UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

Certified Shareholder Report of

Registered Management Investment Companies

Investment Company Act File Number: 811-05085

Capital Income Builder, Inc.

(Exact Name of Registrant as Specified in Charter)

333 South Hope Street

Los Angeles, California 90071

(Address of Principal Executive Offices)

Registrant's telephone number, including area code: (213) 486-9200

Date of fiscal year end: October 31

Date of reporting period: October 31, 2009

Vincent P. Corti

Capital Research and Management Company

333 South Hope Street

Los Angeles, California 90071

(Name and Address of Agent for Service)

Copies to:

Kathryn A. Sanders

O’Melveny & Myers LLP

400 South Hope Street, 10th Floor

Los Angeles, California 90071

(Counsel for the Registrant)

ITEM 1 – Reports to Stockholders

[logo - American Funds®]

The right choice for the long term®

Capital Income Builder

Dividend investing in an uncertain market

[photo of a dew drops on a vine]

Annual report for the year ended October 31, 2009

Capital Income Builder® seeks to provide a growing dividend — with higher income distributions every quarter to the extent possible — together with a current yield exceeding that of U.S. stocks generally.

This fund is one of the 30 American Funds. American Funds is one of the nation’s largest mutual fund families. For nearly 80 years, Capital Research and Management Company,SM the American Funds adviser, has invested with a long-term focus based on thorough research and attention to risk.

Fund results shown in this report, unless otherwise indicated, are for Class A shares at net asset value. If a sales charge (maximum 5.75%) had been deducted, the results would have been lower. Results are for past periods and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value. For current information and month-end results, visit americanfunds.com.

Here are the average annual total returns on a $1,000 investment with all distributions reinvested for periods ended September 30, 2009 (the most recent calendar quarter-end):
Class A shares	1 year			5 years			10 years
Reflecting 5.75% maximum sales charge		–6.01	%		3.65	%		6.35	%

The total annual fund operating expense ratio was 0.66% for Class A shares as of October 31, 2009.

Investment results assume all distributions are reinvested and reflect applicable fees and expenses. The fund’s investment adviser waived a portion of its management fees from September 1, 2004, through December 31, 2008. Fund results shown reflect the waiver, without which they would have been lower. See the Financial Highlights table on pages 28 and 29 for details.

The fund’s 30-day yield for Class A shares as of November 30, 2009, reflecting the 5.75% maximum sales charge and calculated in accordance with the Securities and Exchange Commission formula, was 3.36%.

Results for other share classes can be found on page 34.

Equity investments are subject to market fluctuations. The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. Investing outside the United States may be subject to additional risks, such as currency fluctuations and political instability. See the prospectus and the Risk Factors section of this report for more information on these and other risks associated with investing in the fund.

In this report
	Special feature
6	Dividend investing in an uncertain market
	While the stock market recovery appears to be in place, the economic recovery has yet to follow in force, keeping dividend payments low.
	Contents
1	Letter to shareholders
4	The value of a long-term perspective
12	Summary investment portfolio
18	Financial statements
35	Board of directors and other officers

Fellow shareholders:

[photo of the tip of a curled leaf]

After one of the most tumultuous periods in history, a measure of stability has returned to the financial markets. Stocks have rebounded and there is greater movement in the credit markets. Corporate profits remain low, however, and growing Capital Income Builder’s dividend income remains an issue in today’s cost-cutting environment.

As of October 31, 2009, the fund’s 12-month dividend yield was 5.01% as calculated by Lipper. That’s more than double the 2.26% posted by the Standard & Poor’s 500 Composite Index, which is unmanaged and has no expenses. It also surpassed the 3.56% average yield of the 531 income funds tracked by Lipper.

In terms of total return, the fund gained 15.4% for the fiscal year, bettering the 9.8% of the S&P 500. Illustrating the strength of overseas equities, the MSCI EAFE Index rose 28.4%. The Lipper Income Funds Average gained 16.9% for the period.

Growth of income

The market turmoil that began in late 2008 resulted in near-historic dividend cuts by companies both in the United States and abroad. Thus, during its fiscal year the fund was unable to continue its track record of increasing dividend payments each quarter.

Shareholders received a dividend of 53.5 cents a share in December 2008, up from a 53-cent dividend in September. This was followed by a dividend of 44 cents in March and 45 cents in both June and September. The fund also paid a special dividend of 45 cents in December 2008.

The fund’s board of directors is expected to authorize another special dividend distribution in December. This income is unpredictable and, in light of the fiscal year’s events, the amount is likely to be less than previous special dividends paid to shareholders.

[Begin Sidebar]

Results at a glance
For periods ended October 31, 2009, with all distributions reinvested
	Total returns			Average annual total returns
										Lifetime
	1 year			5 years			10 years			(since 7/30/87)
Capital Income Builder (Class A Shares)		15.44	%		4.17	%		6.72	%		9.78	%
Standard & Poor’s 500 Composite Index1		9.80			0.33			–0.95			7.89
Lipper Income Funds Average2		16.90			2.77			3.54			8.11
Consumer Price Index (inflation)3		–0.18			2.52			2.54			2.93
1 The S&P 500 is unmanaged, and its returns do not reflect the effect of sales charges, commissions or expenses.
2 Source: Lipper. Averages are based on total return and do not reflect the effect of sales charges.
3 Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.

[End Sidebar]

Our primary goal is to continue growing income for our shareholders, but market conditions in the last 12 months and the likelihood of a slow recovery will make this objective difficult. We remain hopeful that the fund’s overall yield will improve — and continue to better its peer group — on an annual basis.

For more on the current environment for dividend investing and a look ahead to the future, please read the feature that begins on page 6.

Our investment landscape

The tail end of the 2007–2008 fiscal year coincided with one of the worst market downturns since the Great Depression, and that downturn continued for the next six months. Stocks fell through November, paused briefly in December, and finally reached bottom in early March. As you’ll recall, Capital Income Builder posted a 3.4% loss for the first half of the recent fiscal year.

This collapse was unsparing of any asset class or international market. Stocks around the world tumbled, led by the financial sector. Concerns about the fragility of the financial system worldwide also led to a near freeze in bond trading, with only U.S. Treasuries and a handful of relatively safe global bond issues rising.

Government intervention, along with coordinated large-scale adjustments in monetary policies, may have contributed to the market’s ultimate stabilization in early March. The panicked selloffs in both stocks and bonds were replaced by a new appreciation for risk, which was followed by strong rallies in equities both here and abroad, as well as in the global bond market. The fund’s full-year return is entirely the result of this turnaround.

However, even as stocks rose, the United States and other developed nations continued to sink into recession. Many U.S. companies cut dividends substantially — the worst cuts thus far of the post-war era.

The dividend environment overseas was somewhat better, but with many international companies tying their dividend payments to their actual profits, the income available from international equities also fell.

Given their conservative nature, the fund’s bond holdings were critical in helping weather the downturn. U.S. Treasuries increased sharply in value, while corporate bonds have outperformed in the recovery, particularly among high-yield issues.

[Begin Sidebar]

Capital Income Builder’s annual dividends compared with inflation (dividends as declared and adjusted for reinvested capital gains)

[begin bar/line chart]

	Dividend		Special  Dividend	Additional income earned on initial shares if capital gain distributions were reinvested		Inflation = Consumer  Price Index  (through  October 2009)
		22.00
Oct-87*		22.00
Oct-88		115.00					100.0
Oct-89		123.00					104.5
Oct-90		133.00					111.1
Oct-91		141.00					114.3
Oct-92		149.00			0.90		118.0
Oct-93		157.00			1.73		121.2
Oct-94		165.00			2.35		124.4
Oct-95		173.00			2.99		127.9
Oct-96		181.00			5.17		131.7
Oct-97		187.50			8.68		134.4
Oct-98		193.50			15.11		136.4
Oct-99		195.00			26.57		139.9
Oct-00		199.50			36.97		144.8
Oct-01		207.00			44.63		147.8
Oct-02		205.50			50.67		150.8
Oct-03		202.50			54.06		153.9
Oct-04		180.50			49.59		158.8
Oct-05		185.50			54.27		165.7
Oct-06		191.50	25		66.97		167.9
Oct-07		199.00	30		75.89		173.8
Oct-08		208.50	55		97.78		180.2
Oct-09		187.50	45		91.14		179.8

[end bar/line chart]

*Not a full fiscal year. Fiscal years ended October 31

[End Sidebar]

The fund’s holdings

As always, Capital Income Builder’s portfolio counselors and analysts rely on their research of individual companies and broader economic trends when making investment decisions. The focus remains on an investment’s potential for current income, dividend growth and price appreciation. We continue to invest for the long term, not getting caught up in day-to-day volatility.

Historically, the financial sector has provided the highest yields, and although the fund is well diversified, its income objective requires it to have considerable weighting in this area. Today, however, the sector’s falling profits have reduced its dividend yield significantly. As a result, the fund has diversified even further in its quest for income, both in terms of industry and geography.

Capital Income Builder now has the greatest percentage of its holdings in telecommunication services, with both domestic and international companies continuing to pay out sizable dividends, given their relative strength against economic uncertainties. Financials are next, with a large base of dividend-paying banks outside the U.S. helping to offset loss of income from domestic holdings. Consumer staples and utilities — both considered defensive holdings in an uncertain economy — are also strongly represented in the portfolio.

[Begin Sidebar]

Largest equity holdings
(as of October 31, 2009)
Company	Percent of net assets
Philip Morris International		1.8	%
AT&T		1.7
Banco Santander		1.7
Verizon		1.3
Royal Dutch Shell		1.2
BP		1.2
Merck		1.1
Sasol		1.1
América Móvil		1.1
Eni		1.0

[End Sidebar]

Six of the fund’s top 10 holdings produced positive returns during the fiscal year, led by Spain’s Banco Santander, which posted a 49.3% jump, and Latin American telecommunications company América Móvil, which gained 42.6%. Of the four stocks that lost ground in the group, AT&T and Verizon nonetheless provided strong dividend yields.

[Begin Sidebar]

A lifetime of current income (Capital Income Builder’s 12-month dividend rate versus its benchmarks — years ended October 31)

[begin line chart]

Date	Capital Income Builder		Lipper Income Funds Average		S&P 500
10/31/88		5.08		6.87		3.29
04/30/89		5.02		7.00		3.27
10/31/89		4.91		6.98		3.21
04/30/90		5.27		7.65		3.47
10/31/90		5.69		8.23		3.91
04/30/91		4.93		7.29		3.25
10/31/91		4.92		6.83		3.09
04/30/92		4.79		6.47		2.93
10/31/92		4.84		6.47		2.95
04/30/93		4.74		5.61		2.83
10/31/93		4.56		4.77		2.68
04/30/94		4.98		4.76		2.82
10/31/94		5.05		4.67		2.76
04/30/95		5.07		4.82		2.59
10/31/95		4.77		4.46		2.35
04/30/96		4.71		4.34		2.17
10/31/96		4.56		4.31		2.10
04/30/97		4.38		4.24		1.89
10/31/97		4.06		4.00		1.68
04/30/98		3.79		3.99		1.44
10/31/98		4.00		4.11		1.48
04/30/99		3.96		3.80		1.23
10/31/99		4.34		4.03		1.22
04/30/00		4.69		4.26		1.15
10/31/00		4.57		4.34		1.15
04/30/01		4.47		4.29		1.27
10/31/01		4.73		4.32		1.49
04/30/02		4.52		3.51		1.46
10/31/02		5.05		3.58		1.81
04/30/03		4.83		3.22		1.79
10/31/03		4.48		2.81		1.61
04/30/04		4.01		2.60		1.64
10/31/04		3.55		2.40		1.68
04/30/05		3.50		2.36		1.76
10/31/05		3.53		2.44		1.77
04/30/06		3.75		2.61		1.76
10/31/06		3.61		2.86		1.76
04/30/07		3.48		2.97		1.71
10/31/07		3.34		3.12		1.76
04/30/08		4.27		3.74		2.05
10/31/08		6.23		4.55		2.99
04/30/09		6.25		4.43		3.10
10/31/09		5.01		3.56		2.26

[end line chart]

All numbers calculated by Lipper.

[End Sidebar]

[Begin Sidebar]

Where the fund’s assets are invested
(percent invested by country)
	October 31, 2009
Equities
Europe		23.8	%
United States		23.0
Asia/Pacific		11.1
Other		5.8
Total equities		63.7	%
Bonds
United States		27.0
Other		3.1
Total bonds		30.1	%
Short-term securities & other assets less liabilities		6.2	%
Total		100.0	%

[End Sidebar]

The fund’s bond portfolio continued to smooth out volatility while contributing to overall yield.

Looking ahead

Even as the stock market makes a recovery, the global economic situation remains uncertain. European companies, with their history of dividend payments, continue to make dividend reductions in the face of falling profits. However, anecdotal evidence suggests that, for now, the worst cuts may have already occurred.

We are gratified that we have been able to find high-yielding stocks in a challenging market. We will endeavor to once again increase our dividend in the future, with an eye toward both growth and sustainability. Once again, we urge you to keep a long-term perspective regarding this fund and your overall portfolio. We appreciate your continued trust.

Cordially,

/s/ James B. Lovelace

James B. Lovelace

Vice Chairman of the Board

/s/ Joyce E. Gordon

Joyce E. Gordon

President

December 7, 2009

For current information about the fund, visit americanfunds.com.

The value of a long-term perspective

How a $10,000 investment has grown over the fund’s lifetime

Fund results shown reflect deduction of the maximum sales charge of 5.75% on the $10,000 investment.1 Thus, the net amount invested was $9,425. Past results are not predictive of results in future periods. The results shown are before taxes on fund distributions and sale of fund shares. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For current information and month-end results, visit americanfunds.com.

Average annual total returns based on a $1,000 investment
(for periods ended October 31, 2009)*
	1 year			5 years			10 years
Class A shares		8.80	%		2.95	%		6.09	%
*Assumes reinvestment of all distributions and payment of the maximum 5.75% sales charge.

Investment results assume all distributions are reinvested and reflect applicable fees and expenses. The fund’s investment adviser waived a portion of its management fees from September 1, 2004, through December 31, 2008. Fund results shown reflect the waiver, without which they would have been lower. See the Financial Highlights table on pages 28 and 29 for details.

[begin mountain chart]

Date	Capital Income Builder with dividends reinvested		Capital  Income Builder  excluding dividends		Standard & Poor’s 500 Composite Index with dividends reinvested3		Lipper  Income Funds  Average2
7/30/1987	$	9,425	$	9,425	$	10,000	$	10,000
10/31/1987	$	8,990	$	8,842	$	7,995		9269.98
10/31/1988	$	10,093	$	9,429	$	9,175		10581.37
10/31/1989	$	11,782	$	10,438	$	11,592		12113.61
10/31/1990	$	11,590	$	9,738	$	10,725		11295.54
10/31/1991	$	14,973	$	11,946	$	14,309		14572.74
10/31/1992	$	16,989	$	12,925	$	15,733		16354.62
10/31/1993	$	19,973	$	14,509	$	18,079		19717.63
10/31/1994	$	20,066	$	13,824	$	18,776		19323.12
10/31/1995	$	23,478	$	15,392	$	23,735		22399.55
10/31/1996	$	27,409	$	17,077	$	29,450		25639.26
10/31/1997	$	33,748	$	20,207	$	38,904		30571.06
10/31/1998	$	38,238	$	21,932	$	47,459		33349.33
10/31/1999	$	39,199	$	21,584	$	59,638		34554.31
10/31/2000	$	41,384	$	21,776	$	63,265		36847.29
10/31/2001	$	44,438	$	22,308	$	47,519		38418.41
10/31/2002	$	44,507	$	21,313	$	40,345		37344.54
10/31/2003	$	52,484	$	23,999	$	48,732		44732.47
10/31/2004	$	61,253	$	26,992	$	53,318		49937.40
10/31/2005	$	66,822	$	28,452	$	57,965		53037.25
10/31/2006	$	80,172	$	32,841	$	67,429		60514.03
10/31/2007	$	96,940	$	38,317	$	77,241		67750.23
10/31/2008	$	65,078	$	24,537	$	49,372		48562.05
10/31/2009	$	75,135	$	26,941	$	54,210	$	56,718

[end mountain chart]

Year ended October 31		1987	4	1988	1989	1990		1991	1992	1993
Total value
Dividends reinvested5	$	92		494	556	633		708	792	880
Value at year-end1,5	$	8,990		10,093	11,782	11,590		14,973	16,989	19,973
CIB total return		(10.1	)%	12.3	16.7	(1.6	)	29.3	13.5	17.6
Year ended October 31		1994		1995	1996	1997		1998	1999	2000
Total value
Dividends reinvested5		974		1,079	1,200	1,324		1,468	1,624	1,809
Value at year-end1,5		20,066		23,478	27,409	33,748		38,238	39,199	41,384
CIB total return		0.5		17.0	16.8	23.2		13.3	2.5	5.6
Year ended October 31		2001		2002	2003	2004		2005	2006	2007
Total value
Dividends reinvested5		2,017		2,152	2,261	2,117		2,288	2,805	3,134
Value at year-end1,5		44,438		44,507	52,484	61,253		66,822	80,172	96,940
CIB total return		7.4		0.2	17.9	16.7		9.1	20.0	20.9
Year ended October 31		2008		2009		Average  annual    total  return   for fund’s   lifetime
Total value
Dividends reinvested5		3,858		3,633
Value at year-end1,5		65,078		75,135
CIB total return		(32.9	)	15.4		9.49	%

1As outlined in the prospectus, the sales charge is reduced for accounts (and aggregated investments) of $25,000 or more and is eliminated for purchases of $1 million or more. There is no sales charge on dividends or capital gain distributions that are reinvested in additional shares.

2Calculated by Lipper with all distributions reinvested. The Lipper Income Funds Average (as shown) only includes funds that have been in existence since July 30, 1987. The average does not reflect the effect of sales charges.

3The S&P 500 is unmanaged, and its results include reinvested dividends but do not reflect the effect of sales charges, commissions, or expenses.

4For the period July 30, 1987 (when the fund began operations), through October 31, 1987.

5Prior to January 1, 2009, dividends from net investment income were declared daily and paid to shareholders quarterly. As of January 1, 2009, the fund began declaring and distributing dividends on a periodic basis. Dividends reinvested reflect quarterly dividends actually paid during the period, while year-end values are adjusted for cumulative dividends accrued but not yet paid.

Dividend investing in an uncertain market

In its most recent fiscal year, the value of Capital Income Builder’s shares recovered alongside the larger market, but dividend cuts have made the fund’s goal of increasing its dividend income a daunting challenge.

[photo of a field of grass shaped in a circular pattern]

[close-up photo of small green leaves]

A dividend, in its basic form, is a distribution of a company’s profits to its shareholders. A company makes a profit and its board of directors decides how much of that profit — if any — is given to the investors who own the company’s shares.

Capital Income Builder derives the bulk of its income from dividends generated by its equity portfolio. This is bolstered by the fund’s bond holdings, which allow for an additional measure of income and help to buffer volatility.

However, over the last year corporate profits have significantly declined. Many tried-and-true dividend-paying companies, particularly in the financial sector, have stopped issuing dividends altogether.

“Capital Income Builder, like any mutual fund, can only pay out what it brings in,” explains Jim Lovelace, vice chairman of the board and one of the fund’s portfolio counselors. “So when companies aren’t distributing as much, there’s less for us to pass along to the investor.”

Thus, in the first quarter of 2009, Capital Income Builder saw its first quarterly dividend decline in five years. However, that does not mean that the fund has abandoned this goal. The fund’s portfolio counselors have cautiously widened their search for investment opportunities in an effort to generate additional income.

“We’ve made slight adjustments to the portfolio as part of our search for new dividend sources, and we’re confident that, at some point, we will be able to resume quarterly dividend growth,” says Joyce Gordon, president of the fund and another of its portfolio counselors. “In the meantime, we have generated a strong yield — better than that of the market. The fund is still doing what it was created to do.”

Challenging environment

The story of 2008’s stock market downturn has been told many times already; its origins in subprime mortgage loans — and subsequent repercussions to the financial system worldwide — were detailed in last year’s annual report and elsewhere. Nevertheless the ongoing impact to the stock and bond markets, as well as to the fund’s 2009 fiscal year, cannot be understated.

[Begin Sidebar]

Dividends in recovery

Downturns don’t simply occur. There’s typically a catalyst that sends the overall market lower. From 2000 through 2002, it was technology stocks that prompted the decline, exacerbated by 9/11 and recession. In 2008, however, when the U.S. financial sector found itself on life support, stocks across the market plummeted — prompting worries about lending, credit and the integrity of the system on a global scale.

When declines occur, however, not every stock deserves to fall. Yet solid companies with dependable revenues and profits can drop right alongside failing corporations. “When markets tumble like they did in 2008, nobody really stops to look at fundamentals,” reflects Joyce. “They sell everything off.”

In recovery, however, dividend-paying stocks can often lead the market higher. “After a downturn, investors are understandably cautious,” admits Jim. “They want to be paid for taking risk. Dividends are one way companies can do that.”

12-month dividend rate

[begin line chart]

Date	S&P 500 with dividends reinvested*		MSCI  World		MSCI EAFE
10/31/88		3.29		2.40		1.70
04/30/89		3.27		2.30		1.70
10/31/89		3.21		2.30		1.70
04/30/90		3.47		2.80		2.20
10/31/90		3.91		3.10		2.60
04/30/91		3.25		2.70		2.30
10/31/91		3.09		2.70		2.40
04/30/92		2.93		2.88		2.75
10/31/92		2.95		2.90		2.80
04/30/93		2.83		2.49		2.22
10/31/93		2.68		2.25		1.92
04/30/94		2.82		2.25		1.88
10/31/94		2.76		2.29		1.99
04/30/95		2.59		2.36		2.18
10/31/95		2.35		2.31		2.23
04/30/96		2.17		2.13		2.02
10/31/96		2.10		2.15		2.16
04/30/97		1.89		2.02		2.12
10/31/97		1.68		1.84		1.98
04/30/98		1.44		1.63		1.82
10/31/98		1.48		1.74		2.00
04/30/99		1.23		1.49		1.75
10/31/99		1.22		1.45		1.67
04/30/00		1.15		1.32		1.51
10/31/00		1.15		1.36		1.60
04/30/01		1.27		1.55		1.82
10/31/01		1.49		1.88		2.28
04/30/02		1.46		1.76		2.07
10/31/02		1.81		2.20		2.73
04/30/03		1.79		2.27		2.94
10/31/03		1.61		2.04		2.53
04/30/04		1.64		2.06		2.50
10/31/04		1.68		2.10		2.57
04/30/05		1.76		2.23		2.68
10/31/05		1.77		2.11		2.47
04/30/06		1.76		2.06		2.35
10/31/06		1.76		2.10		2.47
04/30/07		1.71		2.14		2.49
10/31/07		1.76		2.17		2.57
04/30/08		2.05		2.63		3.21
10/31/08		2.99		3.74		4.77
04/30/09		3.10		3.42		4.22
10/31/09		2.26		2.56		3.08

[end line chart]

*Source: Lipper.

[End Sidebar]

The fund’s 2008 fiscal year ended on October 31, shortly after the Standard & Poor’s 500 Composite Index — one of the most commonly used benchmarks for U.S. equities — began its precipitous decline. As can be expected given the root of the problems, the fund’s exposure to the financial sector was trimmed from 16.7% at the close of fiscal-year 2007, to 8.7% at the end of October 2008. The downturn had spread quickly, however, sending stocks in every corner of the market into a tailspin through November, with the majority of global equities finally bottoming out in March.

“The financial system is at the core of investing,” states Jim. “So when something like this impacts financials, confidence in the whole marketplace is lost. Not only did investors pull back, consumers did as well.”

While stocks have climbed considerably since January, corporate earnings have not. As a result, dividend payouts have fallen sharply. The S&P 500 has cut dividend payments by about 20% over the last 12 months. “This is easily the biggest round of dividend cuts to take place since the 1940s,” Jim adds.

“When you’re in a bear market, dividends are the only return you get,” offers investment analyst Joe Matt, who specializes in dividend research on behalf of the fund. “We’ve been in a bull market more or less for the past 16 years. Not surprisingly, companies and investors grew accustomed to an uninterrupted stream of dividends.”

Working through a recovery

Stocks have rebounded significantly since March, and in the third quarter of 2009, the nation’s gross domestic product reported positive growth for the first time since the second quarter of 2008. However, the United States is saddled with 10% unemployment, and consumer spending remains low.

According to Joyce, there are nonetheless positive signs. “When you’re looking for stocks that are paying dividends, the turnaround is pretty evident. There are a few companies — not as many as we’d like, but some — that are increasing their dividends, and that’s encouraging.”

The portfolio counselors of Capital Income Builder are working hard to find high-quality companies that are able to continue dividend distributions during uneasy markets. Through intensive research, this has led them to potential investments both in the U.S. and abroad.

“I was very nervous about dividend stability at the beginning of the year, when we didn’t really know if stocks were going to fall further or not,” says portfolio counselor David Riley. “At this point, however, a sense of normalcy has returned. This makes it possible for chief executives and corporate boards to once again revisit the idea of dividends.”

Searching for dividends

Problems in the U.S. financial system have all but shut down the flow of dividends from this sector, but there are other high-yield opportunities to be found in companies both domestically and abroad.

[Begin Sidebar]

[photo of the center of a large green plant]

A wealth of experience

Capital Income Builder is managed primarily by six portfolio counselors who are supported by a team of equity and fixed-income investment analysts around the world. Each portfolio counselor manages their own part of the fund and invests as they see fit. An additional portion, the research portfolio, is divided up among the nearly 50 analysts who contribute their research efforts to the fund.

[End Sidebar]

[Begin Photo Caption]

[photo of Tim Armour]

Tim Armour

[End Photo Caption]

[Begin Photo Caption]

[photo of Jim Lovelace]

Jim Lovelace

[End Photo Caption]

[Begin Photo Caption]

[photo of Joyce Gordon]

Joyce Gordon

[End Photo Caption]

[Begin Photo Caption]

[photo of Mark Macdonald]

Mark Macdonald

[End Photo Caption]

[Begin Photo Caption]

[photo of David Hoag]

David Hoag

[End Photo Caption]

[Begin Photo Caption]

[photo of David Riley]

David Riley

[End Photo Caption]

[Begin Sidebar]

[close-up of a spiney green plant] 

Bear markets

Capital Income Builder has had negative returns in just two of the 22 complete fiscal years since its inception. And in both those years, it still realized better total returns than that of its primary benchmark, the S&P 500.

That provided little consolation during the 2007–2008 fiscal year, when the fund had a negative return of 32.9%.

“What happened in 2008 was hardly a typical bear market,” Jim says. “In previous instances, not everything went down. That was particularly true of the dot-com period, when our fund held up fairly well. In most bear markets, there are areas of strength that remain unaffected.

“But again, 2008 wasn’t a typical bear market,” he continues. “It was the worst since the 1930s. True, on the one hand it was part of another market cycle, but it stood out in its severity.”

[End Sidebar]

[Begin Sidebar]

Fund results shown are for past periods and are not predictive of results in future periods. Result shown is for Class A shares at net asset value with all distributions reinvested. If a sales charge had been deducted, the result would have been lower. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For current information and month-end results, visit americanfunds.com.

[End Sidebar]

“The companies that are increasing dividends are the ones that didn’t run into huge problems as a result of the downturn,” Joyce says. “They tend to be good, long-term companies with steadier incomes and a history of increasing payouts. Their businesses aren’t as cyclical, meaning that they weather the boom-and-bust cycle of the marketplace better than others.”

Because Capital Income Builder can invest up to 50% of its assets outside the U.S., many of those companies are overseas. With the bulk of the fund’s bond portfolio invested in domestic issues, this allows for a greater proportion of international equity holdings when domestic stock dividends have trailed off, as is the case today.

“Traditionally, overseas companies have always had comparatively higher yields,” relates Joe. “It’s really part of the culture in many markets, particularly in Europe. There’s just a strong belief in sharing profits via dividend.”

Additionally, many international companies pay dividends as a percentage of profits, rather than in the form of a fixed dividend. So while these companies may have a higher yield in general, the actual dividend payments are more difficult to predict.

“That’s why it’s been harder for us, in this environment, to keep our dividend payments consistently higher than the quarter before,” Jim says. “Overall, I believe we’ll continue to pay an attractive yield, but at the moment we’re more susceptible to quarterly fluctuations.”

The road ahead

Given the immense changes that have taken place in the global financial system over the past year, any attempt to look ahead must be done with caution. However, at the very least, it would appear that the marketplace has stabilized.

“I do think the worst is over in terms of future collapse,” David says. “Right now, I’m more concerned with the possibility of inflation versus deflation. That’s something that is far more manageable, really, than the kind of downturn we had. Overall, I do expect some strengthening economically, which ought to be good for earnings, and thus for dividends.”

