[THE AMERICAN FUNDS GROUP(R)]
THE INCOME FUND OF AMERICA
Semi-Annual Report
for the Six Months Ended
January 31, 1999
[cover caricature: construction of building in the shape of "IFA," floor by
floor]
THE INCOME FUND OF AMERICA(R) SEEKS CURRENT INCOME WHILE SECONDARILY STRIVING
FOR CAPITAL GROWTH THROUGH INVESTMENTS IN STOCKS AND FIXED-INCOME SECURITIES.
A LOOK AT IFA'S DIVIDEND RATE
Compared with the average of equity-income funds and Standard & Poor's 500
Stock Composite Index.
Annual Dividend Rate (percent)
[begin line graph]
<TABLE>
<CAPTION>
<S> <C> <C> <C>
The Income Fund Average of equity-
Date of America income funds S&P 500
1/31/94 5.56 2.81 2.64
7/31/94 6.06 2.91 2.80
1/31/95 6.14 3.03 2.81
7/31/95 5.55 2.78 2.41
1/31/96 5.07 2.48 2.18
7/31/96 5.19 2.44 2.28
1/31/97 5.09 2.09 1.89
7/31/97 4.74 1.81 1.61
1/31/98 4.27 1.73 1.58
7/31/98 4.32 1.64 1.43
1/31/99 4.79 1.54 1.21
</TABLE>
[end graph]
ALL NUMBERS CALCULATED BY LIPPER, INC.
The 12-month dividend rate is calculated by taking the total of the trailing 12
months' dividends and dividing by the month-end net asset value adjusted for
capital gains.
FIGURES SHOWN ARE PAST RESULTS AND ARE NOT PREDICTIVE OF FUTURE RESULTS. SHARE
PRICE AND RETURN WILL VARY, SO YOU MAY LOSE MONEY. INVESTING FOR SHORT PERIODS
MAKES LOSSES MORE LIKELY. INVESTMENTS ARE NOT FDIC-INSURED, NOR ARE THEY
DEPOSITS OF OR GUARANTEED BY A BANK OR ANY OTHER ENTITY.
FELLOW SHAREHOLDERS:
The first half of The Income Fund of America's 1999 fiscal year proved to be a
particularly difficult period for funds that invest in high-yield stocks and
bonds. Many stocks and bonds did quite well, but those that IFA tends to
emphasize did not. For the six months ended January 31, 1999, your fund had a
total return of just 3.4% with dividends and capital gains reinvested. The
average equity-income fund did only slightly better, gaining 4.6% according to
Lipper, Inc., a mutual fund tracking service.
We are pleased to report, however, that IFA again met its primary objective of
providing above-average current income to shareholders despite a volatile six
months marked by record low dividend yields on stocks and fluctuations in bond
returns. IFA paid regular dividends of 20 cents a share in September and
December 1998, plus a special dividend of 8 cents a share in December.
As of January 31, 1999, IFA's annualized dividend rate of 4.8% was more than
three times the 1.5% average dividend rate of the 229 equity-income funds
tracked by Lipper, Inc. It was also more than three times the annualized 1.3%
yield of the unmanaged Standard & Poor's 500 Composite Index, a widely used
gauge of stock market activity; this yield is an all-time low in 73 years of
S&P recordkeeping.
IFA paid a larger-than-usual capital gain distribution of $1.19 a share, or
6.9% of the fund's net asset value, in December. This resulted, in part, from
the sale of stocks that had appreciated to such an extent that their yields
were no longer in line with the fund's income objectives.
FUND EMPHASIZES INCOME
As investors have learned over the years, IFA's emphasis on income has helped
the fund during market declines but sometimes has caused it to lag rapidly
rising markets. For the past six months, IFA and other equity-income funds
produced total returns that were well below the S&P 500's total return of
15.0%. The S&P is increasingly dominated by a small group of technology-related
and global consumer products companies that pay very small dividends or none at
all and therefore do not meet IFA's yield objectives. Moreover, many have been
bid up to unusually high valuations.
In the past six months, such high-growth companies represented more than a
third of the S&P 500 and rose almost 40% on average. Stocks yielding at least
3% represented only 8% of the S&P 500 and delivered a much lower return. In
some cases, high-yielding equities such as energy and insurance stocks actually
declined in price.
The bond market was also volatile during the recent period. U.S. Treasury
securities provided the best returns of the fund's fixed-income investments.
Treasuries benefited from lower inflation and investors' perception of them as
a safe haven from global turmoil. Federal agency obligations and
mortgage-backed securities rose modestly in price, but many higher yielding
corporate bonds declined, reflecting global economic uncertainties. High-yield
bonds are an important part of the fund's overall strategy to provide income to
shareholders.
A LOOK AT THE PAST SIX MONTHS
It's worth taking a more detailed look at the recent volatile period to better
understand how IFA fared in this unusual market. August was an especially bad
month for stocks and high-yield corporate bonds. Many investors fled to the
relative safety of U.S. Treasury bonds in response to the default in Russia,
the near collapse of the U.S. hedge fund Long Term Capital Management and the
financial downturn in Asia. In August, the S&P 500 dropped 14.6%, and the
average Lipper equity-income fund fell 12.3%. In contrast, IFA's 7.2% decline
during the month again demonstrated its historical resistance to stock market
downturns. We believe that IFA's emphasis on securities with above-average
yields provided a cushion during this down period.
In September, the equity market rebounded strongly and kept rising over the
next four months. Three interest-rate cuts by the U.S. Federal Reserve and
coordinated interest-rate cuts by European central banks eased investors' fears
of a global recession and added liquidity to the markets. IFA showed gains as
well for most of the period, but they were much more modest than those recorded
by the S&P 500.
TELECOMMUNICATIONS, PHARMACEUTICALS, CONVERTIBLES SHINE
Telecommunications and pharmaceutical companies were among the industries that
helped the fund's investment results. Strong earnings growth driven by new
product development, growth in cellular services, mergers and cost cutting
helped boost the prices of telecommunications companies. Significant
contributors included AT&T (up 49.7% in price), Ameritech (+32.4%) and Bell
Atlantic (+32.2%).
Share prices of pharmaceutical companies benefited from new drug announcements
as well as investors' perceptions of these companies as being able to generate
growing revenues and profits regardless of the global economic environment. Eli
Lilly rose 39.3% in price and Pharmacia & Upjohn increased 21.4%.
Convertible securities also helped the fund in the recent period. Convertible
bonds and convertible preferred stocks provide regular income streams, and can
be converted into common stocks, allowing potential for appreciation. They
often provide IFA with participation in faster growing areas we could not
invest in otherwise. For example, during the period, Houston Industries 7%
convertible preferred (exchangeable into shares of Time Warner) rose 35.9% and
MediaOne 6.25% convertible preferred increased 41.2%.
ENERGY, INSURANCE, CHEMICALS HURT RESULTS
Energy companies, the fund's third-largest industry holding, continued to
deliver poor returns. World oil prices have dropped more than 40% over the past
year in the wake of the Asian economic crisis and the consequent reduction in
demand. But some analysts believe that a recovery in Asian oil demand and
falling oil supply due to lower energy company expenditures will lead to higher
oil prices early in the year 2000. Energy companies negatively impacting the
fund's results include Atlantic Richfield (-15.3%), Phillips Petroleum (-12.6%)
and Texaco (-22.1%).
Electric and gas utilities contributed importantly to income and provided price
stability during the summer downdraft in the market, but they ended the period
by declining in the month of January. Representing 7.5% of the fund's assets,
this group had a meaningful dampening effect on total return. Other
disappointing industries included insurance and a variety of industrial
companies, such as chemical firms, whose earnings are closely tied to the
business cycle.
As of January 31, IFA had 56.8% invested in equities, 28.4% in bonds and 14.8%
in cash.
THE FUND'S 25TH ANNIVERSARY WITH CAPITAL RESEARCH
December marked the 25th year that The Income Fund of America has been managed
by Capital Research and Management Company. Over the years, we have found that
disciplined, well-researched investments that meet our income-producing
standards have also provided capital growth while reducing price fluctuations
in down markets. We believe that our approach should continue to yield
successful long-term investment results. We look forward to reporting to you
again in the autumn.
Cordially,
/s/Walter P. Stern /s/Janet A. McKinley
Walter P. Stern Janet A. McKinley
Chairman of the Board President
March 11, 1999
The Income Fund of America
RESULTS AT A GLANCE/1/ for periods ended January 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Six Months One Year 10 Years Lifetime/2/ Average Annual
Compound Return
Over Lifetime
THE INCOME FUND OF AMERICA +3.4% +8.6% +248.0% +2,593.9% +14.0%
Standard & Poor's 500 +15.0 +32.4 +460.9 +3,342.7 +15.1
Stock Composite Index
Salomon Smith Barney Long- +3.8 +8.5 +217.4 - -
Term High-Yield Bond
Index/3/
Lehman Brothers Aggregate +5.1 +8.1 +140.7 +845.7 +9.3
Bond Index/4/
Average Savings Institution/5/ +2.1 +4.2 +59.8 +391.0 +6.5
Consumer Price Index +0.7 +1.7 +35.7 +258.0 +5.2
(inflation)/6/
</TABLE>
/1/Distributions reinvested or interest compounded.
/2/Since December 1, 1973, when Capital Research and Management Company became
IFA's investment adviser.
/3/The Salomon Smith Barney Long-Term High-Yield Bond Index tracks high-yield
bonds with a maturity of more than 10 years.
/4/From December 1, 1973, through December 31, 1975, the Lehman Brothers
Government/Corporate Bond Index was used because the Lehman Brothers Aggregate
Bond Index did not yet exist. The Lehman Brothers Aggregate Bond Index is a
broad index that tracks fixed-rate, publicly placed debt issues.
/5/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.
/6/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, 1998
(the most recent calendar quarter), assuming payment of the 5.75% maximum sales
charge at the beginning of the stated periods:
<TABLE>
<CAPTION>
<S> <C> <C>
10 Years Five Years One Year
+244.62% +82.74% +3.19%
(+13.17% annually) (+12.82% annually)
</TABLE>
Sales charges are lower for accounts of $50,000 or more. The fund's 30-day
yield as of February 28, 1999, calculated in accordance with the Securities and
Exchange Commission formula, was 4.74%.
<TABLE>
<S> <C> <C> <C>
Asset Mix Comparison
(Unaudited for January 31, 1999)
January 31, 1999 July 31, 1999
Percent of Percent of
Investment Portfolio Net Assets Investment Portfolio Net Assets
- ---------------------- ------- ----------------------- -------
U.S. Equity Securities + 46.0% U.S. Equity Securities ++ 48.9%
Non-U.S. Equity Securities 10.8 Non-U.S. Equity Securities 10.6
Government Bonds 8.0 Government Bonds 7.4
Other Fixed-Income Securities 20.4 Other Fixed-Income Securities 19.8
Cash & Equivalents 14.8 Cash & Equivalents 13.3
+ Also includes 0.1% in Canadian ++ Also includes 0.2% in
equities that are part of the Canadian equities that are
S&P 500. part of the S&P 500.
