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THE INCOME FUND OF AMERICA
ANNUAL REPORT for the year ended July 31, 1995
THE ADVANTAGES OF INVESTING REGULARLY
[The American Funds Group(R)]
THE INCOME FUND OF AMERICA
Seeks current income while secondarily striving for capital growth through
investments in stocks and fixed-income securities.
RESULTS AT A GLANCE
Here are results for The Income Fund of America(R) weighed against two leading
unmanaged indexes widely used as measures of stock and bond market activity.
<TABLE>
<CAPTION>
FOR THE PAST FISCAL YEAR
AUGUST 1, 1994 THROUGH JULY 31, 1995
THE INCOME FUND OF AMERICA +16.4%
<S> <C>
Standard & Poor's 500 Composite Index +26.1
Lehman Brothers Government/
Corporate Bond Index +10.1
FOR THE PAST 10 FISCAL YEARS
AUGUST 1, 1985 THROUGH JULY 31, 1995
THE INCOME FUND OF AMERICA +215.4%
Standard & Poor's 500 Composite Index +306.3
Lehman Brothers Government/
Corporate Bond Index +158.2
Consumer Price Index (Inflation) +41.5
Average Savings Institution/1/ +73.1
FOR THE PAST 21-1/2 YEARS
FROM DECEMBER 1, 1973, WHEN CAPITAL RESEARCH AND
MANAGEMENT COMPANY BECAME THE FUND'S INVESTMENT ADVISER,
THROUGH JULY 31, 1995
THE INCOME FUND OF AMERICA +1,496.1%
AVERAGE COMPOUND RETURN: +13.6% A YEAR
Standard & Poor's 500 Composite Index +1,319.3
Lehman Brothers Government/
Corporate Bond Index +605.0
Consumer Price Index (Inflation) +232.2
Average Savings Institution/1/ +325.2
</TABLE>
All results shown with dividends reinvested or interest compounded.
/1/ Based on figures, supplied by the U.S. League of Savings Institutions and
the Federal Reserve Board, that reflect all kinds of savings deposits,
including longer term certificates. Unlike investments in the fund, such
deposits are insured and, if held to maturity, offer a guaranteed return of
principal and a fixed rate of interest, but no opportunity for capital growth.
Maximum allowable interest rates were imposed by law until 1983.
Fund results in this report were computed without a sales charge unless
otherwise indicated. Here are the total returns and average annual compound
returns with all distributions reinvested for periods ended June 30, 1995 (the
most recent calendar quarter), assuming payment of the 5.75% maximum sales
charge at the beginning of the stated periods:
<TABLE>
<CAPTION>
Total Average Annual
Return Compound Return
<S> <C> <C>
TEN YEARS +186.68% +11.11%
FIVE YEARS +63.55 +10.34
ONE YEAR +9.60 -
</TABLE>
Sales charges are lower for accounts of $50,000 or more. The fund's 30-day
yield as of August 31, 1995, calculated in accordance with the Securities and
Exchange Commission formula, was 5.19%. Fund results through August 1988 do not
reflect service and distribution expenses now paid under its Plan of
Distribution. Such expenses may not exceed 0.25% of the fund's average net
assets per year and currently amount to approximately 0.22%.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN WILL
VARY, SO YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE SHORTER THE TIME
PERIOD OF YOUR INVESTMENT, THE GREATER THE POSSIBILITY OF LOSS. FUND SHARES ARE
NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY, THE U.S.
GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON.
FELLOW SHAREHOLDERS
Fiscal 1995 was a very rewarding year for investors in The Income Fund of
America - and the 21st consecutive year in which IFA's shares rose in value on
a total return basis.
For the 12 months ended July 31, the gain was 16.4% with all distributions
taken in shares. For those of you who took dividends totaling 83 cents a share
in cash and accepted the capital gain distribution of 6 cents in shares, your
income return was 5.6% and the value of your holdings increased 10.3%.
As you can see at the left, IFA's 12-month results fell between those of
Standard & Poor's 500 Composite Index, a broad measure of the U.S. stock
market, and the Lehman Brothers Government/Corporate Bond Index, which tracks
fixed-income securities.
The fiscal 1995 results brought IFA's total return for the past 10 years
to 215.4%, or an average compound return of 12.2% per year. During this 10-year
period, too, the fund followed a middle course between these two indexes.
However, over the 21-1/2 years that IFA has been managed by Capital Research
and Management Company, it has outpaced both indexes, while providing a
cumulative total return over four and one-half times that of the average
savings account and more than six times the rate of inflation.
This past fiscal year, nearly all of the fund's gain was achieved in the
second half, with both equities and fixed-income securities making significant
contributions. In the first half - and throughout almost all of calendar 1994 -
rising interest rates cast a pall over both markets. Then, in November, bond
prices bottomed and began to rise. The catalyst was the congressional
elections, which offered fresh hope that the federal government might exercise
greater fiscal responsibility. Reports of a softening economy reinforced the
rally in bond prices and eased fears of inflation.
Stocks began their rise in late December and continued moving upward well
into the summer. Declining interest rates and improving corporate earnings
combined to create a bullish environment for equities, with prices soaring to
historic highs. In particular, technology issues experienced a frenzied run-up.
Since IFA's primary emphasis is on income-producing investments, it owns
comparatively few technology issues, which generally carry low yields. They are
well represented in the S&P 500, however, and the run-up in those shares
accounted for much of the differential between the fund and the index for the
12 months.
At fiscal year-end, 54% of IFA's assets were invested in equity-type
securities. The fund benefited during the year from strong showings by some of
its biggest holdings, notably pharmaceutical stocks. Our largest equity
investment, Eli Lilly, rose 60.9%, while the second largest, Bristol-Myers
Squibb, increased 31.6%. We began accumulating substantial positions in these
and other drug stocks a few years ago, when proposals for drastic health care
reforms were making headlines and the stocks were generally out of favor.
IFA also benefited during fiscal 1995 from its sizable investments in
interest-rate-sensitive issues. Several of these stocks moved up sharply,
including American Express (+45.3%) and Citicorp convertible preferred shares
(+46.6%).
The fund's fixed-income holdings - which accounted for 40% of net assets
on July 31 - made a very solid contribution to our fiscal '95 results. A number
of our higher yielding, higher risk corporate bonds did especially well,
recording double-digit increases on a total return basis. These bonds accounted
for 16% of net assets at the end of the fiscal year.
We believe the outlook for interest rates - and for business generally -
is rather uncertain at the moment. Although there have been signs of softening
in parts of the economy, other sectors are showing renewed vigor. It is not yet
clear whether the overall pace of growth will be strong enough to intensify
inflation and move interest rates up, or weak enough to allow further
reductions in rates.
On the following pages, we invite you to meet several of your fellow
investors who pursue a technique called "dollar cost averaging." It is a
discipline that can provide those who are patient with a rewarding investment
experience, while avoiding the uncertainties of attempting to time investments
to catch short-term swings in the stock and bond markets. We believe this
technique fits well with the objectives of The Income Fund of America.
Cordially,
Walter P. Stern
Chairman of the Board
George A. Miller
President
September 8, 1995
FOLLOWING THE COURSE
OF AN INVESTMENT IN IFA
Here's how a $10,000 investment in IFA grew between December 1, 1973 - the
day that Capital Research and Management Company became the fund's investment
adviser - and July 31, 1995, the end of the fund's latest fiscal year.
As you can see, the $10,000 would have grown to $150,385 with all
distributions reinvested, an average increase of 13.3% a year. That's better
than the major unmanaged stock and bond market indexes tracked on the chart.
The fund's year-by-year results appear in the table under the chart. You
can use this table to estimate how much the value of your own holdings has
grown.
AVERAGE ANNUAL
COMPOUND RETURNS*
(for periods ended July 31, 1995)
<TABLE>
<CAPTION>
<S> <C>
TEN YEARS +11.51%
FIVE YEARS +10.85%
ONE YEAR +9.72%
</TABLE>
*Assumes reinvestment of all distributions and payment of the 5.75% sales
charge at the beginning of the stated periods.
THE CASE FOR INVESTING REGULARLY
DOLLAR COST AVERAGING IS A SYSTEMATIC APPROACH THAT CAN WORK - IF YOU STAY WITH
IT THROUGH GOOD TIMES AND BAD.
Changing the oil in your car at regular intervals and brushing your teeth
twice a day are good habits that pay off in the long run. So is investing
regularly. It's a proven method of accumulating assets over time and a good way
to start preparing yourself financially for a comfortable retirement or some
other worthwhile goal.
One of the best ways to invest regularly is by "dollar cost averaging."
This strategy calls for investing at consistent intervals such as once a month
or every quarter. It can be made to work with various types of investments, but
it is especially well-suited to mutual funds, where you can easily buy shares
in increments that suit your pattern of investing.
Thousands of shareholders - including those you'll meet on the next few
pages - use this technique to build up their holdings in The Income Fund of
America. It's also the technique you use, probably without realizing it, if you
participate in a corporate retirement plan that makes regular investments on
your behalf.
With dollar cost averaging, your investment program is on autopilot. You
do not have to guess which way the financial markets may move next and you
won't be waiting around for the perfect time to buy. It's a discipline that
requires you to invest regardless of what's happening in the markets and
insulates you from the kinds of mistakes that are often caused by emotional
factors. It prevents you from becoming overly excited and investing too much
when securities prices are approaching their peak, and it keeps you investing
at difficult yet potentially profitable times, when prices are lower.
An additional advantage of dollar cost averaging is that it can allow
periodic fluctuations in the share price to work in your favor. You end up
buying more shares when the price or net asset value is down, and fewer shares
when it's up. During long periods when the markets have risen more often than
they have fallen, this technique may enable you to accumulate your holdings at
an average cost per share that is quite a bit lower than the average price over
the period.
To illustrate how this works in the case of IFA, let's suppose you had
opened an account with a $1,000 investment and added $100 on the first day of
every month thereafter throughout the fund's lifetime./1/ This lengthy span,
dating back to December 1973, has seen a variety of economic and investment
conditions, including bull and bear markets in both stocks and bonds. During
this time, IFA's share price has traveled upward, though not in a straight
line; it has risen or remained unchanged from the start of one month to the
beginning of the next a total of 149 times, while declining 110 times. The
declines generally have been smaller than the increases, reflecting the overall
rising trend of securities prices during this period. By investing regularly
and taking advantage of those 110 downward fluctuations, you would have made
your monthly investments at an average price per share of $9.91, or 92 cents
below the average monthly share price for the period. Your systematic monthly
investments totaling $26,900 during the 21-1/2 years, plus the value of all
your reinvested distributions, would have grown to $147,315 by July 31, 1995.
