Unassociated Document

The right choice for the long term^®

American Funds

Insurance Series

[photo of a meadow with snow-covered mountains in the background]

The benefits of choice:

understanding your options

Annual report for the year ended December 31, 2006

American Funds Insurance Series^® is the underlying investment vehicle for several variable annuities and insurance products. The investment adviser for American Funds Insurance Series is Capital Research and Management Company.^SM For 75 years, Capital Research has invested with a long-term focus based on thorough research and attention to risk.

Investment portfolios
Global Discovery Fund	24
Global Growth Fund	27
Global Small Capitalization Fund	30
Growth Fund	34
International Fund	37
New World Fund	40
Blue Chip Income and Growth Fund	44
Global Growth and Income Fund	47
Growth-Income Fund	50
Asset Allocation Fund	53
Bond Fund	57
Global Bond Fund	61
High-Income Bond Fund	64
U.S. Government/AAA-Rated Securities Fund	69
Cash Management Fund	72

The summary investment portfolios (with the exception of Cash Management Fund, which shows a complete listing of its portfolio holdings) are designed to streamline this report and help investors better focus on the funds’ principal holdings. For details on how to obtain a complete schedule of portfolio holdings for each fund in the series, please see the outside back cover.

This report shows investment results for Class 1, 2 and 3 shares of the funds in American Funds Insurance Series. Class 2 shares began operations on April 30, 1997. Class 3 shares began operations on January 16, 2004. Results encompassing periods prior to those dates assume a hypothetical investment in Class 1 shares and include deduction of the additional 0.25% annual expense for Class 2 shares and 0.18% for Class 3 shares under the series’ plans of distribution. Results discussed in the individual fund reports are for Class 2 shares. The mountain charts on pages 2 to 15 illustrate the growth of a $10,000 investment in each of the investment portfolios in American Funds Insurance Series (with the exception of Cash Management Fund, which is managed to provide preservation of principal) over the past 10 years (or the lifetime of the fund, if less than 10 years). The mountain charts reflect results for Class 2 shares. The investment results tables on pages 2 to 16 show the average annual total returns over various periods for Class 1, 2 and 3 shares. The variable annuities and life insurance contracts that use the series’ funds contain certain fees and expenses not reflected in this report. The series’ investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased it to 10% on April 1, 2005. Fund results shown reflect the waiver, without which they would have been lower. Please see the Financial Highlights table in this report for details.

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. For current information and month-end results, visit americanfunds.com/afis.html. For month-end results and information about your insurance contract, please go to the website for the company that issued your contract.

Investments outside the United States, especially those in developing countries, are subject to additional risks, such as currency fluctuations, political instability, differing securities regulations and periods of illiquidity. Small-company stocks involve additional risks and can fluctuate in price more than larger company stocks. The return of principal in bond funds is not guaranteed. Bond funds have the same interest rate, inflation and credit risks that are associated with the underlying bonds owned by the fund. High-yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. The market indexes are unmanaged and do not reflect sales charges, commissions or expenses.

Fellow investors:

[photo of a meadow with snow-covered mountains in the background]

The year that ended December 31, 2006, was a strong one for investors in almost every sector from U.S. stock and bond markets to markets around the globe. Against this background, every investment option in the American Funds Insurance Series gained value for the fourth consecutive year.

While most markets around the world fared well, those outside the U.S. posted the greatest gains, rewarding individuals who invested a portion of their assets in non-U.S. stocks and bonds. The dollar’s slide — it lost 10.4% against the euro and 12.2% against the British pound in 2006 — also boosted the returns in non-U.S. markets when the gains were translated into dollars.

In 2006, Standard and Poor’s 500 Composite Index, a broad measure of the U.S. stock market, rose 15.8%, and the Nasdaq Composite Index, home to many of the nation’s technology companies, gained 9.5%. Outside the U.S., stock markets were even stronger. The MSCI EAFE^® (Europe, Australasia, Far East) Index rose 26.9%. In Germany, the DAX rose 22.0% when measured in euros while the London FTSE gained 14.8% when measured in pounds. The Japanese market was a laggard among major markets, but even it gained a solid 7.9%, as measured in yen by the Nikkei 225 Index.

Fixed-income markets in the U.S. and abroad also posted gains. The Citigroup Broad Investment-Grade (BIG) Bond Index gained 4.3%, while the Credit Suisse High Yield Index rose 11.9%, and every fixed-income fund in the series gained value.

While most investments posted good returns in 2006, outside the financial markets it was a tumultuous period. Violence increased in Iraq, and Democrats won control of both the House of Representatives and the Senate for the first time in 12 years. In addition, the long bull market in U.S. residential real estate finally came to an end.

Despite the armed conflict in the Middle East and political change at home, the markets were dominated primarily by economic, not political, factors. Continued low long-term U.S. interest rates, a benign inflation outlook and healthy corporate profits combined to move the markets higher. The economic outlook lacked clarity when the year began. Oil prices, which can be a key driver of inflation, started rising early in the year, peaked in July and began retreating. By the end of the year, prices had declined to the level they were on January 1, 2006.

The U.S. Federal Reserve paused after a long series of short-term interest rate hikes. After four increases in the first six months of 2006, the U.S. central bank held the federal funds rate steady at 5.25% through the end of the year. Yields on the 10-year U.S. Treasury, a benchmark for mortgages and corporate bonds, also rose modestly during the year, from 4.4% to 4.7%.

As we enter 2007, the economy and the markets are sending mixed signals about what lies ahead. U.S. interest rates are relatively low by historical standards, but the Fed has expressed its resolve to fight inflation. In addition, at the end of 2006, yields on short-term Treasury bills were higher than on long-term Treasury bonds. Historically, “inverted yield curves” often preceded a recession. Yet there are also reasons for optimism. The economy continues to grow, and corporate earnings remain strong despite their upward run over the last five years. Furthermore, U.S. stocks, as measured by the S&P 500, are not out of line with historic price-to-earning ratios.

It is impossible to know the future, of course. We do know from experience, however, that the markets will not always be as strong as they have been in the recent past. Nevertheless, we remain confident in the long-term prospects of the global equity and fixed-income markets and urge our investors to remain focused on their financial goals despite market fluctuations — up or down.

The past year was also a time of change for the American Funds Insurance Series, as two new investment options — the Global Growth and Income Fund and the Global Bond Fund — were added. We welcome our new investors in these funds and look forward to reporting to you again in six months.

Cordially,

/s/ James K. Dunton

James K. Dunton

Vice Chairman of the Board

Principal Executive Officer

/s/ Donald D. O’Neal

Donald D. O’Neal

President

February 1, 2007

Global Discovery Fund

Figures shown are past results and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Unit prices and returns will vary, so investors may lose money. For current information and month-end results, visit americanfunds.com/afis.html. For month-end results and information about your insurance contract, please go to the website for the company that issued your contract.

Global Discovery Fund gained 17.4% during the year ended December 31, 2006, outpacing both its relevant indexes. The Global Service and Information Index,¹ which tracks the types of companies the fund invests in, rose 17.3%, and the S&P 500 gained 15.8%.

The fiscal year was a significant one for the fund as it completed its fifth full calendar year in existence. Most investment professionals believe five years is the minimum amount of time required to consider a fund’s track record as long-term. While we are pleased that Global Discovery Fund outpaced its relevant indexes in 2006, we are more gratified by its record over the past five years. During that period, the fund produced an average annual total return of 9.1%. That compares favorably with the 7.7% average annual total return of the Global Service and Information Index and the 6.2% average annual total return produced by the S&P 500.

Where the fund’s assets were invested based on total net assets as of December 31, 2006

[begin pie chart]

46.3%	The Americas
13.4%	Short-term securities & other assets less liabilities
26.4%	Europe
13.7%	Asia/Pacific Basin
.2%	Other regions

[end pie chart]

The Americas
United States	43.1	%
Mexico	2.5
Brazil	.7
	46.3

Europe
France	3.3
Austria	3.2
Finland	2.6
United Kingdom	2.6
Germany	2.2
Spain	2.2
Switzerland	1.5
Italy	1.4
Luxembourg	1.4
Ireland	1.3
Denmark	1.1
Netherlands	1.1
Other	2.5
	26.4

Asia/Pacific Basin
Japan	3.4	%
Taiwan	2.4
Hong Kong	2.2
China	1.7
South Korea	1.4
Indonesia	1.0
Other	1.6
	13.7

Other regions	.2

Short-term securities & other
assets less liabilities	13.4

Total	100.0	%

[begin mountain chart]

AFIS Global Discovery Fund Class 2		S&P 500		Global Service and Information Index¹		Consumer Price Index²

7/5/01	$ 10,000	7/5/01	$ 10,000	7/5/01	$10,000	7/5/01	$10,000
9/30/01	$ 8,310	9/30/01	$ 8,569	9/30/01	$ 8,196	9/30/01	$10,017
12/31/01	$ 9,329	12/31/01	$ 9,485	12/31/01	$ 9,163	12/31/01	$ 9,927
3/31/02	$ 9,429	3/31/02	$ 9,511	3/31/02	$ 8,989	3/31/02	$10,045
6/30/02	$ 8,256	6/30/02	$ 8,237	6/30/02	$ 7,843	6/30/02	$10,107
9/30/02	$ 6,801	9/30/02	$ 6,815	9/30/02	$ 6,237	9/30/02	$10,169
12/31/02	$ 7,307	12/31/02	$ 7,389	12/31/02	$ 6,877	12/31/02	$10,163
3/31/03	$ 7,156	3/31/03	$ 7,157	3/31/03	$ 6,552	3/31/03	$10,348
6/30/03	$ 8,466	6/30/03	$ 8,258	6/30/03	$ 7,848	6/30/03	$10,320
9/30/03	$ 9,021	9/30/03	$ 8,476	9/30/03	$ 8,260	9/30/03	$10,404
12/31/03	$ 10,019	12/31/03	$ 9,508	12/31/03	$ 9,361	12/31/03	$10,354
3/31/04	$ 10,382	3/31/04	$ 9,668	3/31/04	$ 9,640	3/31/04	$10,528
6/30/04	$ 10,360	6/30/04	$ 9,835	6/30/04	$ 9,578	6/30/04	$10,657
9/30/04	$ 10,057	9/30/04	$ 9,651	9/30/04	$ 9,372	9/30/04	$10,669
12/31/04	$ 11,064	12/31/04	$ 10,541	12/31/04	$10,589	12/31/04	$10,691
3/31/05	$ 10,694	3/31/05	$ 10,315	3/31/05	$10,216	3/31/05	$10,860
6/30/05	$ 10,851	6/30/05	$ 10,456	6/30/05	$10,354	6/30/05	$10,927
9/30/05	$ 11,356	9/30/05	$ 10,833	9/30/05	$10,829	9/30/05	$11,169
12/31/05	$ 12,259	12/31/05	$ 11,059	12/31/05	$11,338	12/31/05	$11,056
3/31/06	$ 12,915	3/31/06	$ 11,524	3/31/06	$11,932	3/31/06	$11,225
6/30/06	$ 12,565	6/30/06	$ 11,358	6/30/06	$11,740	6/30/06	$11,399
9/30/06	$ 13,161	9/30/06	$ 12,001	9/30/06	$12,440	9/30/06	$11,399
12/31/06	$ 14,394	12/31/06	$ 12,804	12/31/06	$13,301	12/31/06	$11,337

[end mountain chart]

Average annual total returns based on a $1,000 investment for periods ended December 31, 2006

	Class 1			Class 2

1 year		+17.66	%		+17.41	%
5 years		+9.34			+ 9.06
Lifetime (since July 5, 2001)		+7.12			+ 6.86
Gross expense ratio		.62			.87

The gross expense ratios shown in the table above do not reflect a fee waiver that currently is in effect and which causes the actual expense ratio to be lower. The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased it to 10% on April 1, 2005. Fund results shown reflect the waiver, without which they would have been lower. Please see the Financial Highlights table in this report for details.

The market indexes are unmanaged and include reinvested distributions, but do not reflect sales charges, commissions or expenses.

¹ Subset of MSCI World Index^SM and a market-capitalization weighted index that measures the returns of services and information industries in stock markets in 23 developed countries. The index, which is 70% U.S.-weighted, consists specifically of services and information industries that together represent about 60% of the MSCI World Index.

² Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.

Global Growth Fund

Global Growth Fund gained 20.4% during the 12 months ended December 31, 2006, and was very close to keeping pace with the MSCI World Index,^SM which rose 20.7%. The fund was helped by strong markets outside the United States. Indeed while the U.S. market, as measured by the S&P 500, had a solid year, non-U.S. markets had substantially higher gains, especially when measured in U.S. dollars. In Germany, the DAX rose 22.0% in euros but 36.0% in U.S. dollars. The London FTSE gained 14.8% in pounds but 30.7% when measured in dollars.

In addition to gaining strength from the dollar’s weakness, the fund was helped by its investments in the oil and gas industries. Commercial banks, one of the fund’s largest concentrations, and diversified telecommunication services also boosted returns.

Investments in Internet catalog and retailing, a small area of concentration, and Internet software held returns back somewhat.

Where the fund’s assets were invested based on total net assets as of December 31, 2006

[begin pie chart]

32.4%	Europe
15.4%	Short-term securities & other assets less liabilities
30.1%	The Americas
21.7%	Asia/Pacific Basin
.4%	Other regions

[end pie chart]

Europe
United Kingdom	6.7	%
Germany	6.2
France	4.1
Netherlands	3.9
Switzerland	1.8
Austria	1.7
Spain	1.5
Finland	1.4
Denmark	1.4
Other	3.7
	32.4

The Americas
United States	25.6
Canada	2.5
Mexico	1.4
Brazil	.6
	30.1

Asia/Pacific Basin
Japan	8.5	%
India	2.9
Australia	2.5
South Korea	2.2
Taiwan	2.1
Hong Kong	1.7
China	1.0
Other	.8
	21.7

Other regions	.4

Short-term securities & other
assets less liabilities	15.4

Total	100.0	%

[begin mountain chart]

AFIS Global Growth Fund Class 2		MSCI World Index		Consumer Price Index*

4/30/97	$ 10,000	4/30/97	$10,000	4/30/97	$10,000
6/30/97	$ 10,650	6/30/97	$11,150	6/30/97	$10,006
12/31/97	$ 10,834	12/31/97	$11,209	12/31/97	$10,069
6/30/98	$ 12,880	6/30/98	$13,098	6/30/98	$10,175
12/31/98	$ 13,948	12/31/98	$13,988	12/31/98	$10,231
6/30/99	$ 16,631	6/30/99	$15,203	6/30/99	$10,375
12/31/99	$ 23,666	12/31/99	$17,532	12/31/99	$10,506
6/30/00	$ 24,145	6/30/00	$17,109	6/30/00	$10,762
12/31/00	$ 19,200	12/31/00	$15,267	12/31/00	$10,861
6/30/01	$ 17,652	6/30/01	$13,686	6/30/01	$11,111
12/31/01	$ 16,471	12/31/01	$12,745	12/31/01	$11,030
6/30/02	$ 15,153	6/30/02	$11,649	6/30/02	$11,230
12/31/02	$ 14,060	12/31/02	$10,254	12/31/02	$11,292
6/30/03	$ 15,564	6/30/03	$11,429	6/30/03	$11,467
12/31/03	$ 19,019	12/31/03	$13,717	12/31/03	$11,504
6/30/04	$ 19,567	6/30/04	$14,236	6/30/04	$11,841
12/31/04	$ 21,584	12/31/04	$15,808	12/31/04	$11,879
6/30/05	$ 21,506	6/30/05	$15,744	6/30/05	$12,141
12/31/05	$ 24,622	12/31/05	$17,392	12/31/05	$12,285
6/30/06	$ 26,137	6/30/06	$18,499	6/30/06	$12,665
12/31/06	$ 29,651	12/31/06	$20,984	12/31/06	$12,597

[end mountain chart]

Average annual total returns based on a $1,000 investment for periods ended December 31, 2006

	Class 1			Class 2

1 year		+20.73	%		+20.43	%
5 years		+12.76			+12.48
Lifetime (since April 30, 1997)		+12.17			+11.89
Gross expense ratio		.58			.83

The market indexes are unmanaged and include reinvested distributions, but do not reflect sales charges, commissions or expenses.

*Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.

Global Small Capitalization Fund

Global Small Capitalization Fund had another strong year, gaining 24.1% in the 12 months ended December 31, 2006, while the S&P/Citigroup Global/World Indexes,¹ a combination of four indexes that measures companies with a market capitalization of less than $3.0 billion, rose 21.2% over the same period. The Lipper Global Small-Cap Funds Average rose 20.5%.

The fund benefited from three fundamental forces in the market. Small-cap stocks continued to outpace their large-cap counterparts, non-U.S. markets rose more than the U.S. market and the dollar’s continued weakness boosted returns from investments outside the United States.

With these strong market forces behind it, the fund also gained from its investments in metals and mining, electric utilities and commercial banks. The fund’s holdings in health care equipment and Internet software & services dampened returns. At the end of the year, the fund had 37.6% of its assets invested in U.S. companies and 6.6% invested in the United Kingdom. During the year, however, gains in the U.K. market, as measured by the FTSE 100 in U.S. dollars, were almost double the gains in the S&P 500.

Where the fund’s assets were invested based on total net assets as of December 31, 2006

[begin pie chart]

48.4%	The Americas
6.7%	Short-term securities & other assets less liabilities
28.0%	Asia/Pacific Basin
16.7%	Europe
.2%	Other regions

[end pie chart]

The Americas
United States	37.6	%
Canada	9.3
Brazil	1.4
Argentina	.1
	48.4
Asia/Pacific Basin
South Korea	10.1
Hong Kong	3.0
Philippines	2.3
Taiwan	2.3
Australia	2.1
India	1.9
Singapore	1.6
Thailand	1.6
China	1.5
Other	1.6
	28.0
Europe
United Kingdom	6.6	%
Greece	2.0
Luxembourg	1.3
Netherlands	1.0
Norway	1.0
Other	4.8
	16.7

Other regions	0.2

Short-term securities & other
assets less liabilities	6.7
Total	100.0	%

[begin mountain chart]

Global Small Cap Fund Class 2		S&P/Citigroup Global/World Indexes¹		Consumer Price Index²

4/30/98	$ 10,000	4/30/98	$ 10,000	4/30/98	$ 10,000
6/30/98	$ 9,543	6/30/98	$ 9,536	6/30/98	$ 10,031
12/31/98	$ 10,247	12/31/98	$ 8,901	12/31/98	$ 10,086
6/30/99	$ 13,983	6/30/99	$ 9,927	6/30/99	$ 10,228
12/31/99	$ 19,609	12/31/99	$ 10,892	12/31/99	$ 10,357
6/30/00	$ 20,070	6/30/00	$ 11,402	6/30/00	$ 10,609
12/31/00	$ 16,368	12/31/00	$ 10,375	12/31/00	$ 10,708
6/30/01	$ 15,445	6/30/01	$ 10,620	6/30/01	$ 10,954
12/31/01	$ 14,265	12/31/01	$ 9,939	12/31/01	$ 10,874
6/30/02	$ 13,787	6/30/02	$ 10,249	6/30/02	$ 11,071
12/31/02	$ 11,547	12/31/02	$ 8,832	12/31/02	$ 11,132
6/30/03	$ 13,661	6/30/03	$ 10,521	6/30/03	$ 11,305
12/31/03	$ 17,728	12/31/03	$ 13,545	12/31/03	$ 11,342
6/30/04	$ 18,811	6/30/04	$ 14,732	6/30/04	$ 11,674
12/31/04	$ 21,430	12/31/04	$ 17,010	12/31/04	$ 11,711
6/30/05	$ 22,602	6/30/05	$ 17,331	6/30/05	$ 11,969
12/31/05	$ 26,862	12/31/05	$ 19,943	12/31/05	$ 12,111
6/30/06	$ 29,375	6/30/06	$ 21,382	6/30/06	$ 12,486
12/31/06	$ 33,324	12/31/06	$ 24,180	12/31/06	$ 12,418

[end mountain chart]

Average annual total returns based on a $1,000 investment for periods ended December 31, 2006

	Class 1			Class 2

1 year		+24.35	%		+24.05	%
5 years		+18.78			+18.49
Lifetime (since April 30, 1998)		+15.16			+14.89
Gross expense ratio		.77			1.02

The market indexes are unmanaged and include reinvested distributions, but do not reflect sales charges, commissions or expenses.

¹ Reflects results for the fund’s current and previous benchmarks. The S&P/Citigroup Global Index, used since May 2006, tracks more than 8,000 stocks with market capitalizations under $3 billion. Previously, the fund used two S&P/Citigroup World indexes and a S&P/Citigroup Global index, reflecting market capitalizations of less than $1.2 billion, $1.5 billion and $2 billion, respectively.

² Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.

Growth Fund

Growth Fund gained 10.2% for the year ended December 31, 2006. Although it had a solid year, especially compared to multi-cap growth funds, the fund did not keep pace with the S&P 500, which rose 15.8%.

Strong corporate earnings, a healthy economy and a benign outlook for inflation combined to boost investors’ confidence and drive the markets higher during 2006. Oil prices rose during the first half of the year, hitting a high of $77.03 a barrel in July before declining to $61.05 on December 31, essentially unchanged for the year. Despite the volatility in the price of oil, the fund’s investments in companies that provide oil equipment and services fared well.

Growth Fund also benefited from its holdings in software firms and communications equipment companies, as well as diversified telecommunication services firms. At the same time, the fund was hurt by its investments in the automobile components and consumer services industries.

Where the fund’s assets were invested based on total net assets as of December 31, 2006

[begin pie chart]

13.4%	Health care
15.0%	Energy
15.4%	Information technology
7.7%	Short-term securities & other assets less liabilities
13.1%	Consumer discretionary
8.2%	Consumer staples
27.2%	Other industries

[end pie chart]

[begin mountain chart]

AFIS Growth Fund Class 2		S&P 500		Consumer Price Index*

12/31/96	$ 10,000	12/31/96	$10,000	12/31/96	$10,000
12/31/97	$ 12,979	12/31/97	$13,335	12/31/97	$10,170
12/31/98	$ 17,553	12/31/98	$17,146	12/31/98	$10,334
12/31/99	$ 27,607	12/31/99	$20,753	12/31/99	$10,612
12/31/00	$ 28,841	12/31/00	$18,864	12/31/00	$10,971
12/31/01	$ 23,606	12/31/01	$16,624	12/31/01	$11,141
12/31/02	$ 17,834	12/31/02	$12,951	12/31/02	$11,406
12/31/03	$ 24,398	12/31/03	$16,664	12/31/03	$11,620
12/31/04	$ 27,446	12/31/04	$18,476	12/31/04	$11,999
12/31/05	$ 31,890	12/31/05	$19,382	12/31/05	$12,409
12/31/06	$ 35,149	12/31/06	$22,441	12/31/06	$12,724

[end mountain chart]

Average annual total returns based on a $1,000 investment for periods ended December 31, 2006

	Class 1		Class 2		Class 3

1 year	+10.48	%	+10.22	%	+10.29	%
5 years	+ 8.55		+8.29		+8.36
10 years	+13.67		+13.39		+13.47
Lifetime (since February 8, 1984)	+14.76		+14.45		+14.55
Gross expense ratio	.34		.59		.52

The market indexes are unmanaged and include reinvested distributions, but do not reflect sales charges, commissions or expenses.

*Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.

International Fund

International Fund benefited from the strength in non-U.S. markets and gained 19.0% as of December 31, 2006, a strong year that nevertheless lagged the MSCI EAFE^® (Europe, Australasia, Far East) Index, which rose 26.9%.

The markets with the greatest returns in 2006 were outside the United States. European markets were especially strong, as Germany’s DAX rose 36.0% and the French market gained 35.4%,¹ when measured in U.S. dollars. Other European markets, including the United Kingdom, Austria, Ireland, Spain and the Netherlands, all gained more than 30% when measured in dollars. The gains in non-U.S. markets were magnified by the dollar’s weakness. The greenback lost 10.4% against the euro and 12.2% against the British pound. It gained slightly against the Japanese yen, increasing 0.9%.

Many Asian markets also rose, but returns were not uniformly strong. In U.S. dollar terms, Indonesia’s market rose 74.8% and the Australian market gained 32.5%, but the Japanese market, as measured by the Nikkei 225 Index, rose only 6.9%. The fund’s investments in the energy sector, diversified telecommunications and commercial banks helped, while its holdings in electronic equipment declined.

Where the fund’s assets were invested based on total net assets as of December 31, 2006

[begin pie chart]

46.0%	Europe
9.1%	Short-term securities & other assets less liabilities
36.0%	Asia/Pacific Basin
8.8%	The Americas
.1%	Other regions

[end pie chart]

Europe
Germany	8.9	%
France	7.9
Switzerland	7.7
United Kingdom	7.1
Netherlands	2.5
Spain	2.5
Denmark	2.2
Austria	1.5
Italy	1.4
Belgium	1.1
Other	3.2
	46.0

Asia/Pacific Basin
Japan	13.3
South Korea	6.7
Taiwan	3.3
Australia	3.2
India	3.2
Hong Kong	2.4
Indonesia	1.1
Other	2.8
	36.0

The Americas
Canada	3.5
Brazil	2.5
Mexico	2.1
United States	.7
	8.8

Other regions	.1

Short-term securities & other
assets less liabilities	9.1

Total	100.0	%

[begin mountain chart]

AFIS International Fund Class 2		MSCI EAFE²		Consumer Price Index³

12/31/96	$ 10,000	12/31/96	$10,000	12/31/96	$10,000
12/31/97	$ 10,882	12/31/97	$10,206	12/31/97	$10,170
12/31/98	$ 13,158	12/31/98	$12,281	12/31/98	$10,334
12/31/99	$ 23,155	12/31/99	$15,633	12/31/99	$10,612
12/31/00	$ 18,047	12/31/00	$13,451	12/31/00	$10,971
12/31/01	$ 14,458	12/31/01	$10,599	12/31/01	$11,141
12/31/02	$ 12,312	12/31/02	$ 8,939	12/31/02	$11,406
12/31/03	$ 16,603	12/31/03	$12,441	12/31/03	$11,620
12/31/04	$ 19,810	12/31/04	$15,016	12/31/04	$11,999
12/31/05	$ 24,070	12/31/05	$17,120	12/31/05	$12,409
12/31/06	$ 28,638	12/31/06	$21,718	12/31/06	$12,724

[end mountain chart]

Average annual total returns based on a $1,000 investment for periods ended December 31, 2006

	Class 1		Class 2		Class 3

1 year	+19.33	%	+18.98	%	+19.07	%
5 years	+14.94		+14.65		+14.74
10 years	+11.37		+11.09		+11.17
Lifetime (since May 1, 1990)	+10.93		+10.64		+10.73
Gross expense ratio	.54		.79		.72

The market indexes are unmanaged and include reinvested distributions, but do not reflect sales charges, commissions or expenses.

