THE INCOME FUND OF AMERICA
SEMI-ANNUAL REPORT
FOR THE SIX MONTHS ENDED JANUARY 31, 1997
[The American Funds Group(R)]
[cover: keyhole-shaped, abstract drawing of workplace]
THE INCOME FUND OF AMERICA(R)
Seeks current income while secondarily striving for capital growth through
investments in stocks and fixed-income securities.
[chart]
12-MONTH DIVIDEND RATES FOR IFA
Compared with the average of equity-income funds and
Standard & Poor's 500 Stock Composite Index.
<TABLE>
<CAPTION>
Average of
The Income Fund equity-income
Date of America funds S&P 500
<S> <C> <C> <C>
01/31/92 6.33 3.97 2.96
07/31/92 6.05 3.69 2.89
01/31/93 6.44 3.37 2.83
07/31/93 6.19 3.08 2.79
01/31/94 5.56 2.87 2.64
07/31/94 6.06 2.96 2.80
01/31/95 6.14 3.08 2.81
07/31/95 5.55 2.82 2.41
01/31/96 5.07 2.48 2.18
07/31/96 5.19 2.42 2.28
01/31/97 5.09 2.04 1.89
</TABLE>
All numbers calculated by Lipper Analytical Services.
The 12-month dividend rate is calculated by taking the total of the trailing 12
months' dividends and dividing by the month-end net asset value adjusted for
capital gains.
[end chart]
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:
In a period of historically low dividend yields on stocks, The Income Fund of
America continued to meet its objective of providing well-above-average income
to shareholders for the six months ended January 31, 1997. It also met its
secondary objective of capital growth by producing a strong total return -
14.7% with dividends reinvested.
As of January 31, 1997, IFA's dividend rate was 5.5% on an annual basis - more
than double the average annual rate of 2.1% for the 162 equity-income funds
tracked by Lipper Analytical Services. It was also more than double the 1.9%
annual dividend rate of the U.S. stock market, as measured by the unmanaged
Standard & Poor's 500 Composite Index. As you can see from the chart at the
left, the fund's 12-month dividend rate has far outpaced both of these
benchmarks over the past five years. Carefully selected investments in stocks
that provide above-average yields, in convertible securities and in
investment-grade and high-yield bonds are the keys to the fund's high-income
strategy.
IFA's 14.7% total return for the period compared with a gain of 24.2% for the
S&P 500 and a 4.9% increase in the Lehman Brothers Aggregate Bond Index. Since
the fund invests in a mix of stocks and bonds, its results often fall between
those two unmanaged indexes. This is particularly true during unusually strong
stock market advances because the fund buys stocks that provide
greater-than-average income. As a result, the fund did not have a significant
position in technology stocks (which showed strong gains in the recent period)
because most technology companies provide low, if any, income.
RESILIENCE IN DOWN MARKETS BUILT LONG-TERM RECORD
Over the long run, however, IFA's cumulative total return has kept pace with
the S&P 500. For the slightly more than 23 years that the fund has been managed
by Capital Research and Management Company, its average annual compound total
return is 14.0%, compared with 13.9% for the S&P 500. IFA outpaced the relevant
bond indexes by a much wider margin. Given the fund's income orientation, we
feel this is quite an accomplishment.
Equally important, IFA has helped preserve shareholders' capital, holding up
well during the four major extended equity market declines of 10% or more
during its lifetime. The above-average dividend yield of the companies in IFA's
portfolio and the fund's significant bond investments have helped it show
resilience in market declines. Here are some comparisons of how IFA and the S&P
500 fared in bear markets (assuming all distributions were reinvested for both
the index and the fund):
- - In the period September 21, 1976 to March 6, 1978, the S&P 500 fell 13.4%.
IFA's total return increased 1.9%.
- - From November 28, 1980 to August 12, 1982, the S&P 500 declined 20.0%. In
contrast, IFA's total return increased 19.0%.
- - From August 25 to December 4, 1987, which included the severe market break
of October 19, the S&P 500 fell 32.4%. IFA declined 13.6%.
- - In the decline of July 16 to October 11, 1990, which was triggered by Iraq's
invasion of Kuwait, the S&P 500 was down 19.2%. IFA declined 10.2%.
While we cannot promise that the fund will provide this sort of resilience in
future down markets, this goal remains very important to us.
FUND INCREASED OVERSEAS INVESTMENTS
At the end of January this year, 63.6% of the fund's total assets were invested
in equity-type securities, 30.2% in corporate and government bonds and 6.2% in
cash and equivalents. The portfolio continues to have a large portion in bonds
and cash because of our cautious outlook on the stock market and our focus on
the fund's income requirement.
Last year the fund's Board of Directors authorized it to invest up to 10% of
assets in non-U.S. equity securities. As of the end of January 1997, 7.9% of
the portfolio was invested in the equities of non-U.S. companies, up from 4.0%
at the end of July 1996. Our non-U.S. investments include such large, stable
companies as British Telecom, Glaxo Wellcome and Hongkong Electric. Greater
flexibility to invest globally has enabled us to purchase shares in a number of
companies at higher yields and more attractive valuations than their U.S.
counterparts.
In the U.S., our holdings in the pharmaceutical, banking and energy sectors
showed strong gains. In the past six months, for example, Bristol-Myers Squibb
rose 47%, PNC Bank gained 36%, and Amoco and USX-Marathon Group both increased
30%.
BONDS MADE SOLID CONTRIBUTION
IFA's fixed-income portfolio made a solid contribution to providing yield and
building the six-month total return. Although long-term interest rates
fluctuated somewhat during the period, they ended the six months slightly lower
than when they began. At the end of January, 18.4% of the fund's assets were in
corporate bonds and 11.8% were in government bonds. High-yield corporate bonds,
which make up 13.4% of the fund's total assets, did extremely well in the
period. While the yield advantage of high-yield bonds over investment-grade
bonds is narrowing, our extensive research capability should allow us
to continue to find attractive values in high-yield bonds.
The recent period was another strong one for stocks, but we have doubts that
the current market momentum is sustainable, so we encourage you to maintain a
long-term perspective on your investment. We look forward to reporting to you
in more detail after we complete our fiscal year.
Cordially,
/s/ Walter P. Stern
Walter P. Stern
Chairman of the Board
/s/ Janet A. McKinley
Janet A. McKinley
President
March 11, 1997
RESULTS AT A GLANCE (FOR PERIODS ENDED 1/31/97, WITH DISTRIBUTIONS REINVESTED
OR INTEREST COMPOUNDED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Average Annual
Compound
Six Return Over
Months One Year 10 Years Lifetime/1/ Lifetime/1/
The Income Fund
of America +14.7% +15.5% +204.5% +1,977.6% +14.0%
Standard & Poor's 500 Stock
Composite Index +24.2 +26.3 +287.9 +1,953.3 +13.9
Salomon Brothers Long-Term
High-Yield Bond Index +9.0 +7.6 +191.6 - -
Lehman Brothers Aggregate
Bond Index +4.9 +3.3 +123.0 +678.6/2/ +9.3/2/
Average Savings Institution/3/ +2.1 +4.2 +66.6 +355.1 +6.8
Consumer Price Index/4/ +1.3 +3.0 +43.1 +246.6 +5.5
</TABLE>
/1/ Since December 1, 1973, when Capital Research and Management Company
became IFA's investment adviser.
/2/ From December 1, 1973 through July 31, 1976, the Lehman Brothers Corporate
Bond Index was used.
/3/ Based on figures from 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.
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 December 31, 1996
(the most recent calendar quarter), assuming payment of the 5.75% maximum sales
charge at the beginning of the stated periods:
<TABLE>
<CAPTION>
10 Years 5 Years 12 Months
<S> <C> <C>
+198.05% +74.63% +8.59%
(+11.54% a year) (+11.79% a year)
</TABLE>
Sales charges are lower for accounts of $50,000 or more. The fund's 30-day
yield as of February 28, 1997, calculated in accordance with the Securities and
Exchange Commission formula, was 4.43%.
<PAGE>
COMPARISON OF ASSET MIX (UNAUDITED FOR JANUARY 31, 1997)
[pie chart]
<TABLE>
<CAPTION>
<S> <C>
Percent of
Investment Portfolio January 31, 1997 Net Assets
U.S. Equity-Type Securities* 55.7%
Non-U.S. Equity-Type Securities 7.9
Corporate Bonds 18.4
Government Bonds 11.8
Cash & Equivalents 6.2
Percent of
Investment Portfolio July 31, 1996 Net Assets
U.S. Equity-Type Securities* 56.7%
Non-U.S. Equity-Type Securities 4.0
Corporate Bonds 19.8
Government Bonds 13.1
Cash & Equivalents 6.4
</TABLE>
*Includes 0.4% in Canadian equities that are part of the S&P 500.
