N-30D 1 ifa.txt [logo - American Funds(sm)] The right choice for the long term(sm) THE INCOME FUND OF AMERICA [cover photograph: close-up of person holding peaches] Semi-annual report for the six months ended January 31, 2002 THE INCOME FUND OF AMERICA(R) The Income Fund of America is one of the 29 American Funds,(sm) the nation's third-largest mutual fund family. For seven decades, Capital Research and Management Company,(sm) the American Funds adviser, has invested with a long-term focus based on thorough research and attention to risk. The Income Fund of America seeks current income while secondarily striving for capital growth through investments in stocks and fixed-income securities. IFA DIVIDEND RATE VERSUS BENCHMARKS [begin line chart]
YEAR-END IFA LIPPER INCOME FUND AVERAGE S&P 500 1/31/1975 7.30 7.36 4.71 7/31/1975 7.24 7.04 4.18 1/31/1976 6.30 6.24 3.65 7/31/1976 7.06 6.46 3.66 1/31/1977 6.94 6.36 4.01 7/31/1977 6.15 6.24 4.47 1/31/1978 6.61 6.70 5.28 7/31/1978 6.70 6.56 4.92 1/31/1979 7.56 6.88 5.12 7/31/1979 7.38 6.94 5.19 1/31/1980 7.83 6.92 4.99 7/31/1980 7.63 6.97 4.95 1/31/1981 8.07 7.27 4.81 7/31/1981 8.16 7.94 4.91 1/31/1982 8.75 8.79 5.53 7/31/1982 9.81 9.73 6.37 1/31/1983 7.95 8.32 4.74 7/31/1983 7.95 8.11 4.28 1/31/1984 7.74 7.88 4.36 7/31/1984 8.60 9.22 4.87 1/31/1985 7.58 7.97 4.22 7/31/1985 7.45 8.05 4.07 1/31/1986 7.07 7.40 3.75 7/31/1986 7.27 7.17 3.45 1/31/1987 6.69 6.54 3.03 7/31/1987 7.02 6.85 2.69 1/31/1988 7.50 7.33 3.31 7/31/1988 6.96 7.37 3.27 1/31/1989 6.69 6.88 3.34 7/31/1989 6.67 6.50 3.04 1/31/1990 6.99 6.96 3.37 7/31/1990 7.18 7.01 3.31 1/31/1991 8.12 7.32 3.52 7/31/1991 7.11 6.64 3.11 1/31/1992 6.33 6.12 2.96 7/31/1992 6.06 5.92 2.89 1/31/1993 6.44 5.50 2.83 7/31/1993 6.23 5.04 2.79 1/31/1994 5.56 4.74 2.64 7/31/1994 6.14 4.63 2.80 1/31/1995 6.14 4.81 2.81 7/31/1995 5.56 4.53 2.41 1/31/1996 5.07 4.43 2.18 7/31/1996 5.22 4.67 2.28 1/31/1997 5.09 4.15 1.89 7/31/1997 4.84 4.07 1.61 1/31/1998 4.27 4.20 1.58 7/31/1998 4.49 4.14 1.43 1/31/1999 4.79 3.75 1.29 7/31/1999 5.03 3.95 1.24 1/31/2000 5.40 4.29 1.19 7/31/2000 5.64 4.35 1.15 1/31/2001 4.78 4.25 1.20 7/31/2001 4.87 4.21 1.30 1/31/2002 5.01 3.66 1.40
[end line chart] All numbers calculated by Lipper Inc. The 12-month dividend rate is calculated by taking the total of the trailing 12 months' dividends and dividing the month-end net asset value adjusted for capital gains. FIGURES SHOWN ARE PAST RESULTS AND ARE NOT PREDICTIVE OF FUTURE RESULTS. SHARE PRICE AND RETURN WILL VARY, SO YOU 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. HIGH-YIELD BONDS ARE SUBJECT TO GREATER FLUCTUATIONS IN VALUE AND RISK OF LOSS OF INCOME AND PRINCIPAL. INVESTING OUTSIDE THE UNITED STATES INVOLVES ADDITIONAL RISKS, SUCH AS CURRENCY FLUCTUATIONS, POLITICAL INSTABILITY, DIFFERING SECURITIES REGULATIONS AND PERIODS OF ILLIQUIDITY, WHICH ARE DETAILED IN THE FUND'S PROSPECTUS. FELLOW SHAREHOLDERS: THE INCOME FUND OF AMERICA FINISHED THE FIRST HALF OF ITS FISCAL YEAR WITH A SLIGHTLY NEGATIVE RETURN OF 0.3%. WHILE WE ARE NOT HAPPY TO REPORT EVEN A SMALL DECLINE IN THE VALUE OF YOUR PORTFOLIO, GIVEN THE EXTRAORDINARILY DIFFICULT INVESTMENT ENVIRONMENT, WE ARE GRATIFIED THAT OUR INCOME EMPHASIS HAS CONTINUED TO PROVIDE A MEASURE OF STABILITY. During the six months ended January 31, the fund paid quarterly dividends totaling 40 cents a share and a capital gain distribution of 15.6 cents a share. Those of you who reinvested those distributions received an income return of 2.4% (4.9% annualized), which largely offset a modest drop in net asset value. The fund's 0.3% decline was meaningfully better than the 6.0% slide in stocks, as measured by the unmanaged Standard & Poor's 500 Composite Index, and the 1.2% average loss posted by the 97 income funds tracked by Lipper. The fund's advantage was even more pronounced for the 12 months: In the face of a 16.1% decline in the S&P 500, The Income Fund of America rose 3.5% for the year ended January 31, while the 91 income funds tracked by Lipper declined an average of 2.1% over that time frame. Bonds once again provided a haven from the stock market storms. Neither the fund nor its equity-oriented benchmarks surpassed the unmanaged Lehman Brothers Aggregate Bond Index, which finished the six months 3.2% higher and the 12 months with an increase of 7.6%. AN INCOME CUSHION AND LONG-TERM GROWTH With its emphasis on bonds and dividend-paying stocks with above-average yields, The Income Fund of America delivered a hefty 5.0% dividend rate for the 12 months ended January 31. That stood out from the 1.4% dividend yield for the S&P 500, which remained stubbornly low despite the prolonged decline in equity prices. The fund's dividend rate was also higher than the 3.7% average yield of the income funds tracked by Lipper. Longer term, the fund's income orientation has translated into very attractive returns: Indeed, over its 28-year lifetime The Income Fund of America has enjoyed an average annual total return of 13.1% slightly more than the 13.0% of the S&P 500. (Please see the table on page 5 for other return comparisons.) INVESTOR CONFIDENCE TAKES A DIVE To some extent, the six months resembled the flip side of the headiest days of the Internet bubble. In a period that had no shortage of bad news, investor pessimism fed on itself, sending stocks spiraling lower. As the reporting period began in August, equity prices were continuing to reflect the impact of the first recession experienced by the U.S. economy in a decade. Economic and stock conditions deteriorated further with the September attacks. The picture brightened briefly in the final quarter of 2001 with a rally in technology and other beleaguered sectors, but confidence quickly soured in January, as investor concerns about corporate accounting practices rippled throughout global markets. The Income Fund of America's conservative posture continued to provide a buffer during this latest round of turbulence. Not surprisingly, the fund did not benefit greatly from the narrow technology rally near the end of 2001, but it held up better than the broader stock markets through the worst of the September rout and remained flat when stocks declined in January. A LOOK AT THE PORTFOLIO During the six months, the fund benefited from gains in several of its largest investments. Among industry concentrations, bank holdings were generally strong, as were a number of real estate investment trusts and paper companies. Good individual stock selection also helped. Although not every large holding rose in price, in many cases high dividend yields helped mitigate losses in share price. Solid gainers included PACCAR (+14.1%), a large truck manufacturer; Commonwealth Bank of Australia (+13.5%) and May Department Stores (+12.5%).* While slumping print ad revenues in the U.S. hurt several paper companies, Plum Creek Timber (+19.9%), as well as Scandinavian firms Stora Enso (+36.8%) and UPM-Kymmene (+14.4%), all appreciated considerably. *Returns to the fund reflect monthly changes in size of holdings and dividends received, as well as price changes for the six-month reporting period. [Begin Sidebar] The fund's income emphasis continued to provide a buffer during this latest round of stock market turbulence. [End Sidebar] Our research-intensive investment approach helped the fund largely avoid a slump in utility stocks. In fact, we decreased a number of utility positions last year, when growing demand had pushed electricity prices higher. Of holdings that continue to be well-represented, Ameren (+12.4%), Entergy (+11.5%), Southern Co. (+5.4%) and Consolidated Edison (+5.3%) posted gains for the six months. At the other end of the spectrum, declining energy prices put pressure on our oil and gas investments, among them Marathon Oil (-3.8%) and Royal Dutch/Shell (-15.6%). The weak business climate hurt financial services firms such as ING Groep (-13.4%) and J.P. Morgan Chase (-12.9%). British Airways (-40.9%), our only airline equity holding, was hobbled by slowing air travel following the September attacks. Telecommunications holdings, which are relatively small, also dropped in price. INCOME AND SUPPORT FROM BONDS Fixed-income securities, which represent about one-quarter of net assets, continued to help the fund meet its income objective and helped stabilize the portfolio as stock markets gyrated. The Federal Reserve Board took aggressive measures to help the economy regain its footing. It notched down the target for the federal funds rate - a key short-term rate - five times during the six months, to 1.75% from 3.75%. Bond prices rose in response, particularly for the highest grade issues, but retreated in the final months of the year amid signs that Fed easing could soon come to an end. Lower rated bonds, which tend to do well in periods of strong economic recovery, reversed the pattern of their higher grade counterparts; they declined in early fall, but ended the period on a positive note. Meanwhile, convertible securities, which are stock/bond hybrids, generally tracked equity prices lower, although less severely. The weakness provided opportunities to add substantially to our convertible holdings. The Income Fund of America's bond portfolio is well-diversified, representing hundreds of issuers and many types of debt instruments. As the recent bond volatility demonstrated, that breadth has helped the fund participate in upswings in some areas while mitigating downturns in others. GLIMMERS OF A TURNAROUND, BUT UNCERTAINTY LINGERS There is mounting evidence that the economic troubles in the U.S. may be nearing an end. Technology demand has picked up somewhat, unemployment rates appear to be moderating and retail sales have been better than expected. Still, the investment outlook is far from clear. Corporate earnings remain weak; accounting issues and downgrades by rating agencies could inject fresh uncertainties into stock and bond markets. Recovery is not without its own challenges for an income fund. An economic pick-up could result in higher interest rates, constraining certain sectors of the bond market. Our stock and bond analysts are working together closely to examine prospects of every company we consider for the portfolio. Even as we make every effort to protect your assets, we are looking forward. Price declines have created compelling pockets of value for investors with the resources and patience to find them. The Income Fund of America has a significant position in liquid assets - more than 12% of net assets in cash and equivalents - which we are carefully putting to work on your behalf. We look forward to reporting to you in six months. Cordially, /s/ Janet A. McKinley Janet A. McKinley Chairman of the Board /s/ Darcy B. Kopcho Darcy B. Kopcho President March 11, 2002 Roberta L. Hazard retired from the Fund's Board of Directors on December 31, 2001. She had been a Director since 1993. The Directors thank her for her many contributions to the fund. THE INCOME FUND OF AMERICA AT A GLANCE RESULTS AT A GLANCE TOTAL RETURNS FOR PERIODS ENDED JANUARY 31, 2002
6 months 1 year 10 years Lifetime/1/ Average annualized lifetime return/1/ THE INCOME FUND OF AMERICA -0.3% +3.5% +186.4% +3,068.4% +13.1% Standard & Poor's 500 - 6.0 -16.1 +238.3 +3,057.2 +13.0 Composite Index Lehman Brothers Aggregate +3.2 +7.6 +105.5 +1,036.5 +9.0 Bond Index/2/ Credit Suisse First Boston +1.3 +0.8 +106.3 - - High Yield Index Average savings +2.1 +4.2 +47.0 +451.2 +6.2 institution/3/ Consumer Price Index -0.2 +1.1 +28.2 285.8 +4.9 (inflation)/4/
