American Funds Insurance Series · 497 · On 5/22/02

Filed On 5/22/02   ·   SEC File 2-86838   ·   Accession Number 729528-2-6

Definitive Material   ·   Rule 497
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Document/Exhibit                   Description                      Pages   Size 

 1: 497         Definitive Material                                  178±   782K 

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AMERICAN FUNDS INSURANCE SERIES 
PROSPECTUS SUPPLEMENT 

MAY 20, 2002  
FOR PROSPECTUS DATED MAY 1, 2002

The first paragraph on page 22 is amended as follows:                           

The fund seeks to provide you with a high level of current income, as well as   
preserve your investment. Normally, the fund will invest at least 80% of its    
assets in securities that are guaranteed by the "full faith and credit" pledge  
of the U.S. government or debt securities that are rated Aaa or AAA by Moody's  
Investors Service, Inc. or Standard & Poor's Corporation or unrated but         
determined to be of equivalent quality. The fund may also invest a significant  
portion of its assets in securities backed by pools of mortgages (also called   
"mortgage-backed securities"). The fund is designed for investors seeking       
income and more price stability than stocks and lower quality debt securities,  
and capital preservation over the long term.                                    

Please keep this Supplement with your copy of the Prospectus.                   

AMERICAN FUNDS INSURANCE SERIES 

Part B
Statement of Additional Information 

May 1, 2002 
(as amended May 20, 2002)   

This document is not a prospectus but should be read in conjunction with the    
current prospectus of American Funds Insurance Series (the "Series") dated May  
1, 2002. The prospectus may be obtained from your investment dealer or financial
planner or by writing to the fund at the following address:                     

American Funds Insurance Series 
Attention: Secretary
333 South Hope Street 
Los Angeles, California 90071 
(213) 486-9200

Shareholders who purchase shares at net asset value through eligible retirement 
plans should note that not all of the services or features described below may  
be available to them. They should contact their employer for details.           

TABLE OF CONTENTS 

                                                                [Download Table]

Item                                                                  Page No.
----                                                                  --------
                                                                              
Certain Investment Limitations and Guidelines . . . . . . . . . . .        2  
Description of Certain Securities and Investment Techniques . . . .        6  
Fundamental Policies and Investment Restrictions. . . . . . . . . .       18  
Series Organization and Voting Rights . . . . . . . . . . . . . . .       22  
Board of Trustees and Officers. . . . . . . . . . . . . . . . . . .       23  
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . .       28  
Price of Shares . . . . . . . . . . . . . . . . . . . . . . . . . .       31  
Taxes and Distributions . . . . . . . . . . . . . . . . . . . . . .       32  
Execution of Portfolio Transactions . . . . . . . . . . . . . . . .       36  
General Information . . . . . . . . . . . . . . . . . . . . . . . .       37  
Description of Commercial Paper Ratings . . . . . . . . . . . . . .       39  
Financial Statements                                                          

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CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES 

The following limitations and guidelines are considered at the time of purchase,
under normal circumstances, and are based on a percentage of the funds' net     
assets unless otherwise noted. This summary is not intended to reflect all of   
the funds' investment limitations.                                              

GLOBAL DISCOVERY FUND                                                           

General                                                               

   .    The fund may invest up to 25% of its assets in companies outside the
     services and information area of the global economy. Under normal
 market conditions, the fund will invest in equity securities,
         including common and preferred stocks or other securities convertible
into stocks.                                                

   .    The fund may hold cash or cash equivalents, government or other debt
      securities of companies outside the services and information area.

Non-U.S. Securities                                                   

     .    Although the fund currently expects to invest a majority of its assets
         in the U.S., it may invest its assets on a global basis. The fund may
         invest in securities of issuers domiciled outside the U.S., including
    securities denominated in currencies other than the U.S. dollar.

Debt Securities                                                       

   .    The fund may not invest in debt securities rated below Ca by Moody's
  Investors Service, Inc. ("Moody's") or CC by Standard & Poor's
    Corporation ("S&P") or in unrated securities determined to be of
equivalent quality.                                         

GLOBAL GROWTH FUND                                                              

Debt Securities                                                       

.    The fund may invest up to 10% of its assets in straight debt     
         securities rated Baa and BBB or below by Moody's or S&P or in unrated
securities that are determined to be of equivalent quality. 

GLOBAL SMALL CAPITALIZATION FUND                                                

Equity Securities                                                     

   .    The fund will invest at least 80% of its assets in equity securities
          of small capitalization issuers (market capitalizations of $50 million
to $1.5 billion based on U.S. share prices).                

Debt Securities                                                       

.    The fund may invest in debt securities generally rated in the top
        three categories by S&P or Moody's or in unrated securities that are
determined to be of equivalent quality.                     

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GROWTH FUND                                                                     

Non-U.S. Securities                                                   

   .    The fund may invest up to 15% of its assets in securities of issuers
          domiciled outside the U.S. and Canada and not included in the S&P 500.

Debt Securities                                                       

.    The fund may invest up to 10% of its assets in straight debt     
       securities rated Ba and BB or below by Moody's or S&P or in unrated
securities that are determined to be of equivalent quality. 

INTERNATIONAL FUND                                                              

Debt Securities                                                       

     .    The fund may invest up to 5% of its assets in straight debt securities
         rated BBB and Baa or below by S&P or Moody's or in unrated securities
that are determined to be of equivalent quality.            

NEW WORLD FUND                                                                  

General                                                               

 .    The fund will invest at least 35% of its assets in equity and debt
        securities of companies primarily based in qualified countries which
have developing economies and/or markets.                   

Equity Securities                                                     

    .    The fund may invest the balance of its assets in equity securities of
         any company regardless of where it is based, provided the adviser has
   determined that a significant portion of its assets or revenues
     (generally 20% or more) are attributable to developing countries.

Debt Securities                                                       

.    The fund may invest up to 25% of its assets in straight debt     
      securities of issuers primarily based in qualified countries which
        have developing economies and/or markets, or issuers that the fund's
     investment adviser determines have a significant portion of their
         assets or revenues (generally 20% or more) attributable to developing
countries.                                                  

.    The fund may invest up to 25% of its assets in straight debt     
       securities rated Ba and BB or below by Moody's or S&P or in unrated
securities that are determined to be of equivalent quality. 

BLUE CHIP INCOME AND GROWTH FUND                                                

Equity Securities                                                     

   .    The fund ordinarily will invest at least 90% of its equity assets in
        the stock of companies in business for five or more years (including
predecessor companies);                                     

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          that pay regular dividends; and whose debt securities are rated Baa or
     BBB or above by Moody's or S&P or unrated but determined to be of
      equivalent quality. The fund will not invest in private companies.

Non-U.S. Securities                                                   

  .    The fund may invest up to 10% of its assets in equity securities of
        larger non-U.S. companies (with market capitalizations of $4 billion
and above) that are listed or traded in the U.S.            

GROWTH-INCOME FUND                                                              

Non-U.S. Securities                                                   

  .    The fund may invest up to 10% of its assets in equity securities of
issuers domiciled outside the U.S. and not in the S&P 500.  

Debt Securities                                                       

     .    The fund may invest up to 5% of its assets in straight debt securities
       rated Ba and BB or below by Moody's or S&P or in unrated securities
that are determined to be of equivalent quality.            

ASSET ALLOCATION FUND                                                           

General                                                               

.    The fund will generally invest 40% to 80% of its assets in equity
     securities; 20% to 50% in debt securities; and 0% to 40% in money
market instruments (including cash).                        

Debt Securities                                                       

   .    Up to 25% of the fund's debt assets may be invested in straight debt
       securities rated Ba and BB or below by Moody's or S&P or in unrated
securities that are determined to be of equivalent quality. 

Non-U.S. Securities                                                   

    .    The fund may invest up to 10% of its assets in equity-type securities
 of issuers domiciled outside the U.S. and not in the S&P 500.

.    The fund may invest up to 5% of its assets in debt securities of 
issuers domiciled outside the U.S.                          

BOND FUND                                                                       

Equity Securities                                                     

   .    The fund may not purchase equity securities directly, but may retain
         up to 5% of its assets in common stock, warrants and rights after the
sale of the corresponding debt securities.                  

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Debt Securities                                                       

     .    The fund will invest at least 80% of its assets in bonds. For purposes
          of this limit, bonds include any debt instrument and cash equivalents,
and may include certain preferred securities.               

 .    The fund will invest at least 35% of its assets in debt securities
         (including cash and cash equivalents) rated A or better by Moody's or
        S&P or in unrated securities that are determined to be of equivalent
quality.                                                    

 .    The fund will invest at least 65% of its assets in debt securities
      (including cash and cash equivalents) that are rated Baa or BBB or
         better by Moody's or S&P or in unrated securities that are determined
to be of equivalent quality.                                

.    The fund may invest up to 35% of its assets in straight debt     
       securities rated Ba and BB or below by Moody's or S&P or in unrated
securities that are determined to be of equivalent quality. 

Non-U.S. Securities                                                   

.    The fund may invest up to 20% of its assets in non-U.S. dollar   
denominated securities.                                     

HIGH-INCOME BOND FUND                                                           

Debt Securities                                                       

     .    The fund will invest at least 80% of its assets in bonds. For purposes
          of this limit, bonds include any debt instrument and cash equivalents,
and may include certain preferred securities.               

.The fund will invest at least 65% of its assets in debt securities   
      rated Ba or BB or below by Moody's or S&P or in unrated securities
that are determined to be of equivalent quality.            

Equity and Other Securities                                           

  .    The fund may invest up to 20% of its assets in common and preferred
stocks and convertible securities.                          

Maturity                                                              

     .    The fund generally will invest in securities with maturities in excess
of 3 years.                                                 

Non-U.S. Securities                                                   

   .    The fund may invest up to 25% of its assets in securities of issuers
domiciled outside the U.S.                                  

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U.S. GOVERNMENT/AAA-RATED SECURITIES FUND                                       

General                                                               

.    The fund will invest at least 80% of its assets in securities    
guaranteed by the "full faith and credit" pledge of the U.S.
      government or debt securities that are rated Aaa or AAA by Moody's
 or S&P or unrated but determined to be of equivalent quality.

CASH MANAGEMENT FUND                                                            

General                                                               

     .    The fund will invest in high quality money market instruments rated in
         the two highest quality categories by either Moody's or S&P, provided
        the issuer has commercial paper rated in the highest rating category
by Moody's or S&P.                                          

Maturity                                                              

    .    The fund may purchase securities that mature or may be redeemed in 13
          months or less (25 months or less if U.S. government securities), even
if original maturity is greater than 1 year.                

DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES 

With respect to all funds, portfolio changes will be made without regard to the 
length of time a particular investment may have been held.                      

EQUITY SECURITIES - Equity securities represent an ownership position in a      
company. These securities may include common stocks and securities with equity  
conversion or purchase rights. The prices of equity securities fluctuate based  
on changes in the financial condition of their issuers and on market and        
economic conditions. The growth-oriented, equity-type securities generally      
purchased by certain of the funds may involve large price swings and potential  
for loss.                                                                       

DEBT SECURITIES - Bonds and other debt securities are used by issuers to borrow 
money. Issuers pay investors interest and generally must repay the amount       
borrowed at maturity. Some debt securities, such as zero coupon bonds, do not   
pay current interest, but are purchased at a discount from their face values.   
The prices of debt securities fluctuate depending on such factors as interest   
rates, credit quality, and maturity. In general, their prices decline when      
interest rates rise and increase when interest rates fall.                      

Lower rated bonds, rated Ba or below by Moody's and BB or below by S&P or       
unrated but considered to be of equivalent quality, are described by the rating 
agencies as speculative and involve greater risk of default or price changes due
to changes in the issuer's creditworthiness than higher rated bonds, or they may
already be in default. The market prices of these securities may fluctuate more 
than higher quality securities and may decline significantly in periods of      
general economic difficulty. It may be more difficult to dispose of, or to      
determine the value of, lower rated bonds.                                      

Certain risk factors relating to lower rated bonds are discussed below:         

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     SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - Lower rated bonds, like
     other bonds, may be sensitive to adverse economic changes and political and
corporate developments and may be sensitive to interest rate changes. 
     During an economic downturn or substantial period of rising interest rates,
 highly leveraged issuers may experience increased financial stress that
would adversely affect their ability to service their principal and   
interest payment obligations, to meet projected business goals, and to
   obtain additional financing. In addition, periods of economic uncertainty
 and changes can be expected to result in increased volatility of market
prices and yields of lower rated bonds.                               

 PAYMENT EXPECTATIONS - Lower rated bonds, like other bonds, may contain
     redemption or call provisions. If an issuer exercises these provisions in a
     declining interest rate market, the fund would have to replace the security
with a lower yielding security, resulting in a decreased return to    
investors. If the issuer of a bond defaults on its obligations to pay 
   interest or principal or enters into bankruptcy proceedings, the fund may
incur losses or expenses in seeking recovery of amounts owed to it.   

LIQUIDITY AND VALUATION - There may be little trading in the secondary
    market for particular bonds, which may affect adversely the fund's ability
to value accurately or dispose of such bonds. Adverse publicity and   
 investor perceptions, whether or not based on fundamental analysis, may
decrease the value and liquidity of lower rated bonds.                

The Investment Adviser attempts to reduce the risks described above through     
diversification of the portfolios and by credit analysis of each issuer, as well
as by monitoring broad economic trends and corporate and legislative            
developments, but there can be no assurance that it will be successful in doing 
so.                                                                             

SECURITIES WITH EQUITY AND DEBT CHARACTERISTICS - The funds may invest in       
securities that have a combination of equity and debt characteristics. These    
securities may at times behave more like equity than debt and vice versa. Some  
types of convertible bonds or preferred stock automatically convert into common 
stock. The prices and yields of non-convertible preferred stock generally move  
with changes in interest rates and the issuer's credit quality, similar to the  
factors affecting debt securities.                                              

Convertible bonds, convertible preferred stock, and other securities may        
sometimes be converted into common stock or other securities at a stated        
conversion ratio. These securities, prior to conversion, pay a fixed rate of    
interest or a dividend. Because convertible securities have both debt and equity
characteristics, their value varies in response to many factors, including the  
value of the underlying equity, general market and economic conditions, and     
convertible market valuations, as well as changes in interest rates, credit     
spreads, and the credit quality of the issuer.                                  

INVESTING IN SMALLER CAPITALIZATION STOCKS - Certain funds may invest in the    
stocks of smaller capitalization companies (typically companies with market     
capitalizations of less than $1.5 billion at the time of purchase). The         
Investment Adviser believes that the issuers of smaller capitalization stocks   
often provide attractive investment opportunities. However, investing in smaller
capitalization stocks can involve greater risk than is customarily associated   
with investing in stocks of larger, more established companies. For example,    
smaller companies often have limited product lines, markets, or financial       
resources, may be dependent for management on one or a few key persons, and can 
be more susceptible to losses. Also, their securities may be thinly traded (and 
therefore have to be sold at a discount from current prices or sold in small    
lots over                                                                       

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an extended period of time), may be followed by fewer investment research       
analysts, and may be subject to wider price swings, thus creating a greater     
chance of loss than securities of larger capitalization companies. Because the  
Global Small Capitalization Fund in particular emphasizes the stocks of issuers 
with smaller market capitalizations (by U.S. standards), it can be expected to  
have more difficulty obtaining information about the issuers or valuing or      
disposing of its securities than if it were to concentrate on more larger       
capitalization stocks. The funds determine relative market capitalizations using
U.S. standards. Accordingly, the funds' non-U.S. investments may have large     
capitalizations relative to market capitalizations of companies based outside   
the U.S.                                                                        

INVESTING IN PRIVATE COMPANIES - The Global Discovery Fund, Global Growth Fund, 
Global Small Capitalization Fund, Growth Fund, International Fund, New World    
Fund, Growth-Income Fund, Asset Allocation Fund, Bond Fund and High-Income Bond 
Fund may invest in companies prior to the public offering of their securities.  
Investing in private companies can involve greater risks than those associated  
with investing in publicly traded companies. For example, the securities of     
private companies may be subject to the risk that market conditions, investor   
perception, or regulatory decisions may delay or prevent a company from         
ultimately offering its securities to the public. Furthermore, these investments
are generally considered to be illiquid until a company's public offering and   
are often subject to additional contractual restrictions on resale that would   
prevent the funds from being able to sell their shares of the company for a     
period of time following the public offering.                                   

Investments in private companies can offer the funds significant growth         
opportunities at very attractive prices. For example, extremely positive market 
conditions during the recent past, especially in the technology market, have    
allowed these investments to contribute materially to the funds' investment     
results. These markets have been extremely volatile, and, consequently, there is
no guarantee that similar positive results can be achieved in the future.       

INVESTING IN VARIOUS COUNTRIES - The Global Discovery Fund, Global Growth Fund, 
Global Small Capitalizaiton Fund, Growth Fund, International Fund, New World    
Fund, Blue Chip Income and Growth Fund, Growth-Income Fund, Asset Allocation    
Fund, Bond Fund and the High-Income Bond Fund may invest in securities of       
issuers domiciled outside the U.S. and which may be denominated in currencies   
other than the U.S. dollar. Investing outside the U.S. involves special risks,  
caused by, among other things: currency controls and fluctuating currency       
values; different accounting, auditing, and financial reporting regulations and 
practices in some countries; changing local and regional economic, political,   
and social conditions; expropriation or confiscatory taxation; greater market   
volatility; differing securities market structures; and various administrative  
difficulties such as delays in clearing and settling portfolio transactions or  
in receiving payment of dividends. However, in the opinion of Capital Research  
and Management Company, investing outside the U.S. also can reduce certain      
portfolio risks due to greater diversification opportunities.                   

The risks described above are potentially heightened in connection with         
investments in developing countries. Although there is no universally accepted  
definition, a developing country is generally considered to be a country which  
is in the initial stages of its industrialization cycle with a low per capita   
gross national product. For example, political and/or economic structures in    
these countries may be in their infancy and developing rapidly. Historically,   
the markets of developing countries have been more volatile than the markets of 
developed countries. With the exception of the New World Fund, the funds may    
invest in securities of issuers in developing countries only to a limited       
extent.                                                                         

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Additional costs could be incurred in connection with the funds' investment     
activities outside the U.S. Brokerage commissions may be higher outside the     
U.S., and the funds will bear certain expenses in connection with their currency
transactions. Furthermore, increased custodian costs may be associated with the 
maintenance of assets in certain jurisdictions.                                 

The U.S. Government/AAA-Rated Securities Fund may purchase obligations of       
non-U.S. corporations or governmental entities, provided they are U.S. dollar   
denominated and highly liquid. Accordingly, while the risks mentioned above are 
still present, they are present to a lesser extent.                             

Certain risk factors related to developing countries are discussed below:       

  CURRENCY FLUCTUATIONS - Certain funds may invest in securities valued in
currencies other than the U.S. dollar. Certain developing countries'  
  currencies have experienced and may in the future experience significant
declines against the U.S. dollar.  For example, if the U.S. dollar    
    appreciates against foreign currencies, the value of the funds' securities
    holdings would generally depreciate and vice versa.  Consistent with their
     investment objective, the funds can engage in certain currency transactions
     to hedge against currency fluctuations.  See "Currency Transactions" below.

   GOVERNMENT REGULATION - The political, economic, and social structures of
   certain developing countries may be more volatile and less developed than
  those in the U.S.  Certain developing countries lack uniform accounting,
auditing, and financial reporting standards, have less governmental   
   supervision of financial markets than in the U.S., and do not honor legal
 rights enjoyed in the U.S. Certain governments may be more unstable and
present greater risks of nationalization or restrictions on foreign   
ownership of local companies.                                         

  Repatriation of investment income, capital, and the proceeds of sales by
    foreign investors may require governmental registration and/or approval in
some developing market countries.  While the funds will only invest in
     markets where these restrictions are considered acceptable, a country could
impose new or additional repatriation restrictions after the funds'   
investment. If this happened, the funds' response might include, among
   other things, applying to the appropriate authorities for a waiver of the
restrictions or engaging in transactions in other markets designed to 
 offset the risks of decline in that country.  Such restrictions will be
     considered in relation to the funds' liquidity needs and all other positive
   and negative factors.  Further, some attractive equity securities may not
 be available to the funds because foreign shareholders hold the maximum
amount legally permissible.                                           

   While government involvement in the private sector varies in degree among
developing countries, such involvement may in some cases, include     
government ownership of companies in certain sectors, wage and price  
    controls or imposition of trade barriers and other protectionist measures.
   With respect to any developing country, there is no guarantee that some
     future economic or political crisis will not lead to price controls, forced
   mergers of companies, expropriation, or creation of government monopolies
to the possible detriment of the funds' investments.                  

LESS DEVELOPED SECURITIES MARKETS - Developing countries may have less
  well-developed securities markets and exchanges. They have lower trading
volumes than the                                                      

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securities markets of more developed countries.  These markets may be 
     unable to respond effectively to increases in trading volume. Consequently,
     these markets may be substantially less liquid than those of more developed
   countries and the securities of issuers located in these markets may have
limited marketability. These factors may make prompt liquidation of   
substantial portfolio holdings difficult or impossible at times.      

     SETTLEMENT RISKS - Settlement systems in developing countries are generally
     less well organized than in developed markets.  Supervisory authorities may
also be unable to apply standards comparable with those in developed  
    markets.  Thus, there may be risks that settlement may be delayed and that
 cash or securities belonging to the funds may be in jeopardy because of
    failures of or defects in the systems.  In particular, market practice may
     require that payment be made before receipt of the security being purchased
     or that delivery of a security be made before payment is received.  In such
  cases, default by a broker or bank (the "counterparty") through whom the
    transaction is effected might cause the funds to suffer a loss.  The funds
    will seek, where possible, to use counterparties whose financial status is
  such that this risk is reduced.  However, there can be no certainty that
the funds will be successful in eliminating this risk, particularly as
counterparties operating in developing countries frequently lack the  
  substance or financial resources of those in developed countries.  There
 may also be a danger that, because of uncertainties in the operation of
   settlement systems in individual markets, competing claims may arise with
respect to securities held by or to be transferred to the funds.      

INVESTOR INFORMATION - The funds may encounter problems assessing     
    investment opportunities in certain developing securities markets in light
    of limitations on available information and different accounting, auditing
and financial reporting standards.  In such circumstances, the funds' 
     Investment Adviser will seek alternative sources of information, and to the
    extent the Investment Adviser may not be satisfied with the sufficiency of
   the information obtained with respect to a particular market or security,
the funds will not invest in such market or security.                 

TAXATION - Taxation of dividends and capital gains received by        
non-residents varies among developing countries and, in some cases, is
    comparatively high.  In addition, developing countries typically have less
   well-defined tax laws and procedures and such laws may permit retroactive
    taxation so that the funds could in the future become subject to local tax
liability that they had not reasonably anticipated in conducting their
investment activities or valuing their assets.                        

 LITIGATION - The funds and their shareholders may encounter substantial
     difficulties in obtaining and enforcing judgments against non-U.S. resident
individuals and companies.                                            

    FRAUDULENT SECURITIES - Securities purchased by the funds may subsequently
     be found to be fraudulent or counterfeit, resulting in a loss to the funds.

 LOAN PARTICIPATIONS - New World Fund may invest, subject to its overall
    limitation on debt securities, in loan participations, typically made by a
    syndicate of banks to governmental or corporate borrowers for a variety of
    purposes. The underlying loans to developing market governmental borrowers
     may be in default and may be subject to restructuring under the Brady Plan.
     The underlying loans may be secured or unsecured, and will vary in term and
     legal structure.  When purchasing such instruments, the fund may assume the
     credit risks associated with the original bank lender as well as the credit

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risks associated with the borrower.  Investment in loan participations
    present the possibility that in the U.S., the fund could be held liable as
a co-lender under emerging legal theories of lender liability.  In    
  addition, if the loan is foreclosed, the fund could be part owner of any
collateral, and could bear the costs and liabilities of owning and    
   disposing of the collateral.  Loan participations are generally not rated
    by major rating agencies, may not be protected by securities laws, and are
often considered to be illiquid.                                      

CURRENCY TRANSACTIONS - The Global Discovery Fund, Global Growth Fund, Global   
Small Capitalization Fund, Growth Fund, International Fund, New World Fund,     
Asset Allocation Fund, Bond Fund and High-Income Bond Fund can purchase and sell
currencies to facilitate securities transactions and enter into forward currency
contracts to protect against changes in currency exchange rates.  The           
Growth-Income Fund does not currently intend to engage in any transactions other
than purchasing and selling currencies and foreign exchange contracts which will
be used to facilitate settlement of trades.  A forward currency contract is an  
obligation to purchase or sell a specific currency at a future date, which may  
be any fixed number of days from the date of the contract agreed upon by the    
parties,  at a price set at the time of the contract. Forward currency contracts
entered into by the funds will involve the purchase or sale of one currency     
against the U.S. dollar. While entering into forward currency transactions could
minimize the risk of loss due to a decline in the value of the hedged currency, 
it could also limit any potential gain which might result from an increase in   
the value of the currency. The funds will not generally attempt  to protect     
against all potential changes in exchange rates. The funds will segregate liquid
assets which will be marked to market daily to meet their forward contract      
commitments to the extent required by the Securities and Exchange Commission.   

The Bond Fund and High-Income Bond Fund may enter into the transactions         
described above and may also enter into exchange-traded futures contracts       
relating to foreign currencies ("currency contracts") in connection with        
investments in securities of foreign issuers in anticipation of, or to protect  
against, fluctuations in exchange rates.  In addition, forward currency         
contracts may be used by these funds to purchase or sell a currency against     
another currency at a future date and price as agreed upon by the parties.  An  
exchange-traded futures contract relating to foreign currency is similar to a   
forward foreign currency contract but has a standardized size and exchange date.
Although currency contracts typically will involve the purchase and sale of a 
currency against the U.S. dollar, these funds also may enter into currency      
contracts not involving the U.S. dollar.  In connection with these futures      
transactions, the Series has filed a notice of eligibility with the Commodity   
Futures Trading Commission ("CFTC") that exempts the Series from CFTC           
registration as a "commodity pool operator" as defined under the Commodity      
Exchange Act.  Pursuant to this notice, these funds will observe certain CFTC   
guidelines with respect to its futures transactions that, among other things,   
limit initial margin deposits in connection with the use of futures contracts   
and related options for purposes other than "hedging" (as defined by CFTC rules)
up to 5% of a fund's net assets.                                                

The Bond Fund and High-Income Bond Fund may attempt to accomplish objectives    
similar to those involved in their use of currency contracts by purchasing put  
or call options on currencies.  A put option gives a fund, as purchaser, the    
right (but not the obligation) to sell a specified amount of currency at the    
exercise price until the expiration of the option.  A call option gives a fund, 
as purchaser, the right (but not the obligation) to purchase a specified amount 
of currency at the exercise price until its expiration.  The funds might        
purchase a currency put option, for example, to protect themselves during the   
contract period against a decline in the U.S. dollar value of a currency in     
which they hold or anticipate holding securities.  If the currency's value      
should decline against the U.S. dollar, the loss in currency value should be    
offset, in whole or in                                                          

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part, by an increase in the value of the put.  If the value of the currency     
instead should rise against the U.S. dollar, any gain to the funds would be     
reduced by the premium they had paid for the put option.  A currency call option
might be purchased, for example, in anticipation of, or to protect against, a   
rise in the value against the U.S. dollar of a currency in which the funds      
anticipate purchasing securities.                                               

Currency options may be either listed on an exchange or traded over-the-counter 
("OTC options").  Listed options are third-party contracts (i.e., performance of
the obligations of the purchaser and seller is guaranteed by the exchange or    
clearing corporation) and have standardized strike (exercise) prices and        
expiration dates.  OTC options are two-party contracts with negotiated strike   
prices and expiration dates.  The High-Income Bond Fund and Bond Fund will not  
purchase an OTC option unless the Investment Adviser believes that daily        
valuations for such options are readily obtainable.  OTC options differ from    
exchange-traded options in that OTC options are transacted with dealers directly
and not through a clearing corporation which guarantees performance.            
Consequently, there is a risk of non-performance by the dealer.  Since no     
exchange is involved, OTC options are valued on the basis of a quote provided by
the dealer.  In the case of OTC options, there can be no assurance that a liquid
secondary market will exist for any particular option at any specific time.     

Certain provisions of the Internal Revenue code may limit the extent to which   
the fund may enter into forward contracts.  Such transactions may also affect,  
for U.S. federal tax purposes, the character and timing of income, gain or loss 
recognized by the fund.                                                         

FORWARD COMMITMENTS - The funds may enter into commitments to purchase or sell  
securities at a future date. When a fund agrees to purchase such securities, it 
assumes the risk of any decline in value of the security beginning on the date  
of the agreement. When a fund agrees to sell such securities, it does not       
participate in further gains or losses with respect to the securities beginning 
on the date of the agreement. If the other party to such a transaction fails to 
deliver or pay for the securities, the fund could miss a favorable price or     
yield opportunity, or could experience a loss.                                  

The funds will not use these transactions for the purpose of leveraging and will
segregate liquid assets which will be marked to market daily in an amount       
sufficient to meet their payment obligations in these transactions. Although    
these transactions will not be entered into for leveraging purposes, to the     
extent the funds' aggregate commitments under these transactions exceed their   
segregated assets, the funds temporarily could be in a leveraged position       
(because they may have an amount greater than their net assets subject to market
risk). Should market values of the funds' portfolio securities decline while the
funds are in a leveraged position, greater depreciation of their net assets     
would likely occur than were they not in such a position. The funds will not    
borrow money to settle these transactions and, therefore, will liquidate other  
portfolio securities in advance of settlement if necessary to generate          
additional cash to meet its obligations thereunder.                             

The Asset Allocation Fund, Bond Fund, High-Income Bond Fund and U.S.            
Government/AAA-Rated Securities Fund may also enter into "roll" transactions    
which are the sale of mortgage-backed or other securities together with a       
commitment to purchase similar, but not identical, securities at a later date.  
The funds assume the rights and risks of ownership, including the risk of price 
and yield fluctuations as of the time of the agreement. The funds intend to     
treat roll transactions as two separate transactions: one involving the purchase
of a security and a separate transaction involving the sale of a security. Since
the funds do not intend to enter into                                           

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roll transactions for financing purposes, they may treat these transactions as  
not falling within the definition of "borrowing" set forth in Section 2(a)(23)  
of the Investment Company Act of 1940 (the "1940 Act"). The funds will segregate
liquid assets which will be marked to market daily in an amount sufficient to   
meet their payment obligations in these transactions.                           

REPURCHASE AGREEMENTS - The funds may enter into repurchase agreements, under   
which the funds buy a security and obtain a simultaneous commitment from the    
seller to repurchase the security at a specified time and price. Repurchase     
agreements permit the funds to maintain liquidity and earn income over periods  
of time as short as overnight. The seller must maintain with the Series'        
custodian collateral equal to at least 100% of the repurchase price, including  
accrued interest, as monitored daily by the Investment Adviser. The funds will  
only enter into repurchase agreements involving securities in which they could  
otherwise invest and with selected banks and securities dealers whose financial 
condition is monitored by the Investment Adviser. If the seller under the       
repurchase agreement defaults, the funds may incur a loss if the value of the   
collateral securing the repurchase agreement has declined and may incur         
disposition costs in connection with liquidating the collateral. If bankruptcy  
proceedings are commenced with respect to the seller, realization of the        
collateral by the funds may be delayed or limited.                              

U.S. TREASURY AND AGENCY SECURITIES - U.S. Treasury securities include direct   
obligations of the U.S. Treasury, such as Treasury bills, notes and bonds. For  
these securities, the payment of principal and interest is unconditionally      
guaranteed by the U.S. government, and thus they are of the highest possible    
credit quality. Such securities are subject to variations in market value due to
fluctuations in interest rates, but, if held to maturity, will be paid in full. 

U.S. agency securities include those issued by certain U.S. government          
instrumentalities and certain federal agencies. These securities are neither    
direct obligations of, nor guaranteed by, the Treasury. However, they generally 
involve federal sponsorship in one way or another; some are backed by specific  
types of collateral; some are supported by the issuer's right to borrow from the
Treasury; some are supported by the discretionary authority of the Treasury to  
purchase certain obligations of the issuer; and others are supported only by the
credit of the issuing government agency or instrumentality. These agencies and  
instrumentalities include, but are not limited to: Federal Home Loan Bank,      
Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage       
Association (FNMA), Tennessee Valley Authority, and Federal Farm Credit Bank    
System.                                                                         

PASS-THROUGH SECURITIES - The funds may invest in various debt obligations      
backed by a pool of mortgages or other assets including, but not limited to,    
loans on single family residences, home equity loans, mortgages on commercial   
buildings, credit card receivables, and leases on airplanes or other equipment. 
Principal and interest payments made on the underlying asset pools backing these
obligations are typically passed through to investors. Pass-through securities  
may have either fixed or adjustable coupons. These securities include those     
discussed below.                                                                

"Mortgage-backed securities" are issued both by U.S. government agencies,       
including the Government National Mortgage Association (GNMA), FNMA, FHLMC , and
by private entities. The payment of interest and principal on securities issued 
by U.S. government agencies is guaranteed by the full faith and credit of the   
U.S. government (in the case of GNMA securities) or the issuer (in the case of  
FNMA and FHLMC securities). However, the guarantees do not apply to the market  
prices and yields of these securities, which vary with changes in interest      
rates.                                                                          

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Mortgage-backed securities issued by private entities are structured similarly  
to mortgage-backed securities issued by GNMA, FNMA, and FHLMC. These securities 
and the underlying mortgages are not guaranteed by government agencies. In      
addition, these securities generally are structured with one or more types of   
credit enhancement. Mortgage-backed securities generally permit borrowers to    
prepay their underlying mortgages. Prepayments can alter the effective maturity 
of these instruments.                                                           

"Collateralized mortgage obligations" (CMOs) are also backed by a pool of       
mortgages or mortgage loans, which are divided into two or more separate bond   
issues. CMOs issued by U.S. government agencies are backed by agency mortgages. 
Payments of principal and interest are passed through to each bond at varying   
schedules resulting in bonds with different coupons, effective maturities, and  
sensitivities to interest rates. In fact, some CMOs may be structured in a way  
that when interest rates change the impact of changing prepayment rates on these
securities' effective maturities is magnified.                                  

"Commercial mortgage-backed securities" are backed by mortgages of commercial   
property, such as hotels, office buildings, retail stores, hospitals, and other 
commercial buildings. These securities may have a lower prepayment uncertainty  
than other mortgage-related securities because commercial mortgage loans        
generally prohibit or impose penalties on prepayments of principal. In addition,
commercial mortgage-related securities often are structured with some form of   
credit enhancement to protect against potential losses on the underlying        
mortgage loans. Many of the risks of investing in commercial mortgage-backed    
securities reflect the risks of investing in the real estate securing the       
underlying mortgage loans, including the effects of local and other economic    
conditions on real estate markets, the ability of tenants to make loan payments,
and the ability of a property to attract and retain tenants.                    

"Asset-backed securities" are backed by other assets such as credit card,       
automobile or consumer loan receivables, retail installment loans, or           
participations in pools of leases. Credit support for these securities may be   
based on the underlying assets and/or provided through credit enhancements by a 
third party. The values of these securities are sensitive to changes in the     
credit quality of the underlying collateral, the credit strength of the credit  
enhancement, changes in interest rates, and at times the financial condition of 
the issuer. Some asset-backed securities also may receive prepayments which can 
change the securities' effective maturities.                                    

"IOs and POs" are issued in portions or tranches with varying maturities and    
characteristics; some tranches may only receive the interest paid on the        
underlying mortgages (IOs) and others may only receive the principal payments   
(POs); the values of IOs and POs are extremely sensitive to interest rate       
fluctuations and prepayment rates, and IOs are also subject to the risk of early
repayment of the underlying mortgages which will substantially reduce or        
eliminate interest payments.                                                    

INFLATION-INDEXED BONDS - The funds may invest in inflation-indexed bonds issued
by governments, their agencies or instrumentalities, and corporations. The      
principal value of this type of bond is periodically adjusted according to      
changes in the rate of inflation. The interest rate is generally fixed at       
issuance; however, interest payments are based on an inflation adjusted         
principal value. For example, in a period of deflation, principal value will be 
adjusted downward, reducing the interest payable.                               

Repayment of the original bond principal upon maturity (as adjusted for         
inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds,  
even during a period of deflation. However,                                     

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the current market value of the bonds is not guaranteed, and will fluctuate. The
fund may also invest in other bonds which may or may not provide a similar      
guarantee. If a guarantee of principal is not provided, the adjusted principal  
value of the bond repaid at maturity may be less than the original principal.   

REAL ESTATE INVESTMENT TRUSTS - The funds may invest in securities issued by    
real estate investment trusts (REITs), which are pooled investment vehicles that
primarily invest in real estate or real estate related loans. REITs are not     
taxed on income distributed to shareholders provided they meet requirements     
imposed by the Internal Revenue Code. The risks associated with REIT debt       
investments are similar to the risks of investing in corporate-issued debt. In  
addition, the return on REITs is dependent on such factors as the skill of      
management and the real estate environment in general. Debt that is issued by   
REITs is typically rated by the credit rating agencies as investment grade or   
above.                                                                          

CASH AND CASH EQUIVALENTS - These securities include: (i) commercial paper      
(e.g., short-term notes up to 9 months in maturity issued by corporations,      
governmental bodies or bank/ corporation sponsored conduits (asset-backed       
commercial paper)), (ii) commercial bank obligations (e.g., certificates of     
deposit, bankers' acceptances (time drafts on a commercial bank where the bank  
accepts an irrevocable obligation to pay at maturity)), (iii) savings           
association and savings bank obligations (e.g., bank notes and certificates of  
deposit issued by savings banks or savings associations), (iv) securities of the
U.S. government, its agencies or instrumentalities that mature, or may be       
redeemed, in one year or less, and (v) corporate bonds and notes that mature, or
that may be redeemed, in one year or less.                                      

The Cash Management Fund may only purchase commercial paper judged by the       
Investment Adviser to be of suitable investment quality.  This includes (a)     
commercial paper that is rated in the two highest categories by S&P and by      
Moody's or (b) other commercial paper deemed on the basis of the issuer's       
creditworthiness to be of a quality appropriate for the Cash Management Fund.   
(No more than 5% of the Cash Management Fund's assets may be invested in      
commercial paper rated in the second highest rating category by either Moody's  
or Standard & Poor's; no more than the greater of 1% of the Cash Management     
Fund's assets or $1 million may be invested in such securities of any one       
issuer.)  See the "Description of Commercial Paper Ratings" for a description of
the ratings.                                                                    

The commercial paper in which the Cash Management Fund may invest includes      
variable amount master demand notes.  Variable amount master demand notes permit
the Cash Management Fund to invest varying amounts at fluctuating rates of      
interest pursuant to the agreement in the master note. These are direct lending 
obligations between the lender and borrower, they are generally not traded, and 
there is no secondary market.  Such instruments are payable with accrued        
interest in whole or in part on demand.  The amounts of the instruments are     
subject to daily fluctuations as the participants increase or decrease the      
extent of their participations. Investments in these instruments are limited to 
those that have a demand feature enabling the Cash Management Fund              
unconditionally to receive the amount invested from the issuer upon seven or    
fewer days' notice.  (Generally, the Cash Management Fund attempts to invest in 
instruments having a one-day notice provision).  In connection with master      
demand note arrangements, the Investment Adviser, subject to the direction of   
the Trustees, monitors on an ongoing basis the earning power, cash flow, and    
other liquidity ratios of the borrower and its ability to pay principal and     
interest on demand.  The Investment Adviser also considers the extent to which  
the variable amount master demand notes are backed by bank letters of credit.   
These notes generally are not rated by Moody's or S&P.  The Cash Management Fund
may                                                                             

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invest in them only if it is deemed that at the time of investment the notes are
of comparable quality to the other commercial paper in which the Cash Management
Fund may invest.  Master demand notes are considered to have a maturity equal to
the repayment notice period unless the Investment Adviser has reason to believe 
that the borrower could not make timely repayment upon demand.                  

"Commercial bank obligations" are certificates of deposit (interest-bearing time
deposits), bankers acceptances (time drafts drawn on a commercial bank where the
bank accepts an irrevocable obligation to pay at maturity) representing direct  
or contingent obligations of commercial banks with assets in excess of $1       
billion, based on latest published reports, or other obligations issued by      
commercial banks with assets of less than $1 billion if the principal amount of 
such obligation is fully insured by the U.S. government.                        

The Cash Management Fund may purchase corporate obligations that mature or that 
may be redeemed in one year or less.  These obligations originally may have been
issued with maturities in excess of one year.  The Cash Management Fund may     
invest only in corporate bonds or notes of issuers having outstanding short-term
securities rated as described above in "Commercial Paper."                      