- ----------------------- ------- ----------------------- -------
Ten Largest Industries Percent of Ten Largest Industries Percent of
in Equity Holdings Net Assets in Equity Holdings Net Assets
- ----------------------- ------- ----------------------- -------
Banking 8.9% Energy Sources 8.7%
Utilities: Electric & Gas 7.5 Utilities: Electric & Gas 8.1
Energy Sources 5.9 Banking 8.0
Telecommunications 5.6 Telecommunications 6.3
Insurance 3.2 Insurance 3.9
Forest Products & Paper 3.0 Automobiles 3.4
Beverages & Tobacco 2.4 Health & Personal Care 2.5
Health & Personal Care 2.3 Merchandising 2.2
Real Estate 2.0 Beverages & Tobacco 1.9
Broadcasting & Publishing 1.8 Forest Products & Paper 1.7
- ----------------------- ------- ----------------------- -------
Percent of Percent of
Ten Largest Equity Holdings Net Assets Ten Largest Equity Holdings Net Assets
- ----------------------- ------- ----------------------- -------
First Union 2.2% First Union 2.5%
U S WEST 1.8 Atlantic Richfield 2.1
Atlantic Richfield 1.7 Chrysler 1.9
J.C. Penney 1.2 U S WEST 1.6
Phillips Petroleum 1.2 J.C. Penney 1.6
Weyerhauser 1.1 Texaco 1.5
General Motors 1.1 AT&T 1.4
Philip Morris 1.0 Ford Motor 1.3
Glaxo Wellcome 0.9 Phillips Petroleum 1.2
BankAmerica 0.9 Amoco 1.0
</TABLE>
<TABLE>
The Income Fund of America, Inc.
Investment Portfolio, January 31, 1999 (unaudited)
<S> <C> <C> <C>
Shares or Market Percent
Principal Value of Net
Equity Securities Amount (000) Assets
- ------------------------------------------------------------------------- -------- -------- ------
Banking - 8.92%
First Union Corp. 9,554,100 $ 502,785 2.22%
BankAmerica Corp. 3,094,500 206,945 .91
J.P. Morgan & Co. Inc. 1,760,100 185,691 .82
Bankers Trust Corp. (formerly Bankers Trust New York Corp.) 2,005,200 174,452 .77
National Bank of Canada 8,500,000 132,047
NB Capital Corp. 8.35% exchangeable depositary shares 520,000 13,552 .64
Commonwealth Bank of Australia 8,475,373 127,467 .56
SB Treasury Co. LLC, Series A, 9.40% noncumulative preferred (1) 126,000,00 116,404 .52
Westpac Banking Corp. 15,204,991 105,153 .46
BancWest Corp. (formerly First Hawaiian Bank) 1,900,000 85,262 .38
BANK ONE CORP. (formerly Banc One Corp.) 1,140,700 59,744 .26
KeyCorp 1,800,000 57,375 .25
Keystone Financial, Inc. 1,550,000 54,831 .24
Bank of Nova Scotia 2,400,000 51,673 .23
Tokai Preferred Capital Co. LLC, Series A, 9.98% noncumulative preferred 52,250,000 42,584 .19
Bank of New York Co., Inc. 1,000,000 35,500 .16
Fuji JGB Investment LLC, Series A, 9.87% noncumulative preferred (1) 50,000,000 34,598 .15
First Security Corp. 749,000 15,261 .07
IBJ Preferred Capital Co. LLC, Series A, 8.79% noncumulative preferred (110,000,000 7,935 .04
Chase Manhattan Corp. 87,400 6,724 .03
Banco Nacional de Mexico, SA 11.00% exchangeable notes 2003 (1) $4,175,000 3,591 .02
-------- ------
2,019,574 8.92
-------- ------
Utilities - Electric & Gas - 7.54%
KeySpan Energy Corp. (formerly MarketSpan Corp.) 5,780,000 156,421 .69
Florida Progress Corp. 3,685,000 153,388 .68
Wisconsin Energy Corp. 4,880,000 126,880 .56
DTE Energy Co. 3,000,000 121,500 .54
Consolidated Edison, Inc. 2,300,000 113,706 .50
PECO Energy Co. 2,300,000 87,831 .39
SCANA Corp. 2,315,000 64,097 .28
MCN Energy Group Inc. 3,550,000 63,012 .28
Carolina Power & Light Co. 1,500,000 62,438 .27
BEC Energy 1,600,000 61,200 .27
Entergy Corp. 2,000,000 58,875 .26
Peoples Energy Corp. 1,700,000 58,650 .26
Equitable Resources, Inc. 1,850,000 48,216 .21
Ameren Corp. 1,200,000 47,100 .21
Southern Co. 1,500,000 40,406 .18
CINergy Corp. 1,225,000 38,358 .17
Sempra Energy 1,600,000 36,800 .16
National Power PLC 4,580,000 35,998 .16
GPU, Inc. 840,400 35,822 .16
DQE, Inc. 800,000 31,550 .14
New Jersey Resources Corp. 750,000 27,281 .12
Consolidated Natural Gas Co. 530,000 27,196 .12
AGL Resources Inc. 1,240,000 24,955 .11
OGE Energy Corp. 950,000 24,047 .11
Puget Sound Energy, Inc. 900,000 22,669 .10
TECO Energy, Inc. 934,300 21,722 .09
Scottish Power PLC 2,000,000 21,113 .09
DPL Inc. 1,034,100 19,583 .09
Scottish and Southern Energy PLC (formerly Southern Electric PLC) 2,000,000 19,495 .09
South Jersey Industries, Inc. 500,000 12,813 .06
El Paso Energy Corp. (formerly El Paso Natural Gas Co.) 380,000 12,540 .05
Citizens Utilities Trust 5.00% EPPICS convertible preferred 2036 250,000 10,125 .04
Western Resources, Inc. 275,000 8,645 .04
WICOR, Inc. 366,400 7,351 .03
MDU Resources Group, Inc. 300,000 6,900 .03
-------- ------
1,708,683 7.54
-------- ------
Energy Sources - 5.90%
Atlantic Richfield Co. 6,800,000 390,150 1.72
Phillips Petroleum Co. 6,803,500 262,785 1.16
Sunoco, Inc. (formerly Sun Co., Inc.) 3,932,000 138,111 .61
USX-Marathon Group 4,000,000 91,000 .40
Texaco Inc. 1,800,000 85,275 .38
Ultramar Diamond Shamrock Corp. 3,348,500 73,667 .32
Exxon Corp. 1,000,000 70,438 .31
Unocal Capital Trust $3.125 convertible preferred 1,040,000 49,985 .22
Occidental Petroleum Corp. 3,250,000 48,953 .22
Mobil Corp. 500,000 43,844 .19
BP Amoco PLC (ADS) (formerly Amoco Corp.) 525,000 42,591 .19
Ashland Inc. 570,000 27,075 .12
CalEnergy Capital Trust II 6.25% convertible preferred 2012 270,000 13,095 .06
-------- ------
1,336,969 5.90
-------- ------
Telecommunications - 5.59%
U S WEST, Inc. 6,450,000 397,884 1.76
AT&T Corp. 2,250,000 204,187 .90
Ameritech Corp. 3,130,000 203,841 .90
MediaOne Group, Inc. 6.25% PIES convertible preferred 2001 1,920,000 157,920 .70
Bell Atlantic Corp. 2,000,000 120,000 .53
Telecom Italia SpA, nonconvertible savings shares 5,353,000 36,391 .16
NTL Inc. 7.00% convertible debentures 2008 (1) $15,000,00 33,000 .15
Telecom Corp. of New Zealand Ltd. 9,647,600 25,126 .11
France Telecom, SA 260,000 24,475 .11
SBC Communications Inc. 7.75% DECS exchangeable notes 2001 463,000 20,951 .09
Koninklijke PTT Nederland NV 334,024 18,490 .08
Deutsche Telekom AG 209,400 9,511 .04
Nextel Communications, Inc., Class A (2) 111,547 3,569
Nextel Communications, Inc. warrants, expire 1999 (2)(3) 51,912 182 .02
Cellular Communications International, Inc. (2) 41,380 3,308 .01
COLT Telecom Group PLC warrants, expire 2006 (1)(2) 5,000 2,500 .01
Comunicacion Celular SA, Class B, warrants, expire 2003 (1)(2) 31,000 2,325 .01
Omnipoint Corp. (1)(3) 92,761 1,322 .01
Loral Space & Communications Ltd. (formerly Orion Network Systems, Inc.) 61,000 789 .00
warrants, expire 2007 (2)
Allegiance Telecom, Inc. warrants, expire 2008 (1)(2) 20,000 400 .00
Iridium World Communications Ltd. warrants, expire 2005 (1)(2) 4,000 380 .00
ICG Holdings, Inc. warrants, expire 2005 (1)(2) 19,800 317 .00
Conecel Holdings Ltd., Class B, warrants, expire 2000 (1)(2)(3) 76,825 115 .00
CellNet Data Systems, Inc. warrants, expire 2007 (1)(2) 15,450 93 .00
McCaw International, Ltd. warrants, expire 2007 (1)(2) 31,500 79 .00
-------- ------
1,267,155 5.59
-------- ------
Insurance - 3.15%
American General Corp. 2,014,200 143,638 .63
St. Paul Companies, Inc. 4,260,000 125,138
St. Paul Capital LLC 6.00% MIPS convertible preferred 190,000 11,020 .60
Italy (Republic of) 5.00% PENs 2001 (exchangeable into INA SpA) $65,000,00 114,400 .51
Ohio Casualty Corp. (4) 2,280,000 90,630 .40
Aetna Inc., Class C, 6.25% convertible preferred 1,000,000 80,125 .35
SAFECO Corp. 1,800,000 69,975 .31
Lincoln National Corp. 570,000 47,488 .21
Mutual Risk Management Ltd. 0% convertible debentures 2015 $22,000,00 17,490 .08
PMI Group, Inc. 303,000 12,991 .06
-------- ------
712,895 3.15
-------- ------
Forest Products & Paper - 2.97%
Weyerhaeuser Co. 4,672,900 252,921 1.12
Union Camp Corp. 2,500,000 154,219 .68
UPM-Kymmene Corp. 3,500,000 91,408 .40
Stora Enso Oyj, Class R 6,159,169 55,390
Stora Enso Oyj, Class A 345,942 2,969 .26
Georgia-Pacific Corp., Timber Group 2,500,000 56,250 .25
Potlatch Corp. 1,200,000 41,475 .18
APP Finance (VI) Mauritius Ltd. 0% convertible preferred 2012 $144,000,0 17,640 .08
-------- ------
672,272 2.97
-------- ------
Beverages & Tobacco - 2.38%
Philip Morris Companies Inc. 4,900,000 230,300 1.02
RJR Nabisco Holdings Corp. 4,000,000 108,000 .48
Southcorp Ltd. 24,795,316 83,400 .37
Imperial Tobacco Ltd. 4,000,000 45,975 .20
UST Inc. 1,400,000 44,100 .19
Gallaher Group PLC 3,800,000 26,989 .12