/1/ Since December 1, 1973, when Capital Research and Management Company became IFA's investment adviser. /2/ From December 1, 1973, through December 31, 1975, The Lehman Brothers Government/Credit Bond Index was used because the Aggregate Bond Index did not yet exist. /3/ Based on figures supplied by the U.S. League of Savings Institutions and the Federal Reserve Board reflecting all kinds of savings deposits (maximum allowable interest rates imposed by law until 1983). Savings accounts are guaranteed; the fund is not. /4/ Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics. The indexes are unmanaged and do not reflect sales charges, commissions or expenses. Fund results in this report were calculated for Class A shares at net asset value (without a sales charge) unless otherwise indicated. Here are the average annual compound returns on a $1,000 investment with all distributions reinvested for periods ended December 31, 2001 (the most recent calendar quarter): 1 year 5 years 10 years CLASS A SHARES (reflecting 5.75% maximum sales charge) -0.63% 7.99% 10.53% The fund's 30-day yield for Class A shares as of February 28, 2002, calculated in accordance with the Securities and Exchange Commission formula, was 4.53%. The fund's distribution rate for Class A shares as of that date was 4.71%. The SEC yield reflects income the fund expects to earn based on its current portfolio of securities, while the distribution rate is based solely on the fund's past dividends. Accordingly, the fund's SEC yield and distribution rate may differ. Results for other share classes can be found on the inside back cover. Asset mix comparison January 31, 2002 (unaudited) [pie chart] Percent of Investment portfolio Net Assets U.S. equity securities+ 47.9% Non-U.S. equity securities 12.7 Government bonds 2.4 Other fixed-income securities 24.8 Cash & equivalents 12.2 +Also includes 0.7% in Dutch equities that are part of the S&P500 [end chart] Percent of Net Five Largest Industries in Equity Holdings Assets 1. Banks 5.1% 2. Electric Utilities 5.1 3. Paper & Forest Products 4.9 4. Oil & Gas 4.6 5. Tobacco 4.5 Percent of Net Ten Largest Equity Holdings Assets 1. Philip Morris 2.3% 2. R.J. Reynolds Tobacco Holdings 1.5 3. Weyerhaeuser 1.4 4. J.P. Morgan Chase 1.3 5. PACCAR 1.2 6. H.J. Heinz 1.1 7. May Department Stores 1.1 8. Plum Creek Timber 1.1 9. Marathon Oil 1.0 10. Royal Dutch Petroleum/"Shell" Transport and Trading 1.0
July 31, 2001 [pie chart] Percent of Investment portfolio++ Net Assets U.S. equity securities 47.7% Non-U.S. equity securities 13.6 Government bonds 3.0 Other fixed-income securities 22.5 Cash & equivalents 13.2 ++Also includes 0.2% in Dutch equities that are part of the S&P500 [end chart] Percent of Net Five Largest Industries in Equity Holdings Assets 1. Electric utilities 6.7% 2. Oil & gas 5.6 3. Banks 5.6 4. Paper & forest products 4.8 5. Tobacco 4.1 Percent of Net Ten Largest Equity Holdings Assets 1. Philip Morris 2.2% 2. First Union 1.7 3. Bank of America 1.6 4. Royal Dutch Petroleum/"Shell" Transport and Trading 1.5 5. R.J. Reynolds Tobacco Holdings 1.4 6. Dow Chemical 1.4 7. Weyerhaeuser 1.4 8. Consolidated Edison 1.3 9. Georgia-Pacific 1.3 5. PACCAR 1.1
The Income Fund of America, Inc. Investment Portfolio, January 31, 2002 Unaudited Shares or Market Percent Principal Value of Net Equity Securities Amount (000) Assets BANKS - 5.12% Wachovia Corp. (merged with First Union Corp.) 5,890,100 $195,846 0.94% Bank of America Corp. 3,000,000 189,090 .90 Societe Generale 1,986,100 116,681 .56 Commonwealth Bank of Australia 5,446,730 90,393 .43 National City Corp. 3,030,100 85,206 .41 Bank of Nova Scotia 2,400,000 73,288 .35 Alliance & Leicester PLC 5,586,628 67,278 .32 Lloyds TSB Group PLC 5,000,000 53,437 .25 Westpac Banking Corp. 5,634,249 45,125 .22 Wells Fargo & Co. 657,000 30,478 .15 National Australia Bank Ltd., exchangeable $800,000 25,744 .12 capital units Comerica Inc. 450,000 25,330 .12 ABN AMRO Holding NV 1,000,000 17,290 .08 Bank of New York Co., Inc. 400,000 16,392 .08 BANK ONE CORP. 420,000 15,750 .07 NB Capital Corp. 8.35% exchangeable preferred 520,000 13,832 .07 depositary shares Bank of Ireland 1,040,000 9,781 .05 1,070,941 5.12 ELECTRIC UTILITIES - 5.06% DTE Energy Co. 3,265,000 133,865 .64 Consolidated Edison, Inc. 3,200,000 131,168 .63 Ameren Corp. 2,500,000 107,175 .51 Dominion Resources, Inc. 1,000,000 58,870 Dominion Resources, Inc. 9.50% PIES 722,000 42,237 .48 convertible preferred 2004 Entergy Corp. 2,450,100 100,895 .48 Southern Co. 3,140,000 77,401 .37 American Electric Power Co., Inc. 1,776,600 74,155 .35 TXU Corp., Series C, 8.75% convertible 1,325,200 69,441 .33 preferred 2004, units OGE Energy Corp. 2,810,000 61,595 .30 CMS Energy Corp. 2,300,000 52,509 .25 Duke Energy Corp. 8.25% convertible preferred 1,691,000 41,599 .20 2004, units Progress Energy, Inc. 911,924 39,851 .19 Scottish Power PLC 4,300,000 26,043 .13 FPL Group, Inc. 405,000 21,712 .10 NRG Energy, Inc. 6.50% convertible preferred 1,000,000 14,100 .07 2004, units AES Trust VII 6.00% convertible preferred 193,625 6,220 .03 2008 /1/ 1,058,836 5.06 PAPER & FOREST PRODUCTS - 4.92% Weyerhaeuser Co. 4,902,900 285,937 1.37 Plum Creek Timber Co., Inc. (merger with 7,466,500 225,488 1.08 Georgia-Pacific Corp., Timber Group) UPM-Kymmene Corp. 5,470,000 186,565 .89 International Paper Co. 2,839,640 118,640 International Paper Co., Capital Trust 5.25% 400,000 18,750 .66 convertible preferred 2025 Georgia-Pacific Corp., Georgia-Pacific Group 1,685,000 48,242 .23 7.50% PEPS convertible preferred 2002, units Stora Enso Oyj, Class R 3,664,275 46,422 .22 Kimberly-Clark de Mexico, SA de CV, Class A 13,555,000 37,066 .18 Meadwestvaco Corp. (merger with Westvaco 727,500 23,484 .11 Corp.) /1/ Holmen AB, Class B 942,900 20,951 .10 Potlatch Corp. 600,000 17,418 .08 1,028,963 4.92 OIL & GAS - 4.59% Marathon Oil Corp. (formerly USX-Marathon 7,380,300 207,017 .99 Group) Royal Dutch Petroleum Co. (New York 2,295,000 114,681 registered) "Shell" Transport and Trading Co., PLC 1,696,700 69,683 (New York registered) (ADR) "Shell" Transport and Trading Co., PLC 2,676,600 18,157 .97 ChevronTexaco Corp. (merger of Chevron Corp. 1,999,042 167,520 .80 and Texaco Inc.) Occidental Petroleum Corp. 2,700,000 70,065 .33 Phillips Petroleum Co. 1,129,700 66,054 .32 Conoco Inc. 2,000,000 56,320 .27 Exxon Mobil Corp. 1,420,000 55,451 .27 ENI SpA 3,750,000 48,671 .23 Unocal Capital Trust $3.125 convertible 700,000 35,613 .17 preferred Kerr-McGee Corp. 400,000 21,180 .10 Husky Energy Inc. 1,500,000 14,800 .07 Pennzoil-Quaker State Co. 1,000,000 13,840 .07 959,052 4.59 TOBACCO - 4.49% Philip Morris Companies Inc. 9,400,000 471,034 2.25 R.J. Reynolds Tobacco Holdings, Inc. /2/ 5,200,000 310,700 1.49 Gallaher Group PLC 12,338,425 85,965 .41 Imperial Tobacco Ltd. 4,118,457 52,911 .25 UST Inc. 500,000 17,475 .09 938,085 4.49 REAL ESTATE - 3.36% Equity Residential Properties Trust 4,790,000 128,276 Equity Residential Properties Trust, 600,000 14,970 .68 Series G, 7.25% convertible preferred Health Care Property Investors, Inc. 2,292,900 87,061 .42 Hang Lung Properties Ltd. (formerly Amoy 70,000,000 70,907 .34 Properties SA Ltd.) Weingarten Realty Investors 1,405,000 69,196 .33 Boston Properties, Inc. 1,495,000 54,777 .26 Archstone-Smith Trust (formerly Archstone 1,377,000 34,260 .16 Communities Trust) Unibail 597,554 29,075 .14 CenterPoint Properties Corp. 580,000 28,722 .14 ProLogis Trust, Series D, 7.92% preferred 1,060,000 26,341 .13 Equity Office Properties Trust 880,000 25,335 .12 AMB Property Corp. 895,000 22,921 .11 Kimco Realty Corp. 725,000 22,127 .10 Hysan Development Co. Ltd. 21,001,854 21,274 .10 Sun Hung Kai Properties Ltd. 2,000,000 16,092 .08 Duke Realty Corp., Series B, 7.99% preferred 300,000 14,869 .07 cumulative step-up premium rate Simon Property Group, Inc., Series C, 7.89% 200,000 9,812 .05 preferred cumulative step-up premium rate FelCor Lodging Trust Inc. 450,000 8,068 .04 IAC Capital Trust, Series A, 8.25% TOPRS 300,000 7,653 .04 preferred New Plan Realty Trust, Series D, 7.80% 112,500 5,393 .02 preferred cumulative step-up premium rate Nationwide Health Properties, Inc., Series A, 50,000 3,891 .02 7.677% preferred cumulative step-up premium rate Hang Lung Group Ltd. 2,343,000 2,058 .01 703,078 3.36 FOOD PRODUCTS - 3.04% H.J. Heinz Co. 5,700,000 235,980 1.13 Sara Lee Corp. 7,125,000 150,694 .72 General Mills, Inc. 1,704,800 84,473 .40 Kellogg Co. 2,550,000 78,693 .37 ConAgra Foods, Inc. 2,250,000 55,800 .27 Unilever NV (New York registered) 510,000 28,733 .14 Unilever PLC 250,000 2,010 .01 636,383 3.04 MACHINERY - 2.09% PACCAR Inc. /2/ 3,838,600 254,308 1.22 Caterpillar Inc. 2,050,000 103,074 .49 Pall Corp. 1,000,000 23,060 .11 Metso Oyj 1,779,998 20,196 .10 Cummins Capital Trust I 7.00% QUIPS 356,000 17,992 .09 convertible preferred 2031 /3/ Ingersoll-Rand Co., Class A 405,000 17,913 .08 436,543 2.09 DIVERSIFIED FINANCIALS - 2.09% J.P. Morgan Chase & Co. 7,780,000 264,909 1.27 ING Groep NV 3,508,000 87,679 .42 Swire Pacific Capital Ltd. 8.84% cumulative 1,125,000 28,125 guaranteed perpetual capital securities /3/ Swire Pacific Offshore Financing Ltd. 9.33% 195,000 4,997 .16 cumulative guaranteed perpetual preferred capital securities /3/ Fannie Mae 334,800 27,102 .13 Providian Financial Corp. 3.25% convertible $25,000,000 13,622 .07 debentures 2005 Wilshire Financial Services Group Inc. /1/ /2/ 2,150,517 5,054 .02 Wharf (Holdings) Ltd. 2,201,000 4,769 .02 436,257 2.09 ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.67% Solectron Corp. 0% LYON convertible notes 2020 $264,456,000 135,356 Sanmina Corp. 0% convertible subordinated $161,000,000 60,198 debenture 2020 SCI Systems, Inc. 3.00% convertible $ 33,500,000 25,822 .41 subordinated debentures 2007 Celestica Inc. 0% convertible debenture 2020 $181,000,000 81,214 .39 Agilent Technologies, Inc. 3.00% convertible $ 25,185,000 28,774 .14 debentures 2021 /3/ /4/ Thermo Electron Corp. 4.00% convertible $ 10,000,000 9,500 .04 subordinated debentures 2005 KDDI Corp. 5.25% convertible subordinated $ 10,000,000 7,487 .04 notes 2008 348,351 1.67 CHEMICALS - 1.61% Dow Chemical Co. 4,934,800 145,774 .70 DSM NV 3,072,005 115,041 .55 E.I. du Pont de Nemours and Co. 1,700,000 75,089 .36 335,904 1.61 DIVERSIFIED TELECOMMUNICATION SERVICES - 1.60% SBC Communications Inc. 2,455,600 91,962 .44 AT&T Corp. 4,860,000 86,022 .41 Hellenic Telecommunications Organization SA 4,600,000 72,539 .35 Verizon Communications Inc. 688,000 31,889 Bell Atlantic Financial Services, Inc. 4.25% $18,000,000 18,180 .24 convertible debentures 2005 /3/ ALLTEL Corp. 300,000 16,644 .08 Qwest Trends Trust 5.75% convertible 500,000 11,094 .05 preferred 2003 /3/ WorldCom, Inc. - MCI Group 500,000 6,195 .03 Allegiance Telecom, Inc., warrants, expire 20,000 188 .00 2008 /1/ /3/ /5/ GT Group Telecom Inc., warrants, expire 15,000 75 .00 2010 /1/ /3/ /5/ NTELOS, Inc., warrants, expire 2010 /1/ /5/ 5,200 1 .00 XO Communications, Inc. 14.00% preferred 12 - .00 2009 /1/ /6/ 334,789 1.60 INSURANCE - 1.59% SAFECO Corp. 2,300,000 70,357 .34 Allstate Corp. 2,175,000 70,166 .33 American