¹ Unless otherwise indicated, country returns are based on MSCI indices, assume reinvestment of dividends and are measured in U.S. dollars.

² MSCI EAFE (Europe, Australasia, Far East) Index.

³ Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.

New World Fund

New World Fund did well in absolute terms, gaining 32.6% for the 12 months ended December 31, 2006, and surpassing the MSCI ACWI (All Country World Index) Index,^SM which rose 21.5%.

While we are pleased with the fund’s results relative to its benchmark, it’s important to note that the MSCI ACWI includes fewer emerging markets than New World Fund, which invests heavily in these markets. Indeed, the MSCI Emerging Markets Index^SM rose 32.6% in 2006. New World Fund, though, was not designed to mimic an emerging markets fund. Typically, it will lag emerging markets in good times and not decline as much during downturns. For example, during May and June in 2006, the MSCI Emerging Markets Index declined 10.6%, while New World Fund slipped 7.7%.

Despite the volatile year for crude oil prices, commodity prices in general rose during the year, helping many emerging markets. Prices for precious metals such as gold and silver also rose, as did the prices for agricultural products such as coffee and corn.

Where the fund’s assets were invested based on total net assets as of December 31, 2006

[begin pie chart]

30.5%	Asia/Pacific Basin
7.9%	Short-term securities & other assets less liabilities
27.6%	Europe
25.7%	The Americas
8.3%	Other regions

[end pie chart]

Asia/Pacific Basin
India	7.6	%
Taiwan	4.5
Japan	3.4
South Korea	2.4
Indonesia	2.4
Thailand	1.7
Hong Kong	1.7
Kazakhstan	1.5
Malaysia	1.3
China	1.3
Pakistan	1.2
Other	1.5
	30.5

The Americas
Brazil	8.9
United States	6.6
Mexico	5.6
Argentina	1.4
Canada	1.2
Other	2.0
	25.7

Europe
United Kingdom	5.4	%
Switzerland	3.4
Russia	3.1
Austria	2.9
Poland	2.0
Spain	1.9
Slovenia	1.6
Finland	1.3
Denmark	1.1
Other	4.9
	27.6

Other regions
South Africa	4.8
Israel	1.4
Oman	1.1
Other	1.0
	8.3

Short-term securities & other
assets less liabilities	7.9

Total	100.0	%

[begin mountain chart]

AFIS New World Fund Class 2		MSCI ACWI (All Country World Index) Index		Consumer Price Index*

6/17/99	$ 10,000	6/17/99	$ 10,000	6/17/99	$10,000
6/30/99	$ 10,030	6/30/99	$ 10,000	6/30/99	$10,000
12/31/99	$ 11,835	12/31/99	$ 11,548	12/31/99	$10,126
6/30/00	$ 11,638	6/30/00	$ 11,237	6/30/00	$10,373
12/31/00	$ 10,332	12/31/00	$ 9,938	12/31/00	$10,469
6/30/01	$ 10,340	6/30/01	$ 8,951	6/30/01	$10,710
12/31/01	$ 9,898	12/31/01	$ 8,357	12/31/01	$10,632
6/30/02	$ 10,044	6/30/02	$ 7,678	6/30/02	$10,824
12/31/02	$ 9,338	12/31/02	$ 6,771	12/31/02	$10,884
6/30/03	$ 10,449	6/30/03	$ 7,558	6/30/03	$11,053
12/31/03	$ 12,996	12/31/03	$ 9,116	12/31/03	$11,089
6/30/04	$ 13,216	6/30/04	$ 9,442	6/30/04	$11,414
12/31/04	$ 15,439	12/31/04	$ 10,552	12/31/04	$11,450
6/30/05	$ 16,096	6/30/05	$ 10,547	6/30/05	$11,703
12/31/05	$ 18,640	12/31/05	$ 11,752	12/31/05	$11,841
6/30/06	$ 20,304	6/30/06	$ 12,508	6/30/06	$12,208
12/31/06	$ 24,716	12/31/06	$ 14,282	12/31/06	$12,142

[end mountain chart]

Average annual total returns based on a $1,000 investment for periods ended December 31, 2006

	Class 1		Class 2

1 year	+32.88	%	+32.59	%
5 years	+20.38		+20.08
Lifetime (since June 17, 1999)	+13.03		+12.75
Gross expense ratio	.88		1.13

The market indexes are unmanaged and include reinvested distributions, but do not reflect sales charges, commissions or expenses.

*Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.

Blue Chip Income and Growth Fund

Blue Chip Income and Growth Fund passed a milestone in 2006 and now has a full five-year history. Most investment professionals consider five years as the minimum length of time over which to judge a fund’s long-term track record. Blue Chip Income and Growth Fund gained 17.4% for the 12 months ended December 31, 2006, outpacing its relevant index, the S&P 500, which rose 15.8%.

While we’re pleased with the returns investors earned in the past year, we’re especially gratified to note the fund has earned an average annual total return of 6.8% over the past five years, outpacing the 6.2% average annual total return for the S&P 500 over the same period.

Blue Chip Income and Growth Fund’s policy is to be at least 90% invested in the market at all times. This policy proved beneficial during 2006 when the market made strong gains.

Where the fund’s assets were invested based on total net assets as of December 31, 2006

[begin pie chart]

14.3%	Health care
17.5%	Information technology
19.0%	Financials
12.4%	Consumer discretionary
11.5%	Industrials
16.5%	Other industries
8.8%	Short-term securities & other assets less liabilities

[end pie chart]

[begin mountain chart]

AFIS Blue Chip Income and Growth Class 2		S&P 500		Consumer Price Index*

7/5/01	$10,000	7/5/01	$10,000	7/5/01	$10,000
9/30/01	$ 8,690	9/30/01	$ 8,569	9/30/01	$10,017
12/31/01	$ 9,462	12/31/01	$ 9,485	12/31/01	$ 9,927
3/31/02	$ 9,663	3/31/02	$ 9,511	3/31/02	$10,045
6/30/02	$ 8,478	6/30/02	$ 8,237	6/30/02	$10,107
9/30/02	$ 6,740	9/30/02	$ 6,815	9/30/02	$10,169
12/31/02	$ 7,279	12/31/02	$ 7,389	12/31/02	$10,163
3/31/03	$ 6,964	3/31/03	$ 7,157	3/31/03	$10,348
6/30/03	$ 8,153	6/30/03	$ 8,258	6/30/03	$10,320
9/30/03	$ 8,519	9/30/03	$ 8,476	9/30/03	$10,404
12/31/03	$ 9,516	12/31/03	$ 9,508	12/31/03	$10,354
3/31/04	$ 9,790	3/31/04	$ 9,668	3/31/04	$10,528
6/30/04	$ 9,747	6/30/04	$ 9,835	6/30/04	$10,657
9/30/04	$ 9,634	9/30/04	$ 9,651	9/30/04	$10,669
12/31/04	$10,443	12/31/04	$10,541	12/31/04	$10,691
3/31/05	$10,259	3/31/05	$10,315	3/31/05	$10,860
6/30/05	$10,506	6/30/05	$10,456	6/30/05	$10,927
9/30/05	$10,816	9/30/05	$10,833	9/30/05	$11,169
12/31/05	$11,199	12/31/05	$11,059	12/31/05	$11,056
3/31/06	$11,788	3/31/06	$11,524	3/31/06	$11,225
6/30/06	$11,709	6/30/06	$11,358	6/30/06	$11,399
9/30/06	$12,484	9/30/06	$12,001	9/30/06	$11,399
12/31/06	$13,149	12/31/06	$12,804	12/31/06	$11,337

[end mountain chart]

Average annual total returns based on a $1,000 investment for periods ended December 31, 2006

	Class 1		Class 2

1 year	+17.73	%	+17.42	%
5 years	+7.09		+ 6.80
Lifetime (since July 5, 2001)	+5.40		+ 5.11
Gross expense ratio	.43		.68

The market indexes are unmanaged and include reinvested distributions, but do not reflect sales charges, commissions or expenses.

*Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.

Global Growth and Income Fund

Global Growth and Income Fund was launched on May 1, 2006, and gained 10.3% during its first eight months ended December 31, 2006. During the same time period, the MSCI World Index^SM gained 9.5%. We are pleased that the fund has gotten off to a solid start, but we caution investors against making long-term projections based on such a short time period.

The fund, the 14th in the series, was launched to meet a specific need. Investors who are seeking income-producing stocks now have the opportunity to diversify their investments globally. A look at the fund’s portfolio shows that even in its short lifespan, holdings are diversified globally and across industries. The fund has invested in companies in South Africa, Kazakhstan, the United States, Hong Kong, Taiwan and Italy, as well as in the stocks of banks, auto makers, mining companies and retailers, among others.

Global Growth and Income Fund’s investment professionals will continue to look for investment opportunities around the world, focusing their search on well-established companies. Income will play a key role in the new fund.

Where the fund’s assets were invested based on total net assets as of December 31, 2006

[begin pie chart]

37.6%	The Americas
16.3%	Short-term securities & other assets less liabilities
23.0%	Asia/Pacific Basin
20.9%	Europe
2.2%	Other regions

[end pie chart]

The Americas
United States	29.1	%
Canada	7.9
Other	.6
	37.6

Asia/Pacific Basin
Japan	8.0
Taiwan	4.7
Australia	3.3
Hong Kong	2.2
Israel	1.4
Pakistan	1.3
Kazakhstan	1.1
Thailand	.8
Singapore	.2
	23.0

Europe
United Kingdom	5.6
Germany	4.4
Netherlands	1.8
Finland	1.7
France	1.3
Spain	.9
Austria	.8
Denmark	.8
Italy	.8
Switzerland	.8
Belgium	.5
Ireland	.5
Poland	.5
Russia	.5
	20.9

Other regions
South Africa	2.2
	2.2

Short-term securities & other
assets less liabilities	16.3

Total	100.0	%

[begin mountain chart]

AFIS Global Growth and Income Fund Class 2		MSCI World Index		Consumer Price Index¹

5/1/06	$ 10,000	5/1/06	$ 10,000	5/1/06	$ 10,000
5/31/06	$ 9,640	5/31/06	$ 9,654	5/31/06	$ 10,050
6/30/06	$ 9,600	6/30/06	$ 9,656	6/30/06	$ 10,069
7/31/06	$ 9,660	7/31/06	$ 9,718	7/31/06	$ 10,099
8/31/06	$ 9,900	8/31/06	$ 9,975	8/31/06	$ 10,119
9/30/06	$ 10,030	9/30/06	$ 10,097	9/30/06	$ 10,069
10/31/06	$ 10,390	10/31/06	$ 10,470	10/31/06	$ 10,015
11/30/06	$ 10,790	11/30/06	$ 10,731	11/30/06	$ 10,000
12/31/06	$ 11,030	12/31/06	$ 10,952	12/31/06	$ 10,015

[end mountain chart]

Cumulative total returns based on a $1,000 investment for period ended December 31, 2006

Class 1	Class 1		Class 2

Lifetime (since May 1, 2006)	+10.49	%	+10.30	%
Gross expense ratio	.72²		.97²

The market indexes are unmanaged and include reinvested distributions, but do not reflect sales charges, commissions or expenses.

¹ Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.

² Annualized.

Growth-Income Fund

Growth-Income Fund gained 15.2% for the year ended December 31, 2006, lagging the S&P 500, which rose 15.8% over the same period.

The U.S. stock market registered another solid year in 2006 as the economy continued to grow and corporate profits remained strong. Expectations of higher inflation diminished as oil prices declined during the second half of the year. The Federal Reserve, which raised the federal funds rate four times during the first half of the year, held the rate steady during the final six months.

In many ways, the fund’s return reflected these broader trends. The fund’s investments in telecommunications, helped by the merger of AT&T and Bell South, boosted returns. During the first half of 2006, the fund also benefited from its investments in oil companies, but as the price of oil dropped during the second half of 2006, those holdings lost value. By the end of the year, oil stocks had had little impact on returns. On the negative side, the fund’s investments in information technology stocks hurt returns. The fund also maintained an above-average buying reserve throughout 2006, holding an average of about 13% of its assets in cash.

Where the fund’s assets were invested based on total net assets as of December 31, 2006

[begin pie chart]

12.4%	Health care
13.4%	Financials
20.7%	Information technology
13.2%	Short-term securities & other assets less liabilities
10.8%	Consumer discretionary
8.8%	Industrials
20.7%	Other industries

[end pie chart]

[begin mountain chart]

AFIS Growth & Income Fund Class 2		S&P 500		Consumer Price Index*

12/31/96	$ 10,000	12/31/96	$10,000	12/31/96	$10,000
12/31/97	$ 12,554	12/31/97	$13,335	12/31/97	$10,170
12/31/98	$ 14,825	12/31/98	$17,146	12/31/98	$10,334
12/31/99	$ 16,485	12/31/99	$20,753	12/31/99	$10,612
12/31/00	$ 17,795	12/31/00	$18,864	12/31/00	$10,971
12/31/01	$ 18,251	12/31/01	$16,624	12/31/01	$11,141
12/31/02	$ 14,903	12/31/02	$12,951	12/31/02	$11,406
12/31/03	$ 19,735	12/31/03	$16,664	12/31/03	$11,620
12/31/04	$ 21,783	12/31/04	$18,476	12/31/04	$11,999
12/31/05	$ 23,053	12/31/05	$19,382	12/31/05	$12,409
12/31/06	$ 26,558	12/31/06	$22,441	12/31/06	$12,724

[end mountain chart]

Average annual total returns based on a $1,000 investment for periods ended December 31, 2006

	Class 1		Class 2		Class 3

1 year	+15.51	%	+15.20	%	+15.30	%
5 years	+ 8.06		+ 7.79		+ 7.87
10 years	+10.53		+10.26		+10.33
Lifetime (since February 8, 1984)	+13.18		+12.86		+12.98
Gross expense ratio	.28		.53		.46

The market indexes are unmanaged and include reinvested distributions, but do not reflect sales charges, commissions or expenses.

*Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.

Asset Allocation Fund

Asset Allocation Fund had a strong year in the 12 months ended December 31, 2006, rising 14.7%. The fund trailed the S&P 500, which gained 15.8%, but far outpaced the Citigroup Broad Investment-Grade (BIG) Bond Index, which increased by 4.3%.

At the end of 2006, Asset Allocation Fund’s portfolio was 69.1% invested in equities, from which it gained the majority of its strength, and 20.2% invested in bonds. The fund drew much of its strength from its investments in the oil, gas and consumable fuels industries, which were particularly strong. Its investments in software and diversified telecommunications also helped.

In the fixed-income portfolio, the fund held 8.6% of its assets in corporate bonds. The Federal Reserve raised the federal funds rate four times during the first half of 2006, but the action had little influence on long-term rates. Yields on the 10-year U.S. Treasury, a benchmark for mortgages and corporate bonds, rose from 4.4% at the beginning of the year to 4.7% at year-end.

In this environment, investors showed a willingness to take more risk and the prices of corporate bonds, especially high-yield bonds, gained value.

Where the fund’s assets were invested based on total net assets as of December 31, 2006

[begin pie chart]

69.1%	Equity securities
.1%	Non-U.S. government bonds & notes
.7%	Asset-backed obligations
10.7%	Short-term securities & other assets less liabilities
8.6%	Corporate bonds
6.2%	Mortgage-backed obligations
4.6%	U.S. government & government agency bonds & notes

[end pie chart]

[begin mountain chart]

AFIS Asset Allocation Fund Class 2		S&P 500		Citigroup BIG Index¹		Consumer Price Index²

12/31/96	$ 10,000	12/31/96	$10,000	12/31/96	$ 10,000	12/31/96	$10,000
12/31/97	$ 12,015	12/31/97	$13,335	12/31/97	$ 10,964	12/31/97	$10,170
12/31/98	$ 13,569	12/31/98	$17,146	12/31/98	$ 11,919	12/31/98	$10,334
12/31/99	$ 14,508	12/31/99	$20,753	12/31/99	$ 11,820	12/31/99	$10,612
12/31/00	$ 15,146	12/31/00	$18,864	12/31/00	$ 13,190	12/31/00	$10,971
12/31/01	$ 15,224	12/31/01	$16,624	12/31/01	$ 14,314	12/31/01	$11,141
12/31/02	$ 13,339	12/31/02	$12,951	12/31/02	$ 15,758	12/31/02	$11,406
12/31/03	$ 16,240	12/31/03	$16,664	12/31/03	$ 16,420	12/31/03	$11,620
12/31/04	$ 17,594	12/31/04	$18,476	12/31/04	$ 17,155	12/31/04	$11,999
12/31/05	$ 19,202	12/31/05	$19,382	12/31/05	$ 17,596	12/31/05	$12,409
12/31/06	$ 22,017	12/31/06	$22,441	12/31/06	$ 18,358	12/31/06	$12,724

[end mountain chart]

Average annual total returns based on a $1,000 investment for periods ended December 31, 2006

	Class 1		Class 2		Class 3

1 year	+14.96	%	+14.66	%	+14.75	%
5 years	+ 7.93		+ 7.66		+ 7.74
10 years	+ 8.48		+ 8.21		+ 8.29
Lifetime (since August 1, 1989)	+ 9.70		+ 9.40		+ 9.50
Gross expense ratio	.33		.58		.51

The market indexes are unmanaged and include reinvested distributions, but do not reflect sales charges, commissions or expenses.

¹ Citigroup Broad Investment-Grade (BIG) Bond Index.

² Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.

Bond Fund

Bond Fund gained 7.0% during the year ended December 31, 2006, outpacing the Citigroup Broad Investment-Grade (BIG) Bond Index, which rose 4.3%.

Investors in corporate bonds, especially high-yield bonds, were rewarded in 2006 as the economy remained strong, inflationary expectations were calm and corporate profits were healthy. U.S. Treasury bonds, as measured by the 10-year Treasury, gained value but did not keep pace with corporate- or mortgage-backed securities, which also had a strong year.

Bond Fund’s success during the year can be attributed to its holdings of corporate bonds, which made up 47.6% of its portfolio at year-end, as well as its investments in mortgage-backed securities, which constituted 8.4% of the portfolio on December 31, 2006.

The fund was also aided by its holdings of high-yield bonds. During 2006, investors showed a willingness to assume more risk and bid up the prices of high-yield bonds, especially those issued by airline companies and auto makers. At the beginning of the year, many companies in these two sectors were considered likely candidates for bankruptcy. By the end of the year, however, their prospects had improved markedly and the prices of their bonds had gone up.

Where the fund’s assets were invested based on total net assets as of December 31, 2006

[begin pie chart]

47.6%	Corporate bonds
.7%	Other securities
16.2%	Short-term securities & other assets less liabilities
11.0%	U.S. Treasury
8.4%	Mortgage-backed obligations
8.3%	Non-U.S. government bonds & notes
3.2%	U.S. government & government agency bonds & notes
2.9%	Preferred stocks
1.7%	Asset-backed obligations

[end pie chart]

[begin mountain chart]

AFIS Bond Fund Class 2		Citigroup BIG Index¹		Consumer Price Index²

12/31/96	$ 10,000	12/31/96	$ 10,000	12/31/96	$10,000
12/31/97	$ 10,988	12/31/97	$ 10,964	12/31/97	$10,170
12/31/98	$ 11,440	12/31/98	$ 11,919	12/31/98	$10,334
12/31/99	$ 11,732	12/31/99	$ 11,820	12/31/99	$10,612
12/31/00	$ 12,318	12/31/00	$ 13,190	12/31/00	$10,971
12/31/01	$ 13,322	12/31/01	$ 14,314	12/31/01	$11,141
12/31/02	$ 13,861	12/31/02	$ 15,758	12/31/02	$11,406
12/31/03	$ 15,635	12/31/03	$ 16,420	12/31/03	$11,620
12/31/04	$ 16,529	12/31/04	$ 17,155	12/31/04	$11,999
12/31/05	$ 16,791	12/31/05	$ 17,596	12/31/05	$12,409
12/31/06	$ 17,964	12/31/06	$ 18,358	12/31/06	$12,724

[end mountain chart]

Average annual total returns based on a $1,000 investment for periods ended December 31, 2006

	Class 1		Class 2

1 year	+7.31	%	+6.99	%
5 years	+6.42		+6.16
10 years	+6.30		+6.03
Lifetime (since January 2, 1996)	+6.26		+5.99
Gross expense ratio	.43		.68

The market indexes are unmanaged and include reinvested distributions, but do not reflect sales charges, commissions or expenses.

¹ Citigroup Broad Investment-Grade (BIG) Bond Index.

² Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.

Global Bond Fund

Global Bond Fund was the second of two new funds introduced to the American Funds Insurance Series in 2006. Launched on October 4, 2006, the fund had only a three-month track record by the end of the fiscal year on December 31, 2006. During that brief time, the fund gained 2.4%.³ Its relevant index, the Lehman Brothers Global Aggregate Bond Index, rose 1.8% during the same period.

Three months is far too short a time period to judge a fund. We believe, however, that Global Bond Fund offers investors an opportunity to take advantage of fixed-income opportunities globally.

The new fund could play an important role for investors seeking income and diversification. While the United States has a well-developed bond market, fixed-income investors have not always earned the highest returns in the U.S. market. For the past six years, a non-U.S. bond market has produced better total returns every year, when measured in dollars, according to the Lehman Brothers Global Aggregate Bond Index.

Where the fund’s assets were invested based on total net assets as of December 31, 2006

[begin pie chart]

42.6%	Non-U.S. government bonds & notes
.8%	Other securities
15.1%	Short-term securities & other assets less liabilities
23.3%	U.S. government & government agency bonds & notes
14.0%	Corporate bonds
4.2%	Mortgage-backed obligations

[end pie chart]

Net assets

Currency of denomination	Currency weighting (after hedging	)

United States	49.5	%
European Monetary Union¹	21.7
Japan	6.7
Sweden	4.5
United Kingdom	4.4
Israel	1.6
Malaysia	1.6
Poland	1.5
Mexico	1.2
Singapore	1.1
Egypt	1.1
Turkey	1.0
Norway	1.0
Hungary	.6
Argentina	.6
Thailand	.5
South Korea	.3
Australia	.3
Colombia	.3
Indonesia	.3
Canada	.2
	100.0	%

[begin mountain chart]

AFIS Global Bond Fund Class 2		Lehman Brothers Global Aggregate Bond Index		Consumer Price Index²

10/4/06	$10,000	10/4/06	$10,000	10/4/06	$10,000
10/31/06	$10,088	10/31/06	$10,071	10/31/06	$ 9,946
11/30/06	$10,338	11/30/06	$10,317	11/30/06	$ 9,931
12/31/06	$10,238	12/31/06	$10,180	12/31/06	$ 9,946

[end mountain chart]

Cumulative total returns based on a $1,000 investment for period ended December 31, 2006

	Class 1			Class 2

Lifetime (since October 4, 2006)		+2.52	%		+2.38%³
Gross expense ratio		.15⁴			.13⁵

The market indexes are unmanaged and include reinvested distributions, but do not reflect sales charges, commissions or expenses.

¹ Euro-denominated bonds including corporate and European government debt. European Monetary Union consists of Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.

² Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.

³ AFIS Global Bond Fund Class 2 shares were first sold on November 6, 2006. Results prior to that date are hypothetical based on Class 1 share results adjusted for estimated additional annual expenses of 0.25%.

⁴ From October 4, 2006, commencement of operations.

⁵ From November 6, 2006, when Class 2 shares were first issued.

High-Income Bond Fund

High-Income Bond Fund gained 10.6% for the 12 months ended December 31, 2006, but trailed its relevant index, the Credit Suisse High Yield Index, which increased 11.9%. The Federal Reserve held the federal funds rate steady during the second half of the year, and corporate profits remained strong. Investors seeking higher yields during the year showed a willingness to assume more risk and bid up prices of high-yield bonds.

In this environment, High-Income Bond Fund took a more cautious approach that contributed to the fund lagging its index. The fund was helped by its investments in General Motors and Delphi Corp. At the beginning of the year, debt issued by American automakers was deeply discounted because investors feared they would fall into bankruptcy. During the year, though, General Motors and others reached important agreements with the United Auto Workers and took other steps on the road to recovery that boosted the price of the bonds.