[end pie chart]
TEN LARGEST INDUSTRIES IN EQUITY HOLDINGS
<TABLE>
<CAPTION>
Percent of
January 31, 1997 Net Assets
<S> <C>
Banking 11.3%
Energy Sources 9.7
Utilities: Electric & Gas 5.9
Health & Personal Care 4.9
Telecommunications 4.3
Insurance 4.1
Beverages & Tobacco 2.8
Forest Products & Paper 2.4
Merchandising 2.0
Business & Public Services 1.6
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Percent of
July 31, 1996 Net Assets
Banking 11.3%
Energy Sources 8.7
Health & Personal Care 6.1
Utilities: Electric & Gas 4.2
Insurance 3.6
Telecommunications 3.2
Beverages & Tobacco 2.8
Merchandising 2.4
Forest Products & Paper 2.1
Chemicals 2.0
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
The Income Fund of America
Investment Portfolio January 31, 1997
- ---------------------------------- --- --- ---
Shares or Market Percent
Principal Value of Net
Equity-Type Securities Amount (000) Assets
- ---------------------------------- --- --- ---
Banking - 11.28%
PNC Bank Corp. 5,750,000 228,562 1.38%
CoreStates Financial Corp 3,810,000 189,547 1.14
Bank of New York Co., Inc. 4,529,243 165,884 1.00
Bankers Trust New York Corp. 1,910,200 162,367 .98
First Union Corp. 1,800,000 150,525 .91
Royal Bank of Canada 3,650,000 134,954 .81
J.P. Morgan & Co. Inc. 1,160,000 119,480 .72
First Chicago NBD Corp. 1,645,000 93,971 .57
Fleet Financial Group, Inc. 1,625,000 87,750 .53
First Security Corp. 2,400,000 82,200 .50
Westpac Banking Corp. 11,542,400 66,051 .40
National Bank of Canada 5,700,000 60,305 .36
HSBC Holdings PLC 2,000,000 46,332 .28
NationsBank Corp. 400,000 43,200 .26
Bancorp Hawaii, Inc. 1,000,000 42,500 .26
Commonwealth Bank of Australia 5,758,308 38,215 .23
U.S. Bancorp 800,000 36,450 .22
Regions Financial Corp. 630,000 34,965 .21
KeyCorp 500,000 26,188 .16
Banc One Corp. 550,000 24,956 .15
Central Fidelity Banks, Inc. 675,000 18,984 .11
California Federal Bank, FSB 11.50% preferred 100,000 11,575 .07
Banco Nacional de Mexico, SA 11.00% exchangeable notes
2003 (1) $4,175,000 4,352 .03
-------- -----
1,869,313 11.28
-------- -----
Energy Sources - 9.65%
Atlantic Richfield Co. 2,650,000 350,462 2.11
USX-Marathon Group 9,400,000 250,275 1.51
Amoco Corp. 2,375,000 206,625 1.25
Texaco Inc. 1,825,200 193,243 1.17
Phillips Petroleum Co. 3,300,000 145,612 .88
Sun Co., Inc. 1,707,013 45,022
Sun Co., Inc. $1.80 TARGETS, cumulative preferred,
Series A 2,495,000 67,677 .68
Occidental Petroleum Corp. 2,000,000 51,000
Occidental Petroleum Corp. $3.875 convertible
preferred (1) 300,000 18,075 .42
Exxon Corp. 500,000 51,813 .31
Unocal Capital Trust $3.125 convertible preferred 775,000 44,853 .27
Chevron Corp. 635,000 42,148 .25
Ashland Inc. $3.125 convertible preferred 600,000 40,650 .24
Enterprise Oil PLC 3,600,000 39,752 .24
Cyprus Amax Minerals Co. $4.00 convertible preferred,
Series A 465,000 24,761 .15
Valero Energy Corp. $3.125 convertible preferred 345,000 21,821 .13
Santa Fe Energy Resources, Inc. $0.732 DECS
convertible preferred, Series A 500,000 6,375 .04
-------- -----
1,600,164 9.65
-------- -----
Utilities: Electric & Gas - 5.86%
DTE Energy Co. 3,050,000 95,694 .58
Long Island Lighting Co. 3,460,000 78,715 .47
National Power PLC 8,854,600 70,607 .43
Union Electric Co. 1,825,000 69,350 .42
FPL Group, Inc. 1,500,000 66,375 .40
Consolidated Edison Co. of New York, Inc. 2,100,000 65,100 .39
Southern Co. 2,675,000 58,516 .35
PECO Energy Co. 2,275,000 52,325 .32
Houston Industries Inc. 2,200,000 49,775 .30
Equitable Resources, Inc. 1,500,000 48,750 .29
Carolina Power & Light Co. 1,007,200 37,896 .23
Peoples Energy Corp. 1,080,000 35,910 .22
Hongkong Electric Holdings Ltd. 10,000,000 35,555 .21
American Electric Power Co., Inc. 780,000 32,272 .19
AGL Resources, Inc. 1,340,000 27,973 .17
Public Service Enterprise Group Inc. 1,000,000 27,375 .17
GPU Inc. (formerly General Public Utilities Corp.) 757,200 25,366 .15
New Jersey Resources Corp. 750,000 22,406 .14
Entergy Corp. 750,000 20,156 .12
Puget Sound Power & Light Co. 700,000 17,762 .11
Brooklyn Union Gas Co. 457,500 13,553 .08
El Paso Natural Gas Co. 190,770 10,278 .06
Citizens Utilities Trust 5.00% EPPICS convertible preferred
2036 200,000 9,650 .06
-------- -----
971,359 5.86
-------- -----
Health & Personal Care - 4.86%
American Home Products Corp. 3,210,000 203,434 1.23
Bristol-Myers Squibb Co. 1,565,000 198,755 1.20
Eli Lilly and Co. 1,862,800 162,296 .98
Warner-Lambert Co. 1,050,000 84,525 .51
Pharmacia & Upjohn, Inc. 1,800,000 67,050 .40
Tambrands Inc. 1,300,000 53,300 .32
Glaxo Wellcome PLC 2,000,000 31,944 .19
Glycomed Inc. 7.50% convertible debentures 2003 $5,000,000 4,400 .03
-------- -----
805,704 4.86
-------- -----
Telecommunications - 4.32%
U S WEST Communications Group 5,900,000 193,963
U S WEST Communications Group 0% convertible debentures
2011 $80,000,000 29,100 1.35
AT&T Corp. 3,250,000 127,969 .77
Ameritech Corp. 1,560,400 93,234 .56
British Telecommunications PLC 13,150,000 89,834 .54
Bell Atlantic Corp. 771,700 51,897 .31
NYNEX Corp. 900,000 45,563 .28
STET-Societa Finanziaria Telefonica p.a., ordinary shares 4,000,000 19,766
STET-Societa Finanziaria Telefonica p.a., nonconvertible
savings shares 5,000,000 19,643 .24
Pacific Telesis Group 785,000 30,811 .19
International CableTel Inc. 7.00% convertible debentures
2008 (1) $15,000,000 13,425 .08
Comunicacion Celular SA, Class B, warrants, expire 2003 (1)(2) 31,000 217 .00
IntelCom Group (USA), Inc. warrants, expire 2005
(1)(2) 19,800 213 .00
NEXTEL Communications, Inc. warrants, expire 1999 (2)(3) 51,912 0 .00
-------- -----
715,635 4.32
-------- -----
Insurance - 4.06%
Lincoln National Corp. 2,540,000 136,207 .82
American General Corp. 2,500,000 99,687 .60
St. Paul Companies, Inc. 1,280,000 80,000 .48
Ohio Casualty Corp. (4) 2,095,000 78,039 .47
Italy (Republic of) 5.00% PENs 2001 (exchangeable into INA
SpA) $67,000,000 66,913 .40
SAFECO Corp. 1,500,000 57,000 .34
Aetna Inc. 6.25% convertible preferred, Class C 700,000 54,775 .33
USF&G Corp. 1,000,000 21,125
USF&G Corp. 0% convertible debentures 2009 $10,000,000 6,550 .17
Allstate Corp. 6.76% exchangeable notes 1998 370,000 16,465 .10
CIGNA Corp. 100,000 15,163 .09
U S WEST, Inc. 7.625% DECS exchangeable notes 1998 433,300 14,082 .09
St. Paul Capital LLC 6.00% MIPS convertible preferred 190,000 10,925 .07
Mutual Risk Management Ltd. 0% convertible debentures
2015 (1) $22,000,000 9,158 .06
Jefferson-Pilot Corp. 7.25% ACES convertible preferred 2000 70,000 6,720 .04
-------- -----
672,809 4.06
-------- -----
Beverages & Tobacco - 2.78%
Philip Morris Companies Inc. 2,600,000 309,075 1.87
RJR Nabisco Holdings Corp. 3,300,000 108,075 .65
UST Inc. 1,400,000 43,050 .26
-------- -----
460,200 2.78
-------- -----
Forest Products & Paper - 2.39%
Weyerhaeuser Co. 1,805,000 82,127 .49
Union Camp Corp. 1,685,000 79,827 .48
Koninklijke KNP BT 3,430,000 75,530 .46
James River Corp. of Virginia 550,000 17,669
James River Corp. of Virginia $1.55 DECS convertible
preferred 1,665,000 49,950 .41