International Group, Inc. (merger 613,740 45,509 .22 with American General Corp.) Royal & Sun Alliance Insurance Group PLC 7,800,000 36,753 .18 XL Capital Ltd., Class A 400,000 35,248 .17 St. Paul Companies, Inc. 692,000 30,932 .15 American Financial Group, Inc. 1,174,700 27,711 .13 Irish Life & Permanent PLC 1,400,000 14,910 .07 331,586 1.59 PHARMACEUTICALS - 1.51% Bristol-Myers Squibb Co. 2,275,000 103,217 .49 Eli Lilly and Co. 1,250,000 93,875 .45 Pharmacia Corp. 1,335,878 54,103 .26 American Home Products Corp. 725,000 46,878 .23 ImClone Systems Inc. 5.50% convertible $20,000,000 12,866 .06 debentures 2005 Glycomed Inc. 7.50% convertible subordinated $ 5,000,000 4,600 .02 debentures 2003 315,539 1.51 FOOD & DRUG RETAILING - 1.23% Albertson's, Inc. 6,130,000 176,238 .84 Woolworths Ltd. 9,000,433 54,036 .26 Koninklijke Ahold NV 1,087,000 27,822 .13 258,096 1.23 MULTILINE RETAIL - 1.11% May Department Stores Co. 6,333,200 233,062 1.11 233,062 1.11 AEROSPACE & DEFENSE - 0.99% RC Trust I 8.25% convertible preferred 2006, 1,103,500 70,900 units Raytheon Co. 1,723,900 65,973 .65 Honeywell International Inc. 2,100,000 70,581 .34 207,454 .99 SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.97% Analog Devices, Inc. 4.75% convertible $37,650,000 35,948 .17 subordinated notes 2005 Semtech Corp. 4.50% convertible subordinated $18,530,000 19,781 notes 2007 /3/ Semtech Corp. 4.50% convertible subordinated $ 8,000,000 8,540 .14 notes 2007 Burr-Brown Corp. 4.25% convertible subordinated $17,800,000 19,772 notes 2007 /3/ Burr-Brown Corp. 4.25% convertible subordinated $ 7,200,000 7,998 .13 notes 2007 ASML Holding NV 5.75% convertible notes 2006 /3/ $20,000,000 25,075 .12 Vitesse Semiconductor Corp. 4.00% convertible $29,625,000 24,144 .12 subordinated debentures 2005 LSI Logic Corp. 4.00% convertible subordinated $23,400,000 20,299 .10 notes 2005 TranSwitch Corp. 4.50% convertible notes 2005 $30,400,000 18,356 .09 TriQuint Semiconductor, Inc. 4.00% convertible $23,000,000 17,165 .08 subordinated notes 2007 Amkor Technology, Inc. 5.00% convertible $ 7,000,000 5,083 .02 notes 2007 /3/ 202,161 .97 COMMUNICATIONS EQUIPMENT - 0.88% Motorola, Inc. 7.00% convertible preferred 1,750,000 76,020 .37 2004, units /1/ Nortel Networks Corp. 4.25% convertible $40,000,000 38,850 .19 notes 2008 /3/ Corning Inc. 0% convertible debentures 2015 $66,552,000 36,271 .17 Adaptec, Inc. 4.75% convertible subordinated $23,000,000 21,523 .10 notes 2004 Juniper Networks, Inc. 4.75% convertible $14,000,000 10,602 .05 subordinated notes 2007 183,266 .88 GAS UTILITIES - 0.84% NiSource Inc. 5,722,200 119,022 NiSource Inc. 7.75% PIES convertible 325,000 13,647 .63 preferred 2003 New Jersey Resources Corp. 578,800 26,260 .13 South Jersey Industries, Inc. 500,000 15,840 .08 174,769 .84 AUTOMOBILES - 0.79% General Motors Corp. 3,225,000 164,926 .79 164,926 .79 ROAD & RAIL - 0.69% CSX Corp. 2,363,300 94,532 .45 Union Pacific Capital Trust 6.25% TIDES 741,500 36,982 convertible preferred 2028 /3/ Union Pacific Capital Trust 6.25% TIDES 260,000 12,968 .24 convertible preferred 2028 144,482 .69 HOUSEHOLD PRODUCTS - 0.55% Kimberly-Clark Corp. 1,455,000 87,736 .42 Clorox Co. 650,000 26,507 .13 114,243 .55 BEVERAGES - 0.50% Southcorp Ltd. 29,712,357 105,142 .50 105,142 .50 MEDIA - 0.47% AT&T Corp. Liberty Media Group 3.50% convertible $ 55,000,000 39,160 .19 debentures 2031 /3/ AOL Time Warner Inc. /1/ 850,120 22,367 .10 NTL Inc. 5.75% convertible subordinated $120,000,000 14,100 debentures 2009 NTL Inc., warrants, expire 2008 /1/ /3/ /5/ 25,650 .07 Interpublic Group of Companies, Inc. 1.87% $ 17,000,000 12,835 .06 convertible subordinated notes 2006 /3/ United Pan-Europe Communications NV, convertible 1,180 10,030 preferred /1//3//5/ United Pan-Europe Communications NV, warrants, 572,960 - .05 expire 2007 /1/ /5/ 98,492 .47 COMMERCIAL SERVICES & SUPPLIES - 0.43% Pitney Bowes Inc. 1,025,000 42,866 .21 Waste Management, Inc. 4.00% convertible $28,000,000 28,176 .13 debentures 2002 Brambles Industries PLC /1/ 4,000,000 18,382 .09 Protection One Alarm Monitoring, Inc., 57,600 10 .00 warrants, expire 2005 /1/ /3/ /5/ 89,434 .43 METALS & MINING - 0.37% Phelps Dodge Corp. 900,000 31,383 .15 Inco Ltd. 5.75% convertible debentures 2004 $17,250,000 17,357 Inco Ltd. 0% LYON convertible notes 2021 /3/ $11,500,000 6,644 .12 CONSOL Energy Inc. 553,800 12,654 .06 Freeport-McMoRan Copper & Gold Inc., 300,000 4,665 .02 Class B /1/ Massey Energy Co. 250,300 3,712 .02 76,415 .37 AUTO COMPONENTS - 0.33% TRW Inc. 1,250,000 52,962 .25 GKN PLC 4,000,000 15,403 .08 TI Automotive Ltd. /1/ /5/ 7,000,000 .00 68,365 .33 WIRELESS TELECOMMUNICATION SERVICES - 0.26% Nextel Communications, Inc., Class A /1/ /3/ 2,194,633 17,667 Nextel Communications, Inc. 5.25% convertible $10,000,000 5,836 .11 senior notes 2010 Dobson Communications Corp. 13.00% senior 8,455 7,927 exchangeable preferred 2009 /1/ /6/ Dobson Communications Corp. 12.25% senior 5,173 4,746 exchangeable preferred 2008 /1/ /6/ Price Communications Corp. /1/ 475,722 9,129 .05 American Tower Corp. 5.00% convertible $15,500,000 8,218 .04 debentures 2010 Leap Wireless International, Inc., warrants, 27,025 176 .00 expire 2010 /1/ /3/ McCaw International, Ltd., warrants, expire 31,500 .00 2007 /1/ /3/ /5/ 53,699 .26 OTHER - 2.94% Williams Companies, Inc. 5,359,100 94,749 .45 Hubbell Inc., Class B 2,767,400 83,050 .40 British Airways PLC 26,000,000 75,065 .36 Sepracor Inc. 5.75% convertible notes 2006 /3/ $22,850,000 22,621 Sepracor Inc. /1/ 310,329 15,318 Sepracor Inc. 7.00% convertible subordinated $13,500,000 13,115 debentures 2005 /3/ Sepracor Inc. 7.00% convertible subordinated $ 9,000,000 8,743 .29 debentures 2005 Minnesota Mining and Manufacturing Co. 500,000 55,400 .26 Gillette Co. 1,600,000 53,280 .25 Electronic Data Systems Corp. 7.625% FELINE 989,600 52,102 .25 PRIDES convertible preferred 2004 Amazon.com, Inc. 4.75% convertible subordinated $66,700,000 40,353 .19 debentures 2009 Kingfisher PLC 4,326,646 24,052 .12 PETsMART, Inc. 6.75% convertible subordinated $17,500,000 22,003 .11 notes 2004 /3/ Newell Financial Trust I 5.25% QUIPS convertible 550,000 20,488 .10 preferred 2027 Fluor Corp. 350,300 11,227 .05 Royal Caribbean Cruises Ltd. 0% convertible $17,500,000 6,524 note 2021 Royal Caribbean Cruises Ltd. 0% LYON convertible $14,440,000 4,781 .05 debenture 2021 TXI Capital Trust I 5.50% convertible 250,000 9,275 .04 preferred 2028 Foster Wheeler Ltd. 6.50% convertible $15,000,000 4,217 .02 subordinated notes 2007 /3/ Clarent Hospital Corp. /1/ /2/ /5/ 518,322 1,296 .01 AMF Bowling Worldwide, Inc. 0% convertible $26,391,000 3 .00 debentures 2018 /3/ /5/ /7/ 617,662 2.95 MISCELLANEOUS - 4.52% Other equity securities in initial period of 944,496 4.52 acquisition TOTAL equity securities (cost: $11,125,027,000) 12,670,471 60.61 Principal Market Percent Amount Value of Net Fixed Income Securities (000) (000) Assets MEDIA - 3.82% Charter Communications Holdings, LLC: 8.25% 2007 $ 11,150 $ 10,592 10.00% 2009 7,500 7,575 10.75% 2009 10,000 10,512 0%/9.92% 2011 /8/ 25,850 18,870 11.125% 2011 15,000 15,862 0%/11.75% 2011 /8/ 113,100 70,405 0%/13.50% 2011 /8/ 67,550 45,596 0%/12.75% 2012 /3/ /8/ 72,000 42,300 1.06% Adelphia Communications Corp.: 9.25% 2002 3,750 3,759 10.25% 2006 25,000 25,937 10.25% 2011 25,850 26,852 Century Communications Corp.: 9.75% 2002 9,897 9,897 0% 2003 9,000 8,280 8.75% 2007 13,200 12,738 .42 Fox/Liberty Networks, LLC, FLN Finance, Inc.: 8.875% 2007 23,850 25,042 0%/9.75% 2007 /8/ 43,750 43,969 .33 Time Warner Inc.: 9.625% 2002 8,090 8,220 7.75% 2005 9,500 10,206 8.18% 2007 20,000 22,147 9.125% 2013 5,000 5,861 7.25% 2017 8,000 8,101 AOL Time Warner Inc. 7.625% 2031 6,500 6,720 .29 CBS Corp. 7.15% 2005 26,500 27,677 Viacom Inc.: 6.40% 2006 3,000 3,083 7.70% 2010 10,000 10,786 6.625% 2011 6,000 6,093 .23 Liberty Media Corp.: 7.75% 2009 7,950 8,103 7.875% 2009 16,600 16,686 8.50% 2029 2,000 1,987 8.25% 2030 700 677 .13 Lenfest Communications, Inc. 7.625% 2008 2,000 2,072 Comcast Cable Communications, Inc.: 8.375% 2007 6,750 7,473 6.20% 2008 8,000 7,880 6.875% 2009 3,000 3,042 7.125% 2013 3,000 3,087 .11 EchoStar DBS Corp. 9.125% 2009 /3/ 22,000 22,660 .11 CSC Holdings, Inc.: 7.25% 2008 8,000 7,889 8.125% 2009 8,000 8,107 Cablevision Industries Corp. 9.875% 2013 6,000 6,300 .11 British Sky Broadcasting Group PLC 8.20% 2009 16,250 16,700 .08 Clear Channel Communications, Inc.: 7.25% 2003 6,000 6,241 6.00% 2006 6,700 6,657 Chancellor Media Corp. of Los Angeles, Series B, 3,000 3,157 .08 8.75% 2007 NTL Inc. 12.75% 2005 10,520 3,892 Comcast UK Cable Partners Ltd. 11.20% 2007 13,375 10,967 .07 News America Holdings Inc.: 9.25% 2013 2,290 2,633 7.75% 2045 10,347 9,991 News America Inc. 7.625% 2028 2,000 1,955 .07 Univision Communications Inc. 7.85% 2011 13,700 14,208 .07 TeleWest PLC: 9.625% 2006 450 304 9.875% 2010 500 340 0%/11.375% 2010 /8/ 35,250 13,395 .07 STC Broadcasting, Inc. 11.00% 2007 14,500 13,702 .07 Fox Family Worldwide, Inc. 10.25% 2007 10,241 11,163 .05 Hearst-Argyle Television, Inc. 7.00% 2018 12,425 10,569 .05 Rogers Communications Inc. 8.875% 2007 10,000 9,950 .05 Telemundo Holdings, Inc., Series D, 8,500 8,032 .04 0%/11.50% 2008 /8/ TransWestern Publishing Co. LLC, Series F, 6,250 6,594 .03 9.625% 2007 Young Broadcasting Inc.: Series B, 8.75% 2007 3,250 2,925 10.00% 2011 3,750 3,562 .03 Sun Media Corp.: 9.50% 2007 6,071 6,223 .03 Emmis Communications Corp. 0%/12.50% 2011 /8/ 8,250 5,723 .03 American Media Operations, Inc. 10.25% 2009 5,000 5,175 .02 Penton Media, Inc. 10.375% 2011 6,250 5,000 .02 ACME Television, LLC, Series A, 10.875% 2004 4,920 4,846 .02 Innova, S de RL 12.875% 2007 5,000 4,812 .02 Multicanal Participacoes SA, Series B, 6,475 4,613 .02 12.625% 2004 Antenna TV SA 9.00% 2007 5,250 4,462 .02 Gray Communications Systems, Inc. 9.25% 2011 /3/ 3,500 3,605 .02 Sinclair Broadcast Group, Inc. 8.75% 2011 /3/ 3,125 3,227 .02 RBS Participacoes SA 11.00% 2007 /3/ 4,250 3,092 .01 Cox Radio, Inc. 6.625% 2006 3,000 3,059 .01 Key3Media Group, Inc. 11.25% 2011 2,700 2,450 .01 Carmike Cinemas, Inc., Series B, 9.375% 2009 /7/ 1,550 1,659 .01 A.H. Belo Corp. 7.75% 2027 1,250 1,149 .01 799,075 3.82 BANKS & THRIFTS - 2.36% SB Treasury Co. LLC, Series A, 9.40%/10.925% 124,750 115,394 .55 noncumulative preferred (undated) /3/ /8/ SocGen Real Estate Co. LLC, Series A, 7.64% 54,000 56,035 .27 (undated) /3/ /4/ Fuji JGB Investment LLC, Series A, 9.87% 40,500 34,191 noncumulative preferred (undated) /3/ /4/ IBJ Preferred Capital Co. LLC, Series A, 8.79% 10,000 7,990 .20 noncumulative preferred (undated) /3/ /4/ HSBC Capital Funding LP: /3/ /4/ /8/ Series 1, 9.547% noncumulative perpetual 17,500 20,411 preferred (undated) Series 2, 10.176% noncumulative perpetual 11,500 14,784 preferred (undated) Midland Bank 2.25% Eurodollar notes 5,000 4,027 .19 (undated) /4/ Washington Mutual Bank, FA: 5.625% 2007 6,500 6,500 6.875% 2011 10,000 10,263 Ahmanson Capital Trust I Capital Securities, 8,000 8,144 Series A, 8.36% 2026 /3/ Dime Capital Trust I, Dime Bancorp, Inc., 9,425 10,244 .17 Series A, 9.33% 2027 BNP U.S. Funding LLC, Series A, 7.738% 22,700 24,114 noncumulative preferred (undated) /3/ /4/ BNP Paribas Capital Trust, 9.003% noncumulative 8,000 9,076 .16 trust preferred (undated) /3/ GS Escrow Corp.: 3.23% 2003 /4/ 6,000 5,923 7.00% 2003 1,550 1,566 7.125% 