[Begin Sidebar]

Capital Income Builder’s dividends

As mentioned earlier in the letter to shareholders, the portfolio counselors of Capital Income Builder, with the support and direction of the fund’s board of directors, cannot for the time being continue raising the fund’s dividend each quarter as has been the case in the past.

The fund’s objective, however, will not change. As global equity markets continue their recovery, it may again be possible to provide higher quarterly income distributions.

As you can see here, bonds weathered the market’s recent downturn far better than stocks — one of the reasons Capital Income Builder will continue to maintain a strong bond portfolio, anchored by U.S. bond holdings. Not only does the bond portfolio help stabilize the fund’s return, it also helps provide income that can serve as the foundation of the fund’s dividends to shareholders.

(Index: October 9, 2007 = 100)

[begin line chart]

	S&P 500 with dividends reinvested		Barclays Capital Aggregate Bond Index		10-year Treasuries
10/9/2007		100		100		100
10/31/2007		99.09797791		100.9644932		101.6806974
11/30/2007		94.95332125		102.7800194		105.9566261
12/31/2007		94.29621145		103.0687944		105.7488007
1/31/2008		88.64091761		104.8005123		109.4660101
2/29/2008		85.7636806		104.9455787		110.6357795
3/31/2008		85.39255767		105.303504		111.8305157
4/30/2008		89.55049797		105.0836106		109.1571786
5/31/2008		90.71021624		104.3128874		107.0148576
6/30/2008		83.07021338		104.229273		107.8985574
7/31/2008		82.37164479		104.1440996		108.3030135
8/31/2008		83.56382316		105.132083		110.2259796
9/30/2008		76.12604816		103.7201272		110.4265742
10/31/2008		63.34232063		101.2719022		109.555132
11/30/2008		58.79573149		104.5681839		119.4538183
12/31/2008		59.41528306		108.4698398		126.9665583
1/31/2009		54.41334834		107.512478		121.1572156
2/28/2009		48.63817275		107.1065056		119.5982475
3/31/2009		52.89107677		108.5954516		123.5581151
4/30/2009		57.94883113		109.1152198		119.3439228
5/31/2009		61.18617377		109.9063898		116.0994511
6/30/2009		61.30832776		110.5311366		115.8855186
7/31/2009		65.93952999		112.3143927		116.4467774
8/31/2009		68.31687352		113.4772733		117.5926796
9/30/2009		70.86434817		114.6695595		118.8426806
10/31/2009		69.54960229		115.2358755		118.3394157

[end line chart]

[End Sidebar]

“Dividends aren’t going to make a comeback overnight,” Joyce adds. “I do think there’s still a propensity for companies to use cash to buy back their own stock, rather than pay it out as dividends. But dividends are still popular, especially after bear markets when investors expect income in exchange for the risk they take in purchasing stock. We will get back to a normal environment; it’ll just take some time.”

In the meantime, the portfolio counselors of Capital Income Builder will remain diligent in their efforts to generate as much income as possible for shareholders, with an eye toward eventually resuming quarterly increases.

“Bear markets often reinforce the idea of dividends once the worst has passed,” Jim offers. “I genuinely believe that this recovery will be no different, and that Capital Income Builder will be well positioned to take advantage of that.” n

[close-up photo of leaves]

Summary investment portfolio, October 31, 2009

The following summary investment portfolio is designed to streamline the report and help investors better focus on a fund’s principal holdings.  See the inside back cover for details on how to obtain a complete schedule of portfolio holdings.

[begin pie chart]

Industry sector diversification (percent of net assets)
Telecommunication services	8.56	%
Financials	8.52
Consumer staples	6.73
Utilities	6.70
Energy	6.56
Convertible securities & preferred stocks	1.02
Bonds & notes	30.07
Other industries	25.59
Short-term securities & other assets less liabilities	6.25

[end pie chart]

							Percent
				Value			of net
Common stocks - 62.66%	Shares				(000	)	assets
Telecommunication services - 8.56%
AT&T Inc.		52,431,230		$	1,345,910			1.75	%
Verizon Communications Inc.		33,541,700			992,499			1.29
América Móvil, SAB de CV, Series L (ADR)		18,738,000			826,908			1.07
CenturyTel, Inc. (1)		19,053,597			618,480			.80
Koninklijke KPN NV (2)		27,589,050			500,815			.65
Telefónica, SA (2)		17,460,000			487,955			.63
Other securities					1,825,089			2.37
					6,597,656			8.56
Financials - 8.52%
Banco Santander, SA (2)		82,073,972			1,322,796			1.72
BNP Paribas SA (2)		6,312,291			475,461			.62
Banco Bradesco SA, preferred nominative		22,083,300			434,500			.56
HSBC Holdings PLC (Hong Kong) (2)		26,741,178			292,962
HSBC Holdings PLC (United Kingdom) (2)		9,728,436			107,824			.52
Hang Seng Bank Ltd. (2)		24,991,100			354,651			.46
Westpac Banking Corp. (2)		15,251,722			354,634			.46
Bank of China Ltd., Class H (2)		574,785,000			331,360			.43
Fannie Mae (3)		10,000,000			10,800			.01
Freddie Mac (3)		5,300,000			6,519			.01
Other securities					2,882,327			3.73
					6,573,834			8.52
Consumer staples - 6.73%
Philip Morris International Inc.		30,030,800			1,422,259			1.84
PepsiCo, Inc.		10,980,000			664,839			.86
Nestlé SA (2)		10,975,000			511,070			.66
Coca-Cola Co.		8,972,000			478,297			.62
Kraft Foods Inc., Class A		13,527,870			372,287			.48
Altria Group, Inc.		19,755,000			357,763			.46
Other securities					1,382,564			1.81
					5,189,079			6.73
Utilities - 6.70%
GDF Suez (2)		16,302,320			683,129			.89
Exelon Corp.		9,601,500			450,886			.58
Dominion Resources, Inc.		11,251,980			383,580			.50
Scottish and Southern Energy PLC (2)		20,452,784			362,654			.47
Hongkong Electric Holdings Ltd. (2)		65,466,500			349,786			.45
FirstEnergy Corp.		7,755,500			335,658			.44
Other securities					2,603,148			3.37
					5,168,841			6.70
Energy - 6.56%
Royal Dutch Shell PLC, Class A (ADR)		9,328,000			554,177
Royal Dutch Shell PLC, Class B (2)		5,067,187			147,013
Royal Dutch Shell PLC, Class B (ADR)		1,866,228			108,540
Royal Dutch Shell PLC, Class A (2)		3,055,000			90,976			1.17
BP PLC (2)		94,932,042			895,435			1.16
Sasol Ltd. (2)		22,431,827			836,568			1.08
Eni SpA (2)		28,260,866			701,552
Eni SpA (ADR)		912,492			45,241			.97
ConocoPhillips		8,257,970			414,385			.54
Woodside Petroleum Ltd. (2)		7,880,000			330,590			.43
Other securities					931,613			1.21
					5,056,090			6.56
Industrials - 5.73%
Siemens AG (2)		6,126,000			552,705			.72
Other securities					3,862,601			5.01
					4,415,306			5.73
Health care - 5.36%
Merck & Co., Inc.		28,266,100			874,270			1.13
Bayer AG (2)		8,184,000			567,577			.74
Novartis AG (2)		8,565,000			447,563			.58
Roche Holding AG (2)		2,721,000			436,730			.57
Johnson & Johnson		6,500,000			383,825			.50
Bristol-Myers Squibb Co.		16,450,000			358,610			.46
Pfizer Inc		20,000,000			340,600			.44
Other securities					727,191			.94
					4,136,366			5.36
Information technology - 3.95%
Taiwan Semiconductor Manufacturing Co. Ltd. (2)		275,461,272			499,375
Taiwan Semiconductor Manufacturing Co. Ltd. (ADR)		10,455,599			99,746			.78
Microsoft Corp.		15,321,800			424,874			.55
Other securities					2,025,492			2.62
					3,049,487			3.95
Consumer discretionary - 3.18%
OPAP SA (1) (2)		16,421,040			420,092			.54
Other securities					2,035,561			2.64
					2,455,653			3.18
Materials - 2.80%
Akzo Nobel NV (2)		8,673,000			513,189			.67
Koninklijke DSM NV (2)		8,539,000			374,068			.49
Israel Chemicals Ltd. (2)		26,930,907			314,641			.41
Other securities					956,958			1.23
					2,158,856			2.80
Miscellaneous - 4.57%
Other common stocks in initial period of acquisition					3,527,138			4.57
Total common stocks (cost: $47,138,147,000)					48,328,306			62.66
							Percent
				Value			of net
Preferred stocks - 0.75%	Shares				(000	)	assets
Financials - 0.65%
Banco Santander, SA, Series 10, 10.50% (3)		1,748,757			47,990			.06
Fannie Mae, Series S, 8.25% noncumulative (3)		2,000,000			2,325
Fannie Mae, Series O, 0% (3) (4) (5)		874,555			1,924
Fannie Mae, Series P, 4.50% noncumulative (3)		1,600,000			1,280
Fannie Mae, Series E, 5.10% (3)		608,441			1,027
Fannie Mae, Series L, 5.125% (3)		570,000			832			.01
Freddie Mac, Series V, 5.57% (3)		3,485,635			3,703
Freddie Mac, Series Z, 8.375% (3)		2,041,640			2,271
Freddie Mac, Series W, 5.66% (3)		650,000			658
Freddie Mac, Series Y, 6.55% (3)		350,250			368			.01
Other securities					436,296			.57
					498,674			.65
Other - 0.10%
Other securities					78,276			.10
Total preferred stocks (cost: $869,512,000)					576,950			.75
							Percent
				Value			of net
Convertible securities - 0.27%	Shares				(000	)	assets
Financials - 0.02%
Fannie Mae, Series 2008-1, 8.75% noncumulative convertible preferred (3)		1,352,000			2,163
Fannie Mae, Series 2004-1, 5.375% convertible preferred (3)		240			1,200			.01
Other securities					6,836			.01
					10,199			.02
Other - 0.08%
Other securities					62,740			.08
Miscellaneous - 0.17%
Other convertible securities in initial period of acquisition					131,521			.17
Total convertible securities (cost: $315,872,000)					204,460			.27
	Principal						Percent
	amount			Value			of net
Bonds & notes - 30.07%		(000	)		(000	)	assets
Mortgage-backed obligations (6) - 9.90%
Fannie Mae 0%-11.00% 2012-2047 (2) (5)	$	4,198,846			4,405,632			5.71
Freddie Mac 0%-7.50% 2017-2047 (5)		945,152			987,543			1.28
Other securities					2,246,668			2.91
					7,639,843			9.90
Bonds & notes of U.S. government & government agencies - 7.36%
U.S. Treasury:
2.25% 2014		396,000			397,762
7.50% 2016		250,000			321,543
3.75% 2018		349,950			360,830
0%-11.75% 2010-2039 (2)  (7)		3,000,413			3,184,205			5.53
Fannie Mae 2.00%-6.625% 2010-2015		544,815			590,796			.77
Freddie Mac 1.75%-6.875% 2010-2012		146,500			155,766			.20
Other securities					663,008			.86
					5,673,910			7.36
Financials - 3.29%
Sovereign Bancorp, Inc. 8.75% 2018		27,160			31,146
Santander Issuances, SA Unipersonal 5.805%-6.50% 2016-2019 (4) (5)		29,600			27,799			.08
Other securities					2,479,667			3.21
					2,538,612			3.29
Energy - 1.21%
Shell International Finance B.V. 4.00% 2014		8,580			9,025			.01
BP Capital Markets PLC 3.125% 2012		5,000			5,173			.01
Other securities					918,575			1.19
					932,773			1.21
Health care - 1.05%
Merck & Co., Inc. 1.875%-4.00% 2011-2015		43,885			45,364			.06
Other securities					766,954			.99
					812,318			1.05
Telecommunication services - 1.00%
AT&T Wireless Services, Inc. 7.875% 2011		76,700			83,114
AT&T Inc. 4.85%-6.55% 2013-2039		44,545			47,349
SBC Communications Inc. 5.875%-6.25% 2011-2012		30,000			32,274
AT&T Corp. 8.00% 2031 (5)		17,000			20,979			.24
Verizon Communications Inc. 3.75%-8.75% 2011-2019 (4)		142,595			155,565
Verizon Global Funding Corp. 7.375% 2012		7,000			7,969			.21
Other securities					424,367			.55
					771,617			1.00
Other - 6.26%
Other securities					4,825,882			6.26
Total bonds & notes (cost: $23,018,985,000)					23,194,955			30.07
	Principal						Percent
	amount			Value			of net
Short-term securities - 5.94%		(000	)		(000	)	assets
Freddie Mac 0.12%-0.305% due 11/2/2009-5/26/2010	$	1,873,625			1,872,478			2.43
U.S. Treasury Bills 0.161%-0.33% due 11/19/2009-7/29/2010		860,900			860,191			1.12
Fannie Mae 0.15%-0.70% due 11/16/2009-9/1/2010		430,250			430,042			.56
Other securities					1,422,965			1.83
Total short-term securities (cost: $4,585,283,000)					4,585,676			5.94
Total investment securities (cost: $75,927,799,000)					76,890,347			99.69
Other assets less liabilities					238,684			.31
Net assets				$	77,129,031			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. One of these securities (with a value of $11,131,000, which represented .01% of the net assets of the fund) may be subject to legal or contractual restrictions on resale.

Investment 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 value of "Other securities" under their respective industry sectors. Further details on these holdings and related transactions during the year ended October 31, 2009, appear below.

	Beginning shares		Additions		Reductions		Ending shares			Dividend income (000	)		Value of affiliates at 10/31/09 (000	)
CenturyTel, Inc. (8)		3,572,640		15,480,957		-		19,053,597	$	25,107		$	618,480
OPAP SA  (2)		15,242,040		1,179,000		-		16,421,040		45,232			420,092
MAp Group  (2)		93,268,737		-		-		93,268,737		17,918			238,404
FirstGroup PLC  (2)		-		31,300,000		-		31,300,000		6,463			192,962
RPM International, Inc.		7,900,000		440,000		-		8,340,000		6,538			146,951
Symrise AG (2) (8)		885,000		5,950,085		-		6,835,085		3,575			125,969
Wincor Nixdorf AG (2) (8)		1,325,000		825,312		-		2,150,312		3,652			125,865
Hays PLC (2)		-		71,032,000		-		71,032,000		3,771			114,103
De La Rue PLC (2)		8,804,046		731,000		3,160,427		6,374,619		3,965			95,600
De La Rue PLC, Class B		-		8,804,046		8,804,046		-		-			-
Greene King PLC (2)		8,722,210		5,204,153		48,621		13,877,742		4,391			90,021
Greene King PLC, rights, expire 2009		-		5,204,153		5,204,153		-		-			-
S P Setia Bhd. (2)		65,577,500		-		7,550,500		58,027,000		2,019			65,341
Starwood Property Trust, Inc.		-		2,675,000		-		2,675,000		27			53,848
BELIMO Holding AG (2)		42,250		-		-		42,250		1,269			43,314
Ekornes ASA (2)		1,980,425		-		-		1,980,425		910			36,807
Frasers Centrepoint Trust (2)		30,400,000		8,864,000		-		39,264,000		1,535			33,431
Colony Financial, Inc. (3)		-		750,000		-		750,000		-			14,587
Oakton Ltd. (2)		4,617,960		-		-		4,617,960		84			14,304
Ambuja Cements Ltd. (2) (9)		98,960,919		-		87,156,003		11,804,916		4,496			-
Cambridge Industrial Trust (9)		50,291,000		-		50,291,000		-		457			-
Embarq Corp. (9)		9,263,327		-		9,263,327		-		19,106			-
Fong's Industries Co. Ltd. (9)		36,590,000		-		36,590,000		-		-			-
Fortune Real Estate Investment Trust (9)		52,408,500		-		52,408,500		-		-			-
Frasers Commercial Trust (9)		44,940,001		-		44,940,001		-		440			-
Macquarie Communications Infrastructure Group (9)		27,867,700		-		27,867,700		-		895			-
Macquarie Communications Infrastructure Group (9)		4,539,041		-		4,539,041		-		34			-
Macquarie Infrastructure Group (9)		133,598,374		-		133,598,374		-		7,757			-
Macquarie International Infrastructure Fund Ltd. (9)		83,170,000		-		83,170,000		-		-			-
SBM Offshore NV (9)		9,319,188		-		9,319,188		-		-			-
Singapore Post Private Ltd. (2)  (9)		107,025,000		-		46,625,000		60,400,000		4,557			-
TICON Industrial Connection PCL (9)		41,951,000		-		41,951,000		-		-			-
TICON Industrial Connection PCL, warrants, expire 2014 (9)		-		13,983,666		13,983,666		-		-			-
									$	164,198		$	2,430,079

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) Represents an affiliated company as defined under the Investment Company Act of 1940.

(2) Valued under fair value procedures adopted by authority of the board of directors. The total value of all such securities, including those in "Miscellaneous" and "Other securities," was $27,246,678,000, which represented 35.33% of the net assets of the fund. This amount includes $27,089,979,000 related to certain securities trading outside the U.S. whose values were adjusted as a result of significant market movements following the close of local trading.

(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 U.S. in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities, including those in "Other securities," was $3,450,842,000, which represented 4.47% of the net assets of the fund.

(5) Coupon rate may change periodically.

(6) Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.

(7) Index-linked bond whose principal amount moves with a government retail price index.

(8) This security was an unaffiliated issuer in its initial period of acquisition at 10/31/2008; it was not publicly disclosed.

(9) Unaffiliated issuer at 10/31/2009.

Key to abbreviation

ADR = American Depositary Receipts

See Notes to Financial Statements

Financial statements

Statement of assets and liabilities
at October 31, 2009	(dollars in thousands)
Assets:
Investment securities, at value:
Unaffiliated issuers (cost: $73,390,076)	$	74,460,268
Affiliated issuers (cost: $2,537,723)		2,430,079	$	76,890,347
Cash denominated in currencies other than U.S. dollars (cost: $4,080)				4,080
Cash				9,614
Receivables for:
Sales of investments		991,015
Sales of fund's shares		80,816
Dividends and interest		360,609		1,432,440
				78,336,481
Liabilities:
Payables for:
Purchases of investments		1,016,237
Repurchases of fund's shares		126,644
Investment advisory services		14,693
Services provided by affiliates		43,481
Directors' deferred compensation		1,385
Other		5,010		1,207,450
Net assets at October 31, 2009			$	77,129,031
Net assets consist of:
Capital paid in on shares of capital stock			$	89,395,929
Undistributed net investment income				352,821
Accumulated net realized loss				(13,583,978	)
Net unrealized appreciation				964,259
Net assets at October 31, 2009			$	77,129,031

(dollars and shares in thousands, except per-share amounts)
Total authorized capital stock - 3,000,000 shares, $.01 par value (1,662,044 total shares outstanding)
	Net assets		Shares  outstanding		Net asset value per share*
Class A	$	56,647,598		1,220,593	$	46.41
Class B		3,519,614		75,865		46.39
Class C		8,322,656		179,409		46.39
Class F-1		3,142,187		67,701		46.41
Class F-2		978,977		21,099		46.40
Class 529-A		1,221,274		26,319		46.40
Class 529-B		147,016		3,170		46.38
Class 529-C		459,799		9,914		46.38
Class 529-E		56,541		1,219		46.40
Class 529-F-1		33,125		714		46.41
Class R-1		125,524		2,706		46.38
Class R-2		632,742		13,642		46.38
Class R-3		800,653		17,257		46.40
Class R-4		346,887		7,476		46.40
Class R-5		376,433		8,109		46.42
Class R-6		318,005		6,851		46.42
(*) Maximum offering price and redemption price per share were equal to the net asset value per share for all share classes, except for Classes A and 529-A, for which the maximum offering prices per share were $49.24 and $49.23, respectively.
See Notes to Financial Statements

Statement of operations
for the year ended October 31, 2009				(dollars in thousands)
Investment income:
Income:
Dividends (net of non-U.S. taxes of $158,118; also includes
$164,198 from affiliates)	$	2,285,111
Interest		1,310,612		$	3,595,723
Fees and expenses*:
Investment advisory services		190,754
Distribution services		255,789
Transfer agent services		69,870
Administrative services		26,131
Reports to shareholders		4,774
Registration statement and prospectus		10,137
Directors' compensation		642
Auditing and legal		192
Custodian		7,842
State and local taxes		701
Other		3,721
Total fees and expenses before waiver		570,553
Less investment advisory services waiver		3,266
Total fees and expenses after waiver					567,287
Net investment income					3,028,436
Net realized loss and unrealized appreciation on investments and currency:
Net realized (loss) gain on:
Investments (net of non-U.S. taxes of $171; also includes $406,299 net loss from affiliates)		(12,532,669	)
Currency transactions		20,852			(12,511,817	)
Net unrealized appreciation on:
Investments		19,437,426
Currency translations		6,639			19,444,065
Net realized loss and unrealized appreciation on investments and currency					6,932,248
Net increase in net assets resulting from operations				$	9,960,684
(*) Additional information related to class-specific fees and expenses is included in the Notes to Financial Statements.
See Notes to Financial Statements
Statements of changes in net assets				(dollars in thousands)
	Year ended October 31
		2009			2008
Operations:
Net investment income	$	3,028,436		$	4,035,765
Net realized (loss) gain on investments and currency transactions		(12,511,817	)		19,237
Net unrealized appreciation (depreciation) on investments and currency translations		19,444,065			(42,874,028	)
Net increase (decrease) in net assets resulting from operations		9,960,684			(38,819,026	)
Dividends and distributions paid or accrued to
shareholders:
Dividends from net investment income		(3,441,672	)		(4,584,311	)
Distributions from net realized gain on investments		-			(4,042,060	)
Total dividends and distributions paid or accrued to shareholders		(3,441,672	)		(8,626,371	)
Net capital share transactions		(4,762,774	)		9,153,317
Total increase (decrease) in net assets		1,756,238			(38,292,080	)
Net assets:
Beginning of year		75,372,793			113,664,873
End of year (including undistributed
net investment income: $352,821 and $637,559, respectively)	$	77,129,031		$	75,372,793
See Notes to Financial Statements

Notes to financial statements

1. Organization and significant accounting policies

Organization – Capital Income Builder, Inc. (the "fund") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. The fund seeks to provide a growing dividend – with higher income distributions every quarter to the extent possible – together with a current yield exceeding that of U.S. stocks generally.

The fund has 16 share classes consisting of five retail share classes, five 529 college savings plan share classes and six retirement plan share classes. The 529 college savings plan share classes (529-A, 529-B, 529-C, 529-E and 529-F-1) can be used to save for college education. The six retirement plan share classes (R-1, R-2, R-3, R-4, R-5 and R-6) are generally offered only through eligible employer-sponsored retirement plans. The fund’s share classes are described below:

Share class	Initial sales charge	Contingent deferred sales charge upon redemption	Conversion feature
Classes A and 529-A	Up to 5.75%	None (except 1% for certain redemptions within one year of purchase without an initial sales charge)	None
Classes B and 529-B*	None	Declines from 5% to 0% for redemptions within six years of purchase	Classes B and 529-B convert to Classes A and 529-A, respectively, after eight years
Class C	None	1% for redemptions within one year of purchase	Class C converts to Class F-1 after 10 years
Class 529-C	None	1% for redemptions within one year of purchase	None
Class 529-E	None	None	None
Classes F-1, F-2 and 529-F-1	None	None	None
Classes R-1, R-2, R-3, R-4, R-5 and R-6	None	None	None

*Effective April 21, 2009, Class B and 529-B shares of the fund are not available for purchase.

On May 1, 2009, the fund made an additional retirement plan share class (Class R-6) available for sale pursuant to an amendment to its registration statement filed with the Securities and Exchange Commission (“SEC”). Refer to the fund’s retirement plan prospectus for more details.

Holders of all share classes have equal pro rata rights to assets, dividends and liquidation proceeds.Each share class has identical voting rights, except for the exclusive right to vote on matters affecting only its class. Share classes have different fees and expenses ("class-specific fees and expenses"), primarily due to different arrangements for distribution, administrative and shareholder services. Differences in class-specific fees and expenses will result in differences in net investment income and, therefore, the payment of different per-share dividends by each class.

Significant accounting policies – The financial statements have been prepared to comply with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the fund:

Net asset value – The fund generally determines its net asset value as of approximately 4:00 p.m. New York time each day the New York Stock Exchange is open.

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 one or more independent pricing vendors when such prices are available. However, where the investment adviser deems it appropriate to do so, such securities will be valued in good faith at the mean quoted bid and asked prices that are reasonably and timely available (or bid prices, if asked prices are not available) or at prices for securities of comparable maturity, quality and type. Vendors base bond prices on, among other things, valuation matrices that incorporate dealer-supplied valuations, proprietary pricing models and evaluations of the yield curve as of approximately 3:00 p.m. New York time. 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.

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 guidelines adopted by authority of the fund's board of directors. 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. Fair valuations and valuations of investments that are not actively trading involve judgment and may differ materially from valuations that would have been used had greater market activity occurred.

Security transactions and related investment income – Security transactions are recorded by the fund as of the date the trades are executed with brokers. Realized gains and losses from security transactions are determined based on the specific identified cost of the securities. In the event a security is purchased with a delayed payment date, the fund will segregate liquid assets sufficient to meet its payment obligations. Dividend income is recognized on the ex-dividend date and interest income is recognizedon 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, administrative and shareholder services, are charged directly to the respective share class.

Dividends and distributions to shareholders –Prior to January 1, 2009, dividends paid to shareholders were declared daily from net investment income and paid to shareholders quarterly. Effective January 1, 2009, the fund no longer declared daily dividends and began to declare and distribute dividends on a periodic basis, usually in March, June, September and December. 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.

2. Risk factors

Investing in the fund may involve certain risks including, but not limited to, those described below.

The prices of, and the income generated by, the common stocks and other securities held by the fund may decline in response to certain events taking place around the world, including 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; governmental or governmental agency responses to economic conditions; and currency, interest rate and commodity price fluctuations.

The prices 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 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, "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.

Investments in securities issued by entities based outside the U.S. may be subject to the risks described above to a greater extent. These investments may also be affected by currency controls; different accounting, auditing, financial reporting, and legal standards and practices; expropriation; changes in tax policy; greater market volatility; different 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. Investments in securities issued by entities domiciled in the U.S. may also be subject to many of these risks. These risks may be heightened in connection with investments in developing countries.

3. Taxation and distributions                                                      

Federal income taxation – The fund complies with the requirements under Subchapter M of the Internal Revenue Code applicable to mutual funds and intends to distribute substantially all of its net taxable income and net capital gains each year. The fund is not subject to income taxes to the extent such distributions are made. Therefore, no federal income tax provision is required.

As of and during the period ended October 31, 2009, the fund did not have a liability for any unrecognized tax benefits. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statement of operations. During the period, the fund did not incur any interest or penalties.

The fund is not subject to examination by U.S. federal tax authorities for tax years before 2005, by state tax authorities for tax years before 2004 and by tax authorities outside the U.S. for tax years before 2006.

Non-U.S. taxation – Dividend and interest income is recorded net of non-U.S. taxes paid. Gains realized by the fund on the sale of securities in certain countries are subject to non-U.S. taxes. The fund records a liability based on unrealized gains to provide for potential non-U.S. taxes payable upon the sale of these securities.

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 different 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.; cost of investments sold; paydowns on fixed-income securities; amortization of premiums or discounts; and income on certain investments.The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund for financial reporting purposes. The fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.

During the year ended October 31, 2009, the fund reclassified $140,663,000 from accumulated net realized loss to undistributed net investment income and $12,165,000 from undistributed net investment income to capital paid in on shares of capital stock to align financial reporting with tax reporting.

As of October 31, 2009, the tax basis components of distributable earnings, unrealized appreciation (depreciation) and cost of investment securities were as follows:

(dollars in thousands)
Undistributed ordinary income	$	557,441
Capital loss carryforward expiring 2017*		(12,854,600	)
Gross unrealized appreciation on investment securities		5,883,084
Gross unrealized depreciation on investment securities		(5,857,943	)
Net unrealized appreciation on investment securities		25,141
Cost of investment securities		76,865,206
*The capital loss carryforward will be used to offset any capital gains realized by the fund in future years through the expiration date. The fund will not make distributions from capital gains while a capital loss carryforward remains.

