond Fund

Summary investment portfolio, December 31, 2007

Bonds, notes & other debt instruments - 87.05%	Principal amount (000)	Market value  (000)	Percent of  net assets
Euros  - 20.08%
German Government:
4.50% 2009	€                     2,500	US$                     3,669
3.75% 2013	1,650	2,361
4.50% 2013	3,975	5,900
4.25% 2014	2,880	4,212
Series 6, 4.00% 2016	7,125	10,192
4.25% 2017	7,425	10,791
Series 7, 4.00% 2018	2,085	2,964
4.75% 2034	1,225	1,822
5.25%-6.25% 2008-2024	1,195	1,821	14.23%
Spanish Government:
2.90% 2008	2,125	3,070
4.20% 2013	640	934
6.15% 2013	1,694	2,692	2.18
Other securities		11,291	3.67
		61,719	20.08
Japanese yen  - 6.89%
Japanese Government:
0.90% 2008	¥                 208,900	1,876
1.30% 2011	320,650	2,914
1.50% 2014	823,550	7,532
1.70% 2016	589,250	5,412
0.50%-2.30% 2008-2035	389,400	3,450	6.89
		21,184	6.89
British pounds  - 3.25%
United Kingdom:
5.00% 2014	£                     1,025	2,091
4.00% 2016	1,920	3,674
4.75%-8.00% 2008-2038	1,930	4,117	3.22
Other securities		100	.03
		9,982	3.25
Israeli shekels  - 2.84%
Israeli Government:
7.50% 2014 (1)	ILS                 8,693	2,422
6.50% 2016 (1)	19,180	5,077
5.50% 2017 (1)	5,029	1,239	2.84
		8,738	2.84
Australian dollars  - 2.83%
Queensland Treasury Corp. 6.00% 2015	A$                  5,785	4,812	1.56
Other securities		3,895	1.27
		8,707	2.83
Swedish kronor  - 2.79%
Swedish Government:
5.00% 2009	SKr               17,290	2,698
4.00%-5.25% 2011-2020 (2)	22,380	3,536	2.03
Other securities		2,343	.76
		8,577	2.79
Malaysian ringgit  - 1.83%
Malaysian Government:
3.718% 2012	MYR              8,060	2,437
4.262% 2016	6,910	2,114
3.814%-3.869% 2010-2017	3,570	1,085	1.83
		5,636	1.83
Singapore dollars  - 1.78%
Singapore (Republic of):
4.375% 2009	S$                   2,590	1,846
3.125% 2011	3,820	2,750
3.75% 2016	1,160	873	1.78
		5,469	1.78
South korean won  - 1.69%
South Korean Government:
5.00% 2011	KRW        1,090,000	1,140
5.25% 2015	1,566,430	1,625
5.00% 2016	2,390,000	2,431	1.69
		5,196	1.69
Polish zloty  - 1.60%
Polish Government:
5.75% 2010	PLN                6,750	2,711
5.25%-6.00% 2008-2017	5,500	2,215	1.60
		4,926	1.60
Hungarian forint  - 1.59%
Hungarian Government:
7.25% 2012	HUF            449,050	2,579
6.75% 2017	407,250	2,298	1.59
		4,877	1.59
Egyptian pounds  - 1.37%
Egypt (Arab Republic of) 0%-11.50% 2008-2013 (1)	EGP              23,325	4,226	1.37
		4,226	1.37
Mexican pesos  - 1.28%
United Mexican States Government:
9.00% 2012	MXN             20,000	1,910
Series MI10, 9.50% 2014	16,500	1,626
Series M20, 10.00% 2024	3,800	406	1.28
		3,942	1.28
Danish kroner  - 1.26%
Nykredit:
5.00% 2038 (2)	DKr              14,702	2,729
6.00% 2038 (1) (2)	3,000	583	1.08
Other securities		556	.18
		3,868	1.26
Indonesian rupiah  - 1.07%
Indonesia (Republic of):
12.80% 2021	IDR         14,400,000	1,786
11.00%-12.50% due 2013-2025	12,872,000	1,515	1.07
		3,301	1.07
Turkish lire  - 1.04%
Turkey (Republic of):
Treasury Bill 0% 2008 (1)	TRY               2,110	1,661
10.00%-16.00% 2012 (1) (3)	1,395	1,234	.94
Other securities		311	.10
		3,206	1.04
Brazilian reais  - 1.01%
Brazilian Treasury Bill 6.00% 2015 (1) (3)	BRL                1,000	861
Brazil (Federal Republic of) 10.00% 2014-2017 (1)	4,600	2,232	1.01
		3,093	1.01
U.S. dollars  - 31.85%
U.S. Treasury:
5.50% 2009	US$                2,190	2,261
4.25% 2011	1,090	1,127
4.25% 2012 (4)	1,750	1,811
4.875% 2012 (4)	5,642	5,984
4.50% 2016 (4)	3,750	3,902
5.125% 2016 (4)	6,175	6,683
4.625% 2017 (4)	4,010	4,191	8.44
Freddie Mac:
5.50% 2037 (2) (4)	1,961	1,957
6.00% 2037 (2) (4)	2,710	2,752
0%-6.00% 2008-2037 (2) (4)	3,581	3,431	2.65
Fannie Mae 0%-7.00% 2035-2037 (2) (4)	3,912	3,849	1.25
Turkey (Republic of) 7.25% 2015 (4)	450	484	.16
Other securities		59,471	19.35
		97,903	31.85
Other currencies - 1.00%
Other securities		3,059	1.00
Total bonds, notes & other debt instruments (cost: $263,190,000)		267,609	87.05
Preferred stocks  - 1.57%
Other currencies -  1.11%
Other securities		3,406	1.11
Miscellaneous -  0.46%
Other preferred stocks in initial period of acquisition		1,409	.46
Total preferred stocks (cost: $4,787,000)		4,815	1.57
Short-term securities  - 8.93%	Principal amount (000)	Market value  (000)	Percent of net assets
BP Capital Markets PLC 4.20% due 2/14/2008 (4) (6)	US$                5,100	5,073	1.65
Liberty Street Funding Corp. 6.25% due 1/2/2008 (6)	2,400	2,399	.78
ING (U.S.) Funding LLC 5.15% due 1/9/2008	2,400	2,397	.78
American Honda Finance Corp. 4.50% due 1/3/2008 (4)	2,300	2,299	.75
BASF AG 4.52% due 1/24/2008 (4) (6)	2,200	2,193	.72
HBOS Treasury Services PLC 4.80% due 1/15/2008 (4)	2,040	2,036	.66
Fannie Mae 4.24% due 1/22/2008	2,000	1,995	.65
Electricité de France 4.30% due 3/10/2008 (4)	1,800	1,784	.58
Other securities		7,259	2.36
Total short-term securities (cost: $27,437,000)		27,435	8.93
Total investment securities (cost: $295,414,000)		299,859	97.55
Other assets less liabilities		7,541	2.45
Net assets		US$307,400	100.00%

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

 "Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

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

(1) Valued under fair value procedures adopted by authority of the board of trustees.  The total value of all such securities, including those in "Other securities," was $24,819,000.

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

(3) Index-linked bond whose principal amount moves with a government retail price index.

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

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

(6) Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities, including those in "Other securities," was $30,220,000, which represented 9.83% of the net assets of the fund.

See Notes to Financial Statements

High-Income Bond Fund

Summary investment portfolio, December 31, 2007

Largest individual equity securities	Percent of net assets
Charter Communications		1.95	%
Edison International		1.71
Williams Companies		1.57
NXP		1.43
Univision Communications		1.33
Ford Motor		1.26
Nielsen Co.		1.13
DigitalGlobe		1.11
GMAC		1.03
General Motors		1.03

Bonds, notes & other debt instruments  - 84.64%	Principal amount (000)		Market value (000)		Percent of net assets
Consumer discretionary  - 23.71%
Charter Communications Operating, LLC, Term Loan Facilities B, 6.99% 2014 (1)  (2) (3)	$	8,225	$	7,699
CCO Holdings, LLC and CCO Holdings Capital Corp. 8.75% 2013		6,208		5,960
CCH I, LLC and CCH I Capital Corp. 11.00% 2015		6,975		5,719
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 8.00%-8.375% 2012-2014 (4)		3,900		3,786
Charter Communications Holdings, LLC and Charter Communications Holdings Capital Corp. 12.125%-13.50% 2011-2012		2,050		1,612
CCH I, LLC and CCH I Capital Corp. 10.25% 2010		1,167		1,149		1.95	%
Univision Communications Inc. 9.75% 2015   (4)  (5)		13,990		12,818
Univision Communications, Inc. First Lien Term Loan B, 7.21% 2014 (1)  (2) (3)		4,850		4,430
Univision Communications, Inc. Second Lien Term Loan, 7.345% 2009 (1)  (2) (3)		500		490		1.33
General Motors Corp.:
!7.25% 2013		400		520
!8.80% 2021		7,957		6,724
!7.125%-8.375% 2011-2033		7,355		6,399		1.03
Michaels Stores, Inc. 10.00% 2014		7,575		7,234		.54
Allison Transmission Holdings, Inc. 11.25% 2015   (4)  (5)		8,050		7,144		.54
Ford Motor Co. 6.50%-8.875% 2018-2022		6,399		4,789
Ford Motor Co., Term Loan B, 8.00% 2013 (1)  (2) (3)		1,990		1,846
Ford Capital BV 9.50% 2010		200		189		.51
CanWest Media Inc., Series B, 8.00% 2012		7,076		6,713		.50
Idearc Inc. 8.00% 2016		6,400		5,904		.44
Young Broadcasting Inc. 10.00% 2011		7,467		5,871		.44
Pinnacle Entertainment, Inc. 7.50% 2015 (4)		5,500		5,019		.38
Other securities				213,798		16.05
				315,813		23.71
Industrials  - 11.87%
Nielsen Finance LLC and Nielsen Finance Co.:
!10.00% 2014		7,600		7,809
!0%/12.50% 2016 (6)		9,965		7,050
Nielsen Finance LLC, Term Loan B, 7.146% 2013 (1)  (2) (3)		249		237		1.13
Hawker Beechcraft 8.875% 2015   (4)  (5)		8,110		8,049		.60
DAE Aviation Holdings, Inc. 11.25% 2015   (4)		6,845		7,256		.55
Other securities				127,725		9.59
				158,126		11.87
Financials  - 7.82%
General Motors Acceptance Corp. 6.625%-8.00% 2011-2031 (1)		9,142		7,627
Residential Capital Corp. 7.875%-8.544% 2009-2010 (1) (4)		7,425		4,383
Residential Capital, LLC 5.646%-8.00% 2008-2012 (1)		2,240		1,689		1.03
Ford Motor Credit Co. 5.80%-9.875% 2009-2012 (1)		11,075		10,018		.75
Citigroup Capital XXI 8.30% 2057		5,625		5,890		.44
Other securities				74,530		5.60
				104,137		7.82
Telecommunication services  - 7.81%
American Tower Corp. 7.125% 2012		8,115		8,379		.63
Triton PCS, Inc. 8.50% 2013		6,625		6,890		.52
MetroPCS Wireless, Inc. 9.25% 2014		7,250		6,851		.51
Rural Cellular Corp. 8.124% 2013 (1)		5,675		5,789		.44
Nextel Communications, Inc., Series D, 7.375% 2015		5,175		5,099		.38
Other securities				71,050		5.33
				104,058		7.81
Information technology  - 6.60%
NXP BV and NXP Funding LLC:
!9.50% 2015		12,145		11,158
!7.875%-7.993% 2013-2014 (1)		8,375		7,887		1.43
Hughes Communications, Inc. 9.50% 2014		9,150		9,310		.70
First Data Corp., Term Loan B2, 7.634% 2014 (1)  (2) (3)		8,978		8,545		.64
Sanmina-SCI Corp. 8.125% 2016		9,350		8,333		.62
SunGard Data Systems Inc. 9.125% 2013		6,984		7,141		.54
Serena Software, Inc. 10.375% 2016		5,975		5,915		.44
Other securities				29,668		2.23
				87,957		6.60
Materials  - 5.96%
Georgia Gulf Corp. 9.50% 2014		7,135		5,726		.43
Other securities				73,708		5.53
				79,434		5.96
Health care  - 5.29%
HCA Inc., Term Loan B, 7.09% 2013 (1)  (2) (3)		9,566		9,219		.69
HealthSouth Corp. 10.75% 2016		8,005		8,405		.63
VWR International, Inc. 10.25% 2015   (1)  (4)  (5)		6,310		6,042		.46
Warner Chilcott Corp. 8.75% 2015		5,187		5,369		.40
PTS Acquisition Corp. 9.50% 2015   (4)  (5)		5,345		4,984		.38
Other securities				36,407		2.73
				70,426		5.29
Energy  - 5.04%
Williams Companies, Inc.:
!8.75% 2032		6,825		8,378
!6.375%-8.125% 2010-2021 (1)  (4)		4,650		4,899
Williams Partners L.P. and Williams Partners Finance Corp. 7.25%-7.50% 2011-2017		6,350		6,629
Transcontinental Gas Pipe Line Corp. 7.25% 2026		975		1,041		1.57
Enterprise Products Operating LP 7.034% 2068 (1)		5,675		5,153		.39
Other securities				41,126		3.08
				67,226		5.04
Utilities  - 4.34%
Edison Mission Energy:
!7.50% 2013		4,700		4,841
!7.00% 2017		5,525		5,456
!7.20% 2019		5,725		5,653
!7.625%-7.75% 2016-2027		4,625		4,569
Midwest Generation, LLC, Series B, 8.56% 2016 (2)		2,108		2,250		1.71
Other securities				35,055		2.63
				57,824		4.34
Consumer staples  - 2.86%
Stater Bros. Holdings Inc. 8.125% 2012		4,900		4,863		.37
Other securities				33,222		2.49
				38,085		2.86
Mortgage-backed obligations (2)  - 1.70%
Tower Ventures, LLC, Series 2006-1, Class F, 7.036% 2036   (4)  (7)		5,970		5,816		.44
American Tower Trust I, Series 2007-1A, Class F, 6.639% 2037 (4)  (7)		6,050		5,499		.41
Other securities				11,290		.85
				22,605		1.70
Bonds & notes of governments outside the U.S. - 1.44%
Other securities				19,155		1.44
Other - 0.20%
Other securities				2,600		.20
Total bonds, notes & other debt instruments  (cost: $1,184,478,000)				1,127,446		84.64
Convertible securities  - 0.77%
Other - 0.59%
Other securities				7,832		.59
Miscellaneous  -  0.18%
Other convertible securities in initial period of acquisition				2,373		.18
Total convertible securities (cost: $8,639,000)				10,205		.77
Preferred stocks  - 1.77%
Other - 1.50%
Other securities				19,955		1.50
Miscellaneous  -  0.27%
Other preferred stocks in initial period of acquisition				3,623		.27
Total preferred stocks (cost: $24,943,000)				23,578		1.77
Common stocks  - 1.99%	Shares
Industrials  - 1.11%
DigitalGlobe Inc. (7) (8) (9)		3,677,578		14,710		1.11
Other - 0.52%
Other securities				6,960		.52
Miscellaneous  -  0.36%
Other common stocks in initial period of acquisition				4,779		.36
Total common stocks (cost: $16,516,000)				26,449		1.99
Rights & warrants  - 0.00%
Other - 0.00%
Other securities				-		.00
Total rights & warrants (cost: $428,000)				-		.00
Short-term securities  - 8.70%
Federal Home Loan Bank 4.20%-4.61% due 1/4-4/16/2008 (10)	$	25,100		24,940		1.87
Hewlett-Packard Co. 4.24% due 1/14/2008 (4)		17,300		17,271		1.30
Caterpillar Financial Services Corp. 4.47% due 1/24/2008		16,800		16,744		1.26
Wal-Mart Stores Inc. 4.73% due 1/29/2008 (4)		16,200		16,133		1.21
Ranger Funding Co. LLC 5.02% due 1/25/2008 (4)		13,150		13,102		.98
Procter & Gamble International Funding S.C.A. 4.74% due 1/4/2008 (4)		6,800		6,796		.51
General Electric Capital Corp. 4.15% due 1/2/2008		5,100		5,099		.38
Fannie Mae 4.23% due 3/12/2008 (10)		4,900		4,862		.37
Other securities				10,981		.82
Total short-term securities (cost: $115,931,000)				115,928		8.70
Total investment securities (cost: $1,350,935,000)				1,303,606		97.87
Other assets less liabilities				28,373		2.13
Net assets			$	1,331,979		100.00	%

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

 "Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

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

(1) Coupon rate may change periodically.

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

(3) Loan participations and assignments; the total value of all such loans, including those in "Other securities," was $88,132,000, which represents 6.62% of the net assets of the fund.

(4) Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities, including those in "Other securities," was $329,727,000, which represented 24.75%% of the net assets of the fund.

(5) Payment in kind; the issuer has the option of paying additional securities in lieu of cash.

(6) Step bond; coupon rate will increase at a later date.