Where the fund’s assets were invested based on total net assets as of December 31, 2006

[begin pie chart]

80.2%	Corporate bonds
11.0%	Short-term securities & other assets less liabilities
5.6%	Equity securities
1.6%	Non-U.S. government bonds & notes
1.6%	Other securities

[end pie chart]

[begin mountain chart]

AFIS High-Income Bond Fund Class 2		Credit Suisse High Yield Index		Citigroup BIG Index¹		Consumer Price Index²

12/31/96	$ 10,000	12/31/96	$ 10,000	12/31/96	$ 10,000	12/31/96	$ 10,000
12/31/97	$ 11,208	12/31/97	$ 11,263	12/31/97	$ 10,964	12/31/97	$ 10,170
12/31/98	$ 11,238	12/31/98	$ 11,328	12/31/98	$ 11,919	12/31/98	$ 10,334
12/31/99	$ 11,860	12/31/99	$ 11,700	12/31/99	$ 11,820	12/31/99	$ 10,612
12/31/00	$ 11,467	12/31/00	$ 11,090	12/31/00	$ 13,190	12/31/00	$ 10,971
12/31/01	$ 12,354	12/31/01	$ 11,733	12/31/01	$ 14,314	12/31/01	$ 11,141
12/31/02	$ 12,128	12/31/02	$ 12,097	12/31/02	$ 15,758	12/31/02	$ 11,406
12/31/03	$ 15,708	12/31/03	$ 15,478	12/31/03	$ 16,420	12/31/03	$ 11,620
12/31/04	$ 17,215	12/31/04	$ 17,328	12/31/04	$ 17,155	12/31/04	$ 11,999
12/31/05	$ 17,594	12/31/05	$ 17,719	12/31/05	$ 17,596	12/31/05	$ 12,409
12/31/06	$ 19,457	12/31/06	$ 19,831	12/31/06	$ 18,358	12/31/06	$ 12,724

[end mountain chart]

Average annual total returns based on a $1,000 investment for periods ended December 31, 2006

	Class 1		Class 2		Class 3

1 year	+10.89	%	+10.59	%	+10.66	%
5 years	+ 9.79		+ 9.51		+ 9.58
10 years	+ 7.15		+ 6.88		+ 6.95
Lifetime (since February 8, 1984)	+10.45		+10.08		+10.25
Gross expense ratio	.49		.74		.67

The market indexes are unmanaged and include reinvested distributions, but do not reflect sales charges, commissions or expenses.

¹ Citigroup Broad Investment-Grade (BIG) Bond Index.

² Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.

U.S. Government/AAA-Rated Securities Fund

U.S. Government/AAA-Rated Securities Fund gained 3.8% during the year ended December 31, 2006, trailing the unmanaged Citigroup Treasury/Government Sponsored/Mortgage Index, which rose 4.3%. Although it lagged the index, the fund kept pace with the Lipper Corporate Debt A-Rated Funds Average, which gained 3.9%.

During 2006, investors willing to take more risks were rewarded as corporate bonds and high-yield securities enjoyed the greatest fixed-income returns. A combination of factors — lower inflation expectations, a strong economy and healthy corporate profits — led investors to seek rewards in corporate bonds and high-yield securities. At the same time, the Federal Reserve raised the federal funds rate four times during the first six months of the year.

At the end of the year, yields on U.S. Treasury bonds, which make up 26.5% of the portfolio, were lower than yields on short-term securities.

Prices of U.S. Treasury bonds fluctuated during 2006 and ended the year down slightly. Fears of inflation subsided over the course of 2006 as oil prices rose, peaked in July, turned downward and ended the year virtually unchanged.

Where the fund’s assets were invested based on total net assets as of December 31, 2006

[begin pie chart]

47.8%	Mortgage-backed obligations
5.6%	Short-term securities & other assets less liabilities
26.5%	U.S. Treasury bonds & notes
10.4%	Federal agency bonds & notes
8.7%	Asset-backed obligations
1.0%	Other bonds

[end pie chart]

[begin mountain chart]

U.S. Govt./AAA- Rated Securities Fund Class 2		Citigroup Treasury/ Gov't Sponsored/ Mortgage Index		Consumer Price Index*

12/31/96	$ 10,000	12/31/96	$ 10,000	12/31/96	$ 10,000
12/31/97	$ 10,821	12/31/97	$ 10,950	12/31/97	$ 10,170
12/31/98	$ 11,679	12/31/98	$ 11,909	12/31/98	$ 10,334
12/31/99	$ 11,588	12/31/99	$ 11,838	12/31/99	$ 10,612
12/31/00	$ 12,907	12/31/00	$ 13,299	12/31/00	$ 10,971
12/31/01	$ 13,813	12/31/01	$ 14,321	12/31/01	$ 11,141
12/31/02	$ 15,076	12/31/02	$ 15,782	12/31/02	$ 11,406
12/31/03	$ 15,420	12/31/03	$ 16,217	12/31/03	$ 11,620
12/31/04	$ 15,929	12/31/04	$ 16,887	12/31/04	$ 11,999
12/31/05	$ 16,314	12/31/05	$ 17,344	12/31/05	$ 12,409
12/31/06	$ 16,925	12/31/06	$ 18,083	12/31/06	$ 12,724

[end mountain chart]

Average annual total returns based on a $1,000 investment for periods ended December 31, 2006

	Class 1			Class 2			Class 3

1 year		+3.95	%		+3.75	%		+3.80	%
5 years		+4.41			+4.15			+4.23
10 years		+5.66			+5.40			+5.48
Lifetime (since December 2, 1985)		+7.02			+6.70			+6.83
Gross expense ratio		.47			.72			.65

The market indexes are unmanaged and include reinvested distributions, but do not reflect sales charges, commissions or expenses.

*Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.

Cash Management Fund

Figures shown are past results and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Unit prices and returns will vary, so investors may lose money. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity. For current information and month-end results, visit americanfunds.com/afis.html. For month-end results and information about your insurance contract, please go to the website for the company that issued your contract.

Cash Management Fund rose 4.6% during the year ended December 31, 2006. Most investors view the fund as a balance against volatility in the stock and bond markets and as a reserve to use when opportunities arise. The fund invests in a portfolio of highly liquid, short-term money market instruments.

While we are pleased the fund generated a strong return for such a highly liquid portfolio, we caution investors that the fund may not always have positive results and is not guaranteed to maintain a stable net asset value of $1 per share.

Where the fund’s assets were invested based on total net assets as of December 31, 2006

[begin pie chart]

85.4%	Corporate short-term notes
.3%	Other assets less liabilities
14.3%	Federal agency discount notes

[end pie chart]

Average annual total returns based on a $1,000 investment for periods ended December 31, 2006

	Class 1			Class 2			Class 3

1 year		+4.81	%		+4.59	%		+4.64	%
5 years		+2.12			+1.88			+1.93
10 years		+3.53			+3.28			+3.34
Lifetime (since February 8, 1984)		+4.92			+4.61			+4.73
Gross expense ratio		.33			.58			.51

As of December 31, 2006, Cash Management Fund’s annualized seven-day yield was 4.93% (4.90% without the fee waiver) for Class 1 shares; 4.71% (4.68% without the fee waiver) for Class 2 shares; and 4.76% (4.73% without the fee waiver) for Class 3 shares. The fund’s yields more accurately reflect the fund’s current earnings than do the fund’s returns.

The benefits of choice:

understanding your options

[photo of flowers in a field]

An English novelist once wrote, “the strongest principle of growth lies in human choice.” Though not as she originally intended, her words hold true for investing. Understanding the many available options can help you make better investment decisions and ultimately, maximize the growth of your portfolio. It is important to keep in mind, however, that choosing the right investment options depends on many factors, including your age, when you plan to retire and your tolerance for risk.

With its diverse range of choices, American Funds Insurance Series can help you meet your retirement goals. To that end, two new funds were added to the series’ lineup this year to help balance its offerings and provide you with more options. On the following pages, we’ll differentiate the 15 funds in the series and discuss them in greater detail. We hope this will give you a better understanding of the funds and how they can serve your long-term investment goals.

[photo of flowers in a field]

[Begin Pull Quote]

“It’s important to keep in mind that our focus is on companies — not countries or regions. We rely on in-depth global research to find companies with sound management teams and sustainable competitive advantages.”

— Steve Watson, portfolio counselor

[photo of Steve Watson]

[End Pull Quote]

[Begin Sidebar]

Global Discovery Fund

Global Growth Fund

Global Small Capitalization Fund

International Fund

New World Fund

Growth Fund

[End Sidebar]

[Begin Sidebar]

The global advantage

Over the past few decades, political and economic changes around the world have opened borders to free trade and free enterprise and have spurred technological innovations. As the global marketplace has grown, so has the number of investment opportunities around the world.

[begin pie chart]

Where the world is invested	World capitalization			Market weight (trillions)

United States		45	%	$	13.1
Europe		30			8.8
Japan		10			2.9
Developing markets		8			2.4
Pacific (excluding Japan)		4			1.1
Canada		3			0.9

[end pie chart]

Based on MSCI indices as of December 31, 2006. World capitalization as a percentage of the MSCI ACWI (All Country World Index) Index.

[End Sidebar]

Helping to build your retirement assets

The first phase of retirement savings — accumulating assets — typically begins long before retirement. During this phase, investors are likely to focus on growth. American Funds Insurance Series has six growth-oriented options that give investors a full range of choices.

Global Discovery Fund seeks growth by investing in some of the most dynamic sectors of the global economy. Within these parameters, the fund’s portfolio encompasses a broad spectrum of companies. As industries as diverse as technology, financial services and health care become increasingly intrinsic to how we operate our businesses and manage our lives, the fund’s investment options continue to expand.

“Since its inception, the fund’s purview has gone well beyond technology, telecommunications and media,” says Gordon Crawford, one of the fund’s three portfolio counselors. “We also invest in companies that specialize in business services, retail and finance, to name just a few. None of these industries is new, yet they are always evolving and our investments evolve with them.”

In addition, the fund’s investment universe literally covers the world. While the largest portion of its assets remain in the U.S., the international component of the portfolio has been increasing steadily. Including the U.S., Global Discovery Fund is currently invested in more than two dozen countries.

Some of the largest and most successful companies are based overseas. In fact, more than three-quarters of the world’s stocks are listed on exchanges outside the U.S. Of course, investing outside the United States poses its own risks, including currency fluctuations and political uncertainty. Still, investing overseas offers opportunities, and the flexibility of Global Growth Fund allows it to take advantage of these opportunities.

“We believe that being able to invest in companies regardless of where they are located offers tremendous value to investors. It’s beneficial not only in terms of capitalizing on opportunity, but also by creating a geographically diverse portfolio that is better able to withstand regional economic downturns and currency fluctuations,” says Steve Watson, one of the fund’s three portfolio counselors. “However, it’s important to keep in mind that our focus is on companies — not countries or regions. We rely on in-depth global research to find companies with sound management teams and sustainable competitive advantages.” As of its fiscal year-end, the fund’s portfolio included investments from approximately 50 companies in more than 20 countries.

Global Small Capitalization Fund can also invest globally, but its universe is that of small-company stocks — currently defined by Capital Research and Management Company, investment adviser to the series, as companies with market capitalizations of $3.5 billion or less.

“Despite their attractive growth prospects, many small companies are not widely followed, or understood, by institutions and individual investors. As a result, stock prices don’t always reflect a company’s true potential,” explains Blair Frank, one of three portfolio counselors for the fund. “This works to our advantage. Small-company stocks can reward careful analysis and in-depth research, both of which are at the core of our investment philosophy.”

Because the majority of companies listed on the world’s stock markets are small-capitalization firms, it is difficult for most traditional analysts to follow this vast array of companies. At Capital Research, a dedicated group of investment professionals make up the Small-Company Research Team, which strives to stay at the forefront of change and follows companies where no established industry exists.

Since International Fund, which invests primarily in the stocks of companies located outside the U.S., was launched in 1990, world markets have undergone remarkable changes. Companies are operating globally in order to grow and stay competitive, and the quickening of technological innovation has created new industries. When the fund began, stock markets outside the U.S., as measured by the MSCI ACWI ex USA, had a collective capitalization of about $3.4 trillion, slightly more than that of the United Kingdom today. International stocks are now worth about $16.1 trillion and include markets like South Korea and Brazil.

“One reason to invest outside the U.S. is a simple one: diversification,” says Alwyn Heong, one of the fund’s three portfolio counselors. “Because stock markets often move in different directions, an international component can help cushion your overall portfolio against declines in the U.S. and hopefully help it do even better at times.” Indeed, international markets have bested their U.S. counterparts in 10 of the past 20 calendar years, as measured by the MSCI EAFE and MSCI USA indices.

With the goal of reducing volatility while pursuing long-term capital appreciation, New World Fund blends three types of investments — stocks of multinational companies based in the developed world with significant exposure to the developing world, stocks of companies based in the developing world, and government and corporate bonds of issuers in developing countries.

This flexibility helps the fund meet one of its main objectives —trying to temper some of the volatility inherent in investing in developing countries. “By having the opportunity of investing outside of the developing world, we try to reduce that volatility,” explains Rob Lovelace, one of the fund’s three portfolio counselors. “So when developing markets are weak, the fund has tended to have better results than pure emerging markets funds. When developing markets do really well, the fund has tended to do really well.”

While the pace of growth may slow in developing countries in the next year or two, it is still “expected to remain very robust,” according to the World Bank.

Growth Fund is one of the oldest equity options in the American Funds Insurance Series and invests primarily in U.S. companies that have a record of growth, a sustainable competitive edge, good management and solid prospects for the future.

“I look for companies that have proven in the past to have above-average growth and that we believe will continue to have above-average growth in the future,” says Donnalisa Barnum, one of the fund’s five portfolio counselors. “Careful research by experienced investment professionals is the key. We focus on growth potential for the long term and look for companies with a competitive edge, whether it is in the services or the products they offer, their culture, their product development process, their distribution systems or their technologies.”

The fund’s five portfolio counselors have an average of 31 years of experience and, with more than $27 billion in assets, it is the largest fund in the American Funds Insurance Series.

Complementing your growth strategy

As investors accumulate assets for retirement, they’ll want to use as many tools as they can. One very important tool that can complement long-term growth strategy is reinvested dividends. American Funds Insurance Series has three investment options specifically designed with the importance of dividends in mind. While Asset Allocation Fund does not focus on dividends, its tactical approach to diversification can also complement your growth strategy.

In the two decades since it was launched in 1984, Growth-Income Fund has been the cornerstone of many investment plans. The fund invests primarily in dividend-paying U.S. stocks and is designed to seek both capital appreciation and income.

“There are several reasons behind our long-standing belief that dividends merit a prominent role in portfolio strategy,” says Jim Dunton, one of the fund’s four portfolio counselors. “Dividends provide a strong anchor in all market cycles, and a dividend-focused strategy has historically worked well in a flat or moderately favorable investment environment. They can also smooth out volatility in a portfolio, because dividends tend to be relatively stable and are not directly affected by market fluctuations.”

In addition, reinvested dividends can account for a large portion of total returns over extended periods. Over the past 25 years, dividends have accounted for about 52% of the total return of U.S. stocks as measured by Standard & Poor’s 500 Composite Index.

Blue Chip Income and Growth Fund focuses on the stocks of large, well-established, dividend-paying companies based primarily in the U.S. (10% of the portfolio holdings may be invested in non-dividend-paying companies). Only companies that have demonstrated their ability to produce relatively steady results over long periods of time qualify for the fund’s portfolio.

In short, the fund focuses on stocks issued by large, well-financed U.S.-based companies that often do business around the world. “Global research can be crucial when evaluating U.S. stocks,” explains Jim Dunton, one of the fund’s three portfolio counselors. “In the pharmaceutical industry, for example, the top company in terms of sales is a U.S. company — Pfizer. But many of its largest competitors are foreign corporations, so we have to know what’s going on with them, too.” The fund’s portfolio counselors often benefit from the insights of their Capital Research colleagues working around the world.

Global Growth and Income Fund, one of two new funds introduced this year, balances income with growth and offers the opportunity to participate in global markets by investing in established, dividend-focused companies from around the world.

[Begin Pull Quote]

[photo of Jim Dunton]

“Dividends provide a strong anchor in all market cycles, and a dividend-focused strategy has historically worked well in a flat or moderately favorable investment environment.”

— Jim Dunton, portfolio counselor

[End Pull Quote]

The fund’s global reach greatly facilitates its growth and income objectives. “The fund’s flexible mandate is truly an asset,” says Gregg Ireland, one of three portfolio counselors for the fund. “Good opportunities abound in markets around the globe and we’ve been given carte blanche to seek them out.” Currently, no particular region of the world offers the best value. With Capital Research’s extensive research effort, world-class companies can be found in all corners of the globe.

As investors get close to retirement, they may find themselves with three seemingly contradictory goals — current income, preservation of capital and growth of assets. Asset Allocation Fund aims to achieve these three objectives. It accomplishes this by holding a portfolio of high-quality stocks for growth, a blend of investment-grade and high-yield bonds for current income, and cash for asset preservation.

“Besides diversification by asset class, the stock and bond portfolios are also diversified by industry. The fund’s portfolio represents a cross section of the nation’s economy, including financial companies, information technology, health care, telecommunication services, energy and industrial firms,” observes Alan Berro, one of four portfolio counselors for the fund.

In addition to its varied holdings, the fund achieves further diversification through the multiple portfolio counselor system, which is common to all funds in the American Funds Insurance Series. In this system, each of the fund’s portfolio counselors manages a portion of the portfolio independently within the fund’s overall guidelines. This helps provide diversity of investment options and experience.

[photo of flowers in a field]

[Begin Sidebar]

Growth-Income Fund

Blue Chip Income and Growth Fund

Global Growth and Income Fund

Asset Allocation Fund

[End Sidebar]

[Begin Sidebar]

How dividend and non-dividend-paying companies compare

S&P 500 companies*

1987-2006	Average annual total returns	Standard deviation

Dividend payers	10.11%	15.19
Non-dividend payers	3.39	24.55

[begin line chart]

DATE	Dividend Payers		Non Dividend Payers

12/31/1986		100.00		100.00
01/31/1987		113.27		117.99
02/28/1987		119.24		126.40
03/31/1987		121.19		128.27
04/30/1987		118.65		131.12
05/31/1987		119.24		136.36
06/30/1987		125.11		135.35
07/31/1987		132.53		147.74
08/31/1987		136.30		151.02
09/30/1987		133.21		150.46
10/31/1987		99.39		100.79
11/30/1987		92.63		95.46
12/31/1987		100.90		102.94
01/31/1988		105.61		104.58
02/29/1988		112.71		113.18
03/31/1988		110.94		113.21
04/30/1988		110.87		115.19
05/31/1988		111.22		114.45
06/30/1988		117.24		123.27
07/31/1988		115.97		119.30
08/31/1988		112.41		111.82
09/30/1988		116.97		115.30
10/31/1988		119.07		112.77
11/30/1988		116.05		110.13
12/31/1988		118.56		116.47
01/31/1989		126.41		127.06
02/28/1989		124.49		127.09
03/31/1989		127.21		125.76
04/30/1989		133.23		132.42
05/31/1989		139.12		141.03
06/30/1989		137.89		138.52
07/31/1989		149.23		148.63
08/31/1989		153.03		155.07
09/30/1989		150.62		152.06
10/31/1989		144.05		136.46
11/30/1989		145.92		134.81
12/31/1989		148.23		133.04
01/31/1990		137.19		121.00
02/28/1990		138.54		122.85
03/31/1990		141.89		131.07
04/30/1990		136.34		121.57
05/31/1990		149.42		131.68
06/30/1990		147.25		126.91
07/31/1990		143.80		116.98
08/31/1990		128.06		98.55
09/30/1990		118.58		86.35
10/31/1990		114.37		78.33
11/30/1990		124.26		85.68
12/31/1990		129.32		87.68
01/31/1991		137.12		101.54
02/28/1991		147.87		112.62
03/31/1991		152.08		116.04
04/30/1991		152.86		114.31
05/31/1991		161.39		117.04
06/30/1991		153.79		106.44
07/31/1991		159.73		110.56
08/31/1991		162.40		114.95
09/30/1991		159.37		109.81
10/31/1991		160.72		109.59
11/30/1991		152.13		103.77
12/31/1991		168.94		114.30
01/31/1992		169.91		121.24
02/29/1992		173.60		130.07
03/31/1992		170.66		122.65
04/30/1992		174.26		118.14
05/31/1992		174.72		115.77
06/30/1992		171.02		110.34
07/31/1992		178.00		112.94
08/31/1992		173.42		106.53
09/30/1992		175.67		110.36
10/31/1992		178.22		114.37
11/30/1992		185.20		121.49
12/31/1992		188.74		125.40
01/31/1993		191.80		131.19
02/28/1993		193.81		129.28
03/31/1993		198.83		131.94
04/30/1993		194.11		127.15
05/31/1993		199.31		133.29
06/30/1993		199.59		131.31
07/31/1993		198.81		130.21
08/31/1993		205.99		136.40
09/30/1993		203.87		136.47
10/31/1993		206.61		141.26
11/30/1993		204.58		139.23
12/31/1993		208.85		142.40
01/31/1994		215.58		149.81
02/28/1994		211.06		148.15
03/31/1994		201.72		139.36
04/30/1994		202.68		136.67
05/31/1994		205.08		136.16
06/30/1994		200.66		130.65
07/31/1994		207.22		133.66
08/31/1994		216.95		143.26
09/30/1994		210.91		138.99
10/31/1994		212.76		140.29
11/30/1994		203.22		133.63
12/31/1994		206.33		135.29
01/31/1995		210.69		135.28
02/28/1995		219.68		140.91
03/31/1995		225.44		145.29
04/30/1995		229.62		150.61
05/31/1995		238.07		153.14
06/30/1995		241.96		163.35
07/31/1995		249.88		167.27
08/31/1995		251.60		167.32
09/30/1995		257.54		169.57
10/31/1995		251.51		159.62
11/30/1995		264.19		165.48
12/31/1995		268.18		163.06
01/31/1996		276.26		165.75
02/29/1996		278.85		168.85
03/31/1996		285.02		167.31
04/30/1996		289.92		180.65
05/31/1996		293.06		183.49
06/30/1996		290.90		176.53
07/31/1996		275.15		161.35
08/31/1996		283.81		166.55
09/30/1996		297.19		175.41
10/31/1996		301.65		172.35
11/30/1996		320.41		189.93
12/31/1996		314.74		184.82
01/31/1997		325.20		194.47
02/28/1997		331.46		186.94
03/31/1997		318.82		180.47
04/30/1997		329.43		180.75
05/31/1997		350.75		201.14
06/30/1997		365.09		202.60
07/31/1997		389.51		229.04
08/31/1997		375.70		228.76
09/30/1997		395.55		235.02
10/31/1997		379.89		214.06
11/30/1997		392.70		213.43
12/31/1997		399.85		207.53
01/31/1998		394.97		214.11
02/28/1998		423.93		233.96
03/31/1998		444.10		244.74
04/30/1998		444.29		246.31
05/31/1998		433.49		234.06
06/30/1998		435.06		239.90
07/31/1998		412.95		230.90
08/31/1998		353.47		179.51
09/30/1998		370.86		189.79
10/31/1998		400.07		209.52
11/30/1998		417.83		220.94
12/31/1998		423.85		236.77
01/31/1999		419.69		254.03
02/28/1999		411.92		239.45
03/31/1999		417.40		245.20
04/30/1999		456.94		259.62
05/31/1999		452.61		262.34
06/30/1999		466.79		279.32
07/31/1999		449.27		267.83
08/31/1999		435.92		263.92
09/30/1999		414.45		256.19
10/31/1999		424.39		260.32
11/30/1999		412.75		282.27
12/31/1999		417.69		318.62
01/31/2000		391.59		295.17
02/29/2000		357.98		312.96
03/31/2000		398.41		326.87
04/30/2000		403.32		309.52
05/31/2000		413.91		289.37
06/30/2000		394.38		300.25
07/31/2000		397.55		285.41
08/31/2000		419.43		316.69
09/30/2000		416.97		289.33
10/31/2000		427.83		277.39
11/30/2000		419.29		228.91
12/31/2000		448.66		233.32
01/31/2001		450.87		268.08
02/28/2001		443.37		222.26
03/31/2001		427.61		195.68
04/30/2001		452.16		222.21
05/31/2001		463.06		218.07
06/30/2001		450.63		217.15
07/31/2001		452.98		201.86
08/31/2001		440.69		179.71
09/30/2001		395.82		139.01
10/31/2001		396.60		154.74
11/30/2001		426.06		179.16
12/31/2001		439.77		181.70
01/31/2002		442.09		174.36
02/28/2002		447.76		156.86
03/31/2002		470.37		171.31
04/30/2002		460.43		155.18
05/31/2002		459.06		147.40
06/30/2002		431.17		124.43
07/31/2002		388.76		105.11
08/31/2002		393.67		103.79
09/30/2002		351.26		87.19
10/31/2002		361.09		99.66
11/30/2002		383.74		118.25
12/31/2002		369.87		105.91
01/31/2003		357.89		103.58
02/28/2003		346.83		102.13
03/31/2003		347.68		101.99
04/30/2003		377.55		115.04
05/31/2003		405.79		130.80
06/30/2003		408.11		131.21
07/31/2003		416.59		135.81
08/31/2003		429.07		145.99
09/30/2003		423.18		141.15
10/31/2003		450.55		151.64
11/30/2003		458.21		155.81
12/31/2003		483.46		161.57
01/31/2004		487.63		170.75
02/29/2004		500.09		170.60
03/31/2004		499.26		166.30
04/30/2004		489.85		157.55
05/31/2004		497.10		161.81
06/30/2004		512.04		165.71
07/31/2004		496.79		149.29
08/31/2004		498.63		144.41
09/30/2004		509.56		149.64
10/31/2004		516.81		156.22
11/30/2004		543.85		166.98
12/31/2004		561.58		174.87
01/31/2005		549.68		163.43
02/28/2005		562.11		163.93
03/31/2005		556.22		159.00
04/30/2005		538.62		151.47
05/31/2005		556.53		164.44
06/30/2005		564.17		166.01
07/31/2005		589.81		176.41
08/31/2005		580.62		176.44
09/30/2005		582.93		178.44
10/31/2005		569.69		171.91
11/30/2005		594.45		176.81
12/31/2005		598.88		177.72
01/31/2006		617.62		188.45
02/28/2006		618.27		188.04
03/31/2006		627.81		191.56
04/30/2006		635.34		191.05
05/31/2006		619.69		181.64
06/30/2006		621.36		177.16
07/31/2006		616.05		168.72
08/31/2006		627.40		179.70
09/30/2006		642.62		184.10
10/31/2006		666.25		189.07
11/30/2006		680.59		195.18
12/31/2006		686.93		194.76

[end line chart]

*Returns based on monthly equal-weighted geometric average of total returns of S&P 500 component stocks, with components reconstituted monthly. Underlying data courtesy of Ned Davis Research, Inc. Standard deviation (annualized based on monthly returns) is a measure of how returns over time have varied from the mean and is one of the most common measures of absolute volatility. Results calculated are from December 31, 1986, through December 31, 2006.

