Bond Fund Of America N-CSR Certified annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

Certified Shareholder Report of

Registered Management Investment Companies

Investment Company Act File Number: 811-02444

The Bond Fund of America, Inc.

(Exact name of registrant as specified in charter)

333 South Hope Street

Los Angeles, California 90071

(Address of principal executive offices)

Registrant's telephone number, including area code: (213) 486-9200

Date of fiscal year end: December 31

Date of reporting period: December 31, 2006

Kimberly S. Verdick

Capital Research and Management Company

333 South Hope Street

Los Angeles, California 90071

(Name and address of agent for service)

Copies to:

Michael Glazer

Paul, Hastings, Janofsky & Walker LLP

515 South Flower Street

Los Angeles, California 90071

(Counsel for the registrant)

ITEM 1 - Reports to Stockholders

[logo - American Funds^®]

The right choice for the long term^®

The Bond Fund of America

Research expanding our reach

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Annual report for the year ended December 31, 2006

The Bond Fund of America^SM seeks as high a level of current income as is consistent with preservation of capital through a diversified portfolio of bonds and other fixed-income obligations.

This fund is one of the 30 American Funds. The organization ranks among the nation’s three largest mutual fund families. For 75 years, Capital Research and Management Company,^SM the American Funds adviser, has invested with a long-term focus based on thorough research and attention to risk.

Contents
Letter to shareholders	1
The value of a long-term perspective	4
Feature article:
Research expanding our reach	6
Summary investment portfolio	10
Financial statements	15
Board of directors and other officers	31
What makes American Funds different?	back cover

Figures shown are past results for Class A shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity. For current information and month-end results, visit americanfunds.com. Fund results shown, unless otherwise indicated, are at net asset value. If a sales charge (maximum 3.75%) had been deducted, the results would have been lower.

Please see page 5 for Class A share results with relevant sales charges deducted. Results for other share classes can be found on page 30. Please see the inside back cover for important information about other share classes.

The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased it to 10% on April 1, 2005. Fund results shown reflect the waiver, without which they would have been lower. Please see the Financial Highlights table on pages 23 to 24 for details.

The fund’s 30-day yield for Class A shares as of January 31, 2007, calculated in accordance with the Securities and Exchange Commission formula, was 4.89% (4.87% without the fee waiver). The fund’s distribution rate for Class A shares as of that date was 4.74%. Both reflect the 3.75% maximum sales charge. The SEC yield reflects the rate at which the fund is earning income on its current portfolio of securities while the distribution rate reflects the fund’s past dividends paid to shareholders. Accordingly, the fund’s SEC yield and distribution rate may differ.

The return of principal in bond funds is not guaranteed. Bond funds have the same interest rate, inflation and credit risks that are associated with the underlying bonds owned by the fund. High-yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in non-U.S. bonds is subject to additional risks. They include currency fluctuations, political and social instability, differing securities regulations and accounting standards, higher transaction costs, possible changes in taxation and illiquidity. For more complete information, please read the prospectus.

Fellow shareholders:

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The U.S. bond market posted solid returns for 2006 as the Federal Reserve paused in hiking short-term rates. For the 12 months ended December 31, 2006, The Bond Fund of America produced a total return of 5.9%, aided by careful bond selection.

The income generated by the fund’s portfolio holdings accounted for the bulk of this year’s return. Over the past 12 months, the fund paid monthly dividends totaling 65.5 cents a share. This includes a special dividend of 2.5 cents a share paid in December. Shareholders who reinvested dividends recorded an income return of 5.1%, while those who took dividends in cash earned an income return of 5.0%. In addition, the fund’s total return benefited from a modest increase in the fund’s share price, which climbed to $13.32 a share from $13.22.

The fund’s total return exceeded its primary benchmark, the unmanaged Lehman Brothers Aggregate Bond Index, which returned 4.3% for the year. Fund results were also better than its peer group benchmark, the Lipper Corporate Debt A-Rated Bond Funds Average, which gained 3.9%. Comparative results for longer time periods are shown in the table below.

Bond market overview

Interest rate expectations set the pace for the bond market, neatly dividing the year into distinct halves. During the first half of the year, rates trended higher as the Federal Reserve continued its measured increases in the federal funds rate. As a result, bond prices were generally weaker for the first six months. In August, however, the Fed paused as the economy began exhibiting signs of slower growth. With the Fed on hold during the second half of the year, rates began to decline, mainly for intermediate and longer term bonds. Lower rates led to higher bond prices in many instances, helping much of the market recover from losses logged early in the year.

One consequence of the higher short-term rates set by the Fed and the lower long-term rates levied by the market has been the relatively narrow range of current yields across the spectrum of bond maturities. This can be seen in the yield curve chart on page 2, which depicts the current yields for Treasury debt at year-end 2005 and 2006. As shown, market rates are higher year over year, but the slope of the yield curve has gone from positive (upward sloping) to inverted. In the past, an inverted yield curve has typically represented market expectations for slower economic growth and lower inflation in the months ahead.