(7) Valued under fair value procedures adopted by authority of the board of trustees.  The total value of all such securities, including those in "Miscellaneous" and "Other securities," was $59,720,000.

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

(9) Purchased in a transaction exempt from registration under the Securities Act of 1933.  This security (acquired 4/14/1999-7/31/2003 at a cost of $3,000,000) may be subject to legal or contractual restriction on resale. The total value of all such securities, including those in "Other securities," was $14,811,000, which represented 1.12% of the net assets of the fund.

(10) 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

U.S. Government/AAA-Rated Securities Fund

Summary investment portfolio, December 31, 2007

	Principal	Market	Percent
	amount	value	of net
Bonds, notes and other debt instruments - 92.68%	(000)	(000)	assets
Mortgage-backed obligations  -  52.43%
Federal agency mortgage-backed obligations  (1) - 37.51%
Fannie Mae:
Series 2003-T1, Class B, 4.491% 2012	$                          6,750	$                          6,755
6.00% 2027	7,699	7,842
5.50% 2033	15,965	15,972
4.50% 2035	11,027	10,449
5.50% 2035	12,265	12,259
5.50% 2036	5,208	5,138
5.424% 2037 (2)	5,292	5,339
6.356% 2037 (2)	5,000	5,107
6.50% 2037	17,503	17,905
7.00% 2037	8,617	8,876
7.00% 2037 (3)	5,250	5,407
6.519% 2047 (2)	4,921	5,017
0%-12.016% 2015-2042 (2) (3)	80,147	80,468	22.28%
Freddie Mac:
6.00% 2026	7,594	7,739
6.00% 2027	14,682	14,962
6.00% 2036	5,246	5,324
5.50% 2037	9,364	9,342
Series 3312, Class PA, 5.50% 2037	7,804	7,857
6.00% 2037	29,486	29,922
0%-11%  2008-2038 (2)	52,197	51,849	15.16
Other securities		582	.07
		314,111	37.51
Commercial mortgage-backed securities  (1) - 7.72%
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2006-CIBC14, Class A-4, 3.972%-5.481% 2034-2044 (2)	9,441	9,351	1.12
Fannie Mae, Series 2000-T5, Class B, 6.32%-7.30% 2008-2010	2,106	2,254	.27
Other securities		53,064	6.33
		64,669	7.72
Collateralized mortgage-backed obligations (privately originated) (1) - 7.20%
Countrywide Alternative Loan Trust, 5.00%-6.00%   2020-2047 (2) (3)	12,045	11,742	1.40
CHL Mortgage Pass-Through Trust, Series 2004-J6, Class 3-A-1, 5.00%  2018-2019	8,866	8,633	1.03
Structured Adjustable Rate Mortgage Loan Trust, 5.91%-6.00%   2036-2037 (2) (3)	8,689	8,582	1.03
Other securities		31,307	3.74
		60,264	7.20
Total mortgage-backed obligations		439,044	52.43
U.S. Treasury bonds & notes  - 25.28%
U.S. Treasury:
4.625% 2011	12,250	12,847
3.00% 2012 (3) (4)	11,620	12,595
4.625% 2012 (5)	8,000	8,396
4.25% 2013	37,994	39,365
4.25% 2014	5,000	5,169
11.25% 2015	7,500	10,959
5.125% 2016	19,250	20,834
8.875% 2017	13,690	18,833
8.125% 2019	13,695	18,462
8.50% 2020	12,600	17,526
7.875% 2021 (5)	3,750	5,043
7.125% 2023	7,500	9,676
4.50% 2036	19,600	19,707
2.38%-5.375%   2011-2031 (3) (4) (5)	11,579	12,239	25.28
		211,651	25.28
Asset-backed obligations (1) - 8.01%
CPS Auto Receivables Trust:
Series 2006-C, Class A-4, XLCA insured, 5.14% 2013 (6)	6,125	6,156
Class A-4, FSA insured,   5.60%-5.92%   2014 (6)	2,650	2,625	1.05
PG&E Energy Recovery Funding LLC, Series 2005-2, Class A-2, 5.03% 2014	5,570	5,643	.67
CarMax Auto Owner Trust, Series 2007-2, Class A-4, 5.27% 2012	5,000	4,977	.60
Other securities		47,681	5.69
		67,082	8.01
Federal agency bonds & notes  - 6.35%
Freddie Mac:
4.50% 2014	5,500	5,615
5.25% 2016	5,000	5,277
5.50% 2016	5,000	5,363
5.50% 2017	3,500	3,750	2.39
Fannie Mae 6.00% 2011	13,750	14,718	1.76
Small Business Administration:
Series SBIC-PS 2006-10A, Participating Securities, 5.408% 2016	5,292	5,315
4.84%-6.44%  2021-2023 (1)	5,810	5,942	1.34
Other securities		7,154	.86
		53,134	6.35
Other - 0.61%
Other securities		5,166	.61
Total bonds, notes and other debt insturments (cost: $763,025,000)		776,077	92.68
	Principal	Market	Percent
	amount	value	of net
Short-term securities  - 8.72%	(000)	(000)	assets
Federal Home Loan Bank 4.20% due 4/16/2008	18,545	18,322	2.19
Procter & Gamble International Funding S.C.A. 4.25% due 1/22/2008 (6)	13,400	13,365	1.60
E.I. duPont de Nemours and Co. 4.20% due  1/11/2008 (6)	10,000	9,987	1.19
Walgreen & Co. 4.20% due 1/4/2008	9,000	8,996	1.07
General Electric Capital Corp. 4.15% due 1/2/2008	8,900	8,898	1.06
Hewlett-Packard Co. 4.52% due 1/2/2008 (6)	8,000	7,998	.95
Estée Lauder Companies Inc. 4.24% due 1/3/2008 (6)	5,500	5,498	.66
Total short-term securities (cost: $73,056,000)		73,064	8.72
Total investment securities (cost: $836,081,000)		849,141	101.40
Other assets less liabilities		(11,750)	(1.40)
Net assets		$837,391	100.00%

 "Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

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

(1) Principal payments may be made periodically.

    Therefore, the effective maturity date may be

    earlier than the stated maturity date.

(2) Coupon rate may change periodically.

(3) Valued under fair value procedures adopted by authority of the board of trustees.

The total value of all such securities, including those in "Other securities," was $59,611,000.

(4) Index-linked bond whose principal amount moves with a government

    retail price index.

(5) This security, or a portion of this security, has been segregated to cover funding requirements

on investment transactions settling in the future.

(6) Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities, including those in "Other securities" in the summary investment portfolio, was $85,193,000, which represented 10.17% of the net assets of the fund.

See Notes to Financial Statements

Cash Management

Investment portfolio, December 31, 2007

	Principal			Market			Percent
	amount			value			of net
Short-term securities  - 99.69%		(000	)		(000	)	assets
Corporate short-term notes  -  86.44%
Nestlé Capital Corp. 4.15% due 2/13/2008 (1)	$	20,500		$	20,396			3.49	%
Toronto-Dominion Holdings USA Inc. 4.73%-4.83% due 1/8-1/31/2008 (1)		20,100			20,045			3.43
BMW U.S. Capital LLC 4.45% due 1/3/2008 (1)		20,000			19,993			3.42
American Honda Finance Corp. 4.50% due 1/9/2008		20,000			19,977			3.42
Wells Fargo & Co. 4.30% due 1/11/2008		20,000			19,974			3.42
Brown-Forman Corp. 4.25% due 1/18/2008 (1)		20,000			19,957			3.42
KfW International Finance Inc. 4.30% due 1/24/2008 (1)		20,000			19,943			3.41
Eksportfinans ASA 4.58% due 1/23/2008 (1)		20,000			19,937			3.41
IBM International Group Capital LLC 4.47% due 1/30/2008 (1)		20,000			19,915			3.41
Chevron Funding Corp. 4.27%-4.28% due 2/5-2/6/2008		20,000			19,913			3.41
Hewlett-Packard Co. 4.52%-4.55% due 1/2-1/4/2008 (1)		18,700			18,691			3.20
HBOS Treasury Services PLC 4.85%-5.15% due 1/15-2/4/2008		17,400			17,326			2.97
Procter & Gamble International Funding S.C.A. 4.20%-4.22% due 1/25-1/28/2008 (1)		16,500			16,448			2.81
Bank of America Corp. 4.93% due 1/25/2008		16,400			16,344			2.80
Anheuser-Busch Cos. Inc. 4.18% due 2/1/2008 (1)		16,000			15,940			2.73
Honeywell International Inc. 4.47% due 1/10/2008 (1)		15,000			14,981			2.56
Sheffield Receivables Corp. 4.88% due 1/7/2008 (1)		7,900			7,892
Barclays U.S. Funding Corp. 4.60% due 1/30/2008		6,500			6,472			2.46
Canadian Wheat Board 4.22% due 1/15/2008		13,600			13,576			2.32
Walgreen & Co. 4.40% due 1/14/2008		13,000			12,978			2.22
Coca-Cola Co. 4.47% due 1/17/2008 (1)		13,000			12,972			2.22
GlaxoSmithKline Finance PLC 4.55% due 1/22/2008 (1)		13,000			12,961			2.22
Medtronic Inc. 4.22% due 1/17-1/22/2008 (1)		12,900			12,870			2.20
PepsiCo Inc. 4.15% due 1/14/2008 (1)		12,600			12,580			2.15
Caterpillar Financial Services Corp. 4.20%-4.47% due 1/7-1/8/2008		11,900			11,889			2.03
United Parcel Service Inc. 4.36% due 1/24/2008 (1)		11,800			11,766			2.01
Westpac Banking Corp. 5.10% due 1/14/2008 (1)		11,700			11,677			2.00
Old Line Funding, LLC 4.85% due 1/16/2008 (1)		11,700			11,673			2.00
Dexia Delaware LLC 4.77% due 1/10/2008		11,600			11,585			1.98
Johnson & Johnson 4.20% due 1/9/2008 (1)		10,000			9,989			1.71
CAFCO, LLC 5.30% due 1/8/2008 (1)		9,500			9,489			1.62
Bank of Ireland 4.86% due 1/28/2008 (1)		8,590			8,556			1.46
International Lease Finance Corp. 4.69% due 1/3/2008		8,000			7,997			1.37
Lowe's Co.s, Inc. 4.28% due 1/4/2008		6,400			6,397			1.10
Unilever Capital Corp. 4.23% due 1/25/2008 (1)		5,181			5,166			.88
ANZ National (International) Ltd. 4.50% due 2/1/2008 (1)		5,000			4,980			.85
Kimberly-Clark Worldwide Inc. 4.45% due 1/7/2008 (1)		1,900			1,898			.33
					505,143			86.44
Federal agency discount notes  -  13.25%
Federal Home Loan Bank 4.215% due 2/8/2008		31,000			30,858			5.28
Fannie Mae 4.27%-4.29% due 1/18-2/8/2008		25,900			25,833			4.42
Freddie Mac 4.21%-4.25% due 1/31-2/7/2008		18,000			17,929			3.07
International Bank for Reconstruction and Development 4.33% due 1/22/2008		2,800			2,794			.48
					77,414			13.25
Total investment securities (cost: $582,578,000)					582,557			99.69
Other assets less liabilities					1,807			.31
Net assets				$	584,364			100.00	%

(1) Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $340,715,000, which represented 58.31% of the net assets of the fund.

See Notes to Financial Statements

Financial Statements

Statement of assets and liabilities
at December 31, 2007																											(dollars and shares in thousands, except per-share amounts)
	Global Discovery Fund			Global Growth Fund		Global Small Capitalization Fund			Growth Fund			International Fund		New World Fund			Blue Chip Income and Growth Fund		Global Growth and Income Fund			Growth-Income Fund			Asset Allocation Fund		Bond Fund			Global Bond Fund			High-Income Bond Fund			U.S. Government/ AAA-Rated Securities Fund			Cash Management Fund
Assets:
Investment securities at market:
Unaffiliated issuers	$	277,767		$	5,880,379	$	4,130,774		$	29,736,060		$	11,530,272	$	2,134,771		$	4,413,877	$	2,075,284		$	29,209,224		$	9,245,201	$	5,227,534		$	299,859		$	1,303,606		$	849,141		$	582,557
Affiliated issuers		-			-		215,419			1,151,237			-		-			-		-			-			58,895		-			-			-			-			-
Cash denominated in currencies other than U.S. dollars		-			7		-	*		-	*		1,246		213			-		-	*		-	*		-		-	*		-	*		26			-			-
Cash		64			122		231			208			98		111			134		453			141			421		1,442			127			2,743			358			656
Receivables for:
Sales of investments		5			8,189		11,050			2,983			46,122		297			-		1,228			31,713			919		63			6			3,611			172			-
Sales of fund's shares		711			6,686		7,351			34,069			7,225		4,021			3,740		11,777			74,812			9,808		6,741			2,048			1,898			1,168			1,985
Open forward currency contracts		-			-		-			-			-		-			-		-			-			-		781			237			19			-			-
Closed forward currency contracts		-			-		-			-			-		-			-		-			-			-		109			892			-			-			-
Dividends and interest		127			7,057		6,358			28,052			20,357		6,301			5,407		3,964			26,545			32,995		63,561			4,989			23,261			6,435			-
Other assets		-	*		2		589			11			4		-			1		194			11			163		96			5			265			-	*		-	*
		278,674			5,902,442		4,371,772			30,952,620			11,605,324		2,145,714			4,423,159		2,092,900			29,342,446			9,348,402		5,300,327			308,163			1,335,429			857,274			585,198
Liabilities:
Payables for:
Purchases of investments		3,577			24,863		19,128			52,586			14,109		6,879			2,788		14,823			58,120			36,693		150,104			28			1,603			18,956			-
Repurchases of fund's shares		6			6,891		3,301			50,757			32,928		64			1,103		116			6,565			1,599		32,036			-			750			443			556
Open forward currency contracts		-			-		-			-			-		-			-		-			-			4		897			505			6			-			-
Closed forward currency contracts		-			-		-			-			-		-			-		-			-			-		-			41			-			-			-
Investment advisory services		120			2,318		2,288			7,499			4,279		1,195			1,407		927			5,863			2,157		1,519			127			479			280			142
Distribution services		50			1,098		838			5,474			2,075		393			914		415			5,019			1,565		989			56			215			129			98
Trustees' deferred compensation		2			65		38			891			388		13			39		3			1,015			238		54			-	*		93			75			38
Other		115			3,110		2,491			52			1,347		1,199			1		503			49			36		129			6			304			-	*		-	*
		3,870			38,345		28,084			117,259			55,126		9,743			6,252		16,787			76,631			42,292		185,728			763			3,450			19,883			834
Net assets at December 31, 2007 (total: $108,244,797)	$	274,804		$	5,864,097	$	4,343,688		$	30,835,361		$	11,550,198	$	2,135,971		$	4,416,907	$	2,076,113		$	29,265,815		$	9,306,110	$	5,114,599		$	307,400		$	1,331,979		$	837,391		$	584,364
Investment securities at cost:
Unaffiliated issuers	$	238,424		$	4,834,943	$	3,264,025		$	24,071,275		$	8,791,552	$	1,526,476		$	3,929,113	$	1,982,546		$	24,551,552		$	8,045,912	$	5,301,202		$	295,414		$	1,350,935		$	836,081		$	582,578
Affiliated issuers	$	-		$	-	$	162,441		$	984,779		$	-	$	-		$	-	$	-		$	-		$	48,481	$	-		$	-		$	-		$	-		$	-
Cash denominated in currencies other than U.S. dollars at cost	$	-		$	7	$	-	*	$	-	*	$	1,246	$	213		$	-	$	-	*	$	-	*	$	-	$	-	*	$	-	*	$	26		$	-		$	-
Net assets consist of:
Capital paid in on shares of beneficial interest	$	229,461		$	4,373,987	$	3,024,176		$	22,019,750		$	7,486,715	$	1,380,886		$	3,666,494	$	1,969,602		$	22,918,883		$	7,705,026	$	5,125,785		$	301,657		$	1,493,137		$	825,303		$	580,391
Undistributed (distributions in excess of) net investment income		(12	)		3,943		(59,598	)		21,694			15,527		(2,541	)		14,776		(1,372	)		82,693			39,608		49,998			1,377			15,604			6,027			3,995
Undistributed (accumulated) net realized gain (loss)		6,126			443,787		461,731			2,962,467			1,309,775		150,428			250,873		15,579			1,606,516			351,805		12,323			108			(129,461	)		(6,999	)		(1	)
Net unrealized appreciation (depreciation)		39,229			1,042,380		917,379			5,831,450			2,738,181		607,198			484,764		92,304			4,657,723			1,209,671		(73,507	)		4,258			(47,301	)		13,060			(21	)
Net assets at December 31, 2007	$	274,804		$	5,864,097	$	4,343,688		$	30,835,361		$	11,550,198	$	2,135,971		$	4,416,907	$	2,076,113		$	29,265,815		$	9,306,110	$	5,114,599		$	307,400		$	1,331,979		$	837,391		$	584,364
Shares of beneficial interest issued and outstanding (no stated par value) - unlimited shares authorized:
Class 1:
Net assets (total: $16,970,496)	$	35,161		$	683,751	$	369,280		$	5,051,099		$	1,707,577	$	261,085		$	142,476	$	79,498		$	5,618,032		$	1,927,088	$	436,150		$	27,783		$	308,197		$	211,304		$	112,015
Shares outstanding		2,495			27,192		13,576			75,140			68,836		10,087			12,353		6,750			132,131			104,115		39,167			2,564			26,462			18,015			9,824
Net asset value per share	$	14.09		$	25.15	$	27.20		$	67.22		$	24.81	$	25.88		$	11.53	$	11.78		$	42.52		$	18.51	$	11.14		$	10.83		$	11.65		$	11.73		$	11.40
Class 2:
Net assets (total: $90,172,231)	$	239,643		$	5,180,346	$	3,974,408		$	25,358,763		$	9,719,162	$	1,874,886		$	4,274,431	$	1,996,615		$	23,242,713		$	7,307,690	$	4,678,449		$	279,617		$	996,092		$	597,224		$	452,192
Shares outstanding		17,091			207,180		147,495			380,069			393,200		72,973			373,215		169,874			549,982			397,430		424,083			25,859			86,229			51,245			39,836
Net asset value per share	$	14.02		$	25.00	$	26.95		$	66.72		$	24.72	$	25.69		$	11.45	$	11.75		$	42.26		$	18.39	$	11.03		$	10.81		$	11.55		$	11.65		$	11.35
Class 3:
Net assets (total: $1,102,070)		-			-		-		$	425,499		$	123,459		-			-		-		$	405,070		$	71,332		-			-		$	27,690		$	28,863		$	20,157
Shares outstanding		-			-		-			6,331			4,979		-			-		-			9,528			3,855		-			-			2,376			2,459			1,768
Net asset value per share		-			-		-		$	67.21		$	24.80		-			-		-		$	42.51		$	18.50		-			-		$	11.65		$	11.74		$	11.40
* Amount less than one thousand.
See Notes to Financial Statements