2005 25,500 25,446 .16 Riggs Capital Trust, Series A, 8.625% 2026 1,500 1,176 Riggs Capital Trust II, Series C, 8.875% 2027 25,000 19,188 .10 Development Bank of Singapore Ltd.:/3/ 7.875% 2010 5,000 5,408 7.125% 2011 5,000 5,165 DBS Capital Funding Corp. 7.657% (undated) 6,500 6,611 .08 /3/ /4/ Tokai Preferred Capital Co. LLC, Series A, 19,000 16,661 .08 9.98%/11.091% noncumulative preferred (undated) /3/ /4/ Royal Bank of Scotland Group PLC 7.648% 16,000 16,536 .08 (undated) /4/ Skandinaviska Enskilda Banken AB 7.50% 10,405 10,432 .05 (undated) /3/ /4/ Standard Chartered Bank 1.938% Eurodollar 15,000 9,583 .04 Notes (undated) /4/ AB Spintab:/3/ /4/ 6.80% (undated) 5,150 5,244 7.50% (undated) 2,500 2,607 .04 Canadian Imperial Bank of Commerce 3.625% 10,000 7,784 .04 Eurodollar notes (undated) /4/ Bank of Scotland 7.00% (undated) /3/ /4/ 7,500 7,699 .04 Bank of Nova Scotia 3.625% Eurodollar notes 10,000 7,668 .03 (undated) /4/ Credit Suisse First Boston, Inc. 6.50% 2012 7,000 7,062 .03 BCI US Funding Trust I 8.01% noncumulative 6,500 6,656 .03 preferred (undated) /3/ /4/ Chevy Chase Bank, FSB 9.25% 2005 4,000 4,040 .02 Komercni Finance BV 9.00%/10.75% 2008 /3/ /8/ 150 157 .00 493,785 2.36 WIRELESS TELECOMMUNICATION SERVICES - 2.33% Nextel Communications, Inc.: 0%/9.75% 2007 /8/ 74,325 50,541 0%/10.65% 2007 /8/ 5,475 3,997 0%/9.95% 2008 /8/ 145,275 95,882 12.00% 2008 4,000 3,320 Nextel Partners, Inc.: 12.50% 2009 /3/ 15,750 13,230 0%/14.00% 2009 /8/ 36,029 21,978 11.00% 2010 21,000 16,380 .99 Cricket Communications, Inc.: /4/ 6.25% 2007 21,070 16,013 6.50% 2007 94,875 72,105 Leap Wireless International, Inc.: 12.50% 2010 13,500 9,653 0%/14.50% 2010 /8/ 32,325 9,698 .51 Dobson/Sygnet Communications Co. 12.25% 2008 11,750 12,338 American Cellular Corp. 9.50% 2009 22,400 21,056 Dobson Communications Corp. 10.875% 2010 24,750 24,750 .28 Microcell Telecommunications Inc., Series B, 42,047 35,319 .17 14.00% 2006 TeleCorp PCS Inc. 0%/11.625% 2009 /8/ 26,650 22,919 .11 PanAmSat Corp.: 6.125% 2005 18,000 17,512 6.375% 2008 2,000 1,874 .09 Triton PCS, Inc.: 0%/11.00% 2008 /8/ 6,000 5,340 9.375% 2011 5,000 5,038 .05 Centennial Cellular Corp. 10.75% 2008 14,920 9,474 .05 CFW Communications Co. 13.00% 2010 10,200 7,140 .03 Vodafone AirTouch PLC 7.75% 2010 5,000 5,493 .03 PTC International Finance BV 0%/10.75% 2007 /8/ 5,000 4,838 .02 Cellco Finance NV 15.00% 2005 650 622 .00 PageMart Wireless, Inc.: /5/ /7/ 15.00% 2005 19,410 194 0%/11.25% 2008 /8/ 33,500 84 .00 486,788 2.33 DIVERSIFIED TELECOMMUNICATION SERVICES - 1.79% WCG Note Trust 8.25% 2004 /3/ 38,000 36,206 Williams Communications Group, Inc.: 10.70% 2007 19,650 5,895 11.70% 2008 47,800 14,340 10.875% 2009 28,000 8,400 .31 U S WEST Capital Funding, Inc. 6.25% 2005 6,875 6,738 Qwest Capital Funding, Inc.: 7.90% 2010 34,575 35,014 7.25% 2011 13,175 12,763 7.625% 2021 7,500 7,129 .29 Voicestream Wireless Corp.: 10.375% 2009 27,663 31,557 0%/11.875% 2009 /8/ 27,085 24,033 .27 TCI Communications, Inc. 8.00% 2005 15,000 16,038 AT&T Corp.: 7.30% 2011 /3/ 17,500 17,894 6.50% 2029 10,000 8,780 8.00% 2031 /3/ 10,000 10,573 .25 PCCW-HKT Capital Ltd. 7.75% 2011 /3/ 45,250 45,233 .22 Orange PLC 8.75% 2006 8,000 8,429 France Telecom 7.75% 2011 /3/ /4/ 7,850 8,382 .08 CenturyTel, Inc., Series H, 8.375% 2010 15,000 16,072 .08 British Telecommunications PLC 8.375% 2010 /4/ 12,500 13,959 .07 TELUS Corp. 8.00% 2011 11,150 11,862 .06 Allegiance Telecom, Inc.: 0%/11.75% 2008 /8/ 14,200 5,680 12.875% 2008 2,575 1,700 .04 Koninklijke KPN NV 8.00% 2010 6,750 7,013 .03 Singapore Telecommunications Ltd. 7.375% 6,000 6,146 .03 2031 /3/ Verizon Global Funding Corp. 6.75% 2005 5,000 5,285 .02 COLT Telecom Group PLC 12.00% 2006 5,000 3,750 .02 GT Group Telecom Inc. 0%/13.25% units 2010 /8/ 15,000 2,175 .01 Netia Holdings BV 11.25% 2007 /7/ 7,500 1,238 .01 NEXTLINK Communications, Inc. 0%/12.125% 10,000 1,000 .00 2009 /8/ 373,284 1.79 MULTILINE RETAIL - 0.78% J.C. Penney Co., Inc.: 7.60% 2007 3,250 3,104 7.375% 2008 1,000 960 6.875% 2015 3,370 2,780 7.95% 2017 42,025 36,562 9.75% 2021 /9/ 3,162 3,004 8.25% 2022 /9/ 24,890 21,530 7.125% 2023 4,000 3,200 8.125% 2027 9,500 8,170 7.40% 2037 24,048 23,327 7.625% 2097 8,000 6,198 .52 Federated Department Stores, Inc.: 6.625% 2008 1,000 1,007 6.625% 2011 19,050 19,052 .10 Sears, Roebuck and Co. 9.375% 2011 12,310 14,509 .07 Wal-Mart Stores, Inc. 5.875% 2005 12,000 12,473 .06 Dillard's, Inc.: 6.43% 2004 2,000 1,860 6.69% 2007 625 538 6.625% 2008 1,575 1,315 6.625% 2018 1,000 734 7.13% 2018 500 387 .02 Saks Inc. 7.375% 2019 3,450 2,381 .01 163,091 .78 COMMUNICATIONS EQUIPMENT - 0.76% Crown Castle International Corp.: /8/ 0%/10.625% 2007 11,125 8,900 0%/10.375% 2011 46,450 24,619 0%/11.25% 2011 45,500 24,115 .28 Motorola, Inc.: 8.00% 2011 21,625 21,517 5.22% 2097 15,000 9,362 .15 Nortel Networks Ltd. 6.125% 2006 25,500 21,821 .10 SBA Communications Corp.: 0%/12.00% 2008 /8/ 8,675 5,899 10.25% 2009 21,000 15,120 .10 SpectraSite Holdings, Inc., Series B: /8/ 0%/12.00% 2008 38,250 13,770 0%/11.25% 2009 4,275 1,197 .07 American Tower Corp. 9.375% 2009 16,800 11,928 .06 Fairchild Semiconductor Corp. 10.50% 2009 650 699 .00 158,947 .76 HOTELS, RESTAURANTS & LEISURE - 0.72% Royal Caribbean Cruises Ltd.: 7.00% 2007 7,000 5,915 8.75% 2011 31,150 27,412 .16 Mirage Resorts, Inc.: 6.625% 2005 3,000 3,005 6.75% 2007 3,250 3,132 6.75% 2008 10,500 10,056 MGM Mirage, Inc. 8.50% 2010 13,250 13,965 .14 Horseshoe Gaming Holding Corp., Series B, 21,500 22,306 .11 8.625% 2009 Premier Parks Inc.: 9.25% 2006 1,250 1,303 9.75% 2007 12,750 13,069 Six Flags, Inc.: 9.50% 2009 1,875 1,913 8.875% 2010 /3/ 2,500 2,491 Six Flags Entertainment Corp. 8.875% 2006 2,000 2,090 .10 International Game Technology 7.875% 2004 16,000 16,640 .08 Boyd Gaming Corp.: 9.25% 2003 7,000 7,140 9.25% 2009 8,500 8,904 .08 Florida Panthers Holdings, Inc. 9.875% 2009 10,000 10,425 .05 KSL Recreation Group, Inc. 10.25% 2007 1,250 1,194 .00 150,960 .72 ELECTRIC UTILITIES - 0.64% Edison Mission Energy: 10.00% 2008 11,250 11,394 7.73% 2009 15,720 14,555 9.875% 2011 15,280 15,734 Mission Energy Holding Co. 13.50% 2008 18,075 20,063 Homer City Funding LLC 8.734% 2026 10,000 9,584 Midwest Generation, LLC, Series B, 6,000 5,863 .37 8.56% 2016 /9/ Israel Electric Corp. Ltd.:/3/ 7.70% 2018 22,500 21,170 8.10% 2096 14,405 12,020 .16 AES Corp.: 9.50% 2009 9,275 8,162 9.375% 2010 2,525 2,209 .05 Progress Energy, Inc.: 5.85% 2008 2,500 2,479 7.10% 2011 2,500 2,631 7.00% 2031 2,500 2,561 .04 Exelon Corp. 6.75% 2011 1,000 1,031 Exelon Generation Co., LLC 6.95% 2011 /3/ 1,300 1,351 .01 FirstEnergy Corp., Series B, 6.45% 2011 2,250 2,244 .01 133,051 .64 COMMERCIAL SERVICES & SUPPLIES - 0.60% Allied Waste North America, Inc.: 7.625% 2006 5,000 4,888 8.50% 2008 /3/ 2,500 2,563 10.00% 2009 54,825 55,647 .30 Waste Management, Inc.: 6.875% 2009 5,050 5,091 7.375% 2010 11,950 12,379 WMX Technologies, Inc.: 6.375% 2003 5,050 5,199 7.10% 2026 10,125 10,556 USA Waste Services, Inc.: 6.50% 2002 7,000 7,166 7.00% 2004 4,060 4,246 .22 Cendant Corp. 7.75% 2003 12,000 12,188 .06 KinderCare Learning Centers, Inc., Series B, 2,500 2,425 .01 9.50% 2009 Iron Mountain Inc. 8.75% 2009 1,750 1,824 .01 Safety-Kleen Services, Inc.:/5/ /7/ 9.25% 2008 20,000 200 9.25% 2009 10,000 100 .00 124,472 .60 AUTOMOBILES - 0.59% General Motors Acceptance Corp.: 6.125% 2006 51,100 50,765 7.75% 2010 9,500 9,859 6.875% 2011 26,400 25,933 8.00% 2031 6,250 6,453 .45 Ford Motor Credit Co.: 6.55% 2002 3,000 3,043 5.80% 2009 4,000 3,671 7.25% 2011 2,460 2,420 7.375% 2011 5,250 5,215 7.45% 2031 5,000 4,672 .09 DaimlerChrysler North America Holding 10,000 10,411 .05 Corp. 7.75% 2011 122,442 .59 GAS PRODUCTION & DISTRIBUTION - 0.58% Nisource Finance Corp.: 7.50% 2003 24,000 24,774 7.625% 2005 34,000 35,057 7.875% 2010 15,725 16,218 .36 Gemstone Investors Ltd. 7.71% 2004 /3/ 22,500 22,275 Florida Gas Transmission Co. 7.625% 2010 /3/ 19,000 18,064 El Paso Corp. 7.80% 2031 5,000 4,924 .22 121,312 .58 HEALTH CARE PROVIDERS & SERVICES - 0.55% Aetna Inc.: 7.375% 2006 34,700 34,825 7.875% 2011 15,625 15,370 .24 Columbia/HCA Healthcare Corp.: 6.87% 2003 10,575 10,734 6.91% 2005 10,750 10,858 8.85% 2007 7,500 8,100 8.70% 2010 9,500 10,070 HCA - The Healthcare Co. 8.75% 2010 5,500 6,023 .22 Clarent Hospital Corp. 11.50% 2005 /5/ 11,036 10,484 .05 Humana Inc. 7.25% 2006 7,125 7,160 .03 Integrated Health Services, Inc.:/5/ /7/ 10.25% 2006 /4/ 16,900 169 Series A, 9.50% 2007 87,095 871 Series A, 9.25% 2008 68,298 683 .01 Mariner Health Group, Inc. 9.50% 2006 /5/ /7/ 15,250 153 .00 115,500 .55 PAPER & FOREST PRODUCTS - 0.50% Fort James Corp. 6.625% 2004 2,600 2,433 Georgia-Pacific Corp.: 7.50% 2006 11,650 10,703 8.125% 2011 25,050 22,903 .17 Scotia Pacific Co. LLC, Series B: Class A-2, 7.11% 2014 /9/ 15,800 13,331 Class A-3, 7.71% 2028 20,125 14,088 .13 International Paper Co. 6.75% 2011 13,250 13,331 .06 Bowater Canada Finance Corp. 7.95% 2011 /3/ 13,000 13,275 .06 Domtar Inc. 7.875% 2011 10,000 10,496 .05 Advance Agro Capital BV 13.00% 2007 4,925 2,980 .02 Pindo Deli Finance Mauritius Ltd.:/7/ 10.25% 2002 4,000 700 10.75% 2007 1,325 232 .01 Indah Kiat Finance Mauritious Ltd. 10.00% 2007 3,050 755 .00 105,227 .50 CONSUMER FINANCE - 0.50% Capital One Financial Corp.: 7.25% 2003 7,500 7,580 8.75% 2007 3,500 3,522 7.125% 2008 22,500 20,386 Capital One Bank 6.875% 2006 17,600 17,274 Capital One Capital I 3.78% 2027 /3/ /4/ 13,500 10,162 .28 MBNA Corp.: 6.75% 2008 12,500 12,030 Capital B, Series B, 3.03% 2027 /4/ 32,000 23,076 .17 Household Finance Corp.: 5.75% 2007 4,000 3,949 6.375% 2011 3,500 3,395 .03 Providian Financial Corp. 9.525% 2027 /3/ 10,000 3,500 .02 104,874 .50 INSURANCE - 0.45% Allstate Financial Global Funding 5.25% 16,750 16,680 2007 /3/ Allstate Financing II 7.83% 2045 5,000 5,141 .10 ING Capital Funding Trust III 8.439% 9,125 10,032 (undated) /4/ ReliaStar Financial Corp. 8.00% 2006 8,000 8,781 .09 Prudential Holdings, LLC, Series C, 17,250 18,671 .09 8.695% 2023 /3/ Monumental Global Funding 5.20% 2007 /3/ 16,750 16,348 .08 Conseco Financing Trust II 8.70% 2026/9/ 21,075 6,112 .03 Lincoln National Corp. 7.00% 2018 6,000 5,980 .03 Equitable Life Assurance Society 6.95% 5,000 5,251 .03 2005 /3/ 92,996 .45 CONTAINERS & PACKAGING - 0.44% Container Corp. of America: Series B, 10.75% 2002 2,050 2,078 9.75% 2003 50,550 51,940 .26 Printpack, Inc. 10.625% 2006 20,270 21,284 .10 Owens-Brockway Glass Container Inc. 13,000 13,000 .06 8.875% 2009 /3/ Tekni-Plex, Inc., Series B, 12.75% 2010 3,750 3,713 .02 92,015 .44 SPECIALTY RETAIL - 0.33% Gap, Inc.: 8.15% 2005 /3/ 5,100 4,748 6.90% 2007 2,000 1,680 .26 8.80% 2008 /3/ 51,405 48,163 Toys "R" Us, Inc. 7.625% 2011 /3/ 10,755 10,679 .05 Office Depot, Inc. 10.00% 2008 2,500 2,713 .01 Petco Animal Supplies, Inc. 10.75% 2011 /3/ 1,375 1,437 .01 69,420 .33 METALS & MINING - 0.26% Freeport-McMoRan Copper & Gold Inc.: 7.50% 2006 13,500 10,091 7.20% 2026 18,000 16,425 .13 Allegheny Technologies, Inc. 8.375% 2011 /3/ 10,500 10,633 .05 BHP Finance Ltd. 6.75% 2013 10,000 10,135 .05 Kaiser Aluminum & Chemical Corp. 12.75% 2003 9,500 3,088 .01 Inco Ltd. 9.60% 2022 2,625 2,724 .01 Luscar Coal Ltd. 9.75% 2011 /3/ 1,500 1,598 .01 54,694 .26 REAL ESTATE - 0.22% ProLogis Trust 7.05% 2006 12,000 12,396 .06 FelCor Suites LP 7.375% 2004 10,750 10,858 .05 Security Capital Group Inc. 7.15% 2007 