UPM-Kymmene Corp. (2) 3,130,000 61,908 .37
Sonoco Products Co. $2.25 convertible preferred 345,000 19,449 .12
Bowater Inc. 227,300 9,262 .06
-------- -----
395,722 2.39
-------- -----
Merchandising - 2.04%
J.C. Penney Co., Inc. 4,900,000 232,137 1.40
Giant Food Inc., Class A 2,340,000 77,220 .47
Staples, Inc. 4.50% convertible debentures 2000 (1) $17,000,000 19,125 .11
Home Shopping Network, Inc. 5.875% convertible debentures
2006 (1) $10,000,000 9,500 .06
-------- -----
337,982 2.04
-------- -----
Business & Public Services - 1.63%
Moore Corp. Ltd. 1,900,000 39,425 .24
Browning-Ferris Industries, Inc. 100,000 3,250
Browning-Ferris Industries, Inc. 7.25% ACES convertible
preferred 1998 1,000,000 33,000 .22
Alexander & Baldwin, Inc. 1,221,500 31,759 .19
Ikon Office Solutions Inc. (formerly Alco Standard Corp.) 201,612 8,896
Ikon Office Solutions Inc. 6.50% ACES convertible preferred
1998 200,000 19,900 .17
Tenet Healthcare Corp. 6.00% exchangeable notes 2005 $25,000,000 25,500 .15
Cognizant Corp. (2) 750,000 24,094 .15
FHP International Corp. convertible preferred, Series A 785,000 23,158 .14
Dun & Bradstreet Corp. 750,000 18,000 .11
Vivra Inc. 5.00% convertible debentures 2001 (1) $15,000,000 15,375 .09
Ceridian Corp. (2) 374,000 14,118 .09
Omnicom Group Inc. 4.25% convertible debentures 2007 (1) $11,000,000 11,564 .07
Unisource Worldwide, Inc. 100,806 2,193 .01
Protection One Alarm Monitoring, Inc. warrants, expire 2005 (1)(2) 57,600 346 .00
-------- -----
270,578 1.63
-------- -----
Chemicals - 1.45%
Dow Chemical Co. 1,000,000 77,125 .47
E.I. du Pont de Nemours and Co. 482,500 52,894 .32
Ethyl Corp. 5,200,000 45,500 .27
Witco Corp. 975,000 29,006 .17
Eastman Chemical Co. 450,000 24,581 .15
Atlantic Richfield Co. DECS convertible preferred 500,000 11,500 .07
Sterling Chemicals Holdings, Inc. warrants, expire 2008 (2) 4,000 148 .00
-------- -----
240,754 1.45
-------- -----
Broadcasting & Publishing - 1.21%
Time Warner Financing Trust 4.00% PERCS 1997 400,000 15,700
Time Warner Inc. 10.25% exchangeable preferred, Series M 36,874 40,423
Time Warner Inc. 0% convertible debentures 2012 $36,000,000 13,635
Time Warner Inc. 0% convertible debentures 2013 $65,000,000 28,519 .59
Comcast Corp. 1.125% convertible debentures 2007 $54,000,000 28,012 .17
Reader's Digest Assn., Inc., Class A 689,400 26,628 .16
Turner Broadcasting System, Inc. 0% convertible
debentures 2007 (1) $45,000,000 22,106 .13
Cablevision Systems Corp. $2.125 cumulative convertible
exchangeable preferred, Series I 660,000 14,273 .09
Tele-Communications International 4.50% convertible
debentures 2006 $15,000,000 11,962 .07
Heartland Wireless Communications, Inc. warrants, expire
2000 (1)(2) 18,000 18 .00
-------- -----
201,276 1.21
-------- -----
Automobiles - 1.19%
Ford Motor Co., Class A 4,689,300 150,644 .91
General Motors Corp. 800,000 47,200 .28
-------- -----
197,844 1.19
-------- -----
Food & Household Products - 0.92%
General Mills, Inc. 1,475,000 99,931 .60
H.J. Heinz Co. 1,300,000 52,325 .32
-------- -----
152,256 .92
-------- -----
Miscellaneous Materials & Commodities - 0.87%
English China Clays PLC (4) 19,933,300 63,707 .38
Crown Cork & Seal Co., Inc. 4.50% convertible preferred 1,005,000 54,019 .33
Cooper Industries, Inc. 6.00% DECS convertible preferred 1,500,000 27,000 .16
-------- -----
144,726 .87
-------- -----
Multi-Industry - 0.86%
Tenneco Inc. 2,051,300 82,052 .49
Imasco Ltd. 1,400,000 37,575 .23
Swire Pacific Offshore Financing Ltd. 9.33% cumulative
guaranteed perpetual capital securities (1) 480,000 12,374 .07
Harsco Corp. 160,000 11,220 .07
-------- -----
143,221 .86
-------- -----
Metals: Nonferrous - 0.83%
Freeport McMoRan Copper & Gold Inc., Class A 1,000,000 27,375
Freeport McMoRan Copper & Gold Inc., Class B 299,991 8,625
Freeport McMoRan Copper & Gold Inc. $1.75 convertible
preferred, Series A 1,400,000 38,325 .45
Phelps Dodge Corp. 400,000 27,950 .17
Inco Ltd. 5.75% convertible debentures 2004 $17,250,000 22,166 .13
Alumax Inc. (2) 370,332 12,962 .08
-------- -----
137,403 .83
-------- -----
Real Estate - 0.71%
Security Capital Pacific Trust 1,830,220 43,468 .26
Security Capital Group (1)(2)(3) 18,680 23,653
Security Capital Group 12.00% convertible debentures
2014 (1)(3) $14,150,100 17,129 .24
Weingarten Realty Investors 685,000 29,455 .18
Western Investment Real Estate Trust 344,800 4,482 .03
-------- -----
118,187 .71
-------- -----
Financial Services - 0.66%
Beneficial Corp. 1,200,000 80,700 .48
First USA, Inc. 6.25% PRIDES convertible preferred 250,000 21,094 .13
United Companies Financial Corp. 6.75% PRIDES
convertible preferred 159,000 8,030 .05
-------- -----
109,824 .66
-------- -----
Leisure & Tourism - 0.39%
Host Marriott Financial Trust 6.75% QUIPS convertible
preferred 2026 800,000 44,200 .27
Wendy's Financing I 5.00% TECONS, Series A 350,000 18,725 .11
Homestead Village, Inc. (2) 132,447 2,483 .01
-------- -----
65,408 .39
-------- -----
Transportation: Airlines - 0.38%
Continental Airlines Finance Trust 8.50% convertible
TOPrS (1) 450,000 30,038
Continental Airlines, Inc. 6.75% convertible debentures
2006 (1) $20,049,000 22,455 .31
Airborne Freight Corp. 6.75% convertible debentures 2001 $6,500,000 6,565 .04
Alaska Air Group, Inc. 6.50% convertible debentures 2005 $4,000,000 4,525 .03
-------- -----
63,583 .38
-------- -----
Metals: Steel - 0.38%
USX Corp. $3.25 convertible preferred 350,000 15,969
USX Corp. 5.75% convertible debentures 2001 $21,000,000 19,740 .21
Carpenter Technology Corp. 500,000 18,000 .11
Bethlehem Steel Corp. $3.50 convertible preferred (1) 250,000 9,469 .06
-------- -----
63,178 .38
-------- -----
Energy Equipment - 0.29%
Cooper Industries, Inc. 1,100,000 47,438 .29
-------- -----
Appliances & Household Durables - 0.26%
Corning Delaware LP $3.00 MIPS convertible preferred 699,700 42,857 .26
-------- -----
Recreation & Other Consumer Products - 0.20%
Jostens, Inc. 1,580,000 32,587 .20
-------- -----
Machinery & Engineering - 0.15%
Thermo Electron Corp. 4.25% convertible debentures 2003
(1) $23,000,000 25,300 .15
-------- -----
Data Processing & Reproduction - 0.15%
Data General Corp. 7.75% convertible debentures 2001 $10,000,000 10,900 .07
Wang Laboratories, Inc. 6.50% convertible preferred
depositary shares, Series B (1) 170,000 9,053 .05
AST Research, Inc. 0% convertible debentures 2013 $15,000,000 4,875 .03
-------- -----
24,828 .15
-------- -----
Industrial Components - 0.14%
Dana Corp. 700,000 22,837 .14
-------- -----
Electronic Components & Instruments - 0.06%
Maxtor Corp. 5.75% convertible debentures 2012 $7,500,000 5,100 .03
VLSI Technology, Inc. 8.25% convertible debentures 2005 $4,500,000 4,354 .03
Geotek Communications, Inc. warrants, expire 2005 (1)(2) 300,000 450 .00
-------- -----
9,904 .06
-------- -----
MISCELLANEOUS: Equity-type securities
in initial period of acquisition 594,955 3.59
-------- -----
TOTAL EQUITY-TYPE SECURITIES (cost: $8,145,015,000) 10,537,832 63.56
-------- -----