Statements of operations
for the year ended December 31, 2007
	(dollars in thousands)

	Global Discovery Fund				Global Growth Fund			Global Small Capitalization Fund				Growth Fund			International Fund
Investment income:
Income (net of non-U.S. taxes) (1) (2):
Dividends	$	2,416			$	92,659		$	28,337			$	291,998		$	209,230
Interest		1,580				37,609			15,006				88,054			24,237
		3,996				130,268			43,343				380,052			233,467
Fees and expenses (3):
Investment advisory services		1,306				26,735			27,298				93,790			50,363
Distribution services - Class 2		483				11,594			8,995				61,182			21,178
Distribution services - Class 3		-				-			-				804			221
Transfer agent services		-		(4)		3			2				18			6
Reports to shareholders		6				151			117				1,284			312
Registration statement and prospectus		2				54			41				481			113
Postage, stationery and supplies		2				46			35				269			95
Trustees' compensation		2				45			33				334			126
Auditing and legal		5				38			36				164			67
Custodian		26				658			968				698			2,329
State and local taxes		2				42			31				258			87
Other		4				34			43				52			53
Total fees and expenses before waiver		1,838				39,400			37,599				159,334			74,950
Less waiver of fees and expenses:
Investment advisory services		131				2,714			2,730				9,379			5,036
Total fees and expenses after waiver		1,707				36,686			34,869				149,955			69,914
Net investment income		2,289				93,582			8,474				230,097			163,553
Net realized gain and unrealized
appreciation (depreciation) on investments
and currency:
Net realized gain (loss) on:
Investments (2)		22,813				442,683			510,382				2,966,674			1,311,910
Currency transactions		18				(1,085	)		(740	)			(3,822	)		1,345
		22,831				441,598			509,642				2,962,852			1,313,255
Net unrealized appreciation (depreciation) on:
Investments		9,014				141,895			162,605				146,965			363,035
Currency translations		(9	)			(73	)		-		(4)		7			533
		9,005				141,822			162,605				146,972			363,568
Net realized gain and
unrealized appreciation (depreciation)
on investments and currency		31,836				583,420			672,247				3,109,824			1,676,823
Net increase in net assets resulting
from operations	$	34,125			$	677,002		$	680,721			$	3,339,921		$	1,840,376

 

	New World Fund			Blue Chip Income and Growth Fund			Global Growth and Income Fund		Growth-Income Fund			Asset Allocation Fund
Investment income:
Income (net of non-U.S. taxes) (1) (2):
Dividends	$	28,885		$	84,983		$	28,462	$	439,895		$	98,655
Interest		15,510			18,009			11,791		157,015			155,146
		44,395			102,992			40,253		596,910			253,801
Fees and expenses (3):
Investment advisory services		12,656			18,332			9,447		75,627			26,249
Distribution services - Class 2		3,723			10,674			3,250		58,512			17,563
Distribution services - Class 3		-			-			-		799			135
Transfer agent services		1			3			1		18			5
Reports to shareholders		51			140			38		1,260			254
Registration statement and prospectus		17			48			14		474			92
Postage, stationery and supplies		16			43			10		263			77
Trustees' compensation		13			38			9		348			93
Auditing and legal		28			22			16		153			45
Custodian		709			10			200		543			139
State and local taxes		13			39			9		256			73
Other		42			7			11		52			18
Total fees and expenses before waiver		17,269			29,356			13,005		138,305			44,743
Less waiver of fees and expenses:
Investment advisory services		1,266			1,833			1,786		7,563			2,625
Total fees and expenses after waiver		16,003			27,523			11,219		130,742			42,118
Net investment income		28,392			75,469			29,034		466,168			211,683
Net realized gain and unrealized
appreciation (depreciation) on investments
and currency:
Net realized gain (loss) on:
Investments (2)		165,235			254,410			77,310		1,631,859			357,028
Currency transactions		(62	)		-			496		1,482			73
		165,173			254,410			77,806		1,633,341			357,101
Net unrealized appreciation (depreciation) on:
Investments		263,388			(250,926	)		41,785		(740,115	)		(75,524	)
Currency translations		(3	)		-			11		(250	)		132
		263,385			(250,926	)		41,796		(740,365	)		(75,392	)
Net realized gain and
unrealized appreciation (depreciation)
on investments and currency		428,558			3,484			119,601		892,976			281,709
Net increase in net assets resulting
from operations	$	456,950		$	78,953		$	148,636	$	1,359,144		$	493,392

	Bond Fund			Global Bond Fund				High-Income Bond Fund			U.S. Government/ AAA-Rated Securities Fund			Cash Management Fund
Investment income:
Income (net of non-U.S. taxes) (1) (2):
Dividends	$	1,987		$	-			$	1,482		$	-		$	-
Interest		258,016			7,085				98,936			37,507			25,277
		260,003			7,085				100,418			37,507			25,277
Fees and expenses (3):
Investment advisory services		17,355			776				6,066			3,222			1,566
Distribution services - Class 2		10,166			295				2,375			1,188			916
Distribution services - Class 3		-			-				57			54			34
Transfer agent services		3			-		(4)		1			-	(4)		-	(4)
Reports to shareholders		138			3				35			20			13
Registration statement and prospectus		47			1				14			8			5
Postage, stationery and supplies		43			1				10			6			4
Trustees' compensation		38			1				22			15			9
Auditing and legal		24			4				7			4			3
Custodian		218			37				18			4			1
State and local taxes		36			-		(4)		12			6			4
Other		14			4				5			2			1
Total fees and expenses before waiver		28,082			1,122				8,622			4,529			2,556
Less waiver of fees and expenses:
Investment advisory services		1,736			78				607			322			157
Total fees and expenses after waiver		26,346			1,044				8,015			4,207			2,399
Net investment income		233,657			6,041				92,403			33,300			22,878
Net realized gain and unrealized
appreciation (depreciation) on investments
and currency:
Net realized gain (loss) on:
Investments (2)		34,155			1,559				3,529			2,138			3
Currency transactions		642			1,785				(436	)		-			-
		34,797			3,344				3,093			2,138			3
Net unrealized appreciation (depreciation) on:
Investments		(128,031	)		4,340				(81,453	)		12,104			(32	)
Currency translations		(175	)		(176	)			122			-			-
		(128,206	)		4,164				(81,331	)		12,104			(32	)
Net realized gain and
unrealized appreciation (depreciation)
on investments and currency		(93,409	)		7,508				(78,238	)		14,242			(29	)
Net increase in net assets resulting
from operations	$	140,248		$	13,549			$	14,165		$	47,542		$	22,849

(1) Additional information related to non-U.S. taxes is included in the Notes to Financial Statements.

(2) Additional information related to affiliated transactions is included in the Notes to Financial Statements.

(3) Additional information related to class-specific fees and expenses is included in the Notes to Financial Statements.

(4) Amount less than one thousand.

See Notes to Financial Statements

Statements of changes in net assets
	(dollars and shares in thousands)

	Global Discovery Fund						Global Growth Fund						Global Small Capitalization Fund						Growth Fund						International Fund
	Year ended December 31, 2007			Year ended December 31, 2006			Year ended December 31, 2007			Year ended December 31, 2006			Year ended December 31, 2007			Year ended December 31, 2006			Year ended December 31, 2007			Year ended December 31, 2006			Year ended December 31, 2007			Year ended December 31, 2006
Operations:
Net investment income	$	2,289		$	1,365		$	93,582		$	59,518		$	8,474		$	17,133		$	230,097		$	228,628		$	163,553		$	137,525
Net realized gain (loss) on investments and
currency transactions		22,831			7,701			441,598			267,086			509,642			299,107			2,962,852			1,980,628			1,313,255			500,368
Net unrealized appreciation (depreciation)
on investments and currency translations		9,005			14,780			141,822			325,522			162,605			253,788			146,972			227,023			363,568			722,497
Net increase in net assets
resulting from operations		34,125			23,846			677,002			652,126			680,721			570,028			3,339,921			2,436,279			1,840,376			1,360,390
Dividends and distributions paid to shareholders:
Dividends from net investment income
and currency gains:
Class 1		(377	)		(271	)		(15,248	)		(2,252	)		(9,957	)		(1,490	)		(50,378	)		(34,631	)		(27,717	)		(28,625	)
Class 2		(2,059	)		(1,137	)		(129,196	)		(27,641	)		(106,466	)		(11,446	)		(192,512	)		(174,167	)		(135,569	)		(108,664	)
Class 3		-			-			-			-			-			-			(3,515	)		(3,616	)		(1,795	)		(1,878	)
Total dividends from net investment income
and currency gains		(2,436	)		(1,408	)		(144,444	)		(29,893	)		(116,423	)		(12,936	)		(246,405	)		(212,414	)		(165,081	)		(139,167	)
Distributions from net realized gain on investments:
Short-term net realized gains:
Class 1		(1,013	)		(558	)		(1,007	)		-			(5,130	)		(538	)		(23,434	)		-			(13,679	)		-
Class 2		(6,707	)		(2,896	)		(13,287	)		-			(65,805	)		(5,511	)		(113,371	)		-			(67,770	)		-
Class 3		-			-			-			-			-			-			(2,111	)		-			(991	)		-
Long-term net realized gains:
Class 1		(1,382	)		(465	)		(13,121	)		-			(15,875	)		(11,953	)		(310,646	)		(21,900	)		(67,908	)		(14,699	)
Class 2		(9,278	)		(2,418	)		(173,088	)		-			(203,660	)		(122,408	)		(1,502,851	)		(127,584	)		(336,431	)		(54,210	)
Class 3		-			-			-			-			-			-			(27,987	)		(2,908	)		(4,920	)		(1,054	)
Total distributions from net realized gain on investments		(18,380	)		(6,337	)		(200,503	)		-			(290,470	)		(140,410	)		(1,980,400	)		(152,392	)		(491,699	)		(69,963	)
Total dividends and distributions paid to shareholders		(20,816	)		(7,745	)		(344,947	)		(29,893	)		(406,893	)		(153,346	)		(2,226,805	)		(364,806	)		(656,780	)		(209,130	)
Capital share transactions:
Class 1:
Proceeds from initial capitalization		-			-			-			-			-			-			-			-			-			-
Proceeds from shares sold		6,060			3,836			399,261			53,477			126,470			24,884			2,309,420			75,477			10,273			6,333
Proceeds from reinvestment of dividends and distributions		2,772			1,294			29,376			2,252			30,962			13,981			384,458			56,531			109,304			43,324
Cost of shares repurchased		(4,255	)		(2,250	)		(43,793	)		(25,878	)		(54,125	)		(61,177	)		(1,277,505	)		(634,730	)		(261,901	)		(240,979	)
Net increase (decrease) from Class 1 transactions		4,577			2,880			384,844			29,851			103,307			(22,312	)		1,416,373			(502,722	)		(142,324	)		(191,322	)
Class 2:
Proceeds from shares sold		71,657			46,346			675,865			844,863			650,430			605,175			2,390,962			3,219,737			1,410,185			1,576,966
Proceeds from reinvestment of dividends and distributions		18,044			6,451			315,571			27,641			375,931			139,365			1,808,734			301,751			539,770			162,874
Cost of shares repurchased		(11,522	)		(4,507	)		(137,454	)		(54,850	)		(234,256	)		(172,814	)		(2,925,475	)		(477,546	)		(457,606	)		(163,789	)
Net increase from Class 2 transactions		78,179			48,290			853,982			817,654			792,105			571,726			1,274,221			3,043,942			1,492,349			1,576,051
Class 3:
Proceeds from shares sold		-			-			-			-			-			-			4,170			6,187			3,053			7,615
Proceeds from reinvestment of dividends and distributions		-			-			-			-			-			-			33,613			6,524			7,706			2,931
Cost of shares repurchased		-			-			-			-			-			-			(82,589	)		(99,810	)		(22,414	)		(23,044	)
Net (decrease) increase from Class 3 transactions		-			-			-			-			-			-			(44,806	)		(87,099	)		(11,655	)		(12,498	)
Net increase in net assets resulting from
capital share transactions		82,756			51,170			1,238,826			847,505			895,412			549,414			2,645,788			2,454,121			1,338,370			1,372,231
Total increase in net assets		96,065			67,271			1,570,881			1,469,738			1,169,240			966,096			3,758,904			4,525,594			2,521,966			2,523,491
Net assets:
Beginning of period		178,739			111,468			4,293,216			2,823,478			3,174,448			2,208,352			27,076,457			22,550,863			9,028,232			6,504,741
End of period	$	274,804		$	178,739		$	5,864,097		$	4,293,216		$	4,343,688		$	3,174,448		$	30,835,361		$	27,076,457		$	11,550,198		$	9,028,232
Undistributed (distributions in excess of) net investment income	$	(12	)	$	(168	)	$	3,943		$	58,293		$	(59,598	)	$	1,723		$	21,694		$	43,246		$	15,527		$	15,449
Shares of beneficial interest:
Class 1:
Shares issued from initial capitalization		-			-			-			-			-			-			-			-			-			-
Shares sold		423			309			15,922			2,469			4,520			1,070			33,820			1,227			415			313
Shares issued on reinvestment of dividends and distributions		202			101			1,195			113			1,132			668			5,708			924			4,615			2,124
Shares repurchased		(304	)		(186	)		(1,788	)		(1,224	)		(1,999	)		(2,682	)		(18,697	)		(10,324	)		(11,093	)		(11,857	)
Net increase (decrease) in shares outstanding		321			224			15,329			1,358			3,653			(944	)		20,831			(8,173	)		(6,063	)		(9,420	)
Class 2:
Shares sold		5,027			3,786			27,538			39,535			23,682			26,182			35,619			52,766			59,148			77,838
Shares issued on reinvestment of dividends and distributions		1,325			502			12,903			1,402			13,858			6,710			27,058			4,975			22,881			7,986
Shares repurchased		(832	)		(376	)		(5,664	)		(2,587	)		(8,879	)		(7,671	)		(43,455	)		(7,881	)		(19,682	)		(8,194	)
Net increase in shares outstanding		5,520			3,912			34,777			38,350			28,661			25,221			19,222			49,860			62,347			77,630
Class 3:
Shares sold		-			-			-			-			-			-			63			100			130			375
Shares issued on reinvestment of dividends and distributions		-			-			-			-			-			-			499			107			326			144
Shares repurchased		-			-			-			-			-			-			(1,224	)		(1,629	)		(951	)		(1,144	)
Net (decrease) increase  in shares outstanding		-			-			-			-			-			-			(662	)		(1,422	)		(495	)		(625	)

 