-------- ------
538,764 2.38
-------- ------
Health & Personal Care - 2.31%
Glaxo Wellcome PLC 6,270,000 209,700 .92
Bristol-Myers Squibb Co. 815,000 104,473 .46
Pharmacia & Upjohn, Inc. 1,300,000 74,750 .33
Eli Lilly and Co. 600,000 56,212 .25
American Home Products Corp. 800,000 46,950 .21
Sepracor Inc. 6.25% convertible subordinated debentures 2005 (1) $7,350,000 18,596
Sepracor Inc. 7.00% convertible subordinated debentures 2005 (1) $7,000,000 8,085 .12
Glycomed Inc. 7.50% convertible debentures 2003 $5,000,000 4,075 .02
-------- ------
522,841 2.31
-------- ------
Real Estate - 1.97%
Boston Properties, Inc. 2,634,600 85,625 .38
Equity Residential Properties Trust 1,458,000 59,322
Equity Residential Properties Trust, Series G, 7.25% convertible preferre 600,000 13,350 .32
Spieker Properties, Inc. 1,600,000 54,400 .24
Meditrust Corp. 2,027,900 31,813 .14
ProLogis Trust, Series D, 7.92% preferred 1,080,000 26,325 .12
Amoy Properties Ltd. 35,000,000 22,474 .10
Weingarten Realty Investors 485,000 19,097 .09
CenterPoint Properties Corp. 580,000 18,923 .08
AMB Property Corp. 675,000 14,934 .07
Hysan Development Co. Ltd. 12,561,000 14,510
Hysan Development Co. Ltd. warrants, expire 1999 (2) 1,256,100 6 .06
Glenborough Realty Trust Inc., Series A, 7.75% convertible preferred 800,000 14,400 .06
Duke Realty Investments, Inc., Series B, 7.99% preferred cumulative step- 300,000 14,241 .06
premium rate
Simon DeBartolo Group, Inc., Series C, 7.89% preferred cumulative step-up 300,000 13,978 .06
premium rate
Sun Hung Kai Properties Ltd. 2,000,000 13,165 .06
Archstone Communities Trust 564,000 11,033 .05
IAC Capital Trust, Series A, 8.25% TOPRS preferred 300,000 7,275 .03
CarrAmerica Realty Corp., Series B, 8.57% cumulative redeemable preferred 280,000 6,352 .03
New Plan Realty Trust, Series D, 7.80% preferred cumulative step-up 112,500 5,302 .02
premium rate
-------- ------
446,525 1.97
-------- ------
Broacasting & Publishing - 1.80%
Houston Industries Inc. 7.00% ACES convertible preferred 2000 1,780,000 189,347 .84
NTL Inc. 7.00% convertible subordinated notes 2008 (1) $50,000,00 76,750
NTL Inc. warrants, expire 2008 (1)(2)(3) 25,650 1,495 .34
CSC Holdings, Inc., Series I, $2.125 cumulative convertible exchangeable 760,000 77,235 .34
preferred
Tele-Communications International 4.50% convertible debentures 2006 $34,000,00 38,760 .17
MediaOne Group, Inc., Series D, 4.50% convertible preferred 225,000 24,975 .11
-------- ------
408,562 1.80
-------- ------
Automobiles - 1.72%
General Motors Corp. 2,700,000 242,325 1.07
DaimlerChrysler AG (formerly Chrysler Corp.) (New York Registered Shares) 838,607 86,848 .38
Ford Motor Co. 1,000,000 61,438 .27
-------- ------
390,611 1.72
-------- ------
Merchandising - 1.71%
J.C. Penney Co., Inc. 6,880,000 269,610 1.19
Coles Myer Ltd. 17,400,700 95,395 .42
PETsMart, Inc. 6.75% convertible subordinated notes 2004 $17,500,00 21,263 .10
-------- ------
386,268 1.71
-------- ------
Chemicals - 1.54%
Dow Chemical Co. 1,200,000 105,675 .47
Imperial Chemical Industries PLC (ADR) 2,775,000 99,727 .44
International Flavors & Fragrances Inc. 1,800,000 78,525 .35
DSM NV 400,000 35,132 .16
Witco Corp. 1,981,600 30,467 .12
-------- ------
349,526 1.54
-------- ------
Business & Public Services - 1.01%
Cendant Corp. 7.50% PRIDES convertible preferred 1,425,000 54,239 .24
United Utilities PLC 2,521,463 32,546 .14
Alexander & Baldwin, Inc. 1,375,000 27,801 .12
Budget Group, Inc. 6.25% TIDES convertible preferred 2005 600,000 22,800 .10
Hyder PLC 1,425,000 19,143 .08
Thames Water PLC 1,000,000 17,512 .08
Omnicom Group Inc. 4.25% convertible debentures 2007 (1) $7,500,000 15,469 .07
TNT Post Groep 330,000 11,448 .05
Browning-Ferris Industries, Inc. 405,000 11,137 .05
IKON Office Solutions, Inc. 499,440 7,991 .04
Nationwide Health Properties, Inc., Series A, 7.677% preferred cumulative 50,000 4,080 .02
step-up premium rate
Integrated Health Services, Inc. (2) 280,001 3,920 .02
-------- ------
228,086 1.01
-------- ------
Financial Services - 0.94%
Household International, Inc. 2,453,280 107,791 .48
Bell Atlantic Financial Services, Inc., 4.25% convertible debentures 2005$63,000,00 72,608 .32
BNP U.S. Funding LLC, Series A, 7.738% noncumulative preferred (1) 32,500,000 31,317 .14
-------- ------
211,716 .94
-------- ------
Electronic Components & Instruments - 0.89%
Micron Technology, Inc. 7.00% convertible subordinated notes 2004 $50,000,00 64,000 .28
Advanced Micro Devices, Inc. 6.00% convertible subordinated notes 2005 $40,000,00 36,000 .16
Western Digital Corp. 0% convertible subordinated debentures 2018 (1) $112,500,0 33,890 .15
EMC Corp. 3.25% convertible subordinated notes 2002 $7,000,000 33,880 .15
National Semiconductor Corp. 6.50% convertible debentures 2002 $15,000,00 13,116 .06
Thermo Instrument Systems Inc. 4.00% convertible subordinated debentures $10,000,00 8,338 .04
Quantum Corp. 7.00% convertible subordinated notes 2004 $7,000,000 6,895 .03
Maxtor Corp. 5.75% convertible debentures 2012 $7,500,000 4,500 .02
-------- ------
200,619 .89
-------- ------
Industrial Components - 0.78%
Federal-Mogul Corp. 7.00% convertible preferred 2027 1,000,000 66,375 .29
Dana Corp. 1,400,000 57,575 .25
Tomkins PLC 6,750,000 24,418 .11
Tower Auto Capital Trust 6.75% convertible preferred 2018 (1) 450,000 23,175 .10
BTI Capital Trust 6.50% convertible preferred 2027 (1) 500,000 6,000 .03
-------- ------
177,543 .78
-------- ------
Food & Household Products - 0.70%
General Mills, Inc. 1,885,000 158,222 .70
-------- ------
Recreation & Other Consumer Products - 0.56%
EMI Group PLC 13,546,600 90,212 .40
Jostens, Inc. 1,580,000 36,834 .16
V2 Music Holdings warrants, expire 2008 (1)(2) 14,750 0 .00
-------- ------
127,046 .56
-------- ------
Miscellaneous Materials & Commodities - 0.45%
English China Clays PLC (4) 18,224,000 72,218 .32
Crown Cork & Seal Co., Inc. 4.50% convertible preferred 2000 1,005,000 30,401 .13
-------- ------
102,619 .45
-------- ------
Metals: Nonferrous - 0.40%
Phelps Dodge Corp. 750,000 32,578 .15
Freeport-McMoRan Copper & Gold Inc., Series A, $1.75 convertible preferre 1,400,000 22,225
Freeport-McMoRan Copper & Gold Inc., Class B 300,000 2,962 .11
Cyprus Amax Minerals Co., Series A, $4.00 convertible preferred 465,000 16,624 .07
Inco Ltd. 5.75% convertible debentures 2004 $17,250,00 15,180 .07
-------- ------
89,569 .40
-------- ------
Building Materials & Components - 0.32%
Wolseley PLC 9,000,000 57,863 .25
TXI Capital Trust I 5.50% convertible preferred 2028 450,000 15,272 .07
-------- ------
73,135 .32
-------- ------
Leisure & Tourism - 0.30%
Premier Parks Inc. 7.50% PIES convertible preferred 2001 450,000 27,000 .12
Host Marriott Financial Trust 6.75% QUIPS convertible preferred 2026 600,000 23,700 .11
AMF Bowling, Inc. 0% convertible debentures 2018 (1) $90,000,00 11,250 .05
Royal Caribbean Cruises Ltd., Series A, 7.25% convertible preferred 45,000 5,529 .02
-------- ------
67,479 .30
-------- ------
Machinery & Engineering - 0.24%
Ingersoll-Rand Co. 6.75% PRIDES convertible preferred 1,400,000 34,475 .15
Thermo Electron Corp. 4.25% convertible subordinated debentures 2003 (1) $23,000,00 20,815 .09
-------- ------
55,290 .24
-------- ------
Transportation: Rail & Road - 0.22%
Union Pacific Capital Trust 6.25% TIDES convertible preferred (1) 976,200 48,810 .22
-------- ------
Transportation: Airlines - 0.17%
Qantas Airways Ltd. 17,764,112 38,642 .17
-------- ------
Appliances & Household Durables - 0.16%
Newell Financial Trust 5.25% QUIPS convertible preferred 2027 668,000 35,279 .16
Protection One Alarm Monitoring, Inc. warrants, expire 2005 (1)(2) 57,600 403 .00
-------- ------
35,682 .16
-------- ------
Other Industries - 0.32%
Swire Pacific Capital Ltd. 8.84% cumulative guaranteed perpetual 920,000 16,100
capital securities (1)
Swire Pacific Offshore Financing Ltd. 9.33% cumulative guaranteed perpetu 400,000 7,200 .10
capital securities (1)
Diamond Offshore Drilling, Inc. 3.75% convertible debentures 2007 $18,700,00 17,391 .08
Courtaulds Textiles PLC 4,500,000 9,989 .05
Bethlehem Steel Corp. $3.50 convertible preferred 250,000 9,531 .04