[End Sidebar]

[photo of flowers in a field]

[Begin Pull Quote]

— Mark Dalzell, portfolio counselor

[photo of Mark Dalzell]

[End Pull Quote]

[Begin Sidebar]

Bond Fund

Global Bond Fund

High-Income Bond Fund

U.S. Government/

AAA-Rated Securities Fund

Cash Management Fund

[End Sidebar]

[Begin Sidebar]

Stocks + bonds = balance

[begin line chart]

5 years, 12/31/96 - 12/31/01

Stocks		Bonds		Stocks + Bonds
12/31/1996	$10,000	12/31/1996	$10,000	12/31/1996	$10,000
1/31/1997	$10,624	1/31/1997	$10,031	1/31/1997	$10,327
2/28/1997	$10,708	2/28/1997	$10,055	2/28/1997	$10,382
3/31/1997	$10,269	3/31/1997	$9,944	3/31/1997	$10,106
4/30/1997	$10,881	4/30/1997	$10,093	4/30/1997	$10,487
5/31/1997	$11,543	5/31/1997	$10,188	5/31/1997	$10,866
6/30/1997	$12,060	6/30/1997	$10,309	6/30/1997	$11,185
7/31/1997	$13,019	7/31/1997	$10,587	7/31/1997	$11,803
8/31/1997	$12,290	8/31/1997	$10,497	8/31/1997	$11,394
9/30/1997	$12,963	9/30/1997	$10,652	9/30/1997	$11,807
10/31/1997	$12,531	10/31/1997	$10,806	10/31/1997	$11,668
11/30/1997	$13,110	11/30/1997	$10,856	11/30/1997	$11,983
12/31/1997	$13,335	12/31/1997	$10,965	12/31/1997	$12,150
1/31/1998	$13,482	1/31/1998	$11,106	1/31/1998	$12,294
2/28/1998	$14,454	2/28/1998	$11,098	2/28/1998	$12,776
3/31/1998	$15,194	3/31/1998	$11,136	3/31/1998	$13,165
4/30/1998	$15,347	4/30/1998	$11,194	4/30/1998	$13,270
5/31/1998	$15,083	5/31/1998	$11,300	5/31/1998	$13,192
6/30/1998	$15,695	6/30/1998	$11,396	6/30/1998	$13,546
7/31/1998	$15,529	7/31/1998	$11,420	7/31/1998	$13,475
8/31/1998	$13,286	8/31/1998	$11,606	8/31/1998	$12,446
9/30/1998	$14,137	9/30/1998	$11,878	9/30/1998	$13,008
10/31/1998	$15,286	10/31/1998	$11,815	10/31/1998	$13,551
11/30/1998	$16,212	11/30/1998	$11,882	11/30/1998	$14,047
12/31/1998	$17,146	12/31/1998	$11,918	12/31/1998	$14,532
1/31/1999	$17,862	1/31/1999	$12,003	1/31/1999	$14,933
2/28/1999	$17,307	2/28/1999	$11,793	2/28/1999	$14,550
3/31/1999	$18,000	3/31/1999	$11,859	3/31/1999	$14,929
4/30/1999	$18,697	4/30/1999	$11,896	4/30/1999	$15,297
5/31/1999	$18,256	5/31/1999	$11,792	5/31/1999	$15,024
6/30/1999	$19,268	6/30/1999	$11,755	6/30/1999	$15,511
7/31/1999	$18,667	7/31/1999	$11,705	7/31/1999	$15,186
8/31/1999	$18,575	8/31/1999	$11,699	8/31/1999	$15,137
9/30/1999	$18,066	9/30/1999	$11,834	9/30/1999	$14,950
10/31/1999	$19,209	10/31/1999	$11,878	10/31/1999	$15,543
11/30/1999	$19,599	11/30/1999	$11,877	11/30/1999	$15,738
12/31/1999	$20,753	12/31/1999	$11,820	12/31/1999	$16,286
1/31/2000	$19,710	1/31/2000	$11,781	1/31/2000	$15,746
2/29/2000	$19,338	2/29/2000	$11,924	2/29/2000	$15,631
3/31/2000	$21,228	3/31/2000	$12,081	3/31/2000	$16,654
4/30/2000	$20,590	4/30/2000	$12,046	4/30/2000	$16,318
5/31/2000	$20,167	5/31/2000	$12,041	5/31/2000	$16,104
6/30/2000	$20,664	6/30/2000	$12,291	6/30/2000	$16,478
7/31/2000	$20,342	7/31/2000	$12,403	7/31/2000	$16,372
8/31/2000	$21,604	8/31/2000	$12,583	8/31/2000	$17,093
9/30/2000	$20,464	9/30/2000	$12,662	9/30/2000	$16,563
10/31/2000	$20,377	10/31/2000	$12,745	10/31/2000	$16,561
11/30/2000	$18,772	11/30/2000	$12,954	11/30/2000	$15,863
12/31/2000	$18,864	12/31/2000	$13,194	12/31/2000	$16,029
1/31/2001	$19,533	1/31/2001	$13,410	1/31/2001	$16,471
2/28/2001	$17,753	2/28/2001	$13,527	2/28/2001	$15,640
3/31/2001	$16,629	3/31/2001	$13,595	3/31/2001	$15,112
4/30/2001	$17,920	4/30/2001	$13,538	4/30/2001	$15,729
5/31/2001	$18,040	5/31/2001	$13,620	5/31/2001	$15,830
6/30/2001	$17,601	6/30/2001	$13,671	6/30/2001	$15,636
7/31/2001	$17,428	7/31/2001	$13,977	7/31/2001	$15,703
8/31/2001	$16,338	8/31/2001	$14,137	8/31/2001	$15,238
9/30/2001	$15,019	9/30/2001	$14,302	9/30/2001	$14,660
10/31/2001	$15,305	10/31/2001	$14,601	10/31/2001	$14,953
11/30/2001	$16,479	11/30/2001	$14,400	11/30/2001	$15,440
12/31/2001	$16,624	12/31/2001	$14,308	12/31/2001	$15,466

[end line chart]

[begin line chart]

5 years, 12/31/01 - 12/31/06

Stocks		Bonds		Stocks + Bonds
12/31/2001	$10,000	12/31/2001	$10,000	12/31/2001	$10,000
1/31/2002	$9,854	1/31/2002	$10,081	1/31/2002	$9,968
2/28/2002	$9,664	2/28/2002	$10,179	2/28/2002	$9,921
3/31/2002	$10,028	3/31/2002	$10,009	3/31/2002	$10,018
4/30/2002	$9,420	4/30/2002	$10,203	4/30/2002	$9,812
5/31/2002	$9,351	5/31/2002	$10,290	5/31/2002	$9,820
6/30/2002	$8,685	6/30/2002	$10,379	6/30/2002	$9,532
7/31/2002	$8,008	7/31/2002	$10,504	7/31/2002	$9,256
8/31/2002	$8,061	8/31/2002	$10,682	8/31/2002	$9,371
9/30/2002	$7,185	9/30/2002	$10,855	9/30/2002	$9,020
10/31/2002	$7,817	10/31/2002	$10,805	10/31/2002	$9,311
11/30/2002	$8,277	11/30/2002	$10,802	11/30/2002	$9,540
12/31/2002	$7,791	12/31/2002	$11,026	12/31/2002	$9,408
1/31/2003	$7,587	1/31/2003	$11,035	1/31/2003	$9,311
2/28/2003	$7,473	2/28/2003	$11,188	2/28/2003	$9,330
3/31/2003	$7,545	3/31/2003	$11,179	3/31/2003	$9,362
4/30/2003	$8,167	4/30/2003	$11,271	4/30/2003	$9,719
5/31/2003	$8,597	5/31/2003	$11,481	5/31/2003	$10,039
6/30/2003	$8,706	6/30/2003	$11,459	6/30/2003	$10,082
7/31/2003	$8,860	7/31/2003	$11,073	7/31/2003	$9,967
8/31/2003	$9,032	8/31/2003	$11,147	8/31/2003	$10,090
9/30/2003	$8,937	9/30/2003	$11,442	9/30/2003	$10,189
10/31/2003	$9,442	10/31/2003	$11,335	10/31/2003	$10,389
11/30/2003	$9,525	11/30/2003	$11,362	11/30/2003	$10,444
12/31/2003	$10,024	12/31/2003	$11,478	12/31/2003	$10,751
1/31/2004	$10,208	1/31/2004	$11,570	1/31/2004	$10,889
2/29/2004	$10,350	2/29/2004	$11,696	2/29/2004	$11,023
3/31/2004	$10,194	3/31/2004	$11,783	3/31/2004	$10,989
4/30/2004	$10,034	4/30/2004	$11,477	4/30/2004	$10,755
5/31/2004	$10,171	5/31/2004	$11,431	5/31/2004	$10,801
6/30/2004	$10,369	6/30/2004	$11,495	6/30/2004	$10,932
7/31/2004	$10,026	7/31/2004	$11,609	7/31/2004	$10,818
8/31/2004	$10,066	8/31/2004	$11,831	8/31/2004	$10,949
9/30/2004	$10,175	9/30/2004	$11,863	9/30/2004	$11,019
10/31/2004	$10,331	10/31/2004	$11,962	10/31/2004	$11,146
11/30/2004	$10,749	11/30/2004	$11,867	11/30/2004	$11,308
12/31/2004	$11,114	12/31/2004	$11,976	12/31/2004	$11,545
1/31/2005	$10,843	1/31/2005	$12,051	1/31/2005	$11,447
2/28/2005	$11,071	2/28/2005	$11,980	2/28/2005	$11,526
3/31/2005	$10,876	3/31/2005	$11,919	3/31/2005	$11,397
4/30/2005	$10,669	4/30/2005	$12,080	4/30/2005	$11,375
5/31/2005	$11,009	5/31/2005	$12,211	5/31/2005	$11,610
6/30/2005	$11,024	6/30/2005	$12,277	6/30/2005	$11,651
7/31/2005	$11,434	7/31/2005	$12,165	7/31/2005	$11,800
8/31/2005	$11,330	8/31/2005	$12,321	8/31/2005	$11,826
9/30/2005	$11,422	9/30/2005	$12,194	9/30/2005	$11,808
10/31/2005	$11,231	10/31/2005	$12,098	10/31/2005	$11,664
11/30/2005	$11,655	11/30/2005	$12,151	11/30/2005	$11,903
12/31/2005	$11,660	12/31/2005	$12,267	12/31/2005	$11,963
1/31/2006	$11,968	1/31/2006	$12,268	1/31/2006	$12,118
2/28/2006	$12,001	2/28/2006	$12,308	2/28/2006	$12,154
3/31/2006	$12,150	3/31/2006	$12,188	3/31/2006	$12,169
4/30/2006	$12,313	4/30/2006	$12,165	4/30/2006	$12,239
5/31/2006	$11,959	5/31/2006	$12,152	5/31/2006	$12,056
6/30/2006	$11,975	6/30/2006	$12,178	6/30/2006	$12,077
7/31/2006	$12,049	7/31/2006	$12,343	7/31/2006	$12,196
8/31/2006	$12,335	8/31/2006	$12,532	8/31/2006	$12,433
9/30/2006	$12,653	9/30/2006	$12,642	9/30/2006	$12,647
10/31/2006	$13,065	10/31/2006	$12,726	10/31/2006	$12,895
11/30/2006	$13,313	11/30/2006	$12,873	11/30/2006	$13,093
12/31/2006	$13,500	12/31/2006	$12,799	12/31/2006	$13,149

[end line chart]

Assumes hypothetical $10,000 investments on December 31, 1996, and December 31, 2001, with all distributions reinvested. Stocks are represented by Standard & Poor’s 500 Composite Index. Bonds are represented by the Lehman Brothers Aggregate Bond Index. The stocks and bonds portfolio consists of $5,000 invested in stocks and $5,000 invested in bonds at the beginning of each period. The indexes are unmanaged.

[End Sidebar]

Keeping what you earn

Although investors may still need growth options in their portfolios when they retire, fixed-income investment options should also play a critical role in their plans. Bonds provide a steady stream of income and provide a counterbalance to equity investments, which can often be volatile. American Funds Insurance Series has four fixed-income investment options to help investors diversify their portfolios.

Bond Fund has a broad mandate covering nearly every area of the bond market, which means the fund can diversify among the best income opportunities that fundamental research can uncover.

The fund’s broad diversity helps to minimize risks overall because different types of bonds often respond differently to changing economic conditions and market cycles. Abner Goldstine, one of the fund’s four portfolio counselors, explains, “Changing relationships among the various sectors of the bond market can create pockets of opportunity for investors with the resources to find them. With Bond Fund, we have the opportunity to move portions into a variety of investments any time and anywhere we uncover value in the market.”

As of December 31, 2006, the fund held bonds from issuers in almost every sector of the bond market. Additionally, these holdings have maturities that span the traditional bond sector, from three months to 30 years. With respect to credit quality, the fund focuses primarily on investment-grade debt; it also maintains a modest exposure to high-yield bonds.

With more than half of the world’s bonds issued outside of the U.S., Global Bond Fund can help investors access the benefits of global bond investing. The fund, introduced this year, emphasizes total return and invests in a mix of government and corporate bonds primarily in developed markets around the globe. It can also invest up to 25% of its assets in bonds rated below investment-grade, including bonds issued by governments and companies in developing countries.

“It’s nearly impossible to know which bonds or regions are going to deliver the best returns in a given year. That’s why it’s best to have a mix of investments in your portfolio at all times,” says Mark Dalzell, one of the fund’s three portfolio counselors. However, with that diversity and breadth comes greater complexity.

To help navigate this ever-expanding universe, the fund’s portfolio counselors are supported by a team of investment analysts and bond traders who help identify the individual bonds, classes of bonds and maturities most likely to do well in a given interest-rate environment. Additional insights arise from a fixed-income strategy discussion among traders, economists and portfolio counselors who focus on potential changes in interest rates. This approach helps identify investment opportunities across the full spectrum of the bond market.

High-Income Bond Fund seeks a high level of current income and, secondarily, capital appreciation through a diversified portfolio consisting primarily of lower rated, higher risk corporate bonds.

Although the fund’s primary goal is to produce a high level of current income for investors, the bonds in its portfolio are never judged solely against current yield. Instead, the fund focuses on producing solid long-term results by balancing attention to yield with a view to long-term value. “We buy holdings on an issuer-by-issuer basis,” explains Susan Tolson, one of the fund’s three portfolio counselors. “We first look for companies that can service their debt and then, from those companies, we search for those with the highest yield.”

A look at the fund’s long-term results helps to illustrate this point. Over the past 10 years ended December 31, 2006, the fund’s 12-month dividend yield has averaged about 8%, which is slightly less than that of the Lipper High Current Yield Funds Average. However, the fund’s average annual total return over the same 10-year period was 6.9%, exceeding the 5.5% return of the Lipper average.

Using fundamental research to select a portfolio of top-quality bonds, U.S. Government/AAA-Rated Securities Fund seeks to offer high current income and preservation of capital.

The fund’s focus on high-quality, low-credit-risk bonds can make it an appropriate anchor for a diversified portfolio. “Government bonds tend not only to hold their value during times of market volatility; they tend to go up in value,” says Thomas Hogh, one of the fund’s three portfolio counselors. “This is partly because investors selling stocks and other riskier assets tend to buy government bonds during times of economic weakness or increased financial market uncertainty. Because of this, the fund has tended to have a more stable value over time, which is particularly attractive to those investors who have a shorter investment time horizon.”

With a lifetime average annual total return of 6.7%, the fund has had only three down years in its 21-year history.

Cash Management Fund is as actively managed as the equity and bond funds in the American Funds Insurance Series. “We have access to more than 60 fixed-income investment professionals — traders, economists and analysts who help to provide a broad-based overview, as well as fundamental analysis,” explains Terry Cook, one of the fund’s three traders.

Whether used as a temporary holding place for assets between longer term investments, as part of a regular investment program, or simply as a way to earn income on the cash-reserve portion of a balanced portfolio, the stability and convenience of the fund can be instrumental in helping you achieve your long-term financial goals.

Global Discovery Fund

Summary investment portfolio, December 31, 2006

LARGEST INDIVIDUAL EQUITY SECURITIES	Percent of net assets

Erste Bank	2.1	%
Bayer	2.0
Time Warner	1.9
Schlumberger	1.9
Google	1.9
Veolia Environnement	1.9
American International Group	1.9
eBay	1.9
Cisco Systems	1.8
Xinao Gas Holdings	1.7

				Market			Percent
					value			of net
Common stocks - 86.37%		Shares			(000	)		assets


Banks - 9.20%
Erste Bank der oesterreichischen Sparkassen AG		50,000		$	3,833			2.14	%
Raiffeisen International Bank Holding AG		13,000			1,981			1.11
UniCredito Italiano SpA (Germany)		200,000			1,755
UniCredito Italiano SpA (Italy)		10,000			88			1.03
Other securities					8,791			4.92
					16,448			9.20

Health care equipment & services - 8.36%
Medtronic, Inc.		45,000			2,408			1.35
Zimmer Holdings, Inc. (1)		27,000			2,116			1.18
C. R. Bard, Inc.		25,000			2,074			1.16
Smith & Nephew PLC		197,700			2,063			1.15
Medco Health Solutions, Inc. (1)		25,000			1,336			.75
Apria Healthcare Group Inc. (1)		50,000			1,333			.75
Other securities					3,619			2.02
					14,949			8.36

Software & services - 8.28%
Google Inc., Class A (1)		7,500			3,454			1.93
eBay Inc. (1)		111,000			3,338			1.87
Microsoft Corp.		73,300			2,189			1.23
Affiliated Computer Services, Inc., Class A (1)		33,300			1,626			.91
Other securities					4,191			2.34
					14,798			8.28

Media - 7.33%
Time Warner Inc.		160,000			3,485			1.95
Comcast Corp., Class A (1)		45,000			1,905			1.07
Other securities					7,708			4.31
					13,098			7.33

Pharmaceuticals, biotechnology & life sciences - 6.80%
Roche Holding AG		15,000			2,690			1.50
Novo Nordisk A/S, Class B		23,000			1,916			1.07
Amgen Inc. (1)		25,000			1,708			.96
UCB SA		19,653			1,356			.76
Other securities					4,480			2.51
					12,150			6.80

Retailing - 6.07%
Lowe's Companies, Inc.		91,000			2,835			1.59
Target Corp.		40,000			2,282			1.28
Stockmann Oyj, Class B		40,000			1,925			1.08
Other securities					3,808			2.12
					10,850			6.07

Telecommunication services - 5.55%
Millicom International Cellular SA (1)		40,000			2,466			1.38
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk, Class B		1,574,000			1,768			.99
América Móvil SAB de CV, Series L (ADR)		33,000			1,492			.83
Other securities					4,202			2.35
					9,928			5.55

Technology hardware & equipment - 5.03%
Cisco Systems, Inc. (1)		120,000			3,280			1.84
Advantech Co., Ltd.		390,655			1,403			.78
Other securities					4,311			2.41
					8,994			5.03

Utilities - 4.40%
Veolia Environnement		44,700			3,444			1.93
Xinao Gas Holdings Ltd.		2,610,000			2,953			1.65
Hong Kong and China Gas Co. Ltd.		650,000			1,463			.82
					7,860			4.40

Semiconductors & semiconductor equipment - 4.29%
Hynix Semiconductor Inc. (1)		55,000			2,157			1.21
Other securities					5,510			3.08
					7,667			4.29

Transportation - 3.84%
Ryanair Holdings PLC (ADR) (1)		29,450			2,400			1.34
Nippon Express Co., Ltd.		339,000			1,854			1.04
Other securities					2,608			1.46
					6,862			3.84

Materials - 2.46%
Bayer AG		65,000			3,487			1.95
Other securities					901			.51
					4,388			2.46

Consumer services - 2.19%
Shangri-La Asia Ltd.		800,000			2,062			1.15
Other securities					1,851			1.04
					3,913			2.19

Food & staples retailing - 2.15%
Walgreen Co.		35,000			1,606			.90
Other securities					2,230			1.25
					3,836			2.15

Energy - 1.94%
Schlumberger Ltd.		55,000			3,474			1.94


Insurance - 1.88%
American International Group, Inc.		47,000			3,368			1.88


Other - 2.42%
Other Securities					4,325			2.42


Miscellaneous - 4.18%
Other common stocks in initial period of acquisition					7,462			4.18


Total common stocks (cost: $124,144,000)					154,370			86.37



Convertible securities - 0.28%


Other - .0.28%
Other securities					503			.28


Total convertible securities (cost: $512,000)					503			.28



Short-term securities - 13.66%		Principal amount (000	)


Federal Home Loan Bank 5.132%-5.165% due 1/17-1/24/2007	$	5,500			5,482			3.07
Abbott Laboratories 5.24% due 1/25/2007 (2)		3,100			3,089			1.73
Atlantic Industries 5.20% due 1/26/2007 (2)		3,000			2,989			1.67
Procter & Gamble International Funding S.C.A. 5.28% due 1/12/2007 (2)		2,900			2,895			1.62
Triple-A One Funding Corp.5.26%-5.27% due 1/11-1/12/2007 (2)		2,300			2,296			1.28
Hewlett-Packard Co. 5.29% due 2/9/2007 (2)		2,000			1,988			1.11
HSBC Finance Corp. 5.23% due 1/12/2007		1,800			1,797			1.00
Ranger Funding Co. LLC 5.28% due 1/2/2007 (2)		1,500			1,499			.84
Hershey Co. 5.20% due 2/23/2007 (2) (3)		1,400			1,389			.78
Other securities					999			.56

Total short-term securities (cost: $24,423,000)					24,423			13.66


Total investment securities (cost: $149,079,000)					179,296			100.31
Other assets less liabilities					(557	)		(.31	)

Net assets				$	178,739			100.00	%

"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.

"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item.
(1) Security did not produce income during the last 12 months.
(2) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $17,144,000, which represented 9.59% of the net assets of the fund.
(3) This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future.