	New World Fund						Blue Chip Income and Growth Fund						Global Growth and  Income Fund						Growth-Income Fund						Asset Allocation Fund
	Year ended December 31, 2007			Year ended December 31, 2006			Year ended December 31, 2007			Year ended December 31, 2006			Year ended December 31, 2007			Period ended December 31, 2006 (1)			Year ended December 31, 2007			Year ended December 31, 2006			Year ended December 31, 2007			Year ended December 31, 2006
Operations:
Net investment income	$	28,392		$	19,941		$	75,469		$	53,818		$	29,034		$	3,148		$	466,168		$	411,852		$	211,683		$	164,993
Net realized gain (loss) on investments and
currency transactions		165,173			101,979			254,410			136,955			77,806			3,716			1,633,341			926,245			357,101			275,335
Net unrealized appreciation (depreciation)
on investments and currency translations		263,385			163,011			(250,926	)		388,512			41,796			50,508			(740,365	)		2,133,468			(75,392	)		488,795
Net increase in net assets
resulting from operations		456,950			284,931			78,953			579,285			148,636			57,372			1,359,144			3,471,565			493,392			929,123
Dividends and distributions paid to shareholders:
Dividends from net investment income
and currency gains:
Class 1		(6,659	)		(1,693	)		(4,468	)		(1,925	)		(1,370	)		(271	)		(99,611	)		(63,674	)		(42,539	)		(24,341	)
Class 2		(49,605	)		(13,873	)		(109,535	)		(39,240	)		(30,736	)		(3,240	)		(355,785	)		(327,704	)		(157,653	)		(132,041	)
Class 3		-			-			-			-			-			-			(6,561	)		(6,935	)		(1,590	)		(1,651	)
Total dividends from net investment income
and currency gains		(56,264	)		(15,566	)		(114,003	)		(41,165	)		(32,106	)		(3,511	)		(461,957	)		(398,313	)		(201,782	)		(158,033	)
Distributions from net realized gain on investments:
Short-term net realized gains:
Class 1		(2,014	)		-			(1,063	)		(613	)		(1,952	)		-			(17,061	)		(3,880	)		(5,053	)		-
Class 2		(19,962	)		-			(28,489	)		(14,642	)		(47,286	)		-			(69,728	)		(20,518	)		(28,051	)		-
Class 3		-			-			-			-			-			-			(1,354	)		(474	)		(297	)		-
Long-term net realized gains:
Class 1		(7,335	)		(777	)		(3,868	)		(6,818	)		(565	)		-			(164,342	)		(84,523	)		(36,748	)		(11,851	)
Class 2		(72,698	)		(6,937	)		(103,659	)		(162,814	)		(14,077	)		-			(671,641	)		(447,010	)		(204,006	)		(72,811	)
Class 3		-			-			-			-			-			-			(13,040	)		(10,336	)		(2,162	)		(1,004	)
Total distributions from net realized gain on investments		(102,009	)		(7,714	)		(137,079	)		(184,887	)		(63,880	)		-			(937,166	)		(566,741	)		(276,317	)		(85,666	)
Total dividends and distributions paid to shareholders		(158,273	)		(23,280	)		(251,082	)		(226,052	)		(95,986	)		(3,511	)		(1,399,123	)		(965,054	)		(478,099	)		(243,699	)
Capital share transactions:
Class 1:
Proceeds from initial capitalization		-			-			-			-			-			10,000			-			-			-			-
Proceeds from shares sold		120,507			29,547			8,279			15,459			44,895			30,969			2,341,348			3,828			896,096			169,379
Proceeds from reinvestment of dividends and distributions		16,008			2,470			9,399			9,356			3,887			271			281,014			152,077			84,340			36,192
Cost of shares repurchased		(29,946	)		(21,658	)		(29,039	)		(14,648	)		(18,147	)		(74	)		(673,969	)		(608,513	)		(115,427	)		(102,082	)
Net increase (decrease) from Class 1 transactions		106,569			10,359			(11,361	)		10,167			30,635			41,166			1,948,393			(452,608	)		865,009			103,489
Class 2:
Proceeds from shares sold		374,113			293,407			462,760			482,725			1,224,641			585,540			2,013,524			2,849,467			717,517			777,608
Proceeds from reinvestment of dividends and distributions		142,265			20,810			241,683			216,696			92,099			3,240			1,097,154			795,232			389,710			204,852
Cost of shares repurchased		(86,420	)		(50,811	)		(200,407	)		(130,490	)		(6,505	)		(1,214	)		(2,602,486	)		(636,700	)		(193,263	)		(321,253	)
Net increase from Class 2 transactions		429,958			263,406			504,036			568,931			1,310,235			587,566			508,192			3,007,999			913,964			661,207
Class 3:
Proceeds from shares sold		-			-			-			-			-			-			778			1,254			3,124			3,176
Proceeds from reinvestment of dividends and distributions		-			-			-			-			-			-			20,955			17,745			4,049			2,655
Cost of shares repurchased		-			-			-			-			-			-			(77,378	)		(80,096	)		(12,795	)		(13,663	)
Net (decrease) increase from Class 3 transactions		-			-			-			-			-			-			(55,645	)		(61,097	)		(5,622	)		(7,832	)
Net increase in net assets resulting from
capital share transactions		536,527			273,765			492,675			579,098			1,340,870			628,732			2,400,940			2,494,294			1,773,351			756,864
Total increase in net assets		835,204			535,416			320,546			932,331			1,393,520			682,593			2,360,961			5,000,805			1,788,644			1,442,288
Net assets:
Beginning of period		1,300,767			765,351			4,096,361			3,164,030			682,593			-			26,904,854			21,904,049			7,517,466			6,075,178
End of period	$	2,135,971		$	1,300,767		$	4,416,907		$	4,096,361		$	2,076,113		$	682,593		$	29,265,815		$	26,904,854		$	9,306,110		$	7,517,466
Undistributed (distributions in excess of) net investment income	$	(2,541	)	$	10,927		$	14,776		$	53,310		$	(1,372	)	$	(408	)	$	82,693		$	77,000		$	39,608		$	29,378
Shares of beneficial interest:
Class 1:
Shares issued from initial capitalization		-			-			-			-			-			1,000			-			-			-			-
Shares sold		4,878			1,569			668			1,362			3,807			3,083			52,474			93			46,825			9,512
Shares issued on reinvestment of dividends and distributions		681			146			769			895			337			25			6,397			3,862			4,483			2,052
Shares repurchased		(1,305	)		(1,184	)		(2,380	)		(1,308	)		(1,495	)		(7	)		(15,323	)		(15,201	)		(6,055	)		(5,805	)
Net increase (decrease) in shares outstanding		4,254			531			(943	)		949			2,649			4,101			43,548			(11,246	)		45,253			5,759
Class 2:
Shares sold		15,801			15,627			38,123			42,906			104,297			57,949			46,137			71,465			37,981			44,538
Shares issued on reinvestment of dividends and distributions		6,123			1,238			19,932			20,876			8,017			298			25,097			20,312			20,722			11,718
Shares repurchased		(3,867	)		(2,831	)		(16,554	)		(11,663	)		(561	)		(126	)		(59,040	)		(15,943	)		(10,240	)		(18,153	)
Net increase in shares outstanding		18,057			14,034			41,501			52,119			111,753			58,121			12,194			75,834			48,463			38,103
Class 3:
Shares sold		-			-			-			-			-			-			18			31			165			183
Shares issued on reinvestment of dividends and distributions		-			-			-			-			-			-			476			452			214			151
Shares repurchased		-			-			-			-			-			-			(1,757	)		(2,004	)		(671	)		(776	)
Net (decrease) increase  in shares outstanding		-			-			-			-			-			-			(1,263	)		(1,521	)		(292	)		(442	)

 

	Bond Fund						Global Bond Fund							High-Income Bond Fund						U.S. Government/ AAA-Rated Securities Fund						Cash Management Fund
	Year ended December 31, 2007			Year ended December 31, 2006			Year ended December 31, 2007			Period ended December 31, 2006 (2)				Year ended December 31, 2007			Year ended December 31, 2006			Year ended December 31, 2007			Year ended December 31, 2006			Year ended December 31, 2007			Year ended December 31, 2006
Operations:
Net investment income	$	233,657		$	158,314		$	6,041		$	150			$	92,403		$	73,713		$	33,300		$	28,326		$	22,878		$	15,292
Net realized gain (loss) on investments and
currency transactions		34,797			(4,416	)		3,344			(10	)			3,093			3,708			2,138			(3,537	)		3			-		(3)
Net unrealized appreciation (depreciation)
on investments and currency translations		(128,206	)		57,361			4,164			94				(81,331	)		27,773			12,104			(923	)		(32	)		8
Net increase in net assets
resulting from operations		140,248			211,259			13,549			234				14,165			105,194			47,542			23,866			22,849			15,300
Dividends and distributions paid to shareholders:
Dividends from net investment income
and currency gains:
Class 1		(27,191	)		(7,578	)		(761	)		(79	)			(34,436	)		(18,213	)		(15,945	)		(9,348	)		(7,248	)		(1,903	)
Class 2		(327,209	)		(106,551	)		(7,129	)		(76	)			(110,945	)		(41,173	)		(37,372	)		(14,236	)		(25,540	)		(4,485	)
Class 3		-			-			-			-				(3,325	)		(2,049	)		(2,188	)		(1,245	)		(1,300	)		(378	)
Total dividends from net investment income
and currency gains		(354,400	)		(114,129	)		(7,890	)		(155	)			(148,706	)		(61,435	)		(55,505	)		(24,829	)		(34,088	)		(6,766	)
Distributions from net realized gain on investments:
Short-term net realized gains:
Class 1		-			-			-			-				-			-			-			-			-			-
Class 2		-			-			-			-				-			-			-			-			-			-
Class 3		-			-			-			-				-			-			-			-			-			-
Long-term net realized gains:
Class 1		-			-			-			-				-			-			-			-			-			-
Class 2		-			-			-			-				-			-			-			-			-			-
Class 3		-			-			-			-				-			-			-			-			-			-
Total distributions from net realized gain on investments		-			-			-			-				-			-			-			-			-			-
Total dividends and distributions paid to shareholders		(354,400	)		(114,129	)		(7,890	)		(155	)			(148,706	)		(61,435	)		(55,505	)		(24,829	)		(34,088	)		(6,766	)
Capital share transactions:
Class 1:
Proceeds from initial capitalization		-			-			-			10,000				-			-			-			-			-			-
Proceeds from shares sold		223,507			52,576			15,323			1,200				64,447			6,186			17,198			4,334			82,701			78,397
Proceeds from reinvestment of dividends and distributions		27,191			7,578			761			79				34,436			18,213			15,945			9,348			7,248			1,903
Cost of shares repurchased		(27,058	)		(19,886	)		(687	)		-		(3)		(54,035	)		(52,667	)		(37,415	)		(47,068	)		(73,550	)		(59,631	)
Net increase (decrease) from Class 1 transactions		223,640			40,268			15,397			11,279				44,848			(28,268	)		(4,272	)		(33,386	)		16,399			20,669
Class 2:
Proceeds from shares sold		1,307,778			923,008			256,862			15,491				222,164			199,599			179,695			74,330			400,501			260,270
Proceeds from reinvestment of dividends and distributions		327,209			106,551			7,129			76				110,945			41,173			37,372			14,236			25,540			4,485
Cost of shares repurchased		(133,653	)		(57,649	)		(4,474	)		(98	)			(67,426	)		(28,107	)		(17,046	)		(27,041	)		(247,164	)		(141,648	)
Net increase from Class 2 transactions		1,501,334			971,910			259,517			15,469				265,683			212,665			200,021			61,525			178,877			123,107
Class 3:
Proceeds from shares sold		-			-			-			-				2,454			2,705			3,966			2,168			20,409			23,065
Proceeds from reinvestment of dividends and distributions		-			-			-			-				3,325			2,049			2,188			1,245			1,300			378
Cost of shares repurchased		-			-			-			-				(8,871	)		(10,123	)		(8,953	)		(10,244	)		(19,332	)		(21,422	)
Net (decrease) increase from Class 3 transactions		-			-			-			-				(3,092	)		(5,369	)		(2,799	)		(6,831	)		2,377			2,021
Net increase in net assets resulting from
capital share transactions		1,724,974			1,012,178			274,914			26,748				307,439			179,028			192,950			21,308			197,653			145,797
Total increase in net assets		1,510,822			1,109,308			280,573			26,827				172,898			222,787			184,987			20,345			186,414			154,331
Net assets:
Beginning of period		3,603,777			2,494,469			26,827			-				1,159,081			936,294			652,404			632,059			397,950			243,619
End of period	$	5,114,599		$	3,603,777		$	307,400		$	26,827			$	1,331,979		$	1,159,081		$	837,391		$	652,404		$	584,364		$	397,950
Undistributed (distributions in excess of) net investment income	$	49,998		$	154,269		$	1,377		$	(6	)		$	15,604		$	71,733		$	6,027		$	28,343		$	3,995		$	15,205
Shares of beneficial interest:
Class 1:
Shares issued from initial capitalization		-			-			-			1,000				-			-			-			-			-			-
Shares sold		19,367			4,625			1,435			116				5,144			498			1,447			370			7,068			6,852
Shares issued on reinvestment of dividends and distributions		2,432			691			71			8				2,837			1,518			1,385			826			633			168
Shares repurchased		(2,340	)		(1,746	)		(66	)		-		(3)		(4,245	)		(4,196	)		(3,160	)		(4,006	)		(6,295	)		(5,209	)
Net increase (decrease) in shares outstanding		19,459			3,570			1,440			1,124				3,736			(2,180	)		(328	)		(2,810	)		1,406			1,811
Class 2:
Shares sold		113,731			81,863			24,105			1,514				17,346			16,013			15,266			6,368			34,457			22,823
Shares issued on reinvestment of dividends and distributions		29,490			9,793			667			7				9,210			3,457			3,262			1,264			2,244			398
Shares repurchased		(11,757	)		(5,122	)		(425	)		(9	)			(5,429	)		(2,248	)		(1,450	)		(2,323	)		(21,256	)		(12,425	)
Net increase in shares outstanding		131,464			86,534			24,347			1,512				21,127			17,222			17,078			5,309			15,445			10,796
Class 3:
Shares sold		-			-			-			-				191			219			333			185			1,743			2,015
Shares issued on reinvestment of dividends and distributions		-			-			-			-				273			171			190			110			114			34
Shares repurchased		-			-			-			-				(690	)		(804	)		(759	)		(869	)		(1,658	)		(1,876	)
Net (decrease) increase  in shares outstanding		-			-			-			-				(226	)		(414	)		(236	)		(574	)		199			173

  

(1) For the period May 1, 2006, commencement of operations, through December 31, 2006.

(2) For the period October 4, 2006, commencement of operations, through December 31, 2006.

(3) Amount less than one thousand.

See Notes to Financial Statements

Notes to financial statements

1.   Organization and significant accounting policies

Organization– American Funds Insurance Series (the "series") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company with 15 different funds. The assets of each fund are segregated, with each fund accounted for separately. The funds’ investment objectives are as follows:

Global Discovery Fund	Seeks long-term growth of capital by investing primarily in stocks of companies in the services and information area of the global economy.
Global Growth Fund	Seeks long-term growth of capital by investing primarily in common stocks of companies located around the world.
Global Small Capitalization Fund	Seeks long-term growth of capital by investing primarily in stocks of smaller companies located around the world.
Growth Fund	Seeks long-term growth of capital by investing primarily in common stocks of companies that appear to offer superior opportunities for growth of capital.
International Fund	Seeks long-term growth of capital by investing primarily in common stocks of companies based outside the United States.
New World Fund	Seeks long-term growth of capital by investing primarily in stocks of companies with significant exposure to countries with developing economies and/or markets.
Blue Chip Income and Growth Fund	Seeks to produce income exceeding the average yield on U.S. stocks and provide an opportunity for growth of principal.
Global Growth and Income Fund	Seeks long-term growth of capital and to provide current income by investing primarily in stocks of well-established companies located around the world.
Growth-Income Fund	Seeks growth of capital and income over time by investing primarily in U.S. common stocks and other securities that appear to offer potential for capital appreciation and/or dividends.
Asset Allocation Fund	Seeks high total return (including income and capital gains) consistent with the preservation of capital over the long term.
Bond Fund	Seeks to maximize current income and preserve capital by investing primarily in fixed-income securities.
Global Bond Fund	Seeks a high level of total return over the long term by investing primarily in investment-grade bonds issued by entities based around the world and denominated in various currencies, including U.S. dollars.
High-Income Bond Fund	Seeks to provide a high level of current income with capital appreciation as a secondary goal by investing primarily in higher yielding and generally lower quality debt securities.
U.S. Government/AAA-Rated Securities Fund	Seeks to provide a high level of current income and preservation of capital by investing primarily in a combination of securities guaranteed by the U.S. government and other debt securities rated AAA or Aaa.
Cash Management Fund	Seeks to provide income on cash reserves while preserving capital and maintaining liquidity.