Wang Laboratories, Inc., Series B, 6.50% convertible preferred 170,000 8,160 .03
depositary shares (1)
Daewoo Corp. 0.50% Eurodollar convertible debentures 2007 (1) $5,000,000 3,750 .02
-------- ------
72,121 .32
-------- ------
Miscellaneous - 1.86%
Other equity securities in initial period of acquisition 421,872 1.86
-------- ------
-------- ------
TOTAL EQUITY SECURITIES (cost: $10,385,041,000) 12,869,096 56.82
-------- ------
Shares or Market Percent
Principal Value of Net
Bonds & Notes Amount (000) Assets
- ------------------------------------------------------------------------- -------- -------- ------
Broadcasting, Advertising & Publishing - 3.37%
Time Warner Inc.:
Pass-Through Asset Trust 1997-2, 4.90% 1999 (1)(5) $ 10,000 $ 9,981
7.75% 2005 9,500 10,542
8.18% 2007 20,000 23,231
9.125% 2013 5,000 6,404
7.25% 2017 39,500 43,396 .41
Chancellor Media Corp. of Los Angeles (formerly Chancellor Radio
Broadcasting Co.):
9.375% 2004 28,000 29,610
8.125% 2007 40,500 42,120
Chancellor Media Corp. of Los Angeles:
Series B, 8.75% 2007 4,500 4,770
9.00% 2008 12,000 13,230 .40
CBS Corp. 7.15% 2005 84,500 89,036 .39
Fox/Liberty Networks, LLC, FLN Finance, Inc.:
0%/9.75% 2007 (6) 45,250 32,806
8.875% 2007 24,700 25,688 .26
Comcast Corp. 10.25% 2001 12,600 13,665
Comcast Cable Communications, Inc.:
8.125% 2004 8,000 8,942
8.375% 2007 5,000 5,868
8.875% 2017 15,000 19,050 .21
CSC Holdings, Inc.:
7.25% 2008 8,000 8,360
8.125% 2009 22,000 24,252
9.875% 2013 11,500 12,823 .20
NTL Inc.:
0%/12.75% 2005 (6) 22,000 20,460
Series B, 10.00% 2007 10,000 10,600
0%/9.75% 2008 (6) 5,000 3,506 .15
Hearst-Argyle Television, Inc.:
7.00% 2018 25,750 26,340
7.50% 2027 7,500 8,075 .15
Tele-Communications, Inc. 10.125% 2001 5,000 5,547
TCI Communications, Inc.:
8.00% 2005 15,000 16,994
8.75% 2015 6,500 8,254 .14
TeleWest PLC:
9.625% 2006 5,000 5,375
0%/11.00% 2007 (6) 20,500 18,142 .10
Century Communications Corp.:
8.75% 2007 13,200 14,586
0% 2008 10,000 5,350 .09
Radio One, Inc. 7.00%/12.00% 2004 (6) 16,500 16,871 .07
Comcast UK Cable Partners Ltd. 0%/11.20% 2007 (6) 19,500 16,868 .07
Lenfest Communications, Inc.:
7.625% 2008 2,000 2,100
8.25% 2008 12,500 13,687 .07
American Media Operations, Inc. 11.625% 2004 13,250 13,913 .06
Falcon Holding Group, LP 8.375% 2010 13,000 13,520 .06
STC Broadcasting, Inc. 11.00% 2007 11,500 12,190 .05
TKR Cable I, Inc. 10.50% 2007 10,000 10,869 .05
News America Holdings Inc.:
6.625% 2008 4,500 4,714
7.43% 2026 5,000 5,436 .05
Adelphia Communications Corp.:
8.125% 2003 6,500 6,663
10.50% 2004 3,000 3,300 .04
EZ Communications, Inc. 9.75% 2005 7,500 8,287 .04
Ziff-Davis Inc. 8.50% 2008 8,250 8,209 .04
V2 Music (Holdings) PLC 0%/14.00% 2008 (1)(6) 14,750 8,039 .04
Sun Media Corp. 9.50% 2007 7,071 7,849 .04
Newsquest Capital PLC:
11.00% 2006 5,400 6,021
Series B, 11.00% 2006 1,200 1,338 .03
Coaxial Communications of Central Ohio, Inc. 10.00% 2006 6,750 7,104 .03
Young Broadcasting Inc.:
11.75% 2004 1,000 1,075
10.125% 2005 3,750 3,937
Series B, 8.75% 2007 750 776 .03
Telemundo Holdings, Inc. 0%/11.50% 2008 (1)(6) 8,500 4,845 .02
Multicanal Participacoes SA, Series B, 12.625% 2004 6,475 4,759 .02
Antenna TV SA 9.00% 2007 5,250 4,725 .02
Gray Communications Systems, Inc. 10.625% 2006 3,500 3,719 .02
RBS Participacoes SA 11.00% 2007 (1) 6,750 2,481 .01
Continental Cablevision, Inc. 8.50% 2001 2,000 2,122 .01
Grupo Televisa, SA 11.875% 2006 750 729 .00
-------- ------
763,149 3.37
-------- ------
Wireless Communications - 2.55%
NEXTEL Communications, Inc.:
0%/9.75% 2004 (6) 47,500 47,856
0%/10.125% 2004 (6) 5,000 5,025
0%/9.75% 2007 (6) 59,500 38,675
0%/10.65% 2007 (6) 8,000 5,460
0%/9.95% 2008 (6) 175,875 112,560
0%/12.125% 2008 (6) 37,450 17,367
12.00% 2008 (1) 8,500 9,520 1.04
Omnipoint Corp.:
14.00% 2003 (1)(3) 54,500 53,682
11.625% 2006 55,350 44,280
8.531% 2006 (1)(7) 14,898 13,408 .49
Comcast Cellular Corp., Series B, 9.50% 2007 36,500 41,975 .19
McCaw International, Ltd. 0%/13.00% 2007 (6) 46,850 26,295 .12
PageMart Wireless, Inc. (6):
0%/11.25% 2008 31,000 13,175
0%/15.00% 2005 13,760 12,040 .11
Clearnet Communications 0%/14.75% 2005 (6) 27,000 23,423 .10
Mobile Telecommunication Technologies Corp. 13.50% 2002 19,875 22,608 .10
Comunicacion Celular SA 0%/14.125% 2005 (6) 31,000 20,421 .09
American Cellular Corp. 10.50% 2008 (1) 17,850 18,564 .08
CCPR Services, Inc. 10.00% 2007 18,000 18,270 .08
Esat Telecom Group PLC 0%/12.50% 2007 (6) 12,875 8,691 .04
Sprint Spectrum LP, Sprint Spectrum Finance Corp. 11.00% 2006 6,000 6,997 .03
Centennial Cellular Operating Co. LLC, Centennial Finance Corp. 6,250 6,594 .03
10.75% 2008 (1)
Price Communications Cellular Holdings, Inc. 11.25% 2008 (7) 5,000 4,925 .02
PTC International Finance BV 0%/10.75% 2007 (6) 5,000 3,425 .02
Crown Castle International Corp. 0%/10.625% 2007 (6) 2,600 1,872 .01
Conecel Holdings Ltd., Series A, 16.00% 2000 (1)(3)(7) 2,950 1,033 .00
-------- ------
578,141 2.55
-------- ------
Telecommunications - 1.47%
Cable & Wireless Communications PLC:
6.625% 2005 26,500 27,304
6.75% 2008 38,000 39,751 .30
Loral Orion Network Systems, Inc. (formerly Orion Network Systems, Inc.) 35,175 34,471 .15
11.25% 2007
Time Warner Telecom Inc. 9.75% 2008 27,975 29,933 .13
Viatel, Inc. 11.25% 2008 21,500 21,715 .10
Qwest Communications International Inc.:
0%/9.47% 2007 (6) 15,000 12,000
10.875% 2007 3,084 3,558
0%/8.29% 2008 (6) 7,500 5,850 .09
SpectraSite Holdings, Inc. 0%/12.00% 2008 (1)(6) 37,500 19,312 .08
WorldCom, Inc.:
6.40% 2005 10,000 10,371
8.875% 2006 7,747 8,435 .08
Dobson/Sygnet Communications Co. 12.25% 2008 (1) 14,250 15,247 .07
TVN Entertainment Corp., Units, 14.00% 2008 14,750 13,275 .06
Allegiance Telecom Inc., Units, 0%/11.75% 2008 (6) 23,500 12,690 .06
US Xchange LLC 15.00% 2008 10,500 10,920 .05
Netia Holdings BV:
0%/11.25% 2007 (6) 10,500 6,589
10.25% 2007 3,625 3,344 .04
NEXTLINK Communications, Inc.:
9.625% 2007 4,000 3,940
9.00% 2008 6,250 5,953 .04
ICO Global Communications, Units, 15.00% 2005 10,000 7,850 .03
IMPSAT Corp. 12.375% 2008 10,000 7,775 .03
COLT Telecom Group PLC 0%/12.00% 2006 (6) 7,500 6,375 .03
Sprint Capital Corp. 6.875% 2028 6,000 6,353 .03
Orange PLC 8.00% 2008 6,000 6,255 .03
Teligent, Inc. 11.50% 2007 4,500 4,275 .02
PanAmSat Corp. 6.125% 2005 4,000 3,924 .02
Iridium LLC, Series A, 13.00% 2005 4,000 3,640 .02
CellNet Data Systems, Inc. 0%/14.00% 2007 (6) 9,200 2,760 .01
-------- ------
333,865 1.47
-------- ------
Business & Public Services - 1.35%
Integrated Health Services, Inc.:
10.25% 2006 (7) 16,900 16,731
Series A, 9.50% 2007 35,605 33,647 .38
Series A, 9.25% 2008 38,950 36,613
Columbia/HCA Healthcare Corp.:
6.87% 2003 10,575 10,279
7.15% 2004 6,000 5,861
6.91% 2005 10,750 10,427
8.85% 2007 16,770 18,125
8.70% 2010 9,500 10,034 .24
Paracelsus Healthcare Corp. 10.00% 2006 30,100 25,585 .11
Safety-Kleen Services, Inc. 9.25% 2008 24,250 25,220 .11
Katz Media Corp., Series B, 10.50% 2007 18,300 20,588 .09
Tenet Healthcare Corp.:
8.00% 2005 9,500 9,785
8.125% 2008 10,000 10,300 .09
Allied Waste North America, Inc. 7.625% 2006 (1) 18,750 19,359 .09
Protection One Alarm Monitoring, Inc. 13.625% 2005 (7) 11,685 13,321 .06
Mariner Health Group, Inc. 9.50% 2006 12,750 12,559 .06
Cendant Corp. 7.75% 2003 12,000 12,437 .06
Omega Healthcare 6.95% 2002 5,000 4,861 .02
Allegiance Corp. 7.00% 2026 4,000 4,200 .02
Unison HealthCare Corp.:
0%/13.00% 1999 (1)(3)(6)(8) 2,000 2,000
13.00% 2006 (1)(3)(8) 4,000 800 .01
Iron Mountain Inc. 8.75% 2009 1,750 1,820 .01
-------- ------
304,552 1.35
-------- ------
Banking - 1.10%
Capital One Financial Corp.:
7.25% 2003 10,000 10,235
7.125% 2008 22,500 21,715
Capital One Bank:
7.15% 2006 16,000 16,095
6.70% 2008 5,000 4,850
Capital One Capital I 6.769% 2027 (1)(7) 13,500 11,313 .28
MBNA Corp.:
MBNA 6.75% 2008 12,500 12,418
MBNA Capital A, Series A, 8.278% 2026 10,000 10,274
MBNA Capital B, Series B, 6.019% 2027 (7) 32,000 26,006 .22
Dime Bancorp, Inc. 6.375% 2001 15,000 15,012
Dime Capital Trust I, Dime Bancorp, Inc., Series A, 9.33% 2027 13,950 15,080 .13
Riggs Capital Trust II:
8.625% 2026 (1) 1,500 1,527
8.875% 2027 (1) 23,000 24,226
8.875% 2027 2,000 2,107 .12
Advanta Corp.:
Series D, 6.60% 2000 4,000 3,922