10,000 10,319 .05 EOP Operating LP 8.10% 2010 6,500 7,119 .03 Irvine Co. 7.46% 2006 /3/ /5/ 5,000 5,124 .03 45,816 .22 OIL & GAS - 0.18% Pogo Producing Co. 10.375% 2009 10,000 10,825 .05 Oryx Energy Co. 8.125% 2005 8,500 9,111 .04 Newfield Exploration Co.: Series B, 7.45% 2007 6,000 5,979 7.625% 2011 1,500 1,460 .04 OXYMAR 7.50% 2016 /3/ 8,000 6,569 .03 Clark Refining & Marketing, Inc. 8.875% 2007 3,700 2,886 .01 Pemex Master Trust 7.875% 2009 /3/ 1,600 1,609 .01 38,439 .18 AIRLINES - 0.18% Northwest Airlines, Inc.: 8.375% 2004 7000 6,580 7.625% 2005 1,750 1,558 8.875% 2006 10,730 9,657 .09 Delta Air Lines, Inc.: 7.70% 2005 2,000 1,880 7.90% 2009 7,000 6,440 .04 United Air Lines, Inc. 9.00% 2003 8,000 5,840 .03 AMR Corp. 9.00% 2012 5,000 4,600 .02 36,555 .18 OTHER INDUSTRIES - 1.23% Williams Holdings of Delaware, Inc. 6.25% 2006 7,000 6,815 Williams Companies, Inc.: 7.125% 2011 42,000 40,027 6.75% 2017 3,000 2,853 .24 Atlas Air, Inc., Series 1998-1, Class A, 30,991 28,336 .14 7.38% 2019 /9/ Levi Strauss & Co.: 6.80% 2003 2,800 2,632 11.625% 2008 15,630 15,630 .09 Compaq Computer Corp. 6.20% 2003 12,500 12,563 .06 Hutchison Whampoa International Ltd.: 7.00% 2011 /3/ 5,000 5,079 7.45% 2017 /3/ 6,750 6,810 .06 Rite Aid Corp.: 7.125% 2007 3,035 1,669 6.875% 2013 7,425 3,453 7.70% 2027 10,440 5,063 6.875% 2028 /3/ 3,750 1,688 .06 Citigroup Inc. 7.45% 2002 10,000 10,171 .05 Hyundai Semiconductor America, Inc. 8.625% 16,110 9,374 .04 2007 /3/ Boyds Collection, Ltd., Series B, 9.00% 2008 8,886 9,153 .04 Flextronics International Ltd. 8.75% 2007 7,500 7,725 .04 Wharf Capital International, Ltd. 8.875% 2004 7,000 7,705 .04 Gruma, SA de CV 7.625% 2007 7,750 7,421 .04 Equistar Chemicals, LP 8.50% 2004 7,500 7,412 .04 VF Corp.: 8.10% 2005 1,500 1,625 8.50% 2010 5,250 5,759 .03 Canandaigua Wine Co., Inc.: 8.75% 2003 5,000 4,963 Series C, 8.75% 2003 1,250 1,250 .03 TRW Inc. 7.75% 2029 5,810 5,566 .03 BAE SYSTEMS, Series 2001, Class G, MBIA 5,510 5,632 .03 Insured, 6.664% 2013 /3/ /9/ Reliance Industries Ltd.:/3/ 10.50% 2046 2,250 2,160 Series B, 10.25% 2097 3,125 2,781 .02 Kraft Foods Inc. 5.625% 2011 5,000 4,914 .02 Aurora Foods Inc.: Series B, 9.875% 2007 2,136 2,104 Series D, 9.875% 2007 2,500 2,463 .02 Kellogg Co.: 6.00% 2006 3,000 3,077 6.60% 2011 1,250 1,284 .02 Dana Corp. 9.00% 2011 /3/ 4,950 4,554 .02 AGCO Corp. 9.50% 2008 3,500 3,701 .02 Zilog, Inc. 9.50% 2005 /7/ 9,100 3,322 .02 Teekay Shipping Corp.: 8.875% 2011 2,000 2,085 8.875% 2011 /3/ 1,125 1,173 .01 Terex Corp.: 9.25% 2011 /3/ 1,000 1,030 Class B, 10.375% 2011 2,000 2,170 .01 Salton/Maxim Housewares, Inc. 10.75% 2005 1,375 1,406 .01 Gearbulk Holding Ltd. 11.25% 2004 1,000 1,025 .00 International Shipholding Corp., Series B, 1,150 920 .00 7.75% 2007 Elizabeth Arden, Inc., Series B, 11.75% 2011 625 581 .00 Kroger Co. 7.00% 2018 200 202 .00 257,326 1.23 Collateralized mortgage-/asset-backed obligations /9/ (excluding those issued by federal agencies) - 3.07% Green Tree Financial Corp.: Series 1993-2, Class B, 8.00% 2018 14,000 13,388 Series 1995-4, Class B-2, 7.70% 2025 1,900 989 Series 1995-3, Class B-2, 8.10% 2025 16,121 8,881 Series 1995-2, Class B-2, 8.80% 2026 11,457 6,022 Series 1996-2, Class B-2, 7.90% 2027 12,950 6,502 Series 1996-10, Class B-2, 7.74% 2028 8,369 4,156 Series 1997-8, Class B-2, 7.75% 2028 6,487 2,580 Series 1997-1, Class B-2, 7.76% 2028 9,781 3,908 Series 1997-2, Class B-2, 8.05% 2028 3,297 1,350 Series 1998-4, Class B-2, 8.11% 2028 6,572 2,731 Series 1997-6, Class B-2, 7.75% 2029 10,611 3,903 Series 1998-3, Class B-2, 8.07% 2030 4,842 1,878 Conseco Finance Home Equity Loan Trust: Series 1999-G, Class B-2, 10.96% 2029 18,188 8,610 Series 2000-A, Class BV-2, 4.62% 2031 /4/ 9,350 7,761 .35 Merrill Lynch Mortgage Investors, Inc.: Series 1995-C3, Class A-3, 7.052% 2025 /4/ 24,071 25,155 Series 1996-C2, Class A-1, 7.57% 2028 /4/ 588 597 Series 1999-C1, Class A-2, 7.56% 2031 11,750 12,737 .18 MBNA Master Credit Card Trust: Series 1999-D, Class B, 6.95% 2008 /3/ 4,700 4,869 Series 1998-E, Class C, 6.60% 2010 /3/ 22,500 22,853 .13 Jet Equipment Trust:/3/ Series 1995-B, 10.91% 2014 4,750 3,130 Series 1995-B, Class A, 7.63% 2015 3,357 2,857 Series 1995-A, Class B, 8.64% 2015 12,377 10,503 Series 1995-B, Class C, 9.71% 2015 5,500 3,615 Series 1995-A, Class C, 10.69% 2015 5,000 3,593 .11 L.A. Arena Funding, LLC, Series 1, Class A, 21,634 22,000 .10 7.656% 2026 /3/ Collateralized Mortgage Obligation Trust, 19,688 20,063 .10 Series 63, Class Z, 9.00% 2020 Continental Airlines, Inc.: Series 1998-3, Class C-1, 7.08% 2004 685 575 Series 1996, Class A, 6.94% 2015 6,886 6,406 Series 2001-1, Class B, 7.373% 2015 6,000 5,205 Series 1996, Class C, 9.50% 2015 4,973 3,804 Series 2000-1, Class A-1, 8.048% 2020 4,309 3,959 .10 GS Mortgage Securities Corp. II, Series 1998-C1, 20,000 19,922 .10 Class D, 7.243% 2030 /4/ Team Fleet Financing Corp.: /3/ Series 1996-1, Class A, 6.65% 2002 833 838 Series 1999-3A, Class D, 7.60% 2003 7,000 7,027 Series 2001-3A, Class B, 6.13% 2004 5,305 5,302 Series 2001-3A, Class A, 2.83% 2005 /4/ 6,750 6,746 .10 GMAC Commercial Mortgage Securities, Inc., 20,750 18,656 .09 Series 1997-C2, Class E, 7.624% 2011 First USA Credit Card Master Trust:/3/ Series 1997-4, Class A, 2.74% 2010 /4/ 6,500 6,240 Series 1998-6, Class C, 6.16% 2011 2,000 1,961 Series 1998-2, Class C, 6.80% 2011 8,500 8,634 .08 Pegasus Aviation Lease Securitization, 19,000 16,150 .08 Series 2000-1, Class A-2, 8.37% 2030 /3/ First Union-Lehman Brothers-Bank of America 15,500 16,101 .08 Commerical Mortgage Trust, Series 1998-C2, 6.28% 2035 Deutsche Mortgage & Asset Receiving Corp., 14,521 15,064 .07 Series 1998-C1, Class A-1, 6.22% 2031 AmSouth Auto Trust, Series 2000-1, Class C, 14,260 14,946 .07 7.44% 2007 Airplanes Pass-Through Trust: Class B, 2.57% 2019 /4/ 11,660 9,328 Class 1-C, 8.15% 2019 /5/ 11,894 5,353 .07 SMA Finance Co., Inc., Series 1998-C1, 14,112 14,582 .07 Class A-1, 6.27% 2032 /3/ Bear Stearns Commercial Mortgage Securities Inc.: Series 1999-C1, Class X, interest only, 86,284 4,912 1.181% 2031 /4/ Series 2001-TOP2, Class A-2, 6.48% 2035 7,665 7,853 .06 PRIME Capital Hurricane Ltd. 8.376% 2004 /3/ /4/ 12,500 12,656 .06 CS First Boston Mortgage Securities Corp., 10,623 11,051 .05 Series 1998-C1, Class A-1A, 6.26% 2040 American Airlines Inc., Series 2001-2, 10,810 10,791 .05 Class B, 8.608% 2011 /3/ Fannie Mae Trust, Series 2001-50, Class BA, 10,377 10,693 .05 7.00% 2041 Structured Asset Securities Corp.: /4/ Series 1998-RF2, Class A, 8.528% 2027 /3/ 1,502 1,609 Series 1998-RF1, Class A, 8.664% 2027 /3/ 1,138 1,197 Series 1999-BC1, Class M2, 3.06% 2029 7,500 7,561 .05 Metris Master Trust: /4/ Series 1997-2, Class C, 2.789% 2006 /3/ 5,000 4,998 Series 2001-1, Class B, 2.539% 2007 1,000 1,000 Series 2001-4, Class B, 3.139% 2008 3,000 2,988 .04 NPF XII, Inc.: /3/ Series 1999-3, Class B, 2.888% 2003 /4/ 3,000 3,001 Series 2001-1, Class A, 2.425% 2004 /4/ 5,000 5,001 Series 2001-3, Class A, 5.52% 2007 1,000 975 .04 Holmes Financing PLC:/4/ Series 2, Class 1-C, 3.027% 2040 5,750 5,748 Series 3, Class 1-C, 3.027% 2040 1,750 1,749 Series 5, Class 1-C, 3.513% 2040 1,250 1,250 .04 Mediterranean Re PLC 7.95% 2005 /3/ /4/ 9,000 8,730 .04 Lease Investment Flight Trust, Series 1, 9,782 8,297 .04 Class B-1, 2.94% 2031 /4/ GE Capital Mortgage Services, Inc., Series 8,063 8,186 .04 1994-9, Class A-9, 6.50% 2024 Santa Barbara Bank & Trust Automobile Loan 7,936 8,127 .04 Securitization Corp., Series 2001-A, Class A, 6.13% 2007 /3/ NeHi, Inc. 6.196% 2003 /3/ /4/ 8,000 8,082 .04 Fleet Credit Card Master Trust II, Series 8,000 8,013 .04 1999-A, Class C, 2.846% 2004 /3/ /4/ US Airways, Inc., Series 2001-1G, 7.076% 2021 7,861 7,889 .04 Morgan Stanley Capital I, Inc., Series 1998-WF2, 7,357 7,681 .04 Class A-1, 6.34% 2030 First Nationwide Trust, Series 1999-2, 6,720 6,808 .03 Class 1PA-1, 6.50% 2029 Tobacco Settlement Financing Corp., Series 6,750 6,652 .03 2001-A, 6.36% 2025 PNC Mortgage Securities Corp., Series 1998-10, 6,737 6,594 .03 Class 1-B1, 6.50% 2028 /3/ Residential Reinsurance 2001 Ltd. 7.071% 6,000 6,000 .03 2004 /3/ /4/ America West Airlines, Inc., Series 2000-1, 5,736 5,745 .03 Class G, AMBAC Insured, 8.057% 2020 Chase Commercial Mortgage Securities Corp., 5,292 5,518 .03 Series 1998-1, Class A-1, 6.34% 2030 Rental Car Finance Corp.: /3/ Series 1997-1, Class C-2, 2.88% 2005 /4/ 2,000 1,967 Series 1999-1A, Class D, 7.10% 2007 2,500 2,458 .02 Metropolitan Asset Funding, Inc., Series 4,669 4,314 .02 1998-A, Class B-1, 7.728% 2014 /3/ H. S. Receivables Corp., Series 1999-1, 4,063 4,212 .02 Class A, 8.13% 2006 /3/ Delta Air Lines, Inc., Series 1992-A2, 5,000 4,037 .02 9.20% 2014 Residential Funding Mortgage Securities I, 3,850 3,851 .02 Inc., Series 1998-S17, Class M-1, 6.75% 2028 Providian Master Trust, Series 2000-1, 4,000 3,780 .02 Class C, 2.97% 2009 /3/ /4/ United Air Lines, Inc., Series 1996-A2, 5,000 3,597 .02 7.87% 2019 Nebhelp Trust, Student Loan Interest Margin 3,312 3,390 .02 Securities, Series 1998-1, Class A, MBIA Insured, 6.68% 2016 /3/ Ford Credit Auto Owner Trust, Series 1999-B, 3,000 3,088 .01 Class C, 6.65% 2003 Capital One Master Trust, Series 1999-1, 2,500 2,620 .01 Class C, 6.60% 2007 /3/ Aircraft Finance Trust, Series 1999-1, 2,536 2,490 .01 Class A-2, 2.32% 2024 /4/ Northwest Airlines, Inc.: 8.52% 2004 1,500 1,410 Class G, Series 1999-3, 7.935% 2020 956 980 .01 DLJ Mortgage Acceptance Corp., Series 2,064 2,159 .01 1997-CF1, Class A-1A, 7.40% 2006 /3/ Western Capital Ltd. 6.97% 2003 /3/ /4/ 1,700 1,687 .01 Security National Mortgage Loan Trust, 1,680 1,686 .01 Series 2001-3A, Class A-2, 5.37% 2014 /3/ Toyota Auto Lease Trust, Series 1998-C, 1,675 1,678 .01 Class B, 3.90% 2006 /3/ /4/ Grupo Financiero Banamex-Accival, SA de 1,464 1,346 .01 CV 0% 2002 /3/ MMCA Auto Owner Trust, Class B: Series 2000-1, 7.55% 2005 1,000 1,065 Series 2001-2, 5.75% 2007 500 512 .01 Financial Asset Securitization, Inc., 1,003 1,022 .00 Series 1997-NAM1, Class B-1, 7.75% 2027 Embarcadero Aircraft Securitization Trust, 358 346 .00 Series 2000, Class A-2, 2.30% 2025 /3/ /4/ 642,480 3.07 Federal Agency Obligations: Mortgage pass-throughs /9/ - 1.44% Government National Mortgage Assn.: 6.00% 2029 - 2031 40,474 39,867 7.00% 2022 - 2029 28,372 29,161 7.50% 2017 - 2030 73,061 76,211 8.00% 2017 - 2023 8,265 8,712 8.50% 2017 - 2021 2,288 2,438 9.00% 2016 337 362 9.50% 2009 - 2021 3,643 3,892 10.00% 2020 - 2025 26,431 29,988 .91 Fannie Mae: 5.50% 2016 19,813 19,565 6.00% 2016 19,629 19,757 6.50% 2031 5,694 5,728 7.00% 2016 - 2031 19,755 20,280 7.50% 2023 - 2031 9,943 10,334 8.00% 2024 1,462 1,559 9.00% 2010 1,318 1,434 9.50% 2022 2,092 2,287 10.00% 2018 - 2025 4,079 4,581 .41 Freddie Mac: 6.00% 2032 19,960 19,661 8.50% 2008 - 2010 2,111 2,224 9.00% 2007 1,459 1,553 11.00% 2018 1,612 1,833 .12 301,427 1.44 Federal agency obligations: collateralized mortgage obligations /9/ - 0.15% Fannie Mae: Series 1996-4, Class ZA, 6.50% 2022 7,774 7,825 Series 2001-4, Class GA, 10.025% 2025 /4/ 6,042 6,770 Series 2001-4, Class NA, 11.696% 2025 /4/ 504 574 Series 2001-20, Class E, 9.593% 2031 /4/ 6,509 7,175 Series 2001-T10, Class A-1, 7.00% 2041 6,506 6,579 .14 Freddie Mac: Series 178, Class Z, 9.25% 2021 926 974 Series 2289-NB, 10.912% 2022 /4/ 1,532 1,739 .01 31,636 .15 Other federal agency obligations - 0.31% Fannie Mae: 6.50% 2004 8,000 8,521 