- ---------------------------------- ---
Principal
Bonds & Notes Amount
(000)
- ---------------------------------- ---
Broadcasting, Advertising & Publishing - 3.07%
Time Warner Pass-Through Asset Trust 1997-1 6.10%
2001 (1)(6) $ 12,000 11,472
Time Warner Inc. 7.45% 1998 10,000 10,101
Time Warner Inc. 9.625% 2002 18,000 20,080
Time Warner Inc. 7.75% 2005 5,000 5,048
Time Warner Inc. 10.15% 2012 7,000 8,363
Time Warner Inc. 9.125% 2013 20,000 21,677 .46
Bell Cablemedia PLC 0%/11.95% 2004 (5) 48,750 42,169 .25
International CableTel Inc. 0%/10.875% 2003 (5) 20,075 16,763
International CableTel Inc. 0%/12.75% 2005 (5) 22,000 16,390 .20
TKR Cable I, Inc. 10.50% 2007 30,000 32,850 .20
Videotron Holdings PLC 0%/11.125% 2004 (5) 37,500 32,250 .19
Chancellor Radio Broadcasting Co. 9.375% 2004 28,000 28,175
Chancellor Radio Broadcasting Co. 12.50% 2004 3,000 3,386 .19
News America Holdings Inc. 10.125% 2012 12,000 13,602
News America Holdings Inc. 9.25% 2013 7,500 8,356
News America Holdings Inc. 8.45% 2034 7,500 8,102 .18
Cablevision Systems Corp. 10.75% 2004 18,000 18,608
Cablevision Systems Corp. 9.875% 2013 11,500 11,270 .18
American Media Operations, Inc. 11.625% 2004 17,750 18,993 .12
TeleWest plc 9.625% 2006 5,000 5,125
TeleWest plc 0%/11.00% 2007 (5) 18,000 12,330 .11
Tele-Communications, Inc. 9.875% 1998 7,100 7,359
Tele-Communications, Inc. 10.125% 2001 5,000 5,491
Tele-Communications, Inc. 9.25% 2023 3,500 3,491 .09
Viacom International Inc. 9.125% 1999 4,000 4,090
Viacom International Inc. 10.25% 2001 9,500 10,355 .09
Comcast Corp. 10.25% 2001 12,600 13,529 .08
Insight Communications Co., LP 11.25% 2000 12,750 13,133 .08
Comcast UK Cable Partners Ltd. 0%/11.20% 2007 (5) 18,500 13,043 .08
Infinity Broadcasting Corp. 10.375% 2002 10,250 10,814 .07
Young Broadcasting Inc. 10.125% 2005 10,000 10,350 .06
Multicanal Participacoes SA, Series B, 12.625% 2004 8,750 9,636 .06
Century Communications Corp. 9.75% 2002 4,500 4,646
Century Communications Corp. 11.875% 2003 4,400 4,664 .06
Grupo Televisa, SA, Series A, 11.375% 2003 3,750 4,059
Grupo Televisa, SA 0%/13.25% 2008 (5) 7,250 5,002 .06
Summitt Communications 10.50% 2005 6,655 7,246 .04
TCI Communications, Inc. 8.75% 2015 6,500 6,525 .04
American Radio Systems Corp. 9.00% 2006 6,500 6,435 .04
Storer Communications, Inc. 10.00% 2003 6,000 6,135 .04
Continental Cablevision, Inc. 8.50% 2001 2,000 2,132
Continental Cablevision, Inc. 10.625% 2002 2,250 2,410 .03
Tevecap SA 12.625% 2004 (1) 3,750 3,975 .02
Rogers Communications Inc. 10.875% 2004 3,500 3,666 .02
Heartland Wireless Communications, Inc. 13.00% 2003 3,000 3,015 .02
British Sky Broadcasting Group plc 7.30% 2006 2,000 2,001 .01
-------- -----
508,312 3.07
-------- -----
Wireless Communications - 1.66%
NEXTEL Communications, Inc. 0%/11.50% 2003 (5) 18,000 14,490
NEXTEL Communications, Inc. 0%/9.75% 2004 (5) 18,000 12,690
NEXTEL Communications, Inc. 0%/10.125% 2004 (formerly
CenCall Communications Corp.) (5) 38,250 27,444
NEXTEL Communications, Inc. 0%/12.25% 2004 (formerly Dial
Call Communications Corp.) (5) 14,500 10,947 .39
PriCellular Wireless Corp. 0%/14.00% 2001 (5) 12,000 12,000
PriCellular Wireless Corp. 0%/12.25% 2003 (5) 14,550 12,731
PriCellular Wireless Corp. 10.75% 2004 (1) 7,500 7,856 .20
Centennial Cellular Corp. 8.875% 2001 28,000 27,440
Centennial Cellular Corp. 10.125% 2005 3,000 3,083 .18
Comcast Cellular Corp., Series A, 0% 2000 13,000 9,360
Comcast Cellular Corp., Series B, 0% 2000 18,800 13,700 .14
Comunicacion Celular SA 0%/13.125% 2003 (5) 31,000 21,235 .13
Cellular Communications International, Inc.,
units consisting of notes and warrants, 0% 2000 (2) 24,500 17,272 .10
Cellular, Inc. 0%/11.75% 2003 (5) 18,000 16,290 .10
360 Degrees Communications Co. 7.125% 2003 8,000 7,939
360 Degrees Communications Co. 7.50% 2006 8,000 7,974 .10
Paging Network, Inc. 11.75% 2002 10,500 11,314 .07
InterCel, Inc. 0%/12.00% 2006 (5) 17,500 11,112 .07
Sprint Spectrum LP, Sprint Spectrum Finance Corp. 11.00% 2006 9,000 9,675 .06
Cellular Communications of Puerto Rico, Inc. 10.00% 2007 (1) 6,000 6,030 .03
Geotek Communications, Inc., Series B, 0%/15.00% 2005 (5) 9,000 5,670 .03
Commnet Cellular Inc. 11.25% 2005 3,000 3,187 .02
Rogers Cantel Inc. 9.375% 2008 3,000 3,120 .02
Vanguard Cellular Systems, Inc. 9.375% 2006 3,000 3,022 .02
-------- -----
275,581 1.66
-------- -----
Transportation - 1.53%
Jet Equipment Trust, Series 1994-A, Class B1, 10.91%
2006 (1) 6,843 7,940
Jet Equipment Trust, Series 1995-B, Certificates,
10.91% 2014 (1) 4,750 5,347
Jet Equipment Trust, Series 1995-B, Class A, 7.63%
2015 (1) 14,103 14,426
Jet Equipment Trust, Series 1995-A, Class B, 8.64%
2015 (1) 14,575 15,708
Jet Equipment Trust, Series 1995-B, Class C, 9.71%
2015 (1) 5,500 6,215
Jet Equipment Trust, Series 1995-A, Class C, 10.69%
2015 (1) 5,000 6,035 .34
Continental Airlines, Inc. 9.50% 2001 (1) 31,125 31,631
Continental Airlines, Inc., pass-through certificates,
Series 1996-A, 6.94% 2015 (6) 8,824 8,653
Continental Airlines, Inc., pass-through certificates,
Series 1996-C, 9.50% 2015 (6) 12,745 14,166 .33
USAir, Inc. 9.625% 2001 19,679 19,531
USAir, Inc. 10.00% 2003 7,000 7,017
USAir, Inc., enhanced equipment notes, Class C, 8.93%
2008 2,922 3,142
USAir, Inc., pass-through trust, Series 1993-A3, 10.375%
2013 (6) 17,495 18,195 .29
Airplanes Pass Through Trust, pass-through certificates,
Series 1, Class B, 6.584% 2019 (6)(7) 7,262 7,310
Airplanes Pass Through Trust, pass-through certificates,
Series 1, Class C, 8.15% 2019 (6) 15,000 15,513
Airplanes Pass Through Trust, pass-through certificates,
Series 1, Class D, 10.875% 2019 (6) 11,625 12,787 .21
United Air Lines, Inc. 9.00% 2003 8,000 8,625
United Air Lines, Inc., pass-through certificates,
Series 1993-A3, 8.39% 2011 (6) 7,500 7,739
United Airlines, Inc., pass-through certificates,
Series 1996-A2 7.87% 2019 (6) 5,000 4,806 .13
Delta Air Lines, Inc. 9.875% 1998 6,750 6,961
Delta Air Lines, Inc., pass-through certificates,
Series 1992-A2, 9.20% 2014 (6) 5,000 5,488 .07
Teekay Shipping Corp. 8.32% 2008 9,820 9,722 .06
MC-Cuernavaca Trust 9.25% 2001 (1) 7,305 6,720 .04
NWA Trust No. 2, Class D, 13.875% 2008 5,000 5,950 .04
SFP Pipeline Holdings, Inc. 11.16% 2010 3,000 3,690 .02
-------- -----
253,317 1.53
-------- -----
Telecommunications - 1.51%
MFS Communications Co., Inc. 0%/9.375% 2004 (5) 83,800 73,115
MFS Communications Co., Inc. 0%/8.875% 2006 (5) 54,000 39,690 .68
Orion Network Systems, Inc. 11.25% 2007 36,500 36,637
Orion Network Systems, Inc. 0%/12.50% 2007 (5) 30,000 16,650 .32
U S WEST Capital Funding, Inc. 6.85% 2002 7,000 7,021
U S WEST Capital Funding, Inc. 6.95% 2037 19,500 19,480 .16
Mobile Telecommunications Technologies Corp. 13.50% 2002 11,875 11,638 .07
Omnipoint Corp. 11.625% 2006 11,000 11,495 .07
PanAmSat, LP 9.75% 2000 10,300 10,866 .06
Comtel Brasileira Ltda. 10.75% 2004 (1) 9,200 9,706 .06
Teleport Communications 9.875% 2006 7,500 7,931 .05
Telecom Argentina STET-France Telecom SA 12.00% 2002 2,500 2,847 .02