ADR = American Depositary Receipts

See Notes to Financial Statements

Global Growth Fund

Summary investment portfolio, December 31, 2006

LARGEST INDIVIDUAL EQUITY SECURITIES	Percent of net assets
Koninklijke KPN		1.6	%
Sociéte Générale		1.5
Novo Nordisk		1.4
Microsoft		1.4
IBM		1.4
General Electric		1.3
Reliance Industries		1.3
Telefónica		1.3
Deutsche Post		1.2
Macquarie Bank		1.2

		Shares			Market		Percent
					value		of net
Common stocks - 84.62%					(000	)	assets

Information technology - 14.07%
Microsoft Corp.		2,012,000		$	60,078		1.40	%
International Business Machines Corp.		600,000			58,290		1.36
Samsung Electronics Co., Ltd.		53,440			35,243		.82
Motorola, Inc.		1,675,000			34,438		.80
Nokia Corp.		1,682,000			34,354		.80
Murata Manufacturing Co., Ltd.		480,000			32,471		.76
Taiwan Semiconductor Manufacturing Co. Ltd.		11,731,127			24,305
Taiwan Semiconductor Manufacturing Co. Ltd. (ADR)		709,919			7,760		.75
Cisco Systems, Inc. (1)		1,146,500			31,334		.73
Other securities					285,683		6.65
					603,956		14.07

Financials - 12.48%
Société Générale		369,400			62,678		1.46
Macquarie Bank Ltd.		856,791			53,344		1.24
Allianz SE		192,000			39,204		.91
HSBC Holdings PLC (United Kingdom)		2,117,769			38,605		.90
Mizuho Financial Group, Inc.		4,750			33,928		.79
Kookmin Bank		366,310			29,518		.69
Erste Bank der oesterreichischen Sparkassen AG		352,480			27,020		.63
Other securities					251,480		5.86
					535,777		12.48

Health care - 10.71%
Novo Nordisk A/S, Class B		727,600			60,600		1.41
AstraZeneca PLC (United Kingdom)		443,960			23,853
AstraZeneca PLC (Sweden)		268,005			14,390
AstraZeneca PLC (ADR)		73,000			3,909		.98
Smith & Nephew PLC		4,019,300			41,946		.98
WellPoint, Inc. (1)		486,000			38,243		.89
Bausch & Lomb Inc.		695,000			36,182		.84
UCB SA		490,020			33,587		.78
Roche Holding AG		168,500			30,213		.71
Other securities					176,872		4.12
					459,795		10.71

Consumer discretionary - 9.16%
Toyota Motor Corp.		342,500			22,910		.53
Other securities					370,417		8.63
					393,327		9.16

Telecommunication services - 7.20%
Koninklijke KPN NV		4,875,830			69,285		1.61
Telefónica, SA		2,534,081			53,897		1.26
Telekom Austria AG		1,725,200			46,207		1.08
SOFTBANK CORP.		1,509,000			29,356		.68
Sprint Nextel Corp., Series 1		1,501,750			28,368		.66
Other securities					82,217		1.91
					309,330		7.20

Industrials - 6.89%
General Electric Co.		1,475,455			54,902		1.28
Deutsche Post AG		1,780,000			53,641		1.25
Tyco International Ltd.		1,465,000			44,536		1.04
Macquarie Infrastructure Group		10,254,043			27,986		.65
Other securities					114,668		2.67
					295,733		6.89

Consumer staples - 6.43%
Seven & I Holdings Co., Ltd.		1,274,000			39,612		.92
Koninklijke Ahold NV (1)		3,577,000			38,039		.89
Other securities					198,364		4.62
					276,015		6.43

Energy - 6.10%
Reliance Industries Ltd.		1,900,298			54,719		1.28
Royal Dutch Shell PLC, Class B		574,666			20,141
Royal Dutch Shell PLC, Class B (ADR)		139,643			9,936		.70
Technip SA		430,000			29,502		.69
Norsk Hydro ASA		875,000			27,170		.63
Other securities					120,233		2.80
					261,701		6.10

Materials - 5.44%
K+S AG		267,000			28,957		.67
UPM-Kymmene Corp.		1,090,000			27,497		.64
Other securities					177,316		4.13
					233,770		5.44

Utilities - 3.01%
Veolia Environnement		405,900			31,276		.73
Suez SA		550,000			28,468		.66
Other securities					69,431		1.62
					129,175		3.01

Miscellanous - 3.13%
Other common stocks in initial period of acquisition					134,369		3.13


Total common stocks (cost: $2,731,292,000)					3,632,948		84.62



		Principal			Market		Percent
		amount			value		of net
Short-term securities - 15.58%		(000	)		(000	)	assets


Federal Home Loan Bank 5.155%-5.17% due 2/23-3/28/2007 (2)	$	53,100		$	52,485		1.22	%
Amsterdam Funding Corp. 5.24%-5.25% due 1/4-2/7/2007 (3)		45,000			44,833		1.04
Allied Irish Banks N.A. Inc. 5.23%-5.28% due 1/4-1/29/2007 (3)		35,000			34,913		.81
Ranger Funding Co. LLC 5.25%-5.26% due 1/24-2/1/2007 (3)		35,000			34,849		.81
Liberty Street Funding Corp. 5.25%-5.28% due 1/9-2/21/2007 (3)		35,000			34,828		.81
BMW U.S. Capital LLC 5.22% due 2/14/2007 (3)		35,000			34,780		.81
Danske Corp. 5.24%-5.285% due 1/30-1/31/2007 (3)		34,900			34,744		.81
Bank of Ireland 5.24% due 1/22-3/14/2007 (3)		35,000			34,727		.81
Dexia Delaware LLC 5.24% due 1/17/2007		29,500			29,431		.69
Toyota Motor Credit Corp. 5.23% due 1/10-2/13/2007		21,400			21,320		.50
Other securities					311,928		7.27

Total short-term securities (cost: $668,811,000)					668,838		15.58


Total investment securities (cost: $3,400,103,000)					4,301,786		100.20
Other assets less liabilities					(8,570	)	(.20	)

Net assets				$	4,293,216		100.00	%


"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.

"Miscellaneous" and "Other securities" include securities (with aggregate value of $6,820,000) which were valued under fair value procedures adopted by authority of the board of trustees.

Investments in affiliates

A company is considered to be an affiliate of the fund under the Investment Company Act of 1940 if the fund's holdings in that company represent 5% or more of the outstanding voting shares of that company. The market value of the fund's affiliated-company holding is included in "Other securities" under its respective industry sector in the preceding summary investment portfolio. Further details on this holding and related transactions during the year ended December 31, 2006, appear below.

Company	Beginning shares		Purchases		Sales		Ending shares		Dividend income (000)		Market value of affiliate at 12/31/06 (000)


WestJet Airlines Ltd. (1)		-		750,000		-		750,000		-	$	9,396

The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item.
(1) Security did not produce income during the last 12 months.
(2) This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future.
(3) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $454,194,000, which represented 10.58% of the net assets of the fund.

ADR = American Depositary Receipts

See Notes to Financial Statements

Global Small Capitalization Fund

Summary investment portfolio, December 31, 2006

LARGEST INDIVIDUAL EQUITY SECURITIES	Percent of net assets

Kingboard Chemical Holdings		1.4	%
Advanced Medical Optics		1.3
ORCO PROPERTY GROUP		1.3
Central African Mining & Exploration Co.		1.2
Xinao Gas Holdings		1.2
Novell		1.1
Hyundai Mipo Dockyard		1.1
CNET Networks		1.0
TaeWoong Co.		1.0
Oilexco		1.0

		Shares			Market		Percent
					value		of net
Common stocks - 93.20%					(000	)	assets

Consumer discretionary - 17.01%
Jumbo SA		1,381,940		$	30,231		.95	%
Schibsted ASA		741,000			26,517		.84
Rambler Media Ltd. (1)		718,400			24,066		.76
Pantaloon Retail (India) Ltd.		2,520,750			23,379		.74
CKE Restaurants, Inc.		1,250,000			23,000		.72
Lions Gate Entertainment Corp. (1)		2,140,706			22,970		.72
Bob Evans Farms, Inc.		600,000			20,532		.65
Life Time Fitness, Inc. (1)		420,000			20,374		.64
Integrated Distribution Services Group Ltd.		10,732,000			19,539		.62
Other securities					329,512		10.37
					540,120		17.01

Information technology - 15.73%
Kingboard Chemical Holdings Ltd.		11,482,000			45,101		1.42
Novell, Inc. (1)		5,818,800			36,077		1.14
CNET Networks, Inc. (1)		3,625,000			32,951		1.04
Red Hat, Inc. (1)		1,250,000			28,750		.90
Varian Semiconductor Equipment Associates, Inc. (1)		480,000			21,850		.69
TIBCO Software Inc. (1)		2,215,000			20,910		.66
Mentor Graphics Corp. (1)		1,155,000			20,825		.66
Knot, Inc. (1)		450,000			11,808
Knot, Inc. (1) (2)		330,000			8,659		.64
Other securities					272,487		8.58
					499,418		15.73

Industrials - 13.30%
Hyundai Mipo Dockyard Co., Ltd.		281,450			36,033		1.14
TaeWoong Co., Ltd.		942,997			32,465		1.02
GS Engineering & Construction Co. Ltd.		350,000			31,291		.99
Samsung Engineering Co., Ltd.		597,550			27,804		.88
Kumho Industrial Co., Ltd.		1,000,000			26,842		.85
Corrections Corporation of America (1)		450,000			20,353		.64
International Container Terminal Services, Inc.		47,285,000			20,036		.63
Other securities					227,383		7.15
					422,207		13.30

Materials - 11.04%
Central African Mining & Exploration Co. PLC (1)		34,705,000			38,223		1.20
Cleveland-Cliffs Inc.		550,000			26,642		.84
Sino-Forest Corp. (1)		3,725,100			25,045		.79
Sierra Leone Diamond Co. Ltd. (1)		5,805,000			14,018
Sierra Leone Diamond Co. Ltd. (1) (2)		2,480,000			5,989		.63
Other securities					240,448		7.58
					350,365		11.04

Health care - 10.37%
Advanced Medical Optics, Inc. (1)		1,171,000			41,219		1.30
Mentor Corp.		590,300			28,848		.91
Beckman Coulter, Inc.		450,000			26,910		.85
ArthroCare Corp. (1)		572,000			22,834		.72
Integra LifeSciences Holdings Corp. (1)		500,000			21,295		.67
Kyphon Inc. (1)		487,000			19,675		.62
Wright Medical Group, Inc. (1)		824,000			19,183		.60
Other securities					149,229		4.70
					329,193		10.37

Energy - 7.82%
Oilexco Inc. (United Kingdom) (1) (2)		1,900,000			11,533
Oilexco Inc. (United Kingdom) (1)		1,755,000			10,653
Oilexco Inc. (1)		803,900			5,005
Oilexco Inc. (1) (2)		725,000			4,513		1.00
Quicksilver Resources Inc. (1)		830,550			30,390		.96
OPTI Canada Inc. (1)		1,231,100			20,910		.66
Paladin Resources Ltd (Canada) (1)		2,150,000			14,714
Paladin Resources Ltd (1)		849,703			5,965		.65
Aventine Renewable Energy, Inc. (1)		870,000			20,497		.65
Other securities					124,072		3.90
					248,252		7.82

Financials - 7.53%
ORCO PROPERTY GROUP SA		318,262			40,522		1.28
IndyMac Bancorp, Inc.		650,000			29,354		.92
Other securities					169,239		5.33
					239,115		7.53

Utilities - 2.62%
Xinao Gas Holdings Ltd.		32,539,000			36,817		1.16
Manila Electric Co., Class B (1)		19,124,800			21,480		.68
Other securities					24,838		.78
					83,135		2.62

Telecommunication services - 1.64%
Other securities					52,018		1.64


Consumer staples - 1.22%
Other securities					38,601		1.22


Miscellaneous - 4.92%
Other common stocks in initial period of acquisition					156,216		4.92


Total common stocks (cost: $2,204,910,000)					2,958,640		93.20



Rights & warrants - 0.14%


Other - 0.08%
Other securities					2,410		.08


Miscellaneous - 0.06%
Other rights & warrants in initial period of acquisition					1,860		.06


Total rights & warrants (cost: $645,000)					4,270		.14



Convertible securities - 0.00%


Other - 0.00%
Other securities					-		.00


Total convertible securities (cost: $625,000)					-		.00



Short-term securities - 6.74%		Principal amount (000	)


Old Line Funding, LLC 5.26% due 1/12/2007 (2)	$	25,000			24,956		.79
Amsterdam Funding Corp. 5.24%-5.25% due 1/26-2/1/2007 (2)		25,000			24,890		.78
UBS Finance (Delaware) LLC 5.245% due 2/14/2007		25,000			24,843		.78
Swedish Export Credit Corp. 5.23% due 1/10/2007		22,700			22,667		.71
Barton Capital LLC 5.26% due 1/11-1/16/2007 (2)		21,950			21,911		.69
Stadshypotek Delaware Inc. 5.24% due 2/2/2007 (2)		20,000			19,904		.63
Jupiter Securitization Co., LLC 5.25% due 1/8/2007 (2)		19,600			19,577		.62
Other securities					55,149		1.74

Total short-term securities (cost: $213,890,000)					213,897		6.74


Total investment securities (cost: $2,420,070,000)					3,176,807		100.08
Other assets less liabilities					(2,359	)	(.08	)

Net assets				$	3,174,448		100.00	%


"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.
"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

"Miscellaneous" and "Other securities" include securities (with aggregate value of $4,231,000), which were valued under fair value procedures adopted by authority of the board of trustees.

Investments in affiliates

A company is considered to be an affiliate of the fund under the Investment Company Act of 1940 if the fund's holdings in that company represent 5% or more of the outstanding voting shares of that company. Some of the fund's affiliated holdings listed below are also among the fund's largest holdings and are shown in the preceding summary investment portfolio. Affiliated companies not among the fund's largest holdings are included in the market value of "Other securities" under their respective industry sectors.

Further details on these holdings and related transactions during the year ended December 31, 2006, appear below.

Company	Beginning shares		Purchases		Sales		Ending shares		Dividend income (000)		Market value of affiliates at 12/31/06 (000)

TaeWoong Co., Ltd.		-		942,997		-		942,997	$	72	$	32,465
Sierra Leone Diamond Co. Ltd. (1)		5,805,000		-		-		5,805,000		-		14,018
Sierra Leone Diamond Co. Ltd. (1) (2)		-		2,480,000		-		2,480,000		-		5,989
Jaguar Mining Inc. (1) (2)		-		1,905,000		-		1,905,000		-		11,107
Jaguar Mining Inc. (1)		-		1,043,000		-		1,043,000		-		6,081
Min Aik Technology Co., Ltd.		5,586,000		-		-		5,586,000		536		11,145
Gemfields Resources PLC (1) (2)		2,666,000		2,150,000		-		4,816,000		-		3,960
Gemfields Resources PLC (1)		2,000,000		-		-		2,000,000		-		1,645
Ondine Biopharma Corp. (1) (2)		1,660,000		960,000		-		2,620,000		-		3,217
Ondine Biopharma Corp. (United Kingdom) (1) (2)		490,000		-		-		490,000		-		547
Ondine Biopharma Corp. (1)		400,000		-		-		400,000		-		491
CallWave, Inc. (1)		-		1,348,700		-		1,348,700		-		3,641
Jahwa Electronics Co., Ltd. (3)		1,039,000		-		1,039,000		-		-		-
Korea Development Corp. (3)		600,000		-		600,000		-		148		-
									$	756	$	94,306

The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item.
(1) Security did not produce income during the last 12 months.
(2) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $216,346,000, which represented 6.82% of the net assets of the fund.
(3) Unaffiliated issuer at December 31, 2006.

See Notes to Financial Statements

Growth Fund

Summary investment portfolio, December 31, 2006

LARGEST INDIVIDUAL EQUITY SECURITIES	Percent of net assets

Google		3.2	%
Altria Group		2.7
Microsoft		2.4
Roche Holdings		2.3
Lowe's Companies		1.9
Target		1.7
Schlumberger		1.6
Kohl's		1.4
Medtronic		1.4
Fannie Mae		1.3

	Shares			Market			Percent
					value			of net
Common stocks - 92.33%					(000	)		assets


Information technology - 15.40%
Google Inc., Class A (1)		1,881,400		$	866,347			3.20	%
Microsoft Corp.		21,395,000			638,855			2.36
Cisco Systems, Inc. (1)		12,553,000			343,073			1.27
Oracle Corp. (1)		14,622,800			250,635			.93
NAVTEQ Corp. (1) (2)		5,700,000			199,329			.74
Nokia Corp.		5,015,000			102,428
Nokia Corp. (ADR)		4,250,000			86,360			.70
Samsung Electronics Co., Ltd.		235,000			154,981			.57
eBay Inc. (1)		5,000,000			150,350			.56
Other securities					1,376,469			5.07
					4,168,827			15.40

Energy - 14.99%
Schlumberger Ltd.		6,719,600			424,410			1.57
Canadian Natural Resources, Ltd.		5,625,700			300,221			1.11
Halliburton Co.		9,350,000			290,318			1.07
Suncor Energy Inc.		3,008,256			237,101			.88
Devon Energy Corp.		3,409,072			228,681			.84
Transocean Inc. (1)		2,731,400			220,943			.82
Southwestern Energy Co. (1)		4,681,200			164,076			.61
EOG Resources, Inc.		2,515,000			157,062			.58
Other securities					2,035,820			7.51
					4,058,632			14.99

Health care - 13.37%
Roche Holding AG		3,460,000			620,392			2.29
Medtronic, Inc.		6,900,000			369,219			1.36
Zimmer Holdings, Inc. (1)		3,910,000			306,466			1.13
Amgen Inc. (1)		4,200,000			286,902			1.06
WellPoint, Inc. (1)		3,040,000			239,218			.88
Other securities					1,799,120			6.65
					3,621,317			13.37

Consumer discretionary - 13.07%
Lowe's Companies, Inc.		16,526,000			514,785			1.90
Target Corp.		7,890,000			450,125			1.66
Kohl's Corp. (1)		5,540,000			379,102			1.40
Carnival Corp., units		6,905,000			338,690			1.25
Johnson Controls, Inc.		3,599,600			309,278			1.14
Starbucks Corp. (1)		6,920,000			245,106			.91
Best Buy Co., Inc.		4,490,400			220,883			.82
Other securities					1,080,554			3.99
					3,538,523			13.07

Consumer staples - 8.22%
Altria Group, Inc.		8,380,000			719,172			2.66
Walgreen Co.		5,000,000			229,450			.85
L'Oréal SA		1,500,000			150,214			.55
Coca-Cola Co.		2,645,000			127,621			.47
Procter & Gamble Co.		855,000			54,951			.20
Other securities					945,861			3.49
					2,227,269			8.22

Financials - 8.14%
Fannie Mae		6,140,000			364,655			1.35
American International Group, Inc.		4,350,000			311,721			1.15
Freddie Mac		4,572,700			310,486			1.15
Banco Bradesco SA, preferred nominative (ADR)		5,646,700			227,844			.84
Marsh & McLennan Companies, Inc.		4,963,200			152,172			.56
Citigroup Inc.		2,000,000			111,400			.41
Other securities					724,973			2.68
					2,203,251			8.14

Industrials - 6.57%
Boeing Co.		2,565,000			227,875			.84
General Electric Co.		5,270,000			196,097			.72
Other securities					1,354,065			5.01
					1,778,037			6.57

Materials - 6.22%
Barrick Gold Corp.		11,500,000			353,050			1.30
Newmont Mining Corp.		6,305,000			284,671			1.05
Potash Corp. of Saskatchewan Inc.		1,500,000			215,220			.79
Freeport-McMoRan Copper & Gold Inc., Class B		2,704,500			150,722			.56
Other securities					681,952			2.52
					1,685,615			6.22

Telecommunication services - 3.34%
Qwest Communications International Inc. (1)		43,050,000			360,328			1.33
Sprint Nextel Corp., Series 1		17,430,000			329,253			1.22
Other securities					213,966			.79
					903,547			3.34

Utilities - 0.65%
Other securities					175,626			.65


Miscellaneous - 2.36%
Other common stocks in initial period of acquisition					639,247			2.36


Total common stocks (cost: $19,314,598,000)					24,999,891			92.33



Short-term securities - 7.85%		Principal amount (000	)

Federal Home Loan Bank 5.085%-5.155% due 1/12-1/31/2007		190,200			189,641			.70
Variable Funding Capital Corp. 5.23%-5.235% due 1/17-2/26/2007 (3)		180,000			178,794			.66
Clipper Receivables Co., LLC 5.23%-5.25% due 1/2-1/31/2007 (3)		175,600			175,131			.65
Bank of America Corp 5.205%-5.25% due 1/23-2/28/2007		175,000			173,935			.64
Procter & Gamble International Funding S.C.A. 5.23%-5.24% due 1/5-1/26/2007 (3)		150,000			149,575			.55
CAFCO, LLC 5.25%-5.30% due 1/2-2/12/2007 (3)		82,100			81,747
Ciesco LLC 5.24%-5.25% due 2//5-2/7/2007 (3)		50,200			49,929
Citigroup Funding Inc. 5.24% due 2/12/2007 (4)		15,900			15,802			.55
International Lease Finance Corp. 5.21%-5.22% due 2/1-2/9/2007		100,000			99,479
American General Finance Corp. 5.22% due 1/9/2007		16,500			16,479			.43
Coca-Cola Co. 5.19%-5.20% due 1/17-1/30/2007 (3)		75,000			74,769			.28
Other securities					918,808			3.39

Total short-term securities (cost: $2,123,957,000)					2,124,089			7.85


Total investment securities (cost: $21,438,555,000)					27,123,980			100.18
Other assets less liabilities				$	(47,523	)	$	(.18	)

Net assets				$	27,076,457			100.00	%


"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.

"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

Investments in affiliates

A company is considered to be an affiliate of the fund under the Investment Company Act of 1940 if the fund's holdings in that company represent 5% or more of the outstanding voting shares of that company. The market value of the fund's holdings in affiliated companies is included in "Other securities" under their respective industry sectors in the preceding summary investment portfolio. Further details on these holdings and related transactions during the year ended December 31, 2006, appear below.

Company	Beginning shares	Purchases	Sales	Ending shares	Dividend income (000	)		Market value of affiliates at 12/31/06 (000	)

NAVTEQ Corp. (1) (2)	-	5,700,000	-	5,700,000	-		$	199,329
Rosetta Resources Inc. (1) (2) (3)	2,980,000	-	-	2,980,000	-			55,637
KGen Power Corp. (1) (2) (3) (5)	-	3,166,128	-	3,166,128	-			44,326
DataPath, Inc. (1) (2) (3)	-	2,819,968	-	2,819,968	-			26,790
Aveta, Inc. (1) (3) (6)	3,918,000	-	-	3,918,000	-			-
					-		$	326,082

The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item.
(1) Security did not produce income during the last 12 months.
(2) Represents an affiliated company as defined under the Investment Company Act of 1940.
(3) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $1,627,625,000, which represented 6.01% of the net assets of the fund.
(4) This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future.
(5) Valued under fair value procedures adopted by authority of the board of trustees.
(6) Unaffiliated issuer at December 31, 2006.

ADR = American Depositary Receipts

See Notes to Financial Statements

International Fund

Summary investment portfolio, December 31, 2006

LARGEST INDIVIDUAL EQUITY SECURITIES	Percent of net assets

Roche Holding		2.3	%
Bayer		2.3
Novo Nordisk		2.2
Unibanco		2.0
Nestlé		2.0
Credit Suisse		1.7
Veolia Environnement		1.6
Kookmin Bank		1.4
Nitto Denko		1.4
Royal Dutch Shell		1.4

				Market			Percent
					value			of net
Common stocks - 90.85%		Shares			(000	)		assets


Financials - 23.87%
Unibanco-União de Bancos Brasileiros SA, units (GDR)		1,946,000		$	180,900			2.00	%
Credit Suisse Group		2,205,000			154,256			1.71
Kookmin Bank		1,613,500			130,017			1.44
Sun Hung Kai Properties Ltd.		10,286,000			118,168			1.31
BNP Paribas		986,090			107,532			1.19
Société Générale		586,750			99,557			1.10
ICICI Bank Ltd.		4,400,000			88,928			.99
ING Groep NV		1,915,810			84,906			.94
Banco Bilbao Vizcaya Argentaria, SA		3,502,500			84,291			.93
Sumitomo Mitsui Financial Group, Inc.		7,375			75,609			.84
Macquarie Bank Ltd.		1,206,898			75,141			.83
Hana Financial Holdings		1,398,422			73,569			.81
Mitsubishi UFJ Financial Group, Inc.		5,684			70,214			.78
Erste Bank der oesterreichischen Sparkassen AG		852,647			65,361			.72
Swire Pacific Ltd., Class A		5,720,000			61,447			.68
Other securities					685,313			7.60
					2,155,209			23.87

Health care - 9.07%
Roche Holding AG		1,151,500			206,469			2.29
Novo Nordisk A/S, Class B		2,356,100			196,234			2.17
UCB SA		1,304,456			89,550			.99
Merck KGaA		679,000			70,362			.78
Richter Gedeon NYRT		307,000			70,061			.78
AstraZeneca PLC (United Kingdom)		729,500			39,194
AstraZeneca PLC (Sweden)		510,500			27,410			.74
Other securities					119,263			1.32
					818,543			9.07

Materials - 8.47%
Bayer AG		3,789,600			203,300			2.25
Nitto Denko Corp.		2,591,500			129,793			1.44
Linde AG		959,624			99,087			1.10
Barrick Gold Corp.		2,603,202			80,134			.89
Other securities					252,606			2.79
					764,920			8.47

Information technology - 8.41%
Samsung Electronics Co., Ltd.		168,064			110,837			1.23
Taiwan Semiconductor Manufacturing Co. Ltd.		27,308,177			56,578
Taiwan Semiconductor Manufacturing Co. Ltd. (ADR)		1,879,319			20,541			.85
Hon Hai Precision Industry Co., Ltd.		9,707,388			69,275			.77
Murata Manufacturing Co., Ltd.		1,005,000			67,985			.75
Toshiba Corp.		10,383,000			67,620			.75
Other securities					366,285			4.06
					759,121			8.41

Consumer staples - 7.84%
Nestlé SA		508,600			180,719			2.00
L'Oréal SA		1,117,000			111,859			1.24
Seven & I Holdings Co., Ltd.		3,327,000			103,445			1.15
METRO AG		1,003,000			63,931			.71
Other securities					247,513			2.74
					707,467			7.84

Consumer discretionary - 7.69%
Kingfisher PLC		15,603,645			72,866			.81
Continental AG		605,000			70,325			.78
Other securities					550,943			6.10
					694,134			7.69

Energy - 7.39%
Royal Dutch Shell PLC, Class B		2,460,219			86,226
Royal Dutch Shell PLC, Class B (ADR)		275,839			19,626
Royal Dutch Shell PLC, Class A		522,000			18,403			1.38
Reliance Industries Ltd.		3,628,695			104,488			1.16
Oil & Natural Gas Corp. Ltd.		4,020,000			79,407			.88
Husky Energy Inc.		1,035,000			69,356			.77
Norsk Hydro ASA		2,050,000			63,656			.70
Other securities					225,761			2.50
					666,923			7.39

Telecommunication services - 5.68%
Koninklijke KPN NV		8,685,600			123,422			1.37
América Móvil SAB de CV, Series L (ADR)		2,315,000			104,684			1.16
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk, Class B		83,725,000			94,073			1.04
Telekom Austria AG		2,693,678			72,147			.80
Other securities					119,062			1.31
					513,388			5.68

Utilities - 3.89%
Veolia Environnement		1,855,900			143,003			1.58
E.ON AG		700,000			94,972			1.05
Other securities					113,508			1.26
					351,483			3.89

Industrials - 3.57%
Samsung Engineering Co., Ltd.		1,592,000			74,077			.82
Other securities					247,963			2.75
					322,040			3.57

MISCELLANEOUS - 4.97%
Other common stocks in initial period of acquisition					449,131			4.97


Total common stocks (cost: $5,823,596,000)					8,202,359			90.85



Short-term securities - 9.00%		Principal amount (000	)

Swedish Export Credit Corp. 5.23%-5.25% due 1/16-2/13/2007	$	63,900			63,660			.71
Toyota Motor Credit Corp. 5.23%-5.24% due 1/10/-1/17/2007		62,700			62,569			.69
Alcon Capital Corp. 5.21% due 1/17/2007 (1)		43,800			43,697			.48
Barton Capital LLC 5.26% due 1/30/2007 (1)		30,000			29,868			.33
Other securities					612,714			6.79

Total short-term securities (cost: $812,453,000)					812,508			9.00

Total investment securities (cost: $6,636,049,000)					9,014,867			99.85
Other assets less liabilities					13,365			.15

Net assets				$	9,028,232			100.00	%

"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.
"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

"Miscellaneous" and "Other securities" include securities (with aggregate value of $8,712,000), which were valued under fair value procedures adopted by authority of the board of trustees.