Your broker or financial planner can help you set up a dollar cost
averaging program that meets your specific needs. You may want to arrange to
have it funded through automatic deductions from your checking account. Many
IFA shareholders find that a convenient way of keeping their investment program
on autopilot.
Keep in mind that dollar cost averaging does not ensure a profit or
protect against loss, and its success depends on your willingness to keep
investing at times when the share price declines. However, if you stick with
the program through good times and bad, you have an opportunity to build a
substantial nest egg.
/1/ From December 1, 1973, when Capital Research and Management Company became
The Income Fund of America's investment adviser. This example assumes all
distributions were taken in shares. Current sales charges, where applicable,
have been used to calculate the results.
[Begin photo caption] The Matulas gather for an informal portrait in front of
their 75-year-old barn.[End photo caption]
[Begin photo caption] At the Matula farm, five-year-old Quinn rides Bear, one
of the family's two horses, while his mother holds the reins. Quinn's
eight-year-old sister, Sable, rides the Matulas' old pony, Blue-Boy, with dad
walking alongside. [End photo caption]
[Begin photo caption] Feeding time for Blue-Boy. [End photo caption]
THE MATULAS: THE GOOD LIFE IN THE COUNTRY
Kyna and Laurence Matula were both teaching horseback riding at summer camps
when they met nearly 20 years ago. "The camps were on opposite sides of one of
those clear blue lakes that northern Minnesota is famous for," recalls Kyna.
"We used to meet on the trails in the north woods when we took the kids from
the camps out riding."
Fast forward two decades and we find the Matulas with two children, Sable
and Quinn, and two horses (Bear and Blue-Boy), living on a farm in the northern
Illinois countryside. Kyna teaches fine arts at a local high school; Laurence
manages a division of Acrux Information Systems that installs computers in
schools.
"We enjoy country living," says Kyna. "We're outdoors people. Our idea of
a good vacation is to take a camping trip and ride our bikes all day. We used
to ride about 60 miles in a day. Now we're down to around 30, and by the time
we retire I suppose we may be doing even less than that."
Several years ago, the Matulas began calculating how much income they will
need when they retire. The results of those calculations, says Laurence, "were
a little scary." With the help of their financial adviser, the Matulas arranged
to begin investing regularly in IFA through automatic withdrawals from their
bank account.
"We needed the discipline of a set program," says Laurence. "We didn't
know it by the name dollar cost averaging. We just wanted something where we
could put away the money each month, let it grow, and not have to pay close
attention to it all the time. That way works best for us."
THE MAPLE TREE: A LEARNING EXPERIENCE
In 1985, Ron Calaway and Gary Seiler bought a roadside restaurant near Madison,
Wisconsin and renamed it the Maple Tree. Seiler had been a troubleshooter for a
fast-food chain, Calaway a department store manager. "Between us we thought we
knew a thing or two about managing," says Ron. "But we discovered there was an
awful lot we didn't know."
One thing the partners had to learn the hard way was planning for big
crowds on holidays. On their first Mother's Day, they ended up serving nearly
1,000 people with a skeleton staff and washing dishes well into the night.
"That was a day from hell," recalls Ron's wife, Barbara, who keeps the Maple
Tree's books and occasionally helps out in the restaurant.
The following year, St. Patrick's Day provided another learning
experience. Says Gary: "We made the mistake of offering a St. Paddy's Day
special dinner at a very low price, $3.95. All of the tables were filled half
an hour before we started serving, and more people were lined up outside the
front door. By 6:30 p.m. we had run out of corned beef and we had more than a
few unhappy customers."
A couple of years later, with the Maple Tree packed for dinner on New
Year's Eve, the head chef threatened to quit unless he was given a raise. After
that, Gary decided to take over the job of running the kitchen himself. "That
was the turning point," says Ron, who works at the restaurant five nights a
week. From then on the owners became doers as well as managers, and the Maple
Tree's fortunes improved steadily.
In 1992, with help from their broker, Gary and Ron set up an IFA dollar
cost averaging account for their business. The account serves as a reserve for
unforeseen contingencies and a potential source of funds for an expansion of
the restaurant. "We want to enlarge the place and remodel it, but we're going
to proceed cautiously," says Ron. "I hope we're getting a little smarter as we
get a little older. I think that's the way it's supposed to work."
[Begin photo caption] In the kitchen of their restaurant, Ron Calaway (with
menus) and Gary Seiler pause in the middle of their workday. [End photo
caption]
[Begin photo caption] In the summertime, Ron and Barbara like to start the day
with a trip in their rowboat around the lake in front of their home. [End photo
caption]
[Begin photo caption] The Seilers are avid softball players. That's Mary
catching, husband Gary at the plate, and Erin, their daughter, doing the
pitching. [End photo caption]
[Begin photo caption]Helen and Orrin Colley play a round of golf at a club near
their Massachusetts home.[End photo caption]
[Begin photo caption]Golf is a favorite year-round hobby for the Colleys.[End
photo caption]
[Begin photo caption]A cherished summer pastime is baby-sitting their
grandchildren at the beach.[End photo caption]
THE COLLEYS: ON THE LINKS 12 MONTHS A YEAR
From about May through October, Orrin and Helen Colley play golf several times
a week at a country club near their home in Duxbury on the Massachusetts coast.
When the temperature drops and the weather forecasts begin to mention snow,
they pack their clubs in the back of the car and head for southern Florida.
There, the Colleys play golf regularly at a club near their winter home, a
condominium in the Fort Myers area.
"The conventional wisdom is that the more often you go out on the course,
the better you get," says Orrin. "I'm not sure that's always true. In fact,
there are times when I think maybe we play too darn much golf."
Orrin and Helen are native New Englanders. Their family, including three
grown daughters and five granddaughters, all live within 50 miles of Duxbury.
"That's great for us because it means we get to see quite a bit of the kids,
especially during the summer," says Helen.
For nearly 25 years, Orrin operated a property and casualty insurance
agency in nearby Marshfield. In 1991, he and his partner sold the agency, and
Orrin became an insurance consultant for the buyer.
The Colleys have been dollar cost averagers in IFA since 1987, when their
broker encouraged them to open an account. Although semi-retired, they still
contribute to it regularly. "At some point," says Orrin, "I suppose we might
consider switching to an automatic withdrawal plan."
ONSETT INTERNATIONAL: CREATING INFORMATION NETWORKS
Nina Tsao is an information technology expert who decided five years ago to
pursue a long-held dream. She formed her own consulting firm, Onsett
International, in Cambridge, Massachusetts. Onsett helps companies, including
large global enterprises, build computerized information networks.
"Basically what we do," says Nina, "is take distributed software and
hardware and put them together to create an information technology
infrastructure that's adaptable to a client's changing needs. It's an exciting
business and a competitive one, and it's a field that I have dedicated my
career to."
Nina Tsao is no stranger to information technology. A native of Hong Kong,
she holds advanced degrees in computer science from two American universities
and was one of the original developers of the ARPAnet (which was part of what
is now commonly called the Internet) for the U.S. Department of Defense. Before
starting Onsett, she was director of network systems development for Data
General and vice president of engineering at Ztel, a provider of digital
switching systems. She also was a systems designer and network architect at
Digital Equipment Corporation.
Onsett has clients in several countries and has been growing steadily. To
accumulate funds for future expansion - and to provide what Nina calls "a
financial safety net" - three years ago she and her financial adviser set up a
plan that includes a dollar cost averaging account in IFA. "Averaging makes
sense as a way to build up our cash reserve," she says. Her long-range goal for
Onsett is ambitious. "I want this to become a great company," she says, "and
one that has a positive impact on business and society."
[Begin photo caption]Nina Tsao runs Onsett International from an office
overlooking the Charles River and downtown Boston.[End photo caption]
[Begin photo caption]Biking consumes some of Nina's spare time. She also enjoys
skiing, tennis, and playing the guitar.[End photo caption]
EXAMPLES OF DOLLAR COST AVERAGING*
Here is how your money would have grown if you had invested $100 a month in The
Income Fund of America on the first of each month throughout these periods
(ending July 31, 1995):
<TABLE>
<CAPTION>
Your cumulative The value of
investment would your IFA shares would
have been... have grown to...
<S> <C> <C>
Five Years $6,900 $9,193
Ten Years 12,900 23,312
Fifteen Years 18,900 57,219
Twenty Years 24,900 115,735
</TABLE>
*These hypothetical examples assume an initial investment of $1,000 to open the
account, with all distributions taken in shares. Current sales charges, where
applicable, have been used to calculate the results.