Series D, 6.65% 2000 7,500 7,373
7.50% 2000 4,000 3,768
6.91% 2002 5,000 4,359
6.925% 2002 5,000 4,360 .11
Washington Mutual Capital I Subordinated Capital Income Securities 10,000 10,977 .05
8.375% 2027
Ahmanson Capital Trust I Capital Securities, Series A, 8.36% 2026 (1) 8,000 8,967 .04
HSBC America 7.808% 2026 (1) 8,000 7,688 .03
First Union Corp. 6.824%/7.574% 2026 (6) 5,000 5,566 .03
Bankers Trust New York Corp. 8.25% 2005 5,000 5,519 .02
Komercni Finance BV 9.00%/10.75% 2008 (1)(6) 6,000 4,800 .02
Chase Capital II, Global Floating Rate Capital Securities, Series B, 5,000 4,724 .02
5.719% 2027 (7)
Chevy Chase Bank, FSB 9.25% 2005 4,000 4,040 .02
J.P. Morgan & Co. Inc., Series A, 6.00% 2009 1,650 1,644 .01
-------- ------
248,565 1.10
-------- ------
Transportation - 0.89%
Jet Equipment Trust (1):
Series 1994-A, Class B1, 10.91% 2006 (1) 6,446 7,508
Series 1995-A, Class B, 8.64% 2015 (1) 13,858 15,596
Series 1995-A, Class C, 10.69% 2015 (1) 5,000 6,162 .20
Series 1995-B, 10.91% 2014 (1) 4,750 5,879
Series 1995-B, Class A, 7.63% 2015 (1) 3,697 3,962
Series 1995-B, Class C, 9.71% 2015 (1) 5,500 6,507
USAir, Inc.:
9.625% 2001 8,204 8,503
Enhanced Equipment Notes, Class C, 8.93% 2009 7,431 7,836
pass-through trust, Series 1993-A3, 10.375% 2013 (5) 17,000 19,233 .16
Atlas Air, Inc. Pass-Through Trusts, Series 1998-1, Class A, 7.38% 2018 ( 33,124 33,704 .15
Continental Airlines, Inc.:
9.50% 2001 4,500 4,702
pass-through certificates, Series 1996-A, 6.94% 2015 (5) 8,587 8,957
pass-through certificates, Series 1996-C, 9.50% 2015 (5) 12,403 14,033 .12
Airplanes Pass Through Trust, pass-through certificates, Series 1, 14,661 15,394 .07
Class C, 8.15% 2019
United Air Lines, Inc.:
9.00% 2003 8,000 8,805
pass-through certificates, Series 1996-A2, 7.87% 2019 (5) 5,000 5,017 .06
Teekay Shipping Corp. 8.32% 2008 10,820 10,712 .05
Federal Express Corp., pass-through certificates, Series 1994-A310, 9,450 9,853 .04
Class A1, 7.53% 2006 (5)
Delta Air Lines, Inc., pass-through certificates, Series 1992-A2, 5,000 5,541 .03
9.20% 2014 (5)
MC-Cuernavaca Trust 9.25% 2001 (1)(5) 5,001 3,001 .01
-------- ------
200,905 .89
-------- ------
General Retailing & Merchandising - 0.76%
Fred Meyer, Inc.:
7.375% 2005 21,000 22,333
7.45% 2008 19,000 20,771 .19
Boyds Collection 9.00% 2008 (1) 24,500 26,338 .12
Lifestyle Furnishings International Ltd. 10.875% 2006 22,100 24,255 .11
WestPoint Stevens Inc. 7.875% 2005 18,000 18,495 .08
Stater Bros. Holdings Inc. 11.00% 2001 16,000 16,720 .07
May Department Stores Co. 8.375% 2024 10,000 11,493 .05
Tultex Corp.:
10.625% 2005 11,750 4,700
9.625% 2007 7,000 2,800 .03
Randall's Food Markets, Inc. 9.375% 2007 6,000 6,480 .03
Philips Electronics NV 7.20% 2026 6,000 6,430 .03
Carr-Gottstein Foods Co. 12.00% 2005 5,000 5,700 .03
Salton/Maxim Housewares, Inc. 10.75% 2005 (1) 4,750 4,892 .02
-------- ------
171,407 .76
-------- ------
Real Estate - 0.75%
SocGen Real Estate Co. LLC, Series A, 7.64%/8.406% 2049 (1)(6) 47,500 43,839 .19
Security Capital Group Inc. 7.15% 2007 17,500 16,855
Security Capital Pacific Trust 7.20% 2013 15,000 14,542 .14
ProLogis Trust:
7.05% 2006 12,000 11,755
7.95% 2008 10,000 10,132 .10
EOP Operating LP:
6.375% 2003 7,000 7,007
6.625% 2005 5,250 5,254
6.763% 2007 6,550 6,573 .08
FelCor Suites LP:
7.375% 2004 10,000 9,539
7.625% 2007 5,000 4,704 .06
CarrAmerica Realty Corp. 6.625% 2000 10,000 9,992 .04
Irvine Co. 7.46% 2006 (1)(3) 10,000 9,328 .05
Spieker Properties LP:
7.125% 2006 3,645 3,671
7.50% 2027 5,000 4,841 .04
ERP Operating LP:
7.95% 2002 3,750 3,925
6.63% 2005 1,400 1,401 .02
Shopping Center Associates 6.75% 2004 (1) 5,000 5,012 .02
Beverly Finance Corp. 8.36% 2004 (1) 2,500 2,735 .01
-------- ------
171,105 .75
-------- ------
Energy Sources and Energy Equipment & Services - .70%
Oryx Energy Co.:
9.50% 1999 10,000 10,245
8.00% 2003 5,345 5,625
8.375% 2004 12,750 13,644
8.125% 2005 8,500 9,068 .17
Clark Refining & Marketing, Inc. 8.875% 2007 29,250 25,448 .11
Pioneer Natural Resources Co.:
8.25% 2007 6,000 5,583
7.20% 2028 26,500 18,727 .11
Petro Stopping Centers, LP 10.50% 2007 11,500 12,046 .05
Pogo Producing Co. 10.375% 2009 (1) 10,000 9,875 .04
Cross Timbers Oil Co.:
Series B, 9.25% 2007 1,000 955
8.75% 2009 8,000 7,400 .04
OXYMAR 7.50% 2016 (1) 8,000 7,740 .03
Lomak Petroleum, Inc. 8.75% 2007 7,000 6,650 .03
Newfield Exploration Co., Series B, 7.45% 2007 6,000 5,924 .03
CalEnergy Co., Inc. 9.875% 2003 5,000 5,597 .03
USX Corp. 6.65% 2006 4,500 4,500 .02
Kelley Oil & Gas Corp. 10.375% 2006 6,000 4,410 .02
Petrozuata Finance, Inc., Series A, 7.63% 2009 (1) 3,000 2,380 .01
Benton Oil and Gas Co. 9.375% 2007 3,100 1,829 .01
-------- ------
157,646 .70
-------- ------
Financial Services - 0.69%
AT&T Capital Corp.:
6.875% 2001 15,000 14,996
6.60% 2005 25,000 23,991 .17
GS Escrow Corp.:
6.75% 2003 15,000 14,475
7.125% 2005 (7) 23,000 22,841 .16
Newcourt Credit Group Inc., Series A, 7.125% 2003 (1) 12,500 12,528 .06
Toyota Motor Credit Corp. 6.00% 2003 10,000 10,184 .05
Fleet Capital Trust 6.226% 2028 (7) 10,000 10,015 .04
Wilshire Financial Services Group, Inc. 13.00% 2004 20,750 7,470 .03
Providian Financial Corp. 9.525% 2027 (1) 7,000 7,172 .03
Wharf Capital International, Ltd. 8.875% 2004 7,000 6,457 .03
Ford Capital BV 10.125% 2000 5,500 5,940 .03
General Electric Capital Corp. 8.875% 2009 4,000 5,049 .02
DVI, Inc. 9.875% 2004 5,000 4,800 .02
AMRESCO, Inc. 9.875% 2005 5,000 3,950 .02
Green Tree Financial Corp. 6.50% 2002 2,635 2,460 .01
ContiFinancial Corp. 8.125% 2008 3,250 2,324 .01
AB Spintab 6.80% (undated) (1)(7) 1,500 1,477 .01
-------- ------
156,129 .69
-------- ------
Forest Products & Paper - .66%
Container Corp. of America:
9.75% 2003 50,206 51,712
Series A, 11.25% 2004 19,500 20,621 .32
Pindo Deli Finance Mauritius Ltd.:
10.25% 2002 11,000 5,390
10.75% 2007 25,025 11,824 .08
Scotia Pacific Co. LLC, Timber Collateralized Notes, Class A-3, 16,000 14,407 .06
7.71% 2028 (1)
Copamex Industrias, SA de CV, Series B, 11.375% 2004 13,450 12,139 .05
Fort James Corp.:
6.625% 2004 3,000 3,098
6.875% 2007 7,750 8,130 .05
Advance Agro PCL 13.50% 2007 (1)(7) 8,000 6,520 .03
Paperboard Industries International Inc. 8.375% 2007 5,500 5,362 .02
Grupo Industrial Durango, SA de CV 12.00% 2001 6,000 5,280 .02
Norampac Inc. 9.50% 2008 3,250 3,315 .02
Indah Kiat Finance Mauritius Ltd.:
11.875% 2002 700 446 .01
10.00% 2007 3,050 1,506
-------- ------
149,750 .66
-------- ------
Multi-Industry - 0.48%
Petroleos de Venezuela SA 7.40% 2016 34,000 28,045 .12
Hutchison Whampoa Finance Ltd., Series D, 6.988% 2037 (1) 21,000 19,310 .09
Reliance Industries Ltd.:
8.25% 2027 (1) 10,000 8,400
10.50% 2046 5,750 4,607
Series B, 10.25% 2097 5,000 3,675 .07
Pan Pacific Industrial Investments PLC 0% 2007 (1) 33,500 14,522 .06
Graham Packaging Co.:
8.75% 2008 6,975 7,045
0%/10.75% 2009 (6) 8,000 5,560 .06
Sony Corp. 6.125% 2003 7,500 7,677 .03
Hermes Europe Railtel BV 11.50% 2007 5,000 5,500 .03
Innova, S de RL 12.875% 2007 5,000 3,175 .01
Tenneco Inc. 8.075% 2002 2,000 2,082 .01
-------- ------
109,598 .48
-------- ------
Industrial Components - 0.42%
Federal-Mogul Corp.:
7.50% 2004 6,860 6,936
7.375% 2006 (1) 38,000 38,342
7.75% 2006 4,000 4,065
7.50% 2009 (1) 19,000 18,770 .30
BREED Technologies, Inc. 9.25% 2008 (1) 29,500 19,913 .09
Tekni-Plex, Inc. 9.25% 2008 8,000 8,300 .03
-------- ------
96,326 .42
-------- ------
Food Retailing: Food Products & Beverages - 0.39%
Joseph E. Seagram & Sons, Inc.:
6.625% 2005 25,500 25,999
6.80% 2008 5,000 5,179
7.50% 2018 7,500 7,958 .17
Home Products International, Inc. 9.625% 2008 10,500 10,290 .05
Canandaigua Wine Co., Inc.:
8.75% 2003 6,250 6,469
Series C, 8.75% 2003 3,250 3,356 .04
Gruma, SA de CV 7.625% 2007 7,750 6,770 .03
AKI, Inc. 10.50% 2008 (1) 7,000 6,580 .03
Favorite Brands International, Inc. 10.75% 2006 (1) 6,750 5,400 .03
Sparkling Spring Water Group Ltd. 11.50% 2007 6,000 4,620 .02
Delta Beverage Group, Inc. 9.75% 2003 3,435 3,650 .02
DGS International Finance Co. BV:
10.00% 2007 (1) 1,250 772
10.00% 2007 275 170 .00
-------- ------
87,213 .39
-------- ------
Leisure & Tourism - 0.30%
Mirage Resorts, Inc.:
6.625% 2005 3,000 2,945