The tax character of distributions paid or accrued to shareholders was as follows (dollars in thousands):

	Year ended October 31, 2009						Year ended October 31, 2008
Share class	Ordinary income		Long-term  capital gains		Total distributions paid or accrued		Ordinary  income		Long-term  capital gains		Total distributions paid or accrued
Class A	$	2,597,362	$	-	$	2,597,362	$	3,474,759	$	2,964,774	$	6,439,533
Class B		145,837		-		145,837		199,198		208,829		408,027
Class C		333,808		-		333,808		456,121		478,117		934,238
Class F-1		158,029		-		158,029		252,058		216,992		469,050
Class F-2*		23,817		-		23,817		649		-		649
Class 529-A		51,291		-		51,291		56,066		46,160		102,226
Class 529-B		5,534		-		5,534		6,162		6,376		12,538
Class 529-C		16,511		-		16,511		17,767		18,002		35,769
Class 529-E		2,267		-		2,267		2,554		2,273		4,827
Class 529-F-1		1,482		-		1,482		1,643		1,232		2,875
Class R-1		4,564		-		4,564		5,038		4,894		9,932
Class R-2		21,974		-		21,974		23,202		23,352		46,554
Class R-3		31,906		-		31,906		34,113		29,724		63,837
Class R-4		12,916		-		12,916		12,549		9,805		22,354
Class R-5		28,662		-		28,662		42,432		31,530		73,962
Class R-6†		5,712		-		5,712		-		-		-
Total	$	3,441,672	$	-	$	3,441,672	$	4,584,311	$	4,042,060	$	8,626,371
*Class F-2 was offered beginning August 1, 2008.
†Class R-6 was offered beginning May 1, 2009.

4. Fees and transactions with related parties

Capital Research and Management Company ("CRMC"), the fund’s investment adviser, is the parent company of American Funds Service Company® ("AFS"), the fund’s transfer agent, and American Funds Distributors,® Inc. ("AFD"), the principal underwriter of the fund’s shares.

Investment advisory services - The Investment Advisory and Service Agreement with CRMC providesfor monthly fees accrued daily. These fees are based on a declining series of annual rates beginning with 0.240% on the first $1 billion of daily net assets and decreasing to 0.110% on such assets in excess of $115 billion. The agreement also provides for monthly fees, accrued daily, based on a declining series of rates beginning with 3.00% on the first $100,000,000 of the fund's monthly gross income and decreasing to 2.50% on such income in excess of $100,000,000. CRMC waived a portion of its investment advisory services fee commencing on September 1, 2004, and terminating on December 31, 2008. During the year ended October 31, 2009, total investment advisory services fees waived by CRMC were $3,266,000. As a result, the fee shown on the accompanying financial statements of $190,754,000, which was equivalent to an annualized rate of 0.268%, was reduced to $187,488,000, or 0.264% of average daily net assets.

Class-specific fees and expenses – Expenses that are specific to individual share classes are accrued directly to the respective share class. The principal class-specific fees and expenses are described below:

Distribution services – The fund has adopted plans of distribution for all share classes, except Classes F-2, R-5 and R-6. Under the plans, the board of directors approves certain categories of expenses that are used to finance activities primarily intended to sell fund shares and service existing accounts. The plans provide for payments, based on an annualized percentage of average daily net assets, ranging from 0.30% to 1.00% as noted below. In some cases, the board of directors has limited the amounts that may be paid to less than the maximum allowed by the plans.All share classes with a plan may use up to 0.25% of average daily net assets to pay service fees, or to compensate AFD for paying service fees, to firms that have entered into agreements with AFD to provide certain shareholder services. The remaining amounts available to be paid under each plan are paid to dealers to compensate them for their sales activities.

For Classes A and 529-A, the board of directors has also approved the reimbursement of dealer and wholesaler commissions paid by AFD for certain shares sold without a sales charge. These classes reimburse AFD for amounts billed within the prior 15 months but only to the extent that the overall annual expense limit of 0.30% is not exceeded. As of October 31, 2009, there were no unreimbursed expenses subject to reimbursement for Classes A or 529-A.

Share class	Currently approved limits	Plan limits
Class A	0.30%	0.30%
Class 529-A	0.30	0.50
Classes B and 529-B	1.00	1.00
Classes C, 529-C and R-1	1.00	1.00
Class R-2	0.75	1.00
Classes 529-E and R-3	0.50	0.75
Classes F-1, 529-F-1 and R-4	0.25	0.50

Transfer agent services –The fund hasa transfer agent agreement with AFS for Classes A and B. Under this agreement, these share classes compensate AFS for transfer agent services including shareholder recordkeeping, communications and transaction processing. AFS is also compensated for certain transfer agent services provided to all other share classes from the administrative services fees paid to CRMC as described below.

Administrative services – The fund has an administrative services agreement with CRMC to provide transfer agent and other related shareholder services for all share classes other than Classes A and B.  Each relevant share class pays CRMC annual fees up to 0.15% (0.10% for Class R-5 and 0.05% for Class R-6) based on its respective average daily net assets. Each relevant share class also pays AFS additional amounts for certain transfer agent services. CRMC and AFS may use these fees to compensate third parties for performing these services. Each 529 share class is subject to an additional administrative services fee payable to the Commonwealth of Virginia for the maintenance of the 529 college savings plan.The quarterly fee is based on a declining series of annual rates beginning with 0.10% on the first $30 billion of the net assets invested in Class 529 shares of the American Funds and decreasing to 0.06% on such assets between $120 billion and $150 billion. The fee for any given calendar quarter is accrued and calculated on the basis of the average net assets of Class 529 shares of the American Funds for the last month of the prior calendar quarter. Although these amounts are included with administrative services fees on the accompanying financial statements, the Commonwealth of Virginia is not considered a related party.

Expenses under the agreements described above for the year ended October 31, 2009, were as follows (dollars in thousands):

Share class	Distribution services	Transfer agent services	Administrative services
			CRMC administrative services	Transfer agent services	Commonwealth of Virginia administrative services
Class A	$119,204	$65,518	Not applicable	Not applicable	Not applicable
Class B	33,948	4,352	Not applicable	Not applicable	Not applicable
Class C	78,222	Included in administrative services	$11,459	$1,522	Not applicable
Class F-1	7,584		3,435	358	Not applicable
Class F-2	Not applicable		485	16	Not applicable
Class 529-A	2,099		952	139	$1,051
Class 529-B	1,324		121	40	133
Class 529-C	3,949		360	96	396
Class 529-E	246		45	7	49
Class 529-F-1	-		27	4	29
Class R-1	1,080		120	40	Not applicable
Class R-2	4,007		799	1,908	Not applicable
Class R-3	3,460		1,033	503	Not applicable
Class R-4	666		362	23	Not applicable
Class R-5	Not applicable		537	16	Not applicable
Class R-6*	Not applicable		66	-†	Not applicable
Total	$255,789	$69,870	$19,801	$4,672	$1,658

*Class R-6 was offered beginning May 1, 2009.

† Amount less than one thousand.

Directors’ deferred compensation – Since the adoption of the deferred compensation plan in 1993, directors who are unaffiliated with CRMCmay elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Directors’ compensation of $642,000, shown on the accompanying financial statements, includes $643,000 in current fees (either paid in cash or deferred) and a net decrease of $1,000 in the value of the deferred amounts.

Affiliated officers and directors – Officers and certain directors of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated officers or directors received any compensation directly from the fund.

5. Disclosure of fair value measurements

The fund classifies its assets and liabilities into three levels based on the method used to value the assets or liabilities.Level 1 values are based on quoted prices in active markets for identical securities. Level 2 values are based on significant observable market inputs, such as quoted prices for similar securities and quoted prices in inactive markets. Level 3 values are based on significant unobservable inputs that reflect the fund’s determination of assumptions that market participants might reasonably use in valuing the securities. The valuation levels are not necessarily an indication of the risk or liquidity associated with the underlying investment. For example, U.S. government securities are generally high-quality and liquid; however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.The following table presents the fund’s valuation levels as of October 31, 2009 (dollars in thousands):

Investment securities:	Level 1		Level 2			Level 3		Total
Common stocks:
Telecommunication services	$	3,809,414	$	2,788,242	*	$	-	$	6,597,656
Financials		1,932,579		4,641,255	*		-		6,573,834
Consumer staples		4,287,615		901,464	*		-		5,189,079
Utilities		2,473,246		2,695,595	*		-		5,168,841
Energy		1,496,608		3,559,482	*		-		5,056,090
Industrials		1,528,573		2,886,733	*		-		4,415,306
Health care		2,198,665		1,937,701	*		-		4,136,366
Information technology		1,351,528		1,697,959	*		-		3,049,487
Consumer discretionary		809,664		1,645,989	*		-		2,455,653
Materials		333,081		1,825,775	*		-		2,158,856
Miscellaneous		1,016,801		2,510,337	*		-		3,527,138
Preferred stocks		23,730		553,220			-		576,950
Convertible securities		28,697		175,763			-		204,460
Bonds & notes:
Mortgage-backed obligations		-		7,621,868			17,975		7,639,843
Bonds & notes of U.S. government & government agencies		-		5,673,910			-		5,673,910
Corporate bonds & notes		-		5,055,320			-		5,055,320
Other		1,776		4,824,106			-		4,825,882
Short-term securities		-		4,585,676			-		4,585,676
Total	$	21,291,977	$	55,580,395		$	17,975	$	76,890,347

The following table reconciles the valuation of the fund's Level 3 investment securities and related transactions for the year ended October 31, 2009 (dollars in thousands):
	Beginning		Net transfers				Net			Net			Ending
	value		into		Net unrealized		purchases			realized			value
	at 11/1/2008		Level 3		appreciation (†)		and sales			loss (†)			at 10/31/2009
Investment securities	$	15,047	$	112,337	$	33,370	$	(124,420	)	$	(18,359	)	$	17,975
Net unrealized depreciation during the period on Level 3 investment securities held at October 31, 2009 (dollars in thousands) (†):													$	(575	)
(*) Includes certain securities trading outside the U.S. whose values were adjusted as a result of significant market movements following the close of local trading; therefore, $27,089,979,000 of investment securities were classified as Level 2 instead of Level 1.
(†) Net realized loss and unrealized appreciation (depreciation) are included in the related amounts on investments in the statement of operations.

6. Capital share transactions

Capital share transactions in the fund were as follows (dollars and shares in thousands):

Share class	Sales(1)				Reinvestments of dividends and distributions				Repurchases(1)						Net (decrease) increase
	Amount		Shares		Amount		Shares		Amount			Shares			Amount			Shares
Year ended October 31, 2009
Class A	$	6,862,281		166,287	$	2,702,648		65,760	$	(13,150,034	)		(322,740	)	$	(3,585,105	)		(90,693	)
Class B		202,862		5,032		151,950		3,701		(841,987	)		(20,669	)		(487,175	)		(11,936	)
Class C		949,248		22,910		330,977		8,055		(2,242,034	)		(55,251	)		(961,809	)		(24,286	)
Class F-1		751,710		18,200		151,672		3,698		(1,704,349	)		(41,759	)		(800,967	)		(19,861	)
Class F-2		946,117		22,353		15,154		352		(175,438	)		(4,103	)		785,833			18,602
Class 529-A		190,087		4,573		56,949		1,383		(146,201	)		(3,566	)		100,835			2,390
Class 529-B		11,516		286		6,144		149		(15,147	)		(369	)		2,513			66
Class 529-C		85,169		2,056		18,273		444		(68,975	)		(1,678	)		34,467			822
Class 529-E		10,680		258		2,517		61		(9,278	)		(227	)		3,919			92
Class 529-F-1		7,550		180		1,646		40		(7,927	)		(191	)		1,269			29
Class R-1		31,963		761		5,013		122		(26,350	)		(641	)		10,626			242
Class R-2		193,887		4,693		24,139		586		(143,166	)		(3,489	)		74,860			1,790
Class R-3		222,576		5,367		35,131		853		(193,481	)		(4,677	)		64,226			1,543
Class R-4		151,581		3,580		14,215		345		(88,311	)		(2,133	)		77,485			1,792
Class R-5		246,841		6,015		29,756		734		(641,048	)		(15,598	)		(364,451	)		(8,849	)
Class R-6(2)		275,144		6,725		5,709		130		(153	)		(4	)		280,700			6,851
Total net increase
(decrease)	$	11,139,212		269,276	$	3,551,893		86,413	$	(19,453,879	)		(477,095	)	$	(4,762,774	)		(121,406	)
Year ended October 31, 2008
Class A	$	13,528,465		233,084	$	5,970,821		100,498	$	(12,820,585	)		(240,213	)	$	6,678,701			93,369
Class B		713,699		12,283		376,329		6,301		(924,293	)		(17,147	)		165,735			1,437
Class C		2,513,537		42,921		841,222		14,079		(2,615,364	)		(48,785	)		739,395			8,215
Class F-1		1,914,480		32,727		394,113		6,631		(2,119,450	)		(39,577	)		189,143			(219	)
Class F-2(3)		130,148		2,693		197		4		(9,116	)		(200	)		121,229			2,497
Class 529-A		345,677		5,962		100,205		1,690		(124,472	)		(2,293	)		321,410			5,359
Class 529-B		32,438		561		12,299		206		(14,430	)		(265	)		30,307			502
Class 529-C		145,645		2,518		34,981		587		(70,505	)		(1,286	)		110,121			1,819
Class 529-E		15,484		268		4,736		80		(7,605	)		(143	)		12,615			205
Class 529-F-1		15,716		269		2,798		47		(5,945	)		(111	)		12,569			205
Class R-1		61,656		1,059		9,577		161		(37,646	)		(694	)		33,587			526
Class R-2		274,675		4,783		45,274		759		(173,016	)		(3,120	)		146,933			2,422
Class R-3		397,293		6,893		61,998		1,044		(229,469	)		(4,134	)		229,822			3,803
Class R-4		158,819		2,769		21,733		367		(76,366	)		(1,383	)		104,186			1,753
Class R-5		358,985		6,194		65,644		1,109		(167,065	)		(3,159	)		257,564			4,144
Total net increase
(decrease)	$	20,606,717		354,984	$	7,941,927		133,563	$	(19,395,327	)		(362,510	)	$	9,153,317			126,037
(1) Includes exchanges between share classes of the fund.
(2)Class R-6 was offered beginning May 1, 2009.
(3)Class F-2 was offered beginning August 1, 2008.

7. Investment transactions

The fund made purchases and sales of investment securities, excluding short-term securities and U.S. government obligations, if any, of $24,682,401,000 and $30,961,937,000, respectively, during the year ended October 31, 2009.

8. Subsequent events

On November 24, 2009, shareholders approved a proposal to reorganize the fund from a Maryland corporation to a Delaware statutory trust. The reorganization is expected to be completed in 2010; however, the fund reserves the right to delay the implementation. Shareholders also approved amendments to the fund’s Investment Advisory and Service Agreement and amendments to and elimination of certain fundamental investment policies of the fund. As of December 7, 2009, the date the financial statements were available to be issued, no other subsequent events or transactions had occurred that would have materially impacted the financial statements as presented.

Financial highlights(1)

			Income (loss) from investment operations(2)								Dividends and distributions
	Net asset value, beginning of period		Net investment income(3)		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(4) (5)			Net assets, end of period (in millions)		Ratio of expenses to average net assets before reimbursements/ waivers			Ratio of expenses to average net assets after reimbursements/ waivers(5)			Ratio of net income to average net assets(3) (5)
Class A:
Year ended 10/31/2009	$	42.26	$	1.83	$	4.40		$	6.23		$	(2.08	)	$	-		$	(2.08	)	$	46.41		15.44	%	$	56,648		.66	%		.66	%		4.40	%
Year ended 10/31/2008		68.58		2.31		(23.58	)		(21.27	)		(2.65	)		(2.40	)		(5.05	)		42.26		(32.88	)		55,418		.58			.55			4.03
Year ended 10/31/2007		59.91		2.52		9.62			12.14			(2.30	)		(1.17	)		(3.47	)		68.58		20.93			83,524		.58			.55			3.97
Year ended 10/31/2006		52.58		2.13		8.06			10.19			(2.17	)		(.69	)		(2.86	)		59.91		20.00			58,439		.58			.55			3.82
Year ended 10/31/2005		50.75		2.01		2.56			4.57			(1.84	)		(.90	)		(2.74	)		52.58		9.11			42,303		.59			.57			3.79
Class B:
Year ended 10/31/2009		42.26		1.51		4.40			5.91			(1.78	)		-			(1.78	)		46.39		14.57			3,520		1.44			1.43			3.64
Year ended 10/31/2008		68.58		1.87		(23.58	)		(21.71	)		(2.21	)		(2.40	)		(4.61	)		42.26		(33.41	)		3,711		1.35			1.33			3.25
Year ended 10/31/2007		59.91		2.03		9.62			11.65			(1.81	)		(1.17	)		(2.98	)		68.58		20.02			5,923		1.35			1.32			3.19
Year ended 10/31/2006		52.58		1.69		8.06			9.75			(1.73	)		(.69	)		(2.42	)		59.91		19.07			4,413		1.37			1.34			3.04
Year ended 10/31/2005		50.75		1.59		2.56			4.15			(1.42	)		(.90	)		(2.32	)		52.58		8.26			3,371		1.38			1.36			3.01
Class C:
Year ended 10/31/2009		42.26		1.50		4.40			5.90			(1.77	)		-			(1.77	)		46.39		14.54			8,323		1.47			1.47			3.59
Year ended 10/31/2008		68.58		1.84		(23.58	)		(21.74	)		(2.18	)		(2.40	)		(4.58	)		42.26		(33.45	)		8,609		1.40			1.38			3.21
Year ended 10/31/2007		59.91		2.00		9.62			11.62			(1.78	)		(1.17	)		(2.95	)		68.58		19.97			13,406		1.39			1.37			3.16
Year ended 10/31/2006		52.58		1.67		8.06			9.73			(1.71	)		(.69	)		(2.40	)		59.91		19.02			8,616		1.41			1.38			2.99
Year ended 10/31/2005		50.75		1.56		2.56			4.12			(1.39	)		(.90	)		(2.29	)		52.58		8.19			5,867		1.44			1.42			2.94
Class F-1:
Year ended 10/31/2009		42.26		1.84		4.39			6.23			(2.08	)		-			(2.08	)		46.41		15.43			3,142		.66			.66			4.43
Year ended 10/31/2008		68.58		2.29		(23.58	)		(21.29	)		(2.63	)		(2.40	)		(5.03	)		42.26		(32.90	)		3,701		.62			.59			4.00
Year ended 10/31/2007		59.91		2.50		9.62			12.12			(2.28	)		(1.17	)		(3.45	)		68.58		20.89			6,020		.61			.58			3.95
Year ended 10/31/2006		52.58		2.11		8.06			10.17			(2.15	)		(.69	)		(2.84	)		59.91		19.94			3,494		.62			.60			3.76
Year ended 10/31/2005		50.75		1.96		2.56			4.52			(1.79	)		(.90	)		(2.69	)		52.58		9.01			2,141		.68			.65			3.71
Class F-2:
Year ended 10/31/2009		42.26		1.78		4.54			6.32			(2.18	)		-			(2.18	)		46.40		15.68			979		.42			.41			4.09
Period from 8/1/2008 to 10/31/2008		54.90		.43		(12.53	)		(12.10	)		(.54	)		-			(.54	)		42.26		(22.13	)		105		.10			.10			.90
Class 529-A:
Year ended 10/31/2009		42.26		1.81		4.39			6.20			(2.06	)		-			(2.06	)		46.40		15.36			1,221		.71			.71			4.34
Year ended 10/31/2008		68.58		2.27		(23.58	)		(21.31	)		(2.61	)		(2.40	)		(5.01	)		42.26		(32.93	)		1,011		.66			.63			3.97
Year ended 10/31/2007		59.91		2.47		9.62			12.09			(2.25	)		(1.17	)		(3.42	)		68.58		20.84			1,273		.65			.63			3.92
Year ended 10/31/2006		52.58		2.10		8.06			10.16			(2.14	)		(.69	)		(2.83	)		59.91		19.92			760		.64			.61			3.77
Year ended 10/31/2005		50.75		1.95		2.56			4.51			(1.78	)		(.90	)		(2.68	)		52.58		8.99			458		.71			.68			3.70
Class 529-B:
Year ended 10/31/2009		42.26		1.47		4.40			5.87			(1.75	)		-			(1.75	)		46.38		14.47			147		1.53			1.52			3.53
Year ended 10/31/2008		68.58		1.80		(23.58	)		(21.78	)		(2.14	)		(2.40	)		(4.54	)		42.26		(33.49	)		131		1.47			1.44			3.15
Year ended 10/31/2007		59.91		1.96		9.62			11.58			(1.74	)		(1.17	)		(2.91	)		68.58		19.89			178		1.46			1.44			3.09
Year ended 10/31/2006		52.58		1.63		8.06			9.69			(1.67	)		(.69	)		(2.36	)		59.91		18.93			122		1.49			1.46			2.93
Year ended 10/31/2005		50.75		1.50		2.56			4.06			(1.33	)		(.90	)		(2.23	)		52.58		8.08			83		1.55			1.53			2.85
Class 529-C:
Year ended 10/31/2009		42.26		1.47		4.41			5.88			(1.76	)		-			(1.76	)		46.38		14.48			460		1.52			1.52			3.53
Year ended 10/31/2008		68.58		1.81		(23.58	)		(21.77	)		(2.15	)		(2.40	)		(4.55	)		42.26		(33.49	)		384		1.46			1.44			3.16
Year ended 10/31/2007		59.91		1.96		9.62			11.58			(1.74	)		(1.17	)		(2.91	)		68.58		19.89			499		1.46			1.44			3.11
Year ended 10/31/2006		52.58		1.63		8.06			9.69			(1.67	)		(.69	)		(2.36	)		59.91		18.94			306		1.47			1.45			2.94
Year ended 10/31/2005		50.75		1.51		2.56			4.07			(1.34	)		(.90	)		(2.24	)		52.58		8.10			192		1.54			1.52			2.86
Class 529-E:
Year ended 10/31/2009		42.26		1.68		4.41			6.09			(1.95	)		-			(1.95	)		46.40		15.05			56		1.01			1.01			4.04
Year ended 10/31/2008		68.58		2.10		(23.58	)		(21.48	)		(2.44	)		(2.40	)		(4.84	)		42.26		(33.14	)		48		.95			.93			3.67
Year ended 10/31/2007		59.91		2.28		9.62			11.90			(2.06	)		(1.17	)		(3.23	)		68.58		20.49			63		.95			.93			3.61
Year ended 10/31/2006		52.58		1.92		8.06			9.98			(1.96	)		(.69	)		(2.65	)		59.91		19.55			40		.96			.94			3.45
Year ended 10/31/2005		50.75		1.78		2.56			4.34			(1.61	)		(.90	)		(2.51	)		52.58		8.64			25		1.02			1.00			3.38
Class 529-F-1:
Year ended 10/31/2009	$	42.26	$	1.90	$	4.39		$	6.29		$	(2.14	)	$	-		$	(2.14	)	$	46.41		15.60	%	$	33		.51	%		.51	%		4.55	%
Year ended 10/31/2008		68.58		2.38		(23.58	)		(21.20	)		(2.72	)		(2.40	)		(5.12	)		42.26		(32.79	)		29		.46			.43			4.20
Year ended 10/31/2007		59.91		2.60		9.62			12.22			(2.38	)		(1.17	)		(3.55	)		68.58		21.08			33		.46			.43			4.17
Year ended 10/31/2006		52.58		2.20		8.06			10.26			(2.24	)		(.69	)		(2.93	)		59.91		20.12			14		.46			.44			3.95
Year ended 10/31/2005		50.75		1.97		2.56			4.53			(1.80	)		(.90	)		(2.70	)		52.58		9.04			6		.63			.60			3.78
Class R-1:
Year ended 10/31/2009		42.26		1.50		4.41			5.91			(1.79	)		-			(1.79	)		46.38		14.55			125		1.45			1.45			3.59
Year ended 10/31/2008		68.58		1.85		(23.58	)		(21.73	)		(2.19	)		(2.40	)		(4.59	)		42.26		(33.43	)		104		1.38			1.36			3.26
Year ended 10/31/2007		59.91		1.98		9.62			11.60			(1.76	)		(1.17	)		(2.93	)		68.58		19.94			133		1.42			1.40			3.17
Year ended 10/31/2006		52.58		1.65		8.06			9.71			(1.69	)		(.69	)		(2.38	)		59.91		18.98			69		1.44			1.41			2.96
Year ended 10/31/2005		50.75		1.54		2.56			4.10			(1.37	)		(.90	)		(2.27	)		52.58		8.15			34		1.50			1.46			2.91
Class R-2:
Year ended 10/31/2009		42.26		1.45		4.41			5.86			(1.74	)		-			(1.74	)		46.38		14.44			633		1.56			1.55			3.48
Year ended 10/31/2008		68.58		1.81		(23.58	)		(21.77	)		(2.15	)		(2.40	)		(4.55	)		42.26		(33.48	)		501		1.45			1.43			3.18
Year ended 10/31/2007		59.91		1.98		9.62			11.60			(1.76	)		(1.17	)		(2.93	)		68.58		19.93			647		1.45			1.41			3.14
Year ended 10/31/2006		52.58		1.65		8.06			9.71			(1.69	)		(.69	)		(2.38	)		59.91		18.98			395		1.55			1.42			2.97
Year ended 10/31/2005		50.75		1.55		2.56			4.11			(1.38	)		(.90	)		(2.28	)		52.58		8.18			241		1.61			1.44			2.95
Class R-3:
Year ended 10/31/2009		42.26		1.68		4.41			6.09			(1.95	)		-			(1.95	)		46.40		15.04			801		1.02			1.02			4.03
Year ended 10/31/2008		68.58		2.09		(23.58	)		(21.49	)		(2.43	)		(2.40	)		(4.83	)		42.26		(33.14	)		664		.96			.94			3.67
Year ended 10/31/2007		59.91		2.27		9.62			11.89			(2.05	)		(1.17	)		(3.22	)		68.58		20.47			817		.97			.94			3.61
Year ended 10/31/2006		52.58		1.91		8.06			9.97			(1.95	)		(.69	)		(2.64	)		59.91		19.51			454		.98			.96			3.42
Year ended 10/31/2005		50.75		1.80		2.56			4.36			(1.63	)		(.90	)		(2.53	)		52.58		8.68			268		1.00			.98			3.41
Class R-4:
Year ended 10/31/2009		42.26		1.81		4.40			6.21			(2.07	)		-			(2.07	)		46.40		15.39			347		.70			.69			4.32
Year ended 10/31/2008		68.58		2.27		(23.58	)		(21.31	)		(2.61	)		(2.40	)		(5.01	)		42.26		(32.93	)		240		.65			.63			3.99
Year ended 10/31/2007		59.91		2.46		9.62			12.08			(2.24	)		(1.17	)		(3.41	)		68.58		20.83			270		.67			.64			3.95
Year ended 10/31/2006		52.58		2.07		8.06			10.13			(2.11	)		(.69	)		(2.80	)		59.91		19.88			119		.68			.66			3.68
Year ended 10/31/2005		50.75		1.95		2.56			4.51			(1.78	)		(.90	)		(2.68	)		52.58		9.01			70		.70			.68			3.71
Class R-5:
Year ended 10/31/2009		42.26		1.97		4.36			6.33			(2.17	)		-			(2.17	)		46.42		15.72			376		.40			.40			4.83
Year ended 10/31/2008		68.58		2.44		(23.58	)		(21.14	)		(2.78	)		(2.40	)		(5.18	)		42.26		(32.73	)		717		.36			.34			4.28
Year ended 10/31/2007		59.91		2.65		9.62			12.27			(2.43	)		(1.17	)		(3.60	)		68.58		21.17			879		.37			.35			4.22
Year ended 10/31/2006		52.58		2.24		8.06			10.30			(2.28	)		(.69	)		(2.97	)		59.91		20.23			467		.38			.36			4.03
Year ended 10/31/2005		50.75		2.11		2.56			4.67			(1.94	)		(.90	)		(2.84	)		52.58		9.33			292		.39			.37			4.00
Class R-6:
Six months ended 10/31/2009		39.83		1.00		6.55			7.55			(.96	)		-			(.96	)		46.42		19.10			318		.36	(6)		.36	(6)		4.53	(6)

	Year ended October 31
	2009			2008			2007			2006			2005
Portfolio turnover rate for all classes of shares		43	%		30	%		24	%		26	%		20	%

(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)For the year ended October 31, 2007, this column reflects the impact of a corporate action event that resulted in a one-time increase to net investment income. If the corporate action had not occurred, the Class A net investment income per share and ratio of net income to average net assets would have been lower by $0.22 and 0.34%, respectively. The impact to the other share classes would have been approximately the same.

(4)Total returns exclude any applicable sales charges, including contingent deferred sales charges.

(5)This column reflects the impact, if any, of certain reimbursements/waivers from CRMC. During some of the periods shown, CRMC reduced fees for investment advisory services. In addition, during some of the periods shown, CRMC paid a portion of the fund's transfer agent fees for certain retirement plan share classes.

(6)Annualized.

See Notes to Financial Statements

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Capital Income Builder, Inc.:

In our opinion, the accompanying statement of assets and liabilities, including the summary investment portfolio, 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 Capital Income Builder, Inc. (the "Fund") at October 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its 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 Fund's 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 October 31, 2009 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Los Angeles, California

December 7, 2009

Expense example     

                                                                                                                                                unaudited

As a shareholder of the fund, you incur two types of costs: (1) transaction costs, such as initial sales charges on purchase payments and contingent deferred sales charges on redemptions (loads), and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, and other expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2009, through October 31, 2009).