THE INCOME FUND OF AMERICA
INVESTMENT PORTFOLIO July 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Equity-Type Securities 53.81%
Corporate Bonds 23.34%
Government Bonds 17.15%
Cash & Equivalents 5.70%
</TABLE>
**********
<TABLE>
<CAPTION>
- ---------------------------- -------------
Percent of
Ten Largest Stock Holdings Net Assets
- ---------------------------- -------------
<S> <C>
Eli Lilly 1.91%
Bristol-Myers Squibb 1.59
Philip Morris 1.46
American Home Products 1.30
Upjohn 1.17
Occidental Petroleum .87
Lincoln National .85
Ford Motor .78
Phillips Petroleum .78
U S WEST .77
</TABLE>
**********
<TABLE>
<CAPTION>
- ---------------------------------- --- --- ---
Shares or Market Percent
Principal Value of Net
Equity-Type Securities Amount (000) Assets
- ---------------------------------- --- --- ---
Banking - 7.65%
<S> <C> <C> <C>
AmSouth Bancorporation 750,000 $26,344 .21%
Banc One Corp. 1,500,000 47,625 .39
BANCORP HAWAII, INC. 800,000 24,500 .20
Bank of New York Co., Inc. 1,300,000 52,163
Bank of New York Co., Inc. 7.50% convertible debentures
2001 $13,000,000 26,665 .64
Bankers Trust New York Corp. 1,000,000 64,500 .52
CalFed Inc., Class A (1) 328,535 4,558 .04
Central Fidelity Banks, Inc. 281,250 8,930 .07
CHEMICAL BANKING CORP. 1,600,000 82,600 .67
Citicorp $5.375 convertible preferred, Series 13 160,000 27,200 .22
Comerica Inc. 1,080,000 37,800 .31
CoreStates Financial Corp. 1,700,000 62,050 .50
First Chicago Corp. 575,000 34,931 .28
FIRST FIDELITY BANCORPORATION 558,900 35,211 .29
First Interstate Bancorp 250,000 21,531 .18
First Nationwide Bank, FSB preferred 100,000 10,900 .09
FIRST SECURITY CORP. 1,125,000 31,219 .25
FIRST TENNESSEE NATIONAL CORP. 900,000 44,325 .36
First Union Corp. 1,700,000 83,087 .68
Fleet Financial Group, Inc. 1,225,000 43,641 .36
Glendale Federal Bank, FSB (1) 234,367 3,223
Glendale Federal Bank, FSB warrants, expire 1999 (1) 6,175 8 .03
Mellon Bank Corp. 375,000 15,047 .12
J.P. Morgan & Co. Inc. 660,000 48,263 .39
NATIONAL CITY CORP. 950,000 29,094 .24
PNC Bank Corp. 2,460,000 60,577 .49
Royal Bank of Canada 380,000 8,128 .07
Washington Mutual Savings Bank $6.00 convertible
preferred, Series D 60,000 6,075 .05
-------- -----
940,195 7.65
-------- -----
Health & Personal Care - 7.63%
American Home Products Corp. 2,030,000 160,370 1.30
Baxter International Inc. 1,300,000 48,425 .39
Bristol-Myers Squibb Co. 2,815,000 194,939 1.59
Glycomed Inc. 7.50% convertible debentures 2003 $5,000,000 3,550 .03
Eli Lilly and Co. 3,000,000 234,750 1.91
Merck & Co., Inc. 800,000 41,300 .34
Tambrands Inc. 960,000 45,240 .37
Upjohn Co. 3,750,000 144,375 1.17
Warner-Lambert Co. 775,000 65,100 .53
-------- -----
938,049 7.63
-------- -----
Energy Sources - 6.14%
Amoco Corp. 850,000 57,162 .46
Atlantic Richfield Co. 700,000 80,675 .66
California Energy Co., Inc. 5.00% convertible debentures
2000 (2) $10,000,000 9,900 .08
Chevron Corp. 1,135,000 56,041 .46
Chieftain International Funding Corp. $1.8125
convertible preferred 152,500 3,603 .03
Cyprus Amax Minerals Co. $4.00 convertible preferred,
Series A 465,000 28,772 .23
Howell Corp. $3.50 convertible preferred, Series A 60,000 3,060 .02
Mobil Corp. 550,000 53,763 .44
Occidental Petroleum Corp. 4,000,000 90,000
Occidental Petroleum Corp. $3.875 convertible
preferred (2) 300,000 16,950 .87
Oryx Energy Co. 7.50% convertible debentures 2014 $9,500,000 8,170 .07
Phillips Petroleum Co. 2,700,000 95,512 .78
Santa Fe Energy Resources, Inc. $0.732 DECS
convertible preferred, Series A 500,000 4,813 .04
Sun Co., Inc. 1,632,000 47,940 .39
Texaco Inc. 1,275,000 84,787 .69
Unocal Corp. $3.50 convertible preferred (2) 750,000 39,937 .32
USX-Marathon Group 3,100,000 62,388 .51
Valero Energy Corp. $3.125 convertible preferred 228,100 11,262 .09
-------- -----
754,735 6.14
-------- -----
Insurance - 4.03%
Aetna Life and Casualty Co. 600,000 37,125 .30
Alexander & Alexander Services Inc. $3.625 convertible
preferred, Series A (2) 220,000 10,780 .09
ALLSTATE CORP. 416,141 13,004 .11
American General Corp. 1,550,000 56,381 .46
CIGNA Corp. 975,000 78,609 .64
Lincoln National Corp. 2,540,000 104,457 .85
Ohio Casualty Corp. 1,795,000 57,889 .47
SAFECO CORP. 750,000 43,875 .36
St. Paul Companies, Inc. 1,280,000 62,400 .51
Trenwick Group Inc. 6.00% convertible debentures 1999 $3,000,000 3,135 .02
USF&G Corp. 1,351,071 22,293
USF&G Corp. 0% convertible debentures 2009 $10,000,000 5,500 .22
-------- -----
495,448 4.03
-------- -----
Telecommunications - 3.42%
Ameritech Corp. 1,300,000 62,887 .51
Bell Atlantic Corp. 1,550,000 88,738 .72
BellSouth Corp. 250,000 16,937 .14
Dial Page, Inc. warrants (1) 51,912 0 .00
GTE Corp. 708,000 25,134 .20
NYNEX Corp. 1,000,000 41,250 .34
Pacific Telesis Group 2,635,000 74,439 .61
Sprint Corp. 465,000 15,926 .13
U S WEST, Inc. 1,830,000 78,461
U S WEST, Inc. 0% convertible debentures 2011 $50,000,000 16,188 .77
-------- -----
419,960 3.42
-------- -----
Utilities: Electric & Gas - 3.29%
Consolidated Edison Co. of New York, Inc. 400,000 11,600 .10
Detroit Edison Co. 1,600,000 47,200 .38
Eastern Utilities Associates 640,000 13,920 .11
Entergy Corp. 3,675,000 87,281 .71
General Public Utilities Corp. 1,157,200 33,414 .27
Houston Industries Inc. 1,200,000 52,500 .43
Long Island Lighting Co. 2,450,000 39,200 .32
NorAm Energy Corp. 1,652,300 11,360 .09
Pacific Gas and Electric Co. 2,355,200 69,478 .57
PECO Energy Co. 276,000 7,901 .07
Puget Sound Power & Light Co. 700,000 15,050 .12
Texas Utilities Co. 333,037 11,282 .09
Unicom Corp. 150,000 4,162 .03
-------- -----
404,348 3.29
-------- -----
Beverages & Tobacco - 2.42%
American Brands, Inc. 1,600,000 63,800 .52
Philip Morris Companies Inc. 2,500,000 179,062 1.46
RJR Nabisco Holdings Corp. 1,000,000 27,625 .22
UST Inc. 1,000,000 27,250 .22
-------- -----
297,737 2.42
-------- -----
Transportation: Airlines - 1.45%
Air Wis Services, Inc. 7.75% convertible
debentures 2010 $4,000,000 3,120 .03
Alaska Air Group, Inc. 0% convertible debentures 2006 $28,000,000 12,950 .11
AMR Corp. 6.125% convertible QUICS 2024 $70,000,000 72,800 .59
Delta Air Lines, Inc. $3.50 convertible preferred, Class
C 915,000 56,616
Delta Air Lines, Inc. 3.23% convertible debentures 2003 $20,000,000 20,050 .62
UAL Corp. preferred, Series B 400,000 12,350 .10
-------- -----
177,886 1.45
-------- -----
Chemicals - 1.36%
Dow Chemical Co. 500,000 37,063 .30
E.I. du Pont de Nemours and Co. 600,000 40,200 .33
Eastman Chemical Co. 495,000 31,680 .26
BFGoodrich Co. 465,000 25,226 .20
MONSANTO CO. 300,000 27,937 .23
RPM, Inc. 0% convertible debentures 2012 $12,500,000 5,219 .04
-------- -----
167,325 1.36
-------- -----
Forest Products & Paper - 1.25%
Federal Paper Board Co., Inc. 1,050,000 39,244 .32
James River Corp. of Virginia 550,000 18,356
James River Corp. of Virginia $1.55 DECS convertible
preferred 675,000 19,744 .31
Riverwood International Corp. 6.75% convertible
debentures 2003 (2) $4,000,000 5,560 .05
Union Camp Corp. 550,000 30,938 .25
WEYERHAEUSER CO. 851,900 39,826 .32
-------- -----
153,668 1.25
-------- -----
Real Estate - 1.20%
Kimco Realty Corp. 125,700 5,012 .04
Meditrust 1,050,000 35,438
Meditrust 7.50% convertible debentures 2001 $5,000,000 5,000 .33
SECURITY CAPITAL PACIFIC TRUST (FORMERLY PROPERTY
TRUST OF AMERICA) 730,000 13,231
SECURITY CAPITAL PACIFIC TRUST $1.75
CONVERTIBLE PREFERRED, SERIES A 600,000 13,500 .22
Security Capital Realty, Inc. (1)(2) 18,680 17,830
Security Capital Realty, Inc. 12.00% convertible
debentures 2014 (2) $14,150,100 12,912 .24
Weingarten Realty Investors 1,025,847 36,546 .30
Western Investment Real Estate Trust 714,900 8,400 .07
-------- -----
147,869 1.20
-------- -----
Automobiles - 1.04%
FORD MOTOR CO. 1,700,000 49,087
Ford Motor Co. $4.20 cumulative convertible preferred,
Series A 500,000 47,563 .78
General Motors Corp. 650,000 31,687 .26
-------- -----
128,337 1.04
-------- -----
Business & Public Services - 1.02%
Air & Water Technologies Corp. 8.00% convertible
debentures 2015 $9,900,000 8,167 .07
Ceridian Corp. $2.75 cumulative convertible
exchangeable preferred 170,500 15,729 .13
Deluxe Corp. 850,000 27,306 .22
Dun & Bradstreet Corp. 1,200,000 67,500 .55
Sanifill, Inc. 7.50% convertible debentures 2006 $6,000,000 6,900 .05
-------- -----
125,602 1.02
-------- -----
Financial Services - 0.79%