The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item.
(1) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $428,707,000, which represented 4.75% of the net assets of the fund.

ADR = American Depositary Receipts
GDR = Global Depositary Receipts

See Notes to Financial Statements

New World Fund

Summary investment portfolio, December 31, 2006

LARGEST INDIVIDUAL EQUITY SECURITIES	Percent of net assets

Tesco	2.0	%
Murray & Roberts Holdings	1.7
Bank Rakyat	1.6
Erste Bank	1.4
KRKA	1.3
Oil & Natural Gas	1.2
Nokia	1.2
Novo Nordisk	1.1
Toyota Motor	1.1
Royal Dutch Shell	1.1

		Shares			Market		Percent
					value		of net
Common stocks - 84.60%					(000	)	assets


Financials - 17.96%
PT Bank Rakyat Indonesia		36,995,950		$	21,196		1.63	%
Erste Bank der oesterreichischen Sparkassen AG		246,024			18,859		1.45
Bank Muscat (SAOG) (GDR)		1,120,125			14,001		1.08
Housing Development Finance Corp. Ltd.		375,100			13,835		1.06
JSC Halyk Bank of Kazakhstan (GDR) (1)		354,979			7,809
JSC Halyk Bank of Kazakhstan (GDR) (1) (2)		169,100			3,720		.89
Banco Santander Central Hispano, SA		535,782			9,996		.77
Unibanco-União de Bancos Brasileiros SA, units (GDR)		102,000			9,482		.73
EFG International (1)		240,000			9,050		.70
Piraeus Bank SA		276,250			8,901		.68
Other securities					116,731		8.97
					233,580		17.96

Consumer staples - 10.04%
Tesco PLC		3,283,418			26,005		2.00
Fomento Económico Mexicano, SA de CV (ADR)		99,300			11,495		.88
IOI Corp. Bhd.		2,147,000			11,201		.86
Nestlé SA		31,500			11,193		.86
Other securities					70,731		5.44
					130,625		10.04

Industrials - 9.49%
Murray & Roberts Holdings Ltd.		3,764,000			21,624		1.66
Doosan Heavy Industries and Construction Co., Ltd.		251,300			11,964		.92
Wienerberger AG		194,000			11,518		.89
ALL - América Latina Logística, units		950,000			9,870		.76
Far Eastern Textile Ltd.		11,174,944			9,776		.75
Orascom Construction Industries Co. (GDR)		98,000			9,437		.73
Other securities					49,186		3.78
					123,375		9.49

Consumer discretionary - 9.11%
Toyota Motor Corp.		211,100			14,121		1.09
Kuoni Reisen Holding AG, Class B (1)		21,451			11,477		.88
Truworths International Ltd.		2,477,000			11,370		.87
Honda Motor Co., Ltd.		250,000			9,874		.76
Grupo Televisa, SA, ordinary participation certificates (ADR)		365,000			9,859		.76
Other securities					61,787		4.75
					118,488		9.11

Telecommunication services - 7.46%
América Móvil SAB de CV, Series L (ADR)		310,000			14,018		1.08
Telekomunikacja Polska SA		1,625,000			13,733		1.05
Tele Norte Leste Participações SA, preferred nominative		685,797			10,284		.79
Other securities					59,056		4.54
					97,091		7.46

Materials - 7.45%
Taiwan Cement Corp.		13,538,235			12,238		.94
Votorantim Celulose e Papel SA, preferred nominative (ADR)		555,000			10,884		.84
ACC Ltd.		395,000			9,730		.75
Harmony Gold Mining Co. Ltd. (1)		590,000			9,399		.72
Other securities					54,623		4.20
					96,874		7.45

Energy - 6.25%
Oil & Natural Gas Corp. Ltd.		818,453			16,167		1.24
Royal Dutch Shell PLC, Class B		320,000			11,215
Royal Dutch Shell PLC, Class B (ADR)		39,949			2,842		1.08
Petróleo Brasileiro SA - Petrobras, ordinary nominative (ADR)		86,000			8,857
Petróleo Brasileiro SA - Petrobras, preferred nominative (ADR)		53,000			4,916		1.06
Other securities					37,290		2.87
					81,287		6.25

Information technology - 6.24%
Nokia Corp. (ADR)		502,100			10,203
Nokia Corp.		236,900			4,838		1.16
Hon Hai Precision Industry Co., Ltd.		1,937,708			13,828		1.06
Samsung Electronics Co., Ltd.		17,200			11,343		.87
Acer Inc.		4,564,000			9,526		.73
Mediatek Incorporation		889,319			9,199		.71
Other securities					22,212		1.71
					81,149		6.24

Health care - 3.85%
KRKA, d.d., Novo mesto (3)		16,864			17,377		1.34
Novo Nordisk A/S, Class B		175,160			14,589		1.12
Other securities					18,157		1.39
					50,123		3.85

Utilities - 3.01%
RAO Unified Energy System of Russia (GDR)		90,000			9,864		.76
AES Corp. (1)		400,000			8,816		.68
Other securities					20,416		1.57
					39,096		3.01

Miscellaneous - 3.74%
Other common stocks in initial period of acquisition					48,710		3.74


Total common stocks (cost: $767,951,000)					1,100,398		84.60



		Principal			Market		Percent
		amount			value		of net
Bonds & notes - 7.53%		(000	)		(000	)	assets


Non-U.S. government bonds & notes - 7.16%
Argentina (Republic of):
4.193% 2012 (4) (5)	$	2,000			1,419
5.83% 2033 (4) (6) (7)		ARS 35,814			12,337
GDP-Linked 2035		43,865			1,706
0.63%-2.00% 2014-2038 (4) (6)		13,541			2,246		1.36	%
Brazil (Federal Republic of) Global:
12.50% 2016		R$ 1,900			1,011
8.00%-11.00% 2010-2040 (4)	$	9,534			11,708
Brazilian Treasury Bill 0%-6.00% 2007-2011 (6)		R$ 4,000			2,655		1.18
United Mexican States Government:
6.073%-11.375% 2009-2016	$	8,180			9,465
8.00%-10.00% 2013-2024		MXP 34,001			3,644		1.01
Other securities					46,932		3.61
					93,123		7.16

Other - 0.37%
Other securities					4,820		.37


Total bonds & notes (cost: $85,580,000)					97,943		7.53



		Principal			Market		Percent
		amount			value		of net
Short-term securities - 7.56%		(000	)		(000	)	assets



Stadshypotek Delaware Inc. 5.24% due 1/25-2/2/2007 (2)		18,600			18,529		1.43	%
American Honda Finance Corp. 5.23% due 1/5/2007		13,500			13,490		1.04
Sheffield Receivables Corp. 5.26% due 1/24/2007 (2)		13,000			12,954		1.00
UBS Finance (Delaware) LLC 5.245% due 1/5/2007		11,500			11,492		.88
BMW U.S. Capital LLC 5.22% due 2/14/2007 (2)		10,000			9,937		.76
DaimlerChrysler Revolving Auto Conduit LLC 5.30% due 1/10/2007		9,800			9,786		.75
Other securities					22,168		1.70


Total short-term securities (cost: $98,349,000)					98,356		7.56


Total investment securities (cost: $951,880,000)					1,296,697		99.69
Other assets less liabilities					4,070		.31

Net assets				$	1,300,767		100.00	%

"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.

The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item.

(1) Security did not produce income during the last 12 months.
(2) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $75,341,000, which represented 5.79% of the net assets of the fund.
(3) Valued under fair value procedures adopted by the board of trustees. The total value of all such securities, including those in "Miscellaneous" and "Other securities," was $20,575,000.
(4) Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.
(5) Coupon rate may change periodically.
(6) Index-linked bond whose principal amount moves with a government retail price index.
(7) Payment in kind; the issuer has the option of paying additional securities in lieu of cash.

ADR = American Depositary Receipts
GDR = Global Depositary Receipts


See Notes to Financial Statements

Blue Chip Income and Growth Fund

Summary investment portfolio, December 31, 2006

LARGEST INDIVIDUAL EQUITY SECURITIES	Percent of net assets

Citigroup	4.2	%
General Electric	4.0
BellSouth	3.9
Fannie Mae	3.5
Oracle	3.0
Tyco	3.0
Hewlett-Packard	3.0
Lowe's Companies	2.9
JPMorgan Chase	2.6
Microsoft	2.6

		Shares			Market		Percent
					value		of net
Common stocks - 91.22%					(000	)	assets


Financials - 18.96%
Citigroup Inc.		3,125,000		$	174,062		4.25	%
Fannie Mae		2,430,000			144,318		3.53
J.P. Morgan Chase & Co.		2,200,000			106,260		2.60
American International Group, Inc.		1,300,000			93,158		2.27
Bank of America Corp.		1,176,395			62,808		1.53
Capital One Financial Corp.		700,000			53,774		1.31
Freddie Mac		700,000			47,530		1.16
Washington Mutual, Inc.		750,000			34,117		.83
Other securities					60,724		1.48
					776,751		18.96

Information technology - 17.45%
Oracle Corp. (1)		7,200,000			123,408		3.01
Hewlett-Packard Co.		2,950,000			121,511		2.97
Microsoft Corp.		3,550,000			106,003		2.59
International Business Machines Corp.		975,000			94,721		2.31
Intel Corp.		4,000,000			81,000		1.98
Cisco Systems, Inc. (1)		2,500,000			68,325		1.67
Texas Instruments Inc.		1,500,000			43,200		1.05
Applied Materials, Inc.		1,800,000			33,210		.81
Other securities					43,537		1.06
					714,915		17.45

Health care - 14.30%
Aetna Inc.		2,400,000			103,632		2.53
UnitedHealth Group Inc.		1,250,000			67,163		1.64
Cardinal Health, Inc.		900,000			57,987		1.42
Pfizer Inc		2,050,000			53,095		1.30
AstraZeneca PLC (ADR)		875,000			46,856		1.14
Abbott Laboratories		950,000			46,275		1.13
Amgen Inc. (1)		665,000			45,426		1.11
Merck & Co., Inc.		1,000,000			43,600		1.06
Eli Lilly and Co.		825,000			42,982		1.05
Schering-Plough Corp.		1,750,000			41,370		1.01
Bristol-Myers Squibb Co.		1,425,000			37,506		.91
					585,892		14.30

Consumer discretionary - 12.42%
Lowe's Companies, Inc.		3,800,000			118,370		2.89
Target Corp.		1,475,000			84,149		2.05
Omnicom Group Inc.		400,000			41,816		1.02
Clear Channel Communications, Inc.		1,150,000			40,871		1.00
Leggett & Platt, Inc.		1,500,000			35,850		.88
Dollar General Corp.		2,075,000			33,324		.81
Harley-Davidson, Inc.		425,000			29,950		.73
TJX Companies, Inc.		1,000,000			28,520		.70
Carnival Corp., units		575,000			28,204		.69
Other securities					67,642		1.65
					508,696		12.42

Industrials - 11.46%
General Electric Co.		4,400,000			163,724		4.00
Tyco International Ltd.		4,050,000			123,120		3.00
United Technologies Corp.		760,000			47,515		1.16
United Parcel Service, Inc., Class B		605,000			45,363		1.11
Norfolk Southern Corp.		592,800			29,812		.73
Other securities					59,907		1.46
					469,441		11.46

Telecommunication services - 5.88%
BellSouth Corp.		3,350,000			157,818		3.85
AT&T Inc.		1,400,000			50,050		1.22
Other securities					32,950		.81
					240,818		5.88

Energy - 4.74%
Schlumberger Ltd.		940,000			59,370		1.45
ConocoPhillips		650,000			46,768		1.14
EOG Resources, Inc.		600,000			37,470		.92
Royal Dutch Shell PLC, Class A (ADR)		500,000			35,395		.86
Other securities					15,326		.37
					194,329		4.74

Consumer staples - 3.11%
Wal-Mart Stores, Inc.		1,500,000			69,270		1.69
Other securities					58,219		1.42
					127,489		3.11

Materials - 1.13%
Other securities					46,110		1.13


Utilities - 0.92%
Other securities					37,729		.92


Miscellaneous - 0.85%
Other common stocks in initial period of acquisition					34,700		.85


Total common stocks (cost: $3,001,188,000)					3,736,870		91.22



Short-term securities - 8.20%		Principal amount (000	)



Coca-Cola Co. 5.19% due 1/17/2007-1/18/2007 (2)	$	50,000			49,875		1.50
Atlantic Industries 5.23% due 2/28/2007 (2)		11,700			11,603
Procter & Gamble International Funding S.C.A. 5.23% - 5.28% due 1/9/2007 - 2/9/2007 (2)		42,100			42,012		1.03
Abbott Laboratories 5.20% - 5.24% due 1/25/2007 - 3/6/2007 (2)		24,300			24,162		.59
International Lease Finance Corp. 5.22% due 1/31/2007		15,000			14,935		.36
Ranger Funding Co., LLC 5.24% due 1/3/2007 (2)		13,500			13,494		.33
Jupiter Securitization Co., LLC 5.27% due 1/4/2007 (2)		12,500			12,493		.30
Freddie Mac 5.10% due 1/16/2007		10,600			10,575		.26
CAFCO, LLC 5.25% due 1/16/2007 (2)		8,500			8,480		.21
Other securities					148,198		3.62



Total short-term securities (cost: $335,819,000)					335,827		8.20


Total investment securities (cost: $3,337,007,000)					4,072,697		99.42
Other assets less liabilities					23,664		.58

Net assets				$	4,096,361		100.00	%

"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.

"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item.

(1) Security did not produce income during the last 12 months.
(2) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $228,629,000, which represented 5.58% of the net assets of the fund.


ADR = American Depositary Receipts

See Notes to Financial Statements

Global Growth and Income Fund

Summary investment portfolio, December 31, 2006

LARGEST INDIVIDUAL EQUITY SECURITIES	Percent of net assets

Potash Corp. of Saskatchewan		3.2	%
Citigroup		1.8
Microsoft		1.7
Seven & I Holdings		1.6
Cathay Financial Holding		1.6
Yamana Gold		1.4
Israel Chemicals		1.4
OGDCL		1.3
Newmont Mining		1.3
Bayer		1.3

		Shares			Market		Percent
					value		of net
Common stocks - 83.44%					(000	)	assets


Materials - 18.60%
Potash Corp. of Saskatchewan Inc.		150,000		$	21,522		3.15	%
Yamana Gold Inc.		750,000			9,860		1.44
Israel Chemicals Ltd.		1,500,000			9,389		1.38
Newmont Mining Corp.		200,000			9,030		1.32
Bayer AG		162,300			8,707		1.28
Mosaic Co. (1)		400,000			8,544		1.25
Barrick Gold Corp.		250,000			7,675		1.13
K+S AG		65,000			7,049		1.03
Newcrest Mining Ltd.		296,900			6,171		0.90
Gold Fields Ltd.		318,500			6,057		0.89
Other securities					32,948		4.83
					126,952		18.60

Financials - 15.72%
Citigroup Inc.		219,400			12,221		1.79
Cathay Financial Holding Co., Ltd.		4,722,624			10,727		1.57
AXA SA		146,222			5,917		0.87
Fairfax Financial Holdings Ltd.		27,000			5,371		0.79
TISCO Bank PCL		5,250,000			3,278
TISCO Bank PCL, nonvoting depositary receipt		3,225,000			2,004		0.77
FirstRand Ltd.		1,650,000			5,248		0.77
BOC Hong Kong (Holdings) Ltd.		1,856,500			5,037		0.74
Commerzbank U.S. Finance, Inc.		131,600			5,009		0.73
Other securities					52,506		7.69
					107,318		15.72

Consumer discretionary - 9.49%
Macquarie Communications Infrastructure Group		1,164,000			5,784		0.85
SEGA SAMMY HOLDINGS INC.		214,000			5,773		0.84
General Motors Corp.		186,700			5,735		0.84
Honda Motor Co., Ltd.		79,000			3,120		0.46
Other securities					44,324		6.50
					64,736		9.49

Information technology - 9.35%
Microsoft Corp.		392,700			11,726		1.72
EMC Corp. (1)		552,000			7,286		1.07
Advanced Micro Devices, Inc. (1)		350,000			7,123		1.04
Nokia Corp.		335,300			6,848		1.00
International Business Machines Corp.		68,600			6,665		0.98
Cisco Systems, Inc. (1)		201,180			5,498		0.81
Other securities					18,699		2.73
					63,845		9.35

Consumer staples - 7.48%
Seven & I Holdings Co., Ltd.		353,000			10,976		1.61
Koninklijke Ahold NV (1)		737,500			7,843		1.15
Shoppers Drug Mart Corp.		127,500			5,484		0.80
Other securities					26,762		3.92
					51,065		7.48

Telecommunication services - 5.92%
Vodafone Group PLC		2,087,000			5,782
Vodafone Group PLC (ADR)		100,000			2,778		1.25
AT&T Inc.		150,000			5,363		0.79
Telekom Austria AG		200,000			5,357		0.78
Other securities					21,153		3.10
					40,433		5.92

Industrials - 5.42%
General Electric Co.		217,800			8,104		1.19
Toll Holdings Ltd.		531,806			7,664		1.12
Tyco International Ltd.		204,000			6,202		0.91
Nippon Express Co., Ltd.		1,000,000			5,470		0.80
Other securities					9,545		1.40
					36,985		5.42

Energy - 5.41%
Oil and Gas Development Co. Ltd.		4,345,000			8,198
Oil and Gas Development Co. Ltd. (GDR)		46,200			850		1.33
Chevron Corp.		98,500			7,243		1.06
Other securities					20,621		3.02
					36,912		5.41

Health care - 4.42%
AstraZeneca PLC (United Kindgom)		95,900			5,152
AstraZeneca PLC (Sweden)		54,700			2,937		1.19
Novo Nordisk A/S, Class B		70,000			5,830		0.85
Roche Holding AG		30,850			5,532		0.81
Other securities					10,751		1.57
					30,202		4.42

Utilities - 1.63%
Other securities					11,137		1.63


Total common stocks (cost: $519,139,000)					569,585		83.44


Bonds & notes - 0.23%


Other - 0.23%
Other securities					1,592		0.23

Total bonds & notes (cost: $1,542,000)					1,592		0.23



Short-term securities - 16.01%		Principal amount (000	)


Federal Home Loan Bank 5.155% due 3/28/2007	$	9,400			9,278
Federal Home Loan Bank 5.17% due 2/23/2007 (2)		5,800			5,755		2.20
Amsterdam Funding Corp 5.25% due 1/4/2007 (3)		8,800			8,795		1.29
Barton Capital LLC 5.26% due 1/16/2007 (3)		5,450			5,437
Société Générale North America, Inc. 5.27% due 2/1/2007		2,000			1,990		1.09
Harley-Davidson Funding Corp. 5.26% due 1/29/2007 (3)		6,600			6,572		0.96
Jupiter Securitization Co., LLC 5.25%-5.26% due 1/8-2/5/2007 (3)		5,900			5,881		0.86
Stadshypotek Delaware Inc. 5.24% due 1/25-2/2/2007 (3)		5,400			5,375		0.79
BASF AG 5.23% due 1/12/2007 (3)		5,350			5,341		0.78
AT&T Inc. 5.32% due 1/2/2007 (3)		5,100			5,097		0.75
American Honda Finance Corp. 5.23% due 1/22/2007		5,000			4,984		0.73
Other securities					44,743		6.56


Total short-term securities (cost: $109,251,000)					109,248		16.01


Total investment securities (cost: $629,932,000)					680,425		99.68
Other assets less liabilities					2,168		0.32

Net assets				$	682,593		100.00	%

"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item.

(1) Security did not produce income during the last 12 months.
(2) This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future.
(3) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $70,764,000, which represented 10.37% of the net assets of the fund.


ADR = American Depositary Receipts
GDR = Global Depositary Receipts

See Notes to Financial Statements

Growth-Income Fund

Summary investment portfolio, December 31, 2006

LARGEST INDIVIDUAL EQUITY SECURITIES	Percent of net assets

Oracle	2.5	%
Fannie Mae	2.1
Citigroup	2.1
American International Group	2.1
Lowe's Companies	1.9
General Electric	1.9
Intel	1.8
Microsoft	1.7
Cisco Systems	1.7
Tyco	1.6

				Market		Percent
				value		of net
Common stocks - 86.41%	Shares			(000	)	assets


Information technology - 20.74%
Oracle Corp. (1)	38,605,000		$	661,690		2.46	%
Intel Corp.	23,620,000			478,305		1.78
Microsoft Corp.	15,635,000			466,861		1.74
Cisco Systems, Inc. (1)	16,840,000			460,237		1.71
Nokia Corp.	12,775,000			260,921
Nokia Corp. (ADR)	8,000,000			162,560		1.57
International Business Machines Corp.	4,200,000			408,030		1.52
Hewlett-Packard Co.	7,400,000			304,806		1.13
eBay Inc. (1)	9,200,000			276,644		1.03
Google Inc., Class A (1)	430,000			198,006		.74
Other securities				1,900,514		7.06
				5,578,574		20.74

Financials - 13.35%
Fannie Mae	9,688,500			575,400		2.14
Citigroup Inc.	10,237,800			570,245		2.12
American International Group, Inc.	7,900,000			566,114		2.10
Bank of America Corp.	5,380,000			287,238		1.07
Capital One Financial Corp.	3,099,900			238,134		.89
J.P. Morgan Chase & Co.	4,147,900			200,344		.74
Freddie Mac	2,265,000			153,793		.57
Wachovia Corp.	1,330,419			75,767		.28
Other securities				925,534		3.44
				3,592,569		13.35

Health care - 12.40%
Medtronic, Inc.	4,450,000			238,119		.89
Aetna Inc.	5,500,000			237,490		.88
Cardinal Health, Inc.	3,500,000			225,505		.84
WellPoint, Inc. (1)	2,750,000			216,397		.80
Abbott Laboratories	4,290,000			208,966		.78
Bristol-Myers Squibb Co.	7,860,000			206,875		.77
AstraZeneca PLC (ADR)	3,395,150			181,810
AstraZeneca PLC (Sweden)	392,000			21,048		.75
Eli Lilly and Co.	3,735,000			194,593		.72
Other securities				1,604,666		5.97
				3,335,469		12.40

Consumer discretionary - 10.78%
Lowe's Companies, Inc.	16,460,000			512,729		1.91
Target Corp.	5,750,000			328,038		1.22
News Corp., Class A	10,815,200			232,310		.86
Time Warner Inc.	9,500,000			206,910		.77
Carnival Corp., units	3,982,100			195,322		.73
Other securities				1,424,310		5.29
				2,899,619		10.78

Industrials - 8.83%
General Electric Co.	13,575,000			505,126		1.88
Tyco International Ltd.	13,945,300			423,937		1.57
United Technologies Corp.	3,950,000			246,954		.92
United Parcel Service, Inc., Class B	3,000,000			224,940		.84
Avery Dennison Corp.	2,815,000			191,223		.71
Other securities				782,559		2.91
				2,374,739		8.83

Energy - 7.01%
Marathon Oil Corp.	3,085,000			285,363		1.06
Royal Dutch Shell PLC, Class A (ADR)	2,000,000			141,580
Royal Dutch Shell PLC, Class B (ADR)	1,790,391			127,386
Royal Dutch Shell PLC, Class B	139,816			4,900		1.02
Schlumberger Ltd.	4,040,000			255,166		.95
Chevron Corp.	2,563,200			188,472		.70
Other securities				884,021		3.28
				1,886,888		7.01

Consumer staples - 5.56%
Altria Group, Inc.	2,975,000			255,315		.95
Avon Products, Inc.	5,400,000			178,416		.66
Other securities				1,063,167		3.95
				1,496,898		5.56

Telecommunication services - 3.94%
AT&T Inc.	6,500,000			232,375		.86
Sprint Nextel Corp., Series 1	11,168,500			210,973		.79
Other securities				616,368		2.29
				1,059,716		3.94

Materials - 1.74%
Air Products and Chemicals, Inc.	2,660,000			186,945		.69
Other securities				282,046		1.05
				468,991		1.74

Utilities - 1.13%

Other securities				303,405		1.13


Miscellaneous - 0.93%

Other common stocks in initial period of acquisition				251,180		.93

Total common stocks (cost: $17,848,676,000)				23,248,048		86.41


Convertible securities - 0.36%


Other - 0.33%
Other securities				90,573		.33


Miscellaneous - 0.03%

Other convertible securities in initial period of acquisition				7,087		.03

Total convertible securities (cost: $100,077,000)				97,660		.36



Bonds & notes - 0.05%


Other - 0.05%

Other securities				13,367		.05

Total bonds & notes (cost: $12,529,000)				13,367		.05



Short-term securities - 12.97%	Principal amount (000	)

Freddie Mac 5.07%-5.17% due 1/9-3/27/2007	373,809			371,327		1.38
Federal Home Loan Bank 5.10%-5.18% due 1/3-3/16/2007	301,642			299,697		1.11
Variable Funding Capital Corp. 5.23%-5.25% due 1/4-2/2/2007 (2)	228,600			228,112		.85
Clipper Receivables Co., LLC 5.23%-5.25% due 1/2-1/31/2007 (2)	225,000			224,338		.83
Abbott Laboratories 5.18%-5.24% due 1/2-3/13/2007 (2)	220,500			219,162		.81
Procter & Gamble International Funding S.C.A. 5.23%-5.27% due 1/8-2/12/2007 (2)	218,200			217,362		.81
CIT Group, Inc. 5.22%-5.26% due 1/16-3/20/2007 (2)	185,400			184,308		.69
CAFCO, LLC 5.25%-5.27% due 1/11-2/15/2007 (2)	90,900			90,450
Ciesco LLC 5.25%-5.26% due 1/5-2/7/2007 (2)	86,200			85,913		.66
Fannie Mae 5.075%-5.17% due 1/3-3/23/2007	135,250			134,516		.50
Park Avenue Receivables Co., LLC 5.23%-5.25% due 1/11-3/8/2007 (2)	129,750			129,106		.48
Bank of America Corp. 5.24%-5.245% due 2/16-3/13/2007	113,600			112,716		.42
International Lease Finance Corp. 5.21%-5.23% due 1/4-2/12/2007	85,700			85,541		.32
Ranger Funding Co. LLC 5.25% due 1/12-3/1/2007 (2)	85,280			84,764		.31
IBM Capital Inc. 5.19%-5.24% due 1/25-3/16/2007 (2)	76,300			75,799		.28
Jupiter Securitization Co., LLC 5.25%-5.26% due 1/17-1/23/2007 (2)	71,345			71,129		.26
Edison Asset Securitization LLC 5.23%-5.25% due 1/22-3/12/2007 (2)	67,900			67,580		.25
AT&T Inc. 5.25%-5.26% due 1/11-1/18/2007 (2)	63,700			63,568		.24
Hewlett-Packard Co. 5.24%-5.26% due 1/9-1/30/2007 (2)	58,000			57,839		.21
Other securities				685,974		2.56

Total short-term securities (cost: $3,489,207,000)				3,489,201		12.97

Total investment securities (cost: $21,450,489,000)				26,848,276		99.79
Other assets less liabilities				56,578		.21

Net assets			$	26,904,854		100.00	%

"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.
"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.
The following footnotes apply to either the individual securities noted or one or more of the aggregated and listed as a single line item.