Actual expenses:

The first line of each share class in the table on the next page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period.

Hypothetical example for comparison purposes:

The second line of each share class in the table on the next page provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio for the share class and an assumed rate of return of 5.00% per year before expenses, which is not the actual return of the share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5.00% hypothetical example with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.

Notes:

There are some account fees that are charged to certain types of accounts, such as individual retirement accounts and 529 college savings plan accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually), that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F-1, F-2 and 529-F-1 shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would be lower by the amount of these fees.

Note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Beginning account value 5/1/2009		Ending account value 10/31/2009		Expenses paid during period*		Annualized expense ratio
Class A -- actual return	$	1,000.00	$	1,194.59	$	3.65		.66	%
Class A -- assumed 5% return		1,000.00		1,021.88		3.36		.66
Class B -- actual return		1,000.00		1,190.00		7.89		1.43
Class B -- assumed 5% return		1,000.00		1,018.00		7.27		1.43
Class C -- actual return		1,000.00		1,189.86		8.17		1.48
Class C -- assumed 5% return		1,000.00		1,017.74		7.53		1.48
Class F-1 -- actual return		1,000.00		1,194.69		3.65		.66
Class F-1 -- assumed 5% return		1,000.00		1,021.88		3.36		.66
Class F-2 -- actual return		1,000.00		1,196.19		2.27		.41
Class F-2 -- assumed 5% return		1,000.00		1,023.14		2.09		.41
Class 529-A -- actual return		1,000.00		1,194.20		3.98		.72
Class 529-A -- assumed 5% return		1,000.00		1,021.58		3.67		.72
Class 529-B -- actual return		1,000.00		1,189.32		8.44		1.53
Class 529-B -- assumed 5% return		1,000.00		1,017.49		7.78		1.53
Class 529-C -- actual return		1,000.00		1,189.42		8.39		1.52
Class 529-C -- assumed 5% return		1,000.00		1,017.54		7.73		1.52
Class 529-E -- actual return		1,000.00		1,192.53		5.58		1.01
Class 529-E -- assumed 5% return		1,000.00		1,020.11		5.14		1.01
Class 529-F-1 -- actual return		1,000.00		1,195.66		2.82		.51
Class 529-F-1 -- assumed 5% return		1,000.00		1,022.63		2.60		.51
Class R-1 -- actual return		1,000.00		1,189.83		8.00		1.45
Class R-1 -- assumed 5% return		1,000.00		1,017.90		7.38		1.45
Class R-2 -- actual return		1,000.00		1,189.46		8.44		1.53
Class R-2 -- assumed 5% return		1,000.00		1,017.49		7.78		1.53
Class R-3 -- actual return		1,000.00		1,192.48		5.64		1.02
Class R-3 -- assumed 5% return		1,000.00		1,020.06		5.19		1.02
Class R-4 -- actual return		1,000.00		1,194.43		3.87		.70
Class R-4 -- assumed 5% return		1,000.00		1,021.68		3.57		.70
Class R-5 -- actual return		1,000.00		1,196.06		2.27		.41
Class R-5 -- assumed 5% return		1,000.00		1,023.14		2.09		.41
Class R-6 -- actual return		1,000.00		1,191.04		1.98		.36
Class R-6 -- assumed 5% return		1,000.00		1,023.39		1.84		.36

*The “expenses paid during period” are equal to the “annualized expense ratio,” multiplied by the average account value over the period, multiplied by the number of days in the period, and divided by 365 (to reflect the one-half year period).

Tax information                                                                                                         

                       unaudited

We are required to advise you within 60 days of the fund’s fiscal year-end regarding the federal tax status of certain distributions received by shareholders during such fiscal year. The fund hereby designates the following amounts for the fund’s fiscal year ended October 31, 2009:

Qualified dividend income	$	2,377,211,000
Corporate dividends received deduction	$	922,657,000
U.S. government income that may be exempt from state taxation	$	142,659,000

Individual shareholders should refer to their Form 1099 or other tax information, which will be mailed in January 2010, to determine the calendar year amounts to be included on their 2009 tax returns. Shareholders should consult their tax advisers.

Approval of Investment Advisory and Service Agreement

The fund’s board has approved the fund’s Investment Advisory and Service Agreement (the “agreement”) with Capital Research and Management Company (“CRMC”) for an additional one-year term through October 31, 2010. The board approved the agreement following the recommendation of the fund’s Contracts Committee (the “committee”), which is composed of all of the fund’s independent board members. The board and the committee determined that the fund’s advisory fee structure was fair and reasonable in relation to the services provided and that approving the agreement was in the best interests of the fund and its shareholders.

In reaching this decision, the board and the committee took into account information furnished to them throughout the year, as well as information prepared specifically in connection with their review of the agreement, and were advised by their independent counsel. They considered the factors discussed below, among others, but did not identify any single issue or particular piece of information that, in isolation, was the controlling factor.

1. Nature, extent and quality of services

The board and the committee considered the depth and quality of CRMC’s investment management process, including its global research capabilities; the experience, capability and integrity of its senior management and other personnel; the low turnover rates of its key personnel; the overall financial strength and stability of its organization; and the ongoing evolution of CRMC’s organizational structure designed to maintain and strengthen these qualities. The board and the committee considered, among other things, the impact of current market conditions on the fund and CRMC. The board and the committee also considered the nature, extent and quality of administrative, compliance and shareholder services provided by CRMC to the fund under the agreement and other agreements as well as the benefits to fund shareholders from investing in a fund that is part of a large family of funds. The board and the committee concluded that the nature, extent and quality of the services provided by CRMC have benefited and should continue to benefit the fund and its shareholders.

2. Investment results
The board and the committee considered the investment results of the fund in light of its primary objectives of providing a level of current income that exceeds the average yield on U.S. stocks generally and a growing stream of income, and secondary objective of providing growth of capital. They compared the fund’s total returns with those of other relevant funds (including the other funds that are the basis of the Lipper index for the category in which the fund is included) and market data such as relevant market indices, in each case as available at the time of the related meetings. In addition to the information reviewed by the board and the committee, this report, including the letter to shareholders and related disclosures, contains certain information about the fund’s investment results. The board and the committee concluded that the fund’s results have been satisfactory and that CRMC’s record in managing the fund indicated that its continued management should benefit the fund and its shareholders.

3. Advisory fees and total expenses

The board and the committee compared the advisory fees and total expense levels of the fund to those of other relevant funds. They observed that the fund’s advisory fees and expenses remain significantly below those of most other relevant funds. The board and the committee also noted the breakpoint discounts in the fund’s advisory fee structure that reduce the level of fees charged by CRMC to the fund as fund assets increase. In addition, they reviewed information regarding the advisory fees paid by institutional clients of an affiliate of CRMC with investment mandates similar to those of the fund. They noted that, although the fees paid by those clients generally were lower than those paid by the fund, the differences appropriately reflected the significant investment, operational and regulatory differences between advising mutual funds and institutional clients. The board and the committee concluded that the fund’s cost structure was fair and reasonable in relation to the services provided, and that the shareholders receive reasonable value in return for the advisory fees and other amounts paid to CRMC by the fund.

4. Ancillary benefits

The board and the committee considered a variety of other benefits received by CRMC and its affiliates as a result of CRMC’s relationship with the fund and the other American Funds, including fees for administrative services provided to certain share classes; fees paid to CRMC’s affiliated transfer agent; sales charges and distribution fees received and retained by the fund’s principal underwriter, an affiliate of CRMC; and possible ancillary benefits to CRMC’s institutional management affiliates. The board and the committee reviewed CRMC’s portfolio trading practices, noting that while CRMC receives the benefit of research provided by broker-dealers executing portfolio transactions on behalf of the fund, it does not obtain third-party research or other services in return for allocating brokerage to such broker-dealers. The board and the committee took these ancillary benefits into account in evaluating the reasonableness of the advisory fees and other amounts paid to CRMC by the fund.

5. Adviser financial information

The board and the committee reviewed information regarding CRMC’s costs of providing services to the American Funds, including personnel, systems and resources of investment, compliance, trading, accounting and other administrative operations. They considered CRMC’s costs and willingness to invest in technology, infrastructure and staff to maintain and expand services and capabilities, respond to industry and regulatory developments, and attract and retain qualified personnel. They noted information previously received regarding the compensation structure for CRMC’s investment professionals. The board and the committee also compared CRMC’s profitability to the reported results of several large, publicly held investment management companies. The board and the committee noted the competitiveness and cyclicality of both the mutual fund industry and the capital markets, and the importance in that environment of CRMC’s long-term profitability for maintaining its independence, company culture and management continuity. They further considered the breakpoint discounts in the fund’s advisory fee structure and the termination of CRMC’s 10% advisory fee waiver effective December 31, 2008. The board and the committee concluded that the fund’s advisory fee structure reflected a reasonable sharing of benefits between CRMC and the fund’s shareholders.

Other share class results

unaudited

Classes B, C, F and 529

Fund results shown are for past periods and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For current information and month-end results, visit americanfunds.com.

Average annual total returns for periods ended September 30, 2009 (the most recent calendar quarter-end):
	1 year			5 years			Life of class
Class B shares1 — first sold 3/15/00
Reflecting applicable contingent deferred sales charge
(CDSC), maximum of 5%, payable only if shares are
sold within six years of purchase		–5.75	%		3.76	%		7.07	%
Not reflecting CDSC		–1.03			4.08			7.07
Class C shares — first sold 3/15/01
Reflecting CDSC, maximum of 1%, payable only
if shares are sold within one year of purchase		–2.01			4.03			5.81
Not reflecting CDSC		–1.06			4.03			5.81
Class F-1 shares2 — first sold 3/15/01
Not reflecting annual asset-based fee charged
by sponsoring firm		–0.29			4.84			6.61
Class F-2 shares2 — first sold 8/1/08
Not reflecting annual asset-based fee charged
by sponsoring firm		–0.06			—			–7.93
Class 529-A shares3 — first sold 2/19/02
Reflecting 5.75% maximum sales charge		–6.07			3.57			6.00
Not reflecting maximum sales charge		–0.34			4.81			6.83
Class 529-B shares1,3 — first sold 2/15/02
Reflecting applicable CDSC, maximum of 5%, payable
only if shares are sold within six years of purchase		–5.84			3.63			5.86
Not reflecting CDSC		–1.12			3.95			5.86
Class 529-C shares3 — first sold 2/20/02
Reflecting CDSC, maximum of 1%, payable only
if shares are sold within one year of purchase		–2.06			3.96			5.94
Not reflecting CDSC		–1.11			3.96			5.94
Class 529-E shares2,3 — first sold 3/1/02		–0.61			4.49			6.29
Class 529-F-1 shares2,3 — first sold 9/17/02
Not reflecting annual asset-based fee charged
by sponsoring firm		–0.14			4.97			7.58

1These shares are not available for purchase.

2These shares are sold without any initial or contingent deferred sales charge.

3Results shown do not reflect the $10 account setup fee and an annual $10 account maintenance fee.

Investment results assume all distributions are reinvested and reflect applicable fees and expenses. The fund’s investment adviser waived a portion of its management fees from September 1, 2004, through December 31, 2008. Fund results shown reflect the waiver, without which they would have been lower. See the Financial Highlights table on pages 28 and 29 for details that include expense ratios for all share classes.

For information regarding the differences among the various share classes, refer to the fund’s prospectus.

Board of directors and other officers

“Independent” directors
	Year first
	elected
	a director
Name and age	of the fund1	Principal occupation(s) during past five years
Joseph C. Berenato, 63	2005	Chairman and CEO, Ducommun Incorporated
		(aerospace components manufacturer)
H. Frederick Christie, 76	1987	Private investor; former President and CEO, The
Chairman of the Board		Mission Group (non-utility holding company,
(Independent and Non-Executive)		subsidiary of Southern California Edison Company)
Robert J. Denison, 68	2005	Chair, First Security Management (private investment)
Mary Anne Dolan,4 62	2010	Founder and President, MAD Ink (communications
		company); former Editor-In-Chief, The Los Angeles
		Herald Examiner
R. Clark Hooper,4 63	2010	Private investor; former President, Dumbarton Group
		LLC (securities industry consulting); former Executive
		Vice President — Policy and Oversight, NASD
Koichi Itoh, 69	2005	Executive Chairman of the Board, Itoh Building Co.,
		Ltd. (building management); former President,
		Autosplice KK (electronics)
Merit E. Janow, 51	2001	Professor, Columbia University, School of
		International and Public Affairs; former Member,
		World Trade Organization Appellate Body
Leonade D. Jones,4 62	2010	Co-founder, VentureThink LLC (developed and
		managed e-commerce businesses) and Versura Inc.
		(education loan exchange); former Treasurer, The
		Washington Post Company
Gail L. Neale, 74	1987	President, The Lovejoy Consulting Group, Inc. (a pro
		bono consulting group advising nonprofit
		organizations)
Robert J. O’Neill, Ph.D., 73	1992	Member of the Board of Directors, The Lowy Institute
		for International Policy Studies, Sydney, Australia;
		Chairman, Academic Advisory Committee, United
		States Studies Centre, University of Sydney,
		Australia; Chairman of Directors, Forty Seven Friends
		Pty Ltd (a not-for-profit supporting a local art and craft
		center in Australia); former Planning Director and
		acting CEO, United States Studies Centre, University
		of Sydney, Australia; former Deputy Chairman of the
		Council and Chairman of the International Advisory
		Panel, Graduate School of Government, University of
		Sydney, Australia; former Chairman of the Council,
		Australian Strategic Policy Institute; former Chichele
		Professor of the History of War and Fellow, All Souls
		College, University of Oxford; former Chairman of the
		Council, International Institute for Strategic Studies
Donald E. Petersen, 83	1992	Retired; former Chairman of the Board and CEO,
		Ford Motor Company
Stefanie Powers, 67	1989–1996	Actor, Producer; Co-founder and President of The
	1997	William Holden Wildlife Foundation; conservation
		consultant to Land Rover and Jaguar North America;
		author of The Jaguar Conservation Trust
Christopher E. Stone, 53	2009	Daniel and Florence Guggenheim Professor of the
		Practice of Criminal Justice, John F. Kennedy School
		of Government, Harvard University
Steadman Upham, Ph.D., 60	2001	President and Professor of Anthropology, The
		University of Tulsa; former President and Professor of
		Archaeology, Claremont Graduate University
Charles Wolf, Jr., Ph.D., 85	1987	Senior Economic Adviser and Corporate Chair in
		International Economics, The RAND Corporation;
		former Dean, The RAND Graduate School
“Independent” directors
	Number of
	portfolios
	in fund
	complex2
	overseen by
Name and age	director	Other directorships3 held by director
Joseph C. Berenato, 63	6	None
H. Frederick Christie, 76	3	AECOM Technology Corporation; DineEquity, Inc;
Chairman of the Board		Ducommun Incorporated; SouthWest Water Company
(Independent and Non-Executive)
Robert J. Denison, 68	7	None
Mary Anne Dolan,4 62	9	None
R. Clark Hooper,4 63	20	JPMorgan Value Opportunities Fund, Inc.;
		The Swiss Helvetia Fund, Inc.
Koichi Itoh, 69	6	None
Merit E. Janow, 51	17	The NASDAQ Stock Market, LLC;
		Trimble Navigation Limited
Leonade D. Jones,4 62	9	None
Gail L. Neale, 74	5	None
Robert J. O’Neill, Ph.D., 73	3	None
Donald E. Petersen, 83	2	None
Stefanie Powers, 67	3	None
Christopher E. Stone, 53	6	None
Steadman Upham, Ph.D., 60	17	None
Charles Wolf, Jr., Ph.D., 85	2	None

Mary Myers Kauppila retired from the board on September 1, 2009. The directors thank Mrs. Kauppila for her dedication and service to the fund.

See page 36 for footnotes.

“Interested” directors5
	Year first
	elected a
	director or	Principal occupation(s) during past five years and
Name, age and	officer of	positions held with affiliated entities or the
position with fund	the fund1	principal underwriter of the fund
James B. Lovelace,6 53	1992	Senior Vice President — Capital Research Global
Vice Chairman of the Board		Investors, Capital Research and Management
		Company; Director, The Capital Group Companies,
		Inc.7
Joyce E. Gordon,4 53	1996	Senior Vice President — Capital Research Global
		Investors, Capital Research and Management
		Company; Director, Capital Research and
		Management Company
“Interested” directors5
	Number of
	portfolios
	in fund
	complex2
Name, age and	overseen by
position with fund	director	Other directorships3 held by director
James B. Lovelace,6 53	3	None
Vice Chairman of the Board
Joyce E. Gordon,4 53	2	None

Catherine M. Ward will retire from the board on December 31, 2009. The directors thank Ms. Ward for her dedication and service to the fund.

Founding chairman emeritus
Jon B. Lovelace,6 82	Chairman Emeritus, Capital Research and Management Company

The fund’s statement of additional information includes additional information about fund directors and is available without charge upon request by calling American Funds Service Company at 800/421-0180. The address for all directors and officers of the fund is 333 South Hope Street, Los Angeles, CA 90071, Attention: Secretary.

Other officers
	Year first
	elected	Principal occupation(s) during past five years
Name, age and	an officer	and positions held with affiliated entities or the
position with fund	of the fund1	principal underwriter of the fund
Mark R. Macdonald, 50	2001	Senior Vice President — Fixed Income, Capital
Executive Vice President		Research and Management Company; Director,
		Capital Research and Management Company
Michael J. Thawley, 59	2007	Senior Vice President, Capital Research and
Senior Vice President		Management Company; Senior Vice President,
		Capital Strategy Research, Inc.;7 former Australian
		Ambassador to the United States
David A. Hoag, 44	2006	Senior Vice President — Fixed Income, Capital
Vice President		Research and Management Company
David M. Riley, 42	2006	Senior Vice President — Capital Research Global
Vice President		Investors, Capital Research and Management
		Company
Donald H. Rolfe, 37	2008	Associate Counsel — Fund Business Management
Vice President		Group, Capital Research and Management Company
Vincent P. Corti, 53	1987	Vice President — Fund Business Management
Secretary		Group, Capital Research and Management Company
Jeffrey P. Regal, 38	2001	Vice President — Fund Business Management
Treasurer		Group, Capital Research and Management Company
Tanya Schneider, 37	2008	Assistant Vice President — Fund Business
Assistant Secretary		Management Group, Capital Research and
		Management Company
Neal F. Wellons, 38	2008	Vice President — Fund Business Management
Assistant Treasurer		Group, Capital Research and Management Company

1Directors and officers of the fund serve until their resignation, removal or retirement.

2Capital Research and Management Company manages the American Funds, consisting of 30 funds. Capital Research and Management Company also manages American Funds Insurance Series,® which is composed of 16 funds and serves as the underlying investment vehicle for certain variable insurance contracts; American Funds Target Date Retirement Series® Inc., which is composed of nine funds and is available through tax-deferred retirement plans and IRAs; and Endowments, which is composed of two portfolios and is available to certain nonprofit organizations.

3This includes all directorships (other than those in the American Funds or other funds managed by Capital Research and Management Company) that are held by each director as a director of a public company or a registered investment company.

4Mary Anne Dolan, Joyce E. Gordon, R. Clark Hooper and Leonade D. Jones were elected to the board by the fund’s shareholders effective January 1, 2010.

5“Interested persons” within the meaning of the 1940 Act, as amended, on the basis of their affiliation with the fund’s investment adviser, Capital Research and Management Company, or affiliated entities (including the fund’s principal underwriter).

6James B. Lovelace is the son of Jon B. Lovelace.

7Company affiliated with Capital Research and Management Company.

Offices of the fund and of the investment adviser

Capital Research and Management Company

333 South Hope Street

Los Angeles, CA 90071-1406

6455 Irvine Center Drive

Irvine, CA 92618

Principal underwriter

American Funds Distributors, Inc.

333 South Hope Street

Los Angeles, CA 90071-1406

Transfer agent for shareholder accounts

American Funds Service Company

(Write to the address near you.)

P.O. Box 6007

Indianapolis, IN 46206-6007

P.O. Box 2280

Norfolk, VA 23501-2280

Custodian of assets

JPMorgan Chase Bank

270 Park Avenue

New York, NY 10017-2070

Counsel

O’Melveny & Myers LLP

400 South Hope Street

Los Angeles, CA 90071-2899

Independent registered public accounting firm

PricewaterhouseCoopers LLP

350 South Grand Avenue

Los Angeles, CA 90071-2889

Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in the fund’s summary prospectus and prospectus, which can be obtained from your financial professional and should be read carefully before investing. You may also call American Funds Service Company (AFS) at 800/421-0180 or visit the American Funds website at americanfunds.com.

“American Funds Proxy Voting Procedures and Principles” — which describes how we vote proxies relating to portfolio securities — is available on the American Funds website or upon request by calling AFS. The fund files its proxy voting record with the U.S. Securities and Exchange Commission (SEC) for the 12 months ended June 30 by August 31. The proxy voting record is available free of charge on the SEC website at sec.gov and on the American Funds website.

A complete October 31, 2009, portfolio of Capital Income Builder’s investments is available free of charge by calling AFS or visiting the SEC website (where it is part of Form N-CSR).

Capital Income Builder files a complete list of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. This filing is available free of charge on the SEC website. You may also review or, for a fee, copy this filing at the SEC’s Public Reference Room in Washington, D.C. Additional information regarding the operation of the Public Reference Room may be obtained by calling the SEC’s Office of Investor Education and Advocacy at 800/SEC-0330. Additionally, the list of portfolio holdings is available by calling AFS.

This report is for the information of shareholders of Capital Income Builder, but it also may be used as sales literature when preceded or accompanied by the current summary prospectus or prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. If used as sales material after December 31, 2009, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter.

[logo - American Funds®]

The right choice for the long term®

What makes American Funds different?

For nearly 80 years, we have followed a consistent philosophy to benefit our investors. Our 30 carefully conceived, broadly diversified funds, in addition to the target date retirement series, offer opportunities that have attracted over 50 million shareholder accounts.

Our unique combination of strengths includes these five factors:

•A long-term, value-oriented approach

We seek to buy securities at reasonable prices relative to their prospects and hold them for the long term.

•An extensive global research effort

Our investment professionals travel the world to find the best investment opportunities and gain a comprehensive understanding of companies and markets.

•The multiple portfolio counselor system

Our unique approach to portfolio management, developed 50 years ago, blends teamwork with individual accountability and has provided American Funds with a sustainable method of achieving fund objectives.

•Experienced investment professionals

American Funds portfolio counselors have an average of 25 years of investment experience, providing a depth of knowledge and broad perspective that few organizations have.

•A commitment to low management fees

The American Funds provide exceptional value for shareholders, with management fees that are among the lowest in the mutual fund industry.

American Funds span a range of investment objectives

•Growth funds

Emphasis on long-term growth through stocks

AMCAP Fund®

EuroPacific Growth Fund®

The Growth Fund of America®

The New Economy Fund®

New Perspective Fund®

New World Fund®

SMALLCAP World Fund®

•Growth-and-income funds

Emphasis on long-term growth and dividends through stocks

American Mutual Fund®

Capital World Growth and Income FundSM

Fundamental InvestorsSM

International Growth and Income FundSM

The Investment Company of America®

Washington Mutual Investors FundSM

•Equity-income funds

Emphasis on above-average income and growth through stocks and/or bonds

>Capital Income Builder®

The Income Fund of America®

•Balanced fund

Emphasis on long-term growth and current income through stocks and bonds

American Balanced Fund®

•Bond funds

Emphasis on current income through bonds

American High-Income TrustSM

The Bond Fund of AmericaSM

Capital World Bond Fund®

Intermediate Bond Fund of America®

Short-Term Bond Fund of AmericaSM

U.S. Government Securities FundSM

•Tax-exempt bond funds

Emphasis on tax-exempt current income through municipal bonds

American Funds Short-Term Tax-Exempt Bond FundSM

American High-Income Municipal Bond Fund®

Limited Term Tax-Exempt Bond Fund of AmericaSM

The Tax-Exempt Bond Fund of America®

State-specific tax-exempt funds

The Tax-Exempt Fund of California®

The Tax-Exempt Fund of Maryland®

The Tax-Exempt Fund of Virginia®

•Money market fund

American Funds Money Market FundSM

•American Funds Target Date Retirement Series®

The Capital Group Companies

American FundsCapital Research and ManagementCapital InternationalCapital GuardianCapital Bank and Trust

Lit. No. MFGEAR-912-1209P

Litho in USA BAG/Q/8054-S20665

Printed on paper containing 10% post-consumer waste

Printed with inks containing soy and/or vegetable oil

ITEM 2 – Code of Ethics

The Registrant has adopted a Code of Ethics that applies to its Principal Executive Officer and Principal Financial Officer.  The Registrant undertakes to provide to any person without charge, upon request, a copy of the Code of Ethics.  Such request can be made to American Funds Service Company at 800/421-0180 or to the Secretary of the Registrant, 333 South Hope Street, Los Angeles, California 90071.

ITEM 3 – Audit Committee Financial Expert

The Registrant’s board has determined that Charles Wolf, Jr., a member of the Registrant’s audit committee, is an “audit committee financial expert” and "independent," as such terms are defined in this Item. This designation will not increase the designee’s duties, obligations or liability as compared to his or her duties, obligations and liability as a member of the audit committee and of the board, nor will it reduce the responsibility of the other audit committee members.  There may be other individuals who, through education or experience, would qualify as "audit committee financial experts" if the board had designated them as such.  Most importantly, the board believes each member of the audit committee contributes significantly to the effective oversight of the Registrant’s financial statements and condition.

ITEM 4 – Principal Accountant Fees and Services

Registrant:
	a)  Audit Fees:
		2008	$119,000
		2009	$125,000
	b)  Audit-Related Fees:
		2008	None
		2009	None
	c)  Tax Fees:
		2008	$8,000
		2009	$8,000
		The tax fees consist of professional services relating to the preparation of the Registrant’s tax returns.
	d)  All Other Fees:
		2008	None
		2009	None
Adviser and affiliates (includes only fees for non-audit services billed to the adviser and affiliates for engagements that relate directly to the operations and financial reporting of the Registrant and were subject to the pre-approval policies described below):
	a)  Audit Fees:
		Not Applicable
	b)  Audit-Related Fees:
		2008	None
		2009	None
	c)  Tax Fees:
		2008	None
		2009	$15,000
		The tax fees consist of consulting services relating to the Registrant’s investments.
	d)  All Other Fees:
		2008	None
		2009	$2,000
		The other fees consist of subscription services related to an accounting research tool.

All audit and permissible non-audit services that the Registrant’s audit committee considers compatible with maintaining the independent registered public accounting firm’s independence are required to be pre-approved by the committee.  The pre-approval requirement will extend to all non-audit services provided to the Registrant, the investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant, if the engagement relates directly to the operations and financial reporting of the Registrant. The committee will not delegate its responsibility to pre-approve these services to the investment adviser. The committee may delegate to one or more committee members the authority to review and pre-approve audit and permissible non-audit services.  Actions taken under any such delegation will be reported to the full committee at its next meeting. The pre-approval requirement is waived with respect to non-audit services if certain conditions are met. The pre-approval requirement was not waived for any of the non-audit services listed above provided to the Registrant, adviser and affiliates.

Aggregate non-audit fees paid to the Registrant’s auditors, including fees for all services billed to the Registrant, adviser and affiliates that provide ongoing services to the Registrant, were $8,000 for fiscal year 2008 and $25,000 for fiscal year 2009. The non-audit services represented by these amounts were brought to the attention of the committee and considered to be compatible with maintaining the auditors’ independence.

ITEM 5 – Audit Committee of Listed Registrants

Not applicable to this Registrant, insofar as the Registrant is not a listed issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934.