Each fund offers two or three share classes (1, 2 and 3). 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 certain distribution expenses. 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 series:

Security valuation– Equity securities are valued at the official closing price of, or the last reported sale price on, the exchange or market on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. Prices for each security are taken from the principal exchange or market in which the security trades. Fixed-income securities, including short-term securities purchased with more than 60 days left to maturity, are valued at prices obtained from an independent pricing service when such prices are available. However, where the investment adviser deems it appropriate, such securities will be valued at the mean quoted bid and asked prices (or bid prices, if asked prices are not available) or at prices for securities of comparable maturity, quality and type. Securities with both fixed-income and equity characteristics, or equity securities traded principally among fixed-income dealers, are valued in the manner described above for either equity or fixed-income securities, depending on which method is deemed most appropriate by the investment adviser. Short-term securities purchased within 60 days to maturity are valued at amortized cost, which approximates market value. The value of short-term securities originally purchased with maturities greater than 60 days is determined based on an amortized value to par when they reach 60 days or less remaining to maturity. The ability of the issuers of the debt securities held by the funds to meet their obligations may be affected by economic developments in a specific industry, state or region. Forward currency contracts are valued at the mean of representative quoted bid and asked prices.

Securities and other assets for which representative market quotations are not readily available or are considered unreliable by the investment adviser are fair valued as determined in good faith under procedures adopted by authority of the series’ board of trustees. Market quotations may be considered unreliable if events occur that materially affect the value of securities (particularly securities outside the U.S.) between the close of trading in those securities and the close of regular trading on the New York Stock Exchange. Various factors may be reviewed in order to make a good faith determination of a security’s fair value. These factors include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; significant events occurring after the close of trading in the security; and changes in overall market conditions.

Security transactions and related investment income– Security transactions are recorded by the series 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 series 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) and 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 expenses, are accrued daily and charged directly to the respective share class.

Dividends and distributions to shareholders–Dividends and distributions paid to shareholders are recorded on the ex-dividend date.

Currency translation– Assets and liabilities, including investment securities, denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investment securities and income and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. On the accompanying financial statements, the effects of changes in 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 currencies other than U.S. dollars are disclosed separately.

Forward currency contracts– The series may enter into forward currency contracts, which represent agreements to exchange currencies on specific future dates at predetermined rates. The series enters into these contracts to manage its exposure to changes in exchange rates arising from investments denominated in currencies other than U.S. dollars. 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 exchange rates. Due to these risks, the series could incur losses up to the entire contract amount, which may exceed the net unrealized value shown on the accompanying financial statements. On a daily basis, the series values forward currency contracts based on the applicable exchange rates and records unrealized gains or losses. The series 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.

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

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

2.   Investments outside of the U.S.

Investment risk – The risks of investing in securities of issuers outside the U.S. 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.  Gains realized by the funds on the sale of securities in certain countries are subject to taxes in those countries. The funds record a liability based on unrealized gains to provide for potential taxes payable upon the sale of these securities.

3. Federal income taxation and distributions

The series 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 series is not subject to income taxes to the extent such distributions are made. Therefore, no federal income tax provision is required.

The series adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes, on June 29, 2007. The implementation of FIN 48 resulted in no material liability for unrecognized tax benefits and no material change to the beginning net asset value of the funds.

As of and during the period ended December 31, 2007, the funds did not have a liability for any unrecognized tax benefits. The funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statement of operations. During the period, the funds did not incur any interest or penalties.

All of the funds, with the exception of Global Growth and Income Fund and Global Bond Fund, are not subject to examination by U.S. federal tax authorities for years before 2004, nor by state tax authorities for years before 2003. Global Growth and Income Fund and Global Bond Fund were each launched in 2006; therefore, their only tax years, 2006 and 2007, remain open for examination by U.S. federal and state tax authorities. The following funds are not subject to examination by tax authorities outside the U.S. for the years indicated: Global Small Capitalization Fund, International Fund and New World Fund for tax years before 2001; Global Growth Fund for tax years before 2002; Global Discovery Fund for tax years before 2004; and Growth Fund for tax years before 2005.  All other funds are not subject to examination by tax authorities outside the U.S.

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 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 securities outside the U.S.; deferred expenses; cost of investments sold; paydowns on fixed-income securities; net capital losses; net operating losses; non-U.S. taxes on capital gains;amortization of premiums; and income on certain investments. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the funds for financial reporting purposes.

Dividends from net investment income and currency gains and distributions from short-term net realized gains shown on the accompanying financial statements are considered ordinary income distributions for tax purposes.  Distributions from long-term net realized gains on the accompanying financial statements are considered long-term capital gain distributions for tax purposes.

As indicated in the table below and on the following page, three funds in the series had capital loss carryforwards available at December 31, 2007.  These will be used to offset any capital gains realized by the funds in future years through the expiration dates.  The funds will not make distributions from capital gains while capital loss carryforwards remain.

Additional tax basis disclosures are as follows:

																(dollars in thousands)
	Global Discovery Fund			Global Growth Fund			Global Small Capitalization Fund			Growth Fund			International Fund			New World Fund			Blue Chip Income and Growth Fund
As of December 31, 2007:
Undistributed ordinary income	$	3,099		$	67,002		$	71,155		$	359,823		$	160,621		$	28,543		$	49,874
Post-October currency loss deferrals (realized during the period
November 1, 2007, through December 31, 2007)*		(11	)		(640	)		(574	)		(1,397	)		(662	)		-			-
Undistributed long-term capital gain		3,027			387,152			390,606			2,633,369			1,165,731			127,723			217,880
Reclassification to (from) undistributed net investment income
from (to) undistributed net realized gain	$	303		$	(3,488	)	$	46,628		$	(5,244	)	$	1,606		$	14,404		$	-
Reclassification to (from) undistributed net investment income
from (to) capital paid in on shares of beneficial interest		-			-			-			-			-			-			-
Reclassification to (from) undistributed net realized gain
from (to) capital paid in on shares of beneficial interest		-			-			-			-			-			-			-
Gross unrealized appreciation on investment securities	$	49,536		$	1,260,045		$	1,133,229		$	7,568,459		$	3,017,822		$	630,024		$	798,794
Gross unrealized depreciation on investment securities		(10,193	)		(220,327	)		(272,517	)		(1,743,960	)		(279,102	)		(30,095	)		(316,096	)
Net unrealized appreciation (depreciation) on investment securities	$	39,343		$	1,039,718		$	860,712		$	5,824,499		$	2,738,720		$	599,929		$	482,698
Cost of investment securities	$	238,424		$	4,840,661		$	3,485,481		$	25,062,798		$	8,791,552		$	1,534,842		$	3,931,179
* These deferrals are considered incurred in the subsequent year.
† Amount less than $1,000.

																			(dollars in thousands)
	Global Growth and Income Fund			Growth-Income Fund			Asset Allocation Fund			Bond Fund			Global Bond Fund			High-Income Bond Fund			U.S. Government/ AAA-Rated Securities Fund			Cash Management Fund
As of December 31, 2007:
Undistributed ordinary income	$	9,814		$	258,828		$	49,061		$	58,594		$	1,345		$	17,217		$	6,102		$	4,033
Post-October currency loss deferrals (realized during the period
November 1, 2007, through December 31, 2007)*		-			(505	)		-			-			-			(28	)		-			-
Undistributed long-term capital gain		5,766			1,452,853			345,444			4,691			-			-			-			-
Post-October capital loss deferrals (realized during the period
November 1, 2007, through December 31, 2007)*		-			-			-			-			(13	)		(1,347	)		(29	)		-
Capital loss carryforwards:
Expiring 2008		-			-			-			-			-		$	-		$	2,459		$	-
Expiring 2009		-			-			-			-			-			41,518			-			-
Expiring 2010		-			-			-			-			-			50,900			-			-
Expiring 2011		-			-			-			-			-			35,517			-			-
Expiring 2013		-			-			-			-			-			-			-			1
Expiring 2014		-			-			-			-			-			-			4,453			-	†
	$	-		$	-		$	-		$	-		$	-		$	127,935		$	6,912		$	1
Capital loss carryforwards utilized	$	-		$	-		$	-		$	4,425		$	-		$	2,196		$	2,318		$	3
Reclassification to (from) undistributed net investment income
from (to) undistributed net realized gain	$	2,108		$	1,482		$	329		$	16,472		$	3,232		$	174		$	(111	)	$	-
Reclassification to (from) undistributed net investment income
from (to) capital paid in on shares of beneficial interest		-			-			-			-			-			-			-			-
Reclassification to (from) undistributed net realized gain
from (to) capital paid in on shares of beneficial interest		-			-			-			-			-	†		-			-			-
Gross unrealized appreciation on investment securities	$	180,911		$	6,128,802		$	1,666,884		$	76,029		$	7,130		$	30,922		$	16,393		$	6
Gross unrealized depreciation on investment securities		(89,542	)		(1,492,083	)		(460,298	)		(151,216	)		(2,850	)		(79,871	)		(3,391	)		(27	)
Net unrealized appreciation (depreciation) on investment securities	$	91,369		$	4,636,719		$	1,206,586		$	(75,187	)	$	4,280		$	(48,949	)	$	13,002		$	(21	)
Cost of investment securities	$	1,983,915		$	24,572,505		$	8,097,510		$	5,302,721		$	295,579		$	1,352,555		$	836,139		$	582,578
* These deferrals are considered incurred in the subsequent year.
† Amount less than $1,000.

4. Fees and transactions with related parties

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

Investment advisory services–The Investment Advisory and Service Agreement with CRMC provides for monthly fees accrued daily. These fees are based on annual rates that generally decrease as average net asset levels increase.

The board of trustees approved an amended agreement for Global Growth Fund, Global Growth and Income Fund, and Bond Fund, effective January 1, 2008, that provides for reduced annual rates as reflected in the table below. During the year ended December 31, 2007, CRMC voluntarily reduced investment advisory service fees to the proposed rates for Global Growth Fund, Global Growth and Income Fund, and Bond Fund. In addition, CRMC is currently waiving 10% of investment advisory services fees. During the year ended December 31, 2007, total aggregate investment advisory services fees waived by CRMC were $37,963,000. As a result, the aggregate fees shown on the accompanying financial statements of $370,788,000 were reduced to $332,825,000. The range of rates and asset levels and the current annualized rates of average net assets for the series, before and after the expense waiver, are as follows:

	Rates						Net asset level (in billions)				For the year ended			For the year ended
Fund	Beginning with			Ending with			Up to		In excess of		December 31, 2007, before waiver			December 31, 2007, after waiver
Global Discovery		.580	%		.440	%	$	.5	$	1.0		.58	%		.52	%
Global Growth		.690			.460			.6		5.0		.53			.48
Global Small Capitalization		.800			.650			.6		3.0		.70			.63
Growth		.500			.285			.6		27.0		.32			.29
International		.690			.430			.5		21.0		.49			.44
New World		.850			.660			.5		1.5		.76			.68
Blue Chip Income and Growth		.500			.370			.6		4.0		.41			.37
Global Growth and Income		.690			.500			.6		2.0		.69			.56
Growth-Income		.500			.222			.6		27.0		.26			.24
Asset Allocation		.500			.250			.6		8.0		.31			.28
Bond		.480			.340			.6		5.0		.40			.36
Global Bond		.570					all					.57			.51
High-Income Bond		.500			.420			.6		2.0		.47			.43
U.S. Government/AAA-Rated Securities		.460			.340			.6		2.0		.45			.40
Cash Management		.320					all					.32			.29

Transfer agent services–The aggregate fee of $61,000 was incurred during the year ended December 31, 2007, pursuant to an agreement with AFS. Under this agreement, the series compensates AFS for transfer agent services, including shareholder recordkeeping, communications and transaction processing.

Trustees’ deferred compensation– Since the adoption of the deferred compensation plan in 1993, trustees who are unaffiliated with CRMC may elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the series, are treated as if invested in one or more of the American Funds. These amounts represent general, unsecured liabilities of the series and vary according to the total returns of the selected funds. Trustees’ compensation on the accompanying financial statements includes current fees (either paid in cash or deferred) and a net increase in the value of the deferred amounts as follows:

	(dollars in thousands)
	Current fees		Increase in value of deferred amounts
Global Discovery	$	2	$	-	*
Global Growth		37		8
Global Small Capitalization		29		4
Growth		220		114
International		76		50
New World		12		1
Blue Chip Income and Growth		33		5
Global Growth and Income		9		-	*
Growth-Income		217		131
Asset Allocation		63		30
Bond		32		6
Global Bond		1		-	*
High-Income Bond		10		12
U.S. Government/AAA-Rated Securities		5		10
Cash Management		4		5
* Amount less than one thousand.

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

5.   Distribution services

The series has adopted plans of distribution for Class 2 and 3 shares. 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 average daily net assets, of 0.25% for Class 2 and 0.18% for Class 3 to pay service fees to firms that have entered into agreements with the series. During the year ended December 31, 2007, distribution expenses under the plans for the series aggregated $212,094,000 for Class 2 and $2,104,000 for Class 3. Class 1 shares have not adopted a plan of distribution.

6. Investment transactions and other disclosures

As of December 31, 2007, Asset Allocation Fund, Bond Fund, Global Bond Fund and High-Income Bond Fund had open forward currency contracts to purchase or sell

currencies as follows:

						(amounts in thousands)
		Contract amount				U.S. valuation at December 31, 2007
Fund		Receive		Deliver		Amount		Unrealized appreciation (depreciation)
Purchases:
Bond	Euros, expiring 3/20-3/27/2008	€	8,569	$	12,368	$	12,540	$	172
Bond	Japanese yen, expiring 2/29/2008	¥	2,104,110		19,553		18,958		(595	)
Global Bond	British pounds, expiring 3/6-3/14/2008	£	3,884		7,903		7,692		(211	)
Global Bond	Canadian dollars, expiring 2/13/2008	C$1,074			1,114		1,082		(32	)
Global Bond	Euros, expiring 1/4-3/27/2008	€	10,114		14,746		14,786		40
Global Bond	Japanese yen, expiring 1/30-3/12/2008	¥	858,904		7,866		7,735		(131	)
Global Bond	Norwegian kroner, expiring 3/5-3/7/2008	NKr25,341			4,627		4,656		29
Global Bond	Swedish kronor, expiring 3/31/2008	SKr16,491			2,574		2,572		(2	)
Sales:
Asset Allocation	Euros, expiring 2/15-3/19/2008	$	608	€	419		612		(4	)
Bond	British pounds, expiring 1/28-3/20/2008		19,751	£	9,820		19,455		296
Bond	Euros, expiring 1/28-3/14/2008		54,514	€	37,310		54,504		10
Global Bond	British pounds, expiring 3/12/2008		1,997	£	980		1,941		56
Global Bond	Euros, expiring 3/5-3/31/2008		17,000	€	11,590		16,949		51
Global Bond	Israeli shekels, expiring 3/10-3/20/2008		4,354	ILS17,050			4,422		(68	)
High-Income Bond	Euros, expiring 3/14-3/19/2008		2,931	€	1,997		2,918		13

The following table presents additional information for the year ended December 31, 2007:

												(dollars in thousands)
	Global Discovery Fund		Global Growth Fund		Global Small Capitalization Fund			Growth Fund		International Fund		New World Fund		Blue Chip Income and Growth Fund
Purchases of investment securities*	$	149,233	$	2,158,719	$	1,907,394		$	11,601,028	$	4,695,236	$	756,781	$	1,465,100
Sales of investment securities*		98,262		1,632,260		1,781,271			11,031,224		4,040,204		523,329		1,113,050
Non-U.S taxes paid on dividend income		238		6,220		2,888			8,297		24,754		2,934		582
Non-U.S taxes paid on interest income		-		-		-			-		-		-		-
Non-U.S taxes paid on realized gains		-		2,442		-	†		1,421		-		477		-
Non-U.S taxes provided on unrealized gains as of December 31, 2007		112		3,049		2,375			-		1,138		1,132		-
Dividends from affiliated issuers		-		-		2,298			862		1,131		-		-
Net realized gain from affiliated issuers		-		1,962		18,122			224,548		44,771		-		-
*Excludes short-term securities, except for Cash Management Fund.
† Amount less than ine thousand.

													(dollars in thousands)
	Global Growth and Income Fund		Growth-Income Fund		Asset Allocation Fund		Bond Fund		Global Bond Fund		High-Income Bond Fund		U.S. Government/ AAA-Rated Securities Fund		Cash Management Fund
Purchases of investment securities*	$	1,349,071	$	8,329,286	$	3,191,445	$	3,738,293	$	339,662	$	594,725	$	762,170	$	4,164,007
Sales of investment securities*		416,684		6,242,953		2,230,654		1,996,400		102,602		366,059		615,794		4,002,834
Non-U.S taxes paid on dividend income		2,075		7,504		1,397		-		-		-		-		-
Non-U.S taxes paid on interest income		-		-		44		191		52		33		-		-
Non-U.S taxes paid on realized gains		93		-		-		-		-		-		-		-
Non-U.S taxes provided on unrealized gains as of December 31, 2007		460		-		-		-		-		-		-		-
Dividends from affiliated issuers		-		-		-		-		-		-		-		-
Net realized gain from affiliated issuers		-		-		-		-		-		-		-		-
*Excludes short-term securities, except for Cash Management Fund.
† Amount less than ine thousand.