"Savings association obligations" include certificates of deposit               
(interest-bearing time deposits) issued by savings banks or savings and loan    
associations that have assets in excess of $1 billion, based on latest published
reports, or obligations issued by institutions with assets of less than $1      
billion if the principal amount of such obligation is fully insured by the U.S. 
government.                                                                     

"Floating rate obligations" have a coupon rate that changes at least annually   
and generally more frequently.  The coupon rate is set in relation to money     
market rates.  The obligations, issued primarily by banks, other corporations,  
governments and semi-governmental bodies, may have a maturity in excess of one  
year.  In some cases, the coupon rate may vary with changes in the yield on     
Treasury bills or notes or with changes in LIBOR (London Interbank Offering     
Rate).  The Investment Adviser considers floating rate obligations to be liquid 
investments because a number of U.S. and non-U.S. securities dealers make active
markets in these securities.                                                    

RESTRICTED SECURITIES AND LIQUIDITY - The funds may purchase securities subject 
to restrictions on resale. Securities not actively traded will be considered    
illiquid unless they have been specifically determined to be liquid under       
procedures adopted by the Series' board of trustees, taking into account factors
such as the frequency and volume of trading, the commitment of dealers to make  
markets and the availability of qualified investors, all of which can change    
from time to time. The funds may incur certain additional costs in disposing of 
illiquid securities.                                                            

LOAN PARTICIPATIONS AND ASSIGNMENTS - The Bond Fund and High-Income Bond Fund   
may invest in loan participations or assignments. Loan participations are loans 
or other direct debt instruments which are interests in amounts owed by a       
corporate, governmental or other borrower to another party. They may represent  
amounts owed to lenders or lending syndicates to suppliers of goods or services,
or to other parties. A fund will have the right to receive payments of          
principal, interest and any fees to which it is entitled only from the lender   
selling the participation and only upon receipt by the lender of the payments   
from the borrower. In connection with purchasing participations, a fund         
generally will have no right to enforce compliance by the borrower with the     
terms of the loan agreement relating to loan, nor any rights of set-off against 
the borrower, and a fund may not directly benefit from any collateral supporting
the loan in which it has purchased the participation. As a result, a fund will  
assume the credit risk of both the                                              

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borrower and the lender that is selling the participation. In the event of the  
insolvency of the lender selling a participation, a fund may be treated as a    
general creditor of the lender and may not benefit from any set-off between the 
lender and the borrower.                                                        

When a fund purchases assignments from lenders it will acquire direct rights    
against the borrower on the loan. However, because assignments are arranged     
through private negotiations between potential assignees and potential          
assignors, the rights and obligations acquired by a fund as the purchaser of an 
assignment may differ from, and be more limited than, those held by the         
assigning lender. Investments in loan participations and assignments present the
possibility that a fund could be held liable as a co-lender under emerging legal
theories of lender liability. In addition, if the loan is foreclosed, a fund    
could be part owner of any collateral and could bear the costs and liabilities  
of owning and disposing of the collateral. The funds anticipate that such       
securities could be sold only to a limited number of institutional investors. In
addition, some loan participations and assignments may not be rated by major    
rating agencies and may not be protected by the securities laws.                

REINSURANCE RELATED NOTES AND BONDS - The High-Income Bond Fund may invest in   
reinsurance related notes and bonds. These instruments, which are typically     
issued by special purpose reinsurance companies, transfer an element of         
insurance risk to the note or bond holders. For example, the reinsurance company
would not be required to repay all or a portion of the principal value of the   
notes or bonds if losses due to a catastrophic event under the policy (such as a
major hurricane) exceed certain dollar thresholds. Consequently, the fund may   
lose the entire amount of its investment in such bonds or notes if such an event
occurs and losses exceed certain dollar thresholds. In this instance, investors 
would have no recourse against the insurance company. These instruments may be  
issued with fixed or variable interest rates and rated in a variety of credit   
quality categories by the rating agencies.                                      

REVERSE REPURCHASE AGREEMENTS - The Bond Fund and U.S. Government/AAA-Rated     
Securities Fund are authorized to enter into reverse repurchase agreements.  A  
reverse repurchase agreement is the sale of a security by a fund and its        
agreement to repurchase the security at a specified time and price.  Each fund  
will segregate liquid assets which will be marked to market daily in an amount  
sufficient to cover its obligations under reverse repurchase agreements with    
broker-dealers (but no collateral is required on reverse repurchase agreements  
with banks).  Under the 1940 Act, reverse repurchase agreements may be          
considered borrowing by a fund.  The use of reverse repurchase agreements by a  
fund creates leverage which increases the fund's investment risk.  As a fund's  
aggregate commitments under these reverse repurchase agreements increase, the   
opportunity for leverage similarly increases.  If the income and gains on       
securities purchased with the proceeds of reverse repurchase agreements exceed  
the costs of the agreements, a fund's earnings or net asset value will increase 
faster than otherwise would be the case; conversely, if the income and gains    
fail to exceed the costs, a fund's earnings or net asset value would decline    
faster than otherwise would be the case. There is no current intent to engage in
this investment practice over the next 12 months.                               

LOANS OF PORTFOLIO SECURITIES - The Asset Allocation Fund, Bond Fund,           
High-Income Bond Fund and U.S. Government/AAA-Rated Securities Fund is          
authorized to lend portfolio securities to selected securities dealers or other 
institutional investors whose financial condition is monitored by the Investment
Adviser. The borrower must maintain with the Series' custodian collateral       
consisting of cash, cash equivalents or U.S. government securities equal to at  
least 100% of the value of the borrowed securities, plus any accrued interest.  
The Investment Adviser will monitor the adequacy of the collateral on a daily   
basis. The fund may at any time call a loan                                     

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of its portfolio securities and obtain the return of the loaned securities. The 
fund will receive any interest paid on the loaned securities and a fee or a     
portion of the interest earned on the collateral. The fund will limit its loans 
of portfolio securities to an aggregate of 10% of the value of its total assets,
measured at the time any such loan is made.                                     

There is no current intent to engage in this investment practice over the next  
12 months.                                                                      

PORTFOLIO TURNOVER - Portfolio changes will be made without regard to the length
of time particular investments may have been held. Short-term trading profits   
are not the funds' objective, and changes in its investments are generally      
accomplished gradually, though short-term transactions may occasionally be made.
High portfolio turnover (100% or more) involves correspondingly greater         
transaction costs in the form of dealer spreads or brokerage commissions, and   
may result in the realization of net capital gains, which are taxable when      
distributed to shareholders.                                                    

Under certain market conditions, the investment policies of the Asset Allocation
Fund, the Bond Fund, the High-Income Bond Fund, and the U.S.                    
Government/AAA-Rated Securities Fund may result in higher portfolio turnover    
than those of the other funds, although no fund's annual portfolio turnover rate
is expected to exceed 100%. A fund's portfolio turnover rate would equal 100% if
each security in the fund's portfolio was replaced once per year.               

FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS

FUNDAMENTAL POLICIES - The Series has adopted the following fundamental policies
and investment restrictions which may not be changed without approval by holders
of a majority of its outstanding shares. Such majority is defined in the        
Investment Company Act of 1940 ("1940 Act") as the vote of the lesser of (i) 67%
or more of the outstanding voting securities present at a meeting, if the       
holders of more than 50% of the outstanding voting securities are present in    
person or by proxy, or (ii) more than 50% of the outstanding voting securities. 
All percentage limitations are considered at the time securities are purchased  
and are based on a fund's net assets unless otherwise indicated. None of the    
following investment restrictions involving a maximum percentage of assets will 
be considered violated unless the excess occurs immediately after, and is caused
by, an acquisition by a fund.                                                   

INVESTMENT RESTRICTIONS OF THE GLOBAL DISCOVERY FUND, GLOBAL GROWTH FUND, GLOBAL
SMALL CAPITALIZATION FUND, GROWTH FUND, INTERNATIONAL FUND, NEW WORLD FUND, BLUE
CHIP INCOME AND GROWTH FUND, GROWTH-INCOME FUND,  ASSET ALLOCATION FUND, BOND   
FUND AND HIGH-INCOME BOND FUND                                                  

The Global Discovery Fund, Global Growth Fund, Global Small Capitalization Fund,
Growth Fund, International Fund, New World Fund, Blue Chip Income and Growth    
Fund, Growth-Income Fund, Asset Allocation Fund, Bond Fund and High-Income Bond 
Fund may not:                                                                   

1.   Invest more than 5% of the value of the total assets of the fund in the    
securities of any one issuer, provided that this limitation shall apply only to 
75% of the value of the fund's total assets and, provided further, that the     
limitation shall not apply to obligations of the government of the U.S. under a 
general Act of Congress.  The short-term obligations of commercial banks are    
excluded from this 5% limitation with respect to 25% of the fund's total assets.

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2.   As to 75% of its total assets, purchase more than 10% of the outstanding   
voting securities of an issuer.                                                 

3.   Invest more than 25% of the fund's total assets in the securities of       
issuers in the same industry.  Obligations of the U.S. government, its agencies 
and instrumentalities, are not subject to this 25% limitation on industry       
concentration.  In addition, the fund may, if deemed advisable, invest more than
25% of its assets in the obligations of domestic commercial banks.              

4.   Invest in real estate (including limited partnership interests, but        
excluding securities of companies, such as real estate investment trusts, which 
deal in real estate or interests therein).                                      

5.   Purchase commodities or commodity contracts; except that the Global        
Discovery Fund, Global Small Capitalization Fund, International Fund, Asset     
Allocation Fund, High-Income Bond Fund and Bond Fund may engage in transactions 
involving currencies (including forward or futures contracts and put and call   
options).                                                                       

6.   Invest in companies for the purpose of exercising control or management.   

7.   Make loans to others except for (a) the purchase of debt securities; (b)   
entering into repurchase agreements; (c) the loaning of its portfolio           
securities; and (d) entering into loan participations.                          

8.   Borrow money, except from banks for temporary purposes, and then in an     
amount not in excess of 5% of the value of the fund's total assets.  Moreover,  
in the event that the asset coverage for such borrowings falls below 300%, the  
fund will reduce, within three days, the amount of its borrowings in order to   
provide for 300% asset coverage.                                                

9.   Purchase securities on margin.                                             

10.  Sell securities short, except to the extent that the fund contemporaneously
owns, or has the right to acquire at no additional cost, securities identical to
those sold short.                                                               

11.  Invest in puts, calls, straddles, spreads or any combination thereof;      
except as described above in Investment Restriction number 5.                   

12.  Invest in securities of other investment companies, except as permitted by 
the 1940 Act.                                                                   

13.  Engage in underwriting of securities issued by others, except to the extent
it may be deemed to be acting as an underwriter in the purchase or resale of    
portfolio securities.                                                           

Notwithstanding investment restriction number 12, the funds may invest in       
securities of other managed investment companies if deemed advisable by their   
officers in connection with the administration of a deferred compensation plan  
adopted by Trustees pursuant to an exemptive order granted by the Securities and
Exchange Commission.                                                            

Notwithstanding investment restriction number 13, the funds may not engage in   
the business of underwriting securities of other issuers, except to the extent  
that the disposal of an investment position may technically constitute the fund 
an underwriter as that term is defined under the Securities Act of 1933.        

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NON-FUNDAMENTAL POLICIES - The following non-fundamental policies may be changed
without shareholder approval:                                                   

1.   The funds may not invest more than 15% of their net assets in illiquid     
securities.                                                                     

2.   The funds will not issue senior securities, except as permitted by the 1940
Act.                                                                            

INVESTMENT RESTRICTIONS OF THE U.S. GOVERNMENT/AAA-RATED SECURITIES FUND        

The U.S. Government/AAA-Rated Securities Fund may not:                          

1.   Purchase any security (other than securities issued or guaranteed by the   
U.S. government or its agencies or instrumentalities ("U.S. government          
securities")) if, immediately after and as a result of such investment, more    
than 5% of the value of the fund's total assets would be invested in securities 
of the issuer.                                                                  

2.   Invest 25% or more of the value of its total assets in the securities of   
issuers conducting their principal business activities in the same industry,    
except that this limitation shall not apply to U.S. government securities or    
other securities to the extent they are backed by or represent interests in U.S.
government securities or U.S. government-guaranteed mortgages.                  

3.   Invest in companies for the purpose of exercising control or management.   

4.   Invest in securities of other investment companies, except as permitted by 
the 1940 Act.                                                                   

5.   Buy or sell real estate or commodities or commodity contracts in the       
ordinary course of its business; however, the fund may purchase or sell readily 
marketable debt securities secured by real estate or interests therein or issued
by companies which invest in real estate or interests therein, including real   
estate investment trusts.                                                       

6.   Engage in the business of underwriting securities of other issuers, except 
to the extent that the disposal of an investment position may technically cause 
it to be considered an underwriter as that term is defined under the Securities 
Act of 1933.                                                                    

7.   Make loans, except that the fund may:  (a) purchase readily marketable debt
securities; (b) invest in repurchase agreements; (c) make loans of portfolio    
securities; and (d) enter into loan participations.  The fund will not invest in
repurchase agreements maturing in more than seven days if any such investment,  
together with any illiquid securities (including securities which are subject to
legal or contractual restrictions on resale) held by the fund, exceeds 10% of   
the value of its total assets.                                                  

8.   Sell securities short, except to the extent that the fund contemporaneously
owns or has the right to acquire at no additional cost, securities identical to 
those sold short.                                                               

9.   Purchase securities on margin, except that the fund may obtain such        
short-term credits as may be necessary for the clearance of purchases and sales 
of securities.                                                                  

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10.  Borrow money, except from banks for temporary or emergency purposes not in 
excess of 5% of the value of the fund's total assets, except that the fund may  
enter into reverse repurchase agreements.                                       

11.  Write, purchase or sell puts, calls or combinations thereof.               

Notwithstanding investment restriction number 4, the fund may invest in         
securities of other managed investment companies if deemed advisable by its     
officers in connection with the administration of a deferred compensation plan  
adopted by Trustees pursuant to an exemptive order granted by the Securities and
Exchange Commission.                                                            

NON-FUNDAMENTAL POLICIES - The following non-fundamental policies may be changed
without shareholder approval:                                                   

1.   The fund may not invest more than 15% of its net assets in illiquid        
securities.                                                                     

2.   The fund will not issue senior securities, except as permitted by the 1940 
Act.                                                                            

INVESTMENT RESTRICTIONS OF THE CASH MANAGEMENT FUND                             

The Cash Management Fund may not:                                               

1.   Invest more than 5% of the value of the total assets of the fund in the    
securities of any one issuer, provided that this limitation shall apply only to 
75% of the value of the fund's total assets and, provided further, that the     
limitation shall not apply to obligations of the government of the U.S. under a 
general Act of Congress.  The short-term obligations of commercial banks are    
excluded from this 5% limitation with respect to 25% of the fund's total assets.

2.   As to 75% of its total assets, purchase more than 10% of the outstanding   
voting class of securities of an issuer.                                        

3.   Invest more than 25% of the fund's total assets in the securities of       
issuers in the same industry.  Obligations of the U.S. government, its agencies 
and instrumentalities, are not subject to this 25% limitation on industry       
concentration.  In addition, the fund may, if deemed advisable, invest more than
25% of its assets in the obligations of domestic commercial banks.              

4.   Enter into any repurchase agreement maturing in more than seven days or    
invest in any other illiquid security if, as a result, more than 10% of the     
fund's total assets would be so invested.                                       

5.   Make loans to others except for the purchase of the debt securities listed 
above.  The fund may enter into repurchase agreements as described above.       

6.   Borrow money, except from banks for temporary purposes, and then in an     
amount not in excess of 5% of the value of the fund's total assets.  Moreover,  
in the event that the asset coverage for such borrowings falls below 300%, the  
fund will reduce, within three days, the amount of its borrowings in order to   
provide for 300% asset coverage.                                                

7.   Sell securities short except to the extent that the fund contemporaneously 
owns or has the right to acquire at no additional cost, securities identical to 
those sold short.                                                               

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8.   Invest in puts, calls, straddles, spreads or any combination thereof.      

9.   Purchase or sell securities of other investment companies (except in       
connection with a merger, consolidation, acquisition or reorganization), real   
estate or commodities.                                                          

10.  Act as underwriter of securities issued by others, engage in distribution  
of securities for others, or make investments in other companies for the purpose
of exercising control or management.                                            

Notwithstanding investment restriction number 9, the fund may invest in         
securities of other managed investment companies if deemed advisable by its     
officers in connection with the administration of a deferred compensation plan  
adopted by Trustees pursuant to an exemptive order granted by the Securities and
Exchange Commission.                                                            

Notwithstanding investment restriction number 1 above, in order to comply with  
Rule 2a-7 under the 1940 Act, the Cash Management Fund has adopted a            
non-fundamental policy (that may be changed by the Board of Trustees without    
shareholder approval) of investing no more than 5% of its assets (measured at   
the time of purchase) in the securities of any one issuer (other than the U.S.  
government); provided however, that the Cash Management Fund may invest, as to  
25% of its assets, more than 5% of its assets in certain high-quality securities
(as defined in the Rule) of a single issuer for a period of up to three business
days.  Investment restriction number 9 above does not prevent the purchase by   
the Cash Management Fund of securities that have "put" or "stand-by" commitment 
features.                                                                       

SERIES ORGANIZATION AND VOTING RIGHTS 

The Series, an open-end investment company, was organized as a Massachusetts    
business trust on September 13, 1983.                                           

All Series operations are supervised by its Board of Trustees, which meets      
periodically and performs duties required by applicable state and federal laws. 
Members of the board who are not employed by Capital Research and Management    
Company or its affiliates are paid certain fees for services rendered to the    
Series as described below. They may elect to defer all or a portion of these    
fees through a deferred compensation plan in effect for the Series.             

The Series has two classes of shares - Class 1 and Class 2. The shares of each  
class represent an interest in the same investment portfolio.  Each class has   
equal rights as to voting, redemption, dividends and liquidation, except that   
each class bears different distribution expenses and other expenses properly    
attributable to the particular class as approved by the Board of Trustees and   
set forth in the Series' rule 18f-3 Plan. Class 2 shareholders have exclusive   
voting rights with respect to its rule 12b-1 Plan adopted in connection with the
distribution of Class 2 shares. Each class has exclusive voting rights on other 
matters in which the interests of one class are different from interests in     
another class.  Shares of both classes of the Series vote together on matters   
that affect all classes in substantially the same manner. Each class votes as a 
class on matters that affect that class alone.                                  

The Series does not hold annual meetings of shareholders. However, significant  
matters which require shareholder approval, such as certain elections of board  
members or a change in a fundamental investment policy, will be presented to    
shareholders at a meeting called for such purpose. Shareholders have one vote   
per share owned. At the request of the holders of at least 10% of the shares,   
the Series will hold a meeting at which any member of the board could be removed
by a majority vote.                                                             

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MANAGEMENT OF THE SERIES

BOARD OF TRUSTEES AND OFFICERS                                                  

                                                        [Enlarge/Download Table]

                                        YEAR FIRST                                               NUMBER OF BOARDS                   
                         POSITION        ELECTED                                                  WITHIN THE FUND                   
                           WITH         A TRUSTEE          PRINCIPAL OCCUPATION(S) DURING       COMPLEX/2/ ON WHICH                 
     NAME AND AGE       REGISTRANT   OF THE SERIES/1/               PAST 5 YEARS                  TRUSTEE SERVES                    
---------------------------------------------------------------------------------------------------------------------               
                                                                                                                                    
 "NON-INTERESTED" TRUSTEES                                                                                                          
------------------------------------------------------------------------------------------------------------------------------------
 Lee A. Ault III         Trustee           1999         Chairman of the Board, In-Q-Tel, Inc.            1                          
 Age: 65                                                (information technology); former                                            
                                                        Chairman, President and CEO,                                                
                                                        Telecredit, Inc.                                                            
---------------------------------------------------------------------------------------------------------------------               
 H. Frederick            Trustee           1994         Private Investor; former President              19                          
 Christie                                               and Chief Executive Officer, The                                            
 Age: 68                                                Mission Group (non-utility holding                                          
                                                        company subsidiary of Southern                                              
                                                        California Edison Company)                                                  
---------------------------------------------------------------------------------------------------------------------               
 Joe E. Davis            Trustee           1991         Private Investor; former Chariman,               1                          
 Age: 67                                                Linear Corporation; former President                                        
                                                        and Chief Executive Officer, National                                       
                                                        Health Enterprises, Inc.                                                    
                                                                                                ---------------------               
------------------------------------------------------------------------------------------------                                    
 Martin Fenton           Trustee           1995         Managing Director, Senior Resource              16                          
 Age: 66                                                Group LLC (development and management                                       
                                                        of senior living communities)                                               
                                                                                                ---------------------               
------------------------------------------------------------------------------------------------                                    
 Leonard R. Fuller       Trustee           1999         President, Fuller Consulting                    13                          
 Age: 55                                                (financial management consulting                                            
                                                        firm)                                                                       
---------------------------------------------------------------------------------------------------------------------               
 Mary Myers Kauppila     Trustee           1994         Private Investor; Chairman and CEO,              5                          
 Age: 48                                                Ladera Management Company (venture                                          
                                                        capital and agriculture); former                                            
                                                        owner and President, Energy                                                 
                                                        Investment, Inc.                                                            
---------------------------------------------------------------------------------------------------------------------               
 Kirk P. Pendleton       Trustee           1996         Chairman/Chief Executive Officer,                6                          
 Age: 62                                                Cairnwood, Inc. (venture capital                                            
                                                        investment)                                                                 
---------------------------------------------------------------------------------------------------------------------               


                            OTHER DIRECTORSHIPS/3/ HELD                                                                             
     NAME AND AGE                    BY TRUSTEE                                                                                     
------------------------------------------------------------                                                                        
                                                                                                                                    
 "NON-INTERESTED" TRUSTEES                                                                                                          
------------------------------------------------------------                                                                        
 Lee A. Ault III         Equifax, Inc.; Office Depot, Inc.                                                                          
 Age: 65                                                                                                                            
------------------------------------------------------------                                                                        
 H. Frederick            Ducommun Incorporated;IHOP                                                                                 
 Christie                Corporation;Southwest Water                                                                                
 Age: 68                 Company;Valero L.P.                                                                                        

------------------------------------------------------------                                                                        
 Joe E. Davis            BMC Industries, Inc.; Wilshire                                                                             
 Age: 67                 Technologies, Inc.; Anworth                                                                                
                         Mortgage Asset Corp.; Natural                                                                              
                         Alternatives Inc.                                                                                          
------------------------------------------------------------                                                                        
 Martin Fenton           None                                                                                                       
 Age: 66                                                                                                                            
------------------------------------------------------------                                                                        
 Leonard R. Fuller       None                                                                                                       
 Age: 55                                                                                                                            
------------------------------------------------------------                                                                        
 Mary Myers Kauppila     None                                                                                                       
 Age: 48                                                                                                                            
------------------------------------------------------------                                                                        
 Kirk P. Pendleton       York Group, Inc.                                                                                           
 Age: 62                                                                                                                            
------------------------------------------------------------                                                                        

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                                                        [Enlarge/Download Table]

                                                         PRINCIPAL OCCUPATION(S) DURING                                             
                                       YEAR FIRST               PAST 5 YEARS AND              NUMBER OF BOARDS                      
                                        ELECTED                  POSITIONS HELD                WITHIN THE FUND                      
                        POSITION       A TRUSTEE            WITH AFFILIATED ENTITIES         COMPLEX/2/ ON WHICH                    
                        WITH THE     AND/OR OFFICER       OR THE PRINCIPAL UNDERWRITER             TRUSTEE                          
    NAME AND AGE         SERIES     OF THE SERIES/1/              OF THE SERIES               OR OFFICER SERVES                     
------------------------------------------------------------------------------------------------------------------                  
                                                                                                                                    
 "INTERESTED" TRUSTEES/4,5/                                                                                                         
------------------------------------------------------------------------------------------------------------------------------------
 James K. Dunton       Chairman           1993         Senior Vice President and Director,            2                             
 Age: 64               of the                          Capital Research and Management                                              
                       Board                           Company                                                                      
------------------------------------------------------------------------------------------------------------------                  
 Donald D. O'Neal      President          1998         Senior Vice President, Capital                 2                             
 Age: 41               and                             Research and Management Company                                              
                       Trustee                                                                                                      
------------------------------------------------------------------------------------------------------------------                  
 James F.              Trustee            1995         President and Director, Capital                4                             
 Rothenberg                                            Research and Management Company                                              
 Age: 55                                                                                                                            
------------------------------------------------------------------------------------------------------------------                  


                       OTHER DIRECTORSHIPS/3/ HELD                                                                                  
    NAME AND AGE          BY TRUSTEE OR OFFICER                                                                                     
---------------------------------------------------                                                                                 
                                                                                                                                    
 "INTERESTED" TRUSTEES/4,5/                                                                                                         
---------------------------------------------------                                                                                 
 James K. Dunton       None                                                                                                         
 Age: 64                                                                                                                            
---------------------------------------------------                                                                                 
 Donald D. O'Neal      None                                                                                                         
 Age: 41                                                                                                                            
---------------------------------------------------                                                                                 
 James F.              None                                                                                                         
 Rothenberg                                                                                                                         
 Age: 55                                                                                                                            
---------------------------------------------------                                                                                 

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                                                        [Enlarge/Download Table]

                                                                                    PRINCIPAL OCCUPATION(S) DURING                 
                                                                                    PAST 5 YEARS AND POSITIONS HELD                
                                                YEAR FIRST ELECTED                     WITH AFFILIATED ENTITIES                    
                               POSITION             AN OFFICER                       OR THE PRINCIPAL UNDERWRITER                  
     NAME AND AGE          WITH REGISTRANT        OF THE SERIES                              OF THE SERIES                         
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                   
 OTHER OFFICERS                                                                                                                    
-----------------------------------------------------------------------------------------------------------------------------------
 Michael J. Downer           Senior Vice        1991                Vice President and Secretary, Capital Research and Management  
 Age: 46                      President                             Company; Secretary, American Funds Distributors, Inc.*;        
                                                                    Director, Capital Bank and Trust Company*                      
-----------------------------------------------------------------------------------------------------------------------------------
 Abner D. Goldstine          Senior Vice        1993                Senior Vice President and Director, Capital Research and       
 Age: 72                      President                             Management Company                                             
-----------------------------------------------------------------------------------------------------------------------------------
 Alan N. Berro              Vice President      1998                Senior Vice President, Capital Research Company*               
 Age: 41                                                                                                                           
-----------------------------------------------------------------------------------------------------------------------------------
 Claudia P.                 Vice President      1994                Senior Vice President, Capital Research and Management Company 
 Huntington                                                                                                                        
 Age: 49                                                                                                                           
-----------------------------------------------------------------------------------------------------------------------------------
 Robert W. Lovelace         Vice President      1997                Senior Vice President and Director, Capital Research and       
 Age: 39                                                            Management Company; Director, American Funds Distributors,     
                                                                    Inc.*; President and Director, Capital Research Company*       
-----------------------------------------------------------------------------------------------------------------------------------
 John H. Smet               Vice President      1994                Senior Vice President, Capital Research and Management Company 
 Age: 44                                                                                                                           
-----------------------------------------------------------------------------------------------------------------------------------
 Susan M. Tolson            Vice President      1999                Senior Vice President, Capital Research Company*               
 Age: 37                                                                                                                           
-----------------------------------------------------------------------------------------------------------------------------------
 Chad L. Norton               Secretary         1994                Vice President - Fund Business Management Group, Capital       
 Age: 41                                                            Research and Management Company                                
-----------------------------------------------------------------------------------------------------------------------------------
 Robert P. Simmer             Treasurer         1994                Vice President - Fund Business Management Group, Capital       
 Age: 41                                                            Research and Management Company                                
-----------------------------------------------------------------------------------------------------------------------------------
 Sheryl F. Johnson            Assistant         1997                Vice President - Fund Business Management Group, Capital       
 Age: 33                      Treasurer                             Research and Management Company                                
-----------------------------------------------------------------------------------------------------------------------------------
 David A. Pritchett           Assistant         1999                Vice President - Fund Business Management Group, Capital       
 Age: 35                      Treasurer                             Research and Management Company                                
-----------------------------------------------------------------------------------------------------------------------------------

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* Company affiliated with Capital Research and Management Company.              
1 Trustees and officers of the funds serve until their resignation, removal or  
retirement.                                                                 
2 Capital Research and Management Company manages the American Funds consisting 
of 29 funds. Capital Research and Management Company also manages American  
 Funds Insurance Series and Anchor Pathway Fund, which serve as the underlying
 investment vehicles for certain variable insurance contracts, and Endowments,
whose shareholders are limited to certain non-profit organizations.         
3 This includes all directorships (other than those in the American Funds Group)
that are held by each trustee as a director of a public company or a        
registered investment company.                                              

4 "Interested persons" within the meaning of the 1940 Act on the basis of their 
affiliation with the Series' Investment Adviser, Capital Research and       
Management Company, or the parent company of the Investment Adviser, The    
Capital Group Companies, Inc.                                               
5 All of the Trustees and officers listed are officers and/or directors/trustees
of one or more of the other funds for which Capital Research and Management 
Company serves as Investment Adviser.                                       

THE ADDRESS FOR ALL TRUSTEES AND OFFICERS OF THE FUNDS IS 333 SOUTH HOPE STREET 
- 55TH FLOOR, LOS ANGELES, CALIFORNIA 90071, ATTENTION: FUND SECRETARY.         

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FUND SHARES OWNED BY TRUSTEES AS OF DECEMBER 31, 2001                           

                                                                [Download Table]

                                                     AGGREGATE DOLLAR RANGE/1/ 
                                                             OF SHARES         
                                                        OWNED IN ALL FUNDS     
                                                       IN THE AMERICAN FUNDS   
                             DOLLAR RANGE/1/ OF           FAMILY OVERSEEN      
          NAME              FUND SHARES OWNED/2/            BY TRUSTEE         
-------------------------------------------------------------------------------
                                                                               
 "NON-INTERESTED" TRUSTEES                                                     
-------------------------------------------------------------------------------
 Lee A. Ault III                    None                       None            
-------------------------------------------------------------------------------
 H. Frederick Christie              None                   Over $100,000       
-------------------------------------------------------------------------------
 Joe E. Davis                       None                       None            
-------------------------------------------------------------------------------
 Martin Fenton                      None                   Over $100,000       
-------------------------------------------------------------------------------
 Leonard R. Fuller                  None                $50,001 - $100,000     
-------------------------------------------------------------------------------
 Mary Myers Kauppila                None                   Over $100,000       
-------------------------------------------------------------------------------
 Kirk P. Pendleton                  None                   Over $100,000       
-------------------------------------------------------------------------------
 "INTERESTED" TRUSTEES/3/                                                      
-------------------------------------------------------------------------------
 James K. Dunton                    None                   Over $100,000       
-------------------------------------------------------------------------------
 Donald D. O'Neal                   None                   Over $100,000       
-------------------------------------------------------------------------------
 James F. Rothenberg                None                   Over $100,000       
-------------------------------------------------------------------------------

1 Ownership disclosure is made using the following ranges:  None; $1 - $10,000; 
$10,001 - $50,000; $50,001 - $100,000 and Over $100,000.                    
2 All of the Series' outstanding shares are owned of record by the separate     
accounts of insurance companies that use the Series as the underlying       
investments for variable annuity and variable life insurance contracts.     

3 "Interested persons" within the meaning of the 1940 Act on the basis of their 
affiliation with the Series' Investment Adviser, Capital Research and       
Management Company, or the parent company of the Investment Adviser, The    
Capital Group Companies, Inc.                                               

TRUSTEE COMPENSATION PAID DURING THE FISCAL YEAR ENDED DECEMBER 31, 2001        

No compensation is paid by the Series to any officer or Trustee who is a        
director, officer or employee of the Investment Adviser or its affiliates. The  
Series pays annual fees of $28,000 to Trustees who are not affiliated with the  
Investment Adviser, plus $2,500 for each Board of Trustees meeting attended, and
$1,000 for each meeting attended as a member of a committee of the Board of     
Trustees.                                                                       

No pension or retirement benefits are accrued as part of fund expenses. The     
Trustees may elect, on a voluntary basis, to defer all or a portion of their    
fees through a deferred compensation plan in effect for the Series. The Series  
also reimburses certain expenses of the Trustees who are not affiliated with the
Investment Adviser.                                                             

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                                                        [Enlarge/Download Table]

                                                      TOTAL COMPENSATION (INCLUDING  
                                                          VOLUNTARILY DEFERRED       
                         AGGREGATE COMPENSATION             COMPENSATION/1/)         
                         (INCLUDING VOLUNTARILY         FROM ALL FUNDS MANAGED BY    
                        DEFERRED COMPENSATION/1/)    CAPITAL RESEARCH AND MANAGEMENT 
         NAME                 FROM THE FUND           COMPANY OR ITS AFFILIATES/2/   
-------------------------------------------------------------------------------------
                                                                                     
 Lee A. Ault III                $39,500                        $ 39,500              
-------------------------------------------------------------------------------------
 H. Frederick                   $43,000/3/                     $215,120/3/           
 Christie                                                                            
-------------------------------------------------------------------------------------
 Joe E. Davis                   $43,000                        $ 43,000              
-------------------------------------------------------------------------------------
 Martin Fenton                  $43,000/3/                     $197,620/3/           
-------------------------------------------------------------------------------------
 Leonard R. Fuller              $39,000                        $ 71,620              
-------------------------------------------------------------------------------------
 Mary Myers Kauppila            $39,000/3/                     $118,500/3/           
-------------------------------------------------------------------------------------
 Kirk P. Pendleton              $39,000/3/                     $155,500/3/           
-------------------------------------------------------------------------------------

1 Amounts may be deferred by eligible Trustees under a non-qualified deferred   
compensation plan adopted by the Series in 1993. Deferred amounts accumulate
  at an earnings rate determined by the total return of one or more funds in The
American Funds Group as designated by the Trustees.                         
2 Capital Research and Management Company manages the American Funds consisting 
of 29 funds. Capital Research and Management Company also manages American  
 Funds Insurance Series and Anchor Pathway Fund, which serve as the underlying
 investment vehicles for certain variable insurance contracts, and Endowments,
whose shareholders are limited to certain non-profit organizations.         

3 Since the deferred compensation plan's adoption, the total amount of deferred 
compensation accrued by the Series (plus earnings thereon) through the 2001 
fiscal year for participating Trustees is as follows: H. Frederick Christie 
($200,437), Martin Fenton ($47,772), Mary Myers Kauppila ($322,451) and Kirk
  P. Pendleton ($157,804). Amounts deferred and accumulated earnings thereon are
not funded and are general unsecured liabilities of the Series until paid to
the Trustees.                                                               

MANAGEMENT

INVESTMENT ADVISER - The Investment Adviser, Capital Research and Management    
Company, founded in 1931, maintains research facilities in the U.S. and abroad  
(Los Angeles, San Francisco, New York, Washington, D.C., London, Geneva, Hong   
Kong, Singapore and Tokyo) with a staff of professionals, many of whom have     
significant investment experience. The Investment Adviser is located at 333     
South Hope Street, Los Angeles, CA 90071, and at 135 South State College        
Boulevard, Brea, CA 92821. The Investment Adviser's research professionals      
travel several million miles a year, making more than 5,000 research visits in  
more than 50 countries around the world. The Investment Adviser believes that it
is able to attract and retain quality personnel. The Investment Adviser is a    
wholly owned subsidiary of The Capital Group Companies, Inc.                    

The Investment Adviser is responsible for managing more than $350 billion of    
stocks, bonds and money market instruments and serves over 11 million           
shareholder accounts of all types throughout the world. These investors include 
privately owned businesses and large corporations as well as schools, colleges, 
foundations and other non-profit and tax-exempt organizations.                  

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INVESTMENT ADVISORY AND SERVICE AGREEMENT - The Investment Advisory and Service 
Agreement (the "Agreement") between the Series and the Investment Adviser will  
continue in effect until December 31, 2002, unless sooner terminated, and may be
renewed from year to year thereafter, provided that any such renewal has been   
specifically approved at least annually by (i) the Board of Trustees, or by the 
vote of a majority (as defined in the 1940 Act) of the outstanding voting       
securities of the Series, and (ii) the vote of a majority of Trustees who are   
not parties to the Agreement or interested persons (as defined in the 1940 Act) 
of any such party, cast in person at a meeting called for the purpose of voting 
on such approval. The Agreement provides that the Investment Adviser has no     
liability to the Series for its acts or omissions in the performance of its     
obligations to the Series not involving willful misconduct, bad faith, gross    
negligence or reckless disregard of its obligations under the Agreement. The    
Agreement also provides that either party has the right to terminate it, without
penalty, upon 60 days' written notice to the other party, and that the Agreement
automatically terminates in the event of their assignment (as defined in the    
1940 Act).                                                                      

As compensation for its services, the Investment Adviser receives a monthly fee 
which is accrued daily, calculated at the annual rates of:                      

Global Discovery Fund: 0.58% of net assets;                                     

Global Growth Fund: 0.69% of the first $600 million of net assets, plus 0.59% on
net assets greater than $600 million but not exceeding $1.2 billion, plus 0.53% 
on net assets in excess of $1.2 billion;                                        

Global Small Capitalization Fund: .80% of the first $600 million of net assets, 
plus 0.74% on net assets in excess of $600 million;                             

Growth Fund: 0.50% of the first $600 million of net assets, plus 0.45% on net   
assets greater than $600 million but not exceeding $1.0 billion, plus 0.42% on  
net assets greater than $1.0 billion but not exceeding $2.0 billion, plus 0.37% 
on net assets greater than $2.0 billion but not exceeding $3.0 billion, plus    
0.35% on net assets greater than $3.0 billion but not exceeding $5.0 billion,   
plus 0.33% on net assets greater than $5.0 billion but not exceeding $8.0       
billion, plus 0.315% on net assets greater than $8.0 billion but not exceeding  
$13.0 billion, plus 0.30% on net assets in excess of $13.0 billion.             

International Fund: 0.69% of the first $500 million of net assets, plus 0.59% on
net assets greater than $500 million but not exceeding $1.0 billion, plus 0.53% 
on net assets greater than $1.0 billion but not exceeding $1.5 billion, plus    
0.50% on net assets greater than $1.5 billion but not exceeding $2.5 billion,   
plus 0.48% on net assets greater than $2.5 billion but not exceeding $4.0       
billion, plus 0.47% on net assets greater than $4.0 billion but not exceeding   
$6.5 billion, plus 0.46% on net assets greater than $6.5 billion but not        
exceeding $10.5 billion, plus 0.45% on net assets in excess of $10.5 billion;   

New World Fund: 0.85% of net assets;                                            

Blue Chip Income and Growth Fund: 0.50% of net assets;                          

Growth-Income Fund: 0.50% of the first $600 million of net assets, plus 0.45% on
net assets greater than $600 million but not exceeding $1.5 billion, plus 0.40% 
on net assets greater than $1.5 billion but not exceeding $2.5 billion, plus    
0.32% on net assets greater than $2.5 billion but                               

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not exceeding $4.0 billion, plus 0.285% on net assets greater than $4.0 billion 
but not exceeding $6.5 billion, plus 0.256% on net assets greater than $6.5     
billion but not exceeding $10.5 billion, plus 0.242% on net assets in excess of 
$10.5 billion;                                                                  

Asset Allocation Fund: 0.50% of the first $600 million of net assets, plus 0.42%
on net assets greater than $600 million but not exceeding $1.2 billion, plus    
0.36% on net assets greater than $1.2 billion but not exceeding $2.0 billion,   
plus 0.32% on net assets in excess of $2.0 billion;                             

Bond Fund: 0.48% of the first $600 million of net assets, plus 0.44% on net     
assets greater than $600 million but not exceeding $1.0 billion, plus 0.40% on  
net assets in excess of $1.0 billion;                                           

High-Income Bond Fund: 0.50% of the first $600 million of net assets, plus 0.46%
on net assets greater than $600 million but not exceeding $1.0 billion, plus    
0.45% on net assets in excess of $1.0 billion;                                  

U.S. Government/AAA-Rated Securities Fund: 0.46% of the first $600 million of   
net assets, plus 0.40% on net assets greater than $600 million but not exceeding
$1.0 billion, plus 0.36% on net assets in excess of $1.0 billion;               

Cash Management Fund: 0.50% of the first $100 million of net assets, plus 0.42% 
on net assets greater than $100 million but not exceeding $400 million, plus    
0.38% on net assets in excess of $400 million.                                  