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Results at a glance

(for periods ended December 31, 2006, with all distributions reinvested)

			Average annual total returns
	1 year			5 years		10 years		Lifetime*
The Bond Fund of America	+5.88	%		+6.35	%	+6.17	%	+9.13	%
Lehman Brothers Aggregate Bond Index1	+4.33			+5.06		+6.24		+8.66
Lipper Corporate Debt A-Rated
Bond Funds Average2	+3.87			+4.84		+5.61		+8.61

*Since May 28, 1974.

¹The unmanaged Lehman Brothers Aggregate Bond Index began on January 1, 1976. From May 28, 1974, through December 31, 1975, the Lehman Brothers Government/Credit Bond Index was used.

²Source: Lipper. Lipper averages do not include the effects of sales charges.

[End Sidebar]

[Begin Sidebar]

Treasury yield curves

This chart depicts the current yields for Treasury debt maturing in three months to 30 years. These yields serve as a benchmark for most bonds issued in the United States. One line depicts the yields at 12/30/05, the other at 12/29/06. As shown, short-term yields rose more than long-term yields, resulting in an inverted yield curve.

[begin line chart]

	12/29/2006	12/30/2005
3 mos.	5.04	4.20
6 mos.	5.09	4.46
1 yr.	4.98	4.41
2 yrs.	4.77	4.40
3 yrs.	4.72	4.39
4 yrs.	4.66	4.38
5 yrs.	4.64	4.38
7 yrs.	4.63	4.40
8 yrs.	4.72	4.40
9 yrs.	4.73	4.40
10 yrs.	4.75	4.44
15 yrs.	4.93	4.61
20 yrs.	4.92	4.63
25 yrs.	4.87	4.57
30 yrs.	4.81	4.49

[end line chart]

Source: Bloomberg

[End Sidebar]

[Begin Sidebar]

Portfolio quality summary

(as of December 31, 2006)

[begin pie chart]

U.S. government obligations*	8.9	%
Federal agencies	8.8	%
AAA	22.1	%
AA	6.4	%
A	18.2	%
BBB	18.7	%
High yield†	9.1	%
Equity-related securities	0.3	%
Short-term securities & other assets less liabilities	7.5	%

[end pie chart]

*Securities guaranteed by the full faith and credit of the U.S. government.

^†Bonds rated Ba/BB or below.

[End Sidebar]

Changes in the yield environment and to market expectations favored some bond sectors more than others. During the past year, high-yield bonds flourished, posting the best returns of any sector of the bond market, closely followed by developing market debt. Both sectors benefited from strong investor demand for higher yielding investments. Securitized debt such as asset-backed bonds and mortgages also did well. In contrast, U.S. Treasuries fared less well than sectors that offered more yield. Maturities also made a difference, as intermediate-term bonds generally posted better results than did long-term debt.

How the fund responded

The Bond Fund of America has holdings in every major sector of the bond market. Each holding is selected for its own merits, however, not for its sector representation. This individuated focus on bond selection has helped the fund produce strong results for the past year and an impressive track record over longer time periods.

Careful research is a vital component of our selection process. Throughout the year, our investment analysts identified specific bonds and areas of the market that they believed offered attractive opportunities for our shareholders. Among these were investments in autos, airlines, mortgages and hybrid securities. Of these, our airline and auto-related holdings provided some of the fund’s strongest gains for the year. To learn more about our research focus and the nuances of these investments, we invite you to read our feature article, “Research expanding our reach,” beginning on page 6.

Our research efforts have also identified attractive opportunities outside the United States. These include investments in the bonds of developing countries, many of which posted solid gains for the year, despite a brief period of weakness late in the first half.

Overall, the number of individual securities held in the fund’s portfolio topped 1,900 at the close of the year. While assets grew by 22%, the mix of securities was little changed from a year ago. The pie chart on page 2 provides a snapshot of the portfolio’s solid investment-grade profile. Similarly, the chart atop the summary investment portfolio on page 10 shows the various market sectors represented in the portfolio. Together, these charts help convey the broad diversification of the fund’s holdings.

Looking ahead

The increase in net assets in 2006 marks the sixth consecutive year of double-digit asset growth for the fund. We believe this pattern signifies a growing recognition among investors of the importance of fixed income in a well-diversified investment portfolio. Additionally, we take this opportunity to welcome new shareholders to our family.

The outlook for bonds in the year ahead remains tethered to the interest rate environment and prospects for continued economic growth. We are encouraged by the pace of economic growth evidenced in recent months. Nonetheless, we are always on the lookout for developments that might weaken the value of portfolio holdings and take appropriate steps to help mitigate the effects of adverse events. We fully recognize the important contributions that bonds provide to investor portfolios, and this compels us to invest with caution and prudence at all times.

As always, we appreciate your confidence and support. We look forward to reporting to you again in six months.