(1) Security did not produce income during the last 12 months.
(2) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $2,245,485,000, which represented 8.35% of the net assets of the fund.


ADR = American Depositary Receipts

See Notes to Financial Statements

Asset Allocation Fund

Summary investment portfolio, December 31, 2006

LARGEST INDIVIDUAL EQUITY SECURITIES	Percent of net assets

Microsoft	2.7	%
Altria Group	2.6
Fannie Mae	2.2
Suncor Energy	2.1
Boeing	1.8
Medtronic	1.7
Schlumberger	1.7
Lowe's Companies	1.6
Freddie Mac	1.3
Newmont Mining	1.3

		Shares			Market		Percent
					value		of net
Common stocks - 68.92%					(000	)	assets

Financials - 12.72%
Fannie Mae		2,820,000		$	167,480		2.23	%
Freddie Mac		1,450,000			98,455		1.31
State Street Corp.		1,200,000			80,928		1.08
J.P. Morgan Chase & Co.		1,500,000			72,450		.96
Citigroup Inc.		1,200,000			66,840		.89
Bank of America Corp.		1,250,000			66,737		.89
Société Générale		375,000			63,628		.84
Allied Irish Banks, PLC		1,815,000			53,881		.72
Other securities					285,820		3.80
					956,219		12.72

Information technology - 9.74%
Microsoft Corp.		6,700,000			200,062		2.66
Hewlett-Packard Co.		1,500,000			61,785		.82
Nokia Corp. (ADR)		3,000,000			60,960		.81
International Business Machines Corp.		600,000			58,290		.78
Cisco Systems, Inc. (1)		2,000,000			54,660		.73
Oracle Corp. (1)		3,000,000			51,420		.68
Other securities					244,932		3.26
					732,109		9.74

Energy - 9.60%
Suncor Energy Inc.		1,960,829			154,546		2.06
Schlumberger Ltd.		2,059,800			130,097		1.73
Chevron Corp.		1,234,328			90,760		1.21
Petro-Canada		2,150,000			88,153		1.17
Marathon Oil Corp.		600,000			55,500		.74
Rosetta Resources Inc. (1) (2)		2,970,000			55,450		.74
Other securities					147,187		1.95
					721,693		9.60

Health care - 8.93%
Medtronic, Inc.		2,450,000			131,099		1.74
Endo Pharmaceuticals Holdings Inc. (1)		2,500,000			68,950		.92
Cardinal Health, Inc.		1,000,000			64,430		.86
Eli Lilly and Co.		1,200,000			62,520		.83
Roche Holding AG		300,000			53,791		.71
Bristol-Myers Squibb Co.		2,000,000			52,640		.70
Pfizer Inc		2,000,000			51,800		.69
Johnson & Johnson		500,000			33,010		.44
Other securities					153,335		2.04
					671,575		8.93

Consumer discretionary - 6.70%
Lowe's Companies, Inc.		3,810,000			118,681		1.58
Johnson Controls, Inc.		800,000			68,736		.92
Target Corp.		1,150,000			65,608		.87
Kohl's Corp. (1)		900,000			61,587		.82
Carnival Corp., units		1,200,000			58,860		.78
Toyota Motor Corp.		800,000			53,513		.71
Other securities					76,280		1.02
					503,265		6.70

Industrials - 6.50%
Boeing Co.		1,550,000			137,702		1.83
General Electric Co.		1,700,000			63,257		.84
Deere & Co.		640,000			60,845		.81
Raytheon Co.		1,040,000			54,912		.73
Other securities					172,197		2.29
					488,913		6.50

Materials - 5.79%
Newmont Mining Corp.		2,165,000			97,750		1.30
BHP Billiton Ltd.		4,615,000			92,100		1.22
Sealed Air Corp.		1,000,000			64,920		.86
Alcoa Inc.		2,000,000			60,020		.80
Other securities					120,673		1.61
					435,463		5.79

Consumer staples - 5.05%
Altria Group, Inc.		2,300,000			197,386		2.63
C&C Group PLC		4,276,205			75,885		1.01
Other securities					106,508		1.41
					379,779		5.05

Telecommunication services - 1.89%
Other securities					142,228		1.89


Utilities - 1.01%
Reliant Energy, Inc. (1)		4,000,000			56,840		.76
Other securities					18,753		.25
					75,593		1.01

Miscellaneous - 0.99%
Other common stocks in initial period of acquisition					74,238		.99


Total common stocks (cost: $3,901,410,000)					5,181,075		68.92


					Market		Percent
					value		of net
Preferred stocks - 0.21%					(000	)	assets

Other - 0.21%
Other securities					15,590		.21


Total preferred stocks (cost: $14,987,000)					15,590		.21


					Market		Percent
					value		of net
Rights & warrants - 0.01%					(000	)	assets

Other - 0.01%
Other securities					640		.01


Total rights & warrants (cost: $559,000)					640		.01



		Principal			Market		Percent
		amount			value		of net
Bonds & notes - 20.16%		(000	)		(000	)	assets

Mortgage-backed obligations (3) - 6.17%
Freddie Mac:
6.00% 2036	$	70,105			70,620
4.789%-7.50% 2016-2036 (4)		28,212			28,087		1.31
Fannie Mae 0%-7.00% 2009-2041		59,685			58,840		.78
Other securities					305,915		4.08
					463,462		6.17

U.S. government & government agency bonds & notes - 4.59%
U.S. Treasury:
3.875% 2010		164,000			159,452
3.375%-9.25% 2008-2029		109,000			122,600		3.75
Fannie Mae 5.25%-6.25% 2012-2029		15,375			16,179		.22
Freddie Mac 3.625% 2008		4,750			4,640		.06
Other securities					42,028		.56
					344,899		4.59

Consumer discretionary - 2.16%
Other securities					162,672		2.16


Financials - 1.46%
JPMorgan Chase Capital XVIII, Series R, 6.95% 2036		2,560			2,778		.04
Other securities					107,202		1.42
					109,980		1.46

Industrials - 1.07%
Other securities					80,685		1.07


Other - 4.71%
Other securities					354,104		4.71


Total bonds & notes (cost: $1,510,992,000)					1,515,802		20.16



		Principal			Market		Percent
		amount			value		of net
Short-term securities - 10.37%		(000	)		(000	)	assets

Variable Funding Capital Corp. 5.23%-5.235% due 1/5-1/18/2007 (2)	$	80,900			80,761		1.07
Procter & Gamble International Funding S.C.A. 5.22%-5.26% due 1/2-2/13/2007 (2)		70,000			69,832		.93
NetJets Inc. 5.19%-5.23% due 1/17-2/23/2007 (2)		70,000			69,647		.93
International Lease Finance Corp. 5.22%-5.225% due 2/1-2/12/2007		70,000			69,627		.93
CAFCO, LLC 5.25%-5.30% due 1/2-1/29/2007 (2)		40,600			40,510
Ciesco LLC 5.26% due 2/7/2007 (2)		14,000			13,922		.72
Johnson & Johnson 5.18%-5.20% due 1/18-1/19/2007 (2)		50,000			49,868		.66
IBM Capital Inc. 5.19% due 3/7/2007 (2)		35,000			34,672		.46
Clipper Receivables Co., LLC 5.23%-5.29% due 1/8/2007 (2)		30,500			30,464		.41
Bank of America Corp. 5.23%-5.25% due 2/22-2/28/2007 (5)		26,500			26,286		.35
Jupiter Securitization Co., LLC 5.26%-5.29% due 1/17/2007 (2)		25,000			24,938		.33
Other securities					268,854		3.58


Total short-term securities (cost: $779,313,000)					779,381		10.37


Total investment securities (cost: $6,207,261,000)					7,492,488		99.67
Other assets less liabilities					24,978		.33

Net assets				$	7,517,466		100.00	%


"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.
"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.
"Miscellaneous" and "Other securities" include securities (with aggregate value of $19,979,000), which were valued under fair value procedures adopted by authority of the board of trustees.

Investments in affiliates

A company is considered to be an affiliate of the fund under the Investment Company Act of 1940 if the fund's holdings in that company represent 5% or more of the outstanding voting shares of that company. Some of the fund's affiliated holdings listed below are also among the fund's largest holdings and are shown in the preceding summary investment portfolio. Affiliated companies not among the fund's largest holdings are included in the market value of "Other securities" under their respective industry sectors.

Further details on these holdings and related transactions during the year ended December 31, 2006, appear below.

Company	Beginning shares	Purchases	Sales	Ending shares		Dividend income (000	)		Market value of affiliates at 12/31/06 (000	)

Rosetta Resources Inc. (1) (2)	2,970,000	-	-	2,970,000	$	-		$	55,450
Aventine Renewable Energy, Inc. (6)	2,000,000	-	2,000,000	-		-			-
					$	-		$	55,450

The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item.

(1) Security did not produce income during the last 12 months.
(2) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $840,525,000, which represented 11.18% of the net assets of the fund.
(3) Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.
(4) Coupon rate may change periodically.
(5) This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future.
(6) Unaffiliated issuer at December 31, 2006.


ADR = American Depositary Receipts

See Notes to Financial Statements

Bond Fund

Summary investment portfolio, December 31, 2006

LARGEST HOLDINGS BY ISSUER	Percent of net assets

U.S. Treasury		11.0	%
Fannie Mae		3.3
Freddie Mac		1.8
General Motors		1.2
Ford Motor		1.1
General Motors Acceptance		1.1
Sprint Nextel		1.1
American International Group		0.9
Sumitomo Mitsui Financial Group		0.8
Washington Mutual		0.8

		Principal			Market		Percent
		amount			value		of net
Bonds & notes - 80.40%		(000	)		(000	)	assets

U.S. government & government agency bonds & notes - 14.19%
U.S. Treasury:
3.625% 2007	$	46,065		$	45,759
6.25% 2007		48,525			48,597
4.375% 2008		30,000			29,803
4.50% 2011		28,400			28,152
4.875% 2011		22,355			22,514
4.25% 2013		126,875			123,723
4.00% 2014		12,150			11,634
4.50% 2016		37,603			37,016
4.50% 2036		18,505			17,606
3.25%-10.375% 2007-2012		32,195			32,331		11.02	%
Fannie Mae:
4.25% 2007		18,130			18,034
4.75% 2007		7,355			7,331
5.25% 2007		12,750			12,748
1.75% 2008		¥ 640,000			5,450
5.25% 2012	$	16,000			16,092		1.66
Freddie Mac 4.00% 2007		30,670			30,428		.84
Federal Home Loan Bank:
4.625% 2007		16,600			16,541
5.625% 2016		2,000			2,059		.52
Other securities					5,350		.15
					511,168		14.19

Financials - 14.11%
Residential Capital Corp.:
6.375% 2010		13,000			13,161
6.00%-6.50% 2009-2013 (1)		7,700			7,771
General Motors Acceptance Corp. 6.875%-7.569% 2011-2014 (1)		18,080			18,745		1.10
Ford Motor Credit Co.:
4.875% 2007		€ 1,350			1,781
9.75% 2010 (2)	$	22,325			23,768
7.875%-8.11% 2010-2012 (1)		9,095			9,065		.96
International Lease Finance Corp. 5.40%-5.625% 2012-2013		9,375			9,440
ILFC E-Capital Trust II 6.25% 2065 (1) (2)		7,575			7,708
American General Finance Corp. 5.653%-5.85% 2011-2013 (1)		7,500			7,573
AIG SunAmerica Global Financing 5.30%-5.85% 2007-2008 (2)		5,000			5,007
American International Group, Inc. 6.25% 2036		2,000			2,132		.88
Sumitomo Mitsui Banking Corp. 6.078% (undated) (1) (2)		13,250			13,196		.37
Washington Mutual Preferred Funding II Ltd. 6.665% (undated) (1) (2)		11,800			11,913		.33
Bank of America Corp. 4.375% 2010		3,000			2,918		.08
Other securities					374,341		10.39
					508,519		14.11

Consumer discretionary - 10.12%
General Motors Corp.:
7.125% 2013		12,440			11,756
7.25% 2013		€ 1,000			1,308
8.80% 2021	$	12,860			12,217
7.20%-9.40% 2011-2033		20,435			19,586		1.25
Other securities					319,767		8.87
					364,634		10.12

Mortgage-backed obligations (3) - 8.38%
Fannie Mae:
Series 2000-T5, Class B, 7.30% 2010		12,250			13,132
5.50% 2036		18,313			18,102
5.00%-12.046% 2011-2042 (1)		22,956			23,223		1.51
Freddie Mac 0%-5.50% 2015-2036		35,801			33,458		.93
Government National Mortgage Assn. 6.00% 2036		11,080			11,213		.31
Other securities					202,941		5.63
					302,069		8.38

Non-U.S. government bonds & notes - 8.33%
Swedish Government 5.00% 2009		SKr164,645			24,659		.69
Singapore (Republic of):
3.125% 2011		S$ 17,725			11,613
3.75% 2016		18,090			12,491		.67
Netherlands Government Eurobond 5.75% 2007		€ 16,965			22,434		.62
Polish Government 5.75% 2010		PLN 40,910			14,484		.40
Israeli Government 7.50% 2014		ILS 53,297			14,015		.39
French Government O.A.T. Eurobond 4.75% 2035		€ 10,640			15,495		.43
Ireland (Republic of) Eurobond 5.00% 2013		9,820			13,714		.38
Other securities					171,273		4.75
					300,178		8.33

Industrials - 5.48%
Other securities					197,555		5.48


Telecommunication services - 5.43%
Nextel Communications, Inc.:
6.875% 2013	$	6,410			6,483
Series D, 7.375% 2015		30,490			31,295
Sprint Capital Corp. 6.875% 2028		1,250			1,255		1.08
Other securities					156,792		4.35
					195,825		5.43

Materials - 2.95%
Other securities					106,456		2.95


Energy - 2.90%
Other securities					104,305		2.90


Utilities - 2.12%
Other securities					76,466		2.12


Information technology - 1.92%
Other securities					69,091		1.92


Asset-backed obligations - 1.74%
Other securities					62,595		1.74


Health care - 1.38%
HCA Inc., Term Loan B, 8.114% 2013 (1) (3)		13,000			13,195		.37
Other securities					36,626		1.01
					49,821		1.38

Consumer staples - 1.12%
Tyson Foods, Inc. 6.85% 2016 (1)		11,250			11,608		.32
Other securities					28,806		.80
					40,414		1.12

Other - 0.23%
Other securities					8,306		.23


Total bonds & notes (cost: $2,849,054,000)					2,897,402		80.40



		Shares
Convertible securities - 0.36%

Other - 0.36%
Ford Motor Co. Capital Trust II 6.50% cumulative convertible trust preferred 2032		163,600			5,595		.16
Other securities					7,180		.20


Total convertible securities (cost: $11,780,000)					12,775		.36



Preferred stocks - 2.85%

Financials - 2.85%
MUFG Capital Finance 1 Ltd. 6.346% noncumulative preferred (1)		22,716,000			23,114		.64
Shinsei Finance II (Cayman) Ltd. 7.16% noncumulative preferred (1) (2)		13,990,000			14,252		.40
Fannie Mae, Series O, 7.00% (1) (2)		100,000			5,356		.15
Other securities					59,892		1.66


Total preferred stocks (cost: $100,637,000)					102,614		2.85



Common stocks - 0.17%

Other - 0.13%
Sprint Nextel Corp., Series 1		33,726			637		.02
Other securities					3,972		.11
					4,609		.13

MISCELLANEOUS - 0.04%
Other common stocks in initial period of acquisition					1,646		.04


Total common stocks (cost: $3,176,000)					6,255		.17



Rights & warrants - 0.00%

Other - 0.00%
Other securities					3		.00


Total rights & warrants (cost: $52,000)					3		.00



		Principal
		amount
Short-term securities - 14.59%		(000	)

Abbott Laboratories 5.19%-5.24% due 1/25-3/6/2007 (2)	$	72,600			72,146		2.00
3M Co. 5.19% due 1/24-1/26/2007		70,481			70,227		1.95
Procter & Gamble International Funding S.C.A. 5.23% due 1/8-1/11/2007 (2)		45,500			45,439		1.26
Ranger Funding Co. LLC 5.24%-5.28% due 1/2-1/3/2007 (2)		43,236			43,218		1.20
Federal Home Loan Bank 5.105%-5.175% due 1/12-2/28/2007		42,900			42,653		1.18
International Lease Finance Corp. 5.22% due 2/7/2007		39,000			38,794		1.08
Coca-Cola Co. 5.19% due 1/17-1/18/2007 (2)		21,700			21,645
Atlantic Industries 5.23% due 2/28/2007 (2) (4)		15,800			15,668		1.04
Clipper Receivables Co., LLC 5.275% due 2/6/2007 (2)		36,500			36,302		1.01
Three Pillars Funding, LLC 5.28%-5.31% due 1/2-1/8/2007 (2)		36,200			36,168		1.00
Illinois Tool Works Inc. 5.20% due 1/23/2007		25,000			24,917		.69
CAFCO, LLC 5.23%-5.27% due 1/10-2/26/2007 (2)		21,600			21,549		.60
Harley-Davidson Funding Corp. 5.22% due 2/13-2/27/2007 (2) (4)		20,000			19,853		.55
Triple-A One Funding Corp. 5.26%-5.27% due 1/11-1/12/2007 (2)		17,500			17,470		.48
Hershey Co. 5.20% due 1/5/2007 (2)		14,100			14,090		.39
Other securities					5,795		.16


Total short-term securities (cost: $525,921,000)					525,934		14.59


Total investment securities (cost: $3,490,620,000)					3,544,983		98.37
Other assets less liabilities					58,794		1.63

Net assets				$	3,603,777		100.00	%

"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.
"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

"Miscellaneous" and "Other securities" include securities (with aggregate value of $1,622,000), which were valued under fair value procedures adopted by authority of the board of trustees.

The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item.

(1) Coupon rate may change periodically.
(2) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $927,729,000, which represented 25.74% of the net assets of the fund.
(3) Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.
(4) This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future.


See Notes to Financial Statements

Global Bond Fund

Summary investment portfolio, December 31, 2006

	Principal			Market			Percent
		amount			value			of net
Bonds & notes - 84.54%		(000	)		(000	)		assets

Euros - 17.27%
German Government:
4.50% 2013		€ 525		$	US 713
4.25% 2014		420			565
4.00% 2016		425			563
6.25% 2024		150			250
4.00% 2037		125			163			8.40	%
Ireland (Republic of) Eurobond 5.00% 2013		400			559			2.08
Spanish Government 4.25% 2007		360			476			1.77
French Government O.A.T.:
4.75% 2035		110			160
4.00%-5.25% 2008-2009		140			186			1.29
Belgium (Kingdom of) 4.25% 2014		225			302			1.13
WT Finance (Australia) Pty Ltd., Westfield Europe Finance PLC, and WEA Finance LLC 3.625% 2012		120			151			.56
Other securities					546			2.04
					4,634			17.27

Japanese yen - 5.49%
Japanese Government:
0.50% 2007		¥ 37,800			318
1.80% 2010		28,000			241
1.30% 2011		20,400			172
0.50% 2013		3,000			24
1.50% 2014		63,450			532
2.30% 2035		22,050			186			5.49
					1,473			5.49

Swedish kronor - 4.45%
Swedish Government:
5.00% 2009		SKr 2,230			334
5.25% 2011		3,110			479
6.75% 2014		2,200			381			4.45
					1,194			4.45

British pounds - 4.41%
United Kingdom:
5.00% 2014		£ 75			148
4.75% 2015		245			478
4.75% 2038		75			162
4.50%-5.00% 2007-2012		75			147			3.49
Sumitomo Mitsui Banking Corp. 6.164% (undated) (1)		100			195			.73
Other securities					52			.19
					1,182			4.41

Israeli shekels - 1.64%
Israeli Government:
7.50% 2014		ILS 1,238			326
6.50% 2016		450			113			1.64
					439			1.64

Malaysian ringgit - 1.57%
Malaysia:
3.756% 2011		MYR 700			199
4.262% 2016		750			221			1.57
					420			1.57

Polish zloty - 1.54%
Polish Government:
5.75% 2010		PLN 610			216
4.25% 2011		586			196			1.54
					412			1.54

Mexican pesos - 1.18%
United Mexican States Government:
Series MI10, 9.50% 2014		MXP 2,500			260
Series M20, 10.00% 2024		500			58			1.18
					318			1.18

Singapore dollars - 1.13%
Singapore (Republic of):
3.125% 2011		S$ 315			206
3.75% 2016		140			97			1.13
					303			1.13

Egyptian pounds - 1.10%
Egypt (Arab Republic of) Treasury Bill:
0% 2007		EGP 1,075			173
0% 2007		700			121			1.10
					294			1.10

Turkish lira - 1.03%
Other securities					277			1.03


Norwegian kroner - 1.00%
Norwegian Government 6.50% 2013		NKr 1,500			268			1.00


Australian dollars - 0.86%
Other securities					232			.86


Hungarian forint - 0.63%
Hungarian Government 6.00% 2011		HUF 33,980			169			.63


U.S. dollars - 39.12%
U.S. Treasury:
3.625% 2007	$	US 710			705
4.875% 2012		440			444
3.875% 2013		500			479
4.25% 2014 (2)		600			583
4.50% 2016		968			953
8.125% 2019		125			163
8.50% 2020		325			439
6.50% 2026 (2)		450			540
4.50% 2036		805			766			18.91
Fannie Mae:
4.25% 2007		290			288
4.75% 2007		620			618
4.491%-5.00% 2012-2035 (3)		181			175			4.03
Freddie Mac:
5.50% 2034 (3)		460			455
5.50% 2036 (3)		200			197
0%-5.00% 2035-2036 (3)		201			172			3.07
Federal Home Loan Bank 4.625% 2007		270			269			1.00
Other securities					3,249			12.11

					10,495			39.12
Other currencies - 2.12%
Other securities					567			2.12



Total bonds & notes (cost: $22,572,000)					22,677			84.54



					Market			Percent
					value			of net
Preferred stocks - 0.38%					(000	)		assets


U.S. dollars - 0.38%
Other securities				$	US 102			.38	%



Total preferred stocks (cost: $102,000)					102			.38



		Principal			Market			Percent
		amount			value			of net
Short-term securities - 11.64%		(000	)		(000	)		assets


Federal Farm Credit Banks 5.14% due 2/8/2007	$	US 1,800		$	US 1,789			6.67	%
Federal Home Loan Bank 5.17% due 2/23/2007		700			695			2.59
Barton Capital Corp. 5.31% due 1/2/2007 (4)		640			640			2.38


Total short-term securities (cost: $3,124,000)					3,124			11.64


Total investment securities (cost: $25,798,000)					25,903			96.56
Other assets less liabilities					924			3.44

Net assets				$	US 26,827			100.00	%


"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item.

(1) Coupon rate may change periodically.
(2) This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future.
(3) Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.
(4) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $1,435,000, which represented 5.35% of the net assets of the fund.