ITEM 6 – Schedule of Investments

[logo – American Funds®]

Capital Income Builder®

Investment portfolio

October 31, 2009

Common stocks — 62.66%	Shares			Value (000)
TELECOMMUNICATION SERVICES — 8.56%
AT&T Inc.		52,431,230		$	1,345,910
Verizon Communications Inc.		33,541,700			992,499
América Móvil, SAB de CV, Series L (ADR)		18,738,000			826,908
CenturyTel, Inc.1		19,053,597			618,480
Koninklijke KPN NV2		27,589,050			500,815
Telefónica, SA2		17,460,000			487,955
Telekom Austria AG, non-registered shares2		15,492,711			254,001
Singapore Telecommunications Ltd.2		115,233,500			238,989
Belgacom SA2		6,034,800			226,636
Vodafone Group PLC2		75,200,000			166,638
Telekomunikacja Polska SA2		25,467,566			149,223
France Télécom SA2		5,743,000			142,179
Türk Telekomünikasyon AS, Class D2		46,737,000			141,060
Advanced Info Service PCL2		50,509,000			129,263
Taiwan Mobile Co., Ltd.2		33,484,516			59,551
DiGi.Com Bhd.2		8,852,000			56,546
Philippine Long Distance Telephone Co.2		1,053,250			56,359
Telecom Italia SpA, nonvoting2		46,468,726			51,253
StarHub Ltd2		25,787,250			34,545
Telkom SA Ltd.2		5,227,300			28,929
OJSC Mobile TeleSystems (ADR)		565,500			25,617
MTN Group Ltd.2		1,495,800			22,352
BT Group PLC2		10,000,000			21,383
China Mobile Ltd.2		2,000,000			18,729
Far EasTone Telecommunications Co., Ltd.2		1,634,111			1,836
					6,597,656
FINANCIALS — 8.52%
Banco Santander, SA2		82,073,972			1,322,796
BNP Paribas SA2		6,312,291			475,461
Banco Bradesco SA, preferred nominative		22,083,300			434,500
HSBC Holdings PLC (Hong Kong)2		26,741,178			292,962
HSBC Holdings PLC (United Kingdom)2		9,728,436			107,824
Hang Seng Bank Ltd.2		24,991,100			354,651
Westpac Banking Corp.2		15,251,722			354,634
Bank of China Ltd., Class H2		574,785,000			331,360
JPMorgan Chase & Co.		6,145,000			256,677
Royal Bank of Canada		4,396,111			222,917
Industrial and Commercial Bank of China Ltd., Class H2		257,486,000			204,820
Bank of Nova Scotia		4,847,200			202,957
HCP, Inc.		6,680,500			197,676
Sampo Oyj, Class A2		6,873,962			164,753
Société Générale2		2,403,118			159,817
Itaú Unibanco Holding SA, preferred nominative		7,483,630			142,728
Admiral Group PLC2		7,584,570			127,701
CapitaMall Trust, units2		112,596,592			126,135
Prudential PLC2		10,222,231			92,896
Westfield Group2		8,249,175			88,171
Equity Residential, shares of beneficial interest		2,755,800			79,587
S P Setia Bhd.1,2		58,027,000			65,341
Arthur J. Gallagher & Co.		2,903,589			64,779
Bank of the Philippine Islands2		57,933,564			55,925
Wells Fargo & Co.		1,970,000			54,214
Starwood Property Trust, Inc.1		2,675,000			53,848
Bank of New York Mellon Corp.		1,924,536			51,308
Weingarten Realty Investors		2,634,750			48,743
Sun Hung Kai Properties Ltd.2		2,925,000			44,365
Kimco Realty Corp.		3,103,500			39,228
Champion Real Estate Investment Trust2		89,272,000			37,518
TrygVesta A/S2		514,300			37,119
Frasers Centrepoint Trust1,2		39,264,000			33,431
Unibail-Rodamco SE, non-registered shares2		150,000			33,255
United Bankshares, Inc.		1,775,000			31,684
SM Prime Holdings, Inc.2		125,000,000			25,618
Eurobank Properties REIT2		1,950,000			24,587
CapitaRetail China Trust2		30,837,000			24,468
Kerry Properties Ltd.2		4,240,696			23,809
ProLogis, shares of beneficial interest		1,750,000			19,827
CapitaCommercial Trust2		26,272,300			19,774
Colony Financial, Inc.1,3		750,000			14,587
Banco Bilbao Vizcaya Argentaria, SA2		672,677			12,064
Fannie Mae3		10,000,000			10,800
Freddie Mac3		5,300,000			6,519
					6,573,834
CONSUMER STAPLES — 6.73%
Philip Morris International Inc.		30,030,800			1,422,259
PepsiCo, Inc.		10,980,000			664,839
Nestlé SA2		10,975,000			511,070
Coca-Cola Co.		8,972,000			478,297
Kraft Foods Inc., Class A		13,527,870			372,287
Altria Group, Inc.		19,755,000			357,763
Kellogg Co.		5,349,000			275,687
Diageo PLC2		14,085,000			229,918
Sara Lee Corp.		16,840,600			190,130
Reynolds American Inc.		3,480,000			168,710
Clorox Co.		1,685,000			99,803
Kimberly-Clark Corp.		1,500,000			91,740
H.J. Heinz Co.		2,000,000			80,480
Foster’s Group Ltd.2		13,500,000			65,671
ConAgra Foods, Inc.		3,000,000			63,000
Imperial Tobacco Group PLC2		1,390,000			41,027
SABMiller PLC2		1,050,000			27,617
Nestlé India Ltd.2		480,000			26,161
Procter & Gamble Co.		390,000			22,620
					5,189,079
UTILITIES — 6.70%
GDF Suez2		16,302,320			683,129
Exelon Corp.		9,601,500			450,886
Dominion Resources, Inc.		11,251,980			383,580
Scottish and Southern Energy PLC2		20,452,784			362,654
Hongkong Electric Holdings Ltd.2		65,466,500			349,786
FirstEnergy Corp.		7,755,500			335,658
Fortum Oyj2		11,366,230			269,292
Veolia Environnement2		8,245,682			268,830
Gas Natural SDG, SA2		10,854,000			218,305
PPL Corp.		7,246,893			213,349
RWE AG2		2,400,000			210,414
Public Service Enterprise Group Inc.		6,865,700			204,598
Southern Co.		5,500,000			171,545
Progress Energy, Inc.		3,875,000			145,429
Ameren Corp.		4,816,420			117,232
Xcel Energy Inc.		5,516,000			104,032
DTE Energy Co.		2,750,000			101,695
FPL Group, Inc.		2,000,000			98,200
SUEZ Environnement Co.2		3,837,375			85,497
Cheung Kong Infrastructure Holdings Ltd.2		20,671,000			73,698
Entergy Corp.		752,500			57,732
E.ON AG2		1,500,000			57,407
Electricité de France SA2		850,989			47,385
Electricity Generating PCL2		19,226,428			42,981
Consolidated Edison, Inc.		900,000			36,612
NiSource Inc.		2,289,307			29,578
National Grid PLC2		2,632,652			26,217
Pinnacle West Capital Corp.		738,200			23,120
					5,168,841
ENERGY — 6.56%
Royal Dutch Shell PLC, Class A (ADR)		9,328,000			554,177
Royal Dutch Shell PLC, Class B2		5,067,187			147,013
Royal Dutch Shell PLC, Class B (ADR)		1,866,228			108,540
Royal Dutch Shell PLC, Class A2		3,055,000			90,976
BP PLC2		94,932,042			895,435
Sasol Ltd.2		22,431,827			836,568
Eni SpA2		28,260,866			701,552
Eni SpA (ADR)		912,492			45,241
ConocoPhillips		8,257,970			414,385
Woodside Petroleum Ltd.2		7,880,000			330,590
TOTAL SA2		3,756,000			223,939
TOTAL SA (ADR)		600,000			36,042
Enbridge Inc.		3,523,468			137,228
OAO LUKOIL (ADR)2		2,240,800			129,474
Husky Energy Inc.		4,850,000			127,903
StatoilHydro ASA2		3,500,532			83,188
China National Offshore Oil Corp.2		44,764,000			67,119
PetroChina Co. Ltd., Class H2		44,418,000			53,628
Spectra Energy Corp		2,783,220			53,215
Chevron Corp.		259,700			19,877
					5,056,090
INDUSTRIALS — 5.73%
Siemens AG2		6,126,000			552,705
Geberit AG2		1,718,000			285,023
United Technologies Corp.		4,355,000			267,615
Eaton Corp.		4,321,000			261,204
MAp Group1,2		93,268,737			238,404
Lockheed Martin Corp.		3,183,000			218,959
Schneider Electric SA2		2,034,500			211,585
FirstGroup PLC1,2		31,300,000			192,962
Singapore Technologies Engineering Ltd.2		91,974,000			185,762
Leighton Holdings Ltd.2		5,728,928			180,478
Burlington Northern Santa Fe Corp.		1,803,000			135,802
Waste Management, Inc.		4,150,000			124,002
Emerson Electric Co.		3,165,000			119,479
ASSA ABLOY AB, Class B2		6,460,000			115,394
Hays PLC1,2		71,032,000			114,103
CSX Corp.		2,605,000			109,879
Robert Half International Inc.		4,360,000			101,152
AB Volvo, Class B2		10,062,000			97,187
De La Rue PLC1,2		6,374,619			95,600
Österreichische Post AG2		2,872,569			84,005
General Electric Co.		5,230,000			74,580
Norfolk Southern Corp.		1,540,000			71,795
Uponor Oyj2		3,480,800			63,205
Spirax-Sarco Engineering PLC2		3,045,391			54,392
Transport International Holdings Ltd.2		18,625,900			52,482
Société BIC SA2		690,000			48,080
BELIMO Holding AG1,2		42,250			43,314
AB SKF, Class B2		2,670,000			43,177
Singapore Post Private Ltd.2		60,400,000			40,540
Seco Tools AB, Class B2		2,702,640			36,315
Go-Ahead Group PLC2		1,525,000			35,522
Hopewell Highway Infrastructure Ltd.2		46,145,630			27,798
Steelcase Inc., Class A		4,440,000			25,619
Jiangsu Expressway Co. Ltd., Class H2		26,436,000			23,455
IMI PLC2		3,060,000			21,654
SIA Engineering Co. Ltd.2		8,617,000			17,139
Pfeiffer Vacuum Technology AG, non-registered shares2		215,000			16,190
Watsco, Inc.		285,000			14,598
DCC PLC2		390,000			10,262
Seaspan Corp.		449,100			3,889
					4,415,306
HEALTH CARE — 5.36%
Merck & Co., Inc.		28,266,100			874,270
Bayer AG2		8,184,000			567,577
Novartis AG2		8,565,000			447,563
Roche Holding AG2		2,721,000			436,730
Johnson & Johnson		6,500,000			383,825
Bristol-Myers Squibb Co.		16,450,000			358,610
Pfizer Inc		20,000,000			340,600
Abbott Laboratories		3,520,000			178,006
GlaxoSmithKline PLC2		6,792,000			139,701
Orion Oyj, Class B2		5,837,194			111,074
Sonic Healthcare Ltd.2		7,459,270			92,223
Schering-Plough Corp.		2,246,600			63,354
Takeda Pharmaceutical Co. Ltd.2		1,460,000			58,735
Daiichi Sankyo Co., Ltd.2		2,650,000			52,462
Oriola-KD Oyj, Class B2		4,205,677			22,137
Clínica Baviera, SA2,3		790,430			9,499
					4,136,366
INFORMATION TECHNOLOGY — 3.95%
Taiwan Semiconductor Manufacturing Co. Ltd.2		275,461,272			499,375
Taiwan Semiconductor Manufacturing Co. Ltd. (ADR)		10,455,599			99,746
Microsoft Corp.		15,321,800			424,874
Delta Electronics, Inc.2		74,564,430			207,337
Redecard SA, ordinary nominative		13,737,600			204,520
HTC Corp.2		20,106,975			200,379
MediaTek Inc.2		13,126,446			185,222
Paychex, Inc.		5,480,000			155,687
Acer Inc.2		59,938,444			141,427
Automatic Data Processing, Inc.		3,500,000			139,300
Maxim Integrated Products, Inc.		8,290,700			138,206
Intel Corp.		6,957,200			132,952
Wincor Nixdorf AG1,2		2,150,312			125,865
Canon, Inc.2		2,523,800			94,745
Halma PLC2		15,195,069			56,731
Xilinx, Inc.		2,585,900			56,243
Murata Manufacturing Co., Ltd.2		1,101,900			54,329
Siliconware Precision Industries Co., Ltd.2		40,070,300			53,371
Spectris PLC2		2,864,765			31,807
Neopost SA2		310,200			27,204
Oakton Ltd.1,2		4,617,960			14,304
Renishaw PLC2		655,000			5,863
					3,049,487
CONSUMER DISCRETIONARY — 3.18%
OPAP SA1,2		16,421,040			420,092
McDonald’s Corp.		4,120,000			241,473
Esprit Holdings Ltd.2		34,501,800			225,886
Johnson Controls, Inc.		9,077,990			217,146
Toyota Motor Corp.2		3,297,000			130,514
Mattel, Inc.		6,710,000			127,020
Industria de Diseño Textil, SA2		1,985,599			116,699
Daimler AG2		2,261,400			110,217
Greene King PLC1,2		13,877,742			90,021
Yue Yuen Industrial (Holdings) Ltd.2		31,731,500			88,139
Limited Brands, Inc.		5,000,000			88,000
British Sky Broadcasting Group PLC2		9,849,000			85,997
Kingfisher PLC2		18,845,000			69,045
Leggett & Platt, Inc.		2,490,000			48,132
Genuine Parts Co.		1,280,000			44,787
DSG international PLC2,3		85,412,161			42,876
Li & Fung Ltd.2		9,530,000			39,468
Ekornes ASA1,2		1,980,425			36,807
Intercontinental Hotels Group PLC2		2,412,352			30,940
Bijou Brigitte modische Accessoires AG2		182,900			29,644
Halfords Group PLC2		4,590,000			29,506
Kesa Electricals PLC2		13,430,200			29,190
Carnival Corp., units		1,000,000			29,120
Marks and Spencer Group PLC2		4,780,000			26,826
Headlam Group PLC2		2,938,547			14,990
Aristocrat Leisure Ltd.2		3,791,027			14,977
Fairfax Media Ltd.2		10,000,000			14,155
Autoliv AB		416,500			13,986
					2,455,653
MATERIALS — 2.80%
Akzo Nobel NV2		8,673,000			513,189
Koninklijke DSM NV2		8,539,000			374,068
Israel Chemicals Ltd.2		26,930,907			314,641
RPM International, Inc.1		8,340,000			146,951
Symrise AG1,2		6,835,085			125,969
Fletcher Building Ltd.2		21,176,596			124,845
Impala Platinum Holdings Ltd.2		4,420,000			96,072
Packaging Corp. of America		5,000,000			91,400
CRH PLC2		3,486,962			85,155
OneSteel Ltd.2		25,809,715			69,825
Weyerhaeuser Co.		1,500,000			54,510
Worthington Industries, Inc.		3,639,800			40,220
Lafarge Malayan Cement Bhd.2		22,590,530			39,986
voestalpine AG2		900,000			30,714
Rautaruukki Oyj2		1,431,029			29,191
Ambuja Cements Ltd.2		11,804,916			22,120
					2,158,856
MISCELLANEOUS — 4.57%
Other common stocks in initial period of acquisition					3,527,138
Total common stocks (cost: $47,138,147,000)					48,328,306
Preferred stocks — 0.75%
FINANCIALS — 0.65%
Barclays Bank PLC 7.434%4,5		38,889,000			36,361
Barclays Bank PLC 14.00%5		10,395,000			22,470
Barclays Bank PLC 8.55%4,5		6,011,000			5,801
Barclays Bank PLC 6.86%4,5		4,687,000			3,867
Barclays Bank PLC, Series 1, 6.278% noncumulative5		3,200,000			2,508
Barclays Bank PLC 7.375%4,5		458,000			419
PNC Preferred Funding Trust I 6.517%4,5		53,100,000			37,553
PNC Preferred Funding Trust III 8.70%4,5		32,000,000			31,930
Wells Fargo & Co. 7.98%5		47,224,000			44,450
Wachovia Capital Trust III 5.80%5		21,932,000			15,912
Banco Santander, SA, Series 10, 10.50%3		1,748,757			47,990
JPMorgan Chase & Co., Series I, 7.90%5		44,025,000			44,410
Banco Bilbao Vizcaya Argentaria, SA, 5.919%5		51,660,000			41,387
Mizuho Capital Investment (USD) 2 Ltd. 14.95%4,5		25,000,000			31,482
AXA SA, Series B, 6.379%4,5		28,500,000			24,581
BNP Paribas 7.195%4,5		26,500,000			24,512
QBE Capital Funding II LP 6.797%4,5		28,900,000			23,549
Public Storage, Inc., Series F, 6.45%		1,000,000			21,250
SMFG Preferred Capital USD 2 Ltd. 8.75% noncumulative4		7,031,000			7,043
SMFG Preferred Capital USD 3 Ltd. 9.50%4,5		6,029,000			6,617
Société Générale 5.922%4,5		12,805,000			10,194
Fannie Mae, Series S, 8.25% noncumulative3		2,000,000			2,325
Fannie Mae, Series O, 0%3,4,5		874,555			1,924
Fannie Mae, Series P, 4.50% noncumulative3		1,600,000			1,280
Fannie Mae, Series E, 5.10%3		608,441			1,027
Fannie Mae, Series L, 5.125%3		570,000			832
Freddie Mac, Series V, 5.57%3		3,485,635			3,703
Freddie Mac, Series Z, 8.375%3		2,041,640			2,271
Freddie Mac, Series W, 5.66%3		650,000			658
Freddie Mac, Series Y, 6.55%3		350,250			368
					498,674
U.S. GOVERNMENT AGENCY SECURITIES — 0.08%
CoBank, ACB, Series C, 11.00%4		1,120,000			52,325
US AgBank 6.11%4,5		13,000,000			7,926
					60,251
UTILITIES — 0.02%
Alabama Power Co. 5.625%		800,000			18,025
Total preferred stocks (cost: $869,512,000)					576,950
	Shares or
Convertible securities — 0.27%	principal amount
UTILITIES — 0.05%
PG&E Corp. 9.50% convertible notes 2010	$	14,000,000			38,045
CONSUMER DISCRETIONARY — 0.03%
Ford Motor Co. Capital Trust II 6.50% convertible preferred 2032		473,600			13,687
Johnson Controls, Inc. 11.50% convertible preferred 2012, units		88,000			11,008
					24,695
FINANCIALS — 0.02%
Digital Realty Trust, Inc. 5.50% convertible debentures 20294	$	4,050,000			4,997
Fannie Mae, Series 2004-1, 5.375% convertible preferred3		240			1,200
Fannie Mae, Series 2008-1, 8.75% noncumulative convertible preferred3		1,352,000			2,163
Washington Mutual, Inc., Series R, 7.75% noncumulative convertible preferred3		76,628			1,839
					10,199
MISCELLANEOUS — 0.17%
Other convertible securities in initial period of acquisition					131,521
Total convertible securities (cost: $315,872,000)					204,460
	Principal amount
Bonds & notes — 30.07%		(000	)
MORTGAGE-BACKED OBLIGATIONS6 — 9.90%
Fannie Mae 4.89% 2012	$	25,000			26,388
Fannie Mae, Series 2002-T11, Class B, 5.341% 2012		30,000			32,225
Fannie Mae 4.00% 2015		11,208			11,569
Fannie Mae 11.00% 2015		384			437
Fannie Mae 7.00% 2016		47			50
Fannie Mae 11.00% 2016		165			191
Fannie Mae 5.00% 2017		114			122
Fannie Mae, Series 2002-15, Class PG, 6.00% 2017		7,610			8,180
Fannie Mae 5.00% 2018		19,588			20,909
Fannie Mae 5.00% 2018		1,271			1,356
Fannie Mae 11.00% 2018		352			406
Fannie Mae 4.00% 2019		28,638			29,823
Fannie Mae 4.50% 2019		22,556			23,793
Fannie Mae 4.50% 2019		17,729			18,707
Fannie Mae 4.50% 2019		13,489			14,231
Fannie Mae 5.50% 2019		2,346			2,525
Fannie Mae 4.50% 2020		25,095			26,472
Fannie Mae 4.50% 2020		2,048			2,160
Fannie Mae 5.50% 2020		5,620			6,048
Fannie Mae 11.00% 2020		84			96
Fannie Mae 4.50% 2021		70,941			74,699
Fannie Mae, Series 2006-78, Class CG, 4.50% 2021		15,000			15,581
Fannie Mae 6.00% 2021		5,388			5,803
Fannie Mae 6.00% 2021		728			784
Fannie Mae, Series 2003-48, Class TJ, 4.50% 2022		32,654			33,696
Fannie Mae 5.50% 2022		14,603			15,548
Fannie Mae 5.50% 2022		11,369			12,104
Fannie Mae 5.50% 2022		4,318			4,597
Fannie Mae 10.50% 2022		179			207
Fannie Mae 5.00% 2023		31,505			33,246
Fannie Mae 5.00% 2023		16,182			17,076
Fannie Mae 5.00% 2023		15,377			16,226
Fannie Mae 5.00% 2023		13,352			14,090
Fannie Mae 5.00% 2023		11,502			12,138
Fannie Mae 5.00% 2023		10,739			11,332
Fannie Mae 5.00% 2023		9,921			10,469
Fannie Mae 5.00% 2023		8,919			9,427
Fannie Mae 5.00% 2023		6,533			6,894
Fannie Mae 5.50% 2023		34,238			36,463
Fannie Mae 4.00% 2024		233,672			238,383
Fannie Mae 4.00% 2024		77,612			79,134
Fannie Mae 4.00% 2024		59,179			60,340
Fannie Mae 4.00% 2024		48,242			49,214
Fannie Mae 4.00% 2024		48,157			49,128
Fannie Mae 4.00% 2024		47,755			48,692
Fannie Mae 4.00% 2024		47,473			48,430
Fannie Mae 4.00% 2024		43,679			44,560
Fannie Mae 4.00% 2024		38,290			39,062
Fannie Mae 4.00% 2024		29,327			29,918
Fannie Mae 4.50% 2024		70,553			73,431
Fannie Mae 4.50% 2024		49,227			51,235
Fannie Mae 4.50% 2024		48,517			50,480
Fannie Mae 4.50% 2024		45,021			46,843
Fannie Mae 4.50% 2024		44,086			45,870
Fannie Mae 4.50% 2024		27,138			28,245
Fannie Mae 4.50% 2024		19,567			20,365
Fannie Mae 4.50% 2024		19,448			20,241
Fannie Mae 4.50% 2024		17,796			18,522
Fannie Mae 4.50% 2024		16,627			17,305
Fannie Mae 5.00% 2024		41,795			44,144
Fannie Mae 5.50% 2024		85,275			90,871
Fannie Mae 6.00% 2024		25,654			27,382
Fannie Mae 6.00% 2024		544			583
Fannie Mae 6.00% 2026		63,299			67,564
Fannie Mae 6.00% 2026		8,066			8,609
Fannie Mae 6.00% 2027		143,261			152,914
Fannie Mae 6.50% 2027		3,902			4,199
Fannie Mae 6.00% 2028		5,070			5,412
Fannie Mae 6.00% 2028		4,306			4,589
Fannie Mae 6.00% 2028		2,811			3,000
Fannie Mae 6.00% 2028		2,572			2,741
Fannie Mae 5.50% 2029		80,703			85,368
Fannie Mae 7.50% 2029		54			60
Fannie Mae, Series 2001-25, Class ZA, 6.50% 2031		2,429			2,604
Fannie Mae 7.50% 2031		174			192
Fannie Mae 7.50% 2031		31			34
Fannie Mae 5.50% 2033		7,547			7,986
Fannie Mae 5.50% 2033		2,802			2,965
Fannie Mae 5.50% 2034		13,130			13,883
Fannie Mae, Series 2005-68, Class PG, 5.50% 2035		12,511			13,379
Fannie Mae 5.50% 2035		9,162			9,686
Fannie Mae 6.50% 2035		15,667			16,968
Fannie Mae, Series 2006-32, Class OA, principal only, 0% 2036		11,508			9,722
Fannie Mae, Series 2006-51, Class PO, principal only, 0% 2036		8,136			6,854
Fannie Mae, Series 2006-56, Class OG, principal only, 0% 2036		1,917			1,613
Fannie Mae, Series 2006-96, Class OP, principal only, 0% 2036		1,715			1,416
Fannie Mae, Series 2006-65, Class PF, 0.524% 20365		11,702			11,531
Fannie Mae, Series 2006-101, Class PC, 5.50% 2036		21,534			22,771
Fannie Mae, Series 2006-106, Class HG, 6.00% 2036		58,410			62,580
Fannie Mae 6.00% 2036		54,748			58,583
Fannie Mae, Series 2006-43, Class PX, 6.00% 2036		51,044			54,511
Fannie Mae 6.00% 2036		41,963			44,876
Fannie Mae, Series 2006-49, Class PA, 6.00% 2036		38,630			41,749
Fannie Mae 6.00% 2036		37,728			40,294
Fannie Mae, Series 2006-114, Class PD, 6.00% 2036		34,610			37,103
Fannie Mae 6.00% 2036		25,044			26,798
Fannie Mae 6.00% 2036		15,589			16,681
Fannie Mae 6.00% 2036		12,392			13,260
Fannie Mae 6.00% 2036		3,659			3,921
Fannie Mae 7.00% 2036		2,936			3,207
Fannie Mae 7.50% 2036		2,031			2,207
Fannie Mae, Series 2007-114, Class A7, 0.444% 20372,5		20,000			17,975
Fannie Mae, Series 2007-37, Class AP, 5.25% 2037		69,451			74,259
Fannie Mae 5.284% 20375		6,859			7,232
Fannie Mae, Series 2007-40, Class PT, 5.50% 2037		52,457			56,250
Fannie Mae, Series 2007-33, Class HE, 5.50% 2037		15,623			16,538
Fannie Mae 5.97% 20375		2,665			2,829
Fannie Mae 6.00% 2037		25,856			27,526
Fannie Mae 6.00% 2037		17,854			19,093
Fannie Mae 6.00% 2037		17,843			19,082
Fannie Mae 6.00% 2037		11,964			12,795
Fannie Mae, Series 2007-24, Class P, 6.00% 2037		7,770			8,331
Fannie Mae 6.428% 20375		2,867			3,050
Fannie Mae 6.50% 2037		30,234			32,508
Fannie Mae 6.50% 2037		18,671			20,075
Fannie Mae 6.50% 2037		13,523			14,540
Fannie Mae 6.50% 2037		12,699			13,622
Fannie Mae 6.50% 2037		3,262			3,508
Fannie Mae 6.50% 2037		2,409			2,591
Fannie Mae 6.50% 2037		1,995			2,145
Fannie Mae 6.656% 20375		2,617			2,785
Fannie Mae 7.00% 2037		49,439			54,004
Fannie Mae 7.00% 2037		979			1,069
Fannie Mae 7.00% 2037		411			449
Fannie Mae 7.50% 2037		10,359			11,255
Fannie Mae 7.50% 2037		5,122			5,622
Fannie Mae 7.50% 2037		2,967			3,224
Fannie Mae 7.50% 2037		1,931			2,098
Fannie Mae 7.50% 2037		1,667			1,801
Fannie Mae 7.50% 2037		620			670
Fannie Mae 7.50% 2037		347			377
Fannie Mae 4.50% 2038		94,211			95,450
Fannie Mae 5.00% 2038		43,098			44,735
Fannie Mae 5.131% 20385		17,313			18,169
Fannie Mae 5.373% 20385		23,433			24,895
Fannie Mae 5.454% 20385		14,247			15,152
Fannie Mae 5.50% 2038		143,012			150,791
Fannie Mae 5.50% 2038		59,255			62,469
Fannie Mae 5.50% 2038		46,461			48,988
Fannie Mae 5.50% 2038		40,423			42,634
Fannie Mae 5.50% 2038		28,244			29,859
Fannie Mae 5.50% 2038		28,242			29,774
Fannie Mae 5.50% 2038		22,853			24,160
Fannie Mae 5.50% 2038		18,201			19,242
Fannie Mae 5.50% 2038		16,320			17,222
Fannie Mae 5.50% 2038		12,255			12,956
Fannie Mae 5.50% 2038		11,403			12,022
Fannie Mae 5.50% 2038		5,328			5,632
Fannie Mae 5.549% 20385		2,466			2,615
Fannie Mae 6.00% 2038		95,089			101,230
Fannie Mae 6.00% 2038		77,934			82,918
Fannie Mae 6.00% 2038		47,579			50,651
Fannie Mae 6.00% 2038		15,299			16,287
Fannie Mae 6.00% 2038		11,156			11,877
Fannie Mae 6.50% 2038		41,361			44,468
Fannie Mae 6.50% 2038		26,395			28,380
Fannie Mae 6.50% 2038		16,591			17,837
Fannie Mae 7.00% 2038		1,556			1,699
Fannie Mae 3.58% 20395		13,749			13,989
Fannie Mae 3.618% 20395		25,215			25,968
Fannie Mae 3.62% 20392,5		21,285			21,882
Fannie Mae 3.625% 20395		9,868			10,164
Fannie Mae 3.625% 20395		7,684			7,898
Fannie Mae 3.645% 20395		19,778			20,369
Fannie Mae 3.70% 20392,5		13,760			14,137
Fannie Mae 3.76% 20395		9,897			10,228
Fannie Mae 3.761% 20395		21,936			22,660
Fannie Mae 3.84% 20392,5		10,000			10,325
Fannie Mae 3.85% 20395		9,663			10,010
Fannie Mae 3.861% 20395		16,107			16,696
Fannie Mae 3.90% 20392,5		22,585			23,371
Fannie Mae 3.913% 20395		5,980			6,198
Fannie Mae 3.914% 20395		9,843			10,142
Fannie Mae 3.95% 20395		3,000			3,111
Fannie Mae 3.951% 20395		12,872			13,359