Medium Term Note, 6.75% 2028 30,000 28,720 7.25% 2030 2,750 3,104 .20 Federal Home Loan Bank Bonds 4.875% 2004 22,750 23,393 .11 63,738 .31 Government & governmental authorities (excluding U.S.) - 0.46% United Mexican States Government Eurobonds, Global: 0% 2003 5,387 5 8.375% 2011 5,050 5,277 7.50% 2012 2,155 2,131 11.375% 2016 19,684 24,605 8.125% 2019 4,580 4,523 8.30% 2031 4,610 4,575 .20 Panama (Republic of): Interest Reduction Bond 4.75% 2014 /4/ /9/ 741 676 10.75% 2020 1,250 1,344 8.875% 2027 11,500 10,753 9.375% 2029 5,000 5,288 .09 Turkey (Republic of) 12.375% 2009 11,750 12,314 .06 Poland (Republic of), Past Due Interest Bond, 8,910 8,948 .04 Bearer 6.00% 2014 /4/ /9/ Brazil (Federal Republic of), Debt Conversion Bond, Series L: Bearer, 3.25% 2012 /4/ /9/ 5,000 3,519 3.25% 2012 /4/ /9/ 3,750 2,639 .03 Philippines (Republic of) 8.875% 2008 6,000 6,045 .03 Dominican Republic 9.50% 2006 /3/ 2,135 2,236 .01 Russian Federation 5.00% 2030 /4/ /9/ 1,770 1,089 .00 Venezuela (Republic of) Eurobond 2.875% 571 409 .00 2007 /4/ /9/ 96,376 .46 U.S. TREASURY NOTES AND BONDS - 1.92% 6.625% May 2002 6,000 6,093 6.375% August 2002 10,000 10,239 5.25% May 2004 15,000 15,638 7.25% May 2004 10,000 10,850 7.50% February 2005 25,000 27,641 6.75% May 2005 55,000 59,744 3.375% January 2007 /10/ 52,629 53,353 3.625% January 2008 /10/ 71,379 72,851 10.00% May 2010 35,500 41,829 5.00% February 2011 9,000 8,983 Principal Strip 0% November 2011 20,595 12,210 8.875% August 2017 10,025 13,401 8.875% February 2019 15,000 20,266 7.875% February 2021 20,000 25,072 6.25% August 2023 20,000 21,378 Principal Strip 0% November 2027 11,670 2,675 1.92 402,223 1.92 TOTAL BONDS AND NOTES (cost: $6,157,326,000) 5,677,949 27.16 Principal Market Percent Amount Value of Net Short-Term Securities (000) (000) Assets Federal Agency Short Term Obligations - 6.63% Fannie Mae 1.57%-2.20% due 2/7-8/5/2002 $ 632,925 $ 630,348 3.02% Freddie Mac 1.565%-2.165% due 2/7-6/20/2002 389,765 388,976 1.86 Federal Home Loan Banks 1.66%-2.17% due 280,300 279,409 1.34 2/6-6/13/2002 Federal Farm Credit Bank 1.74% due 4/23/2002 36,500 36,355 .17 Sallie Mae 3.556% due 2/21/2002 25,000 25,000 .12 International Bank for Reconstruction and 25,000 24,961 .12 Development 1.75% due 3/4/2002 1,385,049 6.63 Corporate Short-Term Notes - 4.65% J.P. Morgan Chase & Co. 1.77%-1.78% due 45,000 44,834 4/2-4/30/2002 Park Avenue Receivables Corp. 1.70%-1.75% 35,000 34,934 .38 due 2/27-3/21/2002 /3/ GE Financial Assurance Holdings Inc. 53,000 52,962 1.74%-1.83% due 2/5-3/11/2002 /3/ General Electric Capital Corp. 1.93% 24,300 24,299 .37 due 2/1/2002 Kraft Foods Inc. 1.65%-1.75% due 2/20-3/20/2002 75,900 75,804 .36 Procter & Gamble Co. 1.895%-2.00% due 75,000 74,900 .36 2/20-2/28/2002/3/ Coca-Cola Co. 1.71%-1.97% due 2/21-4/26/2002 73,400 73,247 .35 Abbott Laboratories 1.70%-1.72% due 64,619 64,419 .31 3/8-4/23/2002/3/ American Express Credit Corp. 1.65%-1.85% 62,700 62,560 .30 due 2/1-4/16/2002 Ford Motor Credit Co. 1.69%-1.86% due 61,800 61,751 .30 2/8-2/22/2002 Gannett Co., Inc. 1.64%-1.73% due 53,700 53,666 .26 2/11-2/15/2002 /3/ Triple-A One Funding Corp. 1.78%-1.80% 52,048 52,034 .25 due 2/5-2/6/2002 Three Rivers Funding Corp. 1.72%-1.80% 50,500 50,459 .24 due 2/4-2/21/2002 Verizon Network Funding Co. 1.72%-1.79% 44,998 44,908 .21 due 2/6-4/23/2002 Wells Fargo & Co. 1.79%-1.81% due 3/5-3/19/2002 40,400 40,319 .19 E.W. Scripps Co. 1.78%-2.02% due 35,000 34,964 .17 2/13-2/28/2002 /3/ Merck & Co., Inc. 1.82%-2.02% due 3/8-4/29/2002 30,900 30,828 .15 Tribune Co. 2.05%-2.07% due 2/12-2/13/2002 /3/ 30,200 30,178 .14 SBC Communications Inc. 1.95%-2.05% due 27,300 27,265 .13 2/19-3/6/2002/3/ Private Export Funding Corp. 1.80% due 5/7/2002 25,000 24,880 .12 Monsanto Co. 2.03% due 2/12/2002 13,600 13,591 .06 972,802 4.65 U.S. Treasuries - 0.75% U.S. Treasury Bills 1.785%-2.15% due 158,000 157,421 .75 2/7-7/5/2002 157,421 .75 TOTAL SHORT-TERM SECURITIES 2,515,272 12.03 (cost: $2,515,282,000) TOTAL INVESTMENT SECURITIES 20,863,692 99.81 (cost: $19,797,636,000) Excess of cash and receivables over payables 39,664 .19 NET ASSETS $20,903,356 100.00% /1/ Non-income-producing security. /2/ The fund owns 5.42%, 5.00%, 10.61% and 8.49% of the outstanding voting securities of R.J. Reynolds Tobacco Holdings, PACCAR, Wilshire Financial Services Group, and Clarent Hospital, respectively, and thus is considered an affiliate as defined in the Investment Company Act of 1940. /3/ Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. /4/ Coupon rate may change periodically. /5/ Valued under procedures established by the Board of Directors. /6/ Payment in kind; the issuer has the option of paying additional securities in lieu of cash. /7/ Company not making interest (or dividend) payments; bankruptcy proceedings pending. /8/ Step bond; coupon rate will increase at a later date. /9/ Pass-through securities backed by a pool of mortgages or other loans on which principal payments are periodically made. Therefore, the effective maturities are shorter than the stated maturities. /10/ Index-linked bond whose principal amount moves with a government retail price index. ADR = American Depositary Receipts See Notes to Financial Statements
Income Fund of America Equity Securities Added Equity Securities Eliminated Since July 31, 2001 Since July 31, 2001 1. AES Trust 1. Advanced Micro Devices 2. Agilent Technologies 2. AMCV Capital Trust 3. American Financial Group 3. Anglogold 4. Analog Devices 4. AssiDoman 5. BANK ONE 5. AT&T Wireless Services 6. Brambles Industries 6. Bank of Scotland 7. Clarent Hospital 7. Canadian National Railway 8. CMS Energy 8. China Mobile 9. Electronic Data Systems 9. Cinergy 10. Hang Lung Group 10. CNET 11. Hellenic Telecommunications 11. Comunicacion Celular 12. Husky Energy 12. Crompton 13. ImClone Systems 13. Dana 14. Ingersoll-Rand 14. El Paso 15. Irish Life & Permanent 15. Global Crossing 16. Juniper Networks 16. J.C. Penney 17. Kerr-McGee 17. Millennium Chemicals 18. Kimberly-Clark 18. Niagara Mohawk Holdings 19. Kingfisher 19. Norfolk Southern 20. Koninklijke Ahold 20. Northeast Utilities 21. LSI Logic 21. Origin Energy 22. Motorola 22. Pacific Century Financial 23. National City 23. PNC Financial Services Group 24. Nortel Networks 24. PowerGen 25. Providian Financial 25. Pro Mos Technologies 26. Sara Lee 26. PSINet 27. Societe Generale 27. Rhythms NetConnections 28. TranSwitch 28. Rockwell Automation 29. TXU 29. Rockwell Collins 30. Unibail 30. Safeway 31. Unilever 31. Smiths Group 32. XO Communications 32. Tower Automotive Capital Trust 33. Tultex 34. UAL 35. Ultramar Diamond Shamrock 36. UnitedGlobalCom 37. V2 Music Holdings 38. Vivendi Universal 39. Wisconsin Energy
Income Fund of America Financial statements Statement of assets and liabilities Unaudited at January 31, 2002 (dollars in thousands) Assets: Investment securities at market (cost: $19,797,636) $20,863,692 Cash 3,879 Receivables for - Sales of investments $92,216 Sales of fund's shares 58,730 Dividends and interest 131,402 282,348 21,149,919 Liabilities: Payables for - Purchases of investments 217,744 Repurchases of fund's shares 14,374 Management services 4,407 Other expenses 10,038 246,563 Net assets at January 31, 2002 $20,903,356 Total authorized capital stock - 3,000,000,000 shares, $.001 par value Class A shares: Net assets $20,003,896 Shares outstanding 1,264,372,700 Net asset value per share $15.82 Class B shares: Net assets $514,007 Shares outstanding 32,616,460 Net asset value per share $15.76 Class C shares: Net assets $307,696 Shares outstanding 19,539,640 Net asset value per share $15.75 Class F shares: Net assets $77,757 Shares outstanding 4,917,530 Net asset value per share $15.81 Statement of operations Unaudited for the six months ended January 31, 2002 (dollars in thousands) Investment income: Income: Dividends $211,394 Interest 313,363 $524,757 Expenses: Management services fee 27,650 Distribution expenses - Class A 23,858 Distribution expenses - Class B 1,874 Distribution expenses - Class C 914 Distribution expenses - Class F 59 Transfer agent fee - Class A 6,069 Transfer agent fee - Class B 128 Administrative services fees - Class C 164 Administrative services fees - Class F 44 Reports to shareholders 481 Registration statement and prospectus 324 Postage, stationery and supplies 919 Directors' fees 99 Auditing and legal fees 65 Custodian fee 655 Taxes other than federal income tax 1 Other expenses 8 63,312 Net investment income $461,445 Realized loss and unrealized depreciation on investments: Net realized loss (264,916) Net unrealized depreciation on investments (251,136) Net realized loss and unrealized depreciation on investments (516,052) Net decrease in net assets resulting from operations $(54,607) Statement of changes in net assets (dollars in thousands) Six months ended Year ended January 31, July 31, 2002 /1/ 2001 Operations: Net investment income $461,445 $968,199 Net realized (loss) gain on investments (264,916) 218,923 Net unrealized (depreciation) appreciation on investments (251,136) 1,501,194 Net (decrease) increase in net assets resulting from operations (54,607) 2,688,316 Dividends and distributions paid to shareholders: Dividends from net investment income: Class A (485,076) (920,822) Class B (8,063) (4,447) Class C (3,823) (558) Class F (1,148) (161) Distributions from net realized gain on investments: Class A (191,613) (540,219) Class B (4,250) (1,844) Class C (2,256) - Class F (593) - Total dividends and distributions (696,822) (1,468,051) Capital share transactions: Proceeds from shares sold 2,311,180 2,195,734 Proceeds from shares issued in reinvestment of net investment income dividends and distributions of net realized gain on investments 609,942 1,292,677 Cost of shares repurchased (1,150,551) (2,955,491) Net increase in net assets resulting from capital share transactions 1,770,571 532,920 Total increase in net assets 1,019,142 1,753,185 Net assets: Beginning of period 19,884,214 18,131,029 End of period (including undistributed net investment income: $234,614 and $271,279, respectively) $20,903,356 $19,884,214 /1/ Unaudited. See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION - The Income Fund of America, Inc. (the "fund") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. The fund seeks current income while secondarily striving for capital growth through investments in stocks and fixed-income securities. The fund offers four classes of shares as described below: Class A shares are sold with an initial sales charge of up to 5.75%. Class B shares are sold without an initial sales charge but are subject to a contingent deferred sales charge ("CDSC") paid upon redemption. This charge declines from 5% to zero over a period of six years. Class B shares automatically convert to Class A shares after eight years. Class C shares are sold without an initial sales charge but are subject to a CDSC of 1% for redemptions within one year of purchase. Class C shares automatically convert to Class F shares after ten years. Class F shares, which are sold exclusively through fee-based programs, are sold without an initial sales charge or CDSC. Holders of all classes of shares have equal pro rata rights to assets, dividends, liquidation and other rights. Each class has identical voting rights, except for exclusive rights