Brooks Fiber Properties, Inc. 0%/10.875% 2006 (5) 3,500 2,345 .02
-------- -----
249,421 1.51
-------- -----
Energy Sources and Energy Equipment & Services - 1.32%
California Energy Co., Inc. 9.875% 2003 5,000 5,300
California Energy Co., Inc. 0%/10.25% 2004 (5) 47,300 50,611 .34
Oryx Energy Co. 9.50% 1999 20,500 21,692
Oryx Energy Co. 8.375% 2004 12,500 13,083
Oryx Energy Co. 8.125% 2005 3,500 3,535 .23
J. Ray McDermott, SA 9.375% 2006 18,500 19,332 .12
Cliffs Drilling Co., Series B, 10.25% 2003 14,250 15,319 .09
Global Marine, Inc. 12.75% 1999 13,500 14,513 .09
Falcon Drilling Co., Inc., Series B, 9.75% 2001 6,000 6,285
Falcon Drilling Co., Inc., Series B, 8.875% 2003 7,000 7,315 .08
Chesapeake Energy Corp. 10.50% 2002 3,850 4,158
Chesapeake Energy Corp. 9.125% 2006 6,000 6,195 .06
Mesa Operating Co. 0%/11.625% 2006 (5) 8,500 5,971
Mesa Operating Co. 10.625% 2006 2,000 2,165 .05
Mariner Energy, Inc. 10.50% 2006 (1) 7,250 7,685 .05
OXYMAR 7.50% 2016 (1) 8,000 7,621 .04
Flores & Rucks, Inc. 13.50% 2004 5,750 6,857 .04
Forcenergy Inc 9.50% 2006 5,300 5,512 .03
Dual Drilling Co. 9.875% 2004 4,000 4,320 .03
Kelley Oil & Gas Corp. 10.375% 2006 (1) 3,000 3,180 .02
Noble Drilling Corp. 9.25% 2003 2,750 2,929 .02
Petroleo Brasileiro SA-PETROBRAS 10.087% Eurobonds 1998 (7) 2,500 2,584 .01
Abraxas Petroleum Corp. 11.50% 2004 (1) 2,000 2,165 .01
Petro Stopping Centers, LP 10.50% 2007 (1) 1,000 1,033 .01
-------- -----
219,360 1.32
-------- -----
Utilities: Electric & Gas - 1.21%
Long Island Lighting Co. 7.30% 1999 41,240 41,796
Long Island Lighting Co. 6.25% 2001 9,000 8,729
Long Island Lighting Co. 7.125% 2005 10,000 9,529
Long Island Lighting Co. 7.50% 2007 15,000 14,482
Long Island Lighting Co. 7.90% 2008 20,000 20,050
Long Island Lighting Co. 8.90% 2019 32,000 32,852
Long Island Lighting Co. 9.00% 2022 17,000 18,151
Long Island Lighting Co. 8.20% 2023 22,500 22,560
Long Island Lighting Co. 9.625% 2024 22,250 23,140 1.15
Bridas Corp. 12.50% 1999 6,000 6,525 .04
CMS Energy, Series A, 9.50% 1997 3,000 3,060 .02
-------- -----
200,874 1.21
-------- -----
Business & Public Services - 1.01%
Federal Express Corp., Series B, 10.00% 1998 4,000 4,222
Federal Express Corp. 9.875% 2002 7,000 7,908
Federal Express Corp., pass-through certificates, Series
1994-A310, Class A1, 7.53% 2006 (6) 12,380 12,543
Federal Express Corp, pass-through certificates, Series
1996-A1, 7.85% 2015 (6) 9,960 10,277 .21
Tenet Healthcare Corp. 8.00% 2005 9,000 9,000
Tenet Healthcare Corp. 8.625% 2007 17,300 17,538 .16
Integrated Health Services, Inc. 9.625% 2002 2,250 2,317
Integrated Health Services, Inc. 10.75% 2004 5,175 5,511
Integrated Health Services, Inc. 10.25% 2006 (1) 16,900 17,661 .15
Paracelsus Healthcare Corp. 10.00% 2006 19,750 19,158 .12
Protection One Alarm Monitoring, Inc.
0%/13.625% 2005 (5) 18,000 17,415 .10
Mariner Health Group, Inc. 9.50% 2006 11,000 11,028 .07
Regency Health Services, Inc. 9.875% 2002 5,000 5,100
Regency Health Services, Inc. 12.25% 2003 5,000 5,375 .06
Allied Waste North America, Inc. 10.25% 2006 (1) 9,000 9,585 .06
Merit Behavioral Care Corp. 11.50% 2005 6,750 7,324 .04
ADT Operations 9.25% 2003 4,500 4,747 .03
Neodata Services, Inc., Series B, 12.00% 2003 1,250 1,337 .01
-------- -----
168,046 1.01
-------- -----
Metals: Steel & Nonferrous - 0.61%
Kaiser Aluminum & Chemical Corp. 9.875% 2002 9,000 9,225
Kaiser Aluminum & Chemical Corp. 12.75% 2003 11,000 11,935
Kaiser Aluminum & Chemical Corp., Series B, 10.875% 2006 (1) 32,500 34,938
Kaiser Aluminum & Chemical Corp., Series C, 10.875% 2006 (1) 6,500 6,955 .38
Acme Metals Inc. 12.50% 2002 3,000 3,270
Acme Metals Inc. 0%/13.50% 2004 (5) 10,500 10,920 .09
Inco Ltd. 9.875% 2019 6,500 6,954
Inco Ltd. 9.60% 2022 1,625 1,768 .05
ISPAT Mexicana, SA de CV 10.375% 2001 (1) 2,000 2,060
ISPAT Mexicana, SA de CV 10.375% Eurobonds 2001 4,000 4,120 .04
UCAR Global Enterprises Inc. 12.00% 2005 4,250 4,866 .03
AK Steel Corp. 10.75% 2004 3,800 4,123 .02
-------- -----
101,134 .61
-------- -----
Forest Products & Paper - 0.52%
Container Corp. of America, Series B, 10.75% 2002 1,000 1,090
Container Corp. of America 9.75% 2003 44,550 47,000
Container Corp. of America, Series A, 11.25% 2004 14,000 15,260 .38
Fort Howard Corp. 9.25% 2001 8,750 9,122
Fort Howard Corp. 8.25% 2002 4,000 3,990 .08
Grupo Industrial Durango, SA de CV 12.00% 2001 8,000 8,660 .05
Pacific Lumber Co. 10.50% 2003 1,500 1,523 .01
-------- -----
86,645 .52
-------- -----
Banking & Insurance - 0.52%
First Nationwide Holdings Inc. 10.625% 2003 (1) 9,250 10,036
First Nationwide Holdings Inc. 12.50% 2003 9,500 10,593 .12
Aetna Services, Inc. 6.97% 2036 12,000 12,186 .07
Capital One Capital I 7.112% 2027 (1)(7) 11,500 11,465 .07
First Union Corp. 6.824%/7.574% 2026 (7) 10,000 9,969 .06
Metropolitan Life Insurance Co. 7.45% 2023 (1) 10,000 9,234 .06
Midland American Capital 12.75% 2003 6,000 6,628 .04
Dime Bancorp, Inc. 10.50% 2005 4,000 4,360 .03
Chevy Chase Savings Bank, FSB 9.25% 2005 4,000 4,120 .03
Coast Federal Bank 13.00% 2002 3,500 3,854 .02
Fairfax Financial Holdings Ltd. 8.25% 2015 3,000 3,080 .02
-------- -----
85,525 .52
-------- -----
General Retailing & Merchandising - 0.48%
Barnes & Noble, Inc. 11.875% 2003 22,500 24,525 .15
AnnTaylor, Inc. 8.75% 2000 13,696 13,422 .08
Woolworth Corp., Series A, 7.00% 2002 7,800 7,751
Woolworth Corp. 8.50% 2022 4,000 4,157 .07
May Department Stores Co. 8.375% 2024 10,000 10,267 .06
LifeStyle Furnishings International Ltd. 10.875% 2006 8,775 9,433 .06
Dayton Hudson Corp. 9.50% 2015 5,000 5,790 .04
Loehmann's Inc. 11.875% 2003 3,250 3,510 .02
The Penn Traffic Co. 9.625% 2005 2,250 652 .00
-------- -----
79,507 .48
-------- -----
Food Retailing and Food Products & Beverages - 0.45%
Canandaigua Wine Co., Inc. 8.75% 2003 17,500 17,194
Canandaigua Wine Co., Inc., Series B, 8.75% 2003 (1) 3,500 3,465 .12
Stater Brothers Holdings Inc. 11.00% 2001 16,000 17,280 .10
Allied Supermarkets Inc. (Vons) 6.625% 1998 7,443 7,406 .05
Dr Pepper Bottling Co. of Texas 10.25% 2000 6,500 6,793 .04
Carr-Gottstein Foods Co. 12.00% 2005 5,000 5,325 .03
Bruno's, Inc. 10.50% 2005 5,000 5,212 .03
Smith's Food & Drug Centers, Inc., Series 94-A2, 8.64%
2012 5,000 4,575 .03
Kroger Co. 8.15% 2006 4,000 4,116 .03
Star Markets Co., Inc. 13.00% 2004 3,250 3,673 .02
-------- -----
75,039 .45
-------- -----
Real Estate - 0.36%
B.F. Saul Real Estate Investment Trust 11.625% 2002 23,000 24,955 .15
ERP Operating LP 7.95% 2002 3,750 3,877
ERP Operating LP 7.57% 2026 7,500 7,607 .07
Irvine Co., Series A, 7.46% 2006 (1)(3) 10,000 9,654 .06
Beverly Finance Corp. 8.36% 2004 (1) 5,000 5,217 .03
Shopping Center Associates 6.75% 2004 (1) 5,000 4,840 .03
Security Capital Industrial Trust 7.95% 2008 4,000 4,157 .02
-------- -----
60,307 .36
-------- -----
Data Processing & Reproduction - 0.36%
Digital Equipment Corp. 8.625% 2012 30,000 29,491 .18
Apple Computer, Inc. 6.50% 2004 18,920 15,514 .09
Unisys Corp. 12.00% 2003 12,000 12,960