6.75% 2007 5,000 4,891
6.75% 2008 5,000 4,886 .06
Harrah's Operating Co., Inc. 7.875% 2005 10,750 10,857 .05
Friendly Ice Cream Corp. 10.50% 2007 10,115 9,154 .04
Boyd Gaming Corp. 9.25% 2003 7,000 7,350 .03
Royal Caribbean Cruises Ltd. 7.00% 2007 7,000 7,183 .03
Aztar Corp. 11.00% 2002 6,000 6,120 .03
Regal Cinemas, Inc. 9.50% 2008 (1) 5,000 5,050 .02
CapStar Hotel Co. 8.75% 2007 4,900 4,827 .02
Carmike Cinemas, Inc. 9.375% 2009 (1) 4,000 4,060 .02
KSL Recreation Group, Inc. 10.25% 2007 1,250 1,250 .00
-------- ------
68,573 .30
-------- ------
Utilities: Electric & Gas - 0.26%
Israel Electric Corp. Ltd. (1):
7.70% 2018 22,500 21,983
8.10% 2096 10,405 10,174 .14
Tennessee Gas Pipeline Co. 7.625% 2037 17,750 19,858 .09
Transener SA 9.25% 2008 (1) 7,500 6,112 .03
-------- ------
58,127 .26
-------- ------
Metals: Steel & Nonferrous - 0.23%
Doe Run Resources Corp., Series B, 11.25% 2005 31,000 26,350 .12
Freeport-McMoRan Copper & Gold Inc.:
7.50% 2006 9,500 5,937
7.20% 2026 16,000 10,160 .07
Kaiser Aluminum and Chemical Corp. 12.75% 2003 8,000 7,760 .03
Inco Ltd. 9.60% 2022 2,625 2,960 .01
-------- ------
53,167 .23
-------- ------
Electronic Components - 0.21%
Hyundai Semiconductor America, Inc. (1):
8.25% 2004 5,650 4,774
8.625% 2007 17,650 13,855 .08
Zilog, Inc. 9.50% 2005 17,000 14,790 .07
Flextronics International Ltd. 8.75% 2007 9,000 9,337 .04
Advanced Micro Devices, Inc. 11.00% 2003 5,000 5,275 .02
-------- ------
48,031 .21
-------- ------
Miscellaneous Materials & Commodities - 0.21%
Anchor Glass Container Corp. 11.25% 2005 12,750 13,196 .06
Owens-Illinois, Inc.:
7.85% 2004 6,000 6,303
8.10% 2007 5,750 6,196 .06
Printpack, Inc. 10.625% 2006 12,915 12,398 .05
Consumers International Inc. 10.25% 2005 (7) 8,750 9,209 .04
Ball Corp. 7.75% 2006 (1) 500 525 .00
-------- ------
47,827 .21
-------- ------
Other Industries - 0.28%
J. Ray McDermott, SA 9.375% 2006 18,500 19,425 .08
AMF Bowling Worldwide, Inc.:
0%/12.25% 2006 (6) 6,437 3,733
10.875% 2006 17,155 13,724 .08
Ford Motor Credit Co. 5.80% 2009 15,000 15,052 .07
Jefferson Pilot Corp. 8.14% 2046 (1) 5,000 5,463 .02
Huntsman Corp. 8.33% 2007 (1)(7) 5,000 4,700 .02
Westinghouse Air Brake Co. 9.375% 2005 2,000 2,070 .01
-------- ------
64,167 .28
-------- ------
Collateralized Mortgage/Asset-Backed Obligations (5) (excluding those
issued by by federal agencies) - 3.15%
Collateralized Mortgage Obligation Trust, Series 63, Class Z, 9.00% 2020 52,048 54,748 .24
Gramercy Place Insurance Ltd., Series 1998-A, Class C-2, 8.95% 2002 (1) 52,500 52,096 .23
Green Tree Financial Corp., pass-through certificates:
Series 1994-A, Class NIM, 6.90% 2004 2,853 2,852
Series 1995-A, Class NIM, 7.25% 2005 2,172 2,164
Series 1993-2, Class B, 8.00% 2018 14,000 13,195
Series 1995-4, Class B2, 7.70% 2025 1,900 1,629
Series 1995-1, Class B2, 9.20% 2025 5,500 5,332
Series 1995-9, Class A-5, 6.80% 2027 4,000 4,044
Series 1996-2, Class B2, 7.90% 2027 3,500 3,170
Series 1996-10, Class A-6, 7.30% 2028 3,000 3,116
Series 1998-4, Class B2, 8.11% 2028 6,650 5,659
Series 1998-3, Class B2, 8.07% 2030 5,000 4,242 .20
Morgan Stanley Capital I, Inc.:
Series 1995-GAL1, Class A-2, 7.50% 2005 (1) 7,500 7,880
Series 1998-WF1, Class A-1, 6.25% 2007 (7) 12,521 12,838
Series 1998-WF2, Class A-1, 6.34% 2030 (7) 9,650 9,972 .17
mortgage pass-through certificates, Series 1998-1, Class A-5, 6.75% 2013 8,689 8,637
Merrill Lynch Mortgage Investors, Inc.:
Seller Manufactured Housing Contract, Series 1995-C2, Class A-1, 16,632 16,885
7.142% 2021 (7)
Series 1995-C3, Class A-3, 7.061% 2025 (7) 10,000 10,389
Series 1998-C3, Class E, 7.176% 2030 7,980 6,923
Mortgage Pass-Through Certificates, Series 1996-C2, Class A-1, 2,891 2,964 .16
6.69% 2028 (7)
CSFB Finance Co. Ltd., Series 1995-A, 7.142% 2005 (1)(7) 11,375 10,673
CSFB, Series 98-FL1, Class E, 6.479% 2013 (1)(7) 10,000 9,776
CS First Boston Mortgage Securities Corp., Mortgage Pass-Through
Certificate,1A, Series 1998-C1, Class A- 6.26% 2040 14,429 14,790 .16
GMAC Commercial Mortgage Securities, Inc.:
Series 1997-C1, Class A3, 6.869% 2007 10,659 11,344
Series 1997-C2, Class E, 7.624% 2011 20,750 19,074 .13
DLJ Mortgage Acceptance Corp. (1):
Series 1997-CF1, Class A1A, 7.40% 2006 6,587 6,808
Series 1996-CF2, Class A1A, 6.86% 2021 4,943 5,083
DLJ Commercial Mortgage Corp., Commercial Mortgage Pass-Through Certificates,
Series 1998-CF2, Class A-1B, 6.24% 2031 15,000 15,400 .12
Norwest Asset Securities Corp., Series 1998-8, Class A-1, 6.50% 2013 27,039 26,979 .12
G3 Mortgage Reinsurance (1)(7):
Series I, Class A, 5.94% 2008 10,500 9,790
Series I, Class B, 6.24% 2008 9,000 8,371
Series I, Class C, 7.79% 2008 10,000 8,174 .12
SMA Finance Co., Inc. Commercial Morgage, Series 1998-C1, Class A1, 25,407 25,869 .11
6.27% 2005 (1)
ComEd Transitional Funding Trust, Transitional Funding Trust Notes:
Series 1998, Class A-5, 5.44% 2007 19,750 19,833
Series 1998, Class A-6, 5.63% 2009 5,500 5,512 .11
First USA Credit Card Master Trust, Class A Floating Rate Asset Backed
Certificates (1)(7):
Series 1998-7, 5.60% 2004 13,000 12,722
Series 1998-8, 5.90% 2008 4,427 4,354
Series 1998-8, 6.274% 2010 6,500 6,385 .10
MBNA Master Credit Card Trust, Series 1998-E, Class C, 6.60% 2010 (1) 22,500 22,934 .10
Commercial Mortgage Acceptance Corp., commerical mortgage pass-through
certificates:
Series 1998-C1, Class A-1, 6.23% 2007 6,318 6,482
Series 1998-C2, Class A-1, 5.80% 2015 13,434 13,515 .09
First Union-Lehman Brothers-Bank of America Commerical Mortgage Trust,
Commercial Mortgage Pass-Through Certificates, Series 1998-C2, 19,337 19,844 .09
Class A1, 6.28% 2035
GS Mortgage Securities Corp. II, Mortgage Pass-Through Certificates,2030 20,000 19,206 .09
Series 1998-C1, Class D, 7.45%
Resolution Trust Corp.:
Series 1992-CHF, Class E, 8.25% 2020 3,214 3,198
Series 1993-C1, Class D, 9.45% 2024 6,143 6,143
Series 1993-C1, Class E, 9.50% 2024 409 409
Series 1993-C2, Class C, 8.00% 2025 3,000 2,995
Series 1993-C2, Class D, 8.50% 2025 2,691 2,703 .07
Chase Commercial Mortgage Securities Corp., Series 1998-1, Class A1, 14,345 14,749 .07
6.34% 2030
First Consumer Master Trust, Series 1999-A, Class A, 5.80% 2005 (1) 12,500 12,491 .06
Trinity Re, Ltd., Series 1999-A2, 9.745% 2010 (1)(7) 12,000 11,970 .05
Chase Credit Card Master Trust:
Series 1997-5, Class A, 6.194% 2005 5,585 5,749
Series 1996-4, Class A, 5.13% 2006 (7) 5,100 5,059 .05
Freddie Mac Loan Receivables Trust, Series 1998-A, Class A3, 6.69% 2020 ( 10,100 10,282 .05
FIRSTPLUS Home Loan Owner Trust, Series 1997-1, Class A-6, 6.95% 2015 10,000 10,106 .04
First Nationwide, Series 1999-1, 6.50%2029 8,960 8,964 .04
Residential Reinsurance Ltd., Series 1998-A, Class A, 9.421% 1999 (1) 7,000 7,066 .03
PNC Mortgage Securities Corp., Series 1998-10, Class 1B-1, 6.50% 2028 (1) 6,983 6,886 .03
Bear Stearns Commercial Mortgage Securities, Series 1999-C1, 90,004 6,732 .03
Class X, 0.583% 2031 (7)
GE Capital Mortgage Services, Inc., Series 1994-9, Class A9, 6.50% 2024 6,647 6,474 .03
First Union Commercial Mortgage Trust, Series 1999-C1, Class E, 7,000 6,219 .03
6.974% 2035 (7)
Money Store Trust, Asset-Backed Certificates, Series 1997-D, Class AF3, 5,850 5,866 .03
6.345% 2021
Standard Credit Card Master Trust I, credit card participation certificat 5,000 5,389 .02
Series 1994-2A, 7.25% 2008
Chase Manhattan Bank, NA, Series 1993-I, Class 2A5, 7.25% 2024 5,314 5,327 .02
Structured Asset Securities Corp., pass-through certificates (1)(7):
Series 1998-RF2, Class A, 8.572% 2027 2,720 2,918
Series 1998-RF1, Class A, 8.694% 2027 2,166 2,333 .02
Nebhelp Trust, Student Loan Interest Margin Securities, Series 1998-1, 4,833 4,911 .02
Class A, 6.68% 2016 (1)
Deutsche Mortgage & Asset Receiving Corp., Series 1998-C1, 4,780 4,853 .02
Class A-1, 6.22% 2031
Metropolitan Asset Funding, Inc., Series 1998-A, Class B1, 7.728% 2014 (1 4,669 4,461 .02
UCFC Acceptance Corp., home-equity loan pass-through certificates, 2016 4,250 4,270 .02
Series 1996-D1, Class A-4, 6.776%
Grupo Financiero Banamex Accival, SA de CV 0% 2002 (1) 4,567 4,055 .02
Residential Funding Mortgage Securities I, Inc., Mortgage Pass-Through
Certificates, Series 1998-S17, Class M-1, 6.75% 2028 3,984 3,991 .02