Financial Highlights(1)

		Income from investment operations (2)					Dividends and distributions
Period ended	Net asset value, beginning of period	Net investment income (loss)		Net gains (losses) on securities (both realized  and unrealized)		Total from investment operations	Dividends (from net investment income)	Distributions (from capital gains)	Total dividends and distributions	Net asset value, end of period	Total return (3)		Net assets, end of period (in millions)	Ratio of expenses to average net assets before waiver			Ratio of expenses to average net assets after waiver (3)			Ratio of net income (loss) to average net assets (3)
Global Discovery Fund
Class 1
12/31/07	$13.05	$.17		$ 2.07		$ 2.24	$  (.16)	$  (1.04)	$  (1.20)	$14.09	17.55	%	$  35	.60	%		.54	%		1.25	%
12/31/06	11.63	.15		1.89		2.04	(.13)	(.49)	(.62)	13.05	17.66		28	.62			.56			1.19
12/31/05	10.79	.14		1.05		1.19	(.11)	(.24)	(.35)	11.63	11.07		22	.61			.56			1.27
12/31/04	9.94	.08		.98		1.06	(.09)	(.12)	(.21)	10.79	10.72		20	.61			.60			.81
12/31/03	7.26	.05		2.67		2.72	(.04)	-	(.04)	9.94	37.41		17	.61			.61			.55
Class 2
12/31/07	13.00	.14		2.05		2.19	(.13)	(1.04)	(1.17)	14.02	17.22		240	.85			.79			.98
12/31/06	11.59	.11		1.89		2.00	(.10)	(.49)	(.59)	13.00	17.41		151	.87			.81			.94
12/31/05	10.76	.11		1.05		1.16	(.09)	(.24)	(.33)	11.59	10.80		89	.86			.81			1.04
12/31/04	9.92	.06		.97		1.03	(.07)	(.12)	(.19)	10.76	10.43		51	.86			.85			.60
12/31/03	7.25	.02		2.67		2.69	(.02)	-	(.02)	9.92	37.11		24	.86			.86			.28
Global Growth Fund
Class 1
12/31/07	$23.44	$.51		$ 2.98		$ 3.49	$  (.76)	$  (1.02)	$  (1.78)	$25.15	15.16	%	$  684	.55	%		.50	%		2.06	%
12/31/06	19.63	.41		3.62		4.03	(.22)	-	(.22)	23.44	20.73		278	.58			.53			1.95
12/31/05	17.31	.28		2.19		2.47	(.15)	-	(.15)	19.63	14.37		206	.62			.57			1.56
12/31/04	15.30	.18		1.92		2.10	(.09)	-	(.09)	17.31	13.80		202	.65			.64			1.15
12/31/03	11.35	.12		3.91		4.03	(.08)	-	(.08)	15.30	35.63		188	.70			.70			.94
Class 2
12/31/07	23.29	.45		2.95		3.40	(.67)	(1.02)	(1.69)	25.00	14.85		5,180	.80			.75			1.84
12/31/06	19.52	.36		3.59		3.95	(.18)	-	(.18)	23.29	20.43		4,015	.83			.78			1.71
12/31/05	17.23	.23		2.18		2.41	(.12)	-	(.12)	19.52	14.07		2,617	.87			.82			1.30
12/31/04	15.25	.14		1.91		2.05	(.07)	-	(.07)	17.23	13.49		1,796	.90			.89			.92
12/31/03	11.32	.09		3.89		3.98	(.05)	-	(.05)	15.25	35.27		1,082	.95			.95			.68
Global Small Capitalization Fund
Class 1
12/31/07	$24.87	$.12		$ 5.27		$ 5.39	$  (.90)	$  (2.16)	$  (3.06)	$27.20	21.73	%	$  369	.73	%		.66	%		.45	%
12/31/06	21.29	.19		4.74		4.93	(.14)	(1.21)	(1.35)	24.87	24.35		247	.77			.69			.82
12/31/05	17.14	.13		4.23		4.36	(.21)	-	(.21)	21.29	25.66		231	.79			.73			.72
12/31/04	14.15	.02		2.97		2.99	-	-	-	17.14	21.13		193	.81			.80			.15
12/31/03	9.27	-	(4)	4.97		4.97	(.09)	-	(.09)	14.15	53.92		163	.83			.83			(.03)
Class 2
12/31/07	24.64	.05		5.22		5.27	(.80)	(2.16)	(2.96)	26.95	21.43		3,975	.98			.91			.20
12/31/06	21.12	.14		4.70		4.84	(.11)	(1.21)	(1.32)	24.64	24.05		2,927	1.02			.94			.61
12/31/05	17.02	.09		4.19		4.28	(.18)	-	(.18)	21.12	25.35		1,977	1.04			.97			.49
12/31/04	14.08	(.01)		2.95		2.94	-	-	-	17.02	20.88		1,198	1.06			1.05			(.07)
12/31/03	9.23	(.03)		4.95		4.92	(.07)	-	(.07)	14.08	53.53		665	1.08			1.08			(.28)
Growth Fund
Class 1
12/31/07	$64.51	$.68		$ 7.44		$ 8.12	$  (.68)	$  (4.73)	$  (5.41)	$67.22	12.64	%	$  5,051	.33	%		.30	%		1.00	%
12/31/06	59.36	.70		5.46		6.16	(.63)	(.38)	(1.01)	64.51	10.48		3,503	.34			.31			1.14
12/31/05	51.39	.46		8.00		8.46	(.49)	-	(.49)	59.36	16.50		3,709	.35			.32			.87
12/31/04	45.74	.32		5.51		5.83	(.18)	-	(.18)	51.39	12.75		3,744	.36			.36			.68
12/31/03	33.47	.16		12.26		12.42	(.15)	-	(.15)	45.74	37.15		3,877	.39			.39			.41
Class 2
12/31/07	64.08	.50		7.39		7.89	(.52)	(4.73)	(5.25)	66.72	12.35		25,359	.58			.55			.74
12/31/06	58.98	.54		5.43		5.97	(.49)	(.38)	(.87)	64.08	10.22		23,122	.59			.56			.89
12/31/05	51.10	.34		7.92		8.26	(.38)	-	(.38)	58.98	16.19		18,343	.60			.57			.64
12/31/04	45.50	.23		5.45		5.68	(.08)	-	(.08)	51.10	12.50		12,055	.61			.61			.50
12/31/03	33.29	.06		12.19		12.25	(.04)	-	(.04)	45.50	36.80		7,107	.64			.64			.16
Class 3
12/31/07	64.50	.55		7.45		8.00	(.56)	(4.73)	(5.29)	67.21	12.44		425	.51			.48			.81
12/31/06	59.34	.59		5.46		6.05	(.51)	(.38)	(.89)	64.50	10.29		451	.52			.49			.95
12/31/05	51.38	.37		7.98		8.35	(.39)	-	(.39)	59.34	16.28		499	.53			.50			.69
12/31/04 (5)	47.74	.24		3.50		3.74	(.10)	-	(.10)	51.38	7.85		516	.54		(6)	.53		(6)	.54		(6)
International Fund
Class 1
12/31/07	$22.01	$.43		$ 3.95		$ 4.38	$  (.41)	$  (1.17)	$  (1.58)	$24.81	20.30	%	$  1,708	.52	%		.47	%		1.82	%
12/31/06	18.96	.41		3.21		3.62	(.38)	(.19)	(.57)	22.01	19.33		1,648	.54			.49			1.99
12/31/05	15.82	.32		3.11		3.43	(.29)	-	(.29)	18.96	21.75		1,599	.57			.52			1.92
12/31/04	13.41	.22		2.41		2.63	(.22)	-	(.22)	15.82	19.66		1,495	.60			.59			1.54
12/31/03	10.07	.15		3.38		3.53	(.19)	-	(.19)	13.41	35.12		1,431	.63			.63			1.40
Class 2
12/31/07	21.94	.36		3.94		4.30	(.35)	(1.17)	(1.52)	24.72	20.02		9,719	.77			.72			1.55
12/31/06	18.92	.35		3.20		3.55	(.34)	(.19)	(.53)	21.94	18.98		7,260	.79			.74			1.72
12/31/05	15.79	.28		3.11		3.39	(.26)	-	(.26)	18.92	21.50		4,790	.82			.77			1.64
12/31/04	13.39	.18		2.41		2.59	(.19)	-	(.19)	15.79	19.32		2,752	.84			.83			1.27
12/31/03	10.05	.12		3.37		3.49	(.15)	-	(.15)	13.39	34.85		1,385	.88			.88			1.08
Class 3
12/31/07	22.00	.39		3.94		4.33	(.36)	(1.17)	(1.53)	24.80	20.10		123	.70			.65			1.64
12/31/06	18.96	.37		3.20		3.57	(.34)	(.19)	(.53)	22.00	19.07		120	.72			.67			1.81
12/31/05	15.82	.29		3.11		3.40	(.26)	-	(.26)	18.96	21.54		116	.75			.70			1.74
12/31/04 (5)	13.76	.20		2.05		2.25	(.19)	-	(.19)	15.82	16.45		115	.77		(6)	.77		(6)	1.45		(6)
New World Fund
Class 1
12/31/07	$21.56	$.46		$ 6.25		$ 6.71	$  (.83)	$  (1.56)	$  (2.39)	$25.88	32.53	%	$  261	.82	%		.74	%		1.92	%
12/31/06	16.67	.41		4.95		5.36	(.32)	(.15)	(.47)	21.56	32.88		126	.88			.80			2.19
12/31/05	13.96	.33		2.58		2.91	(.20)	-	(.20)	16.67	21.10		88	.92			.85			2.22
12/31/04	11.99	.23		2.01		2.24	(.27)	-	(.27)	13.96	19.07		63	.93			.92			1.81
12/31/03	8.76	.21		3.21		3.42	(.19)	-	(.19)	11.99	39.56		47	.92			.92			2.15
Class 2
12/31/07	21.40	.40		6.20		6.60	(.75)	(1.56)	(2.31)	25.69	32.21		1,875	1.07			.99			1.69
12/31/06	16.56	.36		4.92		5.28	(.29)	(.15)	(.44)	21.40	32.59		1,175	1.13			1.05			1.93
12/31/05	13.89	.29		2.56		2.85	(.18)	-	(.18)	16.56	20.74		677	1.17			1.10			1.97
12/31/04	11.94	.19		2.01		2.20	(.25)	-	(.25)	13.89	18.80		373	1.18			1.17			1.57
12/31/03	8.73	.19		3.19		3.38	(.17)	-	(.17)	11.94	39.18		224	1.17			1.17			1.90
Blue Chip Income and Growth Fund
Class 1
12/31/07	$11.97	$.24		$ .07		$ .31	$  (.36)	$  (.39)	$  (.75)	$11.53	2.25	%	$  143	.42	%		.38	%		1.95	%
12/31/06	10.91	.20		1.63		1.83	(.16)	(.61)	(.77)	11.97	17.73		159	.43			.39			1.75
12/31/05	10.26	.18		.59		.77	(.12)	-	(.12)	10.91	7.57		135	.45			.41			1.73
12/31/04	9.41	.15		.78		.93	(.08)	-	(.08)	10.26	9.94		129	.46			.46			1.60
12/31/03	7.17	.13		2.11		2.24	-	-	-	9.41	31.24		107	.52			.50			1.67
Class 2
12/31/07	11.87	.21		.07		.28	(.31)	(.39)	(.70)	11.45	2.03		4,274	.67			.63			1.70
12/31/06	10.83	.17		1.61		1.78	(.13)	(.61)	(.74)	11.87	17.42		3,937	.68			.64			1.50
12/31/05	10.20	.15		.58		.73	(.10)	-	(.10)	10.83	7.24		3,029	.70			.66			1.48
12/31/04	9.36	.13		.78		.91	(.07)	-	(.07)	10.20	9.74		2,349	.71			.70			1.37
12/31/03	7.16	.11		2.09		2.20	-	-	-	9.36	30.73		1,490	.76			.74			1.41
Global Growth and Income
Class 1
12/31/07	$10.98	$.28		$ 1.14		$ 1.42	$  (.22)	$  (.40)	$  (.62)	$11.78	13.04	%	$  79	.71	%		.58	%		2.37	%
12/31/06 (7)	10.00	.14		.91		1.05	(.07)	-	(.07)	10.98	10.49		45	.72		(6)	.65		(6)	2.10		(6)
Class 2
12/31/07	10.97	.25		1.13		1.38	(.20)	(.40)	(.60)	11.75	12.67		1,997	.96			.83			2.11
12/31/06 (7)	10.00	.11		.92		1.03	(.06)	-	(.06)	10.97	10.30		638	.97		(6)	.90		(6)	1.64		(6)
Growth-Income Fund
Class 1
12/31/07	$42.43	$.80		$ 1.51		$ 2.31	$  (.77)	$  (1.45)	$  (2.22)	$42.52	5.32	%	$  5,618	.27	%		.25	%		1.82	%
12/31/06	38.31	.77		5.03		5.80	(.72)	(.96)	(1.68)	42.43	15.51		3,759	.28			.25			1.92
12/31/05	36.81	.62		1.61		2.23	(.58)	(.15)	(.73)	38.31	6.08		3,825	.29			.27			1.68
12/31/04	33.61	.48		3.09		3.57	(.37)	-	(.37)	36.81	10.66		4,213	.31			.30			1.39
12/31/03	25.63	.42		7.96		8.38	(.40)	-	(.40)	33.61	32.76		4,402	.34			.34			1.45
Class 2
12/31/07	42.19	.68		1.50		2.18	(.66)	(1.45)	(2.11)	42.26	5.04		23,243	.52			.50			1.57
12/31/06	38.12	.67		4.99		5.66	(.63)	(.96)	(1.59)	42.19	15.20		22,688	.53			.50			1.67
12/31/05	36.64	.53		1.60		2.13	(.50)	(.15)	(.65)	38.12	5.83		17,608	.54			.52			1.44
12/31/04	33.48	.41		3.06		3.47	(.31)	-	(.31)	36.64	10.37		13,105	.56			.55			1.19
12/31/03	25.52	.34		7.92		8.26	(.30)	-	(.30)	33.48	32.43		7,824	.59			.59			1.18
Class 3
12/31/07	42.42	.73		1.50		2.23	(.69)	(1.45)	(2.14)	42.51	5.12		405	.45			.43			1.64
12/31/06	38.31	.70		5.01		5.71	(.64)	(.96)	(1.60)	42.42	15.30		458	.46			.43			1.74
12/31/05	36.80	.56		1.61		2.17	(.51)	(.15)	(.66)	38.31	5.88		471	.47			.45			1.50
12/31/04 (5)	34.64	.41		2.07		2.48	(.32)	-	(.32)	36.80	7.18		537	.49		(6)	.48		(6)	1.24		(6)
Asset Allocation Fund
Class 1
12/31/07	$18.34	$.51		$ .75		$ 1.26	$  (.45)	$  (.64)	$  (1.09)	$18.51	6.82	%	$  1,927	.32	%		.29	%		2.69	%
12/31/06	16.56	.47		1.97		2.44	(.43)	(.23)	(.66)	18.34	14.96		1,079	.33			.30			2.67
12/31/05	15.49	.41		1.05		1.46	(.39)	-	(.39)	16.56	9.45		879	.35			.32			2.57
12/31/04	14.58	.39		.84		1.23	(.32)	-	(.32)	15.49	8.50		899	.38			.37			2.64
12/31/03	12.23	.41		2.29		2.70	(.35)	-	(.35)	14.58	22.14		911	.42			.42			3.12
Class 2
12/31/07	18.23	.47		.74		1.21	(.41)	(.64)	(1.05)	18.39	6.55		7,308	.57			.54			2.45
12/31/06	16.47	.42		1.96		2.38	(.39)	(.23)	(.62)	18.23	14.66		6,362	.58			.55			2.42
12/31/05	15.42	.37		1.04		1.41	(.36)	-	(.36)	16.47	9.14		5,120	.60			.57			2.31
12/31/04	14.51	.36		.84		1.20	(.29)	-	(.29)	15.42	8.34		3,797	.62			.62			2.42
12/31/03	12.18	.37		2.27		2.64	(.31)	-	(.31)	14.51	21.74		2,314	.67			.67			2.81
Class 3
12/31/07	18.34	.48		.74		1.22	(.42)	(.64)	(1.06)	18.50	6.56		71	.50			.47			2.52
12/31/06	16.56	.44		1.97		2.41	(.40)	(.23)	(.63)	18.34	14.75		76	.51			.48			2.49
12/31/05	15.49	.38		1.05		1.43	(.36)	-	(.36)	16.56	9.26		76	.53			.50			2.39
12/31/04 (5)	14.85	.36		.58		.94	(.30)	-	(.30)	15.49	6.38		81	.55		(6)	.55		(6)	2.50		(6)
Bond Fund
Class 1
12/31/07	$11.64	$.65		$ (.24)		$ .41	$  (.91)	-	$  (.91)	$11.14	3.66	%	$  436	.41	%		.37	%		5.59	%
12/31/06	11.31	.63		.17		.80	(.47)	-	(.47)	11.64	7.31		230	.43			.39			5.54
12/31/05	11.57	.60		(.40)		.20	(.46)	-	(.46)	11.31	1.77		182	.44			.40			5.30
12/31/04	11.34	.56		.10		.66	(.43)	-	(.43)	11.57	6.04		195	.45			.44			4.94
12/31/03	10.41	.57		.78		1.35	(.42)	-	(.42)	11.34	13.07		213	.47			.47			5.19
Class 2
12/31/07	11.53	.61		(.24)		.37	(.87)	-	(.87)	11.03	3.33		4,679	.66			.62			5.34
12/31/06	11.22	.60		.16		.76	(.45)	-	(.45)	11.53	6.99		3,374	.68			.64			5.29
12/31/05	11.48	.57		(.39)		.18	(.44)	-	(.44)	11.22	1.59		2,312	.69			.65			5.06
12/31/04	11.27	.53		.09		.62	(.41)	-	(.41)	11.48	5.72		1,759	.70			.69			4.68
12/31/03	10.36	.53		.78		1.31	(.40)	-	(.40)	11.27	12.80		1,280	.72			.72			4.88
Global Bond Fund
Class 1
12/31/07	$10.18	$.49		$ .47		$ .96	$  (.31)	-	$  (.31)	$10.83	9.54	%	$  28	.61	%		.55	%		4.61	%
12/31/06 (8)	10.00	.10		.15		.25	(.07)	-	(.07)	10.18	2.52		12	.15			.13			1.00
Class 2
12/31/07	10.17	.47		.47		.94	(.30)	-	(.30)	10.81	9.23		279	.86			.80			4.41
12/31/06 (9)	10.00	.06		.18		.24	(.07)	-	(.07)	10.17	1.99		15	.13			.12			.60
High-Income Bond Fund
Class 1
12/31/07	$12.90	$.95		$ (.72)		$ .23	$  (1.48)	-	$  (1.48)	$11.65	1.62	%	$  308	.48	%		.44	%		7.41	%
12/31/06	12.41	.92		.37		1.29	(.80)	-	(.80)	12.90	10.89		293	.49			.45			7.36
12/31/05	12.89	.85		(.55)		.30	(.78)	-	(.78)	12.41	2.46		309	.50			.46			6.76
12/31/04	12.54	.84		.32		1.16	(.81)	-	(.81)	12.89	9.83		364	.50			.50			6.74
12/31/03	10.44	.90		2.12		3.02	(.92)	-	(.92)	12.54	29.79		411	.51			.51			7.74
Class 2
12/31/07	12.79	.91		(.72)		.19	(1.43)	-	(1.43)	11.55	1.33		996	.73			.69			7.17
12/31/06	12.32	.89		.36		1.25	(.78)	-	(.78)	12.79	10.59		832	.74			.70			7.12
12/31/05	12.81	.81		(.55)		.26	(.75)	-	(.75)	12.32	2.20		590	.75			.71			6.55
12/31/04	12.47	.81		.32		1.13	(.79)	-	(.79)	12.81	9.59		444	.75			.74			6.48
12/31/03	10.39	.86		2.12		2.98	(.90)	-	(.90)	12.47	29.51		319	.76			.76			7.41
Class 3
12/31/07	12.88	.92		(.72)		.20	(1.43)	-	(1.43)	11.65	1.40		28	.66			.62			7.21
12/31/06	12.39	.90		.36		1.26	(.77)	-	(.77)	12.88	10.66		34	.67			.63			7.19
12/31/05	12.87	.82		(.55)		.27	(.75)	-	(.75)	12.39	2.25		37	.68			.64			6.58
12/31/04 (5)	12.79	.78		.11		.89	(.81)	-	(.81)	12.87	7.52		46	.68		(6)	.68		(6)	6.57		(6)
U.S. Government/AAA-Rated Securities Fund
Class 1
12/31/07	$11.87	$.58		$ .20		$ .78	$  (.92)	-	$  (.92)	$11.73	6.83	%	$  211	.46	%		.41	%		4.83	%
12/31/06	11.91	.55		(.10)		.45	(.49)	-	(.49)	11.87	3.95		218	.47			.42			4.64
12/31/05	12.07	.48		(.16)		.32	(.48)	-	(.48)	11.91	2.70		252	.47			.43			3.99
12/31/04	12.24	.45		(.03)		.42	(.59)	-	(.59)	12.07	3.58		286	.47			.46			3.68
12/31/03	12.37	.46		(.15)		.31	(.44)	-	(.44)	12.24	2.51		373	.46			.46			3.71
Class 2
12/31/07	11.79	.54		.19		.73	(.87)	-	(.87)	11.65	6.49		597	.71			.66			4.58
12/31/06	11.83	.51		(.09)		.42	(.46)	-	(.46)	11.79	3.75		402	.72			.67			4.40
12/31/05	12.00	.45		(.16)		.29	(.46)	-	(.46)	11.83	2.41		341	.72			.68			3.75
12/31/04	12.17	.41		(.03)		.38	(.55)	-	(.55)	12.00	3.30		285	.72			.71			3.42
12/31/03	12.31	.42		(.14)		.28	(.42)	-	(.42)	12.17	2.28		273	.71			.71			3.43
Class 3
12/31/07	11.86	.55		.20		.75	(.87)	-	(.87)	11.74	6.63		29	.64			.59			4.65
12/31/06	11.89	.52		(.09)		.43	(.46)	-	(.46)	11.86	3.80		32	.65			.60			4.45
12/31/05	12.05	.46		(.16)		.30	(.46)	-	(.46)	11.89	2.50		39	.65			.61			3.81
12/31/04 (5)	12.34	.41		(.11)		.30	(.59)	-	(.59)	12.05	2.58		43	.65		(6)	.65		(6)	3.51		(6)
Cash Management Fund
Class 1
12/31/07	$11.62	$.57		$      -	(4)	$ .57	$  (.79)	-	$  (.79)	$11.40	4.95	%	$  112	.33	%		.30	%		4.88	%
12/31/06	11.31	.54		-	(4)	.54	(.23)	-	(.23)	11.62	4.81		98	.33			.30			4.74
12/31/05	11.09	.33		-	(4)	.33	(.11)	-	(.11)	11.31	2.97		75	.33			.30			2.91
12/31/04	11.07	.11		-	(4)	.11	(.09)	-	(.09)	11.09	.96		78	.37			.36			.96
12/31/03	11.17	.07		-	(4)	.07	(.17)	-	(.17)	11.07	.67		103	.47			.47			.68
Class 2
12/31/07	11.56	.54		-	(4)	.54	(.75)	-	(.75)	11.35	4.73		452	.58			.55			4.61
12/31/06	11.26	.51		-	(4)	.51	(.21)	-	(.21)	11.56	4.59		282	.58			.55			4.52
12/31/05	11.05	.30		-	(4)	.30	(.09)	-	(.09)	11.26	2.68		153	.58			.55			2.71
12/31/04	11.03	.08		-	(4)	.08	(.06)	-	(.06)	11.05	.70		110	.61			.61			.76
12/31/03	11.12	.05		-	(4)	.05	(.14)	-	(.14)	11.03	.47		99	.72			.72			.42
Class 3
12/31/07	11.60	.55		-	(4)	.55	(.75)	-	(.75)	11.40	4.83		20	.51			.48			4.70
12/31/06	11.29	.52		-	(4)	.52	(.21)	-	(.21)	11.60	4.64		18	.51			.48			4.53
12/31/05	11.07	.30		-	(4)	.30	(.08)	-	(.08)	11.29	2.74		16	.51			.48			2.70
12/31/04 (5)	11.07	.09		-	(4)	.09	(.09)	-	(.09)	11.07	.78		20	.54		(6)	.54		(6)	.80		(6)