The Investment Adviser, in addition to providing investment advisory services,  
furnishes the services and pays the compensation and travel expenses of         
qualified persons to perform the executive, and related administrative functions
of the Series, provides necessary office space, office equipment and utilities, 
and general purpose accounting forms, supplies, and postage used at the office  
of the Series relating to the services furnished by the Investment Adviser.     
Subject to the expense agreement described below, the Series will pay all       
expenses not expressly assumed by the Investment Adviser, including, but not    
limited to, registration and filing fees with federal and state agencies; blue  
sky expenses (if any); expenses of shareholders' meetings; the expense of       
reports to existing shareholders; expenses of printing proxies and prospectuses;
insurance premiums; legal and auditing fees; dividend disbursement expenses; the
expense of the issuance, transfer, and redemption of its shares; custodian fees;
printing and preparation of registration statements; taxes; compensation, fees  
and expenses paid to Trustees unaffiliated with the Investment Adviser;         
association dues; and costs of stationary and forms prepared exclusively for the
Series.                                                                         

The Agreement provides for an advisory fee reduction to the extent that each    
fund's annual ordinary net operating expenses, except the International Fund's, 
exceed 1 1/2% of the first $30 million of the average month-end total net     
assets of the fund and 1% of the average month-end total net assets in excess   
thereof.  For the International Fund, the advisory fee will be reduced to the   
extent that its annual ordinary net operating expenses exceed 1 1/2% of its     
average month-end total net assets.  Expenditures, including costs incurred in  
connection with the purchase or sale of portfolio securities, which are         
capitalized in accordance with generally accepted accounting principles         
applicable to investment companies, are accounted for as capital items and not  
as expenses.                                                                    

During the fiscal years ended December 31, 2001, 2000 and November 30, 1999, the
Investment Adviser's total fees, respectively, amounted to the following: Global
Growth Fund $5,456,000,                                                         

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$6,048,000 and $2,672,000; Global Small Capitalization Fund $3,204,000,         
$3,765,000 and $1,054,000; Growth Fund $31,344,000, $37,904,000 and $26,451,000;
International Fund $15,387,000, $22,785,000 and $17,107,000; New World Fund     
$1,285,000, $1,135,000 and $154,000; Growth-Income Fund $27,394,000, $26,218,000
and $26,220,000; Asset Allocation Fund $7,043,000, $6,965,000 and $7,418,000;   
Bond Fund $1,970,000, $1,324,000 and $1,228,000; High-Income Bond Fund          
$2,831,000, $3,078,000 and $3,651,000; U.S.Government/ AAA-Rated Securities Fund
$2,204,000, $2,058,000 and $2,681,000; and Cash Management Fund $1,390,000,     
$1,267,000 and $1,441,000.                                                      

During the period ended December 31, 2001, the Investment Adviser's total fee   
for the Global Discovery Fund and Blue Chip Income and Growth Fund amounted to  
$35,000 and $188,000, respectively.                                             

During the one-month period ended December 31, 1999, the Investment Adviser's   
total fee amounted to the following: Global Growth Fund $376,000; Global Small  
Capitalization Fund $176,000; Growth Fund $2,723,000; International Fund        
$1,874,000; New World Fund $54,000; Growth-Income Fund $2,192,000; Asset        
Allocation Fund $623,000; Bond Fund $111,000; High-Income Bond Fund $291,000;   
U.S. Government/AAA-Rated Securities Fund $204,000; and Cash Management Fund    
$134,000.                                                                       

PLAN OF DISTRIBUTION - The Series has adopted a Plan of Distribution (the       
"Plan") for its Class 2 shares, pursuant to rule 12b-1 under the 1940 Act.  As  
required by rule 12b-1, the Plan has been approved by a majority of the entire  
Board of Trustees, and separately by a majority of the Trustees who are not     
"interested persons" of the Series and who have no direct or indirect financial 
interest in the operation of the Plan.  The officers and Trustees who are       
"interested persons" of the Series may be considered to have a direct or        
indirect financial interest in the operation of the Plan due to present or past 
affiliations with the Investment Adviser and related companies.  Potential      
benefits of the Plan to the Series include improved shareholder services,       
benefits to the investment process from growth or stability of assets and       
maintenance of a financially healthy management organization.  The selection and
nomination of Trustees who are not "interested persons" of the Series is        
committed to the discretion of the Trustees who are not "interested persons"    
during the existence of the Plan.  The Plan is reviewed quarterly and must be   
renewed annually by the Board of Trustees.                                      

Under the Plan the Series will pay to insurance company contract issuers 0.25%  
of each fund's average net assets annually (Class 2 shares only) to finance any 
distribution activity which is primarily intended to benefit the Class 2 shares 
of the Series, provided that the Board of Trustees of the Series has approved   
the categories of expenses for which payment is being made.  Payments made      
pursuant to the Plan will be used by insurance company contract issuers to pay a
continuing annual service fee to dealers on the value of all variable annuity   
contract payments. During the fiscal year ended December 31, 2001, the Series   
incurred distribution expenses of $19,250,000, payable to certain life insurance
companies under the Plan. Fees are paid to the contract issuers without regard  
to expenses. Accrued and unpaid distribution expenses were $1,944,000.          

PRICE OF SHARES 

The price paid for shares is based on the net asset value per share which is    
calculated once daily as of approximately 4:00 p.m., New York time, which is the
normal close of trading on the New York Stock Exchange each day the Exchange is 
open.  If, for example, the Exchange closes at                                  

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1:00 p.m., the funds' share prices would still be determined as of 4:00 p.m. New
York time.  The New York Stock Exchange is currently closed on weekends and on  
the following holidays:  New Year's Day, Martin Luther King, Jr. Day,           
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,        
Thanksgiving and Christmas Day.  Certain of the funds invest in securities      
listed on foreign exchanges which trade on Saturdays or other U.S. business     
holidays.  Since the funds typically do not calculate their net asset values on 
Saturdays or other U.S. business holidays, the value of the funds' redeemable   
securities may be affected on days when shareholders do not have access to the  
funds.  The net asset value per share is determined as follows:                 

1. Equity securities, including depositary receipts, are valued at the last     
reported sale price on the exchange or market on which such securities are      
traded, as of the close of business on the day the securities are being valued  
or, lacking any sales, at the last available bid price.  In cases where equity  
securities are traded on more than one exchange, the securities are valued on   
the exchange or market determined by the Investment Adviser to be the broadest  
and most representative market, which may be either a securities exchange or the
over-the-counter market.  Fixed-income securities are valued at prices obtained 
from a pricing service, when such prices are available; however, in             
circumstances where the Investment Adviser deems it appropriate to do so, such  
securities will be valued at the mean quoted bid and asked prices or at prices  
for securities of comparable maturity, quality and type.  Securities with       
original maturities of one year or less having 60 days or less to maturity are  
amortized to maturity based on their cost if acquired within 60 days of maturity
or, if already held on the 60th day, based on the value determined on the 61st  
day.  Forward currency contracts are valued at the mean of representative quoted
bid and asked prices.                                                           

Assets or liabilities initially expressed in terms of foreign currencies are    
translated prior to the next determination of the net asset value of the fund's 
shares into U.S. dollars at the prevailing market rates.                        

Securities and assets for which representative market quotations are not readily
available are valued at fair value as determined in good faith under procedures 
adopted by the Series' Board.  The fair value of all other assets is added to   
the value of securities to arrive at the total assets;                          

2. Liabilities, including accruals of taxes and other expense items, are        
deducted from total assets; and                                                 

3. Net assets so obtained are then divided by the total number of shares        
outstanding, and the result, rounded to the nearer cent, is the net asset value 
per share.                                                                      

TAXES AND DISTRIBUTIONS 

FUND TAXATION - Each fund has elected to be treated as a regulated investment   
company under Subchapter M of the Internal Revenue Code ("Code"). A regulated   
investment company qualifying under Subchapter M of the Code is required to     
distribute to its shareholders at least 90% of its investment company taxable   
income (including the excess of net short-term capital gain over net long-term  
capital losses) and generally is not subject to federal income tax to the extent
that it distributes annually 100% of its investment company taxable income and  
net realized capital gains in the manner required under the Code. Each fund     
intends to distribute annually all of its investment company taxable income and 
net realized capital gains and                                                  

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therefore does not expect to pay federal income tax, although in certain        
circumstances each fund may determine that it is in the interest of shareholders
to distribute less than that amount.                                            

To be treated as a regulated investment company under Subchapter M of the Code, 
each fund must also (a) derive at least 90% of its gross income from dividends, 
interest, payments with respect to securities loans and gains from the sale or  
other disposition of securities or foreign currencies, or other income          
(including, but not limited to, gains from options, futures or forward          
contracts) derived with respect to the business of investing in such securities 
or currencies, and (b) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of each fund's assets is          
represented by cash, U.S. government securities and securities of other         
regulated investment companies, and other securities (for purposes of this      
calculation, generally limited in respect of any one issuer, to an amount not   
greater than 5% of the market value of each fund's assets and 10% of the        
outstanding voting securities of such issuer) and (ii) not more than 25% of the 
value of its assets is invested in the securities of any one issuer (other than 
U.S. government securities or the securities of other regulated investment      
companies), or two or more issuers which each fund controls and which are       
determined to be engaged in the same or similar trades or businesses.           

Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a  
regulated investment company's "required distribution" for the calendar year    
ending within the regulated investment company's taxable year over the          
"distributed amount" for such calendar year. The term "required distribution"   
means the sum of (i) 98% of ordinary income (generally net investment income)   
for the calendar year, (ii) 98% of capital gain (both long-term and short-term) 
for the one-year period ending on October 31 (as though the one-year period     
ending on October 31 were the regulated investment company's taxable year), and 
(iii) the sum of any untaxed, undistributed net investment income and net       
capital gains of the regulated investment company for prior periods. The term   
"distributed amount" generally means the sum of (i) amounts actually distributed
by each fund from its current year's ordinary income and capital gain net income
and (ii) any amount on which each fund pays income tax during the periods       
described above. Although each fund intends to distribute its net investment    
income and net capital gains so as to avoid excise tax liability, each fund may 
determine that it is the interest of shareholders to distribute a lesser amount.

In addition to the asset diversification and other requirements for             
qualification as a regulated investment company, the funds are subject to       
another set of asset diversification requirements applicable to insurance       
company separate accounts and their underlying funding vehicles.  To satisfy    
these diversification requirements, as of the end of each calendar quarter or   
within 30 days thereafter, a fund must (a) be qualified as a "regulated         
investment company"; and (b) have either (i) no more than 55% of the total value
of its assets in cash and cash equivalents, government securities and securities
of other regulated investment companies; or (ii) no more than 55% of the total  
assets represented by any one investment, no more than 70% by any two           
investments, no more than 80% by any three investments, and no more than 90% by 
any four investments.  For this purpose all securities of the same issuer are   
considered a single investment, and each agency or instrumentality of the U.S.  
government is treated as a separate issuer of securities.  The Series intends to
comply with these regulations.  If a fund should fail to comply with these      
regulations, Contracts invested in that fund will not be treated as annuity,    
endowment or life insurance contracts under the Code.                           

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DIVIDENDS - Each fund intends to follow the practice of distributing  
    substantially all of its investment company taxable income, which includes
 any excess of net realized short-term gains over net realized long-term
capital losses.  Investment company taxable income generally includes 
dividends, interest, net short-term capital gains in excess of net    
    long-term capital losses, and certain foreign currency gains, if any, less
expenses and certain foreign currency losses.                         

  Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time the funds accrue receivables or    
liabilities denominated in a foreign currency and the time the funds  
   actually collect such receivables, or pay such liabilities, generally are
   treated as ordinary income or ordinary loss. Similarly, on disposition of
 debt securities denominated in a foreign currency and on disposition of
   certain futures contracts, forward contracts and options, gains or losses
   attributable to fluctuations in the value of foreign currency between the
     date of acquisition of the security or contract and the date of disposition
    are also treated as ordinary gain or loss. These gains or losses, referred
to under the Code as "Section 988" gains or losses, may increase or   
   decrease the amount of the funds' investment company taxable income to be
distributed to its shareholders as ordinary income.                   

If the funds invest in stock of certain passive foreign investment    
  companies, the funds may be subject to U.S. federal income taxation on a
portion of any "excess distribution" with respect to, or gain from the
    disposition of, such stock. The tax would be determined by allocating such
   distribution or gain ratably to each day of the funds' holding period for
     the stock. The distribution or gain so allocated to any taxable year of the
funds, other than the taxable year of the excess distribution or      
 disposition, would be taxed to the funds at the highest ordinary income
    rate in effect for such year, and the tax would be further increased by an
 interest charge to reflect the value of the tax deferral deemed to have
   resulted from the ownership of the foreign company's stock. Any amount of
   distribution or gain allocated to the taxable year of the distribution or
disposition would be included in the funds' investment company taxable
  income and, accordingly, would not be taxable to the funds to the extent
distributed by the funds as a dividend to its shareholders.           

  To avoid such tax and interest, the funds intend to elect to treat these
 securities as sold on the last day of its fiscal year and recognize any
  gains for tax purposes at that time. Under this election, deductions for
    losses are allowable only to the extent of any prior recognized gains, and
     both gains and losses will be treated as ordinary income or loss. The funds
    will be required to distribute any resulting income, even though they have
  not sold the security and received cash to pay such distributions.  Upon
     disposition of these securities, any gain recognized is treated as ordinary
income and loss is treated as ordinary loss to the extent of any prior
recognized gain.                                                      

A portion of the difference between the issue price of zero coupon    
   securities and their face value ("original issue discount") is considered
     to be income to the funds each year, even though the funds will not receive
     cash interest payments from these securities.  This original issue discount
 (imputed income) will comprise a part of the investment company taxable
   income of the funds which must be distributed to shareholders in order to
   maintain the qualification of the funds as regulated investment companies
and to avoid federal income taxation at the level of the funds.       

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   In addition, some of the bonds may be purchased by the fund at a discount
that exceeds the original issue discount on such bonds, if any.  This 
additional discount represents market discount for federal income tax 
     purposes.  The gain realized on the disposition of any bond having a market
  discount may be treated as taxable ordinary income to the extent it does
    not exceed the accrued market discount on such bond or a fund may elect to
include the market discount in income in tax years to which it is     
attributable.  Generally, accrued market discount may be figured under
     either the ratable accrual method or constant interest method.  If the fund
    has paid a premium over the face amount of a bond, the fund has the option
of either amortizing the premium until bond maturity and reducing the 
 fund's basis in the bond by the amortized amount, or not amortizing and
   treating the premium as part of the bond's basis. In the case of any debt
  security having a fixed maturity date of not more than one year from its
   date of issue, the gain realized on disposition generally will be treated
     as short-term capital gain. In general, any gain realized on disposition of
   a security held less than one year is treated as short-term capital gain.

     Dividend and interest income received by the funds from sources outside the
    U.S. may be subject to withholding and other taxes imposed by such foreign
   jurisdictions. Tax conventions between certain countries and the U.S. may
     reduce or eliminate these foreign taxes, however. Most foreign countries do
not impose taxes on capital gains in respect of investments by foreign
investors.                                                            

   CAPITAL GAIN DISTRIBUTIONS - The funds also intend to follow the practice
   of distributing the entire excess of net realized long-term capital gains
     over net realized short-term capital losses. Net capital gains for a fiscal
    year are computed by taking into account any capital loss carry-forward of
the fund.                                                             

If any net long-term capital gains in excess of net short-term capital
     losses are retained by the funds for reinvestment, requiring federal income
   taxes to be paid thereon by the funds, the funds intend to elect to treat
     such capital gains as having been distributed to shareholders. As a result,
    each shareholder will report such capital gains as long-term capital gains
 taxable to individual shareholders at a maximum 20% capital gains rate,
    will be able to claim a pro rata share of federal income taxes paid by the
funds on such gains as a credit against personal federal income tax   
    liability, and will be entitled to increase the adjusted tax basis on fund
     shares by the difference between a pro rata share of the retained gains and
such shareholder's related tax credit.                                

See the applicable Contract prospectus for information regarding the Federal    
income tax treatment of the Contracts and distributions to the separate         
accounts.                                                                       

EXECUTION OF PORTFOLIO TRANSACTIONS 

The Investment Adviser places orders for the funds' portfolio securities        
transactions. The Investment Adviser strives to obtain the best available prices
in its portfolio transactions taking into account the costs and quality of      
executions. When, in the opinion of the Investment Adviser, two or more brokers 
(either directly or through their correspondent clearing agents) are in a       
position to obtain the best price and execution, preference may be given to     
brokers who have sold shares of the funds or who have provided investment       
research, statistical, or other related services to the Investment Adviser. The 
funds do not consider that they have an obligation to                           

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obtain the lowest available commission rate to the exclusion of price, service  
and qualitative considerations.                                                 

There are occasions on which portfolio transactions for the funds may be        
executed as part of concurrent authorizations to purchase or sell the same      
security for other funds served by the Investment Adviser, or for trusts or     
other accounts served by affiliated companies of the Investment Adviser.        
Although such concurrent authorizations potentially could be either advantageous
or disadvantageous to the funds, they are effected only when the Investment     
Adviser believes that to do so is in the interest of the funds. When such       
concurrent authorizations occur, the objective is to allocate the executions in 
an equitable manner. The funds will not pay a mark-up for research in principal 
transactions.                                                                   

Brokerage commissions paid on portfolio transactions for the fiscal years ended 
December 31, 2001, 2000 and November 30, 1999, respectively, amounted to the    
following: Global Growth Fund $946,000, $1,191,000 and $414,000; Global Small   
Capitalization Fund $569,000, $948,000 and $385,000; Growth Fund $5,646,000,    
$6,133,000 and $4,487,000; International Fund $4,046,000, $5,853,000 and        
$5,345,000; Growth-Income Fund $7,914,000, $7,472,000 and $6,110,000; Asset     
Allocation Fund $581,000, $598,000 and $790,000; and New World Fund $244,000,   
$310,000 and $385,000. Brokerage commissions paid on portfolio transactions for 
the fiscal year ended December 31, 2001 only amounted to the following:         
High-Income Bond Fund $15,000; Blue Chip Income and Growth Fund $237,000; and   
Global Discovery Fund $13,000.                                                  

Brokerage commissions paid on portfolio transactions for the one-month period   
ended December 31, 1999 amounted to the following: Global Growth Fund $40,000;  
Global Small Capitalization Fund $89,000; Growth Fund $433,000, International   
Fund $336,000; New World Fund $16,000; Growth-Income Fund $520,000; and Asset   
Allocation Fund $53,000.                                                        

Dealer concessions paid on underwriting transactions for the 2001 fiscal year   
amounted to the following: Global Discovery Fund $1,000; Global Growth Fund     
$40,000; Global Small Capitalization Fund $571,000; Growth Fund; $3,987,000;    
International Fund, $159,000; New World Fund $7,000; Growth-Income Fund         
$1,612,000; Asset Allocation Fund, $1,004,000; Bond Fund $1,397,000; High-Income
Bond Fund $1,254,000; and U.S. Government/AAA-Rated Securities Fund $138,000.   

The Series is required to disclose information regarding investments in the     
securities of broker-dealers (or parent companies of broker-dealers that derive 
more than 15% of their revenue from broker-dealer activities) which have certain
relationships with the funds. During the last fiscal year, the following funds  
held equity or debt securities of broker-dealers that were among the top 10     
dealers that acted as principals in portfolio transactions:                     

Global Discovery Fund held equity securities of Bank of America Corp. in the    
amount of $137,000.                                                             

Global Growth Fund held equity securities of Credit Suisse Group in the amount  
of $4,480,000 and J.P. Morgan Chase & Co, in the amount of $3,998,000.          

Growth Fund held equity securities of J.P. Morgan Chase & Co, in the amount of  
$9,996,000.                                                                     

International Fund held equity securities of Credit Suisse Group in the amount  
of $8,533,000.                                                                  

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Blue Chip Income and Growth Fund held equity securities of J.P. Morgan Chase &  
Co., in the amount of $6,518,000 and Bank of America Corp. in the amount of     
$2,896,000.                                                                     

Growth-Income Fund held equity securities of J.P. Morgan Chase & Co. in the     
amount of $136,592,000 and Bank of America Corp. in the amount of $180,981,000. 

Asset Allocation Fund held equity securities of Bank of America Corp. in the    
amount of $37,770,000.                                                          

Bond Fund held equity securities of UBS AG in the amount of $697,000 and debt   
securities of J.P. Morgan Chase & Co. in the amount of $1,873,000 and Morgan    
Stanley Dean Witter & Co. in the amount of $1,262,000.                          

U.S. Government/AAA-Rated Securities Fund held debt securities of Morgan Stanley
Dean Witter & Co. in the amount of $1,514,000.                                  

Cash Management Fund held debt securities of J.P. Morgan Chase & Co. and Bank of
America Corp. in the amounts of $9,992,000 and $5,792,000, respectively.        

GENERAL INFORMATION 

CUSTODIAN OF ASSETS - Securities and cash owned by all funds, except New World  
Fund, including proceeds from the sale of shares of the funds and of securities 
in the funds' portfolios, are held by State Street Bank and Trust Company, 225  
Franklin Street, Boston, MA 02105, as Custodian. Securites and cash owned by New
World Fund, including proceeds from the sales of shares of the fund and of      
securities in the fund's portfolio, are held by JP Morgan Chase Bank, 270 Park  
Avenue, New York, NY 10017, as Custodian. Non-U.S. securities may be held by the
Custodians in non-U.S. banks or securities depositories or foreign branches of  
U.S. banks.                                                                     

TRANSFER AGENT - American Funds Service Company, a wholly owned subsidiary of   
the Investment Adviser, maintains the records of each insurance company's       
separate account, processes purchases and redemptions of the funds' shares, acts
as dividend and capital gain distribution disbursing agent, and performs other  
related shareholder service functions. American Funds Service Company earned a  
fee of $115,000 for the 2001 fiscal year.                                       

INDEPENDENT ACCOUNTANTS - PricewaterhouseCoopers LLP, 350 South Grand Avenue,   
Los Angeles, CA 90071, serves as the Series' independent accountants providing  
audit services, preparation of tax returns and review of certain documents to be
filed with the Securities and Exchange Commission. The financial statements     
included in this Statement of Additional Information from the Annual Report have
been so included in reliance on the report of PricewaterhouseCoopers LLP,       
independent accountants, given on the authority of said firm as experts in      
accounting and auditing. The selection of the Series' independent accountant is 
reviewed and determined annually by the Board of Trustees.                      

PROSPECTUSES AND REPORTS TO SHAREHOLDERS - The Series' fiscal year ends on      
December 31. Contract owners are provided updated prospectuses annually and at  
least semiannually with reports showing the investment portfolio, financial     
statements and other information. The Series' annual financial statements are   
audited by the independent accounting firm of PricewaterhouseCoopers LLP.       

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PERSONAL INVESTING POLICY - The Series, Capital Research and Management Company 
and its affiliated companies have adopted codes of ethics which allow for       
personal investments, including securities in which the Series may invest from  
time to time. This policy includes:  a ban on acquisitions of securities        
pursuant to an initial public offering; restrictions on acquisitions of private 
placement securities; pre-clearance and reporting requirements; review of       
duplicate confirmation statements; annual recertification of compliance with    
codes of ethics; blackout periods on personal investing for certain investment  
personnel; a ban on short-term trading profits for investment personnel;        
limitations on service as a director of publicly traded companies; and          
disclosure of personal securities transactions.                                 

SHAREHOLDER AND TRUSTEE RESPONSIBILITY - Under the laws of certain states,      
including Massachusetts, where the Series was organized, and California, where  
the Series' principal office is located, shareholders of a Massachusetts        
business trust may, under certain circumstances, be held personally liable as   
partners for the obligations of the Series.  However, the risk of a shareholder 
incurring any financial loss on account of shareholder liability is limited to  
circumstances in which the Series itself would be unable to meet its            
obligations.  The Declaration of Trust contains an express disclaimer of        
shareholder liability for acts or obligations of the Series and provides that   
notice of the disclaimer may be given in each agreement, obligation, or         
instrument which is entered into or executed by the Series or Trustees.  The    
Declaration of Trust provides for indemnification out of Series property of any 
shareholder personally liable for the obligations of the Series and also        
provides for the Series to reimburse such shareholder for all legal and other   
expenses reasonably incurred in connection with any such claim or liability.    

Under the Declaration of Trust, the Trustees or officers are not liable for     
actions or failure to act; however, they are not protected from liability by    
reason of their willful misfeasance, bad faith, gross negligence, or reckless   
disregard of the duties involved in the conduct of their office.  The Series    
will provide indemnification to its Trustees and officers as authorized by its  
By-Laws and by the 1940 Act and the rules and regulations thereunder.           

REGISTRATION STATEMENT - A registration statement has been filed with the       
Securities and Exchange Commission under the Securities Act of 1933 and the 1940
Act, with respect to the Series.  The prospectus and this Statement of          
Additional Information do not contain all information set forth in the          
registration statement, its amendments and exhibits, to which reference is made 
for further information concerning the Series.  Statements contained in the     
prospectus and this Statement of Additional Information as to the content of the
Contracts issued through the separate accounts and other legal instruments are  
summaries.  For a complete statement of the terms thereof, reference is made to 
the registration statements of the separate accounts and Contracts as filed with
the Securities and Exchange Commission.                                         

AUTHORIZED SHARES - The Series was organized as a Massachusetts Business Trust  
which permits each fund of the Series to issue an unlimited number of shares of 
beneficial interest of one or more classes.                                     

DESCRIPTION OF COMMERCIAL PAPER RATINGS 

MOODY'S employs the designations "Prime-1," "Prime-2" and "Prime-3" to indicate 
-------                                                                         
commercial paper having the highest capacity for timely repayment. Issuers rated
Prime-1 have a superior capacity for repayment of short-term promissory         
obligations. Prime-1 repayment capacity will normally be evidenced by the       
following characteristics: leading market positions in                          

American Funds Insurance Series - Page 38 

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well-established industries; high rates of return on funds employed;            
conservative capitalization structures with moderate reliance on debt and ample 
asset protection; broad margins in earnings coverage of fixed financial charges 
and high internal cash generation; and well-established access to a range of    
financial markets and assured sources of alternate liquidity.                   

Issues rated Prime-2 have a strong capacity for repayment of short-term         
promissory obligations. This will normally be evidenced by many of the          
characteristics cited above, but to a lesser degree. Earnings trends and        
coverage ratios, while sound, will be more subject to variation. Capitalization 
characteristics, while still appropriate, may be more affected by external      
conditions. Ample alternate liquidity is maintained.                            

S&P ratings of commercial paper are graded into four categories ranging from "A"
---                                                                             
for the highest quality obligations to "D" for the lowest.                      

A - Issues assigned its highest rating are regarded as having the greatest      
capacity for timely payment. Issues in this category are delineated with numbers
1, 2, and 3 to indicate the relative degree of safety.                          

A-1 - This designation indicates that the degree of safety regarding timely     
payment is either overwhelming or very strong. Those issues determined to       
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.                                                                    

A-2 - Capacity for timely payments on issues with this designation is strong;   
however, the relative degree of safety is not as high as for issues designated  
"A-1."                                                                          

American Funds Insurance Series - Page 39 

American Funds Insurance Series Global Discovery Fund                           
Investment Portfolio as of December 31, 2001                                    

                                                                [Download Table]
                                                                                 

                                                    Percent of                   
Largest Individual Equity Securities                Net Assets                   
Wells Fargo                                               2.78%                  
Berkshire Hathaway                                         2.43                  
American International Group                               2.37                  
USA Networks                                               2.07                  
Cisco Systems                                              1.92                  
Clear Channel Communications                               1.91                  
Intuit                                                     1.78                  
Motorola                                                   1.64                  
Xilinx                                                     1.60                  
Texas Instruments                                          1.53                  

[begin pie chart]                                                                
                                                    Percent of                   
Geographic Location                                 net assets                   
The Americas                                             58.84%                  
Europe                                                     3.01                  
Asia\Pacific Basin                                         2.15                  
Cash & equivalents                                        36.00                  
[end pie chart]                                                                  

                                                        Number   Market  Percent 
                                                            of    Value   of Net 
Equity Securities (common & preferred stocks)           Shares    (000)   Assets 

Semiconductor Equipment & Products - 7.81%                                       
Xilinx, Inc.  /1/                                         6,375   $  249    1.60%
Texas Instruments Inc.                                    8,500      238     1.53
Maxim Integrated Products, Inc.  /1/                      4,000      210     1.35
Taiwan Semiconductor Manufacturing Co. Ltd.              50,000      125      .81
 (Taiwan) /1/                                                                    
Applied Materials, Inc.  /1/                              3,000      120      .77
Altera Corp.  /1/                                         4,950      105      .68
Linear Technology Corp.                                   2,150       84      .54
KLA-Tencor Corp.  /1/                                     1,675       83      .53

Insurance - 7.11%                                                                
Berkshire Hathaway Inc., Class A  /1/                         5      378     2.43
American International Group, Inc.                        4,650      369     2.37
XL Capital Ltd., Class A                                  1,200      110      .71
Allmerica Financial Corp.                                 2,000       89      .57
Allianz AG (Germany)                                        350       83      .53
Allstate Corp.                                            2,300       77      .50

Communications Equipment - 6.69%                                                 
Cisco Systems, Inc.  /1/                                 16,475      298     1.92
Motorola, Inc.                                           17,000      255     1.64
Juniper Networks, Inc.  /1/                              10,000      190     1.22
Telefonaktiebolaget LM Ericsson, Class B (Sweden)        25,000      136      .87
Lucent Technologies Inc., 8.00% convertible                  80       89      .57
 preferred 2031  /2/                                                             
Nokia Corp., Class A (ADR) (Finland)                      2,975       73      .47

Media - 6.42%                                                                    
USA Networks, Inc.  /1/                                  11,800      322     2.07
Clear Channel Communications, Inc.  /1/                   5,825      297     1.91
Viacom Inc., Class B, nonvoting /1/                       4,375      193     1.24
AOL Time Warner Inc.  /1/                                 5,500      177     1.14
NTL Inc.  /1/                                            10,000        9      .06

Commercial Services & Supplies - 4.03%                                           
Concord EFS, Inc.  /1/                                    7,100      232     1.49
Paychex, Inc.                                             4,300      150      .96
ServiceMaster Co.                                        10,000      138      .89
Robert Half International Inc.  /1/                       4,000      107      .69

Banks - 3.87%                                                                    
Wells Fargo & Co.                                         9,950      432     2.78
Bank of America Corp.                                     2,175      137      .88
HSBC Holdings PLC (United Kingdom)                        2,800       33      .21

Wireless Telecommunication Services - 3.83%                                      
America Movil SA de CV, Series L (ADR) (Mexico)          10,850      211     1.36
Western Wireless Corp., Class A  /1/                      7,025      199     1.28
AT&T Wireless Services, Inc.  /1/                         7,725      111      .71
China Mobile (Hong Kong) Ltd. (ADR) (People's             4,250       74      .48
 Republic of China) /1/                                                          

Diversified Financials - 3.62%                                                   
Freddie Mac                                               3,000      196     1.26
Capital One Financial Corp.                               3,200      173     1.11
Fannie Mae                                                1,550      123      .79
ING Groep NV (Netherlands)                                2,500       64      .41
Providian Financial Corp.                                 1,850        7      .05

Multiline Retail - 3.59%                                                         
Wal-Mart de Mexico, SA de CV, Series V                    8,000      219     1.41
 (ADR) (Mexico)                                                                  
Kohl's Corp.  /1/                                         3,000      211     1.36
Dollar General Corp.                                      8,600      128      .82

Specialty Retail - 2.69%                                                         
Gap, Inc.                                                17,000      237     1.52
Lowe's Companies, Inc.                                    3,000      139      .89
United Rentals, Inc.  /1/                                 1,900       43      .28

Software - 2.67%                                                                 
Intuit Inc.  /1/                                          6,480      277     1.78
Microsoft Corp.  /1/                                      1,875      124      .80
Novell, Inc.  /1/                                         3,000       14      .09

Energy Equipment & Services - 2.14%                                              
Schlumberger Ltd.                                         4,175      230     1.48
Precision Drilling Corp. (Canada) /1/                     4,000      103      .66

Internet Software & Services - 1.81%                                             
Yahoo Inc.  /1/                                           6,675      118      .76
CNET Networks, Inc.  /1/                                 11,025       99      .63
VeriSign, Inc.  /1/                                       1,700       65      .42

Airlines - 1.37%                                                                 
Southwest Airlines Co.                                    7,000      129      .83
British Airways PLC (United Kingdom)                     28,000       80      .51
Cathay Pacific Airways Ltd. (Hong Kong)                   3,000        4      .03

Hotels, Restaurants & Leisure - 1.26%                                            
Carnival Corp.                                            7,000      197     1.26

Computers & Peripherals - 1.07%                                                  
EMC Corp.  /1/                                            7,000       94      .61
Hewlett-Packard Co.                                       3,475       72      .46

IT Consulting & Services - 1.00%                                                 
Titan Corp.  /1/                                          6,225      155     1.00

Health Care Providers & Services - 0.76%                                         
Service Corp. International  /1/                         23,600      118      .76

Aerospace & Defense - 0.67%                                                      
Mercury Computer Systems, Inc.  /1/                       2,650      104      .67

Electric Uutilities - 0.24%                                                      
AES Corp.  /1/                                            2,300       38      .24

Miscellaneous - 1.35%                                                            
Other equity securities in initial period of                         210     1.35
 acquisition                                                                     
Total equity securities (cost: $10,515,000)                        9,954    64.00

                                                     Principal                   
                                                        amount                   
Short-Term Securities                                    (000)                   

Corporate Short-Term Notes - 31.30%                                              
Triple-A One Funding Corp. 2.15% due 1/2/02 /2/          $  400   $  400     2.57
Abbott Laboratories 1.87% due 1/3/02 /2/                    400      400     2.57
Minnesota Mining & Manufacturing Co. 1.85%                  400      400     2.57
 due 1/7/02                                                                      
Gannett Co., Inc. 1.90% due 1/10/02 /2/                     400      400     2.57
Kraft Foods Inc. 1.72% due 1/16/02                          400      400     2.57
Equilon Enterprises LLC 1.76% due 1/16/02                   400      400     2.57
BellSouth Corp. 1.75% due 1/22/02 /2/                       400      399     2.57
Colgate-Palmolive Co. 1.83% due 1/31/02 /2/                 400      399     2.57
General Electric Capital Corp. 1.82% due 1/2/02             360      360     2.32
Park Avenue Receivables Corp. 1.84% due 1/8/02 /2/          360      360     2.32
Household Finance Corp. 2.00% due 1/7/02                    350      350     2.25
USA Education Inc. 1.77% due 1/3/02 /2/                     300      300     1.93
SBC Communications Inc. 2.08% due 1/30/02 /2/               300      299     1.92

Federal Agency Discount Notes  -  4.74%                                          
Freddie Mac 1.75% due 2/19/02                               390      389     2.50
Federal Home Loan Banks 1.67% due 2/1/02                    350      349     2.24

Non-U.S. Currency - 0.06%                                                        
New Taiwanese Dollar                                    NT$ 350       10      .06

Total short-term securities (cost: $5,615,000)                     5,615    36.10
Total investment securities (cost: $16,130,000)                   15,569   100.10
Excess of payables over cash and receivables                          15      .10
Net assets                                                       $15,554  100.00%

/1/ Non-income-producing security.                                               
/2/ Purchased in a private placement transaction;                                
 resale may be limited to qualified                                              
 institutional buyers; resale to public                                          
 may require registration.                                                       

ADR = American Depositary Receipts                                               

See Notes to Financial Statements                                                

                                                        [Enlarge/Download Table]
                                                                                     
American Funds Insurance Series Global Growth Fund                                   
Investment Portfolio as of December 31, 2001                                         

[pie chart]                                                                          
                                                       Percent of                    
                                                       Net Assets                    

The Americas                                               40.34%                    
Europe                                                     27.76%                    
Asia/Pacific Basin                                         12.90%                    
Other Countries                                             0.17%                    
Cash & Equivalents                                         18.83%                    
[end pie chart]                                                                      

Largest Individual Equity Securities                                                 
AstraZeneca                                                 1.81%                    
Nokia                                                       1.76%                    
Taiwan Semiconductor Manufacturing                          1.74%                    
Clear Channel Communications                                1.67%                    
Michaels Stores                                             1.54%                    
Pfizer                                                      1.43%                    
AOL Time Warner                                             1.43%                    
Microsoft                                                   1.34%                    
Viacom                                                      1.22%                    
Microchip Technology                                        1.18%                    

Equity Securities (common & preferred stocks)                                        
                                                                     Market  Percent 
                                                        Number of     Value   of Net 
Media  -  12.32%                                           Shares     (000)   Assets 
Clear Channel Communications, Inc. (USA) /1/               266,680   $13,577   1.67% 
AOL Time Warner Inc. (USA) /1/                             362,500    11,636     1.43
Viacom Inc., nonvoting, Class B (USA) /1/                  224,777     9,924     1.22
Univision Communications Inc., Class A (USA) /1/           149,000     6,029      .74
Vivendi Universal  (ADR) (France)                           64,000     3,443         
Vivendi Universal                                           38,617     2,114      .68
Grupo Televisa, SA, ordinary participation                 120,000     5,182      .64
 certificates (ADR) (Mexico) /1/                                                     
USA Networks, Inc. (USA) /1/                               179,000     4,888      .60
Independent News & Media PLC (Ireland)                   2,533,084     4,735      .58
Granada PLC  (United Kingdom)                            2,076,346     4,333      .53
Liberty Media Corp. (formerly AT&T Corp.                   240,000     3,360      .41
 Liberty Media Group), Class A (USA) /1/                                             
Fox Entertainment Group, Inc., Class A (USA) /1/           125,000     3,316      .41
News Corp. Ltd. (Australia)                                405,500     3,233      .40
General Motors Corp., Class H (USA) /1/                    200,000     3,090      .38
Metro International SA, Class B (USA) /1/                  651,377     2,606         
Metro International SA, Class A (Sweden) /1/                68,700       237         
Metro International SA, Class B /1/                         10,600        43      .35
Globo Cabo SA, preferred nominative (ADR)                  738,300     2,591      .32
 (Brazil) /1/                                                                        
Rogers Communications Inc., nonvoting,                     125,000     2,129      .26
 Class B (Canada)                                                                    
Telewest Communications PLC (United Kingdom) /1/         1,500,000     1,352      .17
AVEX Inc. (Japan)                                           45,000     1,335      .16
MIH Ltd., Class A (South Africa) /1/                       150,000     1,095      .14
Washington Post Co., Class B (USA)                           2,000     1,060      .13
Havas Advertising (France)                                 140,000     1,013      .12
Village Roadshow Ltd., Class A, 5.50% preferred          1,222,262     1,011      .12
 (Australia)                                                                         
KirchMedia GmbH & Co. KGaA, nonvoting,                      42,000       984      .12
 (Germany) /2/,/3/                                                                   
Daily Mail and General Trust PLC, nonvoting,                87,250       822      .10
 Class A (United Kingdom)                                                            
PT Multimedia-Servicos de Telecomunicacoes                 118,000       819      .10
 e Multimedia, SGPS, SA (Portugal) /1/                                               
ProSieben SAT.1 Media AG, nonvoting, preferred             144,000       711      .09
 (Germany)                                                                           
PRIMEDIA Inc. (USA) /1/                                    150,000       652      .08
NTL Inc. (USA) /1/                                         550,000       517      .06
Nippon Television Network Corp. (Japan)                      2,300       488      .06
Insight Communications Co., LP,                             20,000       483      .06
 Class A (USA) /1/                                                                   
Clear Media Ltd. (Hong Kong) /1/                           659,000       482      .06
SET Satellite (Singapore) Pte. Ltd.                        125,710       368      .05
 (Singapore)  /1/,/2/,/3/                                                            
United Pan-Europe Communications NV                        395,000       183      .02
 (Netherlands) /1/                                                                   
SET India Ltd. (India)  /1/,/2/,/3/                          6,400       176      .02
UnitedGlobalCom, Inc., Class A (USA) /1/                    35,000       175      .02
Crown Media Holdings, Inc., Class A (USA) /1/               15,000       169      .02

Semiconductor Equipment & Products  -  9.77%                                         
Taiwan Semiconductor Manufacturing Co. Ltd.              5,640,200    14,141     1.74
 (Taiwan) /1/                                                                        
Microchip Technology Inc. (USA) /1/                        247,500     9,588     1.18
Tokyo Electron Ltd. (Japan)                                170,000     8,314     1.02
Texas Instruments Inc. (USA)                               288,000     8,064      .99
Dialog Semiconductor PLC (United Kingdom) /1/              837,000     6,035      .74
Applied Materials, Inc. (USA) /1/                          140,000     5,614      .69
KLA-Tencor Corp. (USA) /1/                                 100,000     4,956      .61
Samsung Electronics Co., Ltd. (South Korea)                 20,000     4,281      .53
Maxim Integrated Products, Inc. (USA) /1/                   64,000     3,361      .41
Rohm Co., Ltd. (Japan)                                      23,000     2,976      .36
Micron Technology, Inc. (USA) /1/                           90,000     2,790      .34
Xilinx, Inc. (USA) /1/                                      65,000     2,538      .31
Linear Technology Corp. (USA)                               61,000     2,381      .29
Altera Corp. (USA) /1/                                      90,000     1,910      .23
ASML Holdings NV, New York registered                      110,000     1,876      .23
 (Netherlands) /1/                                                                   
Micrel, Inc. (USA) /1/                                      30,300       795      .10

Pharmaceuticals  -  7.79%                                                            
AstraZeneca PLC (United Kingdom)                           213,960     9,638         
AstraZeneca PLC                                            107,205     4,932         
AstraZeneca PLC (ADR)                                        3,000       140     1.81
Pfizer Inc (USA)                                           292,950    11,674     1.43
Shionogi & Co., Ltd. (Japan)                               491,000     8,366     1.03
Novo Nordisk A/S, Class B (Denmark)                        126,500     5,176      .64
Pharmacia Corp. (USA)                                      115,000     4,905      .60
Forest Laboratories, Inc. (USA) /1/                         47,400     3,884      .48
Eli Lilly and Co. (USA)                                     45,000     3,534      .43
CSL Ltd. (Australia)                                       100,000     2,628      .32
H. Lundbeck A/S (Denmark) /1/                              101,595     2,617      .32
Aventis (France)                                            35,000     2,484      .30
Elan Corp., PLC (ADR) (Ireland) /1/                         50,000     2,253      .28
Sanofi-Synthelabo (France)                                  16,000     1,194      .15

Specialty Retail  -  3.72%                                                           
Michaels Stores, Inc. (USA) /1/                            380,000    12,521     1.54
Lowe's Companies, Inc. (USA)                               165,000     7,658      .94
Limited Inc. (USA)                                         310,000     4,563      .56
Dixons Group PLC (United Kingdom)                        1,091,929     3,731      .45
Kingfisher PLC (United Kingdom)                            320,119     1,867      .23