Financial Asset Securitization, Inc., Series 1997-NAM1, Class B1, 7.75% 2 2,553 2,624 .01
Chevy Chase Master Credit Card Trust II, Series 1996-C, 2,000 1,981 .01
Class A, 5.14% 2007 (7)
-------- ------
712,827 3.15
-------- ------
Federal Agency Obligations: Mortgage Pass-Throughs (5) - 2.19%
Government National Mortgage Assn.:
5.50% 2028 3,035 2,897
6.00% 2023-2028 17,312 17,171
6.125% 2022 (7) 3,412 3,469
6.50% 2028 27,749 28,062
6.625% 2023 (7) 7,052 7,154
6.875% 2024 (7) 35,473 35,928
7.00% 2008-2027 47,791 48,959
7.00% 2024 (7) 1,239 1,258
7.375% 2022-2024 (7) 4,639 4,718
7.50% 2017-2026 34,717 35,897
8.00% 2017-2023 17,973 18,781
8.50% 2017-2027 17,849 18,971
9.00% 2008-2025 6,438 6,896
9.50% 2009-2021 9,709 10,429
10.00% 2016-2019 824 896
10.50% 2018-2019 83 92
11.00% 2015 55 61 1.07
Fannie Mae:
5.50% 2028 9,955 9,569
6.00% 2013-2029 76,986 76,305
6.134% 2028 (7) 8,387 8,442
6.50% 2013-2028 12,274 12,430
7.50% 2007-2028 24,153 24,879
8.00% 2009-2024 6,988 7,272
8.50% 2014-2025 6,109 6,422
9.00% 2008-2025 6,119 6,504
9.50% 2022 5,650 6,042
10.00% 2005-2025 15,300 16,422
12.50% 2019 1,122 1,287
13.00% 2015 2,754 3,254
15.00% 2013 1,067 1,314 .79
Freddie Mac:
6.00% 2013-2029 56,025 55,660
8.50% 2008-2020 11,870 12,392
9.00% 2007-2021 6,674 6,999
10.00% 2019 120 130
11.50% 2000 6 6 .33
-------- ------
496,968 2.19
-------- ------
Federal Agency Obligations: Collateralized Mortgage Obligations (5) - 0.12%
Fannie Mae:
6.50% 2024 5,421 5,351
Series 1991-78, Class PK, 8.50% 2020 2,536 2,562
Series 1996-4, Class ZA, 6.50% 2022 6,400 6,394
Series 1997-28, Class C, 7.00% 2027 5,000 5,114 .09
Freddie Mac:
Series 178, Class Z, 9.25% 2021 2,576 2,725
Series 1673, Class SA, 5.395% 2024 (7)(9) 6,000 4,974 .03
-------- ------
27,120 .12
-------- ------
Other Federal Agency Obligations - 0.13%
Fannie Mae, Medium-Term Note, 6.75% 2028 30,000 29,948 .13
-------- ------
Governments and Governmental Authorities (excluding U.S. government) - 1.28%
Venezuela (Republic of):
Eurobonds 5.938% 2007 (7) 14,786 8,945
9.25% 2027 115,000 66,413 .33
Argentina (Republic of):
Series L, Eurobonds 6.188% 2005 (7) 1,410 1,128
11.00% 2006 33,250 30,590
11.375% 2017 12,650 11,663 .19
Brazil (Federal Republic of):
Debt Conversion Bond, Series L, 6.188% 2012 (7) 750 341
Bearer 8.00% 2014 57,056 30,610 .14
United Mexican States Government Eurobonds:
Series C, 0% 2003 (3) 2,307 0
Global, 11.375% 2016 9,000 9,405
Global, 11.50% 2026 19,000 20,244
Units, Series C, 6.201% 2019 (7) 1,500 1,202 .14
Philippines (Republic of):
8.875% 2008 17,250 17,350
9.875% 2019 10,750 11,005 .12
Korea (Republic of) 8.875% 2008 18,800 20,207 .09
Panama (Republic of):
Past Due Interest Eurobonds 5.938% 2016 (7) 535 399
8.875% 2027 21,500 19,350 .09
Ontario (Province of):
7.75% 2002 2,500 2,695
5.50% 2008 15,000 15,118 .08
Poland (Republic of), Past Due Interest Bond, Bearer 5.00% 2014 (7) 13,750 12,839 .06
Mendoza (Province of) 10.00% 2007 (1) 9,500 6,341 .03
Bulgaria (Republic of), Front-Loaded Interest Reduction Eurobonds 2,500 1,398 .01
2.50% 2012 (7)
Ecuador (Republic of):
Past Due Interest Bearer Bond 6.625% 2015 (7) 566 178
Past Due Interest Discount Bond 6.625% 2025 (7) 1,500 737 .00
Peru (Republic of):(7)
Front-Loaded Interest Reduction Eurobonds 3.25% 2017 250 127
Past Due Interest Eurobonds 4.00% 2017 1,250 722 .00
-------- ------
289,007 1.28
-------- ------
Floating Rate Eurodollar Notes (undated) (7) - 0.18%
Standard Chartered Bank 5.25% 15,000 8,736 .04
Canadian Imperial Bank of Commerce 5.813% 10,000 7,700 .04
Bank of Nova Scotia 5.813% 10,000 7,600 .03
Bank of Scotland 7.00% 7,500 7,487 .03
BCI US Funding Trust I 8.01% (1) 5,000 4,851 .02
Midland Bank 5.375% 5,000 3,790 .02
-------- ------
40,164 .18
-------- ------
U.S. Treasury Obligations - 4.24%
9.125% May 1999 10,000 10,122 .04
8.75% August 2000 22,500 23,850 .11
7.75% February 2001 28,000 29,680 .13
8.00% May 2001 7,000 7,504 .03
3.625% July 2002 (10) 10,240 10,227 .05
5.75% October 2002 10,000 10,375 .05
10.75% February 2003 19,500 23,805 .10
7.25% May 2004 162,750 182,483 .81
11.625% November 2004 43,500 58,440 .26
7.50% February 2005 124,860 143,082 .63
6.50% May 2005 10,000 10,977 .05
10.75% August 2005 9,000 11,987 .05
7.00% July 2006 2,293 2,611 .01
3.375% January 2007 (10) 7,246 7,047 .03
6.125% August 2007 1,465 1,603 .01
5.50% February 2008 60,000 63,525 .28
10.00% May 2010 18,000 22,896 .10
7.50% November 2016 17,000 21,218 .09
8.875% August 2017 74,775 105,795 .47
7.875% February 2021 37,500 49,564 .22
7.125% February 2023 65,250 80,839 .36
6.50% November 2026 70,000 81,856 .36
-------- ------
959,486 4.24
-------- ------
-------- ------
TOTAL BONDS & NOTES (cost:$6,491,896,000) 6,423,763 28.36
-------- ------
Short-Term Securities
Corporate Short-Term Notes - 7.99%
Ford Motor Credit Co. 4.78%-5.20% due 2/8-4/23/99 133,600 132,435 .59
Coca-Cola Co. 4.76%-5.10% due 2/8-4/30/99 115,000 114,242 .50
Associates First Capital Corp. 4.78%-5.15% due 2/18-5/6/99 109,000 108,082 .48
BellSouth Telecommunications, Inc. 4.76%-5.12% due 2/9-4/5/99 99,000 98,538 .44
Household Finance Corp. 4.78%-5.03% due 2/1-4/26/99 97,400 97,116 .43
Eastman Kodak Co. 4.78%-5.11% due 2/1-3/26/99 96,700 96,358 .43
Procter & Gamble Co. 4.74%-5.02% due 2/23-4/27/99 96,200 95,644 .42
General Electric Capital Corp. 4.79%-5.07% due 2/17-4/27/99 91,600 90,982 .40
American Express Credit Corp. 4.78%-5.05% due 3/2-3/31/99 90,000 89,448 .40
E.I. du Pont de Nemours and Co. 4.75%-4.77% due 4/13-4/29/99 89,400 88,418 .39
Atlantic Richfield Co. 4.83%-5.03% due 3/1-3/16/99 (1) 86,100 85,685 .38
International Lease Finance Corp. 4.77%-5.15% due 2/12-4/15/99 84,000 83,585 .37
A.I. Credit Corp. 4.80%-5.09% due 2/22-5/6/99 83,000 82,356 .36
Lucent Technologies Inc. 4.83%-5.12% due 2/4-3/11/99 77,800 77,623 .34
Johnson & Johnson 4.72%-5.03% due 2/18-6/7/99 (1) 74,100 73,338 .32
Minnesota Mining and Manufacturing Co. 4.95%-5.13% due 2/19-3/19/99 70,000 69,704 .31
IBM Credit Corp. 4.82% due 4/8-4/9/99 70,000 69,345 .31
Motorola, Inc. 4.95%-5.12% due 2/2-4/1/99 69,000 68,626 .30
National Rural Utilities Cooperative Finance Corp. 4.75%-5.05% 67,000 66,573 .29
due 3/12-4/23/99
AC Acquisition Holding Co. 5.00%-5.04% due 3/11-3/12/99 (1) 48,000 47,746 .21
PACCAR Financial Corp. 4.77%-5.07% due 3/25-4/22/99 44,000 43,632 .19
Campbell Soup Co. 4.78%-4.97% due 2/26-3/24/99 30,200 30,016 .13
-------- ------
1,809,492 7.99
-------- ------
Federal Agency Short-Term Obligations - 6.92%
Freddie Mac 4.75%-5.18% due 2/2-4/8/99 830,375 826,686 3.65
Fannie Mae 4.72%-5.18% due 2/4-5/20/99 530,000 527,508 2.33
Federal Home Loan Banks 4.66%-5.00% due 2/3-5/26/99 171,700 170,395 .75
International Bank for Reconstruction and Development 4.98% due 2/19/99 41,700 41,589 .19
-------- ------
1,566,178 6.92
-------- ------
TOTAL SHORT-TERM SECURITIES (cost: $3,375,721,000) 3,375,670 14.91
-------- ------
TOTAL INVESTMENT SECURITIES (cost: $20,252,658,000) 22,668,52100.09
Excess of payables and cash over receivables 19,37 .09
-------- ------
NET ASSETS $22,649,15100.00
======== ======
(1) Purchased in a private placement transaction; resale may
be limited to qualified institutional buyers; resale to the
public may require registration.
(2) Non-income-producing security.
(3) Valued under procedures established by the
Board of Directors.
(4) The fund owns 7.09% and 6.03% of the outstanding voting
securities of Ohio Casualty and English China Clays,
respectively, and thus is considered an affiliate as
defined in the Investment Company Act of 1940.
(5) Pass-through securities backed by a pool of
mortgages or other loans on which principal payments
are periodically made. Therefore, the effective
maturities are shorter than the stated maturities.
(6) Step bond; coupon rate will increase at a later date.
(7) Coupon rate may change periodically.
(8) Company not making interest payments; bankruptcy
proceedings pending.
(9) Inverse floater, which is a floating-rate
note whose interest rate moves in the opposite
direction of prevailing interest rates.
(10) Index-linked bond whose principal amount moves
with a government retail price index.