Unisys Corp. 11.75% 2004 2,000 2,155 .09
-------- -----
60,120 .36
-------- -----
Leisure & Tourism - 0.25%
Station Casinos, Inc., Series A, 9.625% 2003 7,650 7,726
Station Casinos, Inc., Series B, 9.625% 2003 6,500 6,565 .09
Foodmaker, Inc. 9.25% 1999 5,000 5,100
Foodmaker, Inc. 9.75% 2002 6,300 6,458 .07
Trump Atlantic City Associates 11.25% 2006 9,500 9,167 .06
Boyd Gaming Corp. 9.25% 2003 2,500 2,425 .01
Rio Hotel & Casino, Inc. 10.625% 2005 2,000 2,120 .01
Four Seasons Hotels Inc. 9.125% 2000 (1) 2,000 2,050 .01
-------- -----
41,611 .25
-------- -----
Financial Services - 0.24%
General Motors Acceptance Corp. 7.00% 2000 3,000 3,036
General Motors Acceptance Corp. 9.625% 2001 12,500 13,952
General Motors Acceptance Corp. 8.75% 2005 5,000 5,496 .13
Ford Capital BV 10.125% 2000 5,500 6,116 .04
General Electric Capital Corp. 8.875% 2009 4,000 4,587 .03
DVI, Inc. 9.875% 2004 4,500 4,545 .03
Aames Financial Corp. 9.125% 2003 2,000 2,040 .01
-------- -----
39,772 .24
-------- -----
Automobiles - 0.21%
General Motors Corp. 9.45% 2011 5,000 5,856
General Motors Corp. 8.80% 2021 25,000 28,490 .21
-------- -----
34,346 .21
-------- -----
Construction & Building Materials - 0.21%
M.D.C. Holdings, Inc. 11.125% 2003 13,000 13,195 .08
Del Webb Corp. 9.75% 2003 8,500 8,628 .05
The Ryland Group, Inc. 10.50% 2006 7,500 7,856 .05
Schuller International Group, Inc. 10.875% 2004 2,000 2,210 .02
Continental Homes Holding Corp. 10.00% 2006 2,000 2,065 .01
-------- -----
33,954 .21
-------- -----
Recreation, Other Consumer Products - 0.19%
Tyco Toys, Inc. 10.125% 2002 18,700 19,635 .12
AMF Group Inc. 0%/12.25% 2006 (5) 10,000 6,800
AMF Group Inc. 10.875% 2006 5,000 5,400 .07
-------- -----
31,835 .19
-------- -----
Aerospace, Automotive Parts and Machinery - 0.15%
AGCO Corp. 8.50% 2006 10,000 10,100 .06
Newport News Shipbuilding Inc. 9.25% 2006 (1) 9,500 9,880 .06
Caterpillar Inc. 8.01% 2002 5,000 5,269 .03
-------- -----
25,249 .15
-------- -----
Chemicals - 0.13%
Texas Petrochemicals Corp. 11.125% 2006 10,500 11,288 .07
Sterling Chemicals, Inc. 11.75% 2006 7,750 8,234
Sterling Chemical Holdings, Inc. 0%/13.50% 2008 (5) 4,000 2,420 .06
-------- -----
21,942 .13
-------- -----
Appliances & Household Durables - 0.09%
Philips Electronics NV 7.20% 2026 10,000 10,076 .06
The Knoll Group, Inc. 10.875% 2006 3,750 4,125 .03
-------- -----
14,201 .09
-------- -----
Miscellaneous - 0.37%
Reliance Industries Ltd. 8.25% 2027 (1) 10,000 10,015 .06
Freeport McMoRan Copper & Gold Inc. 7.20% 2026 10,000 9,889 .06
Allegiance Corp. 7.00% 2026 9,000 9,103 .06
Newsquest Capital plc 11.00% 2006 8,500 8,946 .05
Printpack Inc. 10.625% 2006 (1) 7,000 7,350 .04
Owens-Illinois, Inc. 11.00% 2003 6,000 6,675 .04
WestPoint Stevens Inc. 8.75% 2001 4,000 4,090 .03
U.S. Can Corp. 10.125% 2006 (1) 3,000 3,150 .02
Tenneco Inc. 8.075% 2002 2,000 2,114 .01
-------- -----
61,332 .37
-------- -----
Collateralized Mortgage/Asset-Backed Obligations (6)
(excluding those issued by federal agencies) - 1.70%
UCFC Acceptance Corp., home-equity loan pass-through
certificates, Series 1996-B1, Class A-2 7.075% 2010 15,000 15,142
UCFC Acceptance Corp., home-equity loan pass-through
certificates, Series 1996-D1, Class A-2 6.381% 2011 25,700 25,668
UCFC Acceptance Corp., home-equity loan pass-through
certificates, Series 1996-D1, Class A-4 6.776% 2016 8,000 7,990
UCFC Acceptance Corp., home-equity loan pass-through
certificates, Series 1995-B1, Class A-3 6.75% 2017 10,965 11,006 .36
Collateralized Mortgage Obligation Trust, Series 63,
Class Z, 9.00% 2020 44,393 48,083 .29
Green Tree Financial Corp., Net Interest Margin Trust,
Series 1994-A, 6.90% 2004 4,509 4,493
Green Tree Financial Corp., Net Interest Margin Trust,
Series 1995-A, 7.25% 2005 2,698 2,688
Green Tree Financial Corp., Seller and Servicer
Manufactured Housing Contract, Series 1993-2, Class B,
8.00% 2018 14,000 14,162
Green Tree Financial Corp., Seller and Servicer
Manufactured Housing Contract, Series 1995-1, Class A-3,
7.95% 2025 5,000 5,078
Green Tree Financial Corp., Seller and Servicer
Manufactured Housing Contract, Series 1995-9, Class A-5,
6.80% 2027 4,000 3,915
Green Tree Financial Corp., Seller and Servicer
Manufactured Housing Contract, Series 1996-10, Class A-6,
7.30% 2028 3,000 2,902 .21
Resolution Trust Corp., Series 1992-CHF, Class E,
8.25% 2020 10,739 10,733
Resolution Trust Corp., Series 1993-C1, Class D,
9.45% 2024 6,143 6,275
Resolution Trust Corp., Series 1993-C1, Class E,
9.50% 2024 1,404 1,398
Resolution Trust Corp., Series 1993-C2, Class C,
8.00% 2025 3,000 3,032
Resolution Trust Corp., Series 1993-C2, Class D,
8.50% 2025 3,290 3,333
Resolution Trust Corp., Series 1993-C2, Class E,
8.50% 2025 390 387 .15
Merrill Lynch Mortgage Investors, Inc., Seller
Manufactured Housing Contract, Series 1992-B, Class A2,
8.05% 2012 895 898
Merrill Lynch Mortgage Investors, Inc., Seller
Manufactured Housing Contract, Series 1995-C2,
Class A-1, 7.457% 2021 (7) 17,284 17,518
Merrill Lynch Mortgage Investors, Inc., mortgage pass-through
certificates, Series 1996-C2, Class A-1, 6.69% 2028 3,228 3,224 .14
Electronic Transfer Master Trust, Series 1995-A, 9.35%
2002 (1) 16,250 16,352 .10
FIRSTPLUS Home Loan Owner Trust 1996-4, Class A-2, 6.14% 2006 10,240 10,176
FIRSTPLUS Home Loan Owner Trust 1996-4, Class A-3 6.28% 2009 4,000 3,958 .08
Aames Capital Corp., mortgage pass-through certificates,
Series 1996-D, Class A-1B 6.34% 2012 5,000 4,975
Aames Capital Corp., mortgage pass-through certificates,
Series 1996-D, Class A-1E 6.87% 2024 7,000 6,918 .07
Chase Manhattan Bank, NA, Series 1993-I, Class 2A5,
7.25% 2024 9,910 9,873 .06
The Money Store, home-equity loan pass-through certificates,
Series 1996-C, Class A-3 7.07% 2016 8,000 8,080 .05
Fifth Avenue Capital Trust, Class C, 12.36% 2007 (1) 5,000 5,681 .03
Banco Nacional de Mexico 0% 2002 (1) 7,057 5,664 .03
Standard Credit Card Master Trust I, credit card
participation certificates, Series 1994-2A, 7.25% 2008 5,000 5,097 .03
CSFB Finance Co. Ltd., Series 1995-A, 5.00%/10.00% 2005 (1) 5,000 4,907 .03
GE Capital Mortgage Services, Inc., Series 1994-9, Class
A9, 6.50% 2024 5,842 4,861 .03
Prudential Home Mortgage Securities Co., Inc.,
Series 1992-37, Class A6, 7.00% 2022 4,336 4,328 .03
Citicorp Mortgage Securities, Inc., Series 1992-20,
Class A3, 7.50% 2006 2,382 2,376 .01
-------- -----
281,171 1.70
-------- -----
Federal Agency Obligations: Mortgage Pass-Throughs (6)
- 2.81%
Government National Mortgage Assn. 5.00% 2025-2026 (7) 10,937 10,802
Government National Mortgage Assn. 6.00% 2023 2,917 2,702
Government National Mortgage Assn. 6.50% 2024-2026 15,609 14,880
Government National Mortgage Assn. 6.50% 2023-2024 (7) 73,589 75,184
Government National Mortgage Assn. 6.875% 2022 (7) 11,679 11,927
Government National Mortgage Assn. 7.00% 2008-2027 26,722 26,295
Government National Mortgage Assn. 7.00% 2024 (7) 6,652 6,801
Government National Mortgage Assn. 7.125% 2022-2024 (7) 19,693 20,119