to vote on matters affecting only its class. Each class of shares may have different distribution, administrative services and transfer agent fees and expenses. Differences in class-specific expenses will result in the payment of different per-share dividends by each class. SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of the significant accounting policies consistently followed by the fund in the preparation of its financial statements: SECURITY VALUATION - Equity securities, including depositary receipts, are valued at 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. In cases where equity securities are traded on more than one exchange, the securities are valued on the exchange or market determined by the investment adviser to be the broadest and most representative market, which may be either a securities exchange or the over-the-counter market. Fixed-income securities are valued at prices obtained from a pricing service, when such prices are available; however, in circumstances where the investment adviser deems it appropriate to do so, such securities will be valued at the mean quoted bid and asked prices or at prices for securities of comparable maturity, quality and type. Short-term securities maturing within 60 days are valued at amortized cost, which approximates market value. The ability of the issuers of the debt securities held by the fund to meet their obligations may be affected by economic developments in a specific industry, state or region. Securities and other assets for which representative market quotations are not readily available are valued at fair value as determined in good faith by a committee appointed by authority of the fund's Board of Directors. NON-U.S. CURRENCY TRANSLATION - Assets and liabilities initially expressed in terms of non-U.S. currencies are translated into U.S. dollars at the prevailing market rates at the end of the reporting period. Purchases and sales of securities and income and expenses are translated into U.S. dollars at the prevailing market rates on the dates of such transactions. The effects of changes in non-U.S. currency exchange rates on investment securities and other assets and liabilities are combined with the net realized and unrealized gain or loss on investment securities for financial reporting purposes. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions are accounted for as of the trade date. Realized gains and losses from securities transactions are determined based on specific identified cost. In the event securities are purchased on a delayed delivery or when-issued basis, the fund will instruct the custodian to segregate liquid assets sufficient to meet its payment obligations in these transactions. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Market discounts, premiums and original issue discounts on fixed-income securities are amortized daily over the expected life of the security. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions paid to shareholders are recorded on the ex-dividend date. CLASS ALLOCATIONS - Income, expenses (other than class-specific expenses) and realized and unrealized gains and losses are allocated daily among the various share classes based on their relative net asset values. Distribution expenses, administrative services fees, certain transfer agent fees and other applicable class-specific expenses are accrued daily and charged to the respective share class. 2. NON-U.S. INVESTMENTS INVESTMENT RISK - Investments in securities of non-U.S. issuers in certain countries involve special investment risks. These risks may include, but are not limited to, investment and repatriation restrictions, revaluation of currencies, adverse political, social and economic developments, government involvement in the private sector, limited and less reliable investor information, lack of liquidity, certain local tax law considerations, and limited regulation of the securities markets. CURRENCY GAINS AND LOSSES - Net realized currency losses on dividends, interest, and other receivables and payables, on a book basis, were $989,000 for the six months ended January 31, 2002. 3. FEDERAL INCOME TAXATION The fund complies with the requirements of the Internal Revenue Code applicable to regulated investment companies and intends to distribute all of its net taxable income and net capital gains for the fiscal year. As a regulated investment company, the fund is not subject to income taxes if such distributions are made. Required distributions are based on net investment income and net realized gains determined on a tax basis and may differ from such amounts for financial reporting purposes. In addition, the fiscal year in which amounts are distributed may differ from the year in which the net investment income is earned and the net gains are realized by the fund. As of January 31, 2002, the cost of investment securities for federal income tax reporting purposes was $19,803,238,000. Net unrealized appreciation on investments aggregated $1,060,454,000; $2,439,931,000 related to appreciated securities and $1,379,477,000 related to depreciated securities. For the six months ended January 31, 2002, the fund realized tax basis net capital losses of $263,560,000. In addition, the fund has recognized, for tax purposes, net losses relating to non-U.S. currency transactions totaling $5,122,000 which were realized during the period November 1, 2000 through July 31, 2001. 4. FEES AND TRANSACTIONS WITH RELATED PARTIES INVESTMENT ADVISORY FEE - The fee of $27,650,000 for management services was incurred pursuant to an agreement with Capital Research and Management Company ("CRMC") with which officers and certain Directors of the fund are affiliated. The Investment Advisory and Service Agreement provides for monthly fees accrued daily, based on a series of rates beginning with 0.250% per annum of the first $500 million of daily net assets decreasing to 0.129% of such assets in excess of $44 billion. The agreement also provides for monthly fees, accrued daily, of 2.25% on the fund's monthly gross investment income. For the six months ended January 31, 2002, the management services fee was equivalent to an annualized rate of 0.273% of average daily net assets. DISTRIBUTION EXPENSES - The fund has adopted plans of distribution under which it may finance activities primarily intended to sell fund shares, provided the categories of expenses are approved in advance by the fund's Board of Directors. The plans provide for annual expenses, based on average daily net assets, of up to 0.25% for Class A shares, 1.00% for Class B and Class C shares, and up to 0.50% for Class F shares. All share classes may use up to 0.25% of these expenses to pay service fees, or to compensate American Funds Distributors, Inc. ("AFD"), the principal underwriter of the fund's shares, for paying service fees to firms that have entered into agreements with AFD for providing certain shareholder services. The balance may be used for approved distribution expenses as follows: CLASS A SHARES - Approved categories of expense include reimbursements to AFD for commissions paid to dealers and wholesalers in respect of certain shares sold without a sales charge. Those reimbursements are permitted for amounts billed to the fund within the prior 15 months but only to the extent that the overall 0.25% annual expense limit for Class A shares is not exceeded. For the six months ended January 31, 2002, aggregate distribution expenses were $23,858,000, equivalent to an annualized rate of 0.24% of average daily net assets attributable to Class A shares. CLASS B SHARES - In addition to service fees of 0.25%, approved categories of expense include fees of 0.75% per annum of average daily net assets attributable to Class B shares payable to AFD. AFD sells the rights to receive such payments (as well as any contingent deferred sales charges payable in respect of shares sold during the period) in order to finance the payment of dealer commissions. For the six months ended January 31, 2002, aggregate distribution expenses were $1,874,000, equivalent to an annualized rate of 1.00% of average daily net assets attributable to Class B shares. CLASS C SHARES - In addition to service fees of 0.25%, the Board of Directors has approved the payment of 0.75% per annum of average daily net assets attributable to Class C shares to AFD to compensate firms selling Class C shares of the fund. For the six months ended January 31, 2002, aggregate distribution expenses were $914,000, equivalent to an annualized rate of 1.00% of average daily net assets attributable to Class C shares. CLASS F SHARES - The plan has an expense limit of 0.50%. However, the Board of Directors has presently approved expenses under the plan of 0.25% per annum of average daily net assets attributable to Class F shares. For the six months ended January 31, 2002, aggregate distribution expenses were $59,000, equivalent to an annualized rate of 0.25% of average daily net assets attributable to Class F shares. As of January 31, 2002, aggregate distribution expenses payable to AFD for all share classes were $7,812,000. AFD received $6,823,000 (after allowances to dealers) as its portion of the sales charges paid by purchasers of the fund's Class A shares for the six months ended January 31, 2002. Such sales charges are not an expense of the fund and, hence, are not reflected in the accompanying Statement of Operations. TRANSFER AGENT FEE - A fee of $6,197,000 was incurred during the six months ended January 31, 2002, pursuant to an agreement with American Funds Service Company ("AFS"), the transfer agent for the fund. As of January 31, 2002, aggregate transfer agent fees payable to AFS for Class A and Class B shares were $1,120,000. ADMINISTRATIVE SERVICES FEES - The fund has an administrative services agreement with CRMC for Class C and Class F shares. Pursuant to this agreement, CRMC provides transfer agency and other related shareholder services. CRMC may contract with third parties to perform these services. Under the agreement, the fund pays CRMC a fee equal to 0.15% per annum of average daily net assets of Class C and Class F shares, plus amounts payable for certain transfer agency services according to a specified schedule. For the six months ended January 31, 2002, total fees under the agreement were $208,000. As of January 31, 2002, aggregate administrative services fees payable to CRMC for Class C and Class F shares were $49,000. DEFERRED DIRECTORS' FEES - Since the adoption of the deferred compensation plan in 1993, Directors who are unaffiliated with CRMC may elect to defer the receipt of part or all of their compensation. Deferred compensation amounts, which remain in 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. As of January 31, 2002, the cumulative amount of these liabilities was $919,000. Directors' fees on the Statement of Operations include the current fees (either paid in cash or deferred) and the net increase or decrease in the value of deferred compensation. AFFILIATED OFFICERS AND DIRECTORS - CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both wholly owned subsidiaries of CRMC. Officers and certain Directors of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No such persons received any remuneration directly from the fund. 5. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES The fund made purchases and sales of investment securities, excluding short-term securities, of $4,893,747,000 and $3,354,720,000, respectively, during the six months ended January 31, 2002. Pursuant to the custodian agreement, the fund receives credits against its custodian fee for imputed interest on certain balances with the custodian bank. For the six months ended January 31, 2002, the custodian fee of $655,000 includes $99,000 that was paid by these credits rather than in cash. For the six months ended January 31, 2002, the fund reclassified $6,822,000 from undistributed net realized gains to additional paid-in-capital to reflect permanent differences between book and tax reporting. As of January 31, 2002, net assets consisted of the following: (dollars in thousands) Capital paid in on shares of capital stock $19,876,540 Undistributed net investment income 234,614 Accumulated net realized loss (273,731) Net unrealized appreciation 1,065,933 Net assets $20,903,356