	Year Ended December 31
Portfolio turnover rate for all classes of shares	2007			2006					2005			2004			2003
Global Discovery Fund		50	%		31	%				53	%		28	%		30	%
Global Growth Fund		38			31					26			24			27
Global Small Capitalization Fund		49			50					47			49			51
Growth Fund		40			35					29			30			34
International Fund		41			29					40			37			40
New World Fund		34			32					26			18			19
Blue Chip Income and Growth Fund		27			21					33			13			12
Global Growth and Income Fund		36			8		(7	)		-			-			-
Growth-Income Fund		24			25					20			21			21
Asset Allocation Fund		29			38					23			20			20
Bond Fund		57			57					46			34			20
Global Bond Fund		85			7		(8	)		-			-			-
High-Income Bond Fund		32			35					35			38			48
U.S. Government/AAA-Rated Securities Fund		91			76					86			68			63
Cash Management Fund		-			-					-			-			-

(1) Based on operations for the periods shown (unless otherwise noted) and, accordingly, may not be representative of a full year.

(2) Based on average shares outstanding.

(3) This column reflects the impact, if any, of certain waivers by CRMC. During some of the periods shown, CRMC reduced fees for investment advisory services.

(4) Amount less than $.01.

(5) From January 16, 2004, when Class 3 shares were first issued.

(6) Annualized.

(7) From May 1, 2006, commencement of operations.

(8) From October 4, 2006 , commencement of operations.

(9) From November 6, 2006, when Class 2 shares were first issued.

See Notes to Financial Statements

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of American Funds Insurance Series:

In our opinion, the accompanying statements of assets and liabilities, including the summary investment portfolios (investment portfolio for Cash Management Fund), and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Global Discovery Fund, Global Growth Fund, Global Small Capitalization Fund, Growth Fund, International Fund, New World Fund, Blue Chip Income and Growth Fund, Global Growth and Income Fund, Growth-Income Fund, Asset Allocation Fund, Bond Fund, Global Bond Fund, High-Income Bond Fund, U.S. Government/AAA-Rated Securities Fund and Cash Management Fund (constituting the American Funds Insurance Series, hereafter referred to as the "Series") at December 31, 2007, the results of each of their operations for the period then ended, the changes in each of their net assets and their financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Series’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the 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 are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities owned at December 31, 2007, by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Los Angeles, California

February 8, 2008

American Funds Insurance Series

Part C

Other Information

Item 23.  Exhibits for Registration Statement (1940 Act No. 811-03857 and 1933 Act No. 002-86838)

(a-1)  Declaration of Trust – Declaration of Trust dated 9/9/83 – previously filed (see Post-Effective (“P/E”) Amendment No. 24 filed 3/31/97); Certificate of Amendment of Declaration of Trust dated 10/19/88 - previously filed (see P/E Amendment No. 24 filed 3/31/97);  Redesignation of an Existing Series of Shares of Beneficial Interest without Par Value dated 3/19/02 – previously filed (see P/E Amendment No. 33 filed 4/30/02);  Establishment and Designation of Additional Class of Shares of Beneficial Interest Without Par Value dated 9/16/02 – previously filed (see P/E Amendment No. 35 filed 10/30/03);  Establishment and Designation of Additional Series of Shares of Beneficial Interest Without Par Value dated 3/14/06 – previously filed (see P/E Amendment No. 40 filed 4/28/06);  Establishment and Designation of Additional Series of Shares of Beneficial Interest Without Par Value dated 9/19/06 – previously filed (see P/E Amendment No. 44 filed 10/2/06)

(a-2) Establishment and Designation of Additional Series of Shares of Beneficial Interest Without Par Value dated 6/18/08

(b) By-Laws - By-Laws as amended 6/13/07 – previously filed (see P/E Amendment No. 46 filed 4/30/08)

(c) Instruments Defining Rights of Security Holders - none

(d-1) Investment Advisory Contracts – Amended Investment Advisory and Service Agreement dated 1/1/08 – previously filed (see P/E Amendment No. 46 filed 4/30/08)

(d-2) Amended Investment Advisory and Service Agreement dated 10/1/08 – to be provided by amendment

(e) Underwriting Contracts – Form of Fund Participation Agreement - previously filed (see P/E Amendment No. 23 filed1/15/97); Principal Underwriting Agreement dated 7/12/89 – previously filed (see P/E Amendment No. 24 filed 3/31/97);  Amendment to Principal Underwriting Agreement dated 2/7/92 – previously filed (see P/E Amendment No. 24 filed 3/31/97);  Fund Participation Agreement dated 9/30/02 – previously filed (see P/E Amendment No. 35 filed 10/30/03)

(f) Bonus or Profit Sharing Contracts – Form of Deferred Compensation Plan as amended 1/1/08 – previously filed (see P/E Amendment No. 46 filed 4/30/08)

(g) Custodian Agreements – Form of Global Custody Agreement dated 12/14/06 – previously filed (see P/E Amendment No. 45 filed 5/1/07)

(h) Other Material Contracts – Shareholder Services Agreement dated 2/18/87 – previously filed (see P/E Amendment No. 24 filed 3/31/97);  Form of Shareholder Services Agreement dated 8/1/02 – previously filed (see P/E Amendment No. 35 filed 10/30/03);  Form of Amended Shareholder Services Agreement dated 4/1/03 – previously filed (see P/E Amendment No. 36 filed 1/15/04);  Amended Shareholder Services Agreement dated 11/1/06 – previously filed (see P/E Amendment No. 45 filed 5/1/07); Form of Indemnification Agreement dated 7/1/04 - previously filed (see P/E Amendment No. 38 filed 4/29/05)

(i) Legal Opinion – Legal Opinion – previously filed (see P/E Amendment No. 24 filed 3/31/97; and P/E Amendment No. 36 filed 1/15/04)

(j) Other Opinions – Consent of Independent Registered Public Accounting Firm – to be provided by amendment

(k) Omitted Financial Statements - none

(l) Initial Capital Agreements – Investment Letter from Investment Adviser relating to initial shares dated December 1983 – previously filed (see P/E Amendment No. 24 filed 3/31/97);  Mixed and Shared Funding Order - previously filed (see P/E Amendment No. 36 filed 1/15/04)

(m) Rule 12b-1 Plan – Class 2 Plan of Distribution - previously filed (see P/E Amendment No. 24 filed 3/31/97); Class 3 Plan of Distribution - previously filed (see P/E Amendment No. 35 filed 10/30/03)

(n) Rule 18f-3 – Form of Multiple Class Plan dated 4/1/97 - previously filed (see P/E Amendment No. 23 filed 1/15/97); Amended and Restated Multiple Class Plan dated 9/16/02 – previously filed (see P/E Amendment No. 35 dated 10/30/03)

(o) Reserved

(p) Code of Ethics – Code of Ethics for The Capital Group Companies dated April 2008 and Code of Ethics for the Registrant dated December 2005 – previously filed (see P/E Amendment No. 46 filed 4/30/08)

Item 24. Persons Controlled by or Under Common Control with the Fund

None.

Item 25. Indemnification

The Registrant is a joint-insured under Investment Adviser/Mutual Fund Errors and Omissions Policies, which insure its officers and trustees against certain liabilities. However, in no event will Registrant maintain insurance to indemnify any such person for any act for which Registrant itself is not permitted to indemnify the individual.

Article V of the Registrant's Declaration of Trust and Article VI of the Registrant's By-Laws as well as the indemnification agreements that the Registrant has entered into with each of its trustees who is not an "interested person" of the Registrant (as defined under the Investment Company Act of 1940, as amended), provide in effect that the Registrant will indemnify its officers and trustees against any liability or expenses actually and reasonably incurred by such person in any proceeding arising out of or in connection with his or her service to the Registrant, to the fullest extent permitted by applicable law, subject to certain conditions.  In accordance with Section 17(h) and 17(i) of the Investment Company Act of 1940, as amended, and their respective terms, these provisions do not protect any person against any liability to the Registrant or its shareholders to which such person would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office.

Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the U.S. Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

Registrant will comply with the indemnification requirements contained in the Investment Company Act of 1940, as amended, and Release Nos. 7221 (June 9, 1972) and 11330 (September 4, 1980).

Item 26. Business and Other Connections of the Investment Adviser

None.

Item 27. Principal Underwriters

Not applicable.

Item 28. Location of Accounts and Records

Accounts, books and other records required by Rules 31a-1 and 31a-2 under the Investment Company Act of 1940, as amended, are maintained and kept in the offices of the Series and the Registrant’s investment adviser, Capital Research and Management Company, 333 South Hope Street, Los Angeles, CA 90071.  Certain accounting records are maintained and kept in the offices of the Investment Adviser's accounting department, 6455 Irvine Center Drive, Irvine, California 92618; and/or 5300 Robin Hood Road, Norfolk, VA  23513.

Records covering portfolio transactions are also maintained and kept by the custodian, State Street Bank and Trust Company, One Lincoln Street, Boston, Massachusetts 02111.

Item 29. Management Services

None.

Item 30. Undertakings

None.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this registration statement under to Rule 485(b) under the Securities Act of 1933 and has duly caused this registration statement to be signed on its behalf by the undersigned, duly authorized, in the City of Los Angeles, and State of California, on the 30th day of September, 2008.

American Funds Insurance Series

By: /s/ James K. Dunton

James K. Dunton, Vice Chairman

Pursuant to the requirements of the Securities Act of 1933, this amendment to registration statement has been signed below on September 30, 2008, by the following persons in the capacities indicated.