Fannie Mae 4.00% 20392,5		9,600			9,972
Fannie Mae 5.126% 20395		8,403			8,911
Fannie Mae 5.50% 2039		18,279			19,268
Fannie Mae 6.00% 2039		29,776			31,680
Fannie Mae, Series 2001-50, Class BA, 7.00% 2041		340			367
Fannie Mae, Series 2002-W3, Class A-5, 7.50% 2041		256			286
Fannie Mae 7.00% 2047		4,565			4,950
Freddie Mac 6.00% 2017		249			269
Freddie Mac 4.50% 2018		3,658			3,861
Freddie Mac, Series 2890, Class KT, 4.50% 2019		2,500			2,610
Freddie Mac 5.50% 2019		7,364			7,937
Freddie Mac, Series 2642, Class BL, 3.50% 2023		7,731			7,829
Freddie Mac, Series 2626, Class NG, 3.50% 2023		4,152			4,210
Freddie Mac 4.50% 2023		42,650			44,439
Freddie Mac 5.50% 2023		16,766			17,872
Freddie Mac 6.00% 2023		9,062			9,752
Freddie Mac, Series 1617, Class PM, 6.50% 2023		3,040			3,372
Freddie Mac 4.50% 2024		28,759			29,923
Freddie Mac 5.00% 2024		35,825			37,907
Freddie Mac, Series 3135, Class OP, principal only, 0% 2026		4,444			3,928
Freddie Mac 6.00% 2026		20,531			21,950
Freddie Mac 6.00% 2026		19,567			20,919
Freddie Mac 5.50% 2027		36,296			38,477
Freddie Mac 6.00% 2027		15,980			17,084
Freddie Mac 6.50% 2027		20,212			21,757
Freddie Mac 6.50% 2027		17,939			19,310
Freddie Mac 5.50% 2028		52,089			55,303
Freddie Mac, Series 2153, Class GG, 6.00% 2029		5,755			6,189
Freddie Mac, Series 2122, Class QM, 6.25% 2029		11,064			11,864
Freddie Mac 6.50% 2032		3,217			3,484
Freddie Mac 7.50% 2032		1,447			1,590
Freddie Mac, Series 3061, Class PN, 5.50% 2035		19,304			20,733
Freddie Mac, Series 3136, Class OP, principal only, 0% 2036		19,670			17,286
Freddie Mac, Series 3155, Class FO, principal only, 0% 2036		12,065			9,642
Freddie Mac, Series 3149, Class MO, principal only, 0% 2036		5,077			4,314
Freddie Mac, Series 3147, Class OD, principal only, 0% 2036		5,007			4,240
Freddie Mac, Series 3149, Class AO, principal only, 0% 2036		4,448			3,780
Freddie Mac, Series 3117, Class OG, principal only, 0% 2036		2,814			2,410
Freddie Mac, Series 3156, Class NG, 6.00% 2036		46,460			50,295
Freddie Mac, Series 3286, Class JN, 5.50% 2037		32,705			34,519
Freddie Mac 5.50% 2037		20,795			22,015
Freddie Mac 5.715% 20375		18,768			19,970
Freddie Mac 5.885% 20375		9,107			9,651
Freddie Mac, Series 3271, Class OA, 6.00% 2037		31,132			33,713
Freddie Mac 6.00% 2037		529			566
Freddie Mac 6.242% 20375		7,930			8,438
Freddie Mac 5.00% 2038		23,842			24,756
Freddie Mac 5.00% 2038		16,518			17,142
Freddie Mac 5.00% 2038		15,588			16,186
Freddie Mac 5.00% 2038		14,814			15,383
Freddie Mac 5.00% 2038		14,277			14,825
Freddie Mac 5.00% 2038		7,023			7,293
Freddie Mac 5.00% 2038		5,026			5,218
Freddie Mac 5.00% 2038		3,301			3,428
Freddie Mac 5.00% 2038		2,902			3,014
Freddie Mac 5.00% 2038		2,524			2,624
Freddie Mac 5.00% 2038		1,398			1,452
Freddie Mac 5.00% 2038		70			72
Freddie Mac 5.054% 20385		9,051			9,546
Freddie Mac 5.50% 2038		72,045			75,953
Freddie Mac 5.558% 20385		11,642			12,342
Freddie Mac 5.928% 20385		17,597			18,725
Freddie Mac 3.604% 20395		6,000			6,134
Freddie Mac 3.756% 20395		6,900			7,112
Freddie Mac 3.85% 20395		11,925			12,324
Freddie Mac 5.00% 2039		85,960			89,222
Freddie Mac 6.50% 2047		10,641			11,384
Government National Mortgage Assn., Series 2005-7, Class AO, principal only, 0% 2035		8,719			7,405
Government National Mortgage Assn. 6.00% 2035		3,320			3,563
Government National Mortgage Assn., Series 2007-8, Class LO, principal only, 0% 2037		10,623			9,253
Government National Mortgage Assn. 6.00% 2038		66,097			70,610
Government National Mortgage Assn. 6.00% 2038		49,126			52,480
Government National Mortgage Assn. 6.50% 2038		23,946			25,578
Government National Mortgage Assn., Series 2003, Class A, 5.612% 2058		20,042			20,812
Government National Mortgage Assn. 5.816% 2058		12,427			12,928
Government National Mortgage Assn., Series 2003, 6.116% 2058		1,452			1,510
Government National Mortgage Assn. 6.172% 2058		1,869			1,944
Government National Mortgage Assn. 6.205% 2058		5,510			5,732
Government National Mortgage Assn. 6.22% 2058		3,252			3,426
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2001-CIBC1, Class A-3, 6.26% 2033		4,935			5,058
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2001-C1, Class F, 6.856% 20354,5		5,050			4,695
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2004-CIBC10, Class A-3, 4.184% 2037		8,055			8,049
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2004-CBX, Class A-5, 4.654% 2037		3,330			3,206
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CIBC12, Class A-M, 4.948% 20375		5,000			4,264
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2003-ML1, Class A-1, 3.972% 2039		6,109			6,208
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2004-PNC1, Class A-2, 4.555% 2041		16,102			16,192
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP3, Class A-2, 4.851% 2042		26,685			26,780
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP3, Class A-4B, 4.996% 20425		14,840			13,319
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CIBC13, Class A-4, 5.28% 20435		7,200			7,257
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CIBC13, Class A-M, 5.321% 20435		16,830			14,036
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2006-CIBC14, Class A-4, 5.481% 20445		15,000			14,698
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2006-LDP7, Class A-4, 5.875% 20455		18,000			17,385
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP1, Class A-2, 4.625% 2046		33,353			33,369
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2007-LDPX, Class A-2, 5.434% (undated)		21,630			20,106
CS First Boston Mortgage Securities Corp., Series 2002-30, Class I-A-1, 7.50% 2032		660			661
CS First Boston Mortgage Securities Corp., Series 2002-34, Class I-A-1, 7.50% 2032		372			317
CS First Boston Mortgage Securities Corp., Series 2003-21, Class V-A-1, 6.50% 2033		534			505
CS First Boston Mortgage Securities Corp., Series 2003-29, Class V-A-1, 7.00% 2033		1,857			1,826
CS First Boston Mortgage Securities Corp., Series 2004-AR1, Class II-A-1, 4.319% 20345		3,595			3,440
CS First Boston Mortgage Securities Corp., Series 2001-CKN5, Class A-4, 5.435% 2034		2,416			2,486
CS First Boston Mortgage Securities Corp., Series 2001-CK3, Class A-4, 6.53% 2034		7,810			8,153
CS First Boston Mortgage Securities Corp., Series 2001-CK1, Class A-3, 6.38% 2035		41,385			42,730
CS First Boston Mortgage Securities Corp., Series 2002-CKP1, Class G, 7.165% 20354,5		1,435			1,217
CS First Boston Mortgage Securities Corp., Series 2002-CKS4, 4.485% 2036		3,252			3,317
CS First Boston Mortgage Securities Corp., Series 2001-CK6, Class A-3, 6.387% 2036		4,871			5,098
CS First Boston Mortgage Securities Corp., Series 2004-C5, Class A-2, 4.183% 2037		22,150			22,157
CS First Boston Mortgage Securities Corp., Series 2004-C5, Class A-3, 4.499% 2037		11,000			10,724
CS First Boston Mortgage Securities Corp., Series 2002-CKN2, Class A-3, 6.133% 2037		5,000			5,261
CS First Boston Mortgage Securities Corp., Series 2005-C5, Class A-3, 5.10% 20385		14,535			14,474
CS First Boston Mortgage Securities Corp., Series 2006-C1, Class A-AB, 5.548% 20395		18,000			18,658
CS First Boston Mortgage Securities Corp., Series 2005-C6, Class A-3, 5.23% 20405		37,500			37,424
Structured Adjustable Rate Mortgage Loan Trust, Series 2005-22, Class 5-A-1, 5.997% 20355		9,404			6,967
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-8, Class 3-AF, 0.624% 20365		13,212			8,356
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-4, Class 5-A-1, 5.857% 20365		16,796			13,174
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-4, Class 4-A-1, 5.859% 20365		10,752			8,333
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-4, Class 6-A, 5.905% 20365		8,967			6,364
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-2, Class 5-A-1, 6.00% 20365		44,047			29,625
Structured Adjustable Rate Mortgage Loan Trust, Series 2007-6, Class 3-A-1, 5.809% 20375		39,990			25,067
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-12, Class 2-A1, 5.853% 20375		19,962			14,090
Structured Adjustable Rate Mortgage Loan Trust, Series 2007-9, Class 2-A1, 5.905% 20475		26,890			16,409
WaMu Mortgage Pass-Through Certificates Trust, Series 2004-AR11, Class A, 2.90% 20345		2,867			2,727
WaMu Mortgage Pass-Through Certificates Trust, Series 2006-AR12, Class 1-A4, 6.037% 20365		4,050			2,928
WaMu Mortgage Pass-Through Certificates Trust, Series 2007-HY7, Class 2-A1, 5.791% 20375		56,826			37,983
WaMu Mortgage Pass-Through Certificates Trust, Series 2007-HY5, Class 3-A1, 5.805% 20375		52,848			41,216
WaMu Mortgage Pass-Through Certificates Trust, Series 2007-HY7, Class 4-A2, 5.836% 20375		35,426			25,991
Banc of America Commercial Mortgage Inc., Series 2001-PB1, Class A-2, 5.787% 2035		19,910			20,595
Banc of America Commercial Mortgage Inc., Series 2001-1, Class A-2, 6.503% 2036		9,482			9,798
Banc of America Commercial Mortgage Inc., Series 2005-1, Class A-3, 4.877% 2042		23,669			23,713
Banc of America Commercial Mortgage Inc., Series 2005-5, Class A-4, 5.115% 20455		3,500			3,484
Banc of America Commercial Mortgage Inc., Series 2005-5, Class A-3A, 5.12% 20455		21,700			21,054
Banc of America Commercial Mortgage Inc., Series 2006-2, Class A-3, 5.711% 20455		4,955			4,823
CHL Mortgage Pass-Through Trust, Series 2004-HYB6, Class A-3, 3.664% 20345		2,551			1,987
CHL Mortgage Pass-Through Trust, Series 2005-HYB8, Class 4-A-1, 5.499% 20355		28,321			19,738
CHL Mortgage Pass-Through Trust, Series 2007-HY5, Class 3-A-1, 6.152% 20375		20,841			14,437
CHL Mortgage Pass-Through Trust, Series 2007-HY5, Class 1-A-1, 5.921% 20475		34,012			23,040
CHL Mortgage Pass-Through Trust, Series 2007-HY4, Class 1-A-1, 6.07% 20475		19,177			13,170
Wachovia Bank Commercial Mortgage Trust, Series 2002-C2, Class A-3, 4.44% 2034		3,931			3,983
Wachovia Bank Commercial Mortgage Trust, Series 2005-C22, Class A-2, 5.242% 2044		20,000			20,048
Wachovia Bank Commercial Mortgage Trust, Series 2005-C22, Class A-4, 5.265% 20445		30,000			30,199
Wachovia Bank Commercial Mortgage Trust, Series 2006-C23, Class A-PB, 5.446% 2045		16,750			16,490
Bear Stearns ARM Trust, Series 2004-1, Class I-2-A-5, 4.431% 20345		3,450			2,658
Bear Stearns ARM Trust, Series 2003-8, Class III-A, 5.10% 20345		3,646			3,290
Bear Stearns ARM Trust, Series 2005-6, Class I-A-1, 3.869% 20355		25,010			17,487
Bear Stearns ARM Trust, Series 2005-10, Class A-3, 4.547% 20355		50,000			39,494
Bear Stearns ARM Trust, Series 2006-4, Class II-A-1, 5.713% 20365		4,137			2,861
Morgan Stanley Mortgage Loan Trust, Series 2004-3, Class 4-A, 5.669% 20345		15,166			14,928
Morgan Stanley Mortgage Loan Trust, Series 2005-6AR, Class 3-A-1, 5.25% 20355		15,105			10,087
Morgan Stanley Mortgage Loan Trust, Series 2005-10, Class 5-A-1, 6.00% 2035		18,587			12,804
Morgan Stanley Mortgage Loan Trust, Series 2006-3AR, Class 3-A-1, 5.93% 20365		24,348			13,561
Morgan Stanley Mortgage Loan Trust, Series 2007-11AR, Class 2-A-1, 6.33% 20375		23,104			11,525
GE Capital Commercial Mortgage Corp., Series 2001-1, Class A-1, 6.079% 2033		883			889
GE Capital Commercial Mortgage Corp., Series 2001-1, Class A-2, 6.531% 2033		22,230			23,232
GE Capital Commercial Mortgage Corp., Series 2002-3, Class A-1, 4.229% 2037		6,864			6,929
GE Capital Commercial Mortgage Corp., Series 2002-3, Class A-2, 4.996% 2037		9,830			10,032
GE Capital Commercial Mortgage Corp., Series 2001-3, Class A-2, 6.07% 2038		13,250			13,949
American Tower Trust I, Series 2007-1A, Class A-FX, 5.42% 20374		27,000			26,934
American Tower Trust I, Series 2007-1A, Class C, 5.615% 20374		10,000			9,775
American Tower Trust I, Series 2007-1A, Class D, 5.957% 20374		15,000			14,589
Countrywide Alternative Loan Trust, Series 2004-14T2, Class A-2, 5.50% 2034		5,803			4,995
Countrywide Alternative Loan Trust, Series 2005-49CB, Class A-1, 5.50% 2035		15,579			13,964
Countrywide Alternative Loan Trust, Series 2004-28CB, Class 5-A-1, 5.75% 2035		3,964			3,341
Countrywide Alternative Loan Trust, Series 2005-9CB, Class 2-A-1, 6.00% 2035		5,285			3,931
Countrywide Alternative Loan Trust, Series 2004-28CB, Class 6-A-1, 6.00% 2035		1,820			1,445
Countrywide Alternative Loan Trust, Series 2006-6CB, Class 1-A-4, 5.50% 2036		5,000			3,485
Countrywide Alternative Loan Trust, Series 2007-HY4, Class 4-A-1, 5.886% 20475		27,570			16,780
Morgan Stanley Capital I Trust, Series 2003-TOP11, Class A-2, 4.34% 2041		67			67
Morgan Stanley Capital I Trust, Series 2005-HQ7, Class A-2, 5.207% 20425		24,000			24,835
Morgan Stanley Capital I Trust, Series 2005-IQ11, Class A-2, 5.693% 20425		5,000			5,104
Morgan Stanley Capital I Trust, Series 2006-IQ11, Class A-M, 5.774% 20425		20,105			16,682
Greenwich Capital Commercial Funding Corp., Series 2003-C1, Class A-2, 3.285% 2035		3,655			3,664
Greenwich Capital Commercial Funding Corp., Series 2005-GG5, Class A-2, 5.117% 2037		5,000			5,015
Greenwich Capital Commercial Funding Corp., Series 2005-GG5, Class A-4-1, 5.243% 20375		38,142			37,756
Thornburg Mortgage Securities Trust, Series 2006-5, Class A-1, 0.364% 20465		41,670			39,834
IndyMac INDX Mortgage Loan Trust, Series 2006-AR5, Class 2-A-1, 5.589% 20365		33,121			25,135
IndyMac INDX Mortgage Loan Trust, Series 2006-AR25, Class 3-A-1, 5.922% 20365		23,876			14,542
Crown Castle Towers LLC, Series 2005-1, Class C, 5.074% 20354		13,620			13,510
Crown Castle Towers LLC, Series 2005-1, Class D, 5.612% 20354		20,000			19,838
Crown Castle Towers LLC, Series 2006-1, Class D, 5.772% 20364		3,380			3,461
Merrill Lynch Mortgage Investors, Inc., Series 2006-A1, Class II-A-1, 6.005% 20365		61,123			34,506
GE Commercial Mortgage Corp., Series 2005-C2, Class A-2, 4.706% 2043		16,685			16,851
GE Commercial Mortgage Corp., Series 2005-C4, Class A-3A, 5.334% 20455		17,000			17,400
Bank of America 5.50% 20124		30,000			31,951
Cendant Mortgage Capital LLC, Series 2003-7P, Class A-1, 4.872% 20174,5		8,346			8,235
Cendant Mortgage Capital LLC, Series 2003-9, Class II-A-1, 4.813% 20185		5,720			5,634
Cendant Mortgage Capital LLC, Series 2003-5P, Class A-3, 4.913% 20194,5		8,932			8,901
Cendant Mortgage Capital LLC, Series 2003-8, Class II-A-1, 4.905% 20335		8,599			8,570
Bear Stearns ALT-A Trust, Series 2005-9, Class II-6A-1, 5.73% 20355		15,617			10,037
Bear Stearns ALT-A Trust, Series 2006-6, Class II-A-1, 5.816% 20365		32,675			20,306
PNC Mortgage Acceptance Corp., Series 2001-C1, Class A-2, 6.36% 2034		28,285			29,438
American General Mortgage Loan Trust, Series 2006-1, Class A-5, 5.75% 20354,5		32,785			28,907
Residential Accredit Loans, Inc., Series 2004-QS16, Class 1-A-1, 5.50% 2034		27,768			23,584
Residential Accredit Loans, Inc., Series 2005-QR1, Class A, 6.00% 2034		97			72
Residential Accredit Loans, Inc., Series 2006-QA1, Class A-II-1, 5.929% 20365		4,033			2,279
Residential Accredit Loans, Inc., Series 2006-QA1, Class A-III-1, 6.22% 20365		3,359			2,028
Bear Stearns Commercial Mortgage Securities Inc., Series 2002-PBW1, Class A-1, 3.97% 2035		2,156			2,182
Bear Stearns Commercial Mortgage Securities Inc., Series 2005-PWR9, Class A-AB, 4.804% 2042		23,500			24,050
MASTR Alternative Loan Trust, Series 2003-2, Class 6-A-1, 6.00% 2033		660			646
MASTR Alternative Loan Trust, Series 2004-2, Class 2-A-1, 6.00% 2034		1,409			1,289
MASTR Alternative Loan Trust, Series 2005-3, Class 1-A-1, 5.50% 2035		7,068			6,063
MASTR Alternative Loan Trust, Series 2005-3, Class 2-A-1, 6.00% 2035		6,671			5,559
MASTR Alternative Loan Trust, Series 2005-3, Class 3-A-1, 6.50% 2035		6,340			4,596
MASTR Alternative Loan Trust, Series 2006-2, Class 2-A-3, 0.594% 20365		14,776			7,126
Northern Rock PLC 5.625% 20174		20,000			18,797
Northern Rock PLC 5.625% 2017		6,000			5,639
GMAC Commercial Mortgage Securities, Inc., Series 2001-C1, Class A-2, 6.465% 2034		23,427			24,186
Merrill Lynch Mortgage Trust, Series 2005-MKB2, Class A-2, 4.806% 2042		15,040			15,078
Merrill Lynch Mortgage Trust, Series 2005-MCP1, Class A-2, 4.556% 2043		3,795			3,826
Merrill Lynch Mortgage Trust, Series 2005-MCP1, Class A-4, 4.747% 20435		5,065			4,979
ML-CFC Commercial Mortgage Trust, Series 2006-4, Class A-3, 5.172% (undated)5		25,000			22,296
Residential Asset Securitization Trust, Series 2005-A8CB, Class A-11, 6.00% 2035		24,219			16,170
Residential Asset Securitization Trust, Series 2006-A6, Class 1-A-11, 0.644% 20365		8,070			3,313
GS Mortgage Securities Corp. II, Series 2001-ROCK, Class A-2FL, 0.606% 20184,5		8,000			7,977
GS Mortgage Securities Corp. II, Series 2001-ROCK, Class A-2, 6.624% 20184		10,000			10,682
SBA CMBS Trust, Series 2006-1A, Class A, 5.314% 20364		16,500			16,426
SBA CMBS Trust, Series 2006-1A, Class C, 5.559% 20364		2,000			1,983
Wells Fargo Alternative Loan Trust, Series 2007-PA4, Class III-A-1, 6.059% 20375		32,364			17,547
Wells Fargo Mortgage-backed Securities Trust, Series 2005-AR10, Class II-A-6, 3.459% 20355		9,919			8,435
Wells Fargo Mortgage-backed Securities Trust, Series 2006-AR19, Class A-6, 5.648% 20365		11,979			8,567
Banco Bilbao Vizcaya Argentaria, SA 5.75% 20174		15,000			16,406
Citigroup Mortgage Loan Trust, Inc., Series 2004-HYB1, Class A-3-1, 5.22% 20345		11,334			9,943
Citigroup Mortgage Loan Trust, Inc., Series 2007-AR5, Class 1-A2A, 5.606% 20375		10,112			5,835
Commercial Mortgage Trust, Series 2000-C1, Class A-2, 7.416% 2033		1,530			1,546
Commercial Mortgage Trust, Series 2004-LNB2, Class A-3, 4.221% 2039		13,636			13,747
J.P. Morgan Mortgage Trust, Series 2005-A4, Class 3-A-1, 5.166% 20355		13,432			12,150
J.P. Morgan Mortgage Trust, Series 2006-A3, Class 3-A-3, 5.73% 20365		4,000			2,975
COBALT CMBS Commerical Mortgage Trust, Series 2006-C1, Class A-2, 5.174% 2048		14,976			15,100
Morgan Stanley Dean Witter Capital I Trust, Series 2001-PGMA, Class A-2, 0.794% 20164,5		8,000			7,963
Morgan Stanley Dean Witter Capital I Trust, Series 2000-LIFE2, Class A-2, 7.20% 2033		2,169			2,220
Morgan Stanley Dean Witter Capital I Trust, Series 2003-TOP9, Class A-1, 3.98% 2036		3,362			3,380
J.P. Morgan Alternative Loan Trust, Series 2006-A2, Class 5-A-1, 6.205% 20365		20,311			13,458
GSR Mortgage Loan Trust, Series 2005-9F, Class 1A-2, 0.744% 20355		8,029			5,542
GSR Mortgage Loan Trust, Series 2005-AR1, Class 2-A-1, 4.502% 20355		6,110			5,214
Hilton Hotel Pool Trust, Series 2000-HLTA, Class C, 7.458% 20154		10,000			10,586
J.P. Morgan Chase Commercial Mortgage Securities Trust, Series 2006-LDP7, Class A-M, 5.875% 20455		12,192			9,632
Washington Mutual Mortgage, WMALT Series 2005-1, Class 5-A-1, 6.00% 2035		10,587			8,622
Washington Mutual Mortgage, WMALT Series 2005-1, Class 6-A-1, 6.50% 2035		1,108			886
Citigroup-Deutsche Bank Commercial Mortgage Trust, Series 2006-CD3, Class A-5, 5.617% 2048		10,000			9,419
ChaseFlex Trust, Series 2007-2, Class A-1, 0.524% 20375		3,248			1,980
ChaseFlex Trust, Series 2007-3, Class 2-A1, 0.544% 20375		10,711			6,336
Salomon Brothers Commercial Mortgage Trust, Series 2000-C3, Class A-2, 6.592% 2033		2,740			2,802
Salomon Brothers Commercial Mortgage Trust, Series 2001-C2, Class A-3, 6.499% 2036		4,530			4,739
Banc of America Funding Trust, Series 2007-3, Class X-A-1, 5.50% 2034		10,042			7,061
BCAP LLC Trust, Series 2006-AA2, Class A-1, 0.414% 20375		12,826			6,843
Banc of America Alternative Loan Trust, Series 2005-6, Class 2-CB-2, 6.00% 2035		7,924			6,329
LB-UBS Commercial Mortgage Trust, Series 2002-C1, Class A-3, 6.226% 2026		758			762
LB-UBS Commercial Mortgage Trust, Series 2005-C3, Class A-3, 4.647% 2030		3,000			3,009
LB-UBS Commercial Mortgage Trust, Series 2005-C7, Class A-4, 5.197% 20305		2,500			2,506
Bear Stearns Commercial Mortgage Securities Trust, Series 2006-PWR13, Class A-2, 5.426% 2041		5,290			5,306
Sequoia Mortgage Trust, Series 2007-1, Class 4-A1, 5.762% 20465		5,354			4,531
Chase Commercial Mortgage Securities Corp., Series 2000-1, Class A-2, 7.757% 2032		2,409			2,429
Harborview Mortgage Loan Trust, Series 2006-6, Class 1A, 4.239% 20365		2,882			1,814
First Union National Bank Commercial Mortgage Trust, Series 2002-C1, Class G, 7.199% 20344,5		2,000			1,494
Structured Asset Securities Corp., Series 1998-RF2, Class A, 8.267% 20274,5		1,147			1,075
Banc of America Mortgage Securities Trust, Series 2004-B, Class 1-A-1, 4.687% 20345		306			269
Bank of America, NA and First Union National Bank Commercial Mortgage Trust, Series 2001-3, Class A-1, 4.89% 2037		140			140
					7,639,843
BONDS & NOTES OF U.S. GOVERNMENT & GOVERNMENT AGENCIES — 7.36%
U.S. Treasury 1.25% 2010		20,000			20,176
U.S. Treasury 2.00% 2010		25,000			25,371
U.S. Treasury 4.50% 2010		75,000			78,184
U.S. Treasury 5.75% 2010		152,000			158,469
U.S. Treasury 6.50% 2010		275,000			280,010
U.S. Treasury 1.00% 2011		25,000			25,048
U.S. Treasury 1.125% 2011		30,000			30,093
U.S. Treasury 4.625% 2011		25,000			26,741
U.S. Treasury 4.875% 2011		25,000			26,593
U.S. Treasury 5.00% 2011		75,000			79,321
U.S. Treasury 5.125% 2011		80,000			85,867
U.S. Treasury 1.50% 2012		25,000			25,163
U.S. Treasury 4.00% 2012		50,000			53,883
U.S. Treasury 4.25% 2012		70,000			75,827
U.S. Treasury 4.875% 2012		83,000			90,924
U.S. Treasury 3.125% 2013		35,000			36,675
U.S. Treasury 3.375% 2013		60,000			63,490
U.S. Treasury 3.375% 2013		40,000			42,316
U.S. Treasury 3.625% 2013		5,000			5,333
U.S. Treasury 3.875% 2013		20,000			21,467
U.S. Treasury 4.25% 2013		148,000			161,314
U.S. Treasury 1.75% 2014		2,000			1,972
U.S. Treasury 1.875% 2014		25,000			24,828
U.S. Treasury 2.25% 2014		396,000			397,762
U.S. Treasury 2.375% 2014		5,000			5,020
U.S. Treasury 2.625% 2014		70,000			71,263
U.S. Treasury 4.25% 2014		100,000			109,215
U.S. Treasury 4.25% 2014		25,000			27,329
U.S. Treasury 11.75% 2014		50,000			50,207
U.S. Treasury 1.625% 20152,7		56,513			58,484
U.S. Treasury 4.25% 2015		80,000			87,175
U.S. Treasury 9.875% 2015		10,000			14,036
U.S. Treasury 11.25% 2015		60,000			86,320
U.S. Treasury 2.375% 2016		240,500			234,158
U.S. Treasury 2.625% 2016		60,000			59,419
U.S. Treasury 3.00% 2016		25,000			25,113
U.S. Treasury 3.25% 2016		236,600			242,016
U.S. Treasury 3.25% 2016		20,000			20,442