American Express Co. 750,000 28,875 .23
Beneficial Corp. 1,000,000 47,375 .39
First USA 6.25% PRIDES convertible preferred 500,000 20,438 .17
-------- -----
96,688 .79
-------- -----
Recreation & Other Consumer Products - 0.76%
Coleman Co., Inc. 0% convertible debentures 2013 $8,000,000 2,400 .02
Eastman Kodak Co. 600,000 34,575 .28
Hasbro, Inc. 6.00% convertible debentures 1998 $7,950,000 8,735 .07
Jostens, Inc. 2,074,000 47,183 .39
-------- -----
92,893 .76
-------- -----
Merchandising - 0.70%
Melville Corp. 900,000 32,400 .26
J.C. PENNEY CO., INC. 800,000 38,700 .32
SEARS, ROEBUCK AND CO. 448,895 14,645 .12
-------- -----
85,745 .70
-------- -----
Multi-Industry - 0.69%
Harsco Corp. 325,000 18,078 .15
Tenneco Inc. 1,356,266 67,135 .54
-------- -----
85,213 .69
-------- -----
Metals: Steel - 0.68%
Bethlehem Steel Corp. $3.50 convertible preferred (2) 250,000 11,437 .09
Carpenter Technology Corp. 250,000 18,438 .15
USX Corp. $3.25 convertible preferred 350,000 16,800
USX Corp. 5.75% convertible debentures 2001 $21,000,000 19,110
USX Corp. 0% convertible debentures 2005 $40,000,000 18,400 .44
-------- -----
84,185 .68
-------- -----
Broadcasting & Publishing - 0.64%
Comcast Corp. 1.125% convertible debentures 2007 $54,000,000 27,000 .22
Time Warner Inc. 0% convertible debentures 2012 $67,000,000 22,445
TIME WARNER INC. 0% CONVERTIBLE DEBENTURES 2013 $25,000,000 10,187 .26
Turner Broadcasting System, Inc. 0% convertible
debentures 2007 (2) $45,000,000 19,350 .16
-------- -----
78,982 .64
-------- -----
Food & Household Products - 0.60%
Clorox Co. 250,000 16,406 .13
ConAgra, Inc. $1.6875 convertible preferred, Class E 100,000 3,812 .03
GENERAL MILLS, INC. 450,000 23,513 .19
H.J. Heinz Co. 700,000 30,362 .25
-------- -----
74,093 .60
-------- -----
Industrial Components - 0.52%
Dana Corp. 700,000 20,650 .17
GOODYEAR TIRE & RUBBER CO. 1,000,000 43,375 .35
-------- -----
64,025 .52
-------- -----
Machinery & Engineering - 0.42%
Deere & Co. 350,000 31,456 .26
Thermo Electron Corp. 5.00% convertible debentures
2001 (2) $13,800,000 20,010 .16
-------- -----
51,466 .42
-------- -----
Metals: Nonferrous - 0.42%
Alumax Inc. $4.00 convertible preferred, Series A 140,000 20,020 .16
FREEPORT-MCMORAN COPPER & GOLD INC., CLASS B 299,991 8,100 .07
Inco Ltd. 5.75% convertible debentures 2004 $15,000,000 19,350 .16
Kaiser Aluminum Corp. 8.255% PRIDES convertible
preferred 260,000 3,705 .03
-------- -----
51,175 .42
-------- -----
Miscellaneous Materials & Commodities - 0.30%
FREEPORT-MCMORAN INC. (1) 427,500 2,137 .02
Olin Corp. 600,000 34,725 .28
-------- -----
36,862 .30
-------- -----
Transportation: Rail & Road - 0.23%
BURLINGTON NORTHERN INC. $3.125 CONVERTIBLE
PREFERRED, SERIES A 258,500 19,129 .16
Yellow Corp. 607,500 9,188 .07
-------- -----
28,317 .23
-------- -----
Energy Equipment - 0.18%
COOPER INDUSTRIES, INC. 600,000 22,425 .18
-------- -----
Textiles & Apparel - 0.15%
Brown Group, Inc. 730,000 18,159 .15
-------- -----
Leisure & Tourism - 0.12%
Topps Co., Inc. 2,345,000 14,656 .12
-------- -----
Electronic Components - 0.10%
Maxtor Corp. 5.75% convertible debentures 2012 $7,500,000 4,500 .04
SEAGATE TECHNOLOGY 5.00% CONVERTIBLE DEBENTURES 2003 (2) $4,365,000 7,562 .06
-------- -----
12,062 .10
-------- -----
Data Processing & Reproduction - 0.08%
Data General Corp. 7.75% convertible debentures 2001 $10,500,000 9,293 .08
-------- -----
Gold Mines - 0.08%
Newmont Mining Corp. $2.75 convertible preferred (2) 150,000 9,113 .08
-------- -----
MISCELLANEOUS: Equity-type securities
in initial period of acquisition 547,225 4.45
-------- -----
TOTAL EQUITY-TYPE SECURITIES (cost: $5,484,689,000) 6,613,736 53.81
-------- -----
- ---------------------------------- ---
Principal
Bonds & Notes Amount
(000)
- ---------------------------------- ---
Broadcasting, Advertising & Publishing - 4.59%
Adelphia Communications Corp. 12.50% 2002 $ 4,000 4,120
Adelphia Communications Corp. 9.50% 2004 (3) 18,798 15,790
Adelphia Communications Corp. 9.875% 2005 17,000 15,555 .29
American Media Operations, Inc. 11.625% 2004 14,250 15,176 .12
Bell Cablemedia PLC 0%/11.95% 2004 (4) 47,000 31,255 .25
Cablevision Industries Corp. 10.75% 2004 18,000 19,350
Cablevision Industries Corp. 9.875% 2013 15,500 16,895
Cablevision Industries Corp. 9.875% 2023 10,000 10,800 .39
Century Communications Corp. 9.50% 2000 3,500 3,561
Century Communications Corp. 9.75% 2002 8,500 8,712
Century Communications Corp. 11.875% 2003 4,400 4,686 .14
Comcast Corp. 10.25% 2001 11,100 11,932
COMCAST CORP. 9.375% 2005 4,000 4,055 .13
Continental Cablevision, Inc. 8.50% 2001 18,200 18,473
Continental Cablevision, Inc. 10.625% 2002 5,500 5,857
Continental Cablevision, Inc. 8.625% 2003 4,000 4,090
Continental Cablevision, Inc. 8.875% 2005 7,000 7,210
Continental Cablevision, Inc. 11.00% 2007 2,000 2,215
Continental Cablevision, Inc. 9.50% 2013 15,000 15,675 .44
Falcon Holding Group, LP 11.00% 2003 (3) 18,208 16,387 .13
HEARTLAND WIRELESS COMMUNICATIONS, INC. 13.00% 2003 (2) 3,000 3,180 .03
Infinity Broadcasting Corp. 10.375% 2002 10,000 10,650 .09
Insight Communications Co., LP 8.25% 2000 (5) 10,750 10,857 .09
Jones Intercable, Inc. 10.50% 2008 15,000 16,125 .13
Marvel Holdings Inc. 0% 1998 62,750 44,866 .37
News America Holdings Inc. 12.00% 2001 7,100 7,984
News America Holdings Inc. 8.50% 2005 7,500 8,052
News America Holdings Inc. 10.125% 2012 20,000 22,882
News America Holdings Inc. 8.45% 2034 7,500 8,004 .38
PEOPLE'S CHOICE TV CORP. 0%/13.125% 2004 (4) 4,000 1,920 .02
Rogers Communications Inc. 10.875% 2004 3,500 3,627 .03
Storer Communications, Inc. 10.00% 2003 6,000 6,000 .05
Summitt Communications 10.50% 2005 6,655 7,320 .06
Time Warner Inc. 7.45% 1998 10,000 10,059
Time Warner Inc. 9.625% 2002 28,000 31,312
Time Warner Inc. 10.15% 2012 12,000 13,874
TIME WARNER INC. 9.125% 2013 15,000 15,538 .57
TKR Cable I, Inc. 10.50% 2007 30,000 33,743 .27
United International Holdings, Inc. 0% 1999 19,750 11,653 .09
Univision Television Group, Inc. 11.75% 2001 17,000 18,275 .15
Viacom International Inc. 9.125% 1999 4,000 4,160
Viacom International Inc. 10.25% 2001 8,000 8,920 .10
Videotron Holdings PLC 0%/11.125% 2004 (4) 37,500 24,562 .20
YOUNG BROADCASTING INC. 10.125% 2005 (2) 8,000 8,200 .07
-------- -----
563,557 4.59
-------- -----
Telecommunications - 3.74%
Cellular, Inc. 0%/11.75% 2003 (4) 18,000 13,320 .11
CenCall Communications Corp. 0%/10.125% 2004 (4) 41,100 21,989 .18
Centennial Cellular Corp. 8.875% 2001 28,000 26,600
CENTENNIAL CELLULAR CORP. 10.125% 2005 1,500 1,506 .23
Comcast Cellular Corp., Series A, 0% 2000 42,000 30,870
Comcast Cellular Corp., Series B, 0% 2000 40,800 29,988 .49
COMMNET CELLULAR INC. 11.25% 2005 3,000 3,105 .02
Dial Call Communications, Inc. 0%/12.25% 2004 (4) 48,500 25,462 .21
GEOTEK COMMUNICATIONS, INC. 0%/15.00% 2005 (2)(4) 10,000 4,925 .04
Horizon Cellular Telephone Co., LP, Series B,
0%/11.375% 2000 (4) 15,000 12,000 .10
International CableTel Inc. 0%/10.875% 2003 (4) 20,075 13,450
INTERNATIONAL CABLETEL INC. 0%/12.75% 2005 (2)(4) 22,000 13,090 .22
MFS Communications Co., Inc. 0%/9.375% 2004 (4) 69,050 49,716 .40
MobileMedia Communications, Inc. 0%/10.50% 2003 (4) 14,500 9,715 .08
NEXTEL Communications, Inc. 0%/11.50% 2003 (4) 48,500 29,343
NEXTEL Communications, Inc. 0%/9.75% 2004 (4) 68,500 35,962 .53
Paging Network, Inc. 11.75% 2002 9,500 10,355 .08
PanAmSat, LP 9.75% 2000 15,300 15,835 .13
PriCellular Wireless Corp. 0%/14.00% 2001 (2)(4) 10,000 8,200 .07
PRONET, INC. 11.875% 2005 (2) 3,000 3,120 .03
Rogers Cantel Mobile Communications Inc. 10.75% 2001 46,000 47,955 .39
TCI COMMUNICATIONS, INC. 8.75% 2015 8,000 8,080 .07
Tele-Communications, Inc. 9.875% 1998 7,100 7,555
Tele-Communications, Inc. 10.125% 2001 5,000 5,605
Tele-Communications, Inc. 9.80% 2012 20,000 22,108
Tele-Communications, Inc. 9.25% 2023 10,000 10,161 .36
-------- -----
460,015 3.74
-------- -----
Forest Products & Paper - 1.83%
Container Corp. of America 9.75% 2003 69,025 70,751
Container Corp. of America 11.25% 2004 16,000 17,120 .72
Fort Howard Corp. 9.25% 2001 19,500 19,500
Fort Howard Corp. 8.25% 2002 4,500 4,275
Fort Howard Corp. 10.00% 2003 5,000 4,975
Fort Howard Corp. 9.00% 2006 18,500 17,159 .37
Grupo Industrial Durango, SA de CV 9.636% 1996 (2)(5) 7,500 6,994
Grupo Industrial Durango, SA de CV 12.00% 2001 2,500 2,175 .08