	Signature	Title
(1)	Principal Executive Officer:
	/s/ Michael J. Downer	Executive Vice President
	Michael J. Downer
(2)	Principal Financial Officer and
	Principal Accounting Officer:
	/s/ David A. Pritchett	Treasurer
	David A. Pritchett
(3)	Trustees:
	Lee A. Ault III*	Chairman (Independent and Non-Executive)
	H. Frederick Christie*	Trustee
	Joe E. Davis*	Trustee
	/s/ James K. Dunton	Vice Chairman
	James K. Dunton
	Martin Fenton*	Trustee
	Leonard R. Fuller*	Trustee
	W. Scott Hedrick*	Trustee
	Merit E. Janow*	Trustee
	Mary Myers Kauppila*	Trustee
	/s/ Donald D. O'Neal	President
	Donald D. O'Neal
	Kirk P. Pendleton*	Trustee
	*By: /s/ Steven I. Koszalka
	(Steven I. Koszalka, pursuant to a power of attorney filed herewith)

Counsel represents that this amendment does not contain disclosures that would make the amendment ineligible for effectiveness under the provisions of rule 485(b).

/s/ Katherine H. Newhall                                                

Katherine H. Newhall

POWER OF ATTORNEY

I, Lee A. Ault III, the undersigned Board member of the following registered investment company:

- American Funds Insurance Series (File No. 002-86838, File No. 811-03857)

- American Funds Target Date Retirement Series, Inc. (File No. 333-138648, File No. 811-21981)

hereby revoke all previous powers of attorney I have signed and otherwise act in my name and behalf in matters involving the Funds and do hereby constitute and appoint

Vincent P. Corti Chad L. Norton Patrick F. Quan Kimberly S. Verdick Steven I. Koszalka Tanya Schneider Courtney R. Taylor Sheryl F. Johnson David A. Pritchett

each of them singularly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacities, all Registration Statements of the Funds on Form N-1A, any and all subsequent Amendments, or Post-Effective Amendments to said Registration Statement on Form N-1A or any successor thereto, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933 and the Investment Company Act of 1940 as amended, and all related requirements of the U. S. Securities and Exchange Commission.  I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.

EXECUTED at Camden, ME, this 3rd day of July, 2007.

 (City, State)

/s/ Lee A. Ault III                                           

Lee A. Ault III, Board member

POWER OF ATTORNEY

I, H. Frederick Christie, the undersigned Board member of the following registered investment companies (collectively, the “Funds”):

- AMCAP Fund, Inc. (File No. 002-26516, File No. 811-01435)

- The American Funds Income Series – U.S. Government Securities Fund (File No. 002-98199, File No. 811-04318)

- American Funds Insurance Series (File No. 002-86838, File No. 811-03857)

- American Funds Target Date Retirement Series, Inc. (File No. 333-138648, File No. 811-21981)

- The American Funds Tax-Exempt Series II – The Tax-Exempt Fund of California (File No. 033-06180, File No. 811-04694)

- American High-Income Municipal Bond Fund, Inc. (File No. 033-80630, File No. 811-08576)

- American High-Income Trust (File No. 033-17917, File No. 811-05364)

- American Mutual Fund, Inc. (File No. 002-10607, File No. 811-00572)

- The Bond Fund of America, Inc. (File No. 002-50700, File No. 811-02444)

- Capital Income Builder, Inc. (File No. 033-12967, File No. 811-05085)

- Capital World Bond Fund, Inc. (File No. 033-12447, File No. 811-05104)

- Capital World Growth and Income Fund, Inc. (File No. 033-54444, File No. 811-07338)

- The Cash Management Trust of America (File No. 002-47940, File No. 811-02380)

- Intermediate Bond Fund of America (File No. 033-19514, File No. 811-05446)

- Limited Term Tax-Exempt Bond Fund of America (File No. 033-66214, File No. 811-07888)

- The New Economy Fund  (File No. 002-83848, File No. 811-03735)

- Short-Term Bond Fund of America, Inc. (File No. 333-135770, File No. 811-21928)

- SMALLCAP World Fund, Inc. (File No. 033-32785, File No. 811-05888)

- The Tax-Exempt Bond Fund of America, Inc. (File No. 002-49291, File No. 811-02421)

- The Tax-Exempt Money Fund of America (File No. 033-26431, File No. 811-05750)

- The U.S. Treasury Money Fund of America (File No. 033-38475, File No. 811-06235)

hereby revoke all previous powers of attorney I have signed and otherwise act in my name and behalf in matters involving the Funds and do hereby constitute and appoint

Vincent P. Corti Chad L. Norton Patrick F. Quan Kimberly S. Verdick Steven I. Koszalka Tanya Schneider Courtney R. Taylor Karl C. Grauman Sheryl F. Johnson Sharon G. Moseley David A. Pritchett Jeffrey P. Regal Ari M. Vinocor

each of them singularly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacities, all Registration Statements of the Funds on Form N-1A, any and all subsequent Amendments, or Post-Effective Amendments to said Registration Statement on Form N-1A or any successor thereto, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933 and the Investment Company Act of 1940 as amended, and all related requirements of the U. S. Securities and Exchange Commission.  I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.

EXECUTED at Palos Verdes, CA, this 1st day of July, 2007.

    (City, State)

/s/ H. Frederick Christie                                           

H. Frederick Christie, Board member

POWER OF ATTORNEY

I, Joe E. Davis, the undersigned Board member of the following registered investment company:

- American Funds Insurance Series (File No. 002-86838, File No. 811-03857)

- American Funds Target Date Retirement Series, Inc. (File No. 333-138648, File No. 811-21981)

hereby revoke all previous powers of attorney I have signed and otherwise act in my name and behalf in matters involving the Funds and do hereby constitute and appoint

Vincent P. Corti Chad L. Norton Patrick F. Quan Kimberly S. Verdick Steven I. Koszalka Tanya Schneider Courtney R. Taylor Sheryl F. Johnson David A. Pritchett

each of them singularly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacities, all Registration Statements of the Funds on Form N-1A, any and all subsequent Amendments, or Post-Effective Amendments to said Registration Statement on Form N-1A or any successor thereto, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933 and the Investment Company Act of 1940 as amended, and all related requirements of the U. S. Securities and Exchange Commission.  I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.

EXECUTED at Encino, CA, this 5th day of July, 2007.

(City, State)

/s/ Joe E. Davis                                           

Joe E. Davis, Board member

POWER OF ATTORNEY

I, Martin Fenton, the undersigned Board member of the following registered investment companies (collectively, the “Funds”):

- AMCAP Fund, Inc. (File No. 002-26516, File No. 811-01435)

- The American Funds Income Series – U.S. Government Securities Fund (File No. 002-98199, File No. 811-04318)

- American Funds Insurance Series (File No. 002-86838, File No. 811-03857)

- American Funds Target Date Retirement Series, Inc. (File No. 333-138648, File No. 811-21981)

- The American Funds Tax-Exempt Series II – The Tax-Exempt Fund of California (File No. 033-06180, File No. 811-04694)

- American High-Income Municipal Bond Fund, Inc. (File No. 033-80630, File No. 811-08576)

- American High-Income Trust (File No. 033-17917, File No. 811-05364)

- American Mutual Fund, Inc. (File No. 002-10607, File No. 811-00572)

- The Bond Fund of America, Inc. (File No. 002-50700, File No. 811-02444)

- Capital World Bond Fund, Inc. (File No. 033-12447, File No. 811-05104)

- The Cash Management Trust of America (File No. 002-47940, File No. 811-02380)

- Intermediate Bond Fund of America (File No. 033-19514, File No. 811-05446)

- The Investment Company of America (File No. 002-10811, File No. 811-00116)

- Limited Term Tax-Exempt Bond Fund of America (File No. 033-66214, File No. 811-07888)

- Short-Term Bond Fund of America, Inc. (File No. 333-135770, File No. 811-21928)

- The Tax-Exempt Bond Fund of America, Inc. (File No. 002-49291, File No. 811-02421)

- The Tax-Exempt Money Fund of America (File No. 033-26431, File No. 811-05750)

- The U.S. Treasury Money Fund of America (File No. 033-38475, File No. 811-06235)

hereby revoke all previous powers of attorney I have signed and otherwise act in my name and behalf in matters involving the Funds and do hereby constitute and appoint

Vincent P. Corti Chad L. Norton Patrick F. Quan Kimberly S. Verdick Steven I. Koszalka Tanya Schneider Courtney R. Taylor Karl C. Grauman Sheryl F. Johnson Sharon G. Moseley David A. Pritchett Carmelo Spinella Ari M. Vinocor

each of them singularly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacities, all Registration Statements of the Funds on Form N-1A, any and all subsequent Amendments, or Post-Effective Amendments to said Registration Statement on Form N-1A or any successor thereto, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933 and the Investment Company Act of 1940 as amended, and all related requirements of the U. S. Securities and Exchange Commission.  I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.

EXECUTED at Bridgehampton, NY, this 7th day of July, 2007.

       (City, State)

/s/ Martin Fenton                                           

Martin Fenton, Board member

POWER OF ATTORNEY

I, Leonard R. Fuller, the undersigned Board member of the following registered investment companies (collectively, the “Funds”):

- The American Funds Income Series – U.S. Government Securities Fund (File No. 002-98199, File No. 811-04318)

- American Funds Insurance Series (File No. 002-86838, File No. 811-03857)

- American Funds Target Date Retirement Series, Inc. (File No. 333-138648, File No. 811-21981)

- The American Funds Tax-Exempt Series II – The Tax-Exempt Fund of California (File No. 033-06180, File No. 811-04694)

- American High-Income Municipal Bond Fund, Inc. (File No. 033-80630, File No. 811-08576)

- American High-Income Trust (File No. 033-17917, File No. 811-05364)

- The Bond Fund of America, Inc. (File No. 002-50700, File No. 811-02444)

- Capital World Bond Fund, Inc. (File No. 033-12447, File No. 811-05104)

- The Cash Management Trust of America (File No. 002-47940, File No. 811-02380)

- Intermediate Bond Fund of America (File No. 033-19514, File No. 811-05446)

- The Investment Company of America (File No. 002-10811, File No. 811-00116)

- Limited Term Tax-Exempt Bond Fund of America (File No. 033-66214, File No. 811-07888)

- Short-Term Bond Fund of America, Inc. (File No. 333-135770, File No. 811-21928)

- The Tax-Exempt Bond Fund of America, Inc. (File No. 002-49291, File No. 811-02421)

- The Tax-Exempt Money Fund of America (File No. 033-26431, File No. 811-05750)

- The U.S. Treasury Money Fund of America (File No. 033-38475, File No. 811-06235)

hereby revoke all previous powers of attorney I have signed and otherwise act in my name and behalf in matters involving the Funds and do hereby constitute and appoint

Vincent P. Corti Chad L. Norton Patrick F. Quan Kimberly S. Verdick Steven I. Koszalka Tanya Schneider Courtney R. Taylor Sheryl F. Johnson Sharon G. Moseley David A. Pritchett Carmelo Spinella Ari M. Vinocor

each of them singularly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacities, all Registration Statements of the Funds on Form N-1A, any and all subsequent Amendments, or Post-Effective Amendments to said Registration Statement on Form N-1A or any successor thereto, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933 and the Investment Company Act of 1940 as amended, and all related requirements of the U. S. Securities and Exchange Commission.  I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.

EXECUTED at Rolling Hills, CA, this 3rd day of July, 2007.

     (City, State)

/s/ Leonard R. Fuller                                           

Leonard R. Fuller, Board member

POWER OF ATTORNEY

I, W. Scott Hedrick, the undersigned Board member of the following registered investment company:

- American Funds Insurance Series (File No. 002-86838, File No. 811-03857)

- American Funds Target Date Retirement Series, Inc. (File No. 333-138648, File No. 811-21981)

hereby revoke all previous powers of attorney I have signed and otherwise act in my name and behalf in matters involving the Funds and do hereby constitute and appoint

Vincent P. Corti Chad L. Norton Patrick F. Quan Kimberly S. Verdick Steven I. Koszalka Tanya Schneider Courtney R. Taylor Sheryl F. Johnson David A. Pritchett

each of them singularly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacities, all Registration Statements of the Funds on Form N-1A, any and all subsequent Amendments, or Post-Effective Amendments to said Registration Statement on Form N-1A or any successor thereto, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933 and the Investment Company Act of 1940 as amended, and all related requirements of the U. S. Securities and Exchange Commission.  I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.

EXECUTED at Santa Barbara, CA, this 18th day of July, 2007.

     (City, State)

/s/ W. Scott Hedrick                                           

W. Scott Hedrick, Board member

POWER OF ATTORNEY

I, Merit E. Janow, the undersigned Board member of the following registered investment companies (collectively, the “Funds”):

- American Funds Insurance Series (File No. 002-86838, File No. 811-03857)

- American Funds Target Date Retirement Series, Inc. (File No. 333-138648, File No. 811-21981)

- Capital Income Builder, Inc. (File No. 033-12967, File No. 811-05085)

- Capital World Growth and Income Fund, Inc. (File No. 033-54444, File No. 811-07338)

hereby revoke all previous powers of attorney I have signed and otherwise act in my name and behalf in matters involving the Funds and do hereby constitute and appoint

Vincent P. Corti Chad L. Norton Patrick F. Quan Kimberly S. Verdick Steven I. Koszalka Tanya Schneider Courtney R. Taylor Sheryl F. Johnson Jeffrey P. Regal

each of them singularly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacities, all Registration Statements of the Funds on Form N-1A, any and all subsequent Amendments, or Post-Effective Amendments to said Registration Statement on Form N-1A or any successor thereto, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933 and the Investment Company Act of 1940 as amended, and all related requirements of the U. S. Securities and Exchange Commission.  I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.

EXECUTED at New York, NY, this 7th day of October, 2007.

  (City, State)

/s/ Merit E. Janow                                           

Merit E. Janow, Board member

POWER OF ATTORNEY

I, Mary Myers Kauppila, the undersigned Board member of the following registered investment companies (collectively, the “Funds”):

- AMCAP Fund, Inc. (File No. 002-26516, File No. 811-01435)

- American Funds Insurance Series (File No. 002-86838, File No. 811-03857)

- American Funds Target Date Retirement Series, Inc. (File No. 333-138648, File No. 811-21981)

- American Mutual Fund, Inc. (File No. 002-10607, File No. 811-00572)

- Capital Income Builder, Inc. (File No. 033-12967, File No. 811-05085)

- Capital World Growth and Income Fund, Inc. (File No. 033-54444, File No. 811-07338)

hereby revoke all previous powers of attorney I have signed and otherwise act in my name and behalf in matters involving the Funds and do hereby constitute and appoint

Vincent P. Corti Chad L. Norton Patrick F. Quan Kimberly S. Verdick Steven I. Koszalka Tanya Schneider Courtney R. Taylor Karl C. Grauman Sheryl F. Johnson David A. Pritchett Jeffrey P. Regal

each of them singularly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacities, all Registration Statements of the Funds on Form N-1A, any and all subsequent Amendments, or Post-Effective Amendments to said Registration Statement on Form N-1A or any successor thereto, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933 and the Investment Company Act of 1940 as amended, and all related requirements of the U. S. Securities and Exchange Commission.  I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.

EXECUTED at Boston, MA, this 5th day of July, 2007.

 (City, State)

/s/ Mary Myers Kauppila                                                                              

Mary Myers Kauppila, Board member

POWER OF ATTORNEY

I, Kirk P. Pendleton, the undersigned Board member of the following registered investment companies (collectively, the “Funds”):

- AMCAP Fund, Inc. (File No. 002-26516, File No. 811-01435)

- American Funds Insurance Series (File No. 002-86838, File No. 811-03857)

- American Funds Target Date Retirement Series, Inc. (File No. 333-138648, File No. 811-21981)

- American Mutual Fund, Inc. (File No. 002-10607, File No. 811-00572)

- EuroPacific Growth Fund (File No. 002-83847, File No. 811-03734)

- New Perspective Fund, Inc. (File No. 002-47749, File No. 811-02333)

- New World Fund, Inc. (File No. 333-67455, File No. 811-09105).

hereby revoke all previous powers of attorney I have signed and otherwise act in my name and behalf in matters involving the Funds and do hereby constitute and appoint

Vincent P. Corti Chad L. Norton Patrick F. Quan Kimberly S. Verdick Steven I. Koszalka Tanya Schneider Courtney R. Taylor R. Marcia Gould Karl C. Grauman Sheryl F. Johnson David A. Pritchett

each of them singularly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacities, all Registration Statements of the Funds on Form N-1A, any and all subsequent Amendments, or Post-Effective Amendments to said Registration Statement on Form N-1A or any successor thereto, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933 and the Investment Company Act of 1940 as amended, and all related requirements of the U. S. Securities and Exchange Commission.  I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.

EXECUTED at Bryn Athyn, PA, this 9th day of July, 2007.

  (City, State)

/s/ Kirk P. Pendleton                                           

Kirk P. Pendleton, Board member