U.S. Treasury 7.50% 2016		250,000			321,543
U.S. Treasury 9.25% 2016		200,000			275,422
U.S. Treasury 4.625% 2017		40,000			44,220
U.S. Treasury 8.875% 2017		10,000			13,950
U.S. Treasury 3.75% 2018		349,950			360,830
U.S. Treasury 4.00% 2018		45,000			47,327
U.S. Treasury 2.75% 2019		72,500			68,903
U.S. Treasury 3.125% 2019		177,300			173,511
U.S. Treasury 3.625% 2019		10,000			10,193
U.S. Treasury 8.125% 2019		10,000			13,897
U.S. Treasury Principal Strip 0% 2039		27,000			7,520
Fannie Mae 6.625% 2010		11,000			11,685
Fannie Mae 5.00% 2011		19,815			21,353
Fannie Mae 5.125% 2011		20,000			21,288
Fannie Mae 6.00% 2011		140,000			151,260
Fannie Mae 2.00% 2012		20,000			20,376
Fannie Mae 4.75% 2012		75,000			81,893
Fannie Mae 6.125% 2012		174,000			193,886
Fannie Mae 4.375% 2013		10,000			10,846
Fannie Mae 2.50% 2014		25,000			25,092
Fannie Mae 2.625% 2014		5,000			4,998
Fannie Mae 2.75% 2014		20,000			20,327
Fannie Mae 5.00% 2015		25,000			27,792
Federal Home Loan Bank 2.25% 2012		25,000			25,583
Federal Home Loan Bank 4.50% 2012		50,000			54,269
Federal Home Loan Banks, Series 312, 5.75% 2012		25,000			27,707
Federal Home Loan Bank 3.625% 2013		90,000			95,388
Federal Home Loan Bank 5.25% 2014		25,000			27,991
Federal Home Loan Bank 5.375% 2016		25,000			28,119
Freddie Mac 2.875% 2010		50,000			51,214
Freddie Mac 5.125% 2010		4,000			4,152
Freddie Mac 6.875% 2010		5,000			5,280
Freddie Mac 1.75% 2012		12,500			12,606
Freddie Mac 5.75% 2012		75,000			82,514
Federal Agricultural Mortgage Corp. 4.875% 20114		30,000			31,594
Federal Agricultural Mortgage Corp. 5.50% 20114		37,300			39,888
United States Government Agency-Guaranteed (FDIC insured), Citigroup Inc. 1.875% 2012		20,000			20,182
United States Government Agency-Guaranteed (FDIC insured), Citigroup Inc. 1.875% 2012		15,000			15,085
United States Government Agency-Guaranteed (FDIC insured), Citigroup Inc. 1.875% 2012		10,000			10,099
United States Government Agency-Guaranteed (FDIC insured), Citigroup Inc. 2.25% 2012		21,850			22,199
United States Government Agency-Guaranteed (FDIC insured), GMAC LLC 1.75% 2012		15,000			15,019
United States Government Agency-Guaranteed (FDIC insured), GMAC LLC 2.20% 2012		45,000			45,601
United States Government Agency-Guaranteed (FDIC insured), Goldman Sachs Group, Inc. 0.499% 20125		25,000			25,133
United States Government Agency-Guaranteed (FDIC insured), Goldman Sachs Group, Inc. 3.25% 2012		15,000			15,665
CoBank ACB 7.875% 20184		18,660			18,971
CoBank ACB 0.899% 20224,5		28,690			19,627
United States Government Agency-Guaranteed (FDIC insured), General Electric Capital Corp., Series G, 2.125% 2012		10,000			10,099
United States Government Agency-Guaranteed (FDIC insured), General Electric Capital Corp., Series G, 2.625% 2012		20,000			20,566
United States Government Agency-Guaranteed (FDIC insured), Bank of America Corp. 2.10% 2012		18,335			18,638
United States Government Agency-Guaranteed (FDIC insured), Morgan Stanley 2.25% 2012		15,000			15,318
United States Government Agency-Guaranteed (FDIC insured), JPMorgan Chase & Co. 0.533% 20125		15,000			15,175
United States Government Agency-Guaranteed (FDIC insured), John Deere Capital Corp. 2.875% 2012		14,000			14,457
United States Government Agency-Guaranteed (FDIC insured), Sovereign Bancorp, Inc. 2.75% 2012		10,000			10,322
United States Government Agency-Guaranteed (FDIC insured), State Street Corp. 1.85% 2011		10,000			10,159
Federal Farm Credit Banks, Consolidated Systemwide Designated Bonds, 3.00% 2014		10,000			10,154
					5,673,910
FINANCIALS — 3.29%
Simon Property Group, LP 4.60% 2010		7,300			7,375
Simon Property Group, LP 4.875% 2010		5,000			5,040
Simon Property Group, LP 4.875% 2010		2,500			2,559
Simon Property Group, LP 5.375% 2011		2,000			2,092
Simon Property Group, LP 5.60% 2011		24,750			25,933
Simon Property Group, LP 5.00% 2012		14,000			14,474
Simon Property Group, LP 5.75% 2012		18,083			19,145
Simon Property Group, LP 6.35% 2012		10,067			10,857
Simon Property Group, LP 6.75% 2014		34,230			36,868
Simon Property Group, LP 5.25% 2016		19,875			19,917
Simon Property Group, LP 6.10% 2016		4,860			5,059
Simon Property Group, LP 5.875% 2017		5,910			6,031
Simon Property Group, LP 6.125% 2018		10,685			11,088
Simon Property Group, LP 10.35% 2019		33,940			42,765
Westfield Capital Corp. Ltd., WT Finance (Australia) Pty Ltd. and WEA Finance LLC 4.375% 20104		44,725			45,359
Westfield Group 5.40% 20124		16,040			16,590
Westfield Capital Corp. Ltd., WT Finance (Australia) Pty Ltd. and WEA Finance LLC 5.125% 20144		26,785			26,692
Westfield Group 7.50% 20144		17,790			19,396
Westfield Group 5.75% 20154		28,000			28,185
Westfield Group 5.70% 20164		26,025			25,491
Westfield Group 7.125% 20184		35,245			36,457
SLM Corp., Series A, 4.50% 2010		21,000			20,711
SLM Corp., Series A, 0.512% 20115		1,100			954
SLM Corp., Series A, 5.40% 2011		20,000			18,889
SLM Corp., Series A, 5.125% 2012		7,333			6,533
SLM Corp., Series A, 5.00% 2013		11,397			9,478
SLM Corp., Series A, 5.375% 2013		43,712			38,828
SLM Corp., Series A, 5.05% 2014		337			269
SLM Corp., Series A, 5.375% 2014		200			165
SLM Corp., Series A, 5.00% 2015		20,344			16,059
SLM Corp., Series A, 5.00% 2018		3,302			2,308
SLM Corp., Series A, 8.45% 2018		35,475			31,288
SLM Corp., Series A, 5.625% 2033		383			263
ProLogis 5.50% 2012		2,250			2,281
ProLogis 5.50% 2013		3,700			3,673
ProLogis 7.625% 2014		18,110			19,229
ProLogis 5.625% 2015		1,565			1,496
ProLogis 5.625% 2016		37,316			34,386
ProLogis 5.75% 2016		11,245			10,557
ProLogis 6.625% 2018		59,860			57,841
ProLogis 7.375% 2019		5,300			5,326
Countrywide Financial Corp., Series A, 4.50% 2010		7,945			8,044
Countrywide Financial Corp., Series B, 5.80% 2012		59,065			62,876
Bank of America Corp. 5.75% 2017		20,950			21,336
Merrill Lynch & Co., Inc. 6.875% 2018		6,500			7,010
Goldman Sachs Group, Inc. 3.625% 2012		8,325			8,583
Goldman Sachs Group, Inc. 6.25% 2017		5,000			5,358
Goldman Sachs Group, Inc. 5.95% 2018		13,337			14,076
Goldman Sachs Group, Inc. 6.15% 2018		46,893			50,052
Goldman Sachs Group, Inc. 7.50% 2019		11,060			12,977
Capital One Financial Corp. 6.25% 2013		7,500			8,070
Capital One Bank 6.50% 2013		13,477			14,383
Capital One Capital III 7.686% 20365		57,199			49,477
Capital One Capital IV 6.745% 20375		14,818			12,114
Liberty Mutual Group Inc. 5.75% 20144		19,000			18,685
Liberty Mutual Group Inc. 6.70% 20164		15,000			14,439
Liberty Mutual Group Inc. 6.50% 20354		11,200			9,113
Liberty Mutual Group Inc. 7.50% 20364		38,050			33,278
Liberty Mutual Group Inc., Series C, 10.75% 20884,5		5,000			5,300
JPMorgan Chase & Co. 4.891% 20155		45,190			43,933
JPMorgan Chase & Co. 6.30% 2019		28,500			31,335
Monumental Global Funding 5.50% 20134		23,915			24,548
Monumental Global Funding III 0.484% 20144,5		24,860			20,819
Monumental Global Funding III 5.25% 20144		22,000			22,370
American Express Credit Corp., Series B, 5.00% 2010		9,000			9,302
American Express Centurion Bank 5.55% 2012		20,000			21,364
American Express Co. 6.15% 2017		27,330			28,865
American Express Co. 6.80% 20665		8,368			7,406
Morgan Stanley 6.00% 2014		5,910			6,350
Morgan Stanley, Series F, 6.00% 2015		29,090			31,164
Morgan Stanley, Series F, 5.95% 2017		5,375			5,536
Morgan Stanley, Series F, 5.625% 2019		23,000			23,188
Citigroup Inc. 6.50% 2013		39,250			42,109
Citigroup Inc. 6.125% 2017		22,275			22,768
UniCredito Italiano SpA 5.584% 20174,5		32,900			30,426
UniCredito Italiano SpA 6.00% 20174		20,323			20,111
HVB Funding Trust I 8.741% 20314		1,555			1,386
HVB Funding Trust III 9.00% 20314		852			748
UniCredito Italiano Capital Trust II 9.20% (undated)4,5		10,000			9,600
CNA Financial Corp. 6.00% 2011		20,000			20,453
CNA Financial Corp. 5.85% 2014		42,000			39,842
Santander Issuances, SA Unipersonal 5.805% 20164,5		19,100			16,958
Sovereign Bancorp, Inc. 8.75% 2018		27,160			31,146
Santander Issuances, SA Unipersonal 6.50% 20194,5		10,500			10,841
Barclays Bank PLC 5.20% 2014		10,000			10,674
Barclays Bank PLC 5.00% 2016		24,500			25,075
Barclays Bank PLC 6.05% 20174		21,620			22,062
ERP Operating LP 5.50% 2012		2,500			2,618
ERP Operating LP 6.625% 2012		8,000			8,599
ERP Operating LP 6.584% 2015		11,080			11,834
ERP Operating LP 5.125% 2016		10,565			10,431
ERP Operating LP 5.75% 2017		21,315			21,490
Wells Fargo Bank, National Assn. 4.75% 2015		47,800			48,867
Prudential Financial, Inc., Series D, 5.10% 2011		6,410			6,748
Prudential Financial, Inc., Series D, 5.15% 2013		9,000			9,453
Prudential Holdings, LLC, Series C, 8.695% 20234,6		15,000			15,402
Prudential Financial, Inc. 8.875% 20685		12,500			13,317
Société Générale 5.75% 20164		43,235			44,413
Kimco Realty Corp., Series C, 4.82% 2011		12,100			12,273
Kimco Realty Corp. 6.00% 2012		4,062			4,252
Pan Pacific Retail Properties, Inc. 6.125% 2013		3,215			3,379
Kimco Realty Corp., Series C, 4.82% 2014		3,068			3,046
Kimco Realty Corp., Series C, 5.783% 2016		9,597			9,477
Kimco Realty Corp. 5.70% 2017		10,500			10,107
ACE INA Holdings Inc. 5.875% 2014		7,500			8,252
ACE INA Holdings Inc. 5.70% 2017		3,825			4,112
ACE INA Holdings Inc. 5.80% 2018		11,000			11,933
ACE Capital Trust II 9.70% 2030		12,210			13,526
Standard Chartered PLC 5.50% 20144		4,300			4,631
Standard Chartered Bank 6.40% 20174		30,760			32,578
New York Life Global Funding 4.625% 20104		5,000			5,091
New York Life Global Funding 5.25% 20124		25,000			27,079
New York Life Global Funding 4.65% 20134		4,000			4,232
Metropolitan Life Global Funding I, 5.125% 20134		4,305			4,562
MetLife Global Funding 5.125% 20144		15,000			15,952
MetLife Capital Trust X 9.25% 20684,5		14,000			15,301
Allstate Life Global Funding Trust, Series 2008-4, 5.375% 2013		15,500			16,655
Allstate Corp., Series B, 6.125% 20675		18,350			15,781
PNC Funding Corp. 5.40% 2014		10,000			10,835
PNC Funding Corp. 4.25% 2015		15,000			15,066
PNC Bank NA 6.875% 2018		5,200			5,562
CIT Group Inc. 5.20% 2010		20,000			12,822
CIT Group Inc. 5.60% 2011		15,000			9,768
CIT Group Inc. 0.704% 20125		8,920			5,767
CIT Group Inc. 7.75% 2012		3,717			2,407
HBOS PLC 6.75% 20184		25,305			23,406
HBOS PLC 6.00% 20334		8,650			6,141
Lehman Brothers Holdings Inc., Series I, 2.951% 20105,8		10,000			1,625
Lehman Brothers Holdings Inc., Series I, 3.018% 20125,8		13,805			2,243
Lehman Brothers Holdings Inc., Series G, 4.80% 20148		60,920			9,899
Lehman Brothers Holdings Inc., Series I, 6.20% 20148		73,610			11,962
Lehman Brothers Holdings Inc., Series H, 5.50% 20168		3,660			595
Lehman Brothers Holdings Inc., Series I, 6.875% 20188		14,465			2,405
Hospitality Properties Trust 6.85% 2012		2,000			2,037
Hospitality Properties Trust 6.75% 2013		14,925			14,804
Hospitality Properties Trust 5.125% 2015		3,675			3,301
Hospitality Properties Trust 6.30% 2016		550			510
Hospitality Properties Trust 6.70% 2018		7,800			7,216
Developers Diversified Realty Corp. 4.625% 2010		1,485			1,466
Developers Diversified Realty Corp. 5.00% 2010		20,000			19,875
Developers Diversified Realty Corp. 5.375% 2012		6,565			6,162
Northern Trust Corp. 5.50% 2013		5,450			5,997
Northern Trust Corp. 4.625% 2014		8,475			9,105
Northern Trust Corp. 5.85% 20179		10,150			11,131
Royal Bank of Scotland Group PLC 4.875% 20144		25,000			25,471
International Lease Finance Corp. 5.00% 2010		4,560			4,499
International Lease Finance Corp. 5.00% 2012		10,000			8,087
American General Finance Corp., Series J, 6.50% 2017		15,000			10,298
SunTrust Banks, Inc. 6.00% 2017		10,000			10,032
SunTrust Banks, Inc. 5.40% 2020		12,500			11,109
Resona Bank, Ltd. 5.85% (undated)4,5		24,000			21,027
Genworth Global Funding Trust, Series 2007-C, 5.25% 2012		19,000			19,044
Discover Financial Services 6.45% 2017		6,116			5,774
Discover Financial Services 10.25% 2019		8,666			10,180
Principal Life Global Funding I 4.40% 20104		10,000			10,114
Principal Life Insurance Co. 6.25% 20124		5,000			5,238
Ford Motor Credit Co. 7.375% 2011		15,000			15,064
Charles Schwab Corp., Series A, 6.375% 2017		11,260			12,569
Schwab Capital Trust I 7.50% 20375		1,795			1,659
Jackson National Life Global 5.375% 20134		12,925			13,158
Fifth Third Capital Trust IV 6.50% 20675		18,000			13,005
Boston Properties, Inc. 5.875% 2019		12,750			12,887
Berkshire Hathaway Finance Corp. 4.60% 2013		12,000			12,877
Brandywine Operating Partnership, LP 5.75% 2012		7,505			7,591
Brandywine Operating Partnership, LP 5.40% 2014		3,955			3,682
Lincoln National Corp. 7.00% 20665		11,295			9,375
Catlin Insurance Ltd. 7.249% (undated)4,5		11,500			8,912
Nationwide Financial Services, Inc. 6.75% 20675		10,000			7,599
Chubb Corp. 6.375% 20675		7,500			6,919
Credit Suisse Group AG 5.50% 2014		5,000			5,427
Paribas, New York Branch 6.95% 2013		2,700			2,992
BNP Paribas 4.80% 20154		2,105			2,174
ZFS Finance (USA) Trust V 6.50% 20674,5		5,040			4,183
ING Security Life Institutional Funding 0.474% 20104,5		4,000			4,003
Compass Bank 5.90% 2026		4,725			3,807
TIAA Global Markets 4.95% 20134		3,225			3,420
UnumProvident Finance Co. PLC 6.85% 20154		1,885			1,878
Unum Group 7.125% 2016		1,105			1,137
Northern Rock PLC 5.60% (undated)4,5		5,095			694
Northern Rock PLC 6.594% (undated)4,5		5,635			768
Federal Realty Investment Trust 8.75% 2009		1,000			1,004
					2,538,612
ASSET-BACKED OBLIGATIONS6 — 1.70%
AmeriCredit Automobile Receivables Trust, Series 2006-R-M, Class A-2, MBIA insured, 5.42% 2011		5,264			5,342
AmeriCredit Automobile Receivables Trust, Series 2007-D-F, Class A-3-A, FSA insured, 5.49% 2012		11,431			11,568
AmeriCredit Automobile Receivables Trust, Series 2006-A-F, Class A-4, FSA insured, 5.64% 2013		18,436			19,037
AmeriCredit Automobile Receivables Trust, Series 2007-C-M, Class A-4-B, MBIA insured, 0.324% 20145		30,000			28,423
AmeriCredit Automobile Receivables Trust, Series 2007-C-M, Class A-4-A, MBIA insured, 5.55% 2014		58,000			59,997
AmeriCredit Automobile Receivables Trust, Series 2007-D-F, Class A-4-A, FSA insured, 5.56% 2014		27,000			27,745
Triad Automobile Receivables Trust, Series 2006-C, Class A-3, AMBAC insured, 5.26% 2011		2,653			2,665
Triad Automobile Receivables Trust, Series 2006-B, Class A-4, FSA insured, 5.52% 2012		49,000			50,688
Triad Automobile Receivables Trust, Series 2006-A, Class A-4, AMBAC insured, 4.88% 2013		14,359			14,700
Triad Automobile Receivables Trust, Series 2006-C, Class A-4, AMBAC insured, 5.31% 2013		25,000			25,790
CPS Auto Receivables Trust, Series 2004-B, Class A-2, XLCA insured, 3.56% 20114		702			705
CPS Auto Receivables Trust, Series 2005-B, Class A-2, FSA insured, 4.36% 20124		3,368			3,409
CPS Auto Receivables Trust, Series 2005-C, Class A-2, FSA insured, 4.79% 20124		4,731			4,805
CPS Auto Receivables Trust, Series 2005-D, Class A-2, FSA insured, 5.06% 20124		7,823			7,980
CPS Auto Receivables Trust, Series 2006-B, Class A-4, MBIA insured, 5.81% 20124		17,247			17,481
CPS Auto Receivables Trust, Series 2007-A, Class A-4, MBIA insured, 5.05% 20134		15,000			15,433
CPS Auto Receivables Trust, Series 2006-D, Class A-4, FSA insured, 5.115% 20134		17,459			17,931
CPS Auto Receivables Trust, Series 2007-TFC, Class A-2, XLCA insured, 5.25% 20134		12,871			13,223
Prestige Auto Receivables Trust, Series 2006-1A, Class A-2, FSA insured, 5.25% 20134		9,412			9,677
Prestige Auto Receivables Trust, Series 2007-1, Class A-3, FSA insured, 5.58% 20144		43,295			44,726
PG&E Energy Recovery Funding LLC, Series 2005-2, Class A-2, 5.03% 2014		27,413			28,816
PG&E Energy Recovery Funding LLC, Series 2005-2, Class A-3, 5.12% 2014		20,095			21,852
Washington Mutual Master Note Trust, Series 2007-A4A, Class A-4, 5.20% 20144		31,500			32,453
Washington Mutual Master Note Trust, Series 2006-A2A, Class A, 0.295% 20154,5		15,000			14,815
UPFC Auto Receivables Trust, Series 2006-B, Class A-3, AMBAC insured, 5.01% 2012		13,238			13,533
UPFC Auto Receivables Trust, Series 2007-B, Class A-3, AMBAC insured, 6.15% 2014		31,279			32,426
Capital One Auto Finance Trust, Series 2006-A, Class A-4, AMBAC insured, 0.255% 20125		33,527			33,237
Capital One Auto Finance Trust, Series 2007-B, Class A-4, MBIA insured, 0.275% 20145		5,750			5,528
Rental Car Finance Corp., Series 2005-1, Class A-2, XLCA insured, 4.59% 20114		37,360			37,405
Hertz Vehicle Financing LLC, Rental Car Asset-backed Notes, Series 2005-1, Class A-5, MBIA insured, 5.08% 20114		15,150			15,486
Hertz Vehicle Financing LLC, Rental Car Asset-backed Notes, Series 2009-2A, Class A-2, 5.29% 20164		17,500			17,648
Residential Funding Mortgage Securities II, Inc., Series 2005-HI1, Class A-5, FGIC insured, 5.45% 20345		16,000			8,920
Residential Funding Mortgage Securities II, Inc., Series 2005-HS1, Class A-1-5, FGIC insured, 4.91% 20355		25,030			14,841
Residential Funding Mortgage Securities II, Inc., Series 2005-HSA1, Class A-I-5, FGIC insured, 5.48% 20355		5,188			1,895
Residential Funding Mortgage Securities II, Inc., Series 2006-HSA2, Class A-I-5, FGIC insured, 5.63% 20365		4,506			1,472
Residential Funding Mortgage Securities II, Inc., Series 2007-HSA3, Class A-I-2, MBIA insured, 5.89% 20375		5,892			5,475
Long Beach Acceptance Auto Receivables Trust, Series 2004-C, Class A-4, FSA insured, 3.777% 2011		1,260			1,270
Long Beach Acceptance Auto Receivables Trust, Series 2006-B, Class A-3, FSA insured, 5.17% 2011		621			622
Long Beach Acceptance Auto Receivables Trust, Series 2005-B, Class A-4, FSA insured, 4.522% 2012		8,525			8,669
Long Beach Acceptance Auto Receivables Trust, Series 2007-A, Class A-4, FSA insured, 5.025% 2014		20,000			20,359
Nissan Auto Lease Trust, Series 2008-A, Class A-3a, 5.14% 2011		26,000			26,784
Hyundai Auto Receivables Trust, Series 2006-B, Class A-4, 5.15% 2013		25,000			25,894
Discover Card Execution Note Trust, Series 2008-3, Class A, 5.10% 2013		23,000			24,205
Nissan Auto Receivables Owner Trust, Series 2008-A, Class A-4, 4.28% 2014		22,000			22,991
PECO Energy Transition Trust, Series 2001-A, Class A-1, 6.52% 2010		22,000			22,768
Ford Credit Auto Owner Trust, Series 2008-A, Class A-4, 4.37% 2012		21,275			22,274
Honda Auto Receivables Owner Trust, Series 2007-2, Class A-3, 5.46% 2011		12,277			12,432
Honda Auto Receivables Owner Trust, Series 2007-1, Class A-4, 5.09% 2013		9,500			9,794
Drivetime Auto Owner Trust, Series 2006-B, Class A-3, MBIA insured, 5.227% 20124,5		21,766			22,191
Vega ContainerVessel PLC, Series 2006-1, Class A, XLCA insured, 5.562% 20214		42,626			21,349
Drive Auto Receivables Trust, Series 2006-1, Class A-4, FSA insured, 5.54% 20134		3,442			3,507
Drive Auto Receivables Trust, Series 2006-2, Class A-3, MBIA insured, 5.33% 20144		16,705			17,116
Chase Issuance Trust, Series 2007-A9, Class A, 0.275% 20145		20,000			19,737
Argent Mortgage Loan Trust, Series 2005-W1, Class A2, FGIC insured, 0.484% 20355		39,999			18,899
BMW Vehicle Owner Trust, Series 2006-A, Class A-4, 5.07% 2011		18,092			18,505
AEP Texas Central Transitioning Funding II LLC, Secured Transition Bonds, Series A, Class A-3, 5.09% 2017		16,970			18,481
MBNA Credit Card Master Note Trust, Series 2005-2, Class B, 0.425% 20125		15,000			14,800
MBNA Credit Card Master Note Trust, Series 2004-8, Class A, 0.395% 20145		3,249			3,210
CenterPoint Energy Transition Bond Company III, LLC, Series 2008, Class A-1, 4.192% 2020		16,019			16,897
CarMax Auto Owner Trust, Series 2008-2, Class A-3a, 4.99% 2012		8,200			8,583
CarMax Auto Owner Trust, Series 2007-3, Class B, 6.12% 2013		7,000			7,119
PE Environmental Funding LLC, Series 2007-A, Class A-1, 4.982% 2016		14,251			14,832
Home Equity Asset Trust, Series 2004-7, Class M-2, 0.904% 20355		20,000			13,755
FPL Recovery Funding LLC, Series 2007-A, Class A-1, 5.053% 2013		3,608			3,696
FPL Recovery Funding LLC, Series 2007-A, Class A-2, 5.044% 2015		9,000			9,734
First Investors Auto Owner Trust, Series 2006-A, Class A-4, MBIA insured, 5.00% 20134		11,811			12,107
Advanta Business Card Master Trust, Series 2005-A2, Class A-2, 0.375% 20135		12,392			11,896
GMAC Mortgage Loan Trust, Series 2007-HE2, Class A-2, FGIC insured, 6.054% 20375		20,000			11,540
CWHEQ Home Equity Loan Trust, Series 2006-S2, Class A-5, FGIC insured, 5.753% 2027		14,266			5,480
CWHEQ Home Equity Loan Trust, Series 2006-S6, Class A-6, AMBAC insured, 5.657% 20345		9,032			4,337
CWHEQ Home Equity Loan Trust, Series 2006-S9, Class A-1, MBIA insured, 0.344% 20365		1,647			1,389
Chase Auto Owner Trust, Series 2006-B, Class A-4, 5.11% 2014		10,828			11,112
Structured Asset Securities Corp., Series 2002-23XS, Class A7, 6.58% 20325		4,196			3,471
Structured Asset Securities Corp., Series 2005-S6, Class A2, 0.534% 20355		7,006			2,780
Structured Asset Securities Corp., Series 2005-S7, Class A2, 0.544% 20354,5		12,999			4,436
Wachovia Auto Loan Owner Trust, Series 2007-1, Class A-3A, 5.29% 2012		10,419			10,637
John Deere Owner Trust, Series 2008, Class A-3, 4.18% 2012		10,000			10,217
CWABS, Inc., Series 2004-15, Class AF-6, 4.613% 2035		14,021			10,065
MBNA Master Credit Card Trust II, Series 2001-B, Class A, 0.505% 20135		5,150			5,115
MBNA Master Credit Card Trust II, Series 2000-H, Class B, 0.845% 20135		5,000			4,940
Citibank Credit Card Issuance Trust, Series 2008, Class C6, 6.30% 2014		9,600			9,927
Santander Drive Auto Receivables Trust, Series 2007-3, Class A-4-A, FGIC insured, 5.52% 2014		10,000			9,921
IndyMac Home Equity Mortgage Loan Asset-backed Trust, Series 2007-H1, Class A-1, FSA insured, 0.404% 20375		16,013			9,804
RAMP Trust, Series 2004-RS12, Class A-I-6, 4.547% 2034		7,571			6,739
RAMP Trust, Series 2004-RS12, Class M-I-1, 5.186% 2034		6,000			2,062
DaimlerChrysler Auto Trust, Series 2006-B, Class A-4, 5.38% 2011		8,579			8,671
Irwin Home Equity, Series 2006-1, Class 2-A2, AMBAC insured, 5.39% 20354,5		10,562			7,280
Capital One Multi-asset Execution Trust, Series 2003-3, Class C, 2.495% 20165		7,000			6,619
CWABS Revolving Home Equity Loan Trust, Series 2004-P, Class 2-A, MBIA insured, 0.565% 20345		17,780			5,968
Vanderbilt Mortgage and Finance, Inc., Series 2000-D, Class A-4, 7.715% 2027		3,209			3,326
Vanderbilt Mortgage and Finance, Inc., Series 2001-A, Class B-2, 9.14% 2031		3,000			2,458