Capital share transactions in the fund were as follows: Six Months Six Months Ended Ended January 31, January 31, 2002 2002 Amount(000) Shares Class A Shares: Sold $1,743,065 109,438,003 Reinvestment of dividends and distributions 592,207 38,176,326 Repurchased (1,117,192) (70,328,889) Net increase in Class A 1,218,080 77,285,440 Class B Shares: /1/ Sold 277,989 17,494,432 Reinvestment of dividends and distributions 10,819 698,797 Repurchased (16,851) (1,068,769) Net increase in Class B 271,957 17,124,460 Class C Shares: /2/ Sold 227,658 14,346,190 Reinvestment of dividends and distributions 5,404 349,090 Repurchased (9,121) (578,150) Net increase in Class C 223,941 14,117,130 Class F Shares: /2/ Sold 62,468 3,918,258 Reinvestment of dividends and distributions 1,512 97,319 Repurchased (7,387) (465,067) Net increase in Class F 56,593 3,550,510 Total net increase in fund $1,770,571 112,077,540 Year Ended Year Ended July 31, July 31, 2001 2001 Amount(000) Shares Class A Shares: Sold $1,859,810 115,591,904 Reinvestment of dividends and distributions 1,286,543 82,606,587 Repurchased (2,943,300) (184,558,431) Net increase in Class A 203,053 13,640,060 Class B Shares: /1/ Sold 222,282 13,795,449 Reinvestment of dividends and distributions 5,514 351,435 Repurchased (8,332) (520,084) Net increase in Class B 219,464 13,626,800 Class C Shares: /2/ Sold 88,306 5,433,965 Reinvestment of dividends and distributions 481 29,661 Repurchased (669) (41,116) Net increase in Class C 88,118 5,422,510 Class F Shares: /2/ Sold 25,336 1,554,581 Reinvestment of dividends and distributions 139 8,534 Repurchased (3,190) (196,095) Net increase in Class F 22,285 1,367,020 Total net increase in fund $ 532,920 34,056,390 /1/ Class B shares were not offered before March 15, 2000. /2/ Class C and Class F shares were not offered before March 15, 2001.
Per-share data and ratios Class A Class A Class A Six months Year Year ended Ended Ended January 31, July 31, July 31, 2002 /1/,/2/ 2001 2000 Net asset value, beginning of period $16.44 $15.43 $17.51 Income from investment operations: Net investment income .37 /3/ .83 /3/ .88 /3/ Net (losses) gains on securities (both (.43)/3/ 1.46 /3/ (1.28)/3/ realized and unrealized) Total from investment operations (.06) 2.29 (.40) Less distributions: Dividends (from net investment income) (.40) (.80) (.87) Distributions (from capital gains) (.16) (.48) (.81) Total distributions (.56) (1.28) (1.68) Net asset value, end of period $15.82 $16.44 $15.43 Total return /4/ (.30)% 15.53% (2.08)% Ratios/supplemental data: Net assets, end of period (in millions) $20,004 $19,519 $18,102 Ratio of expenses to average net assets .60% /5/ .62% .63% Ratio of net income to average net assets 4.58% /5/ 5.18% 5.52% Class A Class A Class A Year Year Year Ended Ended Ended July 31, July 31, July 31, 1999 1998 1997 Net asset value, beginning of period $18.25 $18.59 $15.89 Income from investment operations: Net investment income .88 .85 .86 Net (losses) gains on securities (both .45 1.11 3.55 realized and unrealized) Total from investment operations 1.33 1.96 4.41 Less distributions: Dividends (from net investment income) (.88) (.82) (.90) Distributions (from capital gains) (1.19) (1.48) (.81) Total distributions (2.07) (2.30) (1.71) Net asset value, end of period $17.51 $18.25 $18.59 Total return /4/ 7.79% 11.32% 29.28% Ratios/supplemental data: Net assets, end of period (in millions) $23,012 $22,113 $18,814 Ratio of expenses to average net assets .59% .59% .61% Ratio of net income to average net assets 4.99% 4.75% 5.09% Class B Class B Class B Six months Year ended ended March 15 January 31, July 31, to July 31, 2002 /1/,/2/ 2001 2000 /1/ Net asset value, beginning of period $16.39 $15.39 $14.93 Income from investment operations: /3/ Net investment income .30 .72 .24 Net (losses) gains on securities (both (.43) 1.46 .41 realized and unrealized) Total from investment operations (.13) 2.18 .65 Less distributions: Dividends (from net investment income) (.34) (.70) (.19) Distributions (from capital gains) (.16) (.48) - Total distributions (.50) (1.18) (.19) Net asset value, end of period $15.76 $16.39 $15.39 Total return /4/ (.70)% 14.77% 4.33% Ratios/supplemental data: Net assets, end of period (in millions) $514 $254 $29 Ratio of expenses to average net assets 1.36% /5/ 1.38% .52% Ratio of net income to average net assets 3.73%/5/ 4.15% 1.73% Class C Class C Six months ended March 15 January 31, to July 31, 2002 /1/,/2/ 2001 /1/ Net asset value, beginning of period $16.37 $15.85 Income from investment operations: /3/ Net investment income .28 .21 Net (losses) gains on securities (both (.41) .48 realized and unrealized) Total from investment operations (.13) .69 Less distributions: Dividends (from net investment income) (.33) (.17) Distributions (from capital gains) (.16) - Total distributions (.49) (.17) Net asset value, end of period $15.75 $16.37 Total return /4/ (.70%) 4.35% Ratios/supplemental data: Net assets, end of period (in millions) $307 $89 Ratio of expenses to average net assets 1.47% /5/ .62% Ratio of net income to average net assets 3.56% /5/ 1.28% Class F Class F Six months ended March 15 January 31, to July 31, 2002 /1/,/2/ 2001 /1/ Net asset value, beginning of period $16.44 $15.89 Income from investment operations: /3/ Net investment income .35 .27 Net (losses) gains on securities (both (.43) .48 realized and unrealized) Total from investment operations (.08) .75 Less distributions: Dividends (from net investment income) (.39) (.20) Distributions (from capital gains) (.16) - Total distributions (.55) (.20) Net asset value, end of period $15.81 $16.44 Total return /4/ (.41)% 4.71% Ratios/supplemental data: Net assets, end of period (in millions) $78 $22 Ratio of expenses to average net assets .73% /5/ .31% Ratio of net income to average net assets 4.30% /5/ 1.58% Supplemental data - all classes Six months Year Year ended ended ended January 31, July 31, July 31, 2002 /1/,/2/ 2001 2000 Portfolio turnover rate 19.00% 43.96% 34.73% Supplemental data - all classes Year Year Year ended ended ended July 31, July 31, July 31, 1999 1998 1997 Portfolio turnover rate 44.35% 34.68% 40.92% /1/ Based on operations for the period shown and, accordingly, not representative of a full year (unless otherwise noted). /2/ Unaudited. /3/ Based on average shares outstanding. /4)/Total returns exclude all sales charges, including contingent deferred sales charges. /5/ Annualized.
OTHER SHARE CLASS RESULTS (UNAUDITED) CLASS B, CLASS C AND CLASS F RETURNS FOR PERIODS ENDED DECEMBER 31, 2001 (THE MOST RECENT CALENDAR QUARTER): CLASS B SHARES ONE YEAR LIFE OF CLASS Reflecting applicable contingent deferred sales charge (CDSC), maximum of 5%, payable only if shares are sold -0.30% +8.08%/1/ Not reflecting CDSC +4.66 +10.15/1/ CLASS C SHARES Reflecting CDSC, maximum of 1% payable only if shares are sold within one year of purchase - +2.70/2/ Not reflecting CDSC - +3.69/2/ CLASS F SHARES Not reflecting annual asset-based fee charged by sponsoring firm - +4.35/2/ /1/Average annual compound return from March 15, 2000, when Class B shares first became available. /2/Total return from March 15, 2001, when Class C and Class F shares first became available. There are several ways to invest in The Income Fund of America. Class A shares are subject to a 5.75% maximum up-front sales charge that declines for accounts of $25,000 or more. Other share classes, which are generally not available for certain employer-sponsored retirement plans, have no up-front sales charges but are subject to additional annual expenses and fees. Annual expenses for Class B shares were 0.76% higher than for Class A shares; Class B shares convert to Class A shares after eight years of ownership. If redeemed within six years, Class B shares may also be subject to a contingent deferred sales charge (CDSC) of up to 5% that declines over time. Class C shares were subject to annualized expenses 0.87% higher than those for Class A shares and a 1% CDSC if redeemed within the first year after purchase. Class C shares convert to Class F shares after 10 years. Class F shares, which are available only through certain fee-based programs offered by broker-dealer firms and registered investment advisers, had higher expenses (0.13% annualized) than did Class A shares, and an annual asset-based fee charged by the sponsoring firm. Expenses are deducted from income earned by the fund. As a result, dividends and investment results will differ for each share class. [logo - American Funds(sm)] The right choice for the long term(sm) OFFICE OF THE FUND One Market Steuart Tower, Suite 1800 Mailing address: P.O. Box 7650 San Francisco, CA 94120-7650 INVESTMENT ADVISER Capital Research and Management Company 333 South Hope Street Los Angeles, CA 90071-1443 135 South State College Boulevard Brea, CA 92821-5823 TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS American Funds Service Company (Please write to the address nearest you.) P.O. Box 25065 Santa Ana, CA 92799-5065 P.O. Box 659522 San Antonio, TX 78265-9522 P.O. Box 6007 Indianapolis, IN 46206-6007 P.O. Box 2280 Norfolk, VA 23501-2280 CUSTODIAN OF ASSETS JPMorgan Chase Bank 270 Park Avenue New York, NY 10017-2070 COUNSEL Paul, Hastings, Janofsky & Walker LLP 555 South Flower Street Los Angeles, CA 90071-2371 PRINCIPAL UNDERWRITER American Funds Distributors, Inc. 333 South Hope Street Los Angeles, CA 90071-1462 FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, OR FOR A PROSPECTUS FOR ANY OF THE AMERICAN FUNDS, PLEASE CONTACT YOUR FINANCIAL ADVISER. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE COMPANY AT 800/421-0180 OR VISIT US AT AMERICANFUNDS.COM ON THE WORLD WIDE WEB. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY. This report is for the information of shareholders of The Income Fund of America, but it may also be used as sales literature when preceded or accompanied by the current prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. If used as sales material after March 31, 2002, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter. THE CAPITAL GROUP COMPANIES American Funds Capital Research and Management Capital International Capital Guardian Capital Bank and Trust Lit. No. IFA-013-0302 Litho in USA BAG/GRS/5542 Printed on recycled paper