PT Indah Kiat Pulp & Paper Corp. 11.375% 1999 4,000 4,100
PT Indah Kiat Pulp & Paper Corp. 8.875% 2000 (2) 11,500 10,551
PT Indah Kiat Pulp & Paper Corp. 11.875% 2002 4,500 4,601 .15
PT Indorayon Yankee 9.125% 2000 4,500 4,129 .03
Klabin Fabricadora de Papel e Celulose SA 10.00% 2001 2,500 2,288 .02
Pacific Lumber Co. 10.50% 2003 1,500 1,402 .01
REPAP WISCONSIN 9.875% 2006 17,500 17,413 .14
Riverwood International Corp. 10.75% 2000 7,000 7,542
Riverwood International Corp., Series II, 10.75% 2000 2,000 2,155
Riverwood International Corp. 11.25% 2002 17,750 19,348 .24
Tjiwi Kimia International Finance Co. 13.25% 2001 7,750 8,254 .07
-------- -----
224,732 1.83
-------- -----
Energy Sources and Energy Equipment & Services - 1.61%
California Energy Co., Inc. 0%/10.25% 2004 (2)(4) 60,300 52,461
CALIFORNIA ENERGY CO., INC. 9.875% 2003 3,000 3,030 .45
DUAL DRILLING CO. 9.875% 2004 8,550 8,037 .06
FLORES & RUCKS, INC. 13.50% 2004 9,000 10,102 .08
Global Marine, Inc. 12.75% 1999 17,500 19,316 .16
MESA CAPITAL CORP. 0%/12.75% 1998 (4) 15,000 13,575 .11
Occidental Petroleum Corp. 9.25% 2019 11,400 13,310 .11
Oryx Energy Co. 9.50% 1999 16,000 16,880
Oryx Energy Co. 10.00% 1999 4,500 4,804
Oryx Energy Co. 10.00% 2001 2,000 2,170 .19
Subic Power Corp. 9.50% 2008 (2) 10,102 9,395 .08
TRANSTEXAS GAS CORP. 11.50% 2002 38,000 39,520 .32
Wilrig AS 11.25% 2004 5,500 5,693 .05
-------- -----
198,293 1.61
-------- -----
Utilities - Electric & Gas - 1.38%
BRIDAS CORP. 12.50% 1999 6,000 5,745 .05
CMS Energy Corp. 0%/9.50% 1997 (4) 3,000 2,955 .02
Korea Electric Power Corp. 7.75% 2013 5,000 4,913 .04
LONG ISLAND LIGHTING CO. 7.30% 1999 23,500 23,077
LONG ISLAND LIGHTING CO. 7.125% 2005 10,000 8,819
LONG ISLAND LIGHTING CO. 8.90% 2019 25,000 22,969
Long Island Lighting Co. 9.00% 2022 25,000 23,016
LONG ISLAND LIGHTING CO. 8.20% 2023 10,000 8,837
Long Island Lighting Co. 9.625% 2024 19,000 18,859 .86
Midland Cogeneration Venture LP 10.33% 2002 29,655 30,767
Midland Cogeneration Venture LP, Secured Lease
Obligation Bonds 10.33% 2002 13,871 14,391 .37
OHIO EDISON CO. 7.875% 2023 5,000 4,800 .04
-------- -----
169,148 1.38
-------- -----
Banking and Insurance - 1.37%
H.F. Ahmanson & Co. 9.875% 1999 3,500 3,856 .03
American Re Corp. 10.875% 2004 20,000 22,115 .18
Bank of Scotland 8.80% 2004 (2) 5,000 5,472 .04
BankAmerica Corp. 8.375% 2002 5,000 5,325 .04
BANKERS TRUST NEW YORK CORP. 6.00% 2008 5,000 4,344 .03
Capital One Bank 8.625% 1997 10,000 10,295
CAPITAL ONE BANK 8.33% 1997 10,000 10,240
CAPITAL ONE BANK 8.125% 1998 27,500 28,178 .39
Chevy Chase Savings Bank, F.S.B. 9.25% 2005 5,000 4,875 .04
CIGNA CORP. 6.375% 2006 6,000 5,432 .04
Citicorp 9.50% 2002 5,000 5,611 .05
Coast Federal Bank 13.00% 2002 3,500 4,008 .03
Coast Savings Financial, Inc. 10.00% 2000 6,500 6,792 .06
DIME BANCORP, INC. 10.50% 2005 4,000 4,340 .04
First Nationwide Bank 10.00% 2006 4,000 4,350 .04
Golden West Financial Corp. 10.25% 1997 2,250 2,387 .02
Manufacturers Hanover Corp. 8.50% 1999 3,295 3,478 .03
Midland American Capital 12.75% 2003 6,000 7,043 .06
New American Capital, Inc. 9.60% 1999 (2) 5,000 5,000 .04
Security Pacific Corp. 10.25% 2001 3,000 3,509
Security Pacific Corp. 11.00% 2001 10,500 12,424 .13
SFFED Corp. 11.20% 2004 (2) 10,000 10,325 .08
-------- -----
169,399 1.37
-------- -----
Transportation - 1.27%
American Airlines, pass-through certificates, 1991-A1,
9.71% 2007 (6) 4,622 5,165
AMR Corp. 10.00% 2001 3,000 3,329
AMR Corp. 9.00% 2012 10,500 11,042
AMR Corp. 9.20% 2012 5,000 5,284 .20
Delta Air Lines, Inc. 9.875% 1998 6,750 7,136
Delta Air Lines, Inc. 9.875% 2000 13,000 14,166
Delta Air Lines, Inc. 10.375% 2011 15,000 17,365
Delta Air Lines, Inc., pass-through certificates,
Series 1992-A2, 9.20% 2014 (6) 5,000 5,282
Delta Air Lines, Inc., pass-through certificates,
Series 1993-A2, 10.50% 2016 (6) 6,000 6,862 .42
Mc-Cuernavaca Trust 9.25% 2001 (2) 7,786 5,985 .05
Northwest Airlines, Inc. 12.0916% 2000 10,814 11,192
NWA Trust No. 2, Class D, 13.875% 2008 10,000 11,400 .18
SFP PIPELINE HOLDINGS, INC. 11.16% 2010 3,000 3,840 .03
United Air Lines, Inc. 9.00% 2003 18,000 18,708
United Air Lines, Inc. 8.39% 2011 7,500 7,650
United Air Lines, Inc. 10.67% 2004 14,000 16,174 .34
Viking Star Shipping Inc. 9.625% 2003 6,000 6,090 .05
-------- -----
156,670 1.27
-------- -----
Leisure & Tourism - 0.81%
Foodmaker, Inc. 9.25% 1999 16,750 15,578
Foodmaker, Inc. 9.75% 2002 7,300 6,205 .18
Four Seasons Hotels Inc. 9.125% 2000 (2) 2,000 1,960 .02
Harrah's Jazz Finance Corp. 14.25% 2001 21,250 21,356
HARRAH'S OPERATING CO. INC. 8.75% 2000 4,000 4,025
HARRAH'S OPERATING CO. INC. 10.875% 2002 5,000 5,388 .25
Kloster Cruise Ltd. 13.00% 2003 33,200 24,900 .20
Plitt Theatres, Inc. 10.875% 2004 20,000 20,050 .16
-------- -----
99,462 .81
-------- -----
Financial Services - 0.73%
Chrysler Financial Corp. 13.25% 1999 11,000 13,441 .11
Fairfax Financial Holdings Ltd. 7.75% 2003 9,750 9,550 .08
Ford Capital BV 10.125% 2000 5,500 6,242 .05
Ford Motor Credit Co. 8.875% 1996 2,500 2,565 .02
General Electric Capital Corp. 8.875% 2009 4,000 4,622 .04
General Motors Acceptance Corp. 7.875% 1997 10,000 10,231
General Motors Acceptance Corp. 7.00% 2000 3,000 3,023
General Motors Acceptance Corp. 9.625% 2001 30,000 33,754
General Motors Acceptance Corp. 8.75% 2005 5,000 5,497
General Motors Acceptance Corp. 8.875% 2010 500 563 .43
-------- -----
89,488 .73
-------- -----
Food Retailing and Food Products & Beverages - 0.61%
Allied Supermarkets Inc. 6.625% 1998 9,301 8,929 .07
Canandaigua Wine Co., Inc. 8.75% 2003 17,500 17,237 .14
Dr Pepper Bottling Co. of Texas 10.25% 2000 7,500 7,800 .06
Safeway Inc. 10.00% 2002 3,500 3,990 .03
Smith's Food & Drug Centers, Inc., pass-through
certificates, Series 94-A2, 8.64% 2012 (6) 8,000 8,220 .07
Star Markets Co., Inc. 13.00% 2004 (2) 9,750 9,945 .08
Stater Brothers Holdings Inc. 11.00% 2001 (2) 16,000 16,040 .13
Vons Companies, Inc. 9.625% 2002 3,000 3,173 .03
-------- -----
75,334 .61
-------- -----
General Retailing & Merchandising - 0.60%
AnnTaylor, Inc. 8.75% 2000 10,446 9,924 .08
Barnes & Noble, Inc. 11.875% 2003 23,500 26,026 .21
CompUSA Inc. 9.50% 2000 1,500 1,447 .01
Dayton Hudson Corp. 9.50% 2015 5,000 5,813 .05
Levitz Furniture Corp. 12.375% 1997 9,250 9,065 .07
Thrifty PayLess, Inc. 11.75% 2003 7,500 7,950
Thrifty PayLess, Inc. 12.25% 2004 2,500 2,600
THRIFTY PAYLESS, INC. 12.25% 2004 10,000 11,000 .18
-------- -----
73,825 .60
-------- -----
Business & Public Services - 0.54%
ADT OPERATIONS 9.25% 2003 7,000 7,175 .06
Federal Express Corp. 10.00% 1998 4,000 4,363
Federal Express Corp. 9.875% 2002 7,000 7,993
Federal Express Corp. 7.53% 2006 14,754 14,720 .22
Neodata Services, Inc. 0%/12.00% 2003 (4) 11,500 10,005 .08
PROTECTION ONE ALARM MONITORING, INC., UNITS
CONSISTING OF NOTES AND WARRANTS, 0%/13.625%
2005 (2)(4) 15,000 10,162 .08
TNT Transport (Euro) PLC/TNT (USA) Inc. 11.50% 2004 11,750 12,220 .10
-------- -----
66,638 .54
-------- -----
Metals: Steel & Nonferrous - 0.54%
Acme Metals Inc. 0%/13.50% 2004 (4) 10,500 8,085
Acme Metals Inc. 12.50% 2002 3,000 3,030 .10
AK STEEL CORP. 10.75% 2004 8,000 8,610 .07
Armco Inc. 11.375% 1999 4,950 5,160 .04
Ispat Mexicana 10.375% 2001 (2) 2,000 1,760
Ispat Mexicana, SA de CV, 10.375% 2001 4,000 3,520 .04
KAISER ALUMINUM AND CHEMICAL CORP. 9.875% 2002 5,000 5,050
Kaiser Aluminum and Chemical Corp. 12.75% 2003 7,000 7,753 .11
POHANG IRON & STEEL CO., LTD. 7.375% 2005 10,000 10,044 .08
UCAR Global Enterprises Inc. 12.00% 2005 (2) 7,000 7,700 .06
USX Corp. 9.625% 2003 5,000 5,541 .04
-------- -----
66,253 .54
-------- -----
Miscellaneous - 0.51%
Owens-Illinois, Inc. 11.00% 2003 6,000 6,615 .05
Samsung Electronics Co., Ltd. 8.50% 2002 (2) 22,500 23,934 .19
Tenneco Inc. 10.00% 1998 1,500 1,634
Tenneco Inc. 7.875% 2002 2,000 2,080 .03
Tyco Toys, Inc. 10.125% 2002 15,700 13,973 .12
Unisys Corp. 10.625% 1999 10,000 10,700 .09
WestPoint Stevens Inc. 8.75% 2001 4,000 3,980 .03
-------- -----
62,916 .51
-------- -----
Automobiles - 0.36%
General Motors Corp. 9.45% 2011 5,000 5,832
General Motors Corp. 8.80% 2021 35,000 38,674 .36
-------- -----
44,506 .36
-------- -----
Aerospace, Automotive and Machinery - 0.36%
Caterpillar Inc. 8.01% 2002 15,000 15,903 .13
Coltec Industries Inc 9.75% 1999 8,000 8,280