See Notes to Financial Statements

High Income Bond Fund

Summary investment portfolio, December 31, 2006

LARGEST HOLDINGS BY ISSUER	Percent of net assets

General Motors		2.3	%
Edison International		1.7
Charter Communications		1.7
American Tower		1.5
Williams Companies		1.3
Ford Motor		1.3
Continental Airlines		1.3
Dobson Communications		1.2
AMR		1.1
Qwest Communications International		1.0

		Principal			Market		Percent
		amount			value		of net
Bonds & notes - 83.44%		(000	)		(000	)	assets

Consumer discretionary - 24.38%
General Motors Corp.:
7.125% 2013	$	7,785		$	7,357
7.25% 2013		€ 400			523
7.70% 2016	$	10,425			9,852
8.80% 2021		6,157			5,849
7.20%-8.375% 2011-2033		3,715			3,574		2.34	%
CCO Holdings, LLC and CCO Holdings Capital Corp. 8.75% 2013		6,808			7,106
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 8.00%-8.375% 2012-2014 (1)		4,125			4,314
CCH I, LLC and CCH I Capital Corp. 11.00% 2015		3,700			3,816
Charter Communications Operating, LLC, Term Loan Facilities B, 8.005% 2013 (2) (3)		2,000			2,015
Charter Communications Holdings, LLC and Charter Communications Holdings Capital Corp. 0%-13.50% 2011-2012 (4)		2,050			1,982
CCH II, LLC and CCH II Capital Corp. 10.25% 2010		167			176		1.67
Young Broadcasting Inc. 10.00% 2011		7,467			7,131		.62
Linens 'n Things 10.999% 2014 (2)		6,650			6,484		.56
Michaels Stores, Inc. 10.00% 2014 (1)		6,100			6,374		.55
Burlington Coat Factory Warehouse Corp. 11.125% 2014 (1)		6,350			6,223		.54
CanWest Media Inc., Series B, 8.00% 2012		5,866			6,152		.53
Bon-Ton Department Stores, Inc. 10.25% 2014		5,550			5,703		.49
Cinemark USA, Inc. 9.00% 2013		4,895			5,213		.45
Wynn Las Vegas, LLC and Wynn Las Vegas Capital Corp. 6.625% 2014		4,905			4,899		.42
Ford Motor Co. 6.50% 2018		2,000			1,520		.13
Other securities					186,318		16.08
					282,581		24.38

Industrials - 11.96%
Continental Airlines, Inc.:
Series 2003-ERJ3, Class A, 7.875% 2020 (3)		5,147			5,253
6.545%-8.75% 2011-2022 (3)		9,174			9,524		1.27
American Airlines, Inc. 6.817%-7.858% 2011 (3) (5)		11,015			11,316
AMR Corp. 10.00% 2021		1,000			1,025		1.06
Nielsen Finance LLC and Nielsen Finance Co. 10.00% 2014 (1)		5,600			6,097		.53
UAL Corp., Term Loan B, 9.123% 2012 (2) (3)		5,043			5,080		.44
Other securities					100,330		8.66
					138,625		11.96

Telecommunication services - 9.50%
American Tower Corp.:
7.125% 2012		8,115			8,379
7.25%-7.50% 2011-2012		5,600			5,824		1.23
Qwest Capital Funding, Inc. 7.00%-7.90% 2009-2011		7,760			7,989
Qwest Communications International Inc. 7.25%-7.50% 2011-2014		2,600			2,687
U S WEST Capital Funding, Inc. 6.375%-6.875% 2008-2028		1,450			1,355		1.04
Intelsat (Bermuda), Ltd. 8.25%-11.25% 2012-2016 (1) (2)		11,250			11,770		1.02
Dobson Cellular Systems, Inc. 8.375%-9.875% 2011-2012 (1)		4,950			5,384
Dobson Communications Corp. 8.875% 2013		3,712			3,800
American Cellular Corp., Series B, 10.00% 2011		2,425			2,577		1.01
Nextel Communications, Inc., Series D, 7.375% 2015		6,750			6,928		.60
Triton PCS, Inc. 8.50% 2013		6,625			6,377		.55
Windstream Corp. 8.125% 2013 (1)		5,725			6,226		.54
Cricket Communications, Inc. 9.375% 2014 (1)		5,150			5,459		.47
Other securities					35,335		3.04
					110,090		9.50

Materials - 8.42%
JSG Holdings PLC 11.50% 2015 (6)		€ 5,588			7,495		.65
Plastipak Holdings, Inc. 8.50% 2015 (1)	$	4,585			4,791		.41
Other securities					85,302		7.36
					97,588		8.42

Information technology - 5.54%
Hughes Communications, Inc. 9.50% 2014		9,150			9,596		.83
Sanmina-SCI Corp. 8.125% 2016		9,150			8,898		.77
Serena Software, Inc. 10.375% 2016		5,050			5,385		.46
NXP BV and NXP Funding LLC 9.50% 2015 (1)		4,825			4,970		.43
Other securities					35,342		3.05
					64,191		5.54

Financials - 5.16%
Ford Motor Credit Co. 5.80%-9.875% 2009-2012 (1) (2) (5)		10,600			10,751		.93
Washington Mutual Preferred Funding I Ltd. 6.534% (undated) (1) (2)		6,000			5,952		.51
ILFC E-Capital Trust II 6.25% 2065 (1) (2) (5)		2,000			2,035		.18
Other securities					41,011		3.54
					59,749		5.16

Energy - 4.88%
Williams Companies, Inc. 6.375%-8.75% 2010-2032 (1) (2)		6,450			6,927
Williams Partners LP 7.25%-7.50% 2011-2017 (1)		5,350			5,570
Northwest Pipeline Corp. 8.125% 2010		1,375			1,439
Transcontinental Gas Pipe Line Corp. 6.40%-7.25% 2011-2026		1,250			1,293		1.31
Drummond Co., Inc. 7.375% 2016 (1)		5,070			4,994		.43
Other securities					36,374		3.14
					56,597		4.88

Utilities - 3.78%
Edison Mission Energy:
7.73% 2009		6,325			6,578
7.50% 2013		4,700			4,935
7.75% 2016		1,300			1,385
Midwest Generation, LLC and Midwest Finance Corp. 8.75% 2034		2,200			2,398
Mission Energy Holding Co. 13.50% 2008		2,100			2,326
Midwest Generation, LLC, Series B, 8.56% 2016 (3)		2,108			2,325		1.72
AES Corp. 8.75% 2013 (1)		5,100			5,489		.47
Other securities					18,372		1.59
					43,808		3.78

Health care - 3.60%
HCA Inc., Term Loan B, 8.114% 2013 (2) (3)		7,650			7,765		.67
HealthSouth Corp. 10.75% 2016 (1)		5,100			5,514		.48
Warner Chilcott Corp. 8.75% 2015		5,187			5,343		.46
Other securities					23,122		1.99
					41,744		3.60

Consumer staples - 3.05%
Dole Food Co., Inc. 8.875% 2011		4,888			4,839		.42
Other securities					30,465		2.63
					35,304		3.05


Non-U.S. government bonds & notes - 1.54%
Other securities					17,837		1.54


Mortgage-backed obligations (3) - 1.32%
Tower Ventures, LLC, Series 2006-1, Class F, 7.036% 2036 (1)		5,970			6,077		.52
Other securities					9,229		.80
					15,306		1.32

Other - 0.31%
Other securities					3,577		.31



Total bonds & notes (cost: $941,635,000)					966,997		83.44



		Shares or			Market		Percent
		principal			value		of net
Convertible securities - 1.64%		amount			(000	)	assets

Other - 1.64%
American Tower Corp. 5.00% convertible debentures 2010	$	2,750,000			2,753		.24
Ford Motor Co. Capital Trust II 6.50% cumulative convertible trust preferred 2032		75,000			2,565		.22
Other securities					13,711		1.18
					19,029		1.64


Total convertible securities (cost: $17,421,000)					19,029		1.64



					Market		Percent
					value		of net
Preferred stocks - 2.57%		Shares			(000	)	assets

Financials - 2.57%
Tokai Preferred Capital Co. LLC, Series A, 9.98% noncumulative preferred (1) (2)		6,114,000			6,486		.56
Fuji JGB Investment LLC, Series A, 9.87% noncumulative preferred (1) (2)		5,500,000			5,830		.50
Shinsei Finance II (Cayman) Ltd. 7.16% noncumulative preferred (1) (2)		5,370,000			5,471		.47
Other securities					12,030		1.04
					29,817		2.57

Other - 0.00%
Other securities					0		.00


Total preferred stocks (cost: $26,555,000)					29,817		2.57



					Market		Percent
					value		of net
Common stocks - 1.37%		Shares			(000	)	assets

Other - 1.34%
Drax Group PLC		350,248			5,596		.48
Dobson Communications Corp., Class A (7)		237,211			2,066		.18
American Tower Corp., Class A (7)		3,522			131		.01
Other securities					7,790		.67
					15,583		1.34

Miscellaneous - 0.03%
Other common stocks in initial period of acquisition					370		.03


Total common stocks (cost: $11,634,000)					15,953		1.37



					Market		Percent
					value		of net
Rights & warrants - 0.00%					(000	)	assets

Other - 0.00%
Other securities					1		.00


Total rights & warrants (cost: $428,000)					1		.00



		Principal			Market		Percent
		amount			value		of net
Short-term securities - 8.95%		(000	)		(000	)	assets

Abbott Laboratories 5.24% due 1/25/2007 (1)	$	13,400			13,351		1.15
Citigroup Funding Inc. 5.25% due 1/10/2007		12,100			12,082		1.04
Triple-A One Funding Corp. 5.28% due 1/3/2007 (1)		12,000			11,995		1.04
IBM Corp. 5.24% due 1/30/2007 (1)		11,900			11,845		1.02
AIG Funding, Inc. 5.24% due 1/9/2007		11,300			11,285		.97
Bank of New York Co., Inc. 5.20% due 1/5/2007		10,000			9,993		.86
Jupiter Securitization Co., LLC 5.27% due 1/11/2007 (1)		10,000			9,984		.86
Bank of America Corp. 5.24% due 1/2/2007		5,000			4,998
Ranger Funding Co. LLC 5.26% due 1/31/2007 (1)		5,000			4,977		.86
Concentrate Manufacturing Co. of Ireland 5.19% due 1/12/2007 (1)		8,300			8,286		.72
Pfizer Investment Capital PLC 5.25% due 1/8/2007 (1)		5,000			4,994		.43

Total short-term securities (cost: $103,790,000)					103,790		8.95


Total investment securities (cost: $1,101,463,000)					1,135,587		97.97
Other assets less liabilities					23,494		2.03

Net assets				$	1,159,081		100.00	%

"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.
"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.
"Miscellaneous" and "Other securities" include securities (with aggregate value of $7,658,000), which were valued under fair value procedures adopted by authority of the board of trustees.

The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item.

(1) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $298,913,000, which represented 25.79% of the net assets of the fund.
(2) Coupon rate may change periodically.
(3) Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.
(4) Step bond; coupon rate will increase at a later date.
(5) This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future.
(6) Payment in kind; the issuer has the option of paying additional securities in lieu of cash.
(7) Security did not produce income during the last 12 months.


See Notes to Financial Statements

U.S. Government / AAA-Rated Securities Fund

Summary investment portfolio, December 31, 2006

		Principal			Market		Percent
		amount			value		of net
Bonds & notes - 94.38%		(000	)		(000	)	assets

Mortgage-backed obligations (1) - 47.82%
Fannie Mae:
Series 2003-T1, Class B, 4.491% 2012	$	7,250		$	7,022
5.00% 2017		5,114			5,044
Series 1997-M6, Class ZA, 6.85% 2026		10,159			10,293
4.50% 2035		13,871			12,990
5.00% 2035		6,109			5,901
5.50% 2035		13,989			13,845
5.50% 2036		16,200			16,012
5.50% 2036		5,783			5,716
5.58% 2036 (2)		3,655			3,656
6.00% 2036		8,859			8,920
6.00% 2036		6,846			6,893
0%-12.046% 2008-2042 (2)		6,047			24,028		18.44	%
Freddie Mac:
4.646% 2035 (2)		3,903			3,838
5.00% 2035		3,797			3,666
6.00% 2036		25,835			26,025
0%-11.00% 2008-2036 (2)		20,716			19,562		8.14
Government National Mortgage Assn.:
5.00% 2036		4,748			4,604
5.00% 2036		3,645			3,534
5.50% 2036		18,182			18,052
5.50% 2036		4,164			4,134
6.00% 2036		3,940			3,987
3.624%-9.50% 2009-2036 (2)		6,844			6,797		6.30
Countrywide Alternative Loan Trust 5.00%-6.00% 2020-2036 (2)		9,398			9,339		1.43
J.P. Morgan Chase Commercial Mortgage Securities Corp. 3.972%-5.016% 2034-2046		9,367			9,167		1.40
Morgan Stanley Capital I, Inc., Series 1998-HF2, Class A-2, 6.48% 2030		5,005			5,067		.78
Salomon Brothers Commercial Mortgage Trust, Series 2001-C1, Class A-3, 6.428% 2035		3,050			3,169		.49
Other securities					70,737		10.84
					311,998		47.82

U.S. Treasury bonds & notes - 26.53%
U.S. Treasury:
5.75% 2010		21,300			22,039
4.875% 2011		5,000			5,036
3.875% 2013		10,725			10,266
4.25% 2013		41,250			40,225
4.25% 2014		4,000			3,884
11.25% 2015		3,000			4,311
7.50% 2016		10,250			12,459
8.875% 2017		3,690			4,938
8.125% 2019		3,500			4,574
8.875% 2019		11,695			15,995
8.50% 2020		10,500			14,185
7.875% 2021		3,500			4,557
5.375% 2031		10,639			11,404
4.50% 2036		16,650			15,841
0%-7.125% 2019-2026		3,325			3,390		26.53
					173,104		26.53

Federal agency bonds & notes - 10.40%
Freddie Mac:
5.125% 2008		2,000			2,000
6.625% 2009		3,075			3,202
5.50% 2011		11,250			11,517
4.50% 2014		8,000			7,779		3.76
Small Business Administration:
5.408% 2016		5,804			5,844
4.75%-6.44% 2021-2023 (1)		12,552			12,553		2.82
Fannie Mae:
5.25% 2007		4,000			3,999
6.00% 2008		5,000			5,057		1.39
Federal Home Loan Bank 3.75% 2007		5,410			5,359		.82
Other securities					10,496		1.61
					67,806		10.40

Asset-backed obligations (1) - 8.66%
CPS Auto Receivables Trust, Series 2006-C, Class A-4, XLCA insured, 5.14% 2013 (3)		6,125			6,137		.94
West Penn Funding LLC, Transition Bonds, Series 2005-A, Class A-1, 4.46% 2010 (3)		5,094			5,008		.77
PG&E Energy Recovery Funding LLC, Series 2005-2, Class A-2, 5.03% 2014		5,000			4,999		.76
Drive Auto Receivables Trust, Series 2006-1, Class A-4, FSA insured, 5.54% 2013 (3)		4,000			4,041		.62
UPFC Auto Receivables Trust, Series 2005-B, Class A-3, XLCA insured, 4.98% 2011		4,000			3,984		.61
Other securities					32,337		4.96
					56,506		8.66

Other - 0.97%
Other securities					6,322		.97



Total bonds & notes (cost: $614,780,000)					615,736		94.38



Short-term securities - 4.76%

Ciesco LLC 5.26%-5.27% due 1/4-2/7/2007 (3)		11,900			11,859
CAFCO, LLC 5.30% due 1/2/2007 (3)		5,200			5,197		2.61
AIG Funding, Inc. 5.24% due 1/9/2007		9,000			8,988		1.38
Concentrate Manufacturing Co. of Ireland 5.22% due 1/12/2007 (3)		5,000			4,991		.77


Total short-term securities (cost: $31,035,000)					31,035		4.76


Total investment securities (cost: $645,815,000)					646,771		99.14
Other assets less liabilities					5,633		.86

Net assets				$	652,404		100.00	%

"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item.
(1) Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.
(2) Coupon rate may change periodically.
(3) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $66,997,000, which represented 10.27% of the net assets of the fund.
The industry classifications shown in the summary investment portfolio were obtained from sources believed to be reliable and are not covered by the Report of Independent Registered Public Accounting Firm.


See Notes to Financial Statements

Cash Management Fund

Investment portfolio, December 31, 2006

		Principal			Market		Percent
		amount			value		of net
Short-term securities - 99.66%		(000	)		(000	)	assets


Corporate short-term notes - 85.42%
Private Export Funding Corp. 5.22% due 1/8/2007 (1)	$	10,000		$	9,988		2.51	%
Amsterdam Funding Corp. 5.26% due 1/11/2007 (1)		10,000			9,984		2.51
KfW International Finance Inc. 5.22% due 1/12/2007 (1)		10,000			9,983		2.51
Jupiter Securitization Co. LLC 5.25% due 1/17/2007 (1)		10,000			9,975		2.51
American Express Credit Corp. 5.27% due 1/18/2007		10,000			9,974		2.51
Stadshypotek Delaware Inc. 5.25% due 1/30/2007 (1)		10,000			9,957		2.50
Bank of Montreal 5.22% due 2/2/2007		10,000			9,954		2.50
Pfizer Investment Capital PLC 5.20% due 2/7/2007 (1)		10,000			9,945		2.50
International Lease Finance Corp 5.21% due 2/12/2007		10,000			9,938		2.50
Kimberly-Clark Worldwide Inc. 5.22% due 2/21/2007 (1)		10,000			9,929		2.49
CAFCO, LLC 5.26%-5.28% due 1/11-2/13/2007 (1)		9,700			9,681		2.43
FCAR Owner Trust I 5.27% due 1/4/2007		9,300			9,295		2.33
Clipper Receivables Co., LLC 5.27% due 1/8/2007 (1)		9,000			8,989		2.26
Nestle Capital Corp 5.205% due 1/9/2007 (1)		9,000			8,988		2.26
Three Pillars Funding LLC 5.29% due 1/16/2007 (1)		9,000			8,979		2.26
Dexia Delaware LLC 5.255% due 1/18/2007		9,000			8,976		2.25
Johnson & Johnson 5.18% due 1/19/2007 (1)		9,000			8,975		2.25
3M Co. 5.18% due 1/30/2007		9,000			8,961		2.25
General Electric Co. 5.24% due 2/7/2007		9,000			8,953		2.25
Harvard University 5.18% due 2/6/2007		9,000			8,950		2.25
UnionBanCal Commercial Funding Corp. 5.21% due 2/12/2007		8,800			8,745		2.20
NetJets Inc. 5.22% due 2/15/2007 (1)		8,800			8,741		2.20
HSBC Finance Corp. 5.20% due 2/2/2007		8,100			8,061		2.02
Thunder Bay Funding, LLC 5.27% due 1/5/2007 (1)		8,000			7,994		2.01
BASF AG 5.25% due 1/11/2007 (1)		8,000			7,987		2.01
Hershey Co. 5.21% due 1/12/2007 (1)		8,000			7,986		2.01
Swedish Export Credit Corp. 5.25% due 1/16/2007		8,000			7,981		2.00
Caterpillar Financial Services Corp. 5.23% due 1/5/2007		7,800			7,794		1.96
Triple-A One Funding Corp. 5.26%-5.32% due 1/12-1/19/2007 (1)		7,700			7,681		1.93
Procter & Gamble International Funding S.C.A 5.24% due 1/10/2007 (1)		7,400			7,389		1.86
Barton Capital LLC 5.26% due 1/11/2007 (1)		7,100			7,089		1.78
CIT Group, Inc. 5.25% due 1/12/2007 (1)		7,000			6,988		1.76
American Honda Finance Corp. 5.23% due 1/23/2007		7,000			6,977		1.75
Bank of America Corp. 5.25% due 2/20/2007		6,800			6,750		1.70
Danske Corp. Series A 5.24% due 1/16/2007 (1)		6,600			6,585		1.65
BMW U.S. Capital LLC 5.24% due 1/22/2007 (1)		6,500			6,479		1.63
Export Development Canada 5.16% due 2/21/2007		5,600			5,560		1.40
ING (US) Funding LLC 5.23% due 2/6/2007		5,400			5,371		1.35
Variable Funding Capital Corp. 5.26% due 2/13/2007 (1)		5,000			4,968		1.25
Allied Irish Banks N.A. Inc. 5.28% due 1/29/2007 (1)		4,100			4,083		1.03
Swedbank Mortgage AB 5.25% due 1/4/2007		3,200			3,198		.80
Lloyds Bank PLC 5.25% due 1/29/2007		3,175			3,162		.79
Harley-Davidson Funding Corp. 5.20% due 2/1/2007 (1)		2,000			1,991		.50
					339,934		85.42

Federal agency discount notes - 14.24%
Freddie Mac 5.155%-5.17% due 1/2-1/26/2007		17,250			17,209		4.32
Federal Home Loan Bank 5.145%-5.15% due 1/10-2/15/2007		12,100			12,031		3.02
Federal Farm Credit Banks 5.13% due 2/8/2007		10,400			10,342		2.60
International Bank for Reconstruction and Development 5.19% due 1/22/2007		9,000			8,972		2.26
Fannie Mae 5.17% due 1/5/2007		8,100			8,094		2.04
					56,648		14.24


Total investment securities (cost: $396,571,000)					396,582		99.66
Other assets less liabilities					1,368		.34

Net assets				$	397,950		100.00	%


(1) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities was $201,334,000, which represented 50.59% of the net assets of the fund.


See Notes to Financial Statements.

Financial statements

Statement of assets and liabilities
at December 31, 2006													(dollars and shares in thousands, except per-share amounts					)

		Global Discovery Fund			Global Growth Fund		Global Small Capitalization Fund		Growth Fund		International Fund		New World Fund		Blue Chip Income and Growth Fund		Global Growth and Income Fund
Assets:

Investment securities at market
Unaffiliated issuers	$	179,296		$	4,292,390	$	3,082,501	$	26,797,898	$	9,014,867	$	1,296,697	$	4,072,697	$	680,425
Affiliated issuers		-			9,396		94,306		326,082		-		-		-		-
Cash denominated in non-U.S. currencies		157			3,507		3,916		25,216		7,897		2,250		-		169
Cash		93			99		215		512		98		3,150		207		184
Receivables for:
Sales of investments		-			1,071		2,744		27,293		58,802		36		16,877		983
Sales of fund's shares		327			7,227		2,130		24,779		6,465		2,522		4,941		7,531
Open forward currency contracts		-			-		-		-		-		-		-		-
Closed forward currency contracts		-			-		-		-		-		-		-		-
Dividends and interest		63			5,045		5,728		17,264		13,660		4,444		4,028		670
Other assets		-			-		-		-		-		-		-		-
		179,936			4,318,735		3,191,540		27,219,044		9,101,789		1,309,099		4,098,750		689,962
Liabilities:
Payables for:
Purchases of investments		1,085			16,094		10,312		104,472		52,351		6,180		-		6,881
Repurchases of fund's shares		-			5,596		2,358		24,550		11,597		63		239		29
Open forward currency contracts		-			-		-		-		-		-		-		-
Closed forward currency contracts		-			-		-		-		-		-		-		-
Investment advisory services		78			1,725		1,710		6,660		3,357		764		1,296		328
Distribution services		31			829		614		4,982		1,529		243		828		124
Deferred trustees' compensation		1			46		25		712		316		8		25		-*
Other		2			1,229		2,073		1,211		4,407		1,074		1		7
		1,197			25,519		17,092		142,587		73,557		8,332		2,389		7,369
Net assets at December 31, 2006 (total: $90,093,172)	$	178,739		$	4,293,216	$	3,174,448	$	27,076,457	$	9,028,232	$	1,300,767	$	4,096,361	$	682,593
Investment securities at cost
Unaffiliated issuers	$	149,079		$	3,392,417	$	2,352,457	$	21,147,458	$	6,636,049	$	951,880	$	3,337,007	$	629,932
Affiliated issuers	$	-		$	7,686	$	67,613	$	291,097	$	-	$	-	$	-	$	-
Cash denominated in non-U.S. currencies at cost	$	156		$	3,458	$	3,898	$	25,130	$	7,852	$	2,238	$	-	$	167

Net assets consist of:
Capital paid in on shares of beneficial interest	$	146,705		$	3,135,161	$	2,128,764	$	19,373,962	$	6,148,345	$	844,359	$	3,173,819	$	628,732
Undistributed (distributions in excess of) net investment income		(168	)		58,293		1,723		43,246		15,449		10,927		53,310		(408	)
Undistributed (accumulated) net realized gain (loss)		1,978			199,204		289,187		1,974,771		489,825		101,668		133,542		3,761
Net unrealized appreciation		30,224			900,558		754,774		5,684,478		2,374,613		343,813		735,690		50,508
Net assets at December 31, 2006	$	178,739		$	4,293,216	$	3,174,448	$	27,076,457	$	9,028,232	$	1,300,767	$	4,096,361	$	682,593

Shares of beneficial interest issued and outstanding - unlimited shares authorized:

Class 1:
Net assets (total: $11,722,773)	$	28,365		$	278,028	$	246,792	$	3,503,646	$	1,648,326	$	125,743	$	159,097	$	45,036
Shares outstanding		2,174			11,863		9,923		54,309		74,899		5,833		13,296		4,101
Net asset value per share	$	13.05		$	23.44	$	24.87	$	64.51	$	22.01	$	21.56	$	11.97	$	10.98
Class 2:
Net assets (total: $77,181,384)	$	150,374		$	4,015,188	$	2,927,656	$	23,121,735	$	7,259,480	$	1,175,024	$	3,937,264	$	637,557
Shares outstanding		11,571			172,403		118,834		360,847		330,853		54,916		331,714		58,121
Net asset value per share	$	13.00		$	23.29	$	24.64	$	64.08	$	21.94	$	21.40	$	11.87	$	10.97
Class 3:
Net assets (total: $1,189,015)	$	-		$	-	$	-	$	451,076	$	120,426	$	-	$	-	$	-
Shares outstanding		-			-		-		6,993		5,474		-		-		-
Net asset value per share	$	-		$	-	$	-	$	64.50	$	22.00	$	-	$	-	$	-

* Amount less than one thousand.

See Notes to Financial Statements

Statement of assets and liabilities

at December 31, 2006

(dollars and shares in thousands, except per-share amounts

)

Growth-Income Fund

Asset Allocation Fund

Bond Fund

Global Bond Fund

High-Income Bond Fund

U.S. Government/AAA-Rated Securities Fund

Cash Management Fund

Assets:

Investment securities at market

Unaffiliated issuers

26,848,276

7,437,038