ADS = American Depositary Shares
ADR = American Depositary Receipts
See Notes to Financial Statements
</TABLE>
<TABLE>
The Income Fund of America
<S> <C> <C>
Financial Statements (unaudited)
- ----------------------------------------- --------- ---------
Statement of Assets and Liabilities (dollars in
at January 31, 1999 thousands)
- ----------------------------------------- --------- ---------
Assets:
Investment securities at market
(cost: $20,252,658) $22,668,529
Cash 716
Receivables for-
Sales of investments $ 57,385
Sales of fund's shares 31,097
Dividends and accrued interest 165,129 253,611
--------- ---------
22,922,856
Liabilities:
Payables for-
Purchases of investments 239,385
Repurchases of fund's shares 20,447
Management services 5,100
Accrued expenses 8,771 273,703
--------- ---------
Net Assets at January 31, 1999-
Equivalent to $17.18 per share on
1,318,252,572 shares of $1 par value
capital stock outstanding (authorized
capital stock--1,600,000,000 shares) $22,649,153
============
- ----------------------------------------- --------- ---------
Statement of Operations (dollars in
for the six months ended January 31, 1999 thousands)
- ----------------------------------------- --------- ---------
Investment Income:
Income:
Dividends $ 235,477
Interest 377,437 $ 612,914
---------
Expenses:
Management services fee 31,208
Distribution expenses 25,060
Transfer agent fee 5,093
Reports to shareholders 128
Registration statement and
prospectus 1,251
Postage, stationery and supplies 969
Directors' fees 96
Auditing and legal fees 62
Custodian fee 434
Taxes other than federal income tax 1
Other expenses 76 64,378
--------- ---------
Net investment income 548,536
---------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 961,566
Net change in unrealized appreciation on
investments (773,904)
---------
Net realized gain and change in unrealized
appreciation on investments 187,662
---------
Net Increase in Net Assets Resulting
From Operations $736,198
============
- ----------------------------------------- --------- ---------
(dollars in
Statement of Changes in Net Assets (unaudited) thousands)
- ----------------------------------------- --------- ---------
Six Months
Ended Year Ended
January 31, July 31,
1999* 1998
--------- ---------
Operations:
Net investment income $ 548,536 $ 981,936
Net realized gain on investments 961,566 1,220,942
Net change in unrealized appreciation
on investments (773,904) (34,156)
--------- ---------
Net increase in net assets
resulting from operations 736,198 2,168,722
--------- ---------
Dividends and Distributions
Paid to Shareholders:
Dividends from net investment income (584,238) (922,159)
Distributions from net realized
gain on investments (1,454,557) (1,524,937)
--------- ---------
Total dividends and distributions (2,038,795) (2,447,096)
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
92,809,324 and 205,557,632
shares, respectively 1,638,843 3,777,990
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions of
net realized gain on investments:
108,050,258 and 122,751,251
shares, respectively 1,857,883 2,182,454
Cost of shares repurchased:
93,963,836 and 129,064,287
shares, respectively (1,657,952) (2,383,307)
--------- ---------
Net increase in net assets
resulting from capital share
transactions 1,838,774 3,577,137
--------- ---------
Total Increase in Net Assets 536,177 3,298,763
Net Assets:
Beginning of period 22,112,976 18,814,213
--------- ---------
End of period (including undistributed
net investment income: $162,753
and $198,455, respectively) $22,649,153 $22,112,976
=========== ===========
See Notes to Financial Statements
</TABLE>
The Income Fund of America
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - The Income Fund of America, Inc. (the "fund") is registered
under the Investment Company Act of 1940 as an open-end, diversified management
investment company. The fund seeks current income while secondarily striving
for capital growth through investments in stocks and fixed-income securities.
SIGNIFICANT ACCOUNTING POLICIES - The following is a summary of the
significant accounting policies consistently followed by the fund in the
preparation of its financial statements:
SECURITY VALUATION - Equity securities, including depositary receipts, are
valued at the last reported sale price on the exchange or market on which such
securities are traded, as of the close of business on the day the securities
are being valued or, lacking any sales, at the last available bid price. In
cases where equity securities are traded on more than one exchange, the
securities are valued on the exchange or market determined by the investment
adviser to be the broadest and most representative market, which may be either
a securities exchange or the over-the-counter market. Fixed-income securities
are valued at prices obtained from a pricing service, when such prices are
available; however, in circumstances where the investment adviser deems it
appropriate to do so, such securities will be valued at the mean quoted bid and
asked prices or at prices for securities of comparable maturity, quality and
type. Securities with original maturities of one year or less having 60 days or
less to maturity are amortized to maturity based on their cost if acquired
within 60 days of maturity or, if already held on the 60th day, based on the
value determined on the 61st day. Securities and assets for which
representative market quotations are not readily available are valued at fair
value as determined in good faith by a committee appointed by the Board of
Directors.
NON-U.S. CURRENCY TRANSLATION - Assets or liabilities initially expressed
in terms of non-U.S. currencies are translated into U.S. dollars at the
prevailing market rates at the end of the reporting period. Purchases and sales
of securities and income and expenses are translated into U.S. dollars at the
prevailing market rates on the dates of such transactions. The effects of
changes in non-U.S. currency exchange rates on investment securities are
included with the net realized and unrealized gain or loss on investment
securities.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - 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.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions
paid to shareholders are recorded on the ex-dividend date.
2. FEDERAL INCOME TAXATION
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, 1999, net unrealized appreciation on investments for
federal income tax purposes aggregated $2,415,914,000 of which $3,352,016,000
related to appreciated securities and $936,102,000 related to depreciated
securities. During the six months ended January 31, 1999, the fund realized, on
a tax basis, a net capital gain of $960,084,000 on securities transactions. Net
gains related to non-U.S. currency transactions of $242,000 are treated as
ordinary income for federal income tax purposes. The cost of portfolio
securities for federal income tax purposes was $20,252,615,000 at January 31,
1999.
3. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEE - The fee of $31,208,000 for management services
was incurred 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, in effect through
December 31, 1998, provided 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; 0.145% of such
assets in excess of $13 billion but not exceeding $21 billion; and 0.14% of
such assets in excess of $21 billion; plus 2.25% of monthly gross investment
income. The Board of Directors approved an amended agreement effective January
1, 1999 reducing the fee to 0.25% of the first $500 million of average net
assets; 0.23% of such assets in excess of $500 million but not exceeding $1
billion; 0.21% of such assets in excess of $1 billion but not exceeding $1.5
billion; 0.19% of such assets in excess of $1.5 billion but not exceeding $2.5
billion; 0.17% of such assets in excess of $2.5 billion but not exceeding $4
billion; 0.16% of such assets in excess of $4 billion but not exceeding $6.5
billion; 0.15% of such assets in excess of $6.5 billion but not exceeding $10.5
billion; 0.145% of such assets in excess of $10.5 billion but not exceeding $17
billion; 0.14% of such assets in excess of $17 billion but not exceeding $27.5
billion; and 0.135% of such assets in excess of $27.5 billion; plus 2.25% of
monthly gross investment income.
DISTRIBUTION EXPENSES - 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, 1999, distribution expenses under the Plan were $25,060,000.
As of January 31, 1999, accrued and unpaid distribution expenses were
$8,055,000.
American Funds Distributors, Inc. (AFD), the principal underwriter of the
fund's shares, received $6,565,000 (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.
TRANSFER AGENT FEE - American Funds Service Company (AFS), the transfer
agent for the fund, was paid a fee of $5,093,000.
DEFERRED DIRECTORS' FEES - 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, 1999, aggregate amounts deferred and earnings
thereon were $574,000.
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. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding
short-term securities, of $4,158,037,000 and $4,260,443,000, respectively,
during the six months ended January 31, 1999.
As of January 31, 1999, accumulated undistributed net realized gain on
investments was $573,681,000 and additional paid-in capital was
$18,178,600,000.
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 $434,000 includes $142,000 that was paid by these credits
rather than in cash.
Net realized currency gains on dividends, interest and withholding taxes
reclaimable, on a book basis, were $279,000 for the six months ended January
31, 1999.
<TABLE>
The Income Fund of America
Per-Share Data and Ratios
<S> <C> <c<C> <C> <C> <C> <C>
Six Months
Ended Year eJuly 31
January 31, ------- -------------------------
1999 (1) 1998 1997 1996 1995 1994
------- ------- -------------------------
Net Asset Value, Beginning of Per $18.25 $18.59 $15.89$14.92$13.59$14.47
------- ------- -------------------------
Income from Investment Operations:
Net investment income .44 .85 .86 .87 .85 .83
Net gains or losses on securities
(both realized and unrealized) .16 1.11 3.55 1.11 1.29 (.53)
------- ------- -------------------------
Total from investment operatio .60 1.96 4.41 1.98 2.14 .30
------- ------- -------------------------
Less Distributions:
Dividends (from net investment
income) (.48) (.82) (.90) (.83) (.75) (.83)
Distributions (from capital gains)
(1.19) (1.48) (.81) (.18) (.06) (.35)
------- ------- -------------------------
Total distributions (1.67) (2.30)(1.71)(1.01) (.81)(1.18)
------- ------- -------------------------
Net Asset Value, End of Period $17.18 $18.25 $18.59$15.89$14.92$13.59
======= ======= =========================
Total Return (2) 3.37%(3) 11.32%29.28%13.46%16.42% 1.98%
Ratios/Supplemental Data:
Net assets, end of period
(in millions) $22,649 $22,113 $18,814$14,459$12,290$10,537
Ratio of expenses to average
net assets .29% (3 .59% .61% .62% .65% .63%
Ratio of net income to average
net assets 2.49% (3 4.75% 5.09% 5.56% 6.12% 5.92%
Portfolio turnover rate 22.11%(3 34.68%40.92%37.77%26.26%26.42%
(1) Unaudited
(2) Excludes maximum sales charge
of 5.75%.
(3) Based on operations for the
period shown and, accordingly,
not representative of a full year.
</TABLE>
PREPARING FOR THE YEAR 2000 The fund's key service providers - Capital Research
and Management Company, the investment adviser, and American Funds Service
Company, the transfer agent - have updated all significant computer systems to
process date-related information properly following the turn of the century.
Testing of these and other systems with business partners, vendors and other
service providers will continue through much of 1999. We will continue to keep
you up to date in our regular publications. If you'd like more detailed
information, call Shareholder Services at 800/421-0180, ext. 21, or visit our
Web site at www.americanfunds.com.
[THE AMERICAN FUNDS GROUP(R)]
THE INCOME FUND OF AMERICA(R) IS ONE OF THE 28 MUTUAL FUNDS IN THE AMERICAN
FUNDS GROUP,(R) MANAGED BY CAPITAL RESEARCH AND MANAGEMENT COMPANY. SINCE 1931,
CAPITAL HAS INVESTED WITH A LONG-TERM FOCUS BASED ON THOROUGH RESEARCH AND
ATTENTION TO RISK.
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 92821-5823
TRANSFER AGENT FOR
SHAREHOLDER ACCOUNTS
American Funds Service Company
(Please write to the address nearest you.)
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. YOU MAY ALSO 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, 1999, this report must be accompanied by an
American Funds Group Statistical Update for the most recently completed
calendar quarter.
Printed on recycled paper
Litho in USA BDA/GRS/3963
Lit. No. IFA-013-0399