Coltec Industries Inc 9.75% 2000 8,500 8,797 .14
EXIDE CORP. 10.00% 2005 (2) 8,250 8,601 .07
MagneTek, Inc. 10.75% 1998 2,000 2,100 .02
-------- -----
43,681 .36
-------- -----
Real Estate - 0.29%
Beverly Finance Corp. 8.36% 2004 (2) 5,000 5,188 .04
ERP OPERATING LP 7.95% 2002 3,750 3,844 .03
B.F. Saul Real Estate Investment Trust 11.625% 2002 23,000 21,505 .18
Shopping Center Associates 6.75% 2004 (2) 5,000 4,787 .04
-------- -----
35,324 .29
-------- -----
Construction & Building Materials - 0.23%
BUILDING MATERIALS CORP. 0%/11.75% 2004 (4) 5,000 3,050 .03
M.D.C. Holdings, Inc. 11.125% 2003 10,000 9,000 .07
Tolmex, SA de CV 8.375% 2003 3,500 2,730 .02
TRIANGLE PACIFIC CORP. 10.50% 2003 3,000 3,075 .03
Del Webb Corp. 9.75% 2003 10,500 10,237 .08
-------- -----
28,092 .23
-------- -----
Collateralized Mortgage/Asset-Backed Obligations (6)
(excluding those issued by federal agencies) - 1.69%
BANCO NACIONAL DE MEXICO 0% 2002 (2) 6,500 6,500 .05
Bank of America 9.50% 2008 104 104 .00
CASE EQUIPMENT LOAN TRUST 1995-A 7.30% 2002 19,077 19,387 .16
Chase Manhattan Bank, NA, Series 1993-I, Class 2A5,
7.25% 2024 9,910 9,625 .08
Citicorp Mortgage Securities, Inc., Series 1992-20,
Class A3, 7.50% 2006 8,270 8,304 .07
CMC Securities Corp. I, Series 1993-E, Class S9,
6.50% 2008 2,801 2,627 .02
CSFB FINANCE CO. LTD. 7.00% 2005 (2)(5) 5,000 4,803 .04
ELECTRONIC TRANSFER MASTER TRUST 9.35% 2002 (2) 15,000 15,187 .12
GE Capital Mortgage Services, Inc., Series 94-2, Class
A15, 6.582% 2009 (7) 6,310 3,691 .03
Green Tree Financial Corp., Net Interest Margin Trust,
Series 1994-A, 6.90% 2004 3,640 3,602
Green Tree Financial Corp., Seller and Servicer
Manufactured Housing Contract, Series 1993-2, Class B,
8.00% 2018 14,000 13,877
GREEN TREE FINANCIAL CORP., SELLER AND SERVICER
MANUFACTURED HOUSING CONTRACT, SERIES 1995-1, CLASS A-3,
7.95% 06/15/25
7.95% 2025 5,000 5,184 .18
Jet Equipment Trust, Series 1994-A, Class B1, 10.91%
2006 (2) 6,989 7,776
JET EQUIPMENT TRUST, SERIES 1995-B, CERTIFICATES,
10.91% 2014 (2) 4,750 4,780
JET EQUIPMENT TRUST, SERIES 1995-A, CLASS B, 8.64%
2015 (2) 15,000 15,750
JET EQUIPMENT TRUST, SERIES 1995-A, CLASS C, 10.69%
2015 (2) 5,000 5,419
JET EQUIPMENT TRUST, SERIES 1995-B, CLASS A, 7.63%
2015 (2) 14,500 14,554
JET EQUIPMENT TRUST, SERIES 1995-B, CLASS C, 9.71%
2015 (2) 5,500 5,555 .44
Merrill Lynch Mortgage Investors, Inc., Seller
Manufactured Housing Contract, Series 1992-B, Class A2,
8.05% 2012 2,500 2,544 .02
Prudential Home Mortgage Securities Co., Inc.,
Series 1992-37, Class A6, 7.00% 2022 8,000 7,987 .07
Resolution Trust Corp., Series 1992-CHF, Class E,
8.25% 2020 11,016 10,369
Resolution Trust Corp., Series 1993-C1, Class D,
9.45% 2024 6,142 6,288
Resolution Trust Corp., Series 1993-C1, Class E,
9.50% 2024 2,528 2,481
Resolution Trust Corp., Series 1993-C2, Class C,
8.00% 2025 3,000 3,026
Resolution Trust Corp., Series 1993-C2, Class D,
8.50% 2025 3,290 3,339
Resolution Trust Corp., Series 1993-C2, Class E,
8.50% 2025 1,284 1,268 .23
SKW II REAL ESTATE LP, CLASS A, 6.45% 2002 (2) 7,780 7,780 .06
Standard Credit Card Master Trust I, credit card
participation certificates, Series 1991-1A, 8.50% 1997 4,000 4,079
Standard Credit Card Master Trust I, credit card
participation certificates, Series 1991-4A, 8.00% 1997 5,000 5,094
Standard Credit Card Master Trust I, credit card
participation certificates, Series 1994-2A, 7.25% 2008 5,000 5,062 .11
USWFS Manufactured Housing Contract, Series 1990-A,
9.05% 2010 (2) 1,242 1,252 .01
-------- -----
207,294 1.69
-------- -----
Federal Agency Obligations-Mortgage Pass-Throughs (6)
- 2.94%
Federal Home Loan Mortgage Corp. 8.50% 2008 604 624
Federal Home Loan Mortgage Corp. 8.50% 2020 12,198 12,572
Federal Home Loan Mortgage Corp. 9.00% 2016 3,086 3,211
Federal Home Loan Mortgage Corp. 9.00% 2021 2,482 2,582
Federal Home Loan Mortgage Corp. 10.00% 2019 125 135
Federal Home Loan Mortgage Corp. 11.50% 2000 18 19 .16
Federal National Mortgage Assn. 7.50% 2007-2023 31,210 31,494
Federal National Mortgage Assn. 8.00% 2009-2013 6,426 6,567
Federal National Mortgage Assn. 8.50% 2014-2023 4,014 4,135
Federal National Mortgage Assn. 9.00% 2008-2025 8,774 9,134
FEDERAL NATIONAL MORTGAGE ASSN. 10.00% 2020 4,145 4,502 .46
Government National Mortgage Assn. 5.50% 2023-2024 (5) 90,015 88,545
Government National Mortgage Assn. 6.00% 2017-2024 (5) 12,565 12,495
Government National Mortgage Assn. 6.125% 2022 (5) 14,738 14,834
Government National Mortgage Assn. 6.50% 2024 1,974 1,875
Government National Mortgage Assn. 6.50% 2024 (5) 3,961 3,976
Government National Mortgage Assn. 7.00% 2008-2023 34,018 33,430
Government National Mortgage Assn. 7.50% 2017-2024 36,749 36,726
Government National Mortgage Assn. 8.00% 2017 7,137 7,280
Government National Mortgage Assn. 8.50% 2017-2025 41,812 43,345
Government National Mortgage Assn. 9.00% 2008-2025 18,852 19,806
Government National Mortgage Assn. 9.50% 2009-2025 19,309 20,588
Government National Mortgage Assn. 10.00% 2016-2019 2,167 2,358
Government National Mortgage Assn. 10.50% 2018-2019 335 369
Government National Mortgage Assn. 11.00% 2015 150 167 2.32
-------- -----
360,769 2.94
-------- -----
Federal Agency Obligations-Collateralized Mortgage
Obligations (7) - 0.14%
Federal Home Loan Mortgage Corp., Series 1625, Class SC,
4.703% 2008 2,140 1,273
Federal Home Loan Mortgage Corp., Series 1587, Class SL,
7.511% 2008 3,958 2,963
Federal Home Loan Mortgage Corp., Series 1475, Class SA,
8.035% 2008 2,168 1,725
Federal Home Loan Mortgage Corp., Series 1607, Class SA,
6.536% 2013 5,287 3,374
Federal Home Loan Mortgage Corp., Series 1673, Class SA,
4.445% 2024 6,000 2,786 .10
Federal National Mortgage Assn., Series 1993-234,
Class SC, 4.977% 2008 8,754 4,583
Federal National Mortgage Assn., Series 1993-G19,
Class SJ, 0% 2023 262 136 .04
-------- -----
16,840 .14
-------- -----
Other Federal Agency Obligations - 0.76%
FEDERAL HOME LOAN BANK 7.28% 2000 6,000 6,007
Federal Home Loan Bank 6.41% 2003 10,000 9,634
Federal Home Loan Bank 6.16% 2004 13,000 12,358
Federal Home Loan Bank 6.27% 2004 6,000 5,735 .28
Federal Home Loan Mortgage Corp. 5.74% 2003 5,000 4,677
Federal Home Loan Mortgage Corp. 6.39% 2003 7,750 7,740
Federal Home Loan Mortgage Corp. 6.44% 2003 3,000 2,905
Federal Home Loan Mortgage Corp. 6.50% 2003 5,000 4,855
Federal Home Loan Mortgage Corp. 6.59% 2003 6,000 5,834
Federal Home Loan Mortgage Corp. 6.19% 2004 10,750 10,213
Federal Home Loan Mortgage Corp. 6.27% 2004 5,450 5,208 .33
Federal National Mortgage Assn. 6.30% 1997 10,000 9,998 .08
FNSM Principal STRIPS 0%/8.62% 2022 (4) 10,000 8,066 .07
-------- -----
93,230 .76
-------- -----
Governments and Governmental Authorities - 0.80%
Argentina Bocon 7.306% 2001 (3)(5) 20,000 10,889
Argentina (Republic of) 8.375% 2003 13,000 9,913
Argentina (Republic of) Eurobond Series L, 7.312% 2005
(5) 33,000 20,254
Argentina (Republic of) Eurobond Series L, 5.00% 2023 (5) 42,250 19,646 .50
BRAZIL (REPUBLIC OF) DEBT CONVERSION BOND 7.312%
2012 (5) 2,000 1,047 .01
British Columbia Hydro & Power Authority 12.50% 2014 10,000 12,066 .10
Italy (Republic of) 6.875% 2023 10,000 8,734 .07
Ontario (Province of) 7.75% 2002 2,500 2,624
Ontario (Province of) 15.25% 2012 5,000 6,093 .07
Petroleo Brasileiro SA-PETROBRAS 10.212% 1998 (5) 2,500 2,500 .02
POLAND (REPUBLIC OF) 7.75% 2000 (2) 4,250 4,250 .03
United Mexican States Government 6.25% Eurobonds 2019 1,000 603 .00
-------- -----
98,619 .80
-------- -----
Floating Rate Eurodollar Notes (Undated) (5) - 0.28%
Bank of Nova Scotia 6.562% 10,000 7,838 .06
Canadian Imperial Bank of Commerce 6.625% 10,000 7,925 .07
Financiere Credit Suisse-First Boston 6.125% 2,000 1,560 .01
Gentra Inc. 6.65% 2,125 2,120 .02
Midland Bank 6.125% 5,000 4,075 .03
Standard Chartered Bank 5.812% 15,000 11,231 .09
-------- -----
34,749 .28
-------- -----
U.S. Treasury Obligations - 12.51%
7.25% August 1996 60,000 60,881 .50
8.00% October 1996 4,000 4,100 .03
7.25% November 1996 75,000 76,324 .62
8.00% January 1997 100,000 103,031 .84
6.75% February 1997 4,000 4,055 .03
6.875% April 1997 60,000 61,003 .50
8.50% April 1997 40,000 41,681 .34
8.50% May 1997 6,000 6,262 .05
8.50% July 1997 4,000 4,189 .03
5.625% August 1997 100,000 99,422 .81
8.625% August 1997 75,000 78,856 .64
5.50% September 1997 75,000 74,379 .61