Government National Mortgage Assn. 7.50% 2017-2026 33,029 33,243
Government National Mortgage Assn. 8.00% 2017 5,748 5,987
Government National Mortgage Assn. 8.50% 2017-2026 41,131 42,924
Government National Mortgage Assn. 9.00% 2008-2025 13,069 13,974
Government National Mortgage Assn. 9.50% 2009-2021 18,292 19,846
Government National Mortgage Assn. 10.00% 2016-2019 1,566 1,721
Government National Mortgage Assn. 10.50% 2018-2019 231 260
Government National Mortgage Assn. 11.00% 2015 99 113 1.73
Federal National Mortgage Assn. 6.091% 2028 (7) 11,672 11,592
Federal National Mortgage Assn. 7.50% 2007-2023 24,834 25,207
Federal National Mortgage Assn. 7.618% 2025 (7) 11,048 11,308
Federal National Mortgage Assn. 8.00% 2009-2024 11,082 11,428
Federal National Mortgage Assn. 8.50% 2014-2027 16,016 16,653
Federal National Mortgage Assn. 9.00% 2008-2025 11,480 12,180
Federal National Mortgage Assn. 9.50% 2022 10,237 11,126
Federal National Mortgage Assn. 10.00% 2005-2025 31,443 34,432 .81
Federal Home Loan Mortgage Corp. 8.00% 2025 8,392 8,570
Federal Home Loan Mortgage Corp. 8.50% 2008-2020 22,621 23,550
Federal Home Loan Mortgage Corp. 9.00% 2007-2021 11,745 12,349
Federal Home Loan Mortgage Corp. 10.00% 2019 123 135
Federal Home Loan Mortgage Corp. 11.50% 2000 14 14 .27
-------- -----
465,322 2.81
-------- -----
Federal Agency Obligations: Collateralized Mortgage
Obligations - 0.10%
Federal National Mortgage Assn., Series 1996-4,
Class ZA, 6.50% 2022 5,622 4,863
Federal National Mortgage Assn., Series 1991-78,
Class PK, 8.50% 2020 8,278 8,555 .08
Federal Home Loan Mortgage Corp., Series 1673, Class SA,
5.091% 2024 (8) 6,000 3,334 .02
-------- -----
16,752 .10
-------- -----
Other Federal Agency Obligations - 0.49%
Federal Home Loan Mortgage Corp. 5.74% 2003 5,000 4,736
Federal Home Loan Mortgage Corp. 6.39% 2003 7,750 7,539
Federal Home Loan Mortgage Corp. 6.44% 2003 3,000 2,918
Federal Home Loan Mortgage Corp. 6.50% 2003 5,000 4,847
Federal Home Loan Mortgage Corp. 6.59% 2003 6,000 5,853
Federal Home Loan Mortgage Corp. 6.19% 2004 12,750 12,204
Federal Home Loan Mortgage Corp. 6.27% 2004 5,635 5,437 .27
Federal Home Loan Bank 6.41% 2003 10,000 9,708
Federal Home Loan Bank 6.16% 2004 13,000 12,452
Federal Home Loan Bank 6.27% 2004 6,000 5,787 .17
FNSM Principal STRIPS 0%/8.62% 2022 (5) 10,000 9,109 .05
-------- -----
80,590 .49
-------- -----
Governments and Governmental Authorities
(excluding U.S. government) - 1.07%
Argentina (Republic of), Series L, 6.625% Eurobonds 2005 (7) 24,289 21,800
Argentina (Republic of) 11.00% 2006 34,000 35,955
Argentina (Republic of) 11.375% 2017 27,000 27,742 .51
Venezuela (Republic of) 6.50% 2007 (7) 57,500 51,966 .31
United Mexican States 7.562% Eurobonds 2001 (1)(7) 11,000 11,099
United Mexican States 6.25% Eurobonds 2019 1,000 755 .07
British Columbia Hydro & Power Authority 12.50% 2014 10,000 11,501 .07
The Russian Federation 9.25% 2001 (1) 5,000 4,900 .03
Brazil (Republic of) Debt Conversion Bond, Series L, 6.562%
2012 (7) 6,000 4,815 .03
Philippine Front-Loaded Interest Reduction Bond,
Series B, 5.00% 2008 (7) 5,000 4,788 .03
Ontario (Province of) 7.75% 2002 2,500 2,634 .02
-------- -----
177,955 1.07
-------- -----
Floating Rate Eurodollar Notes (Undated) (7) - 0.21%
Standard Chartered Bank 5.75% 15,000 12,966 .08
Bank of Nova Scotia 5.875% 10,000 8,745 .05
Canadian Imperial Bank of Commerce 5.812% 10,000 8,738 .05
Midland Bank 5.875% 5,000 4,547 .03
-------- -----
34,996 .21
-------- -----
U.S. Treasury Obligations - 7.37%
6.75% February 1997 4,000 4,004 .02
6.875% April 1997 50,000 50,179 .30
8.50% May 1997 6,000 6,052 .04
8.50% July 1997 4,000 4,055 .03
5.625% August 1997 50,000 50,016 .30
8.625% August 1997 50,000 50,828 .31
5.50% September 1997 50,000 50,000 .30
5.75% October 1997 50,000 50,070 .30
8.75% October 1997 25,000 25,543 .15
6.00% November 1997 50,000 50,164 .30
7.875% January 1998 50,000 51,015 .31
9.25% August 1998 10,000 10,494 .06
8.875% February 1999 42,000 44,323 .27
9.125% May 1999 10,000 10,658 .06
6.75% June 1999 50,000 50,828 .31
8.75% August 2000 22,500 24,318 .15
8.50% November 2000 20,000 21,541 .13
7.75% February 2001 68,000 71,666 .43
8.00% May 2001 45,000 47,953 .29
11.625% November 2002 38,000 47,660 .29
10.75% February 2003 19,500 23,732 .14
7.25% May 2004 132,000 138,291 .83
11.625% November 2004 38,500 50,477 .30
6.50% May 2005 55,000 55,078 .33
10.75% August 2005 9,000 11,467 .07
10.375% November 2012 6,000 7,663 .05
8.875% August 2017 65,000 79,290 .48
7.125% February 2023 65,250 67,115 .41
6.50% November 2026 70,000 67,364 .41
-------- -----
1,221,844 7.37
-------- -----
TOTAL BONDS & NOTES (cost: $4,872,567,000) 5,006,060 30.20
-------- -----
- ---------------------------------- --- --- ---
Principal Market Percent
Short-Term Securities Amount Value of Net
(000) (000) Assets
- ---------------------------------- --- --- ---
Corporate Short-Term Notes - 4.87%
Warner-Lambert Co. 5.28%-5.35% due 2/26-5/9/97 (1) 98,950 98,084 .59
Coca-Cola Co. 5.28%-5.30% due 2/18-4/2/97 93,100 92,628 .56
Gannett Co. 5.30% due 2/11-2/13/97 (1) 91,500 91,337 .55
Southwestern Bell Telephone Co. 5.27%-5.32%
due 2/13-3/21/97 76,550 76,295 .46
International Lease Finance Corp. 5.30%-5.32%
due 2/14-4/28/97 72,550 72,049 .44
National Rural Utilities Cooperative Finance Corp.
5.28%-5.30% due 2/6-2/21/97 69,400 69,245 .42
A.I. Credit Corp. 5.27%-5.30% due 2/20-4/1/97 68,400 67,973 .41
Walt Disney Co. 5.30%-5.31% due 4/7-4/14/97 64,000 63,349 .38
General Electric Capital Corp. 5.31% due 3/17-3/20/97 45,800 45,486 .27
American Express Credit Corp. 5.31%-5.33%
due 2/4-4/8/97 45,000 44,740 .27
Ford Motor Credit Co. 5.33% due 2/5-4/4/97 39,800 39,530 .24
Pfizer Inc. 5.53% due 2/10/97 (1) 25,000 24,961 .15
CIT Group Holdings, Inc. 5.31% due 2/14/97 22,200 22,154 .13
-------- -----
807,831 4.87
-------- -----
Federal Agency Short-Term Obligations - 0.72%
Federal National Mortgage Assn.
5.25%-5.41% due 2/3-4/17/97 70,200 69,677 .42
Federal Home Loan Bank 5.25% due 4/10/97 36,200 35,835 .21
Federal Home Loan Mortgage Corp. 5.26%-5.37%
due 2/27-3/25/97 14,450 14,381 .09
-------- -----
119,893 .72
-------- -----
TOTAL SHORT-TERM SECURITIES (cost: $927,755,000) 927,724 5.59
-------- -----
TOTAL INVESTMENT SECURITIES (cost: $13,945,337,000) 16,471,616 99.35
Excess of cash and receivables over payables 107,203 .65
-------- -----
NET ASSETS $16,578,819 100.00%
======== =====
(1) Purchased in a private placement transaction;
resale to the public may require registration or sale
only to qualified institutional buyers.
(2) Non-income-producing securities.
(3) Valued under procedures established by the
Board of Directors.
(4) The fund owns 5.96% and 6.49% of the outstanding voting
securities of Ohio Casualty and English China Clays,
respectively, which represent investments in an affiliate as
defined in the Investment Company Act of 1940.
(5) Represents a zero coupon bond which will convert
to an interest-bearing security at a later date.