Popular ABS Mortgage Pass-Through Trust, Series 2004-5, Class AF-6, 4.747% 20345		5,523			5,207
GMACM Home Loan Trust, Series 2006-HLTV1, Class A-5, FGIC insured, 6.01% 20295		16,901			4,433
Cendant Timeshare Receivables Funding, LLC, Series 2005-1, Class A-1, FGIC insured, 4.67% 20174		4,155			3,574
GE SeaCo Finance SRL, Series 2004-1, Class A, AMBAC insured, 0.545% 20194,5		3,757			3,085
CWHEQ Revolving Home Equity Loan Trust, Series 2007-C, Class A, FGIC insured, 0.395% 20375		10,266			2,481
RSB BondCo LLC, Series A, Class A-1, 5.47% 2014		1,813			1,925
Conseco Finance Securitizations Corp., Series 2002-2, Class A-2, 6.03% 2033		1,676			1,683
Home Equity Mortgage Trust, Series 2006-4, Class A-1, 5.671% 20365		21,465			1,651
Impac CMB Grantor Trust, Series 2004-6, Class 1-A-1, 1.044% 20345		1,467			888
Impac CMB Grantor Trust, Series 2004-6, Class M-2, 1.144% 20345		1,176			392
SACO I Trust, Series 2006-12, Class I-A, 0.384% 20365		9,453			1,119
Vanderbilt Acquisition Loan Trust, Series 2002-1, Class A-3, 5.70% 2023		223			223
ACE Securities Corp. Home Equity Loan Trust, Series 2003-NC1, Class A-2A, 1.084% 20335		130			99
					1,306,657
ENERGY — 1.21%
Kinder Morgan Energy Partners LP 6.75% 2011		9,642			10,271
Kinder Morgan Energy Partners LP 5.85% 2012		20,907			22,547
Kinder Morgan Energy Partners LP 5.00% 2013		19,675			20,608
Kinder Morgan Energy Partners LP 5.125% 2014		40,185			41,910
Kinder Morgan Energy Partners LP 6.00% 2017		6,375			6,733
Kinder Morgan Energy Partners LP 9.00% 2019		4,150			5,068
Kinder Morgan Energy Partners LP 6.85% 2020		4,500			4,992
Kinder Morgan Energy Partners LP 6.95% 2038		15,000			16,120
Williams Companies, Inc. 2.29% 20104,5		5,000			4,998
Williams Companies, Inc. 6.375% 20104		12,000			12,352
Williams Companies, Inc. 7.125% 2011		10,000			10,648
Williams Companies, Inc. 8.125% 2012		16,300			17,764
Transcontinental Gas Pipe Line Corp., Series B, 8.875% 2012		8,000			9,189
Williams Companies, Inc. 8.75% 2020		25,875			29,709
Williams Companies, Inc. 7.875% 2021		25,000			27,333
Devon Financing Corp., ULC 6.875% 2011		37,500			40,918
Devon Energy Corp. 5.625% 2014		4,500			4,891
Devon Energy Corp. 6.30% 2019		24,435			27,104
Enbridge Inc. 5.80% 2014		45,500			50,035
Enbridge Inc. 4.90% 2015		11,310			11,758
Enbridge Inc. 5.60% 2017		10,190			10,878
Rockies Express Pipeline LLC 6.25% 20134		55,485			60,295
Rockies Express Pipeline LLC 6.85% 20184		10,000			11,235
Enbridge Energy Partners, LP 5.35% 2014		3,700			3,891
Enbridge Energy Partners, LP, Series B, 6.50% 2018		42,000			45,196
Enbridge Energy Partners, LP 9.875% 2019		5,000			6,320
Enbridge Energy Partners, LP 8.05% 20775		14,855			13,946
TransCanada PipeLines Ltd. 6.50% 2018		16,585			18,817
TransCanada PipeLines Ltd. 7.125% 2019		9,065			10,797
TransCanada PipeLines Ltd. 6.35% 20675		36,750			34,256
Gaz Capital SA 7.51% 2013		200			211
Gaz Capital SA 8.146% 2018		3,407			3,611
Gaz Capital SA 6.51% 20224		41,182			37,476
Gaz Capital SA, Series 9, 6.51% 2022		737			671
Open Joint Stock Co. Gazprom, Series 2, 8.625% 2034		620			683
Gaz Capital SA 7.288% 2037		11,813			11,075
Enterprise Products Operating LP 4.95% 2010		25,650			26,030
Enterprise Products Operating LP 7.50% 2011		20,000			21,261
Ras Laffan Liquefied Natural Gas III 5.50% 20144		4,800			5,146
Ras Laffan Liquefied Natural Gas III 6.75% 20194		500			554
Ras Laffan Liquefied Natural Gas II 5.298% 20204,6		37,167			37,791
Husky Energy Inc. 6.25% 2012		4,345			4,725
Husky Energy Inc. 5.90% 2014		12,410			13,495
Husky Energy Inc. 6.20% 2017		585			633
Husky Energy Inc. 7.25% 2019		12,780			14,801
StatoilHydro ASA 2.90% 2014		6,205			6,264
StatoilHydro ASA 5.25% 2019		23,000			25,022
Chevron Corp. 3.95% 2014		12,000			12,652
Chevron Corp. 4.95% 2019		14,000			15,032
Pemex Finance Ltd. 8.875% 20106		4,142			4,299
Pemex Project Funding Master Trust 5.75% 2018		12,750			12,686
Sunoco, Inc. 6.75% 2011		7,500			7,923
Sunoco, Inc. 4.875% 2014		8,250			8,406
Canadian Natural Resources Ltd. 5.70% 2017		10,000			10,649
Apache Corp. 6.00% 2013		995			1,109
Apache Corp. 6.90% 2018		7,815			9,258
Gulfstream Natural Gas 5.56% 20154		10,000			10,098
Petrobras International 5.75% 2020		9,540			9,559
Shell International Finance B.V. 4.00% 2014		8,580			9,025
Total Capital 3.125% 2015		7,775			7,868
Phillips Petroleum Co. 8.75% 2010		6,000			6,279
BP Capital Markets PLC 3.125% 2012		5,000			5,173
Energy Transfer Partners, LP 5.95% 2015		2,570			2,729
					932,773
CONSUMER DISCRETIONARY — 1.06%
Time Warner Inc. 5.50% 2011		11,075			11,846
AOL Time Warner Inc. 6.75% 2011		6,310			6,743
AOL Time Warner Inc. 6.875% 2012		15,000			16,509
Time Warner Companies, Inc. 9.125% 2013		10,000			11,649
Time Warner Inc. 5.875% 2016		50,600			54,321
Time Warner Companies, Inc. 7.25% 2017		2,500			2,822
AOL Time Warner Inc. 7.625% 2031		5,000			5,607
Time Warner Inc. 6.50% 2036		19,300			19,669
Comcast Corp. 5.45% 2010		9,500			9,915
Comcast Corp. 5.50% 2011		7,325			7,706
Comcast Cable Communications, Inc. 6.75% 2011		22,005			23,382
Comcast Corp. 5.85% 2015		31,000			33,762
Comcast Corp. 6.30% 2017		21,375			23,169
Comcast Corp. 5.875% 2018		9,250			9,782
Comcast Corp. 6.45% 2037		3,000			3,085
Comcast Corp. 6.40% 2038		11,810			12,090
Time Warner Cable Inc. 5.40% 2012		8,000			8,550
Time Warner Cable Inc. 6.20% 2013		15,418			16,905
Time Warner Cable Inc. 7.50% 2014		23,775			27,393
Time Warner Cable Inc. 8.25% 2014		2,000			2,348
Time Warner Cable Inc. 8.25% 2019		19,000			22,894
Time Warner Cable Inc. 8.75% 2019		14,985			18,513
Staples, Inc. 7.75% 2011		1,405			1,510
Staples, Inc. 9.75% 2014		72,826			88,333
News America Holdings Inc. 9.25% 2013		5,200			6,104
News America Inc. 5.30% 2014		5,000			5,433
News America Holdings Inc. 8.00% 2016		2,000			2,342
News America Holdings Inc. 8.25% 2018		3,000			3,532
News America Inc. 6.90% 2019		22,655			25,443
News America Inc. 6.65% 2037		14,600			15,298
Thomson Corp. 6.20% 2012		14,000			15,240
Thomson Reuters Corp. 5.95% 2013		17,620			19,501
Thomson Reuters Corp. 6.50% 2018		8,000			9,105
Cox Communications, Inc. 4.625% 2010		7,666			7,717
Cox Communications, Inc. 7.125% 2012		7,335			8,237
Cox Communications, Inc. 4.625% 2013		5,495			5,723
Cox Communications, Inc. 5.45% 2014		15,880			17,065
Cox Communications, Inc. 9.375% 20194		3,000			3,764
DaimlerChrysler North America Holding Corp. 8.00% 2010		10,000			10,363
DaimlerChrysler North America Holding Corp., Series E, 5.75% 2011		6,455			6,827
DaimlerChrysler North America Holding Corp. 5.875% 2011		16,450			17,165
DaimlerChrysler North America Holding Corp. 7.75% 2011		2,950			3,135
DaimlerChrysler North America Holding Corp. 7.30% 2012		4,145			4,517
J.C. Penney Co., Inc. 8.00% 2010		32,939			33,392
Target Corp. 6.00% 2018		29,500			33,168
Walt Disney Co. 4.70% 2012		25,000			27,018
Nordstrom, Inc. 6.75% 2014		14,185			15,822
MDC Holdings, Inc. 5.375% 2014		15,000			15,298
Home Depot, Inc. 5.25% 2013		12,875			13,800
Marriott International, Inc., Series I, 6.375% 2017		12,750			13,002
Lowe’s Companies, Inc. 8.25% 2010		5,455			5,698
Lowe’s Companies, Inc., Series B, 7.11% 2037		5,000			5,998
Kohl’s Corp. 6.30% 2011		4,400			4,616
Kohl’s Corp. 6.00% 2033		6,902			6,871
Discovery Communications Inc. 5.625% 2019		10,000			10,302
TJX Companies, Inc. 4.20% 2015		9,350			9,721
					819,720
HEALTH CARE — 1.05%
Roche Holdings Inc. 5.00% 20144		73,400			79,334
Roche Holdings Inc. 6.00% 20194		58,500			64,897
Cardinal Health, Inc. 6.75% 2011		80,250			84,543
Cardinal Health, Inc. 5.50% 2013		9,230			9,782
Cardinal Health, Inc. 5.80% 2016		5,000			5,023
Cardinal Health, Inc. 5.85% 2017		13,540			13,965
Schering-Plough Corp. 6.00% 2017		82,500			92,841
Pfizer Inc. 5.35% 2015		17,500			19,345
Pfizer Inc. 6.20% 2019		47,350			54,006
WellPoint, Inc. 4.25% 2009		4,565			4,583
WellPoint, Inc. 5.00% 2011		24,000			24,874
WellPoint, Inc. 5.00% 2014		2,845			3,002
WellPoint, Inc. 5.875% 2017		25,000			26,430
Hospira, Inc. 0.763% 20105		16,901			16,899
Hospira, Inc. 5.55% 2012		20,000			21,475
Hospira, Inc. 5.90% 2014		5,860			6,334
Hospira, Inc. 6.05% 2017		4,315			4,553
Merck & Co., Inc. 1.875% 2011		18,885			19,132
Merck & Co., Inc. 4.00% 2015		25,000			26,232
Biogen Idec Inc. 6.00% 2013		40,000			42,530
GlaxoSmithKline Capital Inc. 4.85% 2013		30,775			33,216
GlaxoSmithKline Capital Inc. 5.65% 2018		5,000			5,513
Novartis Capital Corp. 4.125% 2014		15,500			16,388
Novartis Securities Investment Ltd. 5.125% 2019		20,500			21,866
Express Scripts Inc. 5.25% 2012		12,485			13,308
Express Scripts Inc. 6.25% 2014		13,837			15,219
Abbott Laboratories 5.875% 2016		12,907			14,476
Abbott Laboratories 5.125% 2019		8,050			8,550
AstraZeneca PLC 5.40% 2012		18,000			19,851
Aetna Inc. 5.75% 2011		12,500			13,168
Aetna Inc. 6.50% 2018		5,000			5,464
UnitedHealth Group Inc. 5.25% 2011		1,585			1,655
UnitedHealth Group Inc. 5.50% 2012		5,450			5,792
UnitedHealth Group Inc. 4.875% 2013		10,000			10,462
Coventry Health Care, Inc. 5.95% 2017		8,500			7,610
					812,318
TELECOMMUNICATION SERVICES — 1.00%
SBC Communications Inc. 6.25% 2011		20,000			21,284
AT&T Wireless Services, Inc. 7.875% 2011		76,700			83,114
SBC Communications Inc. 5.875% 2012		10,000			10,990
AT&T Inc. 4.95% 2013		13,125			14,017
AT&T Inc. 4.85% 2014		12,420			13,277
AT&T Inc. 5.50% 2018		16,000			16,824
AT&T Inc. 5.80% 2019		2,000			2,146
AT&T Corp. 8.00% 20315		17,000			20,979
AT&T Inc. 6.55% 2039		1,000			1,085
Telecom Italia Capital SA 4.00% 2010		10,880			10,943
Telecom Italia Capital SA, Series B, 5.25% 2013		97,843			103,045
Telecom Italia Capital SA 4.95% 2014		15,150			15,741
Telecom Italia Capital SA 6.175% 2014		6,500			7,058
Telecom Italia Capital SA 6.999% 2018		21,500			23,654
Telecom Italia Capital SA 7.20% 2036		11,370			12,431
Telecom Italia Capital SA 7.721% 2038		9,000			10,469
Verizon Communications Inc. 3.75% 20114		53,500			55,326
Verizon Global Funding Corp. 7.375% 2012		7,000			7,969
Verizon Communications Inc. 5.25% 2013		14,500			15,752
Verizon Communications Inc. 7.375% 20134		20,000			23,139
Verizon Communications Inc. 5.55% 20144		5,250			5,726
Verizon Communications Inc. 5.50% 2017		20,000			21,225
Verizon Communications Inc. 5.50% 2018		2,845			2,988
Verizon Communications Inc. 8.75% 2018		14,000			17,514
Verizon Communications Inc. 6.35% 2019		12,500			13,895
Vodafone Group PLC 5.375% 2015		10,716			11,513
Vodafone Group PLC 5.75% 2016		6,475			6,986
Vodafone Group PLC 5.625% 2017		28,950			30,927
Vodafone Group PLC 6.15% 2037		11,000			11,758
Telefónica Emisiones, SAU 5.984% 2011		20,000			21,294
Telefónica Emisiones, SAU 6.421% 2016		15,000			16,665
Singapore Telecommunications Ltd. 6.375% 2011		9,825			10,684
Singapore Telecommunications Ltd. 6.375% 20114		3,490			3,795
Singapore Telecommunications Ltd. 7.375% 20314		12,600			15,718
PCCW-HKT Capital Ltd. 8.00% 20114,5		20,000			21,628
American Tower Corp. 4.625% 20154		4,875			4,939
American Tower Corp. 7.00% 2017		15,000			16,500
Qwest Corp. 7.875% 2011		20,000			20,750
France Télécom 7.75% 20115		15,600			16,868
Deutsche Telekom International Finance BV 6.75% 2018		15,000			16,829
Koninklijke KPN NV 8.375% 2030		11,140			14,172
					771,617
UTILITIES — 0.94%
Cleveland Electric Illuminating Co. 5.65% 2013		20,535			21,876
Jersey Central Power & Light Co. 5.625% 2016		3,550			3,715
Pennsylvania Electric Co. 6.05% 2017		3,000			3,198
Cleveland Electric Illuminating Co. 8.875% 2018		37,275			46,994
Jersey Central Power & Light Co. 7.35% 2019		14,900			17,384
Nevada Power Co., General and Refunding Mortgage Bonds, Series A, 8.25% 2011		13,000			14,163
Sierra Pacific Power Co., General and Refunding Mortgage Notes, Series H, 6.25% 2012		12,000			12,743
Nevada Power Co., General and Refunding Mortgage Notes, Series I, 6.50% 2012		12,325			13,355
Sierra Pacific Power Co., General and Refunding Mortgage Notes, Series Q, 5.45% 2013		10,025			10,695
Nevada Power Co., General and Refunding Mortgage Notes, Series M, 5.95% 2016		8,314			8,871
Nevada Power Co., General and Refunding Mortgage Notes, Series S, 6.50% 2018		16,975			18,631
Nevada Power Co., General and Refunding Mortgage Notes, Series V, 7.125% 2019		2,500			2,860
National Rural Utilities Cooperative Finance Corp. 5.50% 2013		40,000			43,563
National Rural Utilities Cooperative Finance Corp. 5.45% 2018		25,000			26,500
Consumers Energy Co., Series O, 5.00% 2012		5,200			5,506
Consumers Energy Co. First Mortgage Bonds 5.15% 2017		11,500			11,983
Consumers Energy Co. 5.65% 2018		11,400			12,120
Consumers Energy Co., First Mortgage Bonds, 6.125% 2019		24,425			26,905
Consumers Energy Co., First Mortgage Bonds, 6.70% 2019		4,000			4,603
Appalachian Power Co., Series J, 4.40% 2010		10,000			10,175
Ohio Power Co., Series J, 5.30% 2010		18,000			18,718
Appalachian Power Co., Series M, 5.55% 2011		10,000			10,444
MidAmerican Energy Co. 5.125% 2013		1,500			1,589
MidAmerican Energy Co. 5.95% 2017		14,000			15,339
PacifiCorp., First Mortgage Bonds, 5.65% 2018		6,000			6,574
MidAmerican Energy Holdings Co. 5.75% 2018		10,000			10,710
Alabama Power Co., Series R, 4.70% 2010		1,750			1,815
Alabama Power Co., Series 2007-D, 4.85% 2012		21,500			23,249
Alabama Power Co., Series 2008-B, 5.80% 2013		1,225			1,361
Georgia Power Co., Series 2008-D, 6.00% 2013		5,235			5,882
Centerpoint Energy Resources Corp., Series B, 7.875% 2013		17,000			19,186
CenterPoint Energy Houston Electric, LLC, General Mortgage Bonds, Series U, 7.00% 2014		7,600			8,573
Centerpoint Energy, Inc., Series B, 6.85% 2015		4,000			4,204
National Grid PLC 6.30% 2016		28,225			30,862
Pacific Gas and Electric Co., First Mortgage Bonds, 4.20% 2011		1,000			1,036
Pacific Gas and Electric Co. 6.25% 2013		24,100			27,118
Scottish Power PLC 5.375% 2015		25,000			26,939
Oncor Electric Delivery Co. LLC 5.95% 2013		23,500			25,487
Carolina Power & Light Co. d/b/a Progress Energy Carolinas, Inc., First Mortgage Bonds, 5.15% 2015		5,000			5,400
Progress Energy Florida, Inc., First Mortgage Bonds, 5.65% 2018		1,700			1,861
Progress Energy, Inc. 7.05% 2019		15,000			17,377
HKCG Finance Ltd. 6.25% 2018		14,000			15,262
HKCG Finance Ltd. 6.25% 20184		7,525			8,203
AmerenEnergy Generating Co., Series D, 8.35% 2010		1,500			1,562
Illinois Power Co. 6.125% 2017		15,000			16,036
Cilcorp Inc. 9.375% 2029		5,000			5,125
Abu Dhabi National Energy Co. PJSC (TAQA) 5.62% 20124		20,000			20,922
Public Service Co. of Colorado, First Collateral Trust Bonds, Series No. 12, 4.875% 2013		5,000			5,292
Public Service Co. of Colorado 5.80% 2018		9,850			10,941
Public Service Co. of Colorado 5.125% 2019		4,350			4,641
PSEG Power LLC 7.75% 2011		15,000			16,196
Dominion Resources, Inc., Series 2002-D, 5.125% 2009		10,311			10,357
Virginia Electric and Power Co., Series 2003-B, 4.50% 2010		3,000			3,098
Virginia Electric and Power Co., Series A, 6.00% 2037		2,000			2,183
Exelon Corp. 4.45% 2010		10,000			10,196
Commonwealth Edison Co., First Mortgage Bonds, Series 105, 5.40% 2011		4,000			4,295
Southern California Gas Co., First Mortgage Bonds, Series II, 4.375% 2011		5,500			5,705
Southern California Gas Co., First Mortgage Bonds, Series LL, 5.50% 2014		5,000			5,515
Southern California Edison Co., First and Refunding Mortgage Bonds, Series 2008-B, 5.50% 2018		2,450			2,682
					727,775
CONSUMER STAPLES — 0.83%
Altria Group, Inc. 7.75% 2014		20,000			22,843
Altria Group, Inc. 9.70% 2018		41,345			50,983
Altria Group, Inc. 9.25% 2019		106,000			128,731
Altria Group, Inc. 10.20% 2039		50,000			66,839
CVS Caremark Corp. 0.661% 20105		5,000			5,000
CVS Caremark Corp. 6.60% 2019		29,492			32,949
CVS Caremark Corp. 5.789% 20264,6		12,924			12,434
CVS Caremark Corp. 6.036% 20286		17,034			16,776
CVS Caremark Corp. 6.943% 20306		33,513			34,590
CVS Caremark Corp. 8.353% 20314,6		40			45
Kroger Co. 6.75% 2012		1,000			1,097
Kroger Co. 5.00% 2013		11,250			11,889
Kroger Co. 7.50% 2014		23,315			26,929
Kroger Co. 6.40% 2017		48,135			53,359
Wal-Mart Stores, Inc. 4.25% 2013		6,000			6,404
Wal-Mart Stores, Inc., Series 1994-A2, 8.85% 20156		16,000			18,899
Wal-Mart Stores, Inc. 5.375% 2017		5,205			5,682
Wal-Mart Stores, Inc. 5.80% 2018		14,795			16,583
Delhaize Group 5.875% 2014		10,000			10,779
Delhaize Group 6.50% 2017		28,410			31,150
Safeway Inc. 6.25% 2014		5,550			6,135
Safeway Inc. 6.35% 2017		30,000			33,100
Anheuser-Busch InBev NV 4.125% 20154		20,000			20,189
Anheuser-Busch InBev NV 5.375% 20204		5,000			5,093
Walgreen Co. 4.875% 2013		10,000			10,821
Tesco PLC 5.50% 20174		9,070			9,540
SYSCO Corp. 4.20% 2013		2,920			3,074
					641,913
INDUSTRIALS — 0.71%
Koninklijke Philips Electronics NV 4.625% 2013		55,450			58,549
American Airlines, Inc., Series 2001-2, Class B, 8.608% 20126		10,000			9,325
American Airlines, Inc., Series 2001-2, Class A-2, 7.858% 20136		39,450			39,460
Continental Airlines, Inc., Series 1998-1, Class A, 6.648% 20196		7,830			7,468
Continental Airlines, Inc., Series 1997-4, Class A, 6.90% 20196		4,567			4,399
Continental Airlines, Inc., Series 2001-1, Class A-1, 6.703% 20226		8,785			8,274
Continental Airlines, Inc., Series 2007-1, Class B, 6.903% 20226		2,000			1,740
Continental Airlines, Inc., Series 2000-2, Class A-1, 7.707% 20226		12,851			12,265
Continental Airlines, Inc., Series 2000-1, Class A-1, 8.048% 20226		14,004			13,925
Delta Air Lines, Inc., Series 2002-1, Class G-2, MBIA insured, 6.417% 20146		41,770			39,734
Delta Air Lines, Inc., Series 2002-1, Class G-1, MBIA insured, 6.718% 20246		3,018			2,669
Burlington Northern Santa Fe Corp. 7.00% 2014		26,430			30,219
BNSF Funding Trust I 6.613% 20555		6,700			6,356
Canadian National Railway Co. 6.375% 2011		1,822			1,996
Canadian National Railway Co. 4.40% 2013		2,500			2,647
Canadian National Railway Co. 4.95% 2014		4,175			4,491
Canadian National Railway Co. 5.55% 2018		25,000			27,329
Union Pacific Corp. 6.50% 2012		4,000			4,412
Union Pacific Corp. 5.125% 2014		11,495			12,330
Union Pacific Corp. 5.75% 2017		5,405			5,793
Union Pacific Corp. 5.70% 2018		9,870			10,628
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class B, 7.156% 20114,6		25,547			26,556
BAE Systems Holdings Inc. 4.95% 20144		1,375			1,428
CSX Corp. 5.75% 2013		15,000			16,076
CSX Corp. 6.25% 2015		10,000			11,181
Raytheon Co. 4.85% 2011		16,000			16,616
Raytheon Co. 6.40% 2018		1,580			1,830
Raytheon Co. 6.75% 2018		2,420			2,835
Raytheon Co. 7.00% 2028		4,000			4,800
Norfolk Southern Corp. 5.75% 20164		20,340			21,992
Waste Management, Inc. 7.375% 2010		20,000			20,881
Waste Management, Inc. 5.00% 2014		890			928
Northrop Grumman Systems Corp. 7.125% 2011		12,700			13,581
Northrop Grumman Corp. 7.75% 2016		6,640			8,006
Atlas Copco AB 5.60% 20174		17,290			17,950
Lockheed Martin Corp. 4.121% 2013		2,000			2,106
Lockheed Martin Corp. 7.65% 2016		10,135			12,286
Lockheed Martin Corp., Series B, 6.15% 2036		3,000			3,319
Volvo Treasury AB 5.95% 20154		14,950			15,215
John Deere Capital Corp. 5.10% 2013		1,700			1,830
John Deere Capital Corp., Series D, 5.50% 2017		5,350			5,791
John Deere Capital Corp., Series D, 5.35% 2018		2,750			2,930
John Deere Capital Corp., Series D, 5.75% 2018		3,000			3,274
Hutchison Whampoa International Ltd. 6.50% 20134		11,800			12,852
Caterpillar Financial Services Corp. 4.30% 2010		4,300			4,391
Caterpillar Financial Services Corp., Series F, 5.125% 2011		3,000			3,218
Caterpillar Financial Services Corp., Series F, 4.85% 2012		1,290			1,376
Caterpillar Financial Services Corp., Series F, 5.50% 2016		2,000			2,137
Caterpillar Financial Services Corp., Series F, 7.15% 2019		1,000			1,176
United Air Lines, Inc., Series 2007-1, Class A, 6.636% 20246		3,186			2,788
Allied Waste North America, Inc. 6.875% 2017		2,100			2,229
General Electric Co. 4.50% PINES 2035		1,905			1,776
					547,363
MATERIALS — 0.45%
Dow Chemical Co. 7.60% 2014		60,200			66,950
Dow Chemical Co. 5.70% 2018		1,400			1,380
Dow Chemical Co. 8.55% 2019		62,075			70,985
International Paper Co. 7.95% 2018		2,000			2,233
International Paper Co. 9.375% 2019		54,745			66,383
ArcelorMittal 9.85% 2019		30,755			36,304
Rio Tinto Finance (USA) Ltd. 5.875% 2013		10,000			10,786
Rio Tinto Finance (USA) Ltd. 8.95% 2014		12,150			14,373
Rio Tinto Finance (USA) Ltd. 9.00% 2019		5,670			7,066
BHP Billiton Finance (USA) Ltd. 5.50% 2014		18,295			20,117
BHP Billiton Finance (USA) Ltd. 6.50% 2019		10,000			11,507
E.I. du Pont de Nemours and Co. 4.125% 2010		4,000			4,078
E.I. du Pont de Nemours and Co. 5.00% 2013		1,210			1,309
E.I. du Pont de Nemours and Co. 5.25% 2016		1,500			1,612
Arbermarle Corp. 5.10% 2015		7,000			6,841
CRH America Inc. 6.95% 2012		815			884
CRH America, Inc. 6.00% 2016		220			228
CRH America, Inc. 8.125% 2018		2,595			3,001
Stora Enso Oyj 6.404% 20164		4,000			3,651
ICI Wilmington, Inc. 5.625% 2013		3,500			3,610
Holcim Ltd. 6.00% 20194		2,980			3,079
Yara International ASA 7.875% 20194		2,225			2,540
Lubrizol Corp. 8.875% 2019		2,000			2,498
Airgas, Inc. 7.125% 20184		1,800			1,867
Praxair, Inc. 4.375% 2014		1,000			1,069
Alcan Inc. 6.45% 2011		1,000			1,054
Potash Corp. of Saskatchewan Inc. 5.875% 2036		350			358
					345,763
BONDS & NOTES OF GOVERNMENTS & GOVERNMENT AGENCIES OUTSIDE THE U.S. — 0.31%
Australia Government Agency-Guaranteed, National Australia Bank 0.784% 20144,5		25,000			25,047
Australia Government Agency-Guaranteed, National Australia Bank 3.375% 20144		26,750			27,306
Russian Federation 7.50% 20306		37,882			42,542
France Government Agency-Guaranteed, Société Finance 2.25% 20124		29,365			29,730
France Government Agency-Guaranteed, Société Finance 3.375% 20144		10,000			10,276
New Zealand Government Agency-Guaranteed, Westpac Securities Co. 2.50% 20124		10,000			10,097
New Zealand Government Agency-Guaranteed, Westpac Securities Co. 3.45% 20144		14,350			14,412
Australia Government Agency-Guaranteed, Commonwealth Bank of Australia 0.785% 20144,5		20,000			20,280
United Kingdom Government Agency-Guaranteed, Lloyds TSB Group PLC 2.80% 20124		15,000			15,371
Denmark Government Agency-Guaranteed, Danske Bank 0.757% 20124,5		15,000