Software  -  3.32%                                                                   
Microsoft Corp. (USA) /1/                                  165,000    10,931     1.34
Amdocs Ltd. (USA) /1/                                      150,000     5,096      .63
Cadence Design Systems, Inc. (USA) /1/                     217,000     4,757      .58
Mentor Graphics Corp. (USA) /1/                            132,000     3,111      .38
Intuit Inc. (USA) /1/                                       40,000     1,711      .21
Capcom Co., Ltd. (Japan)                                    54,000     1,425      .18

Diversified Telecommunication Services  -  3.21%                                     
Telekom Austria AG (Austria) /1/                           955,000     7,915      .97
Swisscom AG (Switzerland)                                   22,000     6,098      .75
Hellenic Telecommunications Organization SA (Greece)       365,000     5,946      .73
Telefonos de Mexico, SA de CV, Class L (ADR) (Mexico)      130,000     4,552      .56
AT&T Corp. (USA)                                            90,000     1,633      .20

Oil & Gas  -  3.05%                                                                  
Norsk Hydro AS (Norway)                                    170,000     7,122      .87
Husky Energy Inc. (Canada)                                 675,000     6,980      .86
Petroleo Brasileiro SA - Petrobras (ADR) (Brazil)          284,300     6,624      .81
"Shell" Transport and Trading Co., PLC, New York           100,000     4,145      .51
 registered (United Kingdom)                                                         

Banks  -  2.99%                                                                      
Bank of Nova Scotia (Canada)                               161,000     4,949      .61
Royal Bank of Canada (Canada)                              144,000     4,686      .58
Credit Suisse Group (Switzerland) /1/                      105,000     4,480      .55
Lloyds TSB Group PLC (United Kingdom)                      300,000     3,254      .40
DBS Group Holdings Ltd. (Singapore) /1/                    351,000     2,624      .32
Westpac Banking Corp. (Australia)                          214,348     1,724      .21
ABN AMRO Holding NV (Netherlands)                          100,262     1,615      .20
Toronto-Dominion Bank (Canada)                              39,200     1,011      .12

Food Products  -  2.81%                                                              
Lindt & Sprungli AG (Switzerland)                            6,000     3,362         
Lindt & Sprungli AG, participation certificates                525     2,974      .78
Unilever PLC (United Kingdom)                              720,000     5,905      .72
Orkla AS (Norway)                                          282,285     4,781      .59
Unilever NV (Netherlands)                                   60,000     3,517      .43
Sara Lee Corp. (USA)                                       105,000     2,334      .29

Electronic Equipment & Instruments  -  2.73%                                         
EPCOS AG (Germany)                                         130,000     6,712      .83
Murata Manufacturing Co., Ltd. (Japan)                      67,000     4,006      .49
Venture Manufacturing (Singapore) Ltd (Singapore)          490,000     3,530      .43
Samsung Electro-Mechanics Co., Ltd. (South Korea)           85,000     2,856      .35
Celestica Inc. (Canada) /1/                                 65,000     2,625      .32
Hon Hai Precision Industry Co., Ltd. (Taiwan)              540,000     2,476      .31

Wireless Telecommunication Services  -  2.71%                                        
Vodafone Group PLC (United Kingdom)                      1,694,684     4,429         
Vodafone Group PLC (ADR)                                    78,000     2,003      .79
America Movil SA de CV, Series L (ADR) (Mexico)            242,500     4,724      .58
Libertel N.V. (Netherlands) /1/                            408,500     3,756      .46
NTT DoCoMo, Inc. (Japan)                                       285     3,338      .41
Tele Nordeste Celular Participacoes  SA, preferred          82,200     2,317      .28
 nominative (ADR) (Brazil)                                                           
KDDI Corp. (Japan)                                             480       895      .11
Egyptian Co. for Mobile Services (Egypt) /1/                90,000       654      .08

Communications Equipment  -  2.33%                                                   
Nokia Corp., Class A (ADR) (Finland)                       510,000    12,510         
Nokia Corp.                                                 70,000     1,805     1.76
Cisco Systems, Inc. (USA) /1/                              150,000     2,716      .33
Crown Castle International Corp. (USA) /1/                 145,000     1,549      .19
ADVA AG Optical Networking (Germany) /1/                    89,300       374      .05

Commercial Services & Supplies  -  2.24%                                             
Hays PLC (United Kingdom)                                1,946,514     5,887      .72
DeVry Inc. (USA) /1/                                       130,000     3,699      .46
Sabre Holdings Corp., Class A (USA) /1/                     50,000     2,118      .26
Apollo Group, Inc., Class A (USA) /1/                       42,000     1,890      .23
Securitas AB, Class B (Sweden)                              90,000     1,713      .21
Brambles Industries Ltd. (Australia)                       287,358     1,525      .19
Adecco SA (Switzerland)                                     25,325     1,377      .17

Metals & Mining  -  1.98%                                                            
RAO Norilsk Nickel (ADR) (Russia) /1/                      360,000     6,120      .75
Alcoa Inc. (USA)                                           140,000     4,977      .61
BHP Billiton PLC (formerly Billiton PLC)                   500,000     2,538      .31
 (United Kingdom)                                                                    
Hoganas AB, Class B (Sweden)                               160,000     2,502      .31

Diversified Financials  -  1.86%                                                     
Capital One Financial Corp. (USA)                           95,000     5,125      .63
J.P. Morgan Chase & Co. (USA)                              110,000     3,998      .49
ING Groep NV (Netherlands)                                  80,000     2,040      .25
AIFUL Corp. (Japan)                                         25,000     1,613      .20
First Pacific Co. Ltd. (Hong Kong)                      12,842,735     1,581      .19
Shohkoh Fund & Co., Ltd. (Japan)                            10,000       791      .10

Hotels, Restaurants & Leisure  -  1.80%                                              
Starbucks Corp. (USA) /1/                                  320,000     6,096      .75
Carnival Corp. (USA)                                       170,000     4,773      .58
McDonald's Corp. (USA)                                      83,000     2,197      .27
Compass Group PLC (United Kingdom)                         213,205     1,597      .20

Internet Software & Services  -  1.58%                                               
SmartForce PLC (ADR) (Ireland) /1/                         242,200     5,994      .74
VeriSign, Inc. (USA) /1/                                   100,000     3,804      .47
CNET Networks, Inc. (USA) /1/                              182,439     1,637      .20
Yahoo Inc. (USA) /1/                                        75,000     1,331      .16
WEB.DE AG (Germany) /1/                                     30,000       106      .01

Personal Products  -  1.51%                                                          
Shiseido Co., Ltd. (Japan)                                 555,000     5,112      .63
Avon Products, Inc. (USA)                                   77,900     3,622      .45
Estee Lauder Companies Inc., Class A (USA)                 110,000     3,527      .43

Chemicals -  1.36%                                                                   
Dow Chemical Co. (USA)                                     258,000     8,715     1.07
Valspar Corp. (USA)                                         40,000     1,584      .19
BOC Group PLC (United Kingdom)                              50,000       771      .10

Multiline Retail  -  1.31%                                                           
Wal-Mart de Mexico, SA de CV, Series V (ADR)               228,000     6,242      .77
 (Mexico)                                                                            
Woolworths Group PLC (United Kingdom)                    6,450,000     4,443      .54

Containers & packaging  -  1.05%                                                     
Sealed Air Corp. (USA) /1/                                 210,000     8,572     1.05

Automobiles  -  1.01%                                                                
Suzuki Motor Corp. (Japan)                                 520,000     5,672      .69
Honda Motor Co., Ltd. (Japan)                               65,000     2,586      .32

Machinery  -  0.88%                                                                  
Invensys PLC (United Kingdom)                            4,118,706     7,142      .88

Health Care Equipment & Supplies  -  0.81%                                           
Synthes-Stratec Inc. (Switzerland)                           6,500     4,528      .56
Sulzer Medica Ltd (Switzerland)                             49,000     2,067      .25

Air Freight & Couriers  -  0.69%                                                     
Atlas Air Worldwide Holdings, Inc. (USA) /1/               385,000     5,640      .69

Food & Drug Retailing  -  0.67%                                                      
Woolworths Ltd. (Australia)                                640,838     3,677      .45
Koninklijke Ahold NV (Netherlands)                          61,812     1,798      .22

Insurance  -  0.66%                                                                  
Munchener Ruckversicherungs-Gesellschaft AG                 12,500     3,394      .42
 (Germany)                                                                           
American International Group, Inc. (USA)                    25,000     1,985      .24

Computers & Peripherals  -  0.64%                                                    
Opticom ASA (Norway) /1/                                    56,000     2,296      .28
Psion PLC (United Kingdom)                               1,200,000     1,466      .18
C Technologies AB (Sweden) /1/                             404,776     1,413      .18

Paper & Forest Products  -  0.56%                                                    
Kimberly-Clark de Mexico, SA de CV, Class A (Mexico)     1,540,000     4,580      .56

Beverages  -  0.54%                                                                  
Anheuser-Busch Companies, Inc. (USA)                        50,000     2,261      .28
Heineken NV (Netherlands)                                   56,000     2,123      .26

Health Care Providers & Services  -  0.49%                                           
Fresenius Medical Care AG, preferred (Germany)              90,000     4,006      .49

Aerospace & Defense  -  0.44%                                                        
Bombardier Inc., Class B (Canada)                          350,000     3,626      .44

Office Electronics  -  0.43%                                                         
Canon, Inc. (Japan)                                        103,000     3,533      .43

Distributors  -  0.30%                                                               
Li & Fung Ltd. (Hong Kong)                               2,200,000     2,469      .30

Real Estate  -  0.27%                                                                
Cheung Kong (Holdings) Ltd. (Hong Kong)                    210,000     2,182      .27

Internet & Catalog Retail  -  0.25%                                                  
eBay Inc. (USA) /1/                                         30,000     2,007      .25

Household durables  -  0.22%                                                         
Sony Corp. (Japan)                                          39,200     1,786      .22

Airlines  -  0.14%                                                                   
British Airways PLC (United Kingdom)                       400,000     1,134      .14

Miscellaneous  -  0.73%                                                              
Other equity securities in initial period of                           5,915      .73
 acquisition                                                                         

Total equity securities: (cost: $714,159,000)                        661,186    81.17

Short-Tterm Securities                                                               
                                                        Principal                    
                                                           Amount                    
Corporate Short-Term Notes  -  17.27%                       (000)                    
Societe Generale North America Inc. 1.79%-1.95%             16,700    16,693     2.05
 due 1/7-1/10/02                                                                     
Nestle Capital Corp. 1.84%-2.02% due                        14,600    14,584     1.79
 1/8-1/28/02  /2/                                                                    
Stadshypotek AB 1.98% due 1/18/02  /2/                      14,200    14,186     1.74
American Honda Finance Corp. 1.93% due 1/29/02              11,600    11,582     1.42
Danske Corp. Inc. 1.85% due 1/14/02                         11,000    10,992     1.35
Rabobank Nederland NV 1.77%-1.85% due 1/14/02               10,000     9,993     1.23
Asset Securitization Corp. 2.00%-2.10% due                   9,700     9,697     1.19
 1/2-1/10/02  /2/                                                                    
Toyota Motor Credit Corp. 1.80%-2.00% due                    9,200     9,196     1.13
 1/9-1/11/02  /2/                                                                    
Triple-A One Funding Corp. 1.85%-1.99% due                   8,438     8,430     1.03
 1/9-1/22/02  /2/                                                                    
Coca-Cola Co. 1.74% due 1/25/02                              8,100     8,090      .99
Reseau Ferre de France 1.97% due 1/11/02                     7,800     7,795      .96
General Electric Capital Corp. 1.82% due 1/2/02              5,200     5,200      .64
Texaco Inc. 2.01% due 1/10/02                                5,000     4,997      .61
Pfizer Inc 1.80% due 1/31/02 /2/                             4,800     4,793      .59
Merck & Co., Inc. 1.87% due 2/1/02                           4,500     4,493      .55

Federal Agency Discount Notes  -  1.20%                                              
Freddie Mac 1.74%-1.98% due 1/8-2/12/02                      9,800     9,783     1.20

Non-U.S. Currency  -  0.06%                                                          
New Taiwanese Dollar                                    NT$16,474        472      .06

Total short-term securities (cost: $150,985,000)                     150,976    18.53

Total investment securities (cost: $865,144,000)                     812,162    99.70
Excess of cash and receivables over payables                           2,478      .30

Net Assets                                                          $814,640 100.00% 

/1/ Non-income-producing security.                                                   
/2/ Purchased in a private placement transaction;                                    
 resale may be limited to qualified                                                  
 institutional buyers; resale to public                                              
 may require registration.                                                           
/3/Valued under procedures established by the                                        
 Board of Trustees.                                                                  

ADR = American Depositary Receipts                                                   

See Notes to Financial Statements                                                    

                                                        [Enlarge/Download Table]
American Funds Insurance Series Global                                                
Small Capitalization Fund                                                             
Investment Portfolio, December 31, 2001                                               

Investment Portfolio                                                                  
                                                                                      
                                                         Percent                      
                                                          of net                      
                                                           assets                     

The Americas                                               61.36%                     
Asia/Pacific Basin                                          9.69%                     
Europe                                                      9.57%                     
Other Countries                                             2.69%                     
Cash & Equivalents                                         16.69%                     

Largest Individual Equity Securities                                                  

Aviron                                                       2.53%                    
Travelocity.com                                              2.44%                    
Western Oil Sands                                            2.27%                    
Documentum                                                   2.10%                    
Exar                                                         1.90%                    
Hotel Reservations Network                                   1.74%                    
School Specialty                                             1.69%                    
Restoration Hardware                                         1.61%                    
Ticketmaster                                                 1.36%                    
Verisity                                                     1.32%                    

                                                                    Market   Percent  
                                                                      value    of net 
Stocks (common & preferred)                                Shares     (000)    assets 

Internet software & services - 10.36%                                                 
Travelocity.com Inc. (USA) (1)                             360,000   $10,336    2.44% 
Hotel Reservations Network, Inc., Class A (USA) (1)        160,000     7,360      1.74
OTG Software, Inc. (USA) (1)                               400,000     4,000       .95
webMethods, Inc. (USA) (1)                                 200,000     3,352       .79
DoubleClick Inc. (USA) (1)                                 290,000     3,289       .78
SonicWALL, Inc. (USA) (1)                                  150,000     2,916       .69
Retek Inc. (USA) (1)                                        80,000     2,390       .57
MatrixOne, Inc. (USA) (1)                                  150,000     1,949       .46
Cybird Co., Ltd. (Japan) (1)                                   390     1,899       .45
EarthLink, Inc. (USA) (1)                                  150,000     1,825       .43
CNET Networks, Inc. (USA) (1)                              175,000     1,570       .37
SmartForce PLC (ADR) (Ireland) (1)                          40,000       990       .23
RADWARE Ltd. (Israel) (1)                                   60,000       779       .18
Epicentric, Inc., Series C, convertible                    340,136       435       .10
 preferred (USA) (1) (2) (3)                                                          
DreamArts Corp. (Japan) (1) (2) (3)                            400       380       .09
BridgeSpan, Inc., Series B, convertible preferred          246,129       244       .06
 (USA) (1) (2) (3)                                                                    
GFT Technologies AG (Germany) (1)                           23,000       104       .03

Semiconductor equipment & products - 7.81%                                            
Exar Corp. (USA) (1)                                       385,000     8,027      1.90
Cymer, Inc. (USA) (1)                                      150,000     4,009       .95
Elantec Semiconductor, Inc. (USA) (1)                       88,200     3,387       .80
Semtech Corp. (USA) (1)                                     85,000     3,034       .72
Faraday Technology Corp. (Taiwan)                          640,000     3,026       .71
ASM Pacific Technology Ltd. (Hong Kong)                  1,460,000     2,874       .68
TriQuint Semiconductor, Inc. (USA) (1)                     225,000     2,759       .65
Vitesse Semiconductor Corp. (USA) (1)                      210,000     2,610       .61
SOITEC SA (France) (1)                                      85,000     1,684       .40
Melexis NV (Belgium) (1)                                   100,000       757       .18
TranSwitch Corp. (USA) (1)                                 110,800       499       .12
MIPS Technologies, Inc., Class A (USA) (1)                  43,100       372       .09
Custom Silicon Configuration Services (Belgium) (1)         40,000        18       .00

Biotechnology  -  6.66%                                                               
Aviron (USA) (1)                                           215,200    10,702      2.53
IDEXX Laboratories, Inc. (USA) (1)                         188,700     5,380      1.27
Amylin Pharmaceuticals, Inc. (USA) (1)                     500,000     4,570      1.08
ILEX Oncology, Inc. (USA) (1)                              101,000     2,731       .65
XOMA Ltd. (USA) (1)                                        220,000     2,167       .51
Vical Inc. (USA) (1)                                        80,000       979       .23
OSI Pharmaceuticals, Inc. (USA) (1)  (2)                    14,000       640       .15
Genetronics Biomedical Corp. (USA) (1)                     810,000       549       .13
Forbes Medi-Tech Inc. (Canada) (1)                         252,000       467       .11

Software - 6.50%                                                                      
Documentum, Inc. (USA) (1)                                 410,000     8,905      2.10
Verisity Ltd. (Israel) (1)                                 295,500     5,600      1.32
HNC Software Inc. (USA) (1)                                220,000     4,532      1.07
Mentor Graphics Corp. (USA) (1)                            145,000     3,418       .81
Ulticom, Inc. (USA) (1)                                    250,000     2,515       .60
Aspen Technology, Inc. (USA) (1)                           100,000     1,680       .40
Aldata Solution Oyj (Finland) (1)                          230,000       424       .10
Alterian PLC (United Kingdom) (1)                          250,000       262       .06
Melody Interactive Solutions AB, Class A                    86,300       115       .03
 (Sweden) (1) (2) (3)                                                                 
Infoteria Corp. (Japan) (1) (2) (3)                            128        61       .01

Specialty retail -  5.92%                                                             
Restoration Hardware, Inc. (USA) (1)                       406,300     3,632          
Restoration Hardware, Inc. (1) (2) (3)                     282,051     2,269          
Restoration Hardware, Inc. (1) (2)                         100,000       894      1.61
Zale Corp. (USA) (1)                                       125,000     5,235      1.24
Culture Convenience Club Co., Ltd. (Japan)                 165,000     2,636       .62
Circuit City Stores, Inc. - CarMax Group (USA) (1)         100,000     2,274       .54
Michaels Stores, Inc. (USA) (1)                             60,000     1,977       .47
Finlay Enterprises, Inc. (USA) (1)                         190,100     1,580       .37
JJB Sports PLC (United Kingdom)                            200,000     1,338       .31
Sharper Image Corp. (USA) (1)                              100,000     1,175       .28
DFS Furniture Co. PLC (United Kingdom)                     136,425       888       .21
Giordano International Ltd. (Hong Kong)                  1,600,000       708       .17
African Lakes PLC (United Kingdom) (1)                   3,700,000       398       .09
Homac Corp. (Japan)                                          6,500        35       .01

Electronic equipment & instruments  -  5.32%                                          
Keithley Instruments, Inc. (USA)                           300,000     5,070      1.20
Micronic Laser Systems AB (Sweden) (1)                     195,000     3,563       .84
Kingboard Chemical Holdings Ltd. (Hong Kong)             4,600,000     2,950       .70
Newport Corp. (USA)(1)                                     150,000     2,892       .68
Hankuk Electric Glass Co., Ltd. (South Korea)               55,000     2,481       .59
Venture Manufacturing (Singapore) Ltd (Singapore)          168,000     1,210          
Venture Manufacturing (Singapore) Ltd.  (2)                 90,000       648       .44
DDi Corp. (USA) (1)                                         90,000       886       .21
Orbotech Ltd. (Israel) (1)                                  27,000       841       .20
Hana Microelectronics PCL (Thailand)                       460,000       770       .18
Digital Electronics Corp. (Japan)                           52,000       633       .15
QPL International Holdings Ltd. (Hong Kong) (1)          1,293,000       464       .11
JOT Automation Group Oyj (Finland)                         260,000       111       .02

Hotels, restaurants & leisure  -  4.71%                                               
P.F. Chang's China Bistro, Inc. (USA) (1) (2)               75,000     3,547          
P.F. Chang's China Bistro, Inc.  (1)                        35,000     1,656      1.23
Ameristar Casinos, Inc. (USA) (1)                          162,000     4,058       .96
Vail Resorts, Inc. (USA) (1)                               200,000     3,546       .84
Orient-Express Hotels Ltd., Class A (USA) (1)              150,000     2,715       .64
Extended Stay America, Inc. (USA) (1)                      150,000     2,460       .58
Boca Resorts, Inc., Class A (USA) (1)                      150,000     1,965       .46

Media  -  4.26%                                                                       
Groupe AB SA (France)                                      141,250     2,980       .70
Fox Kids Europe NV (Netherlands) (1)                       288,000     2,948       .70
SBS Broadcasting SA (Luxembourg) (1)                       118,000     2,136       .51
Cumulus Media Inc., Class A (USA) (1)                      119,700     1,937       .46
Westwood One, Inc. (USA) (1)                                64,200     1,929       .46
Lions Gate Entertainment Corp., Series A,                      558     1,272          
 convertible preferred (Canada) (3)                                                   
Lions Gate Entertainment Corp. (1)                         100,000       228          
Lions Gate Entertainment Corp., warrants,                  237,150        62       .37
 expire 2004 (1) (3)                                                                  
UnitedGlobalCom, Inc., Class A (USA) (1)                   300,000     1,500       .35
PRIMEDIA Inc. (USA) (1)                                    292,612     1,273       .30
CanWest Global Communications Corp. (Canada)               111,300       831       .20
Sportsworld Media Group PLC (United Kingdom) (1)           179,500       635       .15
GameLoft.com SA (France) (1)                               252,758       176       .04
Modalis Research Technologies, Inc. (USA) (1) (2) (3)      322,270        62       .01
Photobition Group PLC (United Kingdom) (3)               1,460,000        62       .01

Internet & catalog retail  -  3.05%                                                   
School Specialty, Inc. (USA) (1)                           312,700     7,155      1.69
Ticketmaster, Class B (USA) (1)                            350,000     5,736      1.36

Commercial services & supplies -  2.94%                                               
Education Management Corp. (USA) (1)                       145,400     5,271      1.24
Informatics Holdings Ltd. (Singapore)                    2,957,000     1,778       .42
Stericycle, Inc. (USA) (1)                                  25,000     1,522       .36
Oslo Bors Holding ASA (Norway) (1) (2)                      75,000     1,253       .30
ITE Group PLC (United Kingdom) (1)                       3,831,058     1,223       .29
Sylvan Learning Systems, Inc. (USA) (1)                     50,000     1,104       .26
Corporate Services Group PLC (United Kingdom) (1)          578,750       286       .07

Oil & gas  -  2.54%                                                                   
Western Oil Sands Inc. (Canada) (1) (2)                    686,666     8,231          
Western Oil Sands Inc., Class A (1)                        114,444     1,372      2.27
Tullow Oil PLC (United Kingdom) (1)                      1,026,399     1,128       .27

Metals & mining  -  2.29%                                                             
Hoganas AB, Class B (Sweden)                               158,000     2,471       .58
Kenmare Resources PLC (Ireland) (1)                      9,500,000     2,022       .48
Nelson Resources Ltd. (Canada) (1)                       8,250,000     1,865       .44
Gabriel Resources Ltd. (Canada) (1)                        600,000     1,319          
Gabriel Resources Ltd. (1) (2) (3)                         200,000       396       .41
First Quantum Minerals Ltd. (Canada) (1)                   400,000       753       .18
Thistle Mining Inc. (Canada) (1)                         3,945,455       421       .10
Namibian Minerals Corp. (Canada)(1)                      1,900,000       352          
Namibian Minerals Corp. warrants (1) (3)                   950,000      -          .08
Arcon International Resources PLC (Ireland) (1)          3,250,000        95       .02

Computers & peripherals  -  1.32%                                                     
Pinnacle Systems, Inc. (USA) (1)                           300,000     2,382       .56
O2Micro International Ltd. (USA) (1)                        75,000     1,804       .43
C Technologies AB (Sweden) (1)                             372,340     1,300       .31
Sotec Co. Ltd. (Japan) (2)                                     129        91       .02

Wireless telecommunication services  -  1.30%                                         
TeraBeam Networks (USA) (1) (2) (3)                        533,332     1,600       .38
Tele Centro Oeste Celular Participacoes SA,                200,000     1,400       .33
 preferred nominative (ADR) (Brazil)                                                  
Tele Celular Sul Participacoes SA, preferred                50,000       818       .19
 nominative (ADR) (Brazil)                                                            
Tele Norte Celular Participacoes SA, preferred              28,000       640       .15
 nominative (ADR) (Brazil)                                                            
GLOBE TELECOM, Inc.(Philippines) (1)                        40,500       535       .13
Tele Leste Celular Participacoes SA,                        25,000       511       .12
 preferred nominative (ADR) (Brazil) (1)                                              

Airlines  -  1.10%                                                                    
Atlantic Coast Airlines Holdings, Inc. (USA) (1)           200,000     4,658      1.10

Chemicals  -  1.07%                                                                   
SPARTECH Corp. (USA)                                       150,000     3,083       .73
OM Group, Inc. (USA)                                        12,000       794       .19
Cambrex Corp. (USA)                                         15,000       654       .15

Pharmaceuticals  -  1.02%                                                             
Inspire Pharmaceuticals, Inc. (USA) (1)                    116,000     1,634       .39
Medicis Pharmaceutical Corp., Class A (USA) (1)             20,000     1,292       .30
Scios Inc. (USA) (1)                                        50,000     1,188       .28
InterMune Inc.  (USA) (1)                                    4,400       217       .05

Food & drug retailing  -  0.95%                                                       
Performance Food Group Co. (USA) (1)                       100,000     3,517       .83
Migros Turk TAS (Turkey)                                 5,850,000       504       .12

Health care providers & services  -  0.92%                                            
Triad Hospitals, Inc. (USA) (1)                             75,000     2,201       .52
Rhon-Klinikum AG, nonvoting preferred (Germany)             21,000     1,080       .26
ICON PLC (ADR) (Ireland) (1)                                20,000       596       .14

Gas utilities -  0.90%                                                                
International Energy Group Ltd. (United Kingdom)           960,000     3,800       .90

Mutual funds  -  0.85%                                                                
Gladstone Capital Corp. (USA)                              195,000     3,607       .85

Transportation infrastructure  -  0.83%                                               
Zhejiang Expressway Co. Ltd., Class H (China)            7,000,000     1,724       .41
SembCorp Logistics Ltd. (Singapore)                      1,200,000     1,170       .28
International Container Terminal Services,              14,500,000       592       .14
 Inc. (Philippines) (1)                                                               

Insurance  -  0.82%                                                                   
Arthur J. Gallagher & Co. (USA)                            100,000     3,449       .82

Household durables  -  0.78%                                                          
Techtronic Industries Co. Ltd. (Hong Kong)               6,000,000     2,405       .57
Tohoku Pioneer Corp. (Japan)                                50,000       911       .21

Health care equipment & supplies  -  0.70%                                            
InSite Vision Inc. (USA) (1) (2)                           915,000     1,684          
InSite Vision Inc., warrants, expire 2004  (1) (2) (3)       9,150      -          .40
TriPath Imaging, Inc. (USA) (1)                             94,836       714       .17
Transgenomic, Inc. (USA) (1)                                50,000       550       .13

Machinery  -  0.65%                                                                   
Yushin Precision Equipment Co., Ltd. (Japan)                83,900     2,042       .48
Asahi Diamond Industrial Co., Ltd. (Japan)                 175,000       692       .17

Communications equipment  -  0.62%                                                    
Ixia (USA) (1)                                             110,000     1,414       .33
Stratos Lightwave, Inc. (USA) (1)                          113,800       700       .16
Alphyra group PLC  (formerly ITG Group PLC)                 98,029       327       .08
 (Ireland) (1)                                                                        
Toyo Communication Equipment Co., Ltd. (Japan)              70,000       200       .05

Banks  -  0.41%                                                                       
ICICI Bank Ltd. (India)                                    934,200     1,720          
ICICI Bank Ltd.  (ADR)                                       4,000        19       .41

Paper & forest products  -  0.38%                                                     
M-real Oyj, Class B (Finland)                              257,000     1,588       .38

Distributors  -  0.36%                                                                
Sixt AG, nonvoting preferred (Germany)                     100,000       864       .20
Li & Fung Ltd. (Hong Kong)                                 400,000       449       .11
MEDION AG (Germany)                                          5,600       224       .05

Beverages  -  0.36%                                                                   
BRL Hardy Ltd. (Australia)                                 170,976       964       .23
Quilmes Industrial SA, Class B (ADR) (Argentina)            45,000       538       .13

Diversified financials  -  0.34%                                                      
American Capital Strategies, Ltd. (USA)                     50,000     1,418       .34

Food products  -  0.16%                                                               
PT Indofood Sukses Makmur Tbk (Indonesia)               11,500,000       694       .16

Diversified telecommunication services  -  0.03%                                      
Global Light Telecommunications Inc. (Canada) (1)           40,000        76       .02
Glocalnet AB (Sweden) (1) (2)                              800,000        46       .01
Highpoint Telecommunications Inc. (Canada) (1)             510,000         6       .00

Textiles & apparel  -  0.03%                                                          
EUROBIKE AG (Germany)                                       40,000       112       .03

IT consulting & services  -  0.02%                                                    
Alphameric PLC (United Kingdom)                             64,700       104       .02

Total stocks (cost: $367,503,000)                                    331,162     78.28

                                                        Principal                     
                                                           Amount                     
Convertible debentures                                      (000)                     

Oil & gas  -  0.25%                                                                   
Sibir Energy PLC 15.00% 2002 (United Kingdom)             Pound650     1,040       .25

Metals & mining  -  0.12%                                                             
Nelson Resources Ltd., Series A, 13.00% 2004                  $500       500       .12
 (Canada)  (2) (3)                                                                    

Total convertible debentures (cost: $1,486,000)                        1,540       .37

Miscellaneous  -  4.66%                                                               
Other stocks in initial period of acquisition                         19,725      4.66

Total equity securities (cost:  $368,989,000)                        352,427     83.31

Short-term securities                                                                 

Corporate short-term notes  -  13.77%                                                 
Pfizer Inc 1.80% due 1/31/02 (2)                             8,900     8,886      2.10
Asset Securitization Cooperative Corp.1.95%-2.10%            7,600     7,596      1.80
 due 1/7-1/10/02 (2)                                                                  
General Electric Capital Services, Inc.                      6,100     6,099      1.44
 1.82% due 1/2/02                                                                     
H.J. Heinz Co. 2.10% due 1/17/02 (2)                         5,900     5,894      1.39
Coca-Cola Co. 1.74% due 1/25/02                              5,300     5,294      1.25
Rabobank Nederland NV 1.77% due 1/14/02                      5,000     4,997      1.18
Danske Corp. Inc. 1.85% due 1/14/02                          5,000     4,996      1.18
Societe Generale North America Inc. 1.79% due 1/10/02        4,400     4,398      1.04
Toyota Motor Credit Corp. 2.00% due 1/11/02 (2)              3,900     3,898       .92
Stadshypotek AB 1.98% due 1/18/02 (2)                        3,500     3,496       .83
Gaz de France 2.00% due 1/30/02                              2,300     2,296       .54
Nestle Capital Corp. 2.04% due 1/11/02 (2)                     400       400       .10

Federal agency discount notes  -  2.45%                                               
Freddie Mac 1.74% - 1.98% due 1/3 - 2/12/02                 10,400    10,386      2.45

Non-U.S. currency  -  0.08%                                                           
New Taiwanese Dollar                                    NT$11,231        322       .08

Total short-term securities (cost: $68,971,000)                       68,958     16.30

Total investment securities (cost: $437,960,000)                     421,385     99.61
Excess of cash and receivables over payables                           1,670       .39

Net assets                                                          $423,055  100.00% 

(1) Non-income-producing security.                                                    
(2) Purchased in a private placement transaction;                                     
    resale may be limited to qualified institutional                                  
    buyers; resale to public may require registration.                                
(3) Valued under procedures established by the                                        
 Board of Trustees.                                                                   

ADR = American Depositary Receipts                                                    

See Notes to Financial Statements                                                     

Equity securities appearing in the portfolio                                          
 since June 30, 2001                                                                  

Ameristar Casinos                                                                     
Atlantic Coast Airlines Holdings                                                      
Boca Resorts                                                                          
CanWest Global Communications                                                         
Circuit City Stores                                                                   
Extended Stay America                                                                 
Faraday Technology                                                                    
Genetronics Biomedical                                                                
Gladstone Capital                                                                     
Perfomance Food Group                                                                 
Scios                                                                                 
Smartforce                                                                            
Sylvan Learning System                                                                
Techtronic                                                                            
Transgenomic                                                                          
Ulticom                                                                               
Vitesse Semiconductor                                                                 

Equity securities eliminated from the portfolio                                       
 since June 30, 2001                                                                  

@Comm                                                                                 
Alliance Atlantis Communications                                                      
Artprice.com                                                                          
AstroPower                                                                            
Baltimore Technologies                                                                
Black Box                                                                             
Bricsnet                                                                              
BriteSmile                                                                            
Crown Media Holdings                                                                  
CTS                                                                                   
Day Interactive Holding                                                               
DSP Group                                                                             
Eclipsys                                                                              
eCollege.com                                                                          
Emmis Communications                                                                  
ERG                                                                                   
Esprit Holdings                                                                       
F.A.M.E. Film & Music Entertainment                                                   
FI System                                                                             
GoTo.com                                                                              
HighWave Optical Technologies                                                         
HotJobs.com                                                                           
innominate                                                                            
Integra                                                                               
InterTrust Technologies                                                               
Keppel Telecommunications & Transportation                                            
KOMERI                                                                                
Kyowa Exeo                                                                            
LookSmart                                                                             
Macromedia                                                                            
MDC Communications                                                                    
MemberWorks                                                                           
Mercury Computer Systems                                                              
Metalink                                                                              
Minmet                                                                                
Mogul.com Group                                                                       
NH Hoteles                                                                            
Nissin                                                                                
Optical Communication Products                                                        
Optoma                                                                                
Power Integrations                                                                    
Procomp Informatics                                                                   
Radiant Systems                                                                       
Sextant Entertainment                                                                 
SkyWest                                                                               
SportsLine.com                                                                        
Telelogic                                                                             
Too                                                                                   
Toyoda Machine Works                                                                  
TTI Team Telecom International                                                        
Universal Scientific Industrial                                                       
VTech Holdings                                                                        
Yamaichi Electronics                                                                  
Zenith National Insurance                                                             


                                                                [Download Table]
                                                                                    
American Funds Insurance Series Growth Fund                                         
Investment Portfolio, December 31, 2001                                             

[begin pie chart]                                                                   
Equity securities            90.32%                                                 
Cash & equivalents          9.68%                                                   
[end pie chart]                                                                     

                                                       Percent                      
                                                        of Net                      
10 Largest equity securities                            Assets                      

Viacom                                                    5.54%                     
AOL Time Warner                                           3.50%                     
Berkshire Hathaway                                        3.46%                     
PeopleSoft                                                2.89%                     
Texas Instruments                                         2.56%                     
American International Group                              2.26%                     
USA Networks                                              2.25%                     
Clear Channel Communications                              1.88%                     
Applied Materials                                         1.73%                     
Southwest Airlines                                        1.63%                     

                                                                    Market  Percent 
                                                     Number of       Value   of Net 
Equity Securities                                       Shares       (000)   Assets 

Media - 19.65%                                                                      
Viacom Inc., Class B  /1/                             9,347,061    $412,673         
Viacom Inc., Class A  /1/                               878,400      38,869    5.54%
AOL Time Warner Inc.  /1/                             8,892,725     285,456     3.50
USA Networks, Inc.  /1/                               6,700,000     182,977     2.25
Clear Channel Communications, Inc.  /1/               3,000,000     152,730     1.88
Comcast Corp., Class A, special stock  /1/            3,618,300     130,259     1.60
News Corp. Ltd., preferred (ADR) (Australia)          2,964,393      78,438         
News Corp. Ltd. (ADR)                                 1,270,000      40,399     1.46
Fox Entertainment Group, Inc., Class A  /1/           3,450,000      91,528     1.12
Adelphia Communications Corp., Class A  /1/           1,464,300      45,657      .56
TMP Worldwide Inc.  /1/                               1,000,000      42,900      .53
PRIMEDIA Inc.  /1/ /2/                                6,115,200      26,601         
PRIMEDIA Inc.  /1/                                    1,022,900       4,450      .38
UnitedGlobalCom, Inc., Class A  /1/                   3,940,000      19,700      .24
Liberty Media Corp. (formerly AT&T Corp.              1,350,000      18,900      .23
 Liberty Media Group), Class A  /1/                                                 
Univision Communications Inc., Class A /1/              300,000      12,138      .15
Cablevision Systems Corp.-New York Group,               158,200       7,507         
 Class A  /1/                                                                       
Cablevision Systems Corp. - Rainbow Media               151,300       3,737      .14
 Group, Class A /1/                                                                 
NTL Inc.  /1/                                         5,000,000       4,700      .06
United Pan-Europe Communications NV                   2,076,000         961      .01
 (Netherlands) /1/                                                                  

Semiconductor Equipment & Products  - 16.43%                                        
Texas Instruments Inc.                                7,455,000     208,740     2.56
Applied Materials, Inc.  /1/                          3,505,000     140,550     1.73
Microchip Technology Inc. /1/                         3,150,000     122,031     1.50
Taiwan Semiconductor Manufacturing Co.               44,070,000     110,491     1.36
 Ltd. (Taiwan) /1/                                                                  
Analog Devices, Inc.  /1/                             2,449,832     108,748     1.33
KLA-Tencor Corp.  /1/                                 2,020,000     100,111     1.23
Linear Technology Corp.                               2,355,000      91,939     1.13
Xilinx, Inc.  /1/                                     1,975,000      77,124      .95
Micron Technology, Inc.  /1/                          2,215,000      68,665      .84
PMC-Sierra, Inc.  /1/                                 2,801,300      59,556      .73
Maxim Integrated Products, Inc.  /1/                  1,050,300      55,151      .68
Broadcom Corp., Class A  /1/                          1,200,000      49,044      .60
Altera Corp.  /1/                                     2,150,000      45,623      .56
LSI Logic Corp.  /1/                                  2,500,000      39,450      .48
Applied Micro Circuits Corp.  /1/                     3,424,200      38,762      .48
Teradyne, Inc. /1/                                      525,000      15,823      .19
Micrel, Inc.  /1/                                       115,000       3,016      .04
Vitesse Semiconductor Corp.  /1/                        140,000       1,740      .02
Conexant Systems, Inc.  /1/                             120,000       1,723      .02

Insurance  - 9.07%                                                                  
Berkshire Hathaway Inc., Class A  /1/                     3,725     281,610     3.46
American International Group, Inc.                    2,315,000     183,811     2.26
Progressive Corp.                                       700,000     104,510     1.28
XL Capital Ltd., Class A (Bermuda)                      976,900      89,250     1.09
Allmerica Financial Corp.                               510,000      22,720      .28
Aon Corp.                                               438,500      15,576      .19
MGIC Investment Corp.                                   250,000      15,430      .19
Marsh & McLennan Companies, Inc.                        126,800      13,625      .17
Principal Financial Group, Inc.  /1/                    500,200      12,005      .15

Software  - 7.00%                                                                   
PeopleSoft, Inc.  /1/                                 5,850,828     235,203     2.89
Microsoft Corp.  /1/                                  1,310,000      86,787     1.07
Cadence Design Systems, Inc.  /1/                     3,850,000      84,392     1.04
BEA Systems, Inc.  /1/                                2,380,000      36,652      .45
Mentor Graphics Corp.  /1/                            1,250,000      29,462      .36
Intuit Inc.  /1/                                        570,000      24,385      .30
Siebel Systems, Inc.  /1/                               815,000      22,804      .28
VERITAS Software Corp.  /1/                             500,000      22,415      .27
Autodesk, Inc.                                          400,000      14,908      .18
i2 Technologies, Inc.  /1/                            1,025,000       8,097      .10
Roxio, Inc.  /1/                                        244,595       4,048      .05
Asera, Inc., Series C, convertible                      511,776         502      .01
 preferred /1/ /2/ /3/                                                              

Pharmaceuticals  - 6.13%                                                            
AstraZeneca PLC (United Kingdom)                      2,450,000     111,038     1.36
Eli Lilly and Co.                                     1,290,000     101,317     1.24
Pharmacia Corp.                                       2,080,487      88,733     1.09
Pfizer Inc                                            2,212,500      88,168     1.08
Forest Laboratories, Inc.  /1/                          700,000      57,365      .71
American Home Products Corp.                            583,000      35,773      .44
Johnson & Johnson                                       100,000       5,910      .07
IVAX Corp.  /1/                                         265,000       5,337      .07
Andrx Corp. - Andrx Group  /1/                           50,000       3,520      .04
Guilford Pharmaceuticals, Inc.  /1/                     200,000       2,400      .03