5.75% October 1997 100,000 99,609 .81
8.75% October 1997 35,000 36,996 .30
6.00% November 1997 60,000 60,075 .49
7.875% January 1998 50,000 52,133 .42
8.125% February 1998 40,000 41,975 .34
9.25% August 1998 45,000 48,951 .40
8.875% February 1999 12,000 13,048 .11
9.125% May 1999 10,000 10,997 .09
6.75% June 1999 91,000 92,863 .76
6.875% August 1999 78,000 79,950 .65
8.75% August 2000 22,500 24,954 .20
8.50% November 2000 10,000 11,052 .09
7.75% February 2001 70,000 74,955 .61
11.625% November 2002 18,000 23,425 .19
10.75% February 2003 19,500 24,491 .20
11.625% November 2004 30,000 40,598 .33
10.75% August 2005 9,000 11,758 .10
10.375% November 2009 7,100 8,933 .07
12.75% November 2010 9,500 13,793 .11
14.00% November 2011 3,500 5,519 .04
10.375% November 2012 15,000 19,477 .16
8.875% August 2017 18,500 22,547 .18
7.125% February 2023 102,500 105,111 .86
-------- -----
1,537,393 12.51
-------- -----
TOTAL BONDS & NOTES (cost: $4,969,823,000) 4,976,227 40.49
-------- -----
- ----------------------------------
Short-Term Securities
- ----------------------------------
Corporate Short-Term Notes - 2.24%
THE CIT GROUP HOLDINGS, INC. 5.71%-5.95%
DUE 8/11-8/25/95 50,000 49,856 .41
JOHN DEERE CAPITAL CORP. 5.72% DUE 8/8/95 33,800 33,757 .27
E.I. DU PONT DE NEMOURS AND CO. 5.68% DUE 9/8/95 14,900 14,808 .12
KIMBERLY-CLARK CORP. 5.63% DUE 9/7/95 10,000 9,941 .08
ELI LILLY AND CO. 5.65%-5.88% DUE 8/21-9/18/95 23,200 23,098 .19
National Rural Utilities Cooperative Finance Corp.
5.72% due 8/17/95 30,000 29,919 .24
J.C. Penney Funding Corp. 5.69%-5.92% due 8/15-8/24/95 29,180 29,079 .24
PEPSICO, INC. 5.70%-5.91% DUE 8/10-8/29/95 37,700 37,574 .31
US WEST COMMUNICATIONS 5.62% DUE 10/11/95 15,000 14,830 .12
XEROX CORP. 5.73%-5.94% DUE 8/3-8/30/95 32,400 32,331 .26
-------- -----
275,193 2.24
-------- -----
Federal Agency Short-Term Obligations - 0.20%
Federal Home Loan Mortgage Corp.
5.58%-5.85% due 8/4-10/30/95 24,000 23,859 .19
Federal National Mortgage Assn. 7.00% due 2/10/96 1,000 1,006 .01
-------- -----
24,865 .20
-------- -----
U.S. Treasury Short-Term Securities - 2.15%
8.50% August 1995 53,500 53,550 .44
7.50% January 1996 60,000 60,515 .49
7.875% February 1996 50,000 50,555 .41
8.875% February 1996 19,000 19,312 .16
7.375% May 1996 75,000 75,914 .62
7.875% July 1996 4,000 4,078 .03
-------- -----
263,924 2.15
-------- -----
TOTAL SHORT-TERM SECURITIES (cost: $570,234,000) 563,982 4.59
-------- -----
TOTAL INVESTMENT SECURITIES (cost: $11,024,746,000) 12,153,945 98.89
Excess of cash and receivables over payables 136,212 1.11
-------- -----
NET ASSETS $12,290,157 100.00%
========== ======
</TABLE>
(1) Non-income-producing securities.
(2) Purchased in a private placement transaction; resale to the public may
require registration or may extend only to qualified institutional buyers.
(3) Payment in kind. The issuer has the option of paying additional securities
in lieu of cash.
(4) Represents a zero coupon bond which will convert to an interest-bearing
security at a later date.
(5) Coupon rates may change periodically.
(6) Pass-through securities backed by a pool of mortgages or other loans on
which principal payments are periodically made. Therefore, the effective
maturity of these securities is shorter than the stated maturity.
(7) Represents an inverse floater, which is a floating rate note whose interest
rate moves in the opposite direction of prevailing interest rates.
See Notes to Financial Statements
- ----------------------------
Equity-type securities
appearing in the portfolio
since January 31, 1995
- ----------------------------
Allstate
Bancorp Hawaii
Burlington Northern
Chemical Banking
Cooper Industries
First Fidelity
First Security
First Tennessee National
General Mills
Goodyear Tire & Rubber
Monsanto
National City
J.C. Penney
SAFECO
Seagate Technology
Weyerhaeuser
- ------------------------------
Equity-type securities
eliminated from the portfolio
since January 31, 1995
- ------------------------------
Bank of Montreal
BCE
Canadian Imperial Bank of Commerce
Carolina Power & Light
Consolidated Freightways
Dexter
Household International
MBNA
National Semiconductor
National Service Industries
Phelps Dodge
Republic New York
Staples
Tandy
United Technologies
Xerox
*****************
The Income Fund of America
Financial Statements
<TABLE>
<CAPTION>
Statement of Assets and Liabilities (dollars in
July 31, 1995 thousands)
- ---------------------------------------- --------- ------------------
<S> <C> <C>
ASSETS:
Investment securities at market
(cost: $11,024,746) $12,153,945
Cash 1,282
Receivables for-
Sales of investments $ 35,360
Sales of fund's shares 20,017
Dividends and accrued interest 128,816 184,193
--------- ------------------
12,339,420
LIABILITIES:
Payables for-
Purchases of investments 33,037
Repurchases of fund's shares 8,772
Management services 3,193
Accrued expenses 4,261 49,263
--------- ------------------
NET ASSETS AT JULY 31, 1995-
Equivalent to $14.92 per share on
823,830,743 shares of $1 par value
capital stock outstanding (authorized
capital stock--1,200,000,000 shares) $12,290,157
=================
Statement of Operations (dollars in
for the year ended July 31, 1995 thousands)
- ----------------------------------------- --------- ------------------
INVESTMENT INCOME:
Income:
Dividends $259,485
Interest 492,564 $752,049
---------
Expenses:
Management services fee 35,698
Distribution expenses 25,061
Transfer agent fee 7,211
Reports to shareholders 729
Registration statement and
prospectus 960
Postage, stationery and supplies 1,577
Directors' fees 150
Auditing and legal fees 51
Custodian fee 260
Taxes other than federal income tax 2
Other expenses 53 71,752
--------- ----------------
Net investment income 680,297
-----------------
REALIZED GAIN AND UNREALIZED
APPRECIATION ON INVESTMENTS:
Net realized gain 50,302
Net increase in unrealized appreciation on
investments:
Beginning of year 134,366
End of year 1,129,199 994,833
--------- ----------------
Net realized gain and unrealized
appreciation on investments 1,045,135
---------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $1,725,432
================
- ---------------------------------------- ----------------
Statement of Changes in Net Assets (dollars in
thousands)
- ----------------------------------------- ------------------
Year ended
July 31
1995 1994
----------------- ----------------
OPERATIONS:
Net investment income $ 680,297 $ 599,418
Net realized gain on investments 50,302 127,926
Net increase (decrease) in unrealized
appreciation on investments 994,833 (563,497)
--------- ---------
Net increase in net assets
resulting from operations 1,725,432 163,847
--------- ---------
DIVIDENDS AND DISTRIBUTIONS
PAID TO SHAREHOLDERS:
Dividends from net investment income (598,609) (590,832)
Distributions from net realized
gain on investments (47,119) (242,204)
--------- ---------
Total dividends and distributions (645,728) (833,036)
--------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
118,485,003 and 194,658,239
shares, respectively 1,645,595 2,785,416
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions of
net realized gain on investments:
42,687,032 and 47,830,913
shares, respectively 586,118 679,271
Cost of shares repurchased:
112,581,008 and 92,301,774
shares, respectively (1,558,083) (1,303,690)
--------- ---------
Net increase in net assets
resulting from capital share
transactions 673,630 2,160,997
--------- ---------
TOTAL INCREASE IN NET ASSETS 1,753,334 1,491,808
NET ASSETS:
Beginning of year 10,536,823 9,045,015
--------- ---------
End of year (including undistributed
net investment income: $110,419
and $28,731, respectively) $12,290,157 $10,536,823
=========== =================
</TABLE>
See Notes to Financial Statements
Notes to Financial Statements
1. 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 following paragraphs summarize the significant
accounting policies consistently followed by the fund in the preparation of its
financial statements:
Equity-type securities are stated at market value based upon closing sales
prices reported on recognized securities exchanges (or reported on the NASDAQ
national market) on the last business day of the year or, for listed securities
having no sales reported, upon last-reported bid prices on that date.