(6) Pass-through securities backed by a pool of
mortgages or other loans on which principal payments
are periodically made. Therefore, the effective
maturity is shorter than the stated maturity.
(7) Coupon rates may change periodically.
(8) 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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
The Income Fund of America
Financial Statements Unaudited
- ----------------------------------------- --------- ---------
Statement of Assets and Liabilities (dollars in
January 31, 1997 thousands)
- ---------------------------------------- --------- ---------
ASSETS:
Investment securities at market
(cost: $13,945,337) $16,471,616
Cash 619
Receivables for-
Sales of investments $ 132,532
Sales of fund's shares 23,716
Dividends and accrued interest 116,210 272,458
--------- ---------
16,744,693
LIABILITIES:
Payables for-
Purchases of investments 142,189
Repurchases of fund's shares 13,703
Management services 3,805
Accrued expenses 6,177 165,874
--------- ---------
NET ASSETS AT JANUARY 31, 1997-
Equivalent to $16.88 per share on
982,252,366 shares of $1 par value
capital stock outstanding (authorized
capital stock--1,200,000,000 shares) $16,578,819
============
- ---------------------------------------- --------- ---------
Statement of Operations (dollars in
for the six months ended January 31, 1997 thousands)
- ----------------------------------------- --------- ---------
INVESTMENT INCOME:
Income:
Dividends $ 196,677
Interest 251,070 $ 447,747
---------
Expenses:
Management services fee 22,934
Distribution expenses 17,981
Transfer agent fee 4,322
Reports to shareholders 574
Registration statement and
prospectus 744
Postage, stationery and supplies 664
Directors' fees 89
Auditing and legal fees 50
Custodian fee 337
Taxes other than federal income tax 1
Other expenses 81 47,777
--------- ---------
Net investment income 399,970
---------
REALIZED GAIN AND UNREALIZED
APPRECIATION ON INVESTMENTS:
Net realized gain 612,057
Net increase in unrealized appreciation on
investments:
Beginning of period 1,406,174
End of period 2,526,144 1,119,970
--------- ---------
Net realized gain and unrealized
appreciation on investments 1,732,027
---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $2,131,997
============
- ---------------------------------------- --------- ---------
Statement of Changes in Net Assets (dollars in
thousands)
- ----------------------------------------- --------- ---------
Six months
ended
January 31, Year ended
1997* July 31, 1996
--------- ---------
OPERATIONS:
Net investment income $ 399,970 $ 767,059
Net realized gain on investments 612,057 630,886
Net increase in unrealized appreciation
on investments 1,119,970 276,975
--------- ---------
Net increase in net assets
resulting from operations 2,131,997 1,674,920
--------- ---------
DIVIDENDS AND DISTRIBUTIONS
PAID TO SHAREHOLDERS:
Dividends from net investment income (459,723) (718,292)
Distributions from net realized
gain on investments (748,006) (152,790)
--------- ---------
Total dividends and distributions (1,207,729) (871,082)
--------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
61,306,967 and 143,040,894
shares, respectively 1,026,297 2,275,579
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions of
net realized gain on investments:
64,846,055 and 46,413,197
shares, respectively 1,072,555 734,433
Cost of shares repurchased:
53,813,670 and 103,371,820
shares, respectively (903,465) (1,644,843)
--------- ---------
Net increase in net assets
resulting from capital share
transactions 1,195,387 1,365,169
--------- ---------
TOTAL INCREASE IN NET ASSETS 2,119,655 2,169,007
NET ASSETS:
Beginning of period 14,459,164 12,290,157
--------- ---------
End of period (including undistributed
net investment income: $99,249
and $159,002, respectively) $16,578,819 $14,459,164
=========== ===========
*Unaudited
See Notes to Financial Statements
</TABLE>
<PAGE>
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 fund seeks current income while secondarily striving
for capital growth through investments in stocks and fixed-income securities.
The following paragraphs summarize the significant accounting policies
consistently followed by the fund in the preparation of its financial
statements:
Equity-type securities traded on a national securities exchange (or reported
on the NASDAQ national market) and securities traded in the over-the-counter
market are stated at the last reported sales price on the day of valuation;
other securities, and securities for which no sale was reported on that date,
are stated at the last quoted 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 by the Board of Directors or a
committee thereof.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. In the event
the fund purchases securities on a delayed delivery or "when-issued" basis, it
will segregate with its custodian liquid assets in an amount sufficient to meet
its payment obligations in these transactions. 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 and premiums on
securities purchased are amortized over the life of the respective securities.
Dividends and distributions paid to shareholders are recorded on the
ex-dividend date.
Investment securities and other assets and liabilities denominated in
non-U.S. currencies are recorded in the financial statements after translation
into U.S. dollars utilizing rates of exchange on the last business day of the
period. Purchases and sales of investment securities, income and expenses are
calculated using the prevailing exchange rate as accrued. The effects of
changes in foreign currency exchange rates on investment securities are
included with the net realized and unrealized gain or loss on investment
securities.
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 $337,000 includes $240,000 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 January 31, 1997, net unrealized appreciation on investments for
federal income tax purposes aggregated $2,526,322,000, of which $2,658,550,000
related to appreciated securities and $132,228,000 related to depreciated
securities. During the six months ended January 31, 1997, the fund realized, on
a tax basis, a net capital gain of $612,013,000 on securities transactions. Net
gains related to non-U.S. currency transactions of $75,000 were treated as
ordinary income for federal income tax purposes. The cost of portfolio
securities for federal income tax purposes was $13,945,294,000 at January 31,
1997.
3. The fee of $22,934,000 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; 0.15% of such
assets in excess of $8 billion but not exceeding $13 billion; 0.147% of such
assets in excess of $13 billion but not exceeding $21 billion; and 0.145% of
such assets in excess of $21 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 six months ended January 31,
1997, distribution expenses under the Plan were $17,981,000. As of January 31,
1997, accrued and unpaid distribution expenses were $5,770,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $4,322,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $4,683,000 (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 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 January 31,
1997, aggregate amounts deferred and earnings thereon were $290,000.
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 January 31, 1997, accumulated undistributed net realized gain on
investments was $389,816,000 and additional paid-in capital was
$12,581,309,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $3,055,686,000 and $2,813,596,000, respectively,
during the six months ended January 31, 1997.
Net realized currency gains on dividends and withholding taxes reclaimable
were $75,000 for the six months ended January 31, 1997.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Per-Share Data and Ratios
Six Months Year ended July 31
Ended ------- ------- ------- ------- -------
January 31, 1996 1995 1994 1993 1992
1997 /1/
------- ------- ------- ------- ------- -------
Net Asset Value, Beginning of
Period $15.89 $14.92 $13.59 $14.47 $13.94 $12.54
------- ------- ------- ------- ------- -------
Income from Investment
Operations:
Net investment income .43 .87 .85 .83 .85 .85
Net realized and unrealized
gain (loss) on investments 1.87 1.11 1.29 (.53) .74 1.48
------- ------- ------- ------- ------- -------
Total income from
investment operations 2.30 1.98 2.14 .30 1.59 2.33
------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment
income (.50) (.83) (.75) (.83) (.84) (.85)
Distributions from net
realized gains (.81) (.18) (.06) (.35) (.22) (.08)
------- ------- ------- ------- ------- -------
Total distributions (1.31) (1.01) (.81) (1.18) (1.06) (.93)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $16.88 $15.89 $14.92 $13.59 $14.47 $13.94
======= ======= ======= ======= ======= =======
Total Return /2/ 14.73% /3/ 13.46% 16.42% 1.98% 11.88% 19.16%
Ratios/Supplemental Data:
Net assets, end of period (in
millions) $16,579 $14,459 $12,290 $10,537 $9,045 $5,121
Ratio of expenses to average
net assets .31% /3/ .62% .65% .63% .62% .66%
Ratio of net income to average
net assets 2.57% /3/ 5.56% 6.12% 5.92% 6.05% 6.40%
Average commissions paid per share /4/ 3.08 cents /3/ 4.63 cents 6.20 cents 6.40 cents 7.14 cents 7.05 cents
Portfolio turnover rate 19.28% /3/ 37.77% 26.26% 26.42% 29.18% 22.71%
/1/ Unaudited
/2/ Calculated without deducting a sales
charge. The maximum sales charge is
5.75% of the fund's offering price.
/3/ Based on operations for the period
shown and, accordingly, not
representative of a full year's
operations.
/4/ Brokerage commissions paid on
portfolio transactions increase the cost
of securities purchased or reduce the
proceeds of securities sold and are not
separately reflected in the fund's
statement of operations. Shares traded
on a principal basis (without
commissions) such as fixed-income
transactions are excluded.
</TABLE>
<PAGE>
OFFICE OF THE FUND
One Market
Steuart Tower, 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 92821-5804
TRANSFER AGENT FOR
SHAREHOLDER ACCOUNTS
(Please write to the address nearest you.)
American Funds Service Company
P.O. Box 2205
Brea, California 92822-2205
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
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071-2371
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 FINANCIAL ADVISER, CALL AMERICAN FUNDS SERVICE COMPANY, TOLL-FREE,
AT 800/421-0180, OR VISIT WWW.AMERICANFUNDS.COM ON THE WORLD WIDE WEB.
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, 1997, this report must be accompanied by an
American Funds Group Statistical Update for the most recently completed
calendar quarter.
[The American Funds Group(R)]
Printed on recycled paper
Litho in USA BD/AL/3367
Lit. No. IFA-013-0397