Communications Equipment  - 3.76%                                                   
Nokia Corp., Class A (ADR) (Finland)                  3,252,200      79,776      .98
Corning Inc. /1/                                      4,602,500      41,054      .50
Crown Castle International Corp. /1/                  2,905,000      31,025      .38
Cisco Systems, Inc.  /1/                              1,460,000      26,441      .33
Telefonaktiebolaget LM Ericsson,                      4,918,000      25,672      .32
 Class B (ADR) (Sweden)                                                             
JDS Uniphase Corp.  /1/                               2,825,000      24,521      .30
Adaptec, Inc.  /1/                                    1,486,000      21,547      .27
Motorola, Inc.                                        1,035,000      15,546      .19
Brocade Communications Systems, Inc.  /1/               319,000      10,565      .13
3Com Corp.  /1/                                       1,455,000       9,283      .11
Juniper Networks, Inc.  /1/                             475,200       9,005      .11
Nortel Networks Corp. (Canada)                          770,000       5,775      .07
Comverse Technology, Inc.  /1/                           85,000       1,901      .02
Arris Group, Inc. (formerly ANTEC Corp.) /1/            150,000       1,464      .02
CIENA Corp.  /1/                                        100,000       1,431      .02
Nexsi Systems Corp., Series C, convertible              405,997       1,155      .01
 preferred /1/ /2/ /3/                                                              

Commercial Services & Supplies  - 2.64%                                             
Sabre Holdings Corp., Class A  /1/                    1,593,917      67,502      .83
Allied Waste Industries, Inc. /1/                     3,066,700      43,118      .53
Ceridian Corp.  /1/                                   1,967,500      36,891      .45
Robert Half International Inc.  /1/                     800,000      21,360      .26
Avery Dennison Corp.                                    300,000      16,959      .21
Paychex, Inc.                                           250,000       8,712      .11
ARAMARK Corp., Class B  /1/                             300,000       8,070      .10
Arbitron Inc.  /1/                                      219,880       7,509      .09
Concord EFS, Inc.  /1/                                  160,000       5,245      .06

Diversified Financials  -  2.58%                                                    
Fannie Mae                                              962,000      76,479      .94
Capital One Financial Corp.                           1,205,000      65,010      .80
Household International, Inc.                           775,000      44,903      .55
J.P. Morgan Chase & Co.                                 275,000       9,996      .12
Freddie Mac                                             148,000       9,679      .12
State Street Corp.                                       80,000       4,180      .05

Hotels, Restaurants & Leisure  - 2.33%                                              
Starbucks Corp.  /1/                                  6,000,000     114,300     1.40
Carnival Corp.                                        2,480,300      69,647      .86
Outback Steakhouse, Inc. /1/                            175,000       5,994      .07

Oil & Gas  - 2.21%                                                                  
Murphy Oil Corp.                                        609,700      51,239      .63
EOG Resources Inc.                                    1,200,000      46,932      .58
Pogo Producing Co.                                    1,599,300      42,014      .52
Ocean Energy, Inc.                                      892,600      17,138      .21
Enterprise Oil PLC (United Kingdom)                   1,700,000      11,519      .14
Ivanhoe Energy Inc. (Canada) /1/                      4,500,000      10,229         
Ivanhoe Energy Inc., warrants,                        4,500,000         523      .13
 expire 2002 /1/ /3/                                                                

Airlines  -  2.07%                                                                  
Southwest Airlines Co.                                7,197,443     133,009     1.63
AMR Corp.  /1/                                        1,100,000      24,387      .30
Ryanair Holdings PLC (ADR) (Ireland) /1/                200,000       6,410      .08
Delta Air Lines, Inc.                                   150,000       4,389      .06

Internet Software & Services  - 1.61%                                               
Yahoo  Inc.  /1/                                      5,400,000      95,796     1.18
VeriSign, Inc.  /1/                                     549,800      20,914      .26
CNET Networks, Inc.  /1/                                910,000       8,163      .10
Homestore.com, Inc.  /1/ /3/                          2,400,000       6,048      .07

Specialty Retail  - .57%                                                            
Lowe's Companies, Inc.                                1,833,000      85,070     1.04
Staples, Inc.  /1/                                      875,000      16,363      .20
Limited Inc.                                          1,100,000      16,192      .20
CDW Computer Centers, Inc.  /1/                         160,000       8,594      .11
Williams-Sonoma, Inc.  /1/                               45,000       1,931      .02

Electronic Eqipment & Instruments  - 1.44%                                          
Solectron Corp.  /1/                                  4,384,000      49,452      .61
Sanmina-SCI Corp. (merger of Sanmina Corp.            1,205,710      23,994      .29
 and SCI Systems, Inc.)  /1/                                                        
DDi Corp.  /1/                                        1,300,000      12,792      .16
Celestica Inc. (Canada) /1/                             300,000      12,117      .15
Flextronics International Ltd.                          400,000       9,596      .12
 (Singapore) /1/                                                                    
Jabil Circuit, Inc.  /1/                                400,000       9,088      .11

Biotechnology  - 1.19%                                                              
Sepracor Inc.  /1/                                      604,800      34,510      .42
Millennium Pharmaceuticals, Inc.  /1/                 1,200,000      29,412      .36
Genentech, Inc.  /1/                                    300,000      16,275      .20
IDEC Pharmaceuticals Corp.  /1/                         173,400      11,952      .15
Amgen Inc.  /1/                                          90,000       5,080      .06

Air Freight & Couriers  - 1.18%                                                     
FedEx Corp.  /1/                                      1,400,000      72,632      .89
United Parcel Service, Inc., Class B                    436,200      23,773      .29

Beverages  - 1.17%                                                                  
Anheuser-Busch Companies, Inc.                          650,000      29,387      .36
PepsiCo, Inc.                                           400,000      19,476      .24
Coca-Cola Co.                                           412,000      19,426      .24
Coca-Cola West Japan Co. Ltd. (Japan)                   755,000      13,524      .17
Adolph Coors Co., Class B                               250,000      13,350      .16

Tobacco  - 1.05%                                                                    
Philip Morris Companies Inc.                          1,871,000      85,785     1.05

Diversified Telecommunication Services  - 0.96%                                     
Telefonos de Mexico, SA de CV, Class L                1,820,000      63,736      .78
 (ADR) (Mexico)                                                                     
WorldCom, Inc. - WorldCom Group  /1/                  1,000,000      14,080      .18
CoreExpress, Inc., Series C, convertible              1,861,446         230      .00
 preferred  /1/  /2/ /3/                                                            
Sigma Networks, Inc., Series C, convertible           2,546,377          25      .00
 preferred  /1/  /2/ /3/                                                            

Computers & Peripherals  - 0.82%                                                    
Sun Microsystems, Inc.  /1/                           1,500,000      18,450      .23
Quantum Corp. - DLT & Storage Systems /1/             1,500,000      14,775      .18
Storage Technology Corp.  /1/                           500,000      10,335      .13
Maxtor Corp.  /1/                                     1,520,000       9,637      .12
Dell Computer Corp.  /1/                                327,300       8,896      .11
Compaq Computer Corp.                                   450,000       4,392      .05

Containers & Packaging  -  0.65%                                                    
Sealed Air Corp.  /1/                                 1,300,000      53,066      .65

Energy Equipment & Services  - 0.59%                                                
Baker Hughes Inc.                                       625,000      22,794      .28
Schlumberger Ltd.                                       260,000      14,287      .18
Nabors Industries, Inc.  /1/                            131,000       4,497      .06
Cooper Cameron Corp.  /1/                               110,000       4,440      .05
Halliburton Co.                                         150,000       1,965      .02

Internet & Catalog Retail  - 0.47%                                                  
eBay Inc.  /1/                                          500,000      33,450      .41
Pay Pal, Inc. (formerly X.Com Corp),                  1,872,727       5,150      .06
 Series C, convertible preferred  /1//2//3/                                         

Health Care Equipment & Supplies  - 0.47%                                           
Applera Corp. - Applied Biosystems Group                965,600      37,919      .47

Electric Utilities  - 0.46%                                                         
Edison International  /1/                             2,500,000      37,750      .46

Industrial Conglomerates  - 0.43%                                                   
Tyco International Ltd.                                 600,000      35,340      .43

Banks  - 0.41%                                                                      
Charter One Financial, Inc.                           1,212,750      32,926      .41

Aerospace & Defense  - 0.36%                                                        
Bombardier Inc., Class B (Canada)                     1,838,700      19,050      .23
Lockheed Martin Corp.                                   120,000       5,600      .07
Northrop Grumman Corp.                                   45,000       4,536      .06

Chemicals  - 0.35%                                                                  
Valspar Corp.                                           666,100      26,378      .32
Syngenta AG (Switzerland) /1/                            43,491       2,254      .03

Wireless Telecommunication Services  - 0.32%                                        
Vodafone Group PLC (ADR) (United Kingdom)               375,000       9,630         
Vodafone Group PLC                                    2,710,000       7,083      .20
Sprint PCS Group  /1/                                   225,000       5,492      .07
Nextel Communications, Inc., Class A  /1/               350,000       3,836      .05

Multi-Utilities  - 0.23%                                                            
Questar Corp.                                           750,000      18,788      .23

Food & Drug Retailing  - 0.21%                                                      
Walgreen Co.                                            500,000      16,830      .21

IT Consulting & Services  - 0.18%                                                   
Computer Sciences Corp.  /1/                            300,000      14,694      .18

Health Care Providers & Services  - 0.12%                                           
Anthem, Inc.  /1/                                       200,000       9,900      .12

Multiline Retail  - 0.11%                                                           
Kohl's Corp.  /1/                                       125,000       8,805      .11

Miscellaneous  - 0.10%                                                              
Other equity securities in initial period                             7,869      .10
 of acquisition                                                                     

Total equity securities (cost: $6,396,049,000)                    7,355,701    90.32

                                                     Principal      Market  Percent 
                                                        Amount       Value   of Net 
Short-Term Securities                                    (000)       (000)   Assets 

Corporate Short-Term Notes  - 5.80%                                                 
Ciesco LP 1.77%-2.02% due 1/15-2/5/02                  $50,700       50,618      .62
BellSouth Corp. 1.80%-1.93% due 1/17-2/8/02 /2/          50,000      49,920      .61
General Electric Capital Corp. 1.75%-2.05%               45,540      45,483      .56
 due 1/2-2/12/02                                                                    
Household Finance Corp. 1.89%-2.03% due                  40,200      40,172      .49
 1/11-1/22/02                                                                       
Verizon Network Funding Corp. 1.92%-2.22%                32,400      32,362      .40
 due 1/15-1/22/02                                                                   
Equilon Enterprises LLC 1.78%-1.80%                      32,100      32,073      .39
 due 1/8-1/24/02                                                                    
Private Export Funding Corp. 1.75%-1.87%                 32,000      31,890      .39
 due 3/7-3/12/02  /2/                                                               
Three Rivers Funding Corp. 1.78%-1.93%                   29,106      29,090      .36
 due 1/4-1/14/02  /2/                                                               
GE Financial Assurance Holdings Inc. 2.24%               25,000      24,961      .31
 due 1/25/02  /2/                                                                   
E.W. Scripps Co. 1.80%-1.83% due                         25,000      24,947      .30
 1/9-3/20/02  /2/                                                                   
Gannett Co., Inc. 1.75%-1.90% due                        20,100      20,087      .25
 1/10-1/23/02  /2/                                                                  
Estee Lauder Companies Inc. 2.40% due 1/3/02  /2/        20,000      19,996      .25
Tribune Co. 2.20% due 1/22/02  /2/                       19,200      19,174      .24
USAA Capital Corp. 1.97% due 2/15/02                     19,100      19,052      .23
Park Avenue Receivables Corp. 2.05%                      17,500      17,465      .21
 due 2/4/02  /2/                                                                    
Motiva Enterprises LLC 2.00% due 1/11/02                 15,600      15,590      .19

Federal Agency Discount Notes  - 3.80%                                              
Fannie Mae 1.74%-2.34% due 1/31-4/18/02                 114,300     113,951     1.40
Federal Home Loan Banks 1.855%-2.28%                     93,800      93,703     1.15
 due 1/11-1/30/02                                                                   
Freddie Mac 1.68%-2.35% due 1/3-2/19/02                  83,600      83,471     1.02
Federal Farm Credit Bank 2.05% due 1/22/02               18,500      18,477      .23

Non-U.S. Currency  - 0.04%                                                          
New Taiwanese Dollar                                NT$104,136        2,984      .04

Total short-term securities (cost: $785,588,000)                    785,466     9.64

Total investment securities (cost: $7,181,637,000)                8,141,167    99.96
Excess of cash and receivables over payables                          3,239      .04

Net assets                                                       $8,144,406  100.00%

/1/ Non-income-producing security.                                                  
/2/ Purchased in a private placement transaction;                                   
 resale may be limited to qualified                                                 
 institutional buyers; resale to public                                             
 may require registration.                                                          
/3/ Valued under procedures established by the                                      
 Board of Trustees.                                                                 

ADR = American Depositary Receipts                                                  

See Notes to Financial Statements                                                   

                                                        [Enlarge/Download Table]
                                                                                      
American Funds Insurance Series International Fund                                    
Investment Portfolio, December 31, 2001                                               
                                                      Percent of                      
                                                      Net Assets                      
[pie chart]                                                                           
Europe                                                     48.44%                     
Asia/Pacific Basin                                         31.29%                     
The Americas                                               10.95%                     
Other Countries                                             2.46%                     
Cash & Equivalents                                          6.86%                     
[end pie chart]                                                                       

Largest Individual Equity Securities                                                  

Taiwan Semiconductor Manufacturing                          3.47%                     
AstraZeneca                                                 3.32%                     
Petrobras                                                   2.35%                     
Aventis                                                     2.02%                     
Norsk Hydro                                                 2.01%                     
Shionogi                                                    1.93%                     
America Movil                                               1.68%                     
Groupe Bruxelles Lambert                                    1.56%                     
Rohm                                                        1.53%                     
Telekom Austria                                             1.51%                     

                                                       Number of      Market  Percent 
                                                          Shares       Value   of Net 
Stocks (common & preferred)                                            (000)   Assets 

Pharmaceuticals  -  12.63%                                                            
AstraZeneca PLC (United Kingdom)                        1,741,700  $   79,728   3.32% 
Aventis SA (France)                                       682,000      48,418     2.02
Shionogi & Co., Ltd. (Japan)                            2,712,000      46,207     1.93
Sanofi-Synthelabo (France)                                440,000      32,823     1.37
Chugai Pharmaceutical Co., Ltd. (Japan)                 2,200,000      25,419     1.06
Novo Nordisk A/S, Class B (Denmark)                       491,500      20,109      .84
Elan Corp., PLC (ADR) (Ireland) /1/                       415,800      18,736      .78
CSL Ltd. (Australia)                                      450,000      11,826      .49
H. Lundbeck A/S (Denmark) /1/                             344,744       8,880      .37
Novartis AG (Switzerland)                                 200,000       7,231      .30
Shire Pharmaceuticals Group PLC (United Kingdom) /1/      264,800       3,311         
Shire Pharmaceuticals Group PLC (ADR) /1/                  11,000         403      .15

Media  -  8.33%                                                                       
Vivendi Universal  (France)                               604,491      33,094     1.38
Mediaset SpA (Italy)                                    4,100,000      29,874     1.24
KirchMedia GmbH & Co. KGaA, non-voting                    675,511      15,819      .66
 (Germany) /2/ /3/                                                                    
Grupo Televisa, SA (ADR) (Mexico) /1/                     360,000      15,545      .65
Granada PLC (United Kingdom)                            6,631,150      13,837      .58
News Corp. Ltd. (ADR) (Australia)                         362,000      11,515         
News Corp. Ltd., preferred                                203,538       1,356      .54
Modern Times Group MTG AB, Class B (Sweden) /1/           516,600      11,414      .47
British Sky Broadcasting Group PLC                      1,000,000      10,993      .46
 (United Kingdom) /1/                                                                 
ProSieben SAT.1 Media AG (Germany)                      2,211,856      10,928      .45
Nippon Television Network Corp. (Japan)                    42,000       8,916      .37
Fox Kids Europe NV (Netherlands) /1/                      820,000       8,395      .35
Telewest Communications PLC (United Kingdom) /1/        8,500,000       7,663      .32
MIH Ltd., Class A (South Africa) /1/                      985,000       7,190      .30
Pearson PLC (United Kingdom)                              500,000       5,751      .24
SBS Broadcasting SA (Luxembourg) /1/                      158,800       2,874      .12
SET Satellite (Singapore) Pte. Ltd.                       645,000       1,889      .08
 (Singapore) /1/ /2/ /3/                                                              
United Pan-Europe Communications NV                     2,642,000       1,223      .05
 (Netherlands) /1/                                                                    
SET India Ltd. (India)  /1/ /2/ /3/                        32,200         883      .04
KirchPayTV GmbH & Co. KGaA (Germany) /1/ /2/ /3/          239,788         872      .03

Oil & Gas  -  7.63%                                                                   
Petoleo Brasileiro SA - Petrobras, ordinary            2,422,400      56,442     2.35 
 nominative (ADR) (Brazil)                                                            
Norsk Hydro AS (Norway)                                 1,050,000      43,987         
Norsk Hydro AS (ADR)                                      100,000       4,200     2.01
Husky Energy Inc. (Canada)                              2,250,000      23,269      .97
"Shell" Transport and Trading Co., PLC                    410,000      16,994         
 (New York registered) (United Kingdom)                                               
"Shell" Transport and Trading Co., PLC                    540,000       3,706      .86
Petro-Canada (Canada)                                     740,000      18,265      .76
ENI SpA (Italy)                                         1,300,000      16,261      .68

Electronic Equipment & Instruments  -  6.36%                                          
Samsung SDI Co., Ltd. (South Korea)                       811,000      36,086     1.50
Samsung Electro-Mechanics Co., Ltd. (South Korea)         780,580      26,229     1.09
Nippon Electric Glass Co., Ltd. (Japan)                 3,000,000      21,975      .92
Hon Hai Precision Industry Co., Ltd. (Taiwan)           3,745,200      17,170      .72
Orbotech Ltd. (Israel) /1/                                550,000      17,132      .71
Murata Manufacturing Co., Ltd. (Japan)                    211,000      12,615      .53
Hoya Corp. (Japan)                                        175,000      10,423      .43
Hirose Electric Co., Ltd. (Japan)                         111,000       7,540      .31
EPCOS AG (Germany)                                         70,000       3,614      .15

Semiconductor Equipment & Products  -  6.13%                                          
Taiwan Semiconductor Manufacturing Co. Ltd.            33,208,952      83,260     3.47
 (Taiwan) /1/                                                                         
Rohm Co., Ltd. (Japan)                                    284,000      36,745     1.53
Dialog Semiconductor PLC (United Kingdom) /1/           1,369,108       9,872      .41
ASML Holding NV (formerly ASM Lithography                 500,000       8,688      .36
 Holding NV) (Netherlands) /1/                                                        
Samsung Electronics Co., Ltd. (South Korea)                40,000       8,562      .36

Banks  -  6.08%                                                                       
Allied Irish Banks, PLC (Ireland)                       2,300,000      26,617     1.11
Westpac Banking Corp. (Australia)                       2,651,900      21,325      .89
Bank of Nova Scotia (Canada)                              565,000      17,369      .72
Hang Seng Bank Ltd. (Hong Kong)                         1,350,000      14,847      .62
Lloyds TSB Group PLC (United Kingdom)                   1,340,000      14,536      .61
DBS Group Holdings Ltd. (Singapore)                     1,318,700       9,858      .41
Credit Suisse Group (Switzerland) /1/                     200,000       8,533      .35
Unibanco-Uniao de Bancos Brasileiros SA,                  360,000       8,028      .33
 units (GDR) (Brazil)                                                                 
ABN AMRO Holding NV (Netherlands)                         425,737       6,856      .29
HBOS PLC (formerly Bank of Scotland)                      579,000       6,702      .28
 (United Kingdom)                                                                     
Svenska Handelsbanken Group, Class A (Sweden)             300,000       4,419      .18
Sumitomo Mitsui Banking Corp. (Japan)                   1,010,000       4,264      .18
Bangkok Bank PCL (Thailand) /1/                         1,499,000       1,670      .07
Societe Generale  (France)                                 17,400         973      .04

Food Products  -  4.88%                                                               
Orkla AS, Class A (Norway)                              2,097,942      35,529     1.48
Nestle SA (Switzerland)                                   142,520      30,402     1.27
Koninklijke Numico NV (Netherlands)                     1,035,000      24,121     1.00
Unilever NV (Netherlands)                                 255,000      14,948      .62
Groupe Danone (France)                                    100,000      12,196      .51

Diversified Telecommunication Services  -  4.11%                                      
Telekom Austria AG (Austria) /1/                        4,365,000      36,176     1.51
Telefonos de Mexico, SA de CV, Class L                    749,000      26,230     1.09
 (ADR) (Mexico)                                                                       
Hellenic Telecommunications Organization SA (Greece)    1,175,000      19,142      .80
Swisscom AG (Switzerland)                                  20,000       5,544      .23
Videsh Sanchar Nigam Ltd. (ADR) (India)                   555,426       5,332      .22
Bayan Telecommunications Holdings Corp.,                  150,000       3,300       - 
 convertible preferred (Philippines) /2/ /3/                                          
Bayan Telecommunications Holdings Corp.,                   43,010                   - 
 Class A /1/  /2/ /3/                                                                 
Bayan Telecomunications Holdings Corp.,                    14,199                  .14
 Class B /1/  /2/ /3/                                                                 
Philippine Long Distance Telephone Co. (Philippines)      205,000       1,663         
Philippine Long Distance Telephone Co. (ADR)              154,000       1,269      .12

Wireless Telecommunication Services  -  3.49%                                         
America Movil SA de CV (ADR) (Mexico)                   2,064,000      40,207     1.68
China Mobile (Hong Kong) Ltd. (ADR) (People's             650,000      11,362      .47
 Republic of China) /1/                                                               
NTT DoCoMo, Inc. (Japan)                                      780       9,137      .38
China Unicom Ltd. (People's Republic of China) /1/      7,478,200       8,248      .34
Vodafone Group PLC (United Kingdom)                     3,000,000       7,841      .33
KDDI Corp. (Japan)                                          2,750       5,125      .21
Egyptian Co. for Mobile Services (Egypt) /1/              260,000       1,888      .08

Diversified Financials  -  2.99%                                                      
Groupe Bruxelles Lambert SA (Belgium)                     710,000      37,322     1.56
ING Groep NV (Netherlands)                                842,082      21,469      .89
Housing Development Finance Corp. Ltd. (India) /2/        933,000      12,902      .54

Household Durables  -  2.65%                                                          
Nintendo Co., Ltd. (Japan)                                198,600      34,669     1.45
Sony Corp. (Japan)                                        590,200      26,891     1.12
SEGA Corp. (Japan) /1/                                    100,000       1,989      .08

Commercial Services & Supplies  -  2.58%                                              
Adecco SA (Switzerland)                                   469,471      25,532     1.06
Brambles Industries PLC (United Kingdom) /1/            4,031,993      19,934      .83
Brambles Industries Ltd. (Australia)                    2,890,104      15,341      .64
Rentokil Initial PLC (United Kingdom)                     284,100       1,140      .05

Specialty Retail  -  1.84%                                                            
Dixons Group PLC (United Kingdom)                       7,192,341      24,577     1.02
INDITEX SA (Spain) /1/                                    952,600      18,156      .76
Kingfisher PLC (United Kingdom)                           242,376       1,413      .06

Automobiles  -  1.70%                                                                 
Honda Motor Co., Ltd. (Japan)                             561,000      22,317      .93
Suzuki Motor Corp. (Japan)                              1,700,000      18,543      .77

Metals & Mining  -  1.55%                                                             
Anglo American Platinum Corp. Ltd. (South Africa)         490,000      18,145      .76
BHP Billiton PLC (formerly Billiton PLC)                2,243,700      11,387      .47
 (United Kingdom)                                                                     
Anglogold Ltd. (South Africa)                             220,000       7,743      .32

Beverages  -  1.55%                                                                   
Heineken NV (Netherlands)                                 660,000      25,023     1.04
Southcorp Ltd. (Australia)                              3,163,498      12,191      .51

Paper & Forest Products  -  1.50%                                                     
UPM-Kymmene Corp. (Finland)                               945,000      31,336     1.30
Kimberly-Clark de Mexico, SA de CV,                     1,600,000       4,758      .20
 Class A (Mexico)                                                                     

Insurance  -  1.43%                                                                   
Allianz AG (Germany)                                       93,500      22,099      .92
Munchener Ruckversicherungs-Gesellschaft                   45,000      12,218      .51
 AG(Germany)                                                                          

Real Estate  -  1.37%                                                                 
Cheung Kong (Holdings) Ltd. (Hong Kong)                 2,300,000      23,893      .99
Sumitomo Realty & Development Co., Ltd. (Japan)         1,980,000       9,036      .38

Electrical Equipment  -  1.37%                                                        
Schneider SA (France)                                     291,200      13,998      .59
Nitto Denko Corp. (Japan)                                 521,100      12,010      .50
Johnson Electric Holdings Ltd. (Hong Kong)              6,461,500       6,795      .28

Food & Drug Retailing  -  0.99%                                                       
Koninklijke Ahold NV (Netherlands)                        737,550      21,457      .89
Loblaw Companies Ltd. (Canada)                             75,000       2,449      .10

Construction Materials  -  0.77%                                                      
Holcim Ltd. (Switzerland)                                  50,000      10,786      .45
Cemex, SA de CV, ordinary participation                   300,000       7,410      .31
 certificates, Units (ADR) (Mexico)                                                   
Cemex, SA de CV, warrants, expire 2004                     92,038         193      .01

Machinery  -  0.74%                                                                   
Metso Oyj (Finland)                                       830,000       8,719      .36
Mitsubishi Heavy Industries, Ltd. (Japan)               2,500,000       6,655      .28
Sandvik AB (Sweden)                                       110,500       2,373      .10

Electric Utilities  -  0.72%                                                          
Scottish Power PLC (United Kingdom)                     2,950,000      16,300      .68
Manila Electric Co, Class A (GDR)                         587,000         963         
 (Philippines) /1/ /2/ /3/                                                            
Manila Electric Co. Class A (Special Purchase              71,100          28      .04
 Right) (Philippines) /1/ /3/                                                         

Software  -  0.71%                                                                    
SAP AG (Germany)                                          129,600      16,984      .71

Internet Software & Services  -  0.69%                                                
BCE Inc. (Canada) /1/                                     575,000      16,464      .69

Auto Components  -  0.65%                                                             
GKN PLC (United Kingdom)                                4,031,993      15,537      .65

Health Care Providers & Services  -  0.61%                                            
Fresenius Medical Care AG (Germany)                       330,000      14,688      .61

Multiline Retail  -  0.59%                                                            
Wal-Mart de Mexico, SA de CV, Class C (Mexico)          6,000,000      14,105      .59

Biotechnology  -  0.55%                                                               
Serono SA, Class B (Switzerland) /1/                       15,000      13,097      .55

Aerospace & Defense  -  0.50%                                                         
Bombardier Inc., Class B (Canada)                       1,160,600      12,024      .50

Communications Equipment  -  0.42%                                                    
Nokia Corp., Class A (Finland)                            393,000      10,132      .42

Airlines  -  0.42%                                                                    
British Airways PLC (United Kingdom)                    2,846,900       8,072      .34
Cathay Pacific Airways Ltd. (Hong Kong) /1/             1,529,000       1,961      .08

Office Electronics  -  0.40%                                                          
Canon, Inc. (Japan)                                       280,000       9,605      .40

It Consulting & Services  -  0.40%                                                    
Nomura Research Institute, Ltd. (Japan) /1/                81,200       9,499      .40

Computers & Peripherals  -  0.33%                                                     
Opticom ASA (Norway) /1/                                  194,000       7,954      .33

Hotels, Restaurants & Leisure  -  0.26%                                               
Compass Group PLC (United Kingdom)                        830,170       6,217      .26

Transportation Infrastructure  -  0.11%                                               
Zhejiang Expressway Co. Ltd., Class H                  10,298,000       2,536      .11
 (People's Republic of China)                                                         

Chemicals  -  0.04%                                                                   
Syngenta AG (Switzerland) /1/                              17,007         881      .04

TOTAL STOCKS (cost: $2,147,584,000)                                 2,161,730    90.07

                                                       Principal      Market  Percent 
                                                          Amount       Value   of Net 
Convertible Debentures                                     (000)       (000)   Assets 

Media  -  0.12%                                                                       
EM.TV & Merchandising AG 4.00% convertible            Euro 6,508        2,780      .12
 debentures 2005 (Germany)                                                            

Diversified Telecommunication Services  -  0.05%                                      
COLT Telecom Group PLC 2.00% 2006 (United Kingdom)      2,400,000       1,258      .05

Electrical Equipment  -  0.03%                                                        
Elektrim SA 3.75% 2004 (Poland) /3/                           850         681      .03
TOTAL CONVERTIBLE DEBENTURES (cost: $11,270,000)                        4,719      .20

Miscellaneous  -  2.87%                                                               
Other stocks in initial period of acquisition          25,773,823      68,916     2.87

TOTAL EQUITY SECURITIES (cost: $2,229,369,000)                      2,235,365    93.14

                                                       Principal      Market  Percent 
                                                          Amount       Value   of Net 
Short-Term Securities                                      (000)       (000)   Assets 

Corporate Short-Term Notes  -  7.80%                                                  
American Honda Finance Corp. 1.78%-1.90%               42,100,000      42,044     1.75
 due 1/17-2/20/02                                                                     
Asset Securitization Cooperative Corp. 1.88%-2.10%     35,000,000      34,968     1.46
 due 1/8-1/24/02 /2/                                                                  
Triple A One Funding Corp. 1.77%-1.90%                 31,869,000      31,848     1.33
 due 1/11-1/15/02 /2/                                                                 
Reseau Ferre de France 2.01% due 1/29/02               25,000,000      24,959     1.04
Private Export Funding Corp. 1.87% due 3/7/02 /2/      20,000,000      19,935      .83
General Electric Capital Services, Inc.                18,510,000      18,508      .77
 1.82% due 1/2/02                                                                     
UBS Finance (Delaware) Inc. 2.00% due 1/4/02           15,000,000      14,997      .62

Non-U.S. Currency  -  0.06%                                                           
New Taiwanese Dollar                                   NT$52,589        1,507      .06
TOTAL SHORT-TERM SECURITIES (cost: $188,844,000)                      188,766     7.86

TOTAL INVESTMENT SECURITIES (cost: $2,418,213,000)                  2,424,131   101.00
Excess of payables over cash and receivables                           24,035     1.00

NET ASSETS                                                         $2,400,096  100.00%

/1/ Non-income-producing security.                                                    
/2/ Purchased in a private placement transaction;                                     
 resale may be limited to qualified                                                   
 institutional buyers; resale to public                                               
 may require registration.                                                            
/3/ Valued under procedures established by the                                        
 Board of Trustees.                                                                   

ADR = American Depositary Receipts                                                    
GDR = Global Depositary Receipts                                                      

See Notes to Financial Statements                                                     

                                                        [Enlarge/Download Table]
                                                                                       
American Funds Insurance Series New World Fund                                         
Investment Portfolio as of December 31, 2001                                           

[pie chart]                                                                            
The Americas                                                  31.72%                   
Asia/Pacific Basin                                            27.94%                   
Europe                                                        19.73%                   
Other countries                                                5.49%                   
Cash & equivalents                                            15.12%                   
[end pie chart]                                                                        

                                                            Percent                    
                                                             of Net                    
Largest Individual Equity Securities                         Assets                    

Coca-Cola                                                      3.11%                   
Avon Products                                                   2.01                   
Sappi                                                           1.75                   
China Unicom                                                    1.58                   
Votorantim Celulose e Papel                                     1.50                   
Hon Hai Precision Industry                                      1.41                   
Suzuki Motor                                                    1.38                   
Petrobras                                                       1.37                   
Housing Development Finance                                     1.36                   
Migros Turk                                                     1.34                   

                                                             Number    Market  Percent 
                                                                 of     Value   of Net 
Stocks (common & preferred)                                  Shares     (000)   Assets 

Banks  -  7.56%                                                                        
Unibanco-Uniao de Bancos Brasileiros SA,                     84,400    $ 1,882    1.23%
 units (GDR) (Brazil)                                                                  
Shinhan Financial Group Co., Ltd. (formerly                 120,230      1,619     1.06
 Shinhan Bank) (South Korea) /1/                                                       
Yapi ve Kredi Bankasi AS (Turkey) /1/                   412,424,335      1,266      .83
Bank of the Philippine Islands (Philippines)               1,008,200     1,127      .74
ICICI Bank Ltd. (India)                                      576,800     1,062         
ICICI Ltd.  (ADR)                                             08,000        38      .72
Bank Zachodni WBK SA (Poland) /1/                             81,395     1,028      .67
Allied Irish Banks, PLC (Ireland)                             84,500       978      .64
United Overseas Bank Ltd. (Singapore)                        123,000       846      .56
HSBC Holdings PLC (United Kingdom)                            54,800       641      .42
ABN AMRO Holding NV (Netherlands)                             33,577       541      .36
Australia and New Zealand Banking Group Ltd.                  55,000       500      .33
 (Australia)                                                                           

Beverages  -  6.13%                                                                    
Coca-Cola Co. (USA)                                          100,500     4,739     3.11
Fomento Economico Mexicano, SA de CV (ADR)                    45,500     1,572     1.03
 (Mexico)                                                                              
Anheuser-Busch Companies, Inc. (USA)                          30,000     1,356      .89
PepsiCo, Inc. (USA)                                           21,400     1,042      .68
Heineken NV (Netherlands)                                     17,000       645      .42

Wireless Telecommunication Services -  5.22%                                           
China Unicom Ltd. (People's Republic of China) /1/         2,178,000     2,402     1.58
GLOBE TELECOM, Inc. (Philippines) /1/                        143,992     1,903     1.24
China Mobile (Hong Kong) Ltd. (People's Republic             350,000     1,232      .81
 of China) /1/                                                                         
COSMOTE Mobile Telecommunications SA (Greece)                 90,000       915      .60
America Movil SA de CV, Series L (ADR) (Mexico)               40,000       779      .51
Tele Nordeste Celular Participacoes SA, preferred             26,000       733      .48
 nominative (ADR) (Brazil)                                                             

Electronic Equipment & Instruments  -  4.94%                                           
Hon Hai Precision Industry Co., Ltd. (Taiwan)                469,500     2,152     1.41
Samsung SDI Co., Ltd. (South Korea)                           37,000     1,646     1.08
Orbotech Ltd. (Israel) /1/                                    50,000     1,557     1.02
Samsung Electro-Mechanics Co., Ltd. (South Korea)             43,000     1,445      .95
Venture Manufacturing (Singapore) Ltd (Singapore)            101,000       728      .48

Food Products  -  4.88%                                                                
Orkla AS (Norway)                                             86,142     1,459      .96
Unilever PLC (United Kingdom)                                170,000     1,394      .91
Nestle SA (Switzerland)                                       06,000     1,280      .84
Sara Lee Corp. (USA)                                          53,000     1,178      .77
Unilever NV (Netherlands)                                     20,000     1,172      .77
Groupe Danone (France)                                        06,200       756      .50
PT Indofood Sukses Makmur Tbk (Indonesia)                  3,300,000       200      .13

Pharmaceuticals  -  4.27%                                                              
Dr. Reddy's Laboratories Ltd. (India)                         84,000     1,611     1.06
AstraZeneca PLC (United Kingdom)                              31,800     1,463      .96
Aventis (France)                                              16,100     1,143      .75
Teva Pharmaceutical Industries Ltd. (ADR) (Israel)            16,000       986      .65
PLIVA DD (GDR) (Croatia)                                      90,000       922      .60
Pfizer Inc (USA)                                              09,700       387      .25

Paper & Forest Products  -  3.90%                                                      
Sappi Ltd. (South Africa)                                    267,000     2,672     1.75
Votorantim Celulose e Papel SA (ADR) (Brazil)                130,000     2,294     1.50
Kimberly-Clark de Mexico, SA de CV, Class A (Mexico)         330,000       981      .65

Diversified Telecommunication Services  -  3.87%                                       
Telefonos de Mexico, SA de CV, Class L (ADR) (Mexico)         45,000     1,576     1.03
Cia. de Telecomunicaciones de Chile SA (ADR)                 105,800     1,424      .93
 (Chile) /1/                                                                           
Videsh Sanchar Nigam Ltd. (ADR) (India)                      132,100     1,268      .83
Telecom Argentina STET-France Telecom SA,                    160,900     1,049      .69
 Class B (ADR) (Argentina)                                                             
Hellenic Telecommunications Organization SA (Greece)          21,000       342      .23
Philippine Long Distance Telephone Co. (Philippines)          30,800       250      .16

Media  -  3.72%                                                                        
Grupo Televisa, SA, ordinary participation                    39,500     1,706     1.12
 certificates (ADR) (Mexico) /1/                                                       
Independent News & Media PLC (Ireland)                       794,724     1,486      .98
ABS-CBN Holdings Corp. (PDR) (Philippines)                 2,250,000     1,039      .68
BEC World PCL (Thailand)                                     220,000     1,025      .67
Globo Cabo SA, preferred nominative (ADR)                    109,300       384      .25
 (Brazil) /1/                                                                          
United Pan-Europe Communications NV                           39,000        18      .01
 (Netherlands) /1/                                                                     
Antenna TV SA (ADR) (Greece) /1/                              04,200        10      .01

Oil & Gas  -  3.44%                                                                    
Petroleo Brasileiro SA - Petrobras (ADR) (Brazil)             90,000     2,097     1.37
Sasol Ltd. (South Africa)                                    120,000     1,055      .69
LUKOIL (ADR) (Russia)                                         21,400     1,054      .69
Gulf Indonesia Resources Ltd. (Indonesia) /1/                 70,000       630      .41
"Shell" Transport and Trading Co., PLC                        10,000       414      .28
 (New York registered) (United Kingdom)                                                

Metals & Mining  -  3.21%                                                              
Pohang Iron & Steel Co., Ltd. (South Korea)                   15,700     1,469      .96
Cia. Vale do Rio Doce (Brazil)                                55,000     1,279      .84
Anglo American PLC (United Kingdom)                           68,688     1,050      .69
BHP Billiton PLC (formerly Billiton PLC)                     134,052       680      .45
 (United Kingdom)                                                                      
Freeport-McMoRan Copper & Gold Inc.,                          31,000       415      .27
 Class B (USA) /1/                                                                     

Automobiles  -  2.67%                                                                  
Suzuki Motor Corp. (Japan)                                   193,000     2,105     1.38
Honda Motor Co., Ltd. (Japan)                                 33,000     1,313      .86
Nissan Motor Co., Ltd. (Japan)                               125,000       661      .43

Personal Products  -  2.01%                                                            
Avon Products, Inc. (USA)                                     65,800     3,060     2.01

Commercial Services & Supplies  -  2.01%                                               
Sylvan Learning Systems, Inc. (USA) /1/                       92,200     2,035     1.34
Sabre Holdings Corp., Class A (USA) /1/                       24,155     1,023      .67

Diversified Financials  -  1.72%                                                       
Housing Development Finance Corp. Ltd. (India)               150,550     2,082     1.36
First Pacific Co. Ltd. (Hong Kong)                         4,365,959       538      .36

Electric Utilities  -  1.68%                                                           
Huaneng Power International, Inc., Class H                 3,040,000     1,832     1.20
 (People's Republic of China)                                                          
AES Corp. (USA) /1/                                           45,000       736      .48

Food & Drug Retailing  -  1.34%                                                        
Migros Turk TAS (Turkey)                                  23,700,000     2,043     1.34

Hotels, Restaurants & Leisure  -  1.30%                                                
McDonald's Corp. (USA)                                        60,000     1,588     1.04
Millennium & Copthorne Hotels PLC (United Kingdom)           100,000       396      .26

Leisure Equipment & Products  -  1.26%                                                 
Fuji Photo Film Co., Ltd. (Japan)                             54,000     1,922     1.26

Semiconductor Equipment & Products  -  1.12%                                           
Samsung Electronics Co., Ltd. (South Korea)                   08,000     1,712     1.12

Aerospace & Defense  -  1.00%                                                          
EMBRAER - Empresa Brasileira de Aeronautica SA,               69,000     1,527     1.00
 preferred nominative (ADR) (Brazil)                                                   

Health Care Equipment & Supplies  -  0.83%                                             
Lumenis Ltd. (Israel) /1/                                     64,500     1,271      .83

Gas Utilities  -  0.66%                                                                
Gas Natural SDG, SA (Spain)                                   60,000       999      .66

Real Estate  -  0.65%                                                                  
SM Prime Holdings, Inc. (Philippines)                      8,110,000       993      .65

IT Consulting & Services  -  0.60%                                                     
Infosys Technologies Ltd. (India)                             10,800       916      .60

Internet Software & Services  -  0.55%                                                 
Check Point Software Technologies Ltd. (Israel) /1/           21,000       838      .55

Household Products  -  0.54%                                                           
Kimberly-Clark Corp. (USA)                                    13,680       818      .54

Machinery  -  0.53%                                                                    
Mitsubishi Heavy Industries, Ltd. (Japan)                    254,000       676      .44
Sandvik AB (Sweden)                                           06,200       133      .09

Distributors  -  0.53%                                                                 
Li & Fung Ltd. (Hong Kong)                                   714,000       801      .53

Industrial Conglomerates  -  0.52%                                                     
Itausa - Investimentos Itau SA, preferred                    850,000       799      .52
 nominative (Brazil)                                                                   