Securities traded in the over-the-counter market are valued at the last
available sale price prior to the time of valuation or, lacking any sales, at
the last reported bid price.
Bonds and notes are valued at prices obtained from a bond-pricing service
provided by a major dealer in bonds, 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 of their representative quoted bid
and asked prices or, if such prices are not available, at prices for securities
of comparable maturity, quality, and type.
Short-term securities with original or remaining maturities in excess of 60
days are valued at the mean of their quoted bid and asked prices. Short-term
securities with 60 days or less to maturity are valued at amortized cost, which
approximates market value. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by the
Valuation Committee of the Board of Directors.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses from securities transactions are reported on an identified cost
basis. Dividend and interest income is reported on the accrual basis.
Discounts on securities purchased are amortized over the life of the respective
securities. The fund does not amortize premiums on securities purchased.
Dividends and distributions paid to shareholders are recorded on the
ex-dividend date.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $260,000 includes $57,000 that was paid by these credits
rather than in cash.
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision
is required.
As of July 31, 1995, net unrealized appreciation on investments for
federal income tax purposes aggregated $1,129,273,000, of which $1,315,988,000
related to appreciated securities and $186,715,000 related to depreciated
securities. During the year ended July 31, 1995, the fund realized, on a tax
basis, a net capital gain of $50,310,000 on securities transactions. The cost
of portfolio securities for federal income tax purposes was $11,024,672,000 at
July 31, 1995.
3. The fee of $35,698,000 for management services was paid pursuant to an
agreement with Capital Research and Management Company (CRMC), with which
certain officers and Directors of the fund are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily, based
on an annual rate of 0.24% of the first $1 billion of average net assets; 0.20%
of such assets in excess of $1 billion but not exceeding $2 billion; 0.18% of
such assets in excess of $2 billion but not exceeding $3 billion; 0.165% of
such assets in excess of $3 billion but not exceeding $5 billion; 0.155% of
such assets in excess of $5 billion but not exceeding $8 billion; and 0.15% of
such assets in excess of $8 billion; plus 2.25% of monthly gross investment
income.
Pursuant to a Plan of Distribution, the fund may expend up to 0.25% of its
average net assets annually for any activities primarily intended to result in
sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the fund's Board of Directors. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the year ended July 31, 1995,
distribution expenses under the Plan were $25,061,000. As of July 31, 1995,
accrued and unpaid distribution expenses were $4,105,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $7,211,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $7,246,000 (after
allowances to dealers) as its portion of the sales charges paid by purchasers
of the fund's shares. Such sales charges are not an expense of the fund and,
hence, are not reflected in the accompanying statement of operations.
Directors of the fund who are unaffiliated with CRMC may elect to defer
part or all of the fees earned for services as members of the Board. Amounts
deferred are not funded and are general unsecured liabilities of the fund. As
of July 31, 1995, aggregate amounts deferred were $111,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Directors and officers 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.
4. As of July 31, 1995, accumulated undistributed net realized gain on
investments was $47,534,000 and additional paid-in capital was $10,179,174,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $3,377,195,000 and $2,813,332,000, respectively,
during the year ended July 31,1995.
Per-Share Data and Ratios
<TABLE>
<CAPTION>
Year
ended
July 31
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year $13.59 $14.47 $13.94 $12.54 $12.11
------- ------- ------- ------- -------
Income from Investment
Operations:
Net investment income .85 .83 .85 .85 .86
Net realized and unrealized
gain (loss) on investments 1.29 (.53) .74 1.48 .53
------- ------- ------- ------- -------
Total income from
investment operations 2.14 .30 1.59 2.33 1.39
------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment
income (.75) (.83) (.84) (.85) (.89)
Distributions from net
realized gains (.06) (.35) (.22) (.08) (.07)
------- ------- ------- ------- -------
Total distributions (.81) (1.18) (1.06) (.93) (.96)
------- ------- ------- ------- -------
Net Asset Value, End of Year $14.92 $13.59 $14.47 $13.94 $12.54
======= ======= ======= ======= =======
Total Return /1/ 16.42% 1.98% 11.88% 19.16% 12.24%
Ratios/Supplemental Data:
Net assets, end of year (in
millions) $12,290 $10,537 $9,045 $5,121 $2,771
Ratio of expenses to average
net assets .65% .63% .62% .66% .73%
Ratio of net income to average
net assets 6.12% 5.92% 6.05% 6.40% 7.23%
Portfolio turnover rate 26.26% 26.42% 29.18% 22.71% 23.35%
</TABLE>
/1/ This was calculated without deducting a sales charge. The maximum sales
charge is 5.75% of the fund's offering price.
Independent Auditors' Report
To the Board of Directors and Shareholders of
The Income Fund of America, Inc.:
We have audited the accompanying statement of assets and liabilities of
The Income Fund of America, Inc., including the schedule of portfolio
investments as of July 31, 1995, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the per-share data and ratios for each of
the five years in the period then ended. These financial statements and the
per-share data and ratios are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and the
per-share data and ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
per-share data and ratios are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at July 31, 1995 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and per-share data and ratios
referred to above present fairly, in all material respects, the financial
position of the Income Fund of America, Inc. as of July 31, 1995, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the per-share data and
ratios for each of the five years in the period then ended, in conformity with
generally accepted accounting principles.
/s/Deloitte & Touche LLP
Los Angeles, California
August 23, 1995
TAX INFORMATION (UNAUDITED)
Corporate shareholders may deduct up to 70% of qualifying dividends
received during the year. For purposes of computing this exclusion, 38% of the
dividends paid by the fund from net investment income represents qualifying
dividends.
Certain states may exempt from income taxation a portion of the dividends
paid from net investment income if derived from direct U.S. Treasury
obligations. For purposes of computing this exclusion, 20% of the dividends
paid by the fund from net investment income was derived from interest on direct
U.S. Treasury obligations.
In January 1996 we will provide you information on distributions paid
during the calendar year to help you in completing your 1995 income tax
returns. Shareholders should consult their own tax advisors.
The Income Fund Of America
Board of Directors
ROBERT A. FOX, Livingston, California
President And Chief Executive Officer, Foster Farms Inc.
ROBERTA L. HAZARD, McLean, Virginia
Rear Admiral, U.S. Navy (Retired)
E.T. HINSHAW, JR., Newport Beach, California
Private investor; former Yachting Commissioner, Los Angeles Olympic Organizing
Committee
RICHARD H.M. HOLMES, Hillsborough, California
Retired; former Vice President, Capital Research and Management Company
LEONADE D. JONES, Washington, D.C.
Treasurer, The Washington Post Company
JOHN G. MCDONALD, Stanford, California
The IBJ Professor of Finance, Graduate School of Business, Stanford University
THEODORE D. NIERENBERG, Armonk, New York
Private investor; former President, Dansk International Designs, Ltd.
JAMES W. RATZLAFF, San Francisco, California
Vice Chairman of the Board, Capital Research and Management Company
HENRY E. RIGGS, Claremont, California
President and Professor of Engineering, Harvey Mudd College
WALTER P. STERN, New York, New York
Chairman of the Board of the Fund
Chairman of the Board, Capital Group International, Inc.
PATRICIA K. WOOLF, Princeton, New Jersey
Private Investor; lecturer, Department of Molecular Biology, Princeton
University
Other Officers
GEORGE A. MILLER, San Francisco, California
President of the Fund
Senior Vice President and Director, Capital Research And Management Company
STEPHEN E. BEPLER, New York, New York
Senior Vice President of the fund
Senior Vice President and Director, Capital Research Company
ABNER D. GOLDSTINE, Los Angeles, California
Senior Vice President of the fund
Senior Vice President and Director, Capital Research And Management Company
PAUL G. HAAGA, JR., Los Angeles, California
Senior Vice President of the fund
Senior Vice President and Director, Capital Research and Management Company
RICHARD T. SCHOTTE, Los Angeles, California
Senior Vice President of the fund
Senior Vice President, Capital Research and Management Company
STEVEN N. KEARSLEY, Los Angeles, California
Vice President of the fund
Vice President and Treasurer, Capital Research and Management Company
JANET A. MCKINLEY, New York, New York
Vice President of the fund
Senior Vice President, Capital Research Company
DINA N. PERRY, Washington, D.C.
Vice President of the fund
Vice President, Capital Research and Management Company
JOHN H. SMET, Los Angeles, California
Vice President of the fund
Vice President, Capital Research and Management Company
PATRICK F. QUAN, San Francisco, California
Secretary of the fund
Vice President - Fund Business Management Group,
Capital Research and Management Company
MARY C. CREMIN, Los Angeles, California
Treasurer of the fund
Senior Vice President - Fund Business Management Group,
Capital Research and Management Company
R. MARCIA GOULD, Los Angeles, California
Assistant Treasurer of the fund
Vice President - Fund Business Management Group,
Capital Research and Management Company
Office of the Fund
Four Embarcadero Center, Suite 1800
Mailing Address: P.O. Box 7650
San Francisco, California 94120-7650
Investment Adviser
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92621-5804
Transfer Agent for
Shareholder Accounts
American Funds Service Company
P.O. Box 2205
Brea, California 92622-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
Custodian of Assets
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081-0001
Counsel
Morrison & Foerster
345 California Street
San Francisco, California 94104-2675
Independent Auditors
Deloitte & Touche LLP
1000 Wilshire Boulevard
Los Angeles, California 90017-2472
Principal Underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, PLEASE
CONTACT YOUR SECURITIES DEALER OR FINANCIAL PLANNER, OR CALL THE FUND'S
TRANSFER AGENT, TOLL-FREE, AT 800/421-0180.
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 SEPTEMBER 30, 1995, THIS REPORT MUST BE ACCOMPANIED BY AN
AMERICAN FUNDS GROUP STATISTICAL UPDATE FOR THE MOST RECENTLY COMPLETED
CALENDAR QUARTER.
Litho in USA BDA/AL/2685
Lit. No. IFA-011-0995
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