Electrical Equipment  -  0.46%                                                         
Johnson Electric Holdings Ltd. (Hong Kong)                   667,000       701      .46

Multiline Retail  -  0.39%                                                             
Wal-Mart de Mexico, SA de CV, Series V (ADR)                  22,000       602      .39
 (Mexico)                                                                              

Construction Materials -  0.37%                                                        
Cheung Kong Infrastructure Holdings Ltd. (Hong Kong)         360,000       561      .37

Household Durables  -  0.33%                                                           
Sony Corp. (Japan)                                            11,000       501      .33

Transportation Infrastructure  -  0.30%                                                
Grupo Aeroportuario del Sureste, SA de CV,                    30,000       462      .30
 Class B (ADR) (Mexico) /1/                                                            

Building Pproducts  -  0.29%                                                           
Asahi Glass Co., Ltd. (Japan)                                 74,000       436      .29

Energy Equipment & Services  -  0.23%                                                  
Tubos de Acero de Mexico, SA (ADR) (Mexico)                   40,000       358      .23

Total stocks (cost: $119,688,000)                                      114,430    75.03

                                                          Principal                    
                                                             Amount                    
Convertible Debentures                                        (000)                    

Aerospace & Defense  -  0.44%                                                          
Banco Nacional de Desenvolvimento Economico e                750,000       677      .44
 Social 6.50% 2006 (Brazil) /2/                                                        

Electrical Equipment  -  0.10%                                                         
Elektrim SA 3.75% 2004 (Poland) /3/                    Euro 200,000        160      .10

Total convertible debentures (cost: $956,000)                              837      .54
Total equity securities (cost:  $120,644,000)                          115,267    75.57

                                                          Principal    Market  Percent 
                                                             Amount     Value   of Net 
Bonds & Notes                                                 (000)     (000)   Assets 

Wireless Telecommunication Services  -  0.60%                                          
PTC International Finance BV 0%/10.75% 2007 /4/              375,000       337      .22
Cellco Finance NV 12.75% 2005                                350,000       305      .20
GLOBE TELECOM, Inc. 13.00% 2009                              247,000       270      .18

Non-U.S. Government Obligations  -  8.71%                                              
Brazil (Federal Republic of):                                                          
   Bearer 8.00% 2014 /5/  /6/                            $1,539,000      1,189         
   10.125% 2027                                           1,175,000        867         
   14.50% 2009                                               450,000       482         
   3.25% 2009 /6/  /7/                                       436,765       351         
   Eligible Interest Bond 3.188% 2006 /6/ /7/                378,000       332         
   8.875% 2024                                               295,000       197     2.24
Russian Federation:                                                                    
   5.00% 2030 /2/  /6/  /7/                                2,906,250     1,693         
   5.00% 2030 /6/  /7/                                     1,000,000       583         
   8.25% 2010 /2/                                            365,753       319         
   8.25% 2010                                                250,000       218     1.84
United Mexican States Government Eurobonds, Global:                                    
   9.875% 2007                                               750,000       851         
   11.375% 2016                                              623,000       770         
   8.30% 2031                                                365,000       360         
   10.375% 2009                                              250,000       287         
   9.875% 2010                                               125,000       140         
   8.625% 2008                                               125,000       134     1.67
Panama (Republic of):                                                                  
   Interest Reduction Bond 4.75% 2014 /6/  /7/               919,630       819         
   9.375% 2029                                               585,000       614      .94
Turkey (Republic of) 11.875% 2030                            975,000       943      .62
Poland (Republic of) Past Due Interest Bond,                 717,750       715      .47
 Bearer 6.00% 2014 /6/  /7/                                                            
Croatian Government:                                                                   
   Series A, 4.529% 2010 /7/                                 544,091       536         
   Series B, 4.529% 2006 /7/                                  60,187        59      .39
Argentina (Republic of):                                                               
   12.25% 2018 /5/  /6/                                    1,049,660       255         
   7.00%/15.50% 2008 /4/  /6/                                389,378       106         
   12.00% 2031 /5/  /6/                                      305,481        68      .28
Philippines (Republic of) 10.625% 2025                                     393      .26

Total bonds & notes (cost: $13,967,000)                                 14,193     9.31

                                                          Principal    Market  Percent 
                                                             Amount     Value   of Net 
Short-Term Securities                                         (000)     (000)   Assets 

Corporate Short-Term Notes  -  14.26%                                                  
Gaz de France 2.00% due 1/30/02                            3,500,000     3,494     2.29
Stadshypotek AB 1.85% due 1/14/02 /2/                      2,600,000     2,598     1.70
Export Development Corp. 1.90% due 1/29/02                 2,600,000     2,596     1.70
CBA (Delaware) Finance Inc. 1.82% due 1/11/02              2,000,000     1,999     1.31
Danske Corp. Inc. 1.85% due 1/14/02                        2,000,000     1,998     1.31
Asset Securitization Corp. 2.10% due 1/10/02 /2/           1,900,000     1,899     1.25
Societe Generale North America Inc. 1.79%                  1,600,000     1,599     1.05
 due 1/10/02                                                                           
Triple-A One Funding Corp. 1.99% due 1/9/02 /2/            1,500,000     1,499      .98
Glaxo Wellcome PLC 2.00% due 2/6/02 /2/                    1,175,000     1,173      .77
Coca-Cola Co. 1.74% due 1/25/02                              800,000       799      .53
General Electric Capital Corp. 1.82% due 1/2/02              700,000       700      .46
Pfizer Inc 1.80% due 1/31/02 /2/                             700,000       699      .46
Rio Tinto America, Inc. 1.80% due 2/27/02 /2/                694,000       692      .45

Federal Agency Discount Notes  -  1.57%                                                
Freddie Mac 1.74% due 2/12/02                              2,400,000     2,395     1.57

Non-U.S. Currency  -  0.02%                                                            
New Taiwanese Dollar                                       NT$1,280         37      .02

Total short-term securities (cost: $24,180,000)                         24,177    15.85
Total investment securities (cost: $158,791,000)                       153,637   100.73
Excess of payables over cash and receivables                             1,120      .73
Net assets                                                            $152,517  100.00%

/1/ Non-income-producing security.                                                     
/2/ Purchased in a private placement transaction;                                      
 resale may be limited to qualified                                                    
 institutional buyers; resale to public                                                
 may require registration.                                                             
/3/ Valued under procedures established by the Board                                   
 of Trustees                                                                           
/4/ Step bond; coupon rate will increase at a                                          
 later date.                                                                           
/5/ Payment in kind; the issuer has the option of                                      
 paying additional securities in lieu of cash.                                         
/6/ Pass-through securities backed by a pool of                                        
 mortgages or other loans on which principal                                           
 payments are periodically made.                                                       
 Therefore, the effective maturities                                                   
 are shorter than the stated maturities.                                               
/7/ Coupon rate may change periodically.                                               

ADR = American Depositary Receipts                                                     
GDR = Global Depositary Receipts                                                       
PDR = Philippine Depositary Receipts                                                   

See Notes to Financial Statements                                                      

                                                                [Download Table]
                                                                                
American Funds Insurance Series                                                 
 Blue Chip Income and Growth Fund                                               
Investment Portfolio, December 31, 2001                                         

[pie chart]                                                                     
                                                     Percent                    
                                                      of Net                    
                                                      Assets                    

Equity Securities                                     93.93%                    
Cash & Equivalents                                     6.07%                    
[end pie chart]                                                                 

Largest Invidividual Equity Securities                                          

H.J. Heinz                                             4.11%                    
J.P. Morgan Chase                                        4.08                   
Kimberly-Clark                                           3.36                   
TRW                                                      3.25                   
Household International                                  3.23                   
Sanmina-SCI                                              2.89                   
ChevronTexaco                                            2.78                   
Interpublic Group of Companies                           2.72                   
Dow Chemical                                             2.57                   
General Electric                                         2.48                   

                                                                Market  Percent 
                                                   Number of     Value   of Net 
EQUITY SECURITIES (common & preferred stocks)         Shares     (000)   Assets 

DIVERSIFIED FINANCIALS  -  10.64%                                               
J.P. Morgan Chase & Co.                               179,300  $  6,518   4.08% 
Household International, Inc.                          89,000     5,157     3.23
Freddie Mac                                            43,200     2,825     1.77
USA Education Inc.                                     15,000     1,260      .79
Fannie Mae                                             15,400     1,224      .77

PHARMACEUTICALS  -  9.15%                                                       
Schering-Plough Corp.                                 104,100     3,728     2.33
Eli Lilly and Co.                                      39,500     3,102     1.94
Bristol-Myers Squibb Co.                               59,400     3,029     1.90
AstraZeneca PLC (ADR) (United Kingdom)                 53,800     2,507     1.57
Merck & Co., Inc.                                      38,200     2,246     1.41

ELECTRIC UTILITIES  -  8.31%                                                    
FPL Group, Inc.                                        64,200     3,621     2.27
Xcel Energy Inc.                                      120,700     3,348     2.10
Duke Energy Corp.                                      72,500     2,846     1.78
TXU Corp.                                              54,000     2,546     1.59
FirstEnergy Corp.                                      25,901       906      .57

FOOD PRODUCTS  -  5.43%                                                         
H.J. Heinz Co.                                        159,600     6,563     4.11
Unilever NV (New York registered) (Netherlands)        36,600     2,109     1.32

OIL & GAS  -  5.40%                                                             
ChevronTexaco Corp.                                    49,600     4,445     2.78
Unocal Corp.                                           64,100     2,312     1.45
Royal Dutch Petroleum Co. (New York registered)        38,200     1,873     1.17
 (Netherlands)                                                                  

COMPUTERS & PERIPHERALS  -  4.84%                                               
EMC Corp.  /1/                                        228,900     3,076     1.93
Hewlett-Packard Co.                                   138,400     2,843     1.78
International Business Machines Corp.                  15,000     1,814     1.13

COMMERCIAL SERVICES & SUPPLIES  -  3.89%                                        
Pitney Bowes Inc.                                     104,900     3,945     2.47
Automatic Data Processing, Inc.                        38,600     2,274     1.42

CHEMICALS  -  3.77%                                                             
Dow Chemical Co.                                      121,600     4,108     2.57
Air Products and Chemicals, Inc.                       40,600     1,905     1.20

DIVERSIFIED TELECOMMUNICATION SERVICES  -  3.61%                                
AT&T Corp.                                            196,700     3,568     2.24
Qwest Communications International Inc.               109,800     1,552      .97
Verizon Communications Inc.                            13,600       645      .40

AEROSPACE & DEFENSE  -  3.49%                                                   
Honeywell International Inc.                           98,300     3,325     2.08
United Technologies Corp.                              34,700     2,243     1.41

HOUSEHOLD PRODUCTS  -  3.36%                                                    
Kimberly-Clark Corp.                                   89,600     5,358     3.36

AUTO COMPONENTS  -  3.25%                                                       
TRW Inc.                                              140,300     5,197     3.25

ELECTRONIC EQUIPMENT & INSTRUMENTS  -  2.89%                                    
Sanmina-SCI Corp.  /1/                                231,900     4,615     2.89

MEDIA  -  2.72%                                                                 
Interpublic Group of Companies, Inc.                  146,800     4,336     2.72

INDUSTRIAL CONGLOMERATES  -  2.48%                                              
General Electric Co.                                   98,800     3,960     2.48

SEMICONDUCTOR EQUIPMENT & PRODUCTS  - 2.35%                                     
Texas Instruments Inc.                                133,800     3,746     2.35

BANKS  -  2.20%                                                                 
Wells Fargo & Co.                                      80,800     3,511     2.20

INSURANCE  -  1.94%                                                             
American International Group, Inc.                     28,200     2,239     1.40
Jefferson-Pilot Corp.                                  18,400       851      .54

ELECTRICAL EQUIPMENT  -  1.67%                                                  
Emerson Electric Co.                                   46,800     2,672     1.67

HOTELS, RESTAURANTS & LEISURE  -  1.44%                                         
Carnival Corp.                                         81,900     2,300     1.44

ENERGY EQUIPMENT & SERVICES  -  1.42%                                           
Schlumberger Ltd.                                      41,300     2,269     1.42

LEISURE EQUIPMENT & PRODUCTS  -  1.32%                                          
Eastman Kodak Co.                                      71,900     2,116     1.32

AIR FREIGHT & COURIERS  -  1.28%                                                
United Parcel Service, Inc., Class B                   37,600     2,049     1.28

SPECIALTY RETAIL  -  1.13%                                                      
Gap, Inc.                                             129,000     1,798     1.13

PAPER & FOREST PRODUCTS  -  1.07%                                               
Weyerhaeuser Co.                                       31,700     1,714     1.07

FOOD & DRUG RETAILING  -  0.78%                                                 
Albertson's, Inc.                                      39,400     1,241      .78

MISCELLANEOUS  -  4.10%                                                         
Other equity securities in initial period                         6,542     4.10
 of acquisition                                                                 

TOTAL EQUITY SECURITIES (cost: $148,015,000)                    149,977    93.93

                                                   Principal                    
                                                      Amount                    
Short-Term Securities                                  (000)                    

Corporate Short-Term Notes  -  6.71%                                            
Bank of America Corp. 1.76% due 1/28/02                 2,900     2,896     1.81
BellSouth Corp. 1.84% due 1/10/02 /2/                   2,200     2,199     1.38
Ciesco LP 1.75% due 1/7/02                              1,500     1,499      .94
Three Rivers Funding Corp. 1.85% due 1/17/02 /2/        1,400     1,399      .88
Asset Securitization Corp. 2.00% due 1/2/02 /2/         1,100     1,100      .69
Verizon Network Funding Corp. 1.73% due 1/11/02         1,000       999      .62
Triple-A One Funding Corp. 1.78%-1.85% due                618       618      .39
 1/7-1/18/02 /2/                                                                

Federal Agency Discount Notes  -  0.50%                                         
Freddie Mac 1.85% due 1/2/02                              800       800      .50

TOTAL SHORT-TERM SECURITIES (cost: $11,510,000)                  11,510     7.21

TOTAL INVESTMENT SECURITIES (cost: $159,525,000)                161,487   101.14
Excess of payables over cash and receivables                      1,816     1.14

NET ASSETS                                                     $159,671  100.00%

/1/ Non-income-producing security.                                              
/2/ Purchased in a private placement transaction;                               
 resale may be limited to qualified                                             
 institutional buyers; resale to public                                         
 may require registration.                                                      

ADR = American Depositary Receipts                                              

See Notes to Financial Statements                                               

                                                        [Enlarge/Download Table]
                                                                                     
American Funds Insurance Series Growth-Income Fund                                   

Investment Portfolio As of December 31, 2001                                         

                                                                             Percent 
                                                                              of net 
                                                                              assets 
[pie chart]                                                                          
Equity securities                                                              85.49%
Corporate bonds                                                                 0.24%
Cash & equivalents                                                             14.27%
[end pie chart]                                                                      

Largest individual equity securities                                                 

Bank of America                                                                 2.10%
Allied Waste Industries                                                         1.57%
AT&T                                                                            1.51%
Household International                                                         1.48%
Philip Morris                                                                   1.33%
Lowe's Companies                                                                1.32%
J.P. Morgan Chase                                                               1.27%
Wells Fargo                                                                     1.21%
Petro-Canada                                                                    1.18%
Sanmina-SCI                                                                     1.15%

                                                         Number      Market  Percent 
                                                             of       value   of net 
Stocks (common & preferred)                              Shares       (000)   assets 

Oil & Gas  -  5.60%                                                                  
Petro-Canada (Canada)                                  4,100,000   $101,200    1.18% 
ChevronTexaco Corp. (formed by the merger of           1,001,000      89,700     1.04
 Chevron Corp. and Texaco Inc.)                                                      
Pennzoil-Quaker State Co.                              3,830,900      55,356      .64
USX-Marathon Group                                     1,432,600      42,978      .50
Ultramar Diamond Shamrock Corp.  /1/                     826,400      40,890      .48
Exxon Mobil Corp.                                        700,000      27,510      .32
"Shell" Transport and Trading Co., PLC                   568,900      23,581         
 (New York registered) (United Kingdom)                                              
"Shell" Transport and Trading Co., PLC                   486,600       3,340      .31
Unocal Corp.                                             600,000      21,642      .25
BP PLC (ADR) (United Kingdom)                            450,000      20,929      .24
Noble Affiliates, Inc.                                   500,000      17,645      .21
Conoco Inc.                                              491,369      13,906      .16
Kerr-McGee Corp.                                         225,000      12,330      .14
Ashland Inc.                                             250,000      11,520      .13

Pharmaceuticals  -  4.89%                                                            
Eli Lilly and Co.                                      1,035,000      81,289      .94
Schering-Plough Corp.                                  2,230,000      79,856      .93
Pfizer Inc                                             1,487,500      59,277      .69
Scios Inc.  /1/                                        1,911,900      45,446      .53
AstraZeneca PLC (ADR) (United Kingdom)                   756,750      35,264      .41
Forest Laboratories, Inc.  /1/                           382,400      31,338      .36
Merck & Co., Inc.                                        500,000      29,400      .34
Bristol-Myers Squibb Co.                                 450,000      22,950      .27
Johnson & Johnson                                        350,000      20,685      .24
Pharmacia Corp.                                          360,000      15,354      .18

Banks  -  4.75%                                                                      
Bank of America Corp.                                  2,875,000     180,981     2.10
Wells Fargo & Co.                                      2,397,000     104,150     1.21
Bank of New York Co., Inc.                               800,000      32,640      .38
Wachovia Corp. (formerly First Union Corp.)              972,800      30,507      .35
BANK ONE CORP.                                           768,012      29,991      .35
FleetBoston Financial Corp.                              500,000      18,250      .21
SunTrust Banks, Inc.                                     200,000      12,540      .15

Media  -  4.74%                                                                      
Viacom Inc., Class B, nonvoting  /1/                   2,075,000      91,611     1.06
Interpublic Group of Companies, Inc.                   2,637,600      77,915      .90
News Corp. Ltd. (ADR) (Australia)                      1,100,000      34,991         
News Corp. Ltd., preferred (ADR)                         900,000      23,814      .68
Clear Channel Communications, Inc.  /1/                  948,700      48,298      .56
AOL Time Warner Inc.  /1/                              1,150,000      36,915      .43
Gannett Co., Inc.                                        500,000      33,615      .39
Dow Jones & Co., Inc.                                    450,000      24,629      .29
Fox Entertainment Group, Inc., Class A  /1/              700,000      18,571      .22
Comcast Corp., Class A, special nonvoting                500,000      18,000      .21
 stock  /1/                                                                          

Commercial Services & Supplies  -  4.68%                                             
Allied Waste Industries, Inc.  /1/                     9,600,100     134,977     1.57
Pitney Bowes Inc.                                      2,282,200      85,834     1.00
Ceridian Corp. (new)  /1/                              2,000,000      37,500      .43
Avery Dennison Corp.                                     600,000      33,918      .39
Sabre Holdings Corp., Class A  /1/                       750,000      31,762      .37
ServiceMaster Co.                                      1,600,000      22,080      .26
Waste Management, Inc.                                   500,000      15,955      .18
IMS Health Inc.                                          800,000      15,608      .18
Equifax Inc.                                             500,000      12,075      .14
Cendant Corp.  /1/                                       500,000       9,805      .11
First Data Corp.                                          50,000       3,923      .05

Diversified Financials  -  4.15%                                                     
Household International, Inc.                          2,200,000     127,468     1.48
J.P. Morgan Chase & Co.                                3,000,000     109,050     1.27
Freddie Mac                                              700,000      45,780      .53
American Express Co.                                     800,000      28,552      .33
Citigroup Inc.                                           550,050      27,766      .32
Providian Financial Corp.  /1/                         4,227,200      15,007      .18
MBNA Corp.                                               100,000       3,520      .04

Specialty Retail  -  3.69%                                                           
Lowe's Companies, Inc.                                 2,450,000     113,705     1.32
Circuit City Stores, Inc. - Circuit City Group         3,400,000      88,230     1.02
Gap, Inc.                                              3,875,000      54,017      .63
Limited Inc.                                           1,500,000      22,080      .25
AutoZone, Inc.  /1/                                      300,000      21,540      .25
Staples, Inc.  /1/                                     1,000,000      18,700      .22

Insurance  -  3.60%                                                                  
Allstate Corp.                                         2,050,000      69,085      .80
Manulife Financial Corp. (Canada)                      2,500,000      65,150      .76
Allmerica Financial Corp.                              1,100,000      49,005      .57
American International Group, Inc.                       550,000      43,670      .51
 (formerly American General Corp.)                                                   
MGIC Investment Corp.                                    575,000      35,489      .41
Royal & Sun Alliance Insurance Group PLC               4,500,000      25,830      .30
 (United Kingdom)                                                                    
St. Paul Companies, Inc.                                 500,000      21,985      .25

Semiconductor Equipment & Products  -  3.24%                                         
Texas Instruments Inc.                                 2,950,000      82,600      .96
Applied Materials, Inc.  /1/                           1,200,000      48,120      .56
Altera Corp.  /1/                                      1,495,000      31,724      .37
Maxim Integrated Products, Inc.  /1/                     500,000      26,255      .31
LSI Logic Corp.  /1/                                   1,600,000      25,248      .29
Xilinx, Inc.  /1/                                        531,100      20,739      .24
Intel Corp.                                              600,000      18,870      .22
Micrel, Inc.  /1/                                        492,400      12,916      .15
Agere Systems Inc., Class A  /1/                       1,385,400       7,883      .09
Micron Technology, Inc.  /1/                             150,000       4,650      .05

Communications Equipment  -  3.23%                                                   
Cisco Systems, Inc.  /1/                               3,642,600      65,967      .76
Telefonaktiebolaget LM Ericsson, Class B (Sweden)      6,000,000      32,711         
Telefonaktiebolaget LM Ericsson, Class B (ADR)         5,250,000      27,405      .70
Nokia Corp., Class A (ADR) (Finland)                   2,450,000      60,099      .70
Motorola, Inc.                                         2,000,000      30,040      .35
Corning Inc. /1/                                       3,350,000      29,882      .34
Lucent Technologies Inc., 8.00% convertible               12,910      14,330         
 preferred 2031  /2/                                                                 
Lucent Technologies Inc.  /1/                            400,000       2,516      .20
Harris Corp.                                             500,000      15,255      .18

Diversified Telecommunication Services  -  2.99%                                     
AT&T Corp.                                             7,175,700     130,167     1.51
ALLTEL Corp.                                             530,000      32,717      .38
Verizon Communications                                   650,000      30,849      .36
Qwest Communications International Inc.                1,400,000      19,782      .23
SBC Communications Inc.                                  500,000      19,585      .23
Sprint FON Group                                         850,000      17,068      .20
WorldCom, Inc. - WorldCom Group  /1/                     500,000       7,040      .08

Aerospace & Defense  -  2.74%                                                        
Honeywell International Inc.                           2,600,000      87,932     1.02
Lockheed Martin Corp.                                  1,280,800      59,775      .69
United Technologies Corp.                                623,200      40,277      .47
Raytheon Co.                                             892,300      28,973      .34
Boeing Co.                                               500,000      19,390      .22

Multiline Retail  -  2.41%                                                           
Kohl's Corp.  /1/                                      1,035,000      72,905      .85
Dollar General Corp.                                   3,362,400      50,100      .58
Federated Department Stores, Inc.  /1/                 1,000,000      40,900      .47
May Department Stores Co.                              1,100,000      40,678      .47
Dillard's, Inc., Class A                                 201,100       3,218      .04

Computers & Peripherals  -  1.82%                                                    
International Business Machines Corp.                    310,000      37,497      .43
Compaq Computer Corp.                                  3,500,000      34,160      .40
Hewlett-Packard Co.                                    1,550,000      31,837      .37
Dell Computer Corp.  /1/                                 700,000      19,026      .22
Lexmark International, Inc., Class A  /1/                313,300      18,485      .21
Sun Microsystems, Inc.  /1/                            1,300,000      15,990      .19

Electronic Equipment & Instruments  -  1.75%                                         
Sanmina-SCI Corp. (formerly SCI Systems, Inc.) /1/     4,978,000      99,062     1.15

Solectron Corp.  /1/                                   2,315,600      26,120      .30
Flextronics International Ltd. /1/                       550,000      13,195      .15
Jabil Circuit, Inc.  /1/                                 550,000      12,496      .15

Tobacco  -  1.72%                                                                    
Philip Morris Companies Inc.                           2,500,000     114,625     1.33
R.J. Reynolds Tobacco Holdings, Inc.                     600,000      33,780      .39

Paper & Forest Products  -  1.71%                                                    
Bowater Inc.                                           1,245,000      59,387      .69
Weyerhaeuser Co.                                         750,000      40,560      .47
International Paper Co.                                  750,000      30,262      .35
Georgia-Pacific Corp., Georgia-Pacific Group             439,660      12,139      .14
Westvaco Corp.                                           187,500       5,334      .06

Road & Rail  -  1.71%                                                                
Norfolk Southern Corp.                                 4,400,000      80,652      .94
Burlington Northern Santa Fe Corp.                     1,409,500      40,213      .47
CSX Corp.                                                300,000      10,515      .12
Union Pacific Corp.                                      150,000       8,550      .10
Canadian National Railway Co. (Canada)                   150,000       7,242      .08

Electric Utilities  -  1.70%                                                         
Edison International  /1/                              2,499,500      37,742      .44
Ameren Corp.                                             645,400      27,300      .32
Dominion Resources, Inc.                                 350,000      21,035      .24
TECO Energy, Inc.                                        750,000      19,680      .23
Duke Energy Corp.                                        350,400      13,757      .16
American Electric Power Co., Inc.                        275,000      11,971      .14
Constellation Energy Group, Inc.                         300,000       7,965      .09
TXU Corp.                                                150,000       7,073      .08

Software  -  1.65%                                                                   
Microsoft Corp.  /1/                                   1,320,000      87,450     1.02
Oracle Corp.  /1/                                      1,500,000      20,715      .24
BMC Software, Inc.  /1/                                1,000,000      16,370      .19
Cadence Design Systems, Inc.  /1/                        475,000      10,412      .12
Computer Associates International, Inc.                  200,000       6,898      .08

Food & Drug Retailing  -  1.58%                                                      
Albertson's, Inc.                                      3,040,000      95,730     1.11
Walgreen Co.                                           1,200,000      40,392      .47

Food Products  -  1.53%                                                              
Sara Lee Corp.                                         2,200,000      48,906      .57
H.J. Heinz Co.                                           988,700      40,656      .47
General Mills, Inc.                                      620,000      32,246      .37
Wm. Wrigley Jr. Co.                                      200,000      10,274      .12

Textiles & Apparel  -  1.35%                                                         
NIKE, Inc., Class B                                    1,609,600      90,524     1.05
VF Corp.                                                 650,000      25,356      .30

Hotels, Restaurants & Leisure  -  1.22%                                              
McDonald's Corp.                                       2,000,000      52,940      .61
Carnival Corp.                                         1,150,000      32,292      .38
MGM Mirage, Inc.   /1/                                   700,000      20,209      .23

Personal Products  -  1.15%                                                          
Avon Products, Inc.                                    2,125,000      98,812     1.15

Energy equipment & services  -  1.13%                                                
Schlumberger Ltd.                                      1,770,000      97,261     1.13

Machinery  -  1.07%                                                                  
Ingersoll-Rand Co.  /1/                                1,025,000      42,855      .50
Caterpillar Inc.                                         400,000      20,900      .24
Pall Corp.                                               700,000      16,842      .20
CNH Global NV (Netherlands)                            1,200,000       7,308      .08
Deere & Co.                                               97,700       4,266      .05

Wireless Telecommunication Services  -  1.00%                                        
Nextel Communications, Inc., Class A  /1/              3,070,000      33,648      .39
AT&T Wireless Services, Inc.  /1/                      2,067,790      29,714      .35
Western Wireless Corp., Class A  /1/                     797,600      22,532      .26

Health Care Equipment & Supplies  -  0.99%                                           
Applera Corp. - Applied Biosystems Group               1,084,600      42,592      .50
Guidant Corp.  /1/                                       470,800      23,446      .27
Becton, Dickinson and Co.                                570,000      18,896      .22

Household Products  -  0.96%                                                         
Kimberly-Clark Corp.                                   1,240,000      74,152      .86
Colgate-Palmolive Co.                                    150,000       8,663      .10

Health Care Providers & Services -  0.88%                                            
Cardinal Health, Inc.                                    675,000      43,646      .51
Service Corp. International  /1/                       4,000,000      19,960      .23
Aetna Inc.                                               375,000      12,371      .14

Air Freight & Couriers  -  0.87%                                                     
FedEx Corp.  /1/                                         900,000      46,692      .54
United Parcel Service, Inc., Class B                     511,400      27,871      .33

Office Electronics  -  0.67%                                                         
Xerox Corp.  /1/                                       3,319,936      34,594      .40
IKON Office Solutions, Inc.                            2,000,000      23,380      .27

Chemicals  -  0.63%                                                                  
PPG Industries, Inc.                                     400,000      20,688      .24
Air Products and Chemicals, Inc.                         400,000      18,764      .22
Millennium Chemicals Inc.                              1,150,000      14,490      .17

Real Estate  -  0.62%                                                                
Equity Residential Properties Trust                    1,000,000      28,710      .33
Boston Properties, Inc.                                  650,000      24,700      .29

Auto Components  -  0.54%                                                            
TRW Inc.                                               1,175,000      43,522      .50
Dana Corp.                                               231,800       3,217      .04

Electrical Equipment  -  0.50%                                                       
Emerson Electric Co.                                     750,000      42,825      .50

Internet Software & Services  -  0.48%                                               
Yahoo  Inc.  /1/                                       2,311,200      41,001      .48

Containers & Packaging  -  0.45%                                                     
Sonoco Products Co.                                      800,000      21,264      .25
Owens-Illinois, Inc.  /1/                              1,500,000      14,985      .17
Crown Cork & Seal Co., Inc.  /1/                       1,150,000       2,921      .03

IT Consulting & Services  -  0.37%                                                   
Computer Sciences Corp.  /1/                             650,000      31,837      .37

Airlines  -  0.32%                                                                   
Southwest Airlines Co.                                 1,500,000      27,720      .32

Internet & Catalog Retail  -  0.31%                                                  
eBay Inc.  /1/                                           400,000      26,760      .31

Metals & Mining  -  0.31%                                                            
Alcoa Inc.                                               750,000      26,662      .31

Automobiles  -  0.28%                                                                
General Motors Corp.                                     500,000      24,300      .28
Total stocks (cost: $6,437,348,000)                                7,062,223    81.98

                                                      Principal                      
                                                         amount                      
Convertible debentures                                    (000)                      

Biotechnology  -  0.21%                                                              
Sepracor Inc. 5.00% 2007                                $20,000       17,754      .21

Diversified Telecommunication Services  -  0.16%                                     
Telefonos de Mexico, SA de CV 4.25% 2004 (Mexico)         11,060      14,104      .16
Total convertible debentures (cost: $30,364,000)                      31,858      .37

Miscellaneous  -  3.14%                                                              
Other equity securities in initial period                            270,395     3.14
 of acquisition                                                                      
Total equity securities (cost: $6,467,712,000)                     7,364,476    85.49

                                                      Principal      Market  Percent 
                                                         amount       value   of net 
Bonds & Notes                                             (000)       (000)   assets 

Wireless Telecommunication Services  -  0.24%                                        
Nextel Communications, Inc.:  /3/                                                    
     0%/9.95% 2008                                      $22,200     $15,263          
     0%/10.65% 2007                                        7,200       5,436      .24
Total bonds & notes (cost: $18,793,000)                               20,699      .24

Short-Term Securities                                                                

Corporate Short-Term Notes  -  8.16%                                                 
SBC Communications Inc. 1.83%-2.37%                       75,400      75,299      .88
 due 1/9-2/14/02  /2/                                                                
Coca-Cola Co. 1.77%-1.97% due 1/28-2/22/02                53,800      53,674      .62
General Electric Capital Corp. 2.05%-2.10%                46,900      46,807      .54
 due 1/22-2/12/02                                                                    
Corporate Asset Funding Co. 1.72%-2.32%                   46,700      46,585      .54
 due 1/18-3/13/02  /2/                                                               
Tribune Co. 1.74%-1.87% due 2/6-2/20/02  /2/              45,800      45,701      .53
BellSouth Corp. 1.80%-1.93% due 1/17-2/8/02  /2/          43,300      43,250      .50
Three Rivers Funding Corp. 1.78%-1.96%                    41,484      41,448      .48
 due 1/7-2/8/02  /2/                                                                 
Merck & Co., Inc. 1.80%-1.87% due 1/31-2/14/02            40,000      39,918      .46
Gannett Co., Inc. 1.75%-1.90% due                         37,400      37,363      .44
 1/10-1/25/02  /2/                                                                   
Equilon Enterprises LLC 1.80% due 1/17-1/25/02            36,400      36,362      .42
Park Avenue Receivables Corp. 2.05%-2.06%                 36,250      36,204      .42
 due 1/16-2/4/02  /2/                                                                
Household Finance Corp. 2.16%-2.17% due                   34,400      34,358      .40
 1/14-1/24/02                                                                        
Procter & Gamble Co. 1.78%-1.97% due                      33,100      33,002      .38
 2/12-2/28/02  /2/                                                                   
Private Export Funding Corp. 1.75%-1.87%                  30,675      30,591      .36
 due 1/15-3/20/02  /2/                                                               
Motiva Enterprises LLC 1.87%-2.00% due                    30,100      30,088      .35
 1/7-1/11/02                                                                         
J.P. Morgan Chase & Co. 1.75% due 2/12/02                 27,600      27,542      .32
E.W. Scripps Co. 1.82%-1.88% due 2/5-3/20/02 /2/          25,000      24,923      .29
Ciesco LP  1.80%-2.02% due 1/11-1/15/02                   20,000      19,986      .23

Federal Agency Discount notes  -  6.23%                                              
Fannie Mae 1.73%-2.34% due 1/31-4/25/02                  221,594     220,821     2.57
Freddie Mac 1.68%-2.30% due 1/3-3/27/02                  203,000     202,532     2.35
Federal Home Loan Banks 1.75%-3.63% due                  113,200     112,987     1.31
 1/2-3/20/02                                                                         

Non-U.S. Currency  -  0.04%                                                          
New Taiwanese Dollar                                NT$ 137,967        3,953      .04

Total Short-Term Securities (cost: $1,243,403,000)                 1,243,394    14.43
Total Investment Securities (cost: $7,729,908,000)                 8,628,569   100.16
Excess of Payables Over Cash and Receivables                          13,854      .16
Net Assets                                                        $8,614,715  100.00%

/1/ Non-income-producing security.                                                   
/2/ Purchased in a private placement transaction;                                    
 resale may be limited to qualified                                                  
 institutional buyers; resale to public                                              
 may require registration.                                                           
/3/ Step bond; coupon rate will increase at                                          
 a later date.                                                                       

ADR = American Depositary Receipts                                                   

See Notes to Financial Statements                                                    

                                                        [Enlarge/Download Table]
American Funds Insurance Series Asset Allocation Fund                                          
Investment Portfolio, December 31, 2001                                                        
                                                                                               
                                                              Percent of                       
                                                               net assets                      
                                                             ------------                      
Equity securities                                                  62.06%                      
Corporate bonds                                                    13.94%                      
U.S. Treasury bonds & notes                                          3.8%                      
Asset-backed obligations                                             3.6%                      
Mortgaged-backed obligations                                        4.32%                      
Cash & equivalents                                                 12.28%                      

Largest individual equity securities                                                           

Household International                                              2.50%                     
CenturyTel                                                           2.45%                     
BANK ONE                                                             2.35%                     
Carnival                                                             2.26%                     
Bank of America                                                      2.17%                     
Pitney Bowes                                                         2.16%                     
ChevronTexaco                                                        2.08%                     
AstraZeneca                                                          2.01%                     
United Technologies                                                  1.86%                     
Albertson's                                                          1.81%                     

                                                               Principal                       
                                                             amount (000)      Market  Percent 
                                                                Number of       value   of net 
Stocks (common & preferred)                                        shares       (000)   assets 

Pharmaceuticals -  6.89%                                                                       
AstraZeneca PLC (ADR) (United Kingdom)                      750,000             34,950   2.01% 
Pfizer Inc                                                  650,000             25,902     1.49
Bristol-Myers Squibb Co.                                    395,700             20,181     1.16
Schering-Plough Corp.                                       400,000             14,324      .82
Pharmacia Corp.                                             300,000             12,795      .73
Eli Lilly and Co.                                           150,000             11,781      .68

Banks  -  5.05%                                                                                
BANK ONE CORP.                                            1,050,000             41,003     2.35
Bank of America Corp.                                       600,000             37,770     2.17
HSBC Capital Funding LP, Series 1, 9.547% noncumulative      $3,000              3,478      .20
 preferred (undated) (United Kingdom) (1) (2) (3)                                              
First Republic Capital Corp., Series A, 10.50%                2,250              2,160      .13
 preferred (1)                                                                                 
Fuji JGB Investment LLC, Series A, 9.87% noncumulative       $2,500              1,976      .11
 preferred (undated) (Japan) (1) (2)                                                           
NB Capital Corp. 8.35% exchangeable preferred                60,000              1,560      .09
 depositary shares                                                                             

Diversified telecommunication services -  4.24%                                                
CenturyTel, Inc.                                          1,298,350             42,586     2.45
AT&T Corp.                                                1,400,000             25,396     1.46
Qwest Communications International Inc.                     400,000              5,652      .32
COLT Telecom Group PLC (ADR) (United Kingdom) (4)            38,400                263      .01
GT Group Telecom Inc., warrants, expire 2010                  2,250                 13      .00
 (Canada) (1) (4) (5)                                                                          

Aerospace & defense  -  3.98%                                                                  
United Technologies Corp.                                   500,000             32,315     1.86
Raytheon Co.                                                700,000             22,729     1.30
Honeywell International Inc.                                400,000             13,528      .78
EarthWatch Inc., Series B, 7.00% convertible                339,255                750      .04
 preferred 2009 (1) (4) (5) (6)                                                                

Oil & gas  -  3.94%                                                                            
ChevronTexaco Corp. (merger of Chevron Corp.                404,000             36,202     2.08
 and Texaco Inc.)                                                                              
Royal Dutch Petroleum Co., New York registered              360,000             17,647     1.01
 (Netherlands)                                                                                 
Petro-Canada (Canada)                                       600,000             14,810      .85

Commercial services & supplies  -  3.91%                                                       
Pitney Bowes Inc.                                         1,000,000             37,610     2.16
Rentokil Initial PLC (ADR) (United Kingdom)               1,000,000             19,563     1.12
Ceridian Corp. (4)                                          583,100             10,933      .63

Diversified financials -  3.41%                                                                
Household International, Inc.                               750,000             43,455     2.50
Fannie Mae                                                  200,000             15,900      .91

Multiline retail -  2.52%                                                                      
May Department Stores Co.                                   825,000             30,508     1.75
J.C. Penney Co., Inc.                                       500,000             13,450      .77

Insurance - 2.46%                                                                              
Allstate Corp.                                              400,000             13,480      .77
American International Group, Inc.                          146,718             11,649      .67
Allmerica Financial Corp.                                   200,000              8,910      .51
Aon Corp.                                                   250,000              8,880      .51

Media  - 2.40%                                                                                 
Interpublic Group of Companies, Inc.                        650,000             19,201     1.10
New York Times Co., Class A                                 300,000             12,975      .75
AOL Time Warner Inc. (4)                                    225,000              7,223      .41
Adelphia Communications Corp., Series B, 13.00%              25,000              2,500      .14
 preferred 2009 (4)                                                                            

Food & drug retailing -  2.39%                                                                 
Albertson's, Inc.                                         1,000,000             31,490     1.81
Walgreen Co.                                                300,000             10,098      .58

Hotels, restaurants & leisure - 2.26%                                                          
Carnival Corp.                                            1,400,000             39,312     2.26

Computers & peripherals - 1.87%                                                                
International Business Machines Corp.                       150,000             18,144     1.04
Hewlett-Packard Co.                                         700,000             14,378      .83

Communications equipment - 1.84%                                                               
Nokia Corp., Class A (ADR) (Finland)                        980,000             24,039     1.38
Corning Inc. (4)                                            600,000              5,352      .31
Crown Castle International Corp. 12.75% exchangeable          3,786              2,726      .15
 preferred 2010 (4) (6)                                                                        

Electric utilities - 1.84%                                                                     
Edison International (4)                                  1,600,000             24,160     1.39
American Electric Power Co., Inc.                           180,000              7,835      .45

Food products - 1.53%                                                                          
General Mills, Inc.                                         300,000             15,603      .89
Sara Lee Corp.                                              500,000             11,115      .64

Energy equipment & services  -  1.42%                                                          
Schlumberger Ltd.                                           450,000             24,728     1.42

Semiconductor equipment & products - 1.14%                                                     
Texas Instruments Inc.                                      523,700             14,664      .84
Agere Systems Inc., Class A (4)                             923,593              5,255      .30

Trading companies & distributors - 1.05%                                                       
Genuine Parts Co.                                           500,000             18,350     1.05

Paper & forest products  - 0.93%                                                               
Weyerhaeuser Co.                                            300,000             16,224      .93

Software -  0.86%                                                                              
Autodesk, Inc.                                              400,000             14,908      .86

Beverages - 0.84%                                                                              
PepsiCo, Inc.                                               300,000             14,607      .84

Metals & mining - 0.82%                                                                        
Alcoa Inc.                                                  400,000             14,220      .82

Health care providers & services - 0.80%                                                       
CIGNA Corp.                                                 150,000             13,898      .80

Machinery - 0.64%                                                                              
Dover Corp.                                                 300,000             11,121      .64

Auto components - 0.64%                                                                        
TRW Inc.                                                    300,000             11,112      .64

Chemicals - 0.58%                                                                              
Millennium Chemicals Inc.                                   800,000             10,080      .58

Specialty retail - 0.54%                                                                       
Limited Inc.                                                636,546              9,370      .54

Road & rail - 0.29%                                                                            
Burlington Northern Santa Fe Corp.                          175,700              5,013      .29

Wireless telecommunication services - 0.19%                                                    
AT&T Wireless Services, Inc. (formerly AT&T                 140,700              2,022      .12
 Wireless Group) (4)                                                                           
Nextel Communications, Inc., Series D, 13.00%                 2,142              1,264      .07
 exchangeable preferred 2009 (4) (6)                                                           
Leap Wireless International, Inc., warrants,                    700                  5      .00
 expire 2010 (1) (4)                                                                           
NTELOS, Inc., warrants, expire 2010 (4) (5)                   2,000                  2      .00
McCaw International, Ltd., warrants, expire                   2,000                -        -  
 2007 (1) (4) (5)                                                                              

Electronic equipment & instruments - 0.09%                                                     
Agilent Technologies, Inc. (4)                               57,210              1,631      .09

Total stocks (cost: $914,559,000)                                            1,068,734   61.36 

                                                                Principal      Market  Percent 
                                                                   amount       value   of net 
Convertible debentures                                              (000)       (000)   assets 

Electronic equipment & instruments - 0.15%                                                     
Solectron Corp., 0% LYON convertible notes 2020           $   5,000              2,657      .15

Total convertible debentures (cost: $10,733,000)                                 2,657      .15

Miscellaneous -  0.55%                                                                         
Other equity securities in initial period of acquisition                         9,516      .55

Total equity securities (cost: $925,292,000)                                 1,080,907   62.06 

Bonds & notes                                                                                  

Media - 3.12%                                                                                  
Clear Channel Communications, Inc. 6.625% 2008                5,000              4,882         
Chancellor Media Corp. of Los Angeles 8.00% 2008              2,000              2,080      .40
Fox/Liberty Networks, LLC, FLN Finance, Inc.:                                                  
 0%/9.75% 2007 (3)                                            5,000              5,025         
 8.875% 2007                                                  1,500              1,560      .38
Cox Communications, Inc. 7.875% 2009                          5,000              5,348      .31
Liberty Media Corp. 7.875% 2009                               5,000              5,066      .29
Telemundo Holdings, Inc., Series D, 0%/11.50% 2008 (3)        4,000              3,780      .22
Gray Communications Systems, Inc.:                                                             
 9.25% 2011 (1)                                               2,000              1,990         
 10.625% 2006                                                 1,600              1,648      .21
Univision Communications Inc. 7.85% 2011                      2,750              2,784      .16
Young Broadcasting Inc.:                                                                       
 10.00% 2011                                                  2,250              2,104         
 Series B, 8.75% 2007                                           250                228      .13
British Sky Broadcasting Group PLC 8.20% 2009                 2,250              2,319      .13
Fox Family Worldwide, Inc.:                                                                    
 10.25% 2007                                                  1,403              1,515         
 9.25% 2007                                                     700                745      .13
Viacom Inc. 6.625% 2011                                       2,000              2,037      .12
Charter Communications Holdings, LLC:                                                          
 0%/11.75% 2011 (3)                                           2,000              1,210         
 11.125% 2011                                                   500                533      .10
ACME Television, LLC, Series B, 10.875% 2004                  1,750              1,680      .09
Emmis Communications Corp. 0%/12.50% 2011 (3)                 2,500              1,525      .09
Belo Corp. 8.00% 2008                                         1,250              1,278      .07
Antenna TV SA 9.75% 2008                                       Euro 1,500        1,162      .06
Key3Media Group, Inc. 11.25% 2011                         $   1,250              1,038      .06
American Media Operations, Inc. 10.25% 2009                   1,000              1,010      .06
Penton Media, Inc. 10.375% 2011                               1,250                719      .04
Sun Media Corp. 9.50% 2007                                      500                512      .03
Adelphia Communications Corp. 10.25% 2011                       500                501      .03
NTL Communications Corp., Series B, 11.875% 2010                325                106      .01

Hotels, restaurants & leisure - 1.19%                                                          
Royal Caribbean Cruises Ltd.:                                                                  
 7.00% 2007                                                   3,000              2,385         
 8.75% 2011                                                   1,000                810      .18
Premier Parks Inc.:                                                                            
 9.25% 2006                                                   1,150              1,161         
 9.75% 2007                                                   1,100              1,111         
 0%/10.00% 2008 (3)                                           1,000                852      .18
MGM Mirage Inc. 8.50% 2010                                    3,000              2,983      .17
Boyd Gaming Corp. 9.25% 2009 (1)                              2,000              2,050      .12
Harrah's Operating Co., Inc. 7.125% 2007                      2,000              2,026      .11
Argosy Gaming Co. 10.75% 2009                                 1,250              1,369      .08
Hard Rock Hotel, Inc., Series B, 9.25% 2005                   1,250              1,200      .07
Horseshoe Gaming Holding Corp. 8.625% 2009                    1,000              1,034      .06
Jupiters Ltd. 8.50% 2006                                      1,000              1,005      .06
Venetian Casino Resort, LLC 12.25% 2004                       1,000              1,000      .06
Eldorado Resorts LLC 10.50% 2006                              1,000                970      .05
Hollywood Casino Corp. 11.25% 2007                              750                810      .05

Diversified telecommunication services - 1.10%                                                 
TCI Communications, Inc. 8.75% 2015                           2,000              2,295         
AT&T Corp. 7.30% 2011 (1)                                     2,000              2,055      .25
COLT Telecom Group PLC 12.00% 2006                            3,750              3,225      .18
PCCW-HKT Capital Ltd. 7.75% 2011 (1)                          3,000              2,999      .17
CenturyTel, Inc., Series H, 8.375% 2010                       2,500              2,645      .15
Qwest Capital Funding, Inc. 7.75% 2006                        2,000              2,044      .12
TELUS Corp. 7.50% 2007                                        1,500              1,561      .09
Allegiance Telecom, Inc. 12.875% 2008                         1,300                968      .06
Koninklijke KPN NV 8.00% 2010                                   900                909      .05
Williams Communications Group, Inc. 10.875% 2009              1,250                534      .03

Wireless telecommunication services - 0.81%                                                    
Nextel Partners, Inc.:                                                                         
 0%/14.00% 2009 (3)                                           6,875              4,262         
 11.00% 2010                                                  1,000                810      .29
Verizon Wireless Capital LLC 5.375% 2006 (1)                  2,250              2,242      .13
Centennial Cellular Corp. 10.75% 2008                         2,250              1,901      .11
Dobson/Sygnet Communications Co. 12.25% 2008                  1,500              1,590      .09
CFW Communications Co. 13.00% 2010                            2,000              1,400      .08
Leap Wireless International, Inc. 12.50% 2010                   550                418         
Cricket Communications, Inc.: (2)                                                              
 6.25% 2007                                                     280                214         
 6.50% 2007                                                     165                126      .04
Telesystem International Wireless Inc. 14.00% 2003 (1)          859                649      .04
AirGate PCS, Inc. 0%/13.50% 2009 (3)                            575                437      .03

Banks & thrifts -  0.73%                                                                       
SocGen Real Estate Co. LLC, Series A, 7.64%                   4,000              4,122      .24
 (undated) (1) (2)                                                                             
National Westminster Bank PLC 7.75% (undated) (2)             3,200              3,417      .19
Regional Diversified Funding Ltd. 9.25% 2030 (1)              3,000              3,143      .18
BANK ONE, Texas, NA 6.25% 2008                                2,000              2,039      .12

Insurance - 0.70%                                                                              
Prudential Holdings, LLC, Series C, 8.695% 2023 (1)           4,000              4,173      .24
Monumental Global Funding Trust II, Series                    2,000              2,048         
 2001-A,  6.05% 2006 (1)                                                                       
Transamerica Corp. 9.375% 2008                                1,600              1,822      .22
UnumProvident Corp. 7.625% 2011                               2,000              2,078      .12
AFLAC Inc. 6.50% 2009                                         2,000              2,010      .12

Consumer finance - 0.63%                                                                       
Capital One Financial Corp. 7.125% 2008                       3,200              2,973         
Capital One Capital I 3.78% 2027 (1) (2)                      1,250                949      .22
Household Finance Corp. 7.875% 2007                           3,000              3,275      .19
MBNA Corp., MBNA Capital B, Series B, 3.03% 2027 (2)          3,000              2,164      .12
Advanta Capital Trust I, Series B, 8.99% 2026                 3,000              1,680      .10

Communications equipment - 0.62%                                                               
Motorola, Inc. 8.00% 2011 (1)                                 3,500              3,514      .20
SpectraSite Holdings, Inc., Series B:                                                          
 10.75% 2010                                                  3,250              1,658         
 0%/12.875% 2010 (3)                                          3,250                813         
 12.50% 2010                                                  1,250                681      .18
SBA Communications Corp.:                                                                      
 10.25% 2009                                                  2,500              2,112         
 0%/12.00% 2008 (3)                                             500                371      .15
American Tower Corp. 9.375% 2009                              2,000              1,585      .09

Electric utilities - 0.56%                                                                     
Edison Mission Energy:                                                                         
 9.875% 2011                                                  2,750              2,865         
 7.73% 2009                                                   1,500              1,395         
Mission Energy Holding Co. 13.50% 2008                        1,250              1,387      .32
Israel Electric Corp. Ltd.:                                                                    
 7.70% 2018 (1)                                               1,750              1,645         
 7.75% 2027 (1)                                               1,500              1,365      .17
AES Corp.:                                                                                     
 9.50% 2009                                                     875                761         
 9.375% 2010                                                    455                412      .07

Metals & mining - 0.45%                                                                        
BHP Finance Ltd.:                                                                              
 6.75% 2013                                                   2,680              2,714         
 6.69% 2006                                                   2,000              2,070      .27
Allegheny Technologies, Inc. 8.375% 2011 (1)                  3,000              2,945      .17
Doe Run Resources Corp., Series B, 9.38% 2003 (2)             1,500                165      .01

Commercial services & supplies - 0.43%                                                         
Allied Waste North America, Inc.:                                                              
 10.00% 2009                                                  1,750              1,794         
 8.50% 2008 (1)                                                 875                888         
 8.875% 2008                                                    500                518      .19
Cendant Corp. 7.75% 2003                                      2,750              2,795      .16
KinderCare Learning Centers, Inc., Series B, 9.50% 2009       1,500              1,433      .08

Health care providers & services - 0.41%                                                       
Humana Inc. 7.25% 2006                                        3,000              3,019      .18
Aetna Inc. 7.375% 2006                                        3,000              3,015      .17
CIGNA Corp. 6.375% 2011                                       1,000                988      .06
Integrated Health Services, Inc., Series A: (5) (7)                                            
 9.25% 2008                                                   1,750                 17         
 9.50% 2007                                                   1,250                 13      .00

Paper & forest products - 0.40%                                                                
Georgia-Pacific Corp. 8.125% 2011                             3,250              3,184         
Fort James Corp. 6.875% 2007                                  1,000                945      .24
Scotia Pacific Co. LLC, Series B, Class A-2,                  2,000              1,684      .09
 7.11% 2014 (8)                                                                                
Potlatch Corp. 10.00% 2011 (1)                                1,000              1,045      .06
Pindo Deli Finance Mauritius Ltd. 10.75% 2007 (7)             1,000                153      .01

Multiline retail - 0.33%                                                                       
J.C. Penney Co., Inc.:                                                                         
 8.25% 2022 (8)                                               3,650              3,157         
 7.60% 2007                                                   2,000              1,960         
 7.05% 2005                                                     500                490      .32
Saks Inc. 7.375% 2019                                           295                209      .01

Automobiles - 0.27%                                                                            
Ford Motor Credit Co.:                                                                         
 5.80% 2009                                                   3,000              2,719         
 6.875% 2006                                                  1,000              1,000         
 7.25% 2011                                                   1,000                975      .27

Auto components - 0.26%                                                                        
TRW Inc. 8.75% 2006                                           3,000              3,216      .18
Dana Corp. 9.00% 2011 (1)                                     1,500              1,357      .08

Oil & gas - 0.24%                                                                              
Pemex Finance Ltd., Series 1999-2, Class A3,                  1,870              2,147      .12
 10.61% 2017 (8)                                                                               
OXYMAR 7.50% 2016 (1)                                         2,500              2,044      .12

Specialty retail - 0.23%                                                                       
Toys "R" Us, Inc. 7.625% 2011 (1)                             1,830              1,788      .10
Gap, Inc. 8.80% 2008 (1)                                      1,680              1,472      .09
Woolworth Corp., Series A, 7.00% 2002                           750                756      .04

Containers & packaging - 0.22%                                                                 
Container Corp. of America 9.75% 2003                         2,000              2,050         
Stone Container Corp. 9.75% 2011                                250                266      .13
Riverwood International Corp. 10.875% 2008                    1,500              1,523      .09

Aerospace & defense - 0.20%                                                                    
BAE SYSTEMS 2001 Asset Trust Pass-Through Trusts,             3,478              3,495      .20
 Series 2001, Class B, 7.156% 2011 (1) (8)                                                     

Textiles & apparel - 0.19%                                                                     
VF Corp. 8.50% 2010                                           3,000              3,296      .19

Gas production & distribution -  0.17%                                                         
Gemstone Investor Ltd. 7.71% 2004 (1)                         3,000              2,918      .17

Food & drug retailing - 0.14%                                                                  
Rite Aid Corp.:                                                                                
 7.70% 2027                                                   2,600              1,807         
 6.875% 2013                                                    700                490         
 6.875% 2028 (1)                                                225                146      .14

Industrial congolmerates - 0.12%                                                               
Hutchison Whampoa International Ltd. 7.00% 2011 (1)           2,000              2,039      .12

Food products - 0.11%                                                                          
Fage Dairy Industry SA 9.00% 2007                             2,000              1,880      .11

Machinery - 0.08%                                                                              
Terex Corp., Class B, 10.375% 2011                            1,350              1,411      .08

Semiconductor equipment & products - 0.07%                                                     
Amkor Technology, Inc. 9.25% 2008                             1,275              1,205      .07

Personal products - 0.06%                                                                      
Playtex Products, Inc. 9.375% 2011                            1,000              1,050      .06

Real estate - 0.06%                                                                            
EOP Operating LP 7.25% 2018                                   1,000                948      .06

Airlines - 0.04%                                                                               
United Air Lines, Inc. 9.00% 2003                               500                370      .02
Northwest Airlines, Inc. 8.875% 2006                            300                255      .02

Mortgage-backed obligations (8) -  4.32%                                                       
Agency Pass-Throughs:                                                                          
Government National Mortgage Assn.:                                                            
 7.50% 2029                                                   8,070              8,347         
 8.00% 2020-2030                                              6,614              6,923         
 7.00% 2022-2024                                              6,057              6,184         
 6.50% 2029                                                   6,118              6,139         
 8.50% 2021-2029                                              1,201              1,273         
 10.00% 2019                                                    315                354     1.68
Fannie Mae:                                                                                    
 6.00% 2013-2032                                             12,522             12,500         
 6.50% 2016                                                   4,700              4,791         
 7.00% 2009                                                     544                567     1.03
Commercial Mortgage-Backed Securities:                                                         
DLJ Commercial Mortgage Corp.:                                                                 
 Series 1998-CF1, Class A-1B, 6.41% 2008                      5,000              5,151         
 Series 1996-CF2, Class A-1B, 7.29% 2021 (1)                  3,000              3,195      .48
Fannie Mae Grantor Trust, Series 2001-T10,                    4,892              5,067      .29
 Class A1, 7.00% 2041                                                                          
Starwood Asset Receivables Trust, Series 2000-1,              5,000              4,992      .29
 Class D, 3.38% 2022 (1) (2)                                                                   
Morgan Stanley Capital I, Inc., Series 1998-HF2,              3,000              3,102      .18
 Class A-2, 6.48% 2030                                                                         
L.A. Arena Funding, LLC, Series 1, Class A,                   1,973              1,980      .11
 7.656% 2026 (1)                                                                               
Security National Mortgage Loan Trust, Series                 1,830              1,823      .10
 2001-2A, Class M, 8.10% 2007 (1)                                                              
Private Issue Collateralized Mortgage Obligations:                                             
 Structured Asset Securities Corp., Series 1998-RF2,          2,600              2,796      .16
 Class A, 8.527% 2027 (1) (2)                                                                  

Asset-backed obligations (8) -  3.60%                                                          
Continental Airlines, Inc.:                                                                    
 Series 2001-1, Class B,  7.373% 2015                         2,476              2,135         
 Series 1999-1, 10.22% 2014                                   1,847              1,348         
 Series 1997-4, Class A, 6.90% 2018                           1,362              1,207         
 Series 1998-3, Class C-2, 7.25% 2005                         1,500              1,110      .33
MMCA Auto Owner Trust:                                                                         
 Series 2000-1, Class B, 7.55% 2005                           3,000              3,191         
 Series 2000-2, Class B, 7.42% 2005                           2,000              2,140      .30
Money Store Residential Trust 1997-1,                         5,000              5,131      .29
 Class M-1, 7.085% 2016                                                                        
Tobacco Settlement Financing Corp., Series                    5,000              4,881      .28
 2001A, 6.36% 2025                                                                             
NPF XII, Inc., Series 2001-3, Class A, 5.52% 2007 (1)         5,000              4,803      .28
NextCard Credit Card Master Note Trust: (1) (2)                                                
 Series 2000-1, Class B, 2.696% 2006                          2,750              2,662         
 Series 2001-1A, Class B, 2.776% 2007                         2,000              2,000      .27
US Airways, Inc., Series 2001-1G, 7.076% 2021                 4,492              4,505      .26
Residential Funding Mortgage Securities II, Inc.,             3,000              3,133      .18
 Series 2000-HI5, Class AI4, AMBAC Insured, 6.94% 2014                                         
Hyundai Auto Receivables Trust, Series 2001-A,                3,000              2,997      .17
 Class C, 5.57% 2006 (1)                                                                       
Metris Master Trust, Series 2001-3, Class B,                  3,000              2,945      .17
 3.003% 2008 (2)                                                                               
United Air Lines, Inc.:                                                                        
 Series 1996-A2, 7.87% 2019                                   2,500              1,796         
 Series 1995-A1, 9.02% 2012                                   1,241              1,135      .17
Prestige Auto Receivables Trust, Series 2001-1A,              2,371              2,407      .14
 Class A, FSA Insured, 5.26% 2009 (1)                                                          
Airplanes Pass-Through Trust:                                                                  
 Class B, 2.646% 2019 (2)                                     1,967              1,574         
 Class 1-C, 8.15% 2019 (6)                                    1,539                924      .14
Delta Air Lines, Inc.:                                                                         
 Series 1993-A2, 10.50% 2016                                  2,000              1,570         
 Series 1992-A2, 9.20% 2014                                   1,000                806      .14
First Consumer Master Trust, Series 1999-A,                   2,250              2,336      .13
 Class A, 5.80% 2005 (1)                                                                       
Jet Equipment Trust, Series 1995-B, Class B,                  2,098              1,574      .09
 7.83% 2015 (1)                                                                                
H.S. Receivables Corp., Series 1999-1, Class A,               1,406              1,458      .08
 8.13% 2004 (1)                                                                                
Providian Master Trust, Series 2000-1, Class C,               1,500              1,415      .08
 3.046% 2009 (1) (2)                                                                           
Drive Auto Receivables Trust, Series 2000-1,                  1,279              1,316      .08
 Class A, MBIA Insured, 6.672% 2006 (1)                                                        
Northwest Airlines, Inc. 8.52% 2004                             350                306      .02

U.S. Treasury bonds & notes - 3.80%                                                            
 7.00% 2006                                                  25,000             27,641         
 6.50% 2005                                                  20,000             21,581         
 3.50% 2011 (2) (9)                                          10,211             10,184         
 3.375% 2007 (2) (9)                                          5,609              5,625         
 11.75% 2010                                                    500                611         
 10.75% 2003                                                    500                554     3.80

Total bonds and notes (cost: $456,676,000)                                     446,901    25.66

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

Corporate short-term notes  -  10.18%                                                          
Kraft Foods Inc. 1.72% due 1/16/02                           22,000             21,983     1.26
Procter & Gamble Co. 1.77% due 2/26/02 (1)                   21,000             20,941     1.20
Wells Fargo & Co. 2.14% due 1/18/02                          20,000             19,979     1.15
Coca-Cola Co. 1.90%-1.97% due 1/28-2/8/02                    18,100             18,066     1.04
Coca-Cola Co. 01-28-02                                        7,600              7,588         
Coca-Cola Co. 02-08-02                                       10,500             10,478     1.04
Gannett Co.1.75%-1.90% due 1/10-1/25/02 (1)                  16,900             16,886      .97
Gannett Co., Inc. 01-10-02 (1)                                8,800              8,796         
Gannett Co., Inc. 01-25-02 (1)                                8,100              8,090      .97
Corporate Asset Funding Co. Inc. 2.07% due 1/4/02 (1)        15,865             15,861      .91
Household Finance Corp. 2.03% due 1/11/02                    12,600             12,592      .72
Triple-A One Funding Corp. 1.96% due 1/8/02 (1)              12,088             12,083      .69
General Electric Capital Corp. 1.82% due 1/2/02              11,680             11,679      .67
Equilon Enterprises LLC 1.78% due 1/8/02                     10,000              9,996      .58
E.W. Scripps Co. 1.80% due 1/9/02 (1)                         9,900              9,896      .57
BellSouth Corp. 1.80% due 2/4/02 (1)                          7,300              7,287      .42

Federal agency discount notes  - 1.72%                                                         
Freddie Mac 2.05% due 1/24/02                                13,525             13,507      .78
Federal Home Loan Banks 1.97% due 1/23/02                    10,000              9,987      .57
Federal Farm Credit Bank 2.05% due 1/22/02                    6,500              6,492      .37

Total short-term securities (cost: $207,235,000)                               207,235    11.90

Total investment securities (cost: $1,589,203,000)                           1,735,043    99.62
Excess of cash and receivables over payables                                     6,578      .38

Net assets                                                                  $1,741,621  100.00%

(1) Purchased in a private placement transaction; resale                                       
    may be limited to qualified institutional buyers;                                          
    resale to public may require registration.                                                 
(2) Coupon rate may change periodically.                                                       
(3) Step bond; coupon rate will increase at a later date.                                      
(4) Non-income-producing security.                                                             
(5) Valued under procedures established by the Board of                                        
    Trustees.                                                                                  
(6) Payment in kind; the issuer has the option of paying                                       
    additional securities in lieu of cash.                                                     
(7) Company not making interest (or dividend) payments;                                        
    bankruptcy proceedings pending.                                                            
(8) Pass-through securities backed by a pool of                                                
    mortgages or other loans on which principal payments                                       
    are periodically made.  Therefore, the effective                                           
    maturities are shorter than the stated maturities.                                         
(9) Index-linked bond whose principal amount moves with                                        
    a government retail price index.                                                           

ADR = American Depositary Receipts                                                             

See Notes to Financial Statements.                                                             

American Funds Insurance Series Bond Fund                                       
Investment Portfolio, December 31, 2001                                         

                                                                [Download Table]
                                                      
[pie chart]                                           
                                           Percent of 
                                           Net Assets 
Corporate bonds                                53.72% 
Mortgage-backed obligations                      11.86
U.S. Treasury bonds & notes                       7.14
Equity securities                                 7.08
Federal agency obligations                        3.45
Asset-backed obligations                          3.38
Non-U.S. government obligations                   1.63
Cash & equivalents                               11.74

Total                                         100.00% 

[end pie chart]                                                                 

                                                                [Download Table]
                                                                                    

                                                       Principal    Market  Percent 
                                                          Amount     Value   of Net 
Bonds & Notes                                              (000)     (000)   Assets 

MEDIA  -  11.36%                                                                    
Charter Communications Holdings, LLC:                                               
 0%/11.75% 2011 /1/                                        $5,350  $  3,237         
 0%/13.50% 2011 /1/                                         1,750     1,164         
 10.75% 2009                                                1,000     1,060         
 10.00% 2009                                                1,000     1,020         
 0%/9.92% 2011 /1/                                          1,250       900         
 0%/11.75% 2010 /1/                                           450       319    1.42%
A.H. Belo Corp.:                                                                    
 8.00% 2008                                                 5,500     5,625         
 7.75% 2027                                                   500       439     1.12
Fox/Liberty Networks, LLC, FLN Finance, Inc.:                                       
 0%/9.75% 2007 /1/                                          3,750     3,769         
 8.875% 2007                                                1,500     1,560      .98
Adelphia Communications Corp.:                                                      
 10.25% 2011                                                2,250     2,256         
 10.25% 2006                                                2,000     2,050         
Century Communications, Inc. 0% 2003                        1,000       890      .96
Liberty Media Corp.:                                                                
 7.875% 2009                                                2,000     2,026         
 8.50% 2029                                                 1,000       977         
 8.25% 2030                                                   850       804         
 7.75% 2009                                                   500       503      .79
CBS Corp. 7.15% 2005                                        2,000     2,111         
Viacom Inc. 6.625% 2011                                     2,000     2,037      .77
Fox Family Worldwide, Inc.:                                                         
 10.25% 2007                                                1,810     1,955         
 9.25% 2007                                                   500       532      .46
Young Broadcasting Inc.:                                                            
 10.00% 2011                                                1,250     1,169         
 Series B, 9.00% 2006                                         875       822         
 Series B, 8.75% 2007                                         500       456      .45
Key3Media Group, Inc. 11.25% 2011                           2,850     2,365      .44
News America Holdings Inc. 7.75% 2045                       2,000     1,922      .35
Comcast UK Cable Partners Ltd. 11.20% 2007                  1,900     1,368         
NTL Communications Corp.:                                                           
 Series B, 11.875% 2010                                     1,000       325         
 9.875% 2009                                             Euro 825       222      .35
Emmis Communications Corp. 0%/12.50% 2011 /1/             $ 2,650     1,616      .30
AOL Time Warner Inc. 7.625% 2031                            1,000     1,058         
Time Warner Inc. 7.75% 2005                                   500       537      .29
Radio One, Inc., Series B, 8.875% 2011                      1,500     1,545      .29
EchoStar DBS Corp. 9.125% 2009 /2/                          1,500     1,500      .28
Univision Communications Inc. 7.85% 2011                    1,425     1,443      .27
Telemundo Holdings, Inc., Series D, 0%/11.50%               1,500     1,417      .26
 2008 /1/                                                                           
Clear Channel Communications, Inc. 6.625% 2008                750       732         
Chancellor Media Corp. of Los Angeles,                        500       522      .23
 Series B, 8.75% 2007                                                               
Antenna TV SA 9.75% 2008                               Euro 1,425     1,104      .20
Gray Communications Systems, Inc. 9.25% 2011 /2/            $ 875       871      .16
Comcast Cable Communications, Inc. 8.375% 2007                750       832      .15
CSC Holdings, Inc. 8.125% 2009                                750       773      .14
American Media Operations, Inc. 10.25% 2009                   750       757      .14
British Sky Broadcasting Group PLC 8.20% 2009                 625       644      .12
Penton Media, Inc. 10.375% 2011                             1,000       575      .11
Cox Radio, Inc. 6.625% 2006                                   500       506      .09
Sinclair Broadcast Group, Inc. 8.75% 2011 /2/                 500       502      .09
Rogers Communications Inc. 8.875% 2007                        250       254      .05
Carmike Cinemas, Inc., Series B, 9.375% 2009 /3/              225       229      .04
RBS Particicacoes SA 11.00% 2007 /2/                          250       173      .03
Hearst-Argyle Television, Inc. 7.00% 2018                     175       147      .03

DIVERSIFIED TELECOMMUNICATION SERVICES  -  5.85%                                    
France Telecom: /2/  /4/                                                            
 8.50% 2031                                                 1,850     2,108         
 7.20% 2006                                                 2,000     2,100         
 7.75% 2011                                                   750       803         
Orange PLC 8.75% 2006                                       2,000     2,091     1.31
PCCW-HKT Capital Ltd. 7.75% 2011 /2/                        4,500     4,499      .83
Qwest Capital Funding, Inc.:                                                        
 7.90% 2010                                                 2,300     2,343         
 7.625% 2021 /2/                                            1,500     1,434         
 7.25% 2011                                                   700       683      .82
AT&T Corp.: /2/                                                                     
 8.00% 2031                                                 2,650     2,772         
 7.30% 2011                                                 1,000     1,028      .70
VoiceStream Wireless Corp., 10.375% 2009                    2,797     3,194      .59
British Telecommunications PLC:  /4/                                                
 8.875% 2030                                                1,500     1,721         
 8.375% 2010                                                1,000     1,105      .52
CenturyTel, Inc., Series H, 8.375% 2010                     2,500     2,645      .49
WCG Note Trust 8.25% 2004 /2/                               1,000       978      .18
TELUS Corp. 8.00% 2011                                        750       791      .15
Koninklijke KPN NV 8.00% 2010                                 750       757      .14
Allegiance Telecom, Inc. 0%/11.75% 2008 /1/                   500       225      .04
COLT Telecom Group PLC 12.00% 2006                            250       215      .04
GT Group Telecom Inc., units 0%/13.25% 2010 /1/             1,000       125      .02
NEXTLINK Communications, Inc.:                                                      
 9.625% 2007                                                  500        59         
 0%/12.25% 2009 /1/                                           500        39      .02

WIRELESS TELECOMMUNICATION SERVICES  -  4.30%                                       
Nextel Communications, Inc.:                                                        
 0%/9.75% 2007 /1/                                          2,475     1,754         
 0%/9.95% 2008 /1/                                          2,375     1,633         
 0%/10.65% 2007 /1/                                         1,525     1,151         
 12.00% 2008                                                  500       436      .92
Cricket Communications, Inc.:  /4/                                                  
 6.50% 2007                                                 1,350     1,029         
 6.50% 2007                                                 1,000       762         
 6.25% 2007                                                   440       335         
Leap Wireless International, Inc. 0%/14.50%                 2,050       748      .53
 2010 /1/                                                                           
PanAmSat Corp.:                                                                     
 6.125% 2005                                                2,000     1,813         
 6.375% 2008                                                  500       426      .41
Dobson Communications Corp. 10.875% 2010                    1,000     1,050         
American Cellular Corp. 9.50% 2009                            750       735         
Dobson/Sygnet Communications Co. 12.25% 2008                  250       265      .38
AT&T Wireless Services, Inc. 7.875% 2011                    1,650     1,759      .32
Tritel PCS, Inc. 10.375% 2011                               1,125     1,274         
TeleCorp PCS, Inc. 0%/11.625% 2009 /1/                        500       430      .31
Verizon Wireless Capital LLC 5.375% 2006 /2/                1,250     1,246      .23
Triton PCS, Inc. 9.375% 2011                                1,000     1,040      .19
Cingular Wireless 5.625% 2006 /2/                           1,000     1,009      .19
Nextel Partners, Inc. 12.50% 2009 /2/                       1,000       880      .16
CFW Communications Co. 13.00% 2010                          1,250       875      .16
Microcell Telecommunications Inc., Series B,                1,000       860      .16
 14.00% 2006                                                                        
Centennial Cellular Corp. 10.75% 2008                         750       634      .12
Horizon PCS, Inc. 13.75% 2011 /2/                             500       500      .09
Vodafone AirTouch PLC 7.75% 2010                              375       412      .08
Rogers Cantel Inc. 9.75% 2016                                 250       249      .05
PageMart Wireless, Inc. 0%/11.25% 2008 /1/ /3/ /5/            750         2      .00

ELECTRIC UTILITIES  -  4.05%                                                        
Mission Energy Holding Co. 13.50% 2008                      2,650     2,941         
Edison Mission Energy:                                                              
 10.00% 2008                                                1,000     1,030         
 7.73% 2009                                                 1,000       930         
 9.875% 2011                                                  875       912         
Homer City Funding LLC 8.734% 2026                          1,000       921         
Midwest Generation, LLC, Series B, 8.56% 2016 /6/             900       849         
Edison International 6.875% 2004                              760       699     1.53
AES Corp.:                                                                          
 9.375% 2010                                                1,300     1,176         
 9.50% 2009                                                   400       348         
AES Drax Holdings Ltd., Series A, 10.41% 2020 /6/           1,350     1,212         
AES Ironwood, LLC 8.857% 2025 /6/                           1,250     1,179         
AES Red Oak, LLC, Series B, 9.20% 2029 /6/                  1,000       975      .90
American Electric Power Co., Inc., Series A,                2,950     2,916      .54
 6.125% 2006                                                                        
Exelon Generation Co., LLC 6.95% 2011 /2/                   1,150     1,168         
Exelon Corp. 6.75% 2011                                       750       761         
Commonwealth Edison Co. 6.95% 2018                            700       678      .48
Israel Electric Corp. Ltd.:  /2/                                                    
 7.70% 2018                                                 1,000       940         
 7.75% 2027                                                   620       564      .28
FirstEnergy Corp., Series C, 7.375% 2031                    1,250     1,220      .22
Louis Dreyfus Natural Gas Corp. 9.25% 2004                    500       549      .10

BANKS & THRIFTS  -  3.24%                                                           
SocGen Real Estate Co. LLC, Series A, 7.64%                 2,250     2,319      .43
 (undated) /2/  /4/                                                                 
Royal Bank of Scotland Group PLC 7.648%                     2,250     2,278      .42
 (undated) /4/                                                                      
Washington Mutual Bank, FA 6.875% 2011                      1,250     1,285         
Washington Mutual Finance 8.25% 2005                          800       876      .40
Abbey National PLC: /4/                                                             
 6.70% (undated)                                            1,300     1,280         
 7.35% (undated)                                              825       854      .39
J.P. Morgan & Co. Inc., Series A, 8.382%                    2,000     1,873      .35
 2012 /4/                                                                           
DBS Bank Ltd. 7.875% 2009 /2/                               1,500     1,610      .30
National Westminister Bank PLC:                                                     
 9.375% 2003                                                  276       305         
 7.75% (undated) /4/                                          250       267         
Bank of Scotland 7.00% (undated) /2/  /4/                     480       485      .19
GS Escrow Corp.:                                                                    
 7.00% 2003                                                   500       506         
 7.125% 2005                                                  500       498      .19
AB Spintab 7.50% (undated) /2/  /4/                           750       778      .14
Barclays Bank PLC 7.375% (undated) /2/  /4/                   500       519      .10
Chevy Chase Bank, FSB 9.25% 2008                              500       505      .09
Imperial Capital Trust I, Imperial Bancorp                    350       394      .07
 9.98% 2026                                                                         
Riggs Capital Trust II 8.875% 2027                            500       375      .07
Komercni Finance BV 9.00% 2008 /2/ /4/                        300       313      .06
BankUnited Capital Trust, BankUnited Financial                250       236      .04
 Corp. 10.25% 2026                                                                  

HOTELS, RESTAURANTS & LEISURE  -  2.85%                                             
Mirage Resorts, Inc.:                                                               
 6.625% 2005                                                2,000     1,976         
 6.75% 2008                                                   250       234         
MGM Mirage Inc. 8.50% 2010                                    875       870      .57
Boyd Gaming Corp.:                                                                  
 9.25% 2009 /2/                                             1,500     1,537         
 9.25% 2003                                                   500       509         
 9.50% 2007                                                   500       505      .47
Royal Caribbean Cruises Ltd.:                                                       
 7.00% 2007                                                   925       735         
 8.75% 2011                                                   875       709         
 6.75% 2008                                                   175       133      .29
Horseshoe Gaming Holding Corp., Series B,                   1,500     1,551      .28
 8.625% 2009                                                                        
Ameristar Casinos, Inc. 10.75% 2009                         1,000     1,085      .20
Florida Panthers Holdings, Inc. 9.875% 2009                 1,000     1,035      .19
Mohegan Tribal Gaming Authority 8.375% 2011                 1,000     1,035      .19
Harrah's Operating Co., Inc. 7.50% 2009                     1,000     1,011      .19
Premier Parks Inc. 9.75% 2007                               1,000     1,010      .19
International Game Technology:                                                      
 7.875% 2004                                                  500       516         
 8.375% 2009                                                  250       263      .14
Station Casinos, Inc. 8.375% 2008                             500       507      .09
Argosy Gaming Co. 9.00% 2011                                  250       262      .05

AUTOMOBILES  -  2.84%                                                               
General Motors Acceptance Corp.:                                                    
 6.125% 2006                                                6,500     6,432         
 8.00% 2031                                                 2,500     2,529         
 6.875% 2011                                                1,000       978         
 7.75% 2010                                                   500       515     1.93
Ford Motor Credit Co.:                                                              
 7.25% 2011                                                 1,500     1,462         
 7.375% 2011                                                  500       493         
Ford Motor Co. 7.45% 2031                                   1,000       918      .53
DaimlerChrysler North America Holding Corp.                 2,000     2,073      .38
 7.75% 2011                                                                         

COMMUNICATIONS EQUIPMENT  -  2.84%                                                  
Motorola, Inc.:                                                                     
 8.00% 2011 /2/                                             3,100     3,112         
 5.22% 2097                                                   750       472         
 7.50% 2025                                                   500       466         
 6.50% 2028                                                   250       205      .78
Crown Castle International Corp.:                                                   
 10.75% 2011                                                2,000     1,955         
 0%/10.625% 2007 /1/                                        1,000       875         
 0%/11.25% 2011 /1/                                         1,000       640      .64
American Tower Corp. 9.375% 2009                            3,500     2,774      .51
SBA Communications Corp.:                                                           
 10.25% 2009                                                1,750     1,479         
 0%/12.00% 2008 /1/                                           500       371      .34
Nortel Networks Ltd. 6.125% 2006                            2,000     1,600      .30
SpectraSite Holdings, Inc., Series B:                                               
 12.50% 2010                                                1,000       545         
 0%/12.875% 2010 /1/                                        1,250       312         
 10.75% 2010                                                  500       255         
 0%/12.00% 2008 /1/                                           500       190         
 0%/11.25% 2009 /1/                                           500       138      .27

PAPER & FOREST PRODUCTS  -  2.13%                                                   
Georgia-Pacific Corp.:                                                              
 8.125% 2011                                                3,450     3,380         
 7.50% 2006                                                 1,000       991      .81
Bowater Canada Finance Corp. 7.95% 2011 /2/                 1,850     1,864      .34
International Paper Co. 6.75% 2011                          1,750     1,762      .32
Potlatch Corp. 10.00% 2011 /2/                              1,250     1,306      .24
Scotia Pacific Co. LLC, Series B, Class A-2,                1,000       842      .16
 7.11% 2028 /6/                                                                     
Kappa Beheer BV 10.625% 2009                             Euro 750       735      .14
Pindo Deli Finance Mauritius Ltd.:  /3/                                             
 10.25% 2002                                              $ 1,500       229         
 10.75% 2007                                                  750       114      .06
Appleton Papers Inc. 12.50% 2008 /2/                          350       335      .06

COMMERCIAL SERVICES & SUPPLIES  -  1.62%                                            
Allied Waste North America, Inc.:                                                   
 10.00% 2009                                                2,500     2,563         
 Series B, 8.875% 2008                                      1,000     1,035         
 8.50% 2008 /2/                                               750       761      .80
Waste Management, Inc.:                                                             
 7.375% 2010                                                1,400     1,439         
 6.625% 2002                                                  925       941         
WMX Technologies, Inc. 7.10% 2026                             500       523      .54
Cendant Corp. 7.75% 2003                                    1,500     1,525      .28
Safety-Kleen Corp. 9.25% 2009 /3/ /5/                       1,000        10      .00

INSURANCE  -  1.42%                                                                 
Prudential Holdings, LLC, Series C, 8.695%                  2,250     2,347      .43
 2023 /2/                                                                           
ING Capital Funding Trust III 8.439%                        1,500     1,640         
 (undated) /4/                                                                      
ReliaStar Financial Corp. 8.00% 2006                          250       275      .35
Provident Companies, Inc. 7.00% 2018                        1,460     1,382      .26
AIG SunAmerica Global Financing VII 5.85%                   1,000     1,008      .19
 2008 /2/                                                                           
Lindsey Morden Group Inc., Series B, 7.00%               C$ 1,895       773      .14
 2008 /2/ /5/                                                                       
The Equitable Life Assurance Society of the                 $ 250       263      .05
 United States 6.95% 2005 /2/                                                       

MULTILINE RETAIL  -  1.39%                                                          
J.C. Penney Co., Inc.:                                                              
 8.25% 2022 /6/                                             2,700     2,336         
 7.40% 2037                                                   750       737         
 6.875% 2015                                                  600       495         
 7.95% 2017                                                   500       443         
 7.65% 2016                                                   500       438         
 8.125% 2027                                                  200       172      .85
Federated Department Stores, Inc. 6.625% 2011               2,000     1,965      .36
Dillard's, Inc. 6.30% 2008                                    700       615      .11
Saks Inc. 7.375% 2019                                         500       354      .07

HEALTH CARE PROVIDERS & SERVICES  -  1.32%                                          
Aetna Inc.:                                                                         
 7.875% 2011                                                2,350     2,310         
 7.375% 2006                                                1,650     1,658      .73
Columbia/HCA Healthcare Corp. 6.91% 2005                    1,500     1,508         
HCA - The Healthcare Co. 8.75% 2010                           500       541      .38
Humana Inc. 7.25% 2006                                        750       755      .14
Clarent Hospital Corp. 11.50% 2005 /5/                        367       349      .06
Integrated Health Services, Inc., Series A:  /3/                                    
 9.25% 2008 /5/                                             2,000        20         
 9.50% 2007 /5/                                               750         8      .01

CONSUMER FINANCE  -  1.23%                                                          
Capital One Bank:                                                                   
 6.875% 2006                                                1,500     1,461         
 8.25% 2005                                                   800       817         
 6.375% 2003                                                  500       508         
Capital One Financial Corp. 7.125% 2008                     1,000       929         
Capital One Capital I 3.78% 2027 /2/  /4/                     250       190      .72
Household Finance Corp. 6.75% 2011                          1,850     1,841      .34
MBNA Corp. 6.75% 2008                                         500       472      .09
Advanta Capital Trust I, Series B, 8.99% 2026                 500       280      .05
Providian Financial Corp. 9.525% 2027 /2/                     750       180      .03

GAS PRODUCTION & DISTRIBUTION  -  0.89%                                             
NiSource Finance Corp.:                                                             
 7.875% 2010                                                1,550     1,603         
 7.625% 2005                                                1,250     1,307      .53
Gemstone Investor Ltd. 7.71% 2004 /2/                       2,000     1,945      .36

SPECIALTY RETAIL  -  0.88%                                                          
Gap, Inc. 8.80% 2008 /2/                                    2,250     1,971      .36
Toys "R" Us, Inc. 7.625% 2011 /2/                           1,750     1,710      .32
Office Depot, Inc. 10.00% 2008                              1,000     1,090      .20

METALS & MINING  -  0.75%                                                           
Kaiser Aluminum & Chemical Corp. 12.75% 2003                2,500     1,822      .34
Freeport-McMoRan Copper & Gold Inc.:                                                
 7.20% 2026                                                 1,000       890         
 7.50% 2006                                                   100        73      .18
Luscar Coal Ltd. 9.75% 2011 /2/                               750       780      .14
Allegheny Technologies, Inc. 8.375% 2011 /2/                  500       491      .09

CONTAINERS & PACKAGING  -  0.70%                                                    
Container Corp. of America 9.75% 2003                       1,000     1,025         
Stone Container Corp. 9.75% 2011                              750       799      .34
Tekni-Plex, Inc., Series B, 12.75% 2010                     1,500     1,463      .27
Printpack, Inc. 10.625% 2006                                  500       520      .09

FOOD & DRUG RETAILING  -  0.62%                                                     
Rite Aid Corp.:                                                                     
 7.125% 2007                                                  900       729         
 11.25% 2008                                                  375       369         
 6.875% 2028 /2/                                              450       291         
 7.70% 2027                                                   400       278         
 6.875% 2013                                                  275       193      .34
Delhaize America, Inc. 8.125% 2011                          1,350     1,481      .28

AUTO COMPONENTS  -  0.54%                                                           
Dana Corp. 9.00% 2011 /2/                                   2,350     2,127      .39
TRW Inc. 7.75% 2029                                           830       780      .15

TEXTILES & APPAREL  -  0.39%                                                        
VF Corp. 8.50% 2010                                         1,750     1,922      .35
Levi Strauss & Co. 11.625% 2008                               250       218      .04

LEISURE PRODUCTS  -  0.38%                                                          
Hasbro, Inc. 7.95% 2003                                     2,000     2,040      .38

MACHINERY  -  0.28%                                                                 
Terex Corp. 9.25% 2011 /2/                                  1,250     1,256      .23
Deere & Co. 8.95% 2019                                        250       276      .05

FOOD PRODUCTS  -  0.27%                                                             
Gruma, SA de CV 7.625% 2007                                 1,000       943      .17
Smithfield Foods, Inc. 8.00% 2009 /2/                         500       518      .10

AIR FREIGHT & COURIERS  -  0.24%                                                    
Atlas Air, Inc., Pass Through Trusts, Series                1,422     1,299      .24
 1998-1, Class A, 7.38% 2019 /6/                                                    

CHEMICALS  -  0.21%                                                                 
Equistar Chemicals, LP 8.75% 2009                             750       724      .13
Reliance Industries Ltd., Series B, 10.25% 2097               500       421      .08

CONSTRUCTION & ENGINEERING  -  0.20%                                                
McDermott Inc. 9.375% 2002                                  1,150     1,093      .20

INDUSTRIAL CONGLOMERATES  -  0.19%                                                  
Hutchison Whampoa International Ltd. 7.00%                  1,000     1,020      .19
 2011 /2/                                                                           

REAL ESTATE  -  0.15%                                                               
EOP Operating LP 8.10% 2010                                   500       542      .10
ProLogis Trust 7.05% 2006                                     250       258      .05

AEROSPACE & DEFENSE  -  0.14%                                                       
BAE SYSTEMS, Series 2001, Class G, MBIA Insured,              767       788      .14
 6.664% 2013 /2/ /6/                                                                

ELECTRONIC EQUIPMENT & INSTRUMENTS  -  0.12%                                        
Flextronics International Ltd. 9.875% 2010                    625       656      .12

SEMICONDUCTOR EQUIPMENT & PRODUCTS  -  0.11%                                        
Hyundai Semiconductor America, Inc. 8.625%                    600       327      .06
 2007 /2/                                                                           
Zilog, Inc. 9.50% 2005 /3/                                    950       283      .05

MARINE  -  0.09%                                                                    
Teekay Shipping Corp. 8.875% 2011                             500       515      .09

AIRLINES  -  0.07%                                                                  
United Air Lines, Inc. 10.67% 2004                            500       365      .07

MULTI-UTILITIES  -  0.04%                                                           
Florida Gas Transmission Co. 7.625% 2010 /2/                  250       238      .04

INTERNET SOFTWARE & SERVICES  -  0.02%                                              
Exodus Communications, Inc. 11.625% 2010 /3/                  500       115      .02

MORTGAGE-BACKED OBLIGATIONS  /6/  -  11.86%                                         
AGENCY PASS-THROUGHS:                                                               
 GOVERNMENT NATIONAL MORTGAGE ASSN.:                                                
  8.00% 2023 - 2031                                         6,927     7,252         
  7.50% 2023 - 2030                                         5,844     6,044         
  7.00% 2023 - 2029                                         3,255     3,323         
  6.00% 2029 - 2031                                         2,338     2,295         
  6.50% 2025 - 2028                                           890       893         
  10.00% 2019                                                 210       236         
  9.50% 2021                                                  208       221     3.73
 FANNIE MAE:                                                                        
  6.50% 2016 - 2031                                         4,514     4,597         
  5.50% 2016 - 2017                                         4,491     4,415         
  6.00% 2013 - 2016                                         2,636     2,643         
  7.00% 2026                                                  865       884         
  7.50% 2031                                                  695       717         
  10.00% 2018                                                 106       119     2.47
 Freddie Mac 6.00% 2032                                     2,495     2,443      .45
COMMERCIAL MORTGAGE-BACKED SECURITIES:                                              
 Merrill Lynch Mortgage Investors, Inc.:                                            
  Series 1995-C3, Class A-3, 7.051% 2025 /4/                2,675     2,728         
  Series 1999-C1, Class A-2, 7.56% 2031                     1,500     1,621      .80
 CS First Boston Mortgage Securities Corp.:                                         
  Series 1998-C1, Class A-1B, 6.48% 2040                    1,250     1,289         
  Series 2001-CK6, Class A-2, 6.103% 2036                   1,230     1,240         
  Series 1998-C1, Class A-1A, 6.26% 2040                      894       928      .64
 Chase Commercial Mortgage Securities Corp.:                                        
  Series 1998-1, Class A-2, 6.56% 2030                      1,250     1,301         
  Series 1999-1, Class B, 7.619% 2031                         750       809         
  Series 1998-2, Class A-2, 6.39% 2030                        750       770      .53
 Bear Stearns Commercial Mortgage Securities                                        
 Inc.:                                                                              
  Series 2000-WF2, Class A-2, 7.32% 2032                    1,520     1,621         
  Series 2001-TOP2, Class A-2, 6.48% 2035                     750       765      .44
 Morgan Stanley Capital I, Inc.:                                                    
  Series 1997-HF1, Class B, 7.33% 2007 /2/                  1,000     1,067         
  Series 1998-HF2, Class A-2, 6.48% 2030                    1,000     1,034      .39
 GS Mortgage Securities Corp. II, Series                                            
 1998-C1:  /4/                                                                      
  Class E, 7.242% 2030                                      1,250     1,170         
  Class D, 7.242% 2030                                      1,000       961      .39
 Nomura Asset Securities Corp., Series 1998-D6,             1,376     1,432      .26
 Class A-A1, 6.28% 2030                                                             
 L.A. Arena Funding, LLC, Series 1, Class A,                1,282     1,287      .24
 7.656% 2026 /2/                                                                    
 Salomon Brothers Commercial Mortgage Trust,                1,250     1,285      .24
  Series 2000-C3, Class A-2, 6.592% 2033                                            
 Morgan Stanley Dean Witter Capital I Trust,                1,250     1,262      .23
  Series 2001-TOP5, Class A-3, 6.16% 2035                                           
 GGP Mall Properties Trust, Series 2001-C1A,                  749       725      .13
  Class A-2 5.007% 2011 /2/                                                         
 DLJ Mortgage Acceptance Corp., Series 1995-CF2,              582       598      .11
  Class A1B, 6.85% 2027 /2/                                                         
 LB-UBS Commercial Mortgage Trust, Series 2000-C3,            500       556      .10
  Class A-2, 7.95% 2010                                                             
 DLJ Commercial Mortgage Corp., Series 1999-CG1,              500       515      .10
  Class A1B, 6.46% 2032                                                             
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS:                                         
 Fannie Mae:                                                                        
  Series 2001-T10, Class A-1, 7.00% 2041                      734       760         
  Series 2001-20, Class C, 11.538% 2031 /4/                   602       685         
  Series 2001-4, Class GA, 10.018% 2025 /4/                   360       401      .34
PRIVATE ISSUE COLLATERALIZED MORTGAGE OBLIGATIONS:                                  
 Fannie Mae Trust, Series 2001-50, Class BA                   737       756      .14
  7.00% 2041                                                                        
 Residential Funding Mortgage Securities I, Inc.,             220       228      .04
  Series 2001-S1, Class A-1, 7.00% 2016                                             
PRIVATE ISSUE PASS-THROUGH OBLIGATIONS:                                             
 Structured Asset Securities Corp., Series                    459       493      .09
  1998-RF2, Class A, 8.527% 2027 /2/  /4/                                           

ASSET-BACKED OBLIGATIONS /6/  -  3.38%                                              
Conseco Finance Home Equity Loan Trust:                                             
 Series 2001-C, Class A-3, 5.39% 2025                       1,250     1,271         
 Series 2000-A, Class BV-2, 4.696% 2031 /4/                 1,000       820         
 Series 1999-G, Class B-2, 10.96% 2029                      1,750       802         
Green Tree Financial Corp.:                                                         
 Series 1996-5, Class B-2, 8.45% 2027                         992       525         
 Series 1995-6, Class B-2, 8.00% 2026                         940       489         
 Series 1997-8, Class B-2, 7.75% 2028                         499       194         
Conseco Finance Manufactured Housing Contract                 750       758      .90
 Trust, Series 2001-3, Class A-2, 5.16% 2033                                        
Continental Airlines, Inc.:                                                         
 Series 1998-3, Class A-2, 6.32% 2008                         500       456         
 Series 1999-1, Class B, 6.795% 2020                          496       410         
 Series 1998-1, Class A,  6.648% 2019                         458       406         
 Series 1998-3, Class C-2, 7.25% 2005                         500       370         
 Series 1997-1, Class C-1, 7.42%  2007 /4/                    363       284         
 Series 1996, Class C, 9.50% 2015                             204       148      .38
ComEd Transitional Funding Trust, Series 1998,              2,000     2,046      .38
 Class A-4, 5.39% 2005                                                              
Residential Funding Mortgage Securities II,                 1,250     1,277      .24
 Inc., Series 2001-HS2, Class A-4, AMBAC Insured,                                   
 6.43% 2016                                                                         
Southwest Airlines Co., Series 2001-1, Class B,             1,000       979      .18
 6.126% 2006                                                                        
United Air Lines, Inc., Series 2000-1, Class A-2,           1,000       865      .16
 7.73% 2012                                                                         
American Airlines Inc., Series 2001-1,                        876       829      .15
 Class A-1, 6.977% 2021 /2/                                                         
Airplanes Pass Through Trust:                                                       
 Class 1-C, 8.15% 2019  /5/                                   746       448         
 Class B, 2.646% 2019 /4/                                     472       378      .15
Tobacco Settlement Financing Corp., Series 2001-A,            800       781      .14
 6.36% 2025                                                                         
PF Export Receivables Master Trust, Series 2001-B,            750       756      .14
 MBIA Insured, 6.60% 2011 /2/                                                       
Team Fleet Financing Corp., Series 2001-3A,                   750       750      .14
 Class A, 2.83% 2005 /2/  /4/                                                       
US Airways, Inc.:                                                                   
 Series 2000-3G, 7.89% 2020                                   496       497         
 Series 2001-1G, 7.076% 2021                                  250       250      .14
Jet Equipment Trust:  /2/                                                           
 Series 1995-D, 11.44% 2014                                   300       195         
 Series 1995-A, Class C, 10.69% 2015                          250       179         
 Series 1994-A, 11.79% 2013                                   250       163      .10
America West Airlines, Inc., Series 2000-1,                   490       497      .09
 Class G, AMBAC Insured, 8.057% 2020                                                
Northwest Airlines, Inc., Series 1999-3,                      478       490      .09
 Class G, 7.935% 2020                                                               

U.S. TREASURY BONDS & NOTES  -  7.14%                                               
6.25% 2003-2023                                            10,500    11,102         
6.75% 2005                                                 10,000    10,872         
3.375% 2007  /7/                                            4,767     4,781         
4.75% 2008                                                  4,000     3,982         
5.00% 2011                                                  2,000     1,993         
10.375% 2009-2012                                           1,500     1,868         
7.25% 2004                                                  1,500     1,637         
8.875% 2019                                                 1,000     1,342         
7.50% 2016                                                  1,000     1,183     7.14

FEDERAL AGENCY OBLIGATIONS  -  3.45%                                                
Freddie Mac:                                                                        
 5.00% 2004                                                 4,750     4,893         
 6.75% 2031                                                 4,500     4,772     1.78
Fannie Mae:                                                                         
 4.75% 2004                                                 4,750     4,873         
 7.25% 2030                                                 3,000     3,380     1.52
Small Business Administration, Series 2001-20J,               800       782      .15
 Class 1, 5.76% 2021 /6/                                                            

NON-U.S. GOVERNMENT OBLIGATIONS  -  1.63%                                           
United Mexican States Government Eurobonds,                                         
 Global:                                                                            
 9.875% 2010                                                1,000     1,120         
 11.375% 2016                                                 750       927         
 8.625% 2008                                                  500       538      .48
Deutschland Republic 5.25% 2008                        Euro 2,400     2,190      .40
Panama (Republic of):                                                               
 8.875% 2027                                              $ 1,000       923         
 Interest Reduction Bond 4.75% 2014 /4/  /6/                  241       214      .21
Ontario (Province of) 5.50% 2008                            1,000     1,003      .18
Canadian Government 4.25% 2026 /7/                       C$ 1,112       756      .14
Brazil (Federal Republic of) 14.50% 2009                    $ 500       536      .10
Philippines (Republic of) 9.875% 2019                         500       477      .09
Argentina (Republic of) 7.00%/15.50% 2008 /1/ /6/             562       153      .03

Total bonds & notes (cost: $456,680,000)                            440,396    81.18

                                                       Principal                    
                                                    Amount (000)    Market  Percent 
                                                    or Number of     Value   of Net 
Stocks (Common & Preferred)                               Shares     (000)   Assets 

BANKS & THRIFTS  -  1.63%                                                           
BNP U.S. Funding LLC, Series A, 7.738%                    $ 1,175     1,240         
 noncumulative preferred (undated)                                                  
 (France) /2/ /4/                                                                   
BNP Paribas Capital Trust, 9.003% noncumulative             $ 850       959      .41
 preferred (undated) /2/                                                            
Fuji JGB Investment LLC, Series A, 9.87%                  $ 1,600     1,265         
 noncumulative preferred (undated) (Japan) /2//4/                                   
IBJ Preferred Capital Co. LLC, Series A, 8.79%              $ 650       485      .32
 noncumulative preferred (undated) /2/ /4/                                          
HSBC Capital Funding LP, Series 1, 9.547%                 $ 1,500     1,739      .32
 noncumulative preferred (undated) (United                                          
 Kingdom) /2/ /4/                                                                   
First Republic Capital Corp., Series A, 10.50%                750       720      .13
 preferred /2/                                                                      
UBS Preferred Funding Trust 1 8.622% noncumulative          $ 625       697      .13
 preferred (undated) (Switzerland)                                                  
SB Treasury Co. LLC, Series A, 9.40% /10.925%               $ 750       682      .13
 noncumulative preferred (undated) (Japan) /2/ /4/                                  
NB Capital Corp. 8.35% exchangeable preferred              20,000       520      .10
 depositary shares                                                                  
BCI U.S. Funding Trust I 8.01% noncumulative                $ 500       513      .09
 preferred (undated) /2/ /4/                                                        

WIRELESS TELECOMMUNICATION SERVICES  -  0.61%                                       
Dobson Communications Corp.:  /8/ /9/                                               
 13.00% senior exchangeable preferred 2009                  1,213     1,201         
 12.25% senior exchangeable preferred 2008                    717       674      .34
Nextel Communications, Inc.: /8/                                                    
 Class A /2/                                               80,320       880         
 Series D, 13.00% exchangeable preferred 2009 /9/             957       565      .27
Leap Wireless International, Inc., warrants,                2,300        16      .00
 expire 2010 /2/ /8/                                                                
NTELOS, Inc., warrants, expire 2010 /5/ /8/                 1,250         1      .00
McCaw International, Ltd., warrants, expire                 2,000         -        -
 2007  /2/ /5/ /8/                                                                  

MEDIA  -  0.29%                                                                     
Cumulus Media Inc. 13.75% preferred 2009 /8/ /9/              828       820      .15
Adelphia Communications Corp., Series B,                    5,000       500      .09
 13.00% preferred 2009 /8/                                                          
Sinclair Capital 11.625% preferred 2009                     2,500       242      .05
NTL Inc., warrants, expire 2008 /2/ /5/ /8/                   238         -        -

INDUSTRIAL CONGLOMERATES  -  0.29%                                                  
Swire Pacific Capital Ltd. 8.84% cumulative                65,000     1,560      .29
 guaranteed perpetual capital securities                                            
 (Hong Kong) /2/                                                                    

COMMUNICATIONS EQUIPMENT  -  0.19%                                                  
Crown Castle International Corp. 12.75% senior              1,452     1,045      .19
 exchangeable preferred 2010 /8/ /9/                                                

REAL ESTATE  -  0.16%                                                               
ProLogis Trust, Series D, 7.92% preferred                  36,800       877      .16

AEROSPACE & DEFENSE  -  0.03%                                                       
EarthWatch Inc., Series B, 7.00% convertible               84,814       188      .03
 preferred 2009 /2/ /5/ /8/ /9/                                                     

HEALTH CARE PROVIDERS & SERVICES  -  0.01%                                          
Clarent Hospital Corp. /5/ /8/                             17,220        43      .01

DIVERSIFIED TELECOMMUNICATION SERVICES  -  0.00%                                    
GT Group Telecom Inc., warrants, expire 2010                1,000         6      .00
 (Canada) /2/ /5/ /8/                                                               

Total stocks (cost: $16,797,000)                                     17,438     3.21

                                                       Principal    Market  Percent 
                                                          Amount     Value   of Net 
Convertible Debentures                                     (000)     (000)   Assets 

ELECTRONIC EQUIPMENT & INSTRUMENTS  -  1.39%                                        
Solectron Corp. 0% 2020                                   $ 9,150     3,889         
Solectron Corp. 0% 2020                                     4,000     2,125     1.11
SCI Systems, Inc. 3.00% 2007                                1,000       831      .15
Celestica Inc. 0% 2020                                      1,700       723      .13

SEMICONDUCTOR EQUIPMENT & PRODUCTS  -  0.60%                                        
Conexant Systems, Inc. 4.00% 2007                           1,500       977      .18
LSI Logic Corp. 4.00% 2005                                    678       575      .10
Vitesse Semiconductor Corp. 4.00% 2005                        500       393      .07
TranSwitch Corp. 4.50% 2005                                   660       370      .07
TriQuint Semiconductor, Inc. 4.00% 2007                       500       366      .07
Cypress Semiconductor Corp. 3.75% 2005                        330       272      .05
Analog Devices, Inc. 4.75% 2005                               270       258      .05
RF Micro Devices, Inc. 3.75% 2005                              54        45      .01

DIVERSIFIED TELECOMMUNICATION SERVICES - 0.59%                                      
Hellenic Finance SCA 2.00% exchangeable 2005           Euro 1,750     1,678      .31
Bell Atlantic Financial Services, Inc. 4.25%              $ 1,500     1,496      .28
 2005 /2/                                                                           

COMMUNICATIONS EQUIPMENT  - 0.52%                                                   
Corning Inc. 0% 2015                                        2,472     1,292      .24
Juniper Networks, Inc. 4.75% 2007                           1,500     1,087      .20
Adaptec, Inc. 4.75% 2004                                      500       450      .08

INTERNET & CATALOG RETAIL  - 0.36%                                                  
Amazon.com, Inc. 6.875% PEACS 2010                     Euro 4,300     1,938      .36

HEALTH CARE PROVIDERS & SERVICES  - 0.17%                                           
Omnicare, Inc. 5.00% 2007                                 $ 1,000       928      .17

COMMERCIAL SERVICES & SUPPLIES  -  0.13%                                            
Waste Management, Inc. 4.00% 2002                             700       699      .13

SPECIALTY RETAIL  -  0.11%                                                          
Sunglass Hut International Ltd. 5.25% 2003                    600       600      .11

Total convertible debentures (cost: $20,941,000)                     20,992     3.87

Total equity securities (cost: $37,738,000)                          38,430     7.08

                                                       Principal    Market  Percent 
                                                          Amount     Value   of Net 
Short-Term Securities                                      (000)     (000)   Assets 

Corporate Short-Term Notes  -  9.28%                                                
Pfizer Inc 1.80% due 1/31/02 /2/                          $ 8,500     8,487     1.56
Corporate Asset Funding Co. Inc. 1.75%                      7,000     6,990     1.29
 due 1/29/02 /2/                                                                    
Coca-Cola Co. 1.74% due 1/25/02                             6,150     6,143     1.13
Merck & Co., Inc. 1.865% due 2/1/02                         5,500     5,491     1.01
Procter & Gamble Co. 2.00% due 1/7/02 /2/                   5,000     4,998      .92
SBC Communications Inc. 1.91% due 1/14/02 /2/               5,000     4,996      .92
General Electric Capital Corp. 1.82% due 1/2/02             4,400     4,400      .81
Triple-A One Funding Corp. 1.89% due 1/15/02 /2/            4,100     4,097      .76
Gannett Co., Inc. 1.90% due 1/14/02 /2/                     2,800     2,798      .52
Wells Fargo & Co. 1.74% due 2/7/02                          1,000       998      .18
Estee Lauder Companies Inc. 1.80% due 1/31/02 /2/             955       953      .18

Federal Agency Discount Notes  -  1.33%                                             
Freddie Mac 2.01% due 1/2/02                                7,200     7,199     1.33

Total short-term securities (cost: $57,550,000)                      57,550    10.61

Total investment securities (cost: $551,968,000)                    536,376    98.87
Excess of cash and receivables over payables                          6,149     1.13

Net assets                                                         $542,525  100.00%

/1/ Step bond; coupon rate will increase at a                                       
 later date.                                                                        
/2/ Purchased in a private placement transaction;                                   
 resale may be limited to qualified                                                 
 institutional buyers; resale to the public                                         
 may require registration.                                                          
/3/ Company not making interest payments;                                           
 bankruptcy proceedings pending.                                                    
/4/ Coupon rate may change periodically.                                            
/5/ Valued under procedures established by the                                      
 Board of Trustees.                                                                 
/6/ Pass-through securities backed by a pool of                                     
 mortgages or other loans on which principal                                        
 payments are periodically made.                                                    
 Therefore, the effective maturities                                                
 are shorter than the stated maturities.                                            
/7/ Index-linked bond whose principal amount                                        
 moves with a government retail price index.                                        
/8/ Non-income-producing security.                                                  
/9/ Payment in kind; the issuer has the option                                      
 of paying additional securities in lieu of cash.                                   

See Notes to Financial Statements                                                   

American Funds Insurance Series High-Yield Bond Fund                            
Investment Portfolio, December 31, 2001                                         

                                                                [Download Table]
                                                                             

                                                                  Percent of 
[Pie Chart]                                                       Net Assets 

Corporate Bonds                                                       74.50% 
Equity Securities                                                       15.43
U.S. Treasury bonds & notes                                              3.25
Non-U.S. Government Obligations                                          1.41
Asset-Backed Obligations                                                 0.50
Mortgage-Backed Obligations                                              0.26
Cash & Equivalents                                                       4.65
Total                                                                100.00% 
[end pie chart]                                                              
                                                                  Percent of 
Largest Holdings (by issuer)                                      Net Assets 

Nextel Communications                                                  3.88% 
Charter Communications                                                   3.45
U.S. Treasury bonds & notes                                              3.25
Smurfit-Stone Container                                                  2.94
Crown Castle International                                               2.76
Dobson Communications                                                    2.61
Fox/Liberty Networks                                                     2.27
Edison International                                                     1.98
Adelphia Communications                                                  1.85
Fox Family Worldwide                                                     1.80

                                                        [Enlarge/Download Table]
                                                                                      

                                                        Principal    Market  Percent  
                                                           Amount     Value   of Net  
Bonds & Notes                                               (000)     (000)   Assets  

MEDIA  -  21.72%                                                                      
Charter Communications Holdings, LLC:                                                 
  0%/9.92% 2011 /1/                                      $ 15,675  $ 11,286           
  0%/13.50% 2011 /1/                                         7,500     4,987          
  10.00% 2009                                                1,500     1,530          
  0%/11.75% 2011 /1/                                         1,750     1,059          
Avalon Cable Holdings LLC 0%/11.875% 2008 /1/                  500       413    3.45% 
Fox/Liberty Networks, LLC, FLN Finance, Inc.:                                         
  0%/9.75% 2007 /1/                                          8,085     8,125          
  8.875% 2007                                                4,410     4,586     2.27 
Fox Family Worldwide, Inc.:                                                           
  10.25% 2007                                                7,719     8,336          
  9.25% 2007                                                 1,600     1,704     1.80 
American Media Operations, Inc. 10.25% 2009                  7,650     7,726     1.38 
Chancellor Media Corp. of Los Angeles:                                                
  Series B, 8.75% 2007                                       6,000     6,270          
  8.00% 2008                                                 1,000     1,040     1.31 
ACME Intermediate Holdings, LLC, Series B,                   8,911     6,472     1.16 
 0%/12.00% 2005 /1/                                                                   
Adelphia Communications Corp. 10.25% 2011                    2,905     2,912          
FrontierVision 11.00% 2006                                   2,500     2,575          
Century Communications, Inc. 0% 2003                         1,000       890     1.14 
Gray Communications Systems, Inc.:                                                    
  10.625% 2006                                               5,250     5,407          
  9.25% 2011 /2/                                               750       746     1.10 
Young Broadcasting Inc.:                                                              
  10.00% 2011                                                5,250     4,909          
  Series B, 9.00% 2006                                         500       470          
  Series B, 8.75% 2007                                         125       114      .98 
Emmis Communications Corp. 0%/12.50% 2011 /1/                9,000     5,490      .98 
Telemundo Holdings, Inc., Series D, 0%/11.50%                3,750     3,544      .63 
 2008 /1/                                                                             
TransWestern Publishing Co. LLC 9.625% 2007                  3,250     3,347      .60 
NTL Inc. 0%/10.75% 2008 /1/                           Pound 4,000      1,512          
Comcast UK Cable Partners Ltd. 11.20% 2007                $ 1,250        900          
NTL Communications Corp.:                                                             
  Series B, 11.875% 2010                                     1,900       617          
  9.875% 2009                                            Euro 825        222      .58 
EchoStar DBS Corp. 9.125% 2009 /2/                        $ 3,250      3,250      .58 
Big City Radio, Inc. 11.25% 2005                             6,250     3,125      .56 
Cablevision Industries Corp. 9.875% 2013                     2,500     2,650      .47 
Liberty Media Corp.:                                                                  
  7.875% 2009                                                1,000     1,013          
  8.25% 2030                                                 1,000       945          
  8.50% 2029                                                   500       488      .44 
Antenna TV SA 9.00% 2007                                     2,750     2,392      .43 
Univision Communications Inc. 7.85% 2011                     2,000     2,025      .36 
Carmike Cinemas, Inc., Series B, 9.375% 2009 /3/             1,850     1,887      .34 
STC Broadcasting, Inc. 11.00% 2007                           2,000     1,700      .30 
Key3Media Group, Inc. 11.25% 2011                            1,500     1,245      .22 
Telewest Communications PLC:                                                          
  0%/11.375% 2010 /1/                                        2,000       780          
  11.25% 2008                                                  500       365      .21 
Globo Comunicacoes e Participacoes SA:                                                
  10.50% 2006 /2/                                              630       443          
  10.50% 2006                                                  360       253      .13 
RBS Participacoes SA 11.00% 2007 /2/                         1,000       692      .12 
Multicanal Participacoes SA, Series B, 12.625% 2004          1,000       662      .12 
Sun Media Corp. 9.50% 2007                                     325       333      .06 

WIRELESS TELECOMMUNICATION SERVICES  -  8.69%                                         
Nextel Partners, Inc.:                                                                
  0%/14.00% 2009 /1/                                         6,390     3,962          
  12.50% 2009 /2/                                            3,000     2,640          
  11.00% 2010                                                2,273     1,841     1.51 
Nextel Communications, Inc.: /1/                                                      
  0%/10.65% 2007                                             6,500     4,907          
  0%/9.95% 2008                                              3,000     2,062          
  0%/9.75% 2007                                              1,750     1,240     1.47 
Leap Wireless International, Inc.:                                                    
  12.50% 2010                                                5,000     3,800          
  0%/14.50% 2010 /1/                                         5,650     2,062          
Cricket Communications, Inc.: /4/                                                     
  6.25% 2007                                                 1,340     1,022          
  6.50% 2007                                                 1,310       999     1.41 
CFW Communications Co. 13.00% 2010                           6,375     4,462      .80 
TeleCorp PCS, Inc.:                                                                   
  10.625% 2010                                               2,000     2,285          
  0%/11.625% 2009 /1/                                        2,375     2,042      .78 
Microcell Telecommunications Inc., Series B,                 4,250     3,655      .65 
 14.00% 2006                                                                          
Centennial Cellular Corp. 10.75% 2008                        3,750     3,169      .57 
Dobson/Sygnet Communications Co. 12.25% 2008                 2,500     2,650          
American Cellular Corp. 9.50% 2009                             500       490      .56 
AirGate PCS, Inc. 0%/13.50% 2009 /1/                         3,242     2,464      .44 
PTC International Finance BV 0%/10.75% 2007 /1/              2,000     1,795      .32 
Triton PCS, Inc. 9.375% 2011                                   500       520      .09 
Teletrac Holdings, Inc. 9.00% 2004 /2/ /5/ /6/                 579       464      .08 
PageMart Wireless, Inc. 0%/11.25% 2008 /1/ /3/ /6/          17,400        43      .01 

HOTELS, RESTAURANTS & LEISURE  -  7.39%                                               
Boyd Gaming Corp.:                                                                    
  9.25% 2003                                                 4,000     4,070          
  9.25% 2009 /2/                                             3,000     3,075          
  9.50% 2007                                                   750       758     1.41 
Horseshoe Gaming Holding Corp., Series B,                    7,000     7,236     1.30 
 8.625% 2009                                                                          
Premier Parks Inc.:                                                                   
  9.75% 2007                                                 1,350     1,364          
  0%/10.00% 2008 /1/                                         1,250     1,066          
  9.25% 2006                                                   150       152          
Six Flags Entertainment Corp. 8.875% 2006                    2,250     2,306          
Six Flags Inc. 9.50% 2009                                    1,875     1,891     1.21 
William Hill Finance 10.625% 2008                     Pound 2,207      3,522      .63 
MGM Mirage Inc. 8.50% 2010                                $ 2,000      1,989          
Mirage Resorts, Inc.:                                                                 
  6.75% 2007                                                   500       472          
  6.75% 2008                                                   500       467      .52 
KSL Recreation Group, Inc. 10.25% 2007                       2,480     2,297      .41 
Ameristar Casinos, Inc. 10.75% 2009                          1,800     1,953      .35 
Hollywood Casino Corp. 11.25% 2007                           1,745     1,885      .34 
Station Casinos, Inc. 8.375% 2008                            1,500     1,521      .27 
Mohegan Tribal Gaming Authority 8.375% 2011                  1,000     1,035      .19 
Venetian Casino Resort, LLC 12.25% 2004                        750       750      .13 
Hard Rock Hotel, Inc., Series B, 9.25% 2005                    750       720      .13 
International Game Technology 8.375% 2009                      500       526      .09 
Florida Panthers Holdings, Inc. 9.875% 2009                    500       518      .09 
Royal Caribbean Cruises Ltd.:                                                         
  7.00% 2007                                                   350       278          
  6.75% 2008                                                   300       228      .09 
Argosy Gaming Co. 9.00% 2011                                   400       420      .08 
Eldorado Resorts LLC 10.50% 2006                               300       291      .05 
Mandalay Resort Group 10.25% 2007                              250       259      .05 
Harrah's Operating Co., Inc. 7.125% 2007                       250       253      .05 

DIVERSIFIED TELECOMMUNICATION SERVICES  -  4.97%                                      
COLT Telecom Group PLC 12.00% 2006                           7,250     6,235     1.12 
Voicestream Wireless Corp.:                                                           
  10.375% 2009                                               3,659     4,179          
  0%/11.875% 2009 /1/                                          975       847      .90 
British Telecommunications PLC 6.875% 2011             Euro 3,500      3,268      .58 
PCCW-HKT Capital Ltd. 7.75% 2011 /2/                      $ 2,500      2,499      .45 
Qwest Capital Funding, Inc.:                                                          
  7.90% 2010                                                 1,375     1,401          
  7.25% Telecom 8.00% 2011 /2/ /4/                            2,000     2,142      .38
CenturyTel, Inc., Series H, 8.375% 2010                      1,750     1,851      .33 
AT&T Corp. 7.30% 2011 /2/                                    1,750     1,798      .32 
TELUS Corp. 7.50% 2007                                       1,000     1,041      .19 
GT Group Telecom Inc., units 0%/13.25% 2010 /1/              4,000       500      .09 
Allegiance Telecom, Inc. 0%/11.75% 2008 /1/                  1,000       450      .08 
Williams Communications Group, Inc. 11.70% 2008                975       417      .07 
NEXTLINK Communications, Inc. 9.625% 2007                      500        59      .01 
IMPSAT Corp. 12.375% 2008 /3/                                  400        13      .00 

CONTAINERS & PACKAGING  -  4.94%                                                      
Container Corp. of America:                                                           
  9.75% 2003                                                13,500    13,838          
  Series B, 10.75% 2002                                      1,250     1,269          
Stone Container Corp. 9.75% 2011                             1,250     1,331     2.94 
Printpack, Inc. 10.625% 2006                                 5,508     5,728     1.02 
Tekni-Plex, Inc., Series B, 12.75% 2010                      5,625     5,484      .98 

COMMUNICATIONS EQUIPMENT  -  4.81%                                                    
Crown Castle International Corp.:                                                     
  0%/11.25% 2011 /1/                                         6,000     3,840          
  0%/10.625% 2007 /1/                                        3,500     3,063          
  10.75% 2011                                                1,750     1,711     1.54 
SBA Communications Corp.:                                                             
  10.25% 2009                                                7,250     6,126          
  0%/12.00% 2008 /1/                                         2,000     1,485     1.36 
SpectraSite Holdings, Inc., Series B:                                                 
  12.50% 2010                                                5,000     2,725          
  0%/12.00% 2008 /1/                                         5,250     1,995          
  0%/11.25% 2009 /1/                                         4,125     1,134          
  0%/12.875% 2010 /1/                                        2,500       625          
  10.75% 2010                                                  500       255     1.21 
American Tower Corp., 9.375% 2009                            2,425     1,922      .34 
Nortel Networks Ltd. 6.125% 2006                             1,000       800      .14 
Motorola, Inc.:                                                                       
  8.00% 2011 /2/                                               500       502          
  7.50% 2025                                                   150       140          
  6.50% 2028                                                   100        82          
  5.22% 2097                                                   100        63      .14 
Lucent Technologies Inc. 7.25% 2006                            500       425      .08 

FOOD PRODUCTS  -  2.62%                                                               
Fage Dairy Industry SA 9.00% 2007                            9,750     9,165     1.64 
Aurora Foods Inc., Series B, 9.875% 2007                     3,250     3,136      .56 
Smithfield Foods, Inc. 8.00% 2009 /2/                        2,250     2,329      .42 

COMMERCIAL SERVICES & SUPPLIES  -  2.53%                                              
Allied Waste North America, Inc.:                                                     
  10.00% 2009                                                7,450     7,636          
  8.875% 2008                                                  625       647          
  8.50% 2008 /2/                                               500       508     1.57 
Waste Management, Inc.:                                                               
  7.70% 2002                                                 3,000     3,072          
  7.375% 2010                                                  500       514      .64 
Stericycle, Inc., Series B, 12.375% 2009                       650       770      .14 
KinderCare Learning Centers, Inc., Series B,                   650       621      .11 
 9.50% 2009                                                                           
Iron Mountain Inc. 8.75% 2009                                  350       366      .07 
Safety-Kleen Services, Inc. 9.25% 2008 /3/ /6/               1,750        18      .00 

ELECTRIC UTILITIES  -  2.51%                                                          
Mission Energy Holding Co. 13.50% 2008                       4,000     4,440          
Edison Mission Energy:                                                                
  7.73% 2009                                                 3,125     2,906          
  9.875% 2011                                                1,125     1,172          
Edison International 6.875% 2004                             2,750     2,530     1.98 
AES Drax Holdings Ltd., Series A, 10.41% 2020 /7/            2,250     2,019      .45 
AES Corp. 9.50% 2009                                           575       500          
Israel Electric Corp. Ltd. 7.75% 2027 /2/                      500       455      .08 

MULTILINE RETAIL  -  2.15%                                                            
J.C. Penney Co., Inc.:                                                                
  7.625% 2097                                                2,300     1,775          
  6.875% 2015                                                2,000     1,650          
  7.65% 2016                                                 1,400     1,225          
  7.40% 2037                                                   950       933          
  8.25% 2022 /7/                                               900       779          
  7.375% 2004                                                  500       498          
  7.375% 2008                                                  500       488          
  7.95% 2017                                                   500       443          
  7.05% 2005                                                   100        98          
  8.125% 2027                                                  100        86     1.42 
Kmart Corp., Series 1995 K-2, 9.78% 2020 /7/                 2,000     1,389          
DR Securitized Lease Trust, Series 1994 K-2,                 1,500     1,053      .44 
 9.35% 2019 /7/                                                                       
Saks Inc. 7.375% 2019                                        1,440     1,019      .18 
Dillard's, Inc. 6.30% 2008                                     700       615      .11 

PAPER & FOREST PRODUCTS  -  1.94%                                                     
Georgia-Pacific Corp.:                                                                
  7.50% 2006                                                 2,700     2,677          
  8.125% 2011                                                1,750     1,715          
  8.875% 2031                                                1,500     1,484     1.05 
Potlatch Corp. 10.00% 2011 /2/                               1,500     1,568      .28 
Advance Agro Capital BV 13.00% 2007                          2,275     1,320      .24 
Riverwood International Corp. 10.875% 2008                   1,250     1,269      .23 
Indah Kiat Finance Mauritius Ltd.: /3/                                                
  11.875% 2002                                               2,000       545          
  10.00% 2007                                                  250        48      .11 
Pindo Deli Finance Mauritius Ltd. 10.75% 2007 /3/            1,300       198      .03 

METALS & MINING  -  1.22%                                                             
Kaiser Aluminum & Chemical Corp. 12.75% 2003                 4,100     2,988      .54 
Freeport-McMoRan Copper & Gold Inc. 7.20% 2026               2,400     2,136      .38 
Luscar Coal Ltd. 9.75% 2011 /2/                              1,150     1,196      .21 
Allegheny Technologies, Inc. 8.375% 2011 /2/                   500       491      .09 

SEMICONDUCTOR EQUIPMENT & PRODUCTS  -  1.14%