Cordially,

/s/ Paul G. Haaga, Jr.

Paul G. Haaga, Jr.

Vice Chairman of the Board

/s/ Abner D. Goldstine

Abner D. Goldstine

President

February 8, 2007

For current information about the fund, visit americanfunds.com.

The value of a long-term perspective

How a $10,000 investment has grown

Figures shown are past results for Class A shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For current information and month-end results, visit americanfunds.com. Fund figures reflect deduction of the maximum sales charge of 3.75% on the $10,000 investment.¹ Thus, the net amount invested was $9,625.²

There have always been reasons not to invest. You will find, however, that despite occasional stumbles, financial markets have tended to reward investors over the long term. Active management — bolstered by experience and careful research — can add even more value. As the chart below shows, over its lifetime, The Bond Fund of America has done demonstrably better than its relevant benchmarks.

Dividends, particularly when reinvested, have accounted for virtually all of the fund’s overall results. The table beneath the chart details the fund’s annual dividends and the cumulative value of the original investment.

Average annual total returns based on a $1,000 investment

(for periods ended December 31, 2006)*

	1 year		5 years		10 years
Class A shares	+1.87	%	+5.54	%	+5.76	%

 

*Assumes reinvestment of all distributions and payment of the maximum 3.75% sales charge.

The total annual fund operating expense ratio was 0.65% for Class A shares as of the most recent fiscal year-end. This figure does not reflect a fee waiver that currently is in effect and which causes the actual expense ratio to be lower.

The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased it to 10% on April 1, 2005. Fund results shown reflect actual expenses, with the waiver applied. Fund results would have been lower without the waiver. Please see the Financial Highlights table on pages 23 to 24 for details.

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Year ended Dec 31		BFA with dividends reinvested3		Lehman Brothers Aggregate Bond Index4		Consumer Price Index (inflation)5
5/28/74	$	9,625	$	10,000	$	10,000
1974		9,988		10,318		10,679
1975		11,254		11,587		11,420
1976		13,293		13,395		11,975
1977		13,977		13,802		12,778
1978		14,261		13,994		13,930
1979		14,710		14,264		15,782
1980		15,230		14,650		17,757
1981		16,242		15,565		19,342
1982		21,586		20,643		20,082
1983		23,628		22,368		20,844
1984		26,450		25,756		21,667
1985		33,488		31,449		22,490
1986		38,568		36,250		22,737
1987		39,324		37,248		23,745
1988		43,533		40,186		24,794
1989		47,942		46,025		25,947
1990		49,509		50,149		27,531
1991		59,927		58,174		28,374
1992		66,722		62,480		29,198
1993		76,155		68,571		30,000
1994		72,335		66,572		30,802
1995		85,536		78,870		31,584
1996		91,274		81,733		32,634
1997		99,709		89,624		33,189
1998		104,863		97,409		33,724
1999		107,265		96,609		34,630
2000		113,906		107,841		35,802
2001		122,051		116,946		36,358
2002		129,514		128,939		37,222
2003		145,335		134,231		37,922
2004		153,837		140,055		39,156
2005		156,815		143,457		40,494
2006		166,032		149,674		41,523

[end mountain chart]

Year ended
December 31		19746		1975	1976	1977	1978	1979	1980
Total value
Dividends reinvested	$	418		907	1,020	1,126	1,211	1,401	1,724
Value at year-end	$	9,988		11,254	13,293	13,977	14,261	14,710	15,230
BFA’s total return		(0.1	)%	12.7	18.1	5.1	2.0	3.1	3.5
Year ended
December 31		1981		1982	1983	1984	1985	1986	1987
Total value
Dividends reinvested		2,118		2,434	2,556	2,869	3,227	3,604	3,787
Value at year-end		16,242		21,586	23,628	26,450	33,488	38,568	39,324
BFA’s total return		6.6		32.9	9.5	11.9	26.6	15.2	2.0
Year ended
December 31		1988		1989	1990	1991	1992	1993	1994
Total value
Dividends reinvested		3,953		4,471	4,699	4,909	5,275	5,325	5,733
Value at year-end		43,533		47,942	49,509	59,927	66,722	76,155	72,335
BFA’s total return		10.7		10.1	3.3	21.0	11.3	14.1	(5.0	)
Year ended
December 31		1995		1996	1997	1998	1999	2000	2001
Total value
Dividends reinvested		6,178		6,473	6,704	7,007	7,398	8,190	8,228
Value at year-end		85,536		91,274	99,709	104,863	107,265	113,906	122,051
BFA’s total return		18.2		6.7	9.2	5.2	2.3	6.2	7.2
Year ended
December 31		2002		2003	2004	2005	2006
Total value
Dividends reinvested		8,189		7,370	6,913	7,924	7,949
Value at year-end		129,514		145,335	153,837	156,815	166,032
BFA’s total return		6.1		12.2	5.8	1.9	5.9

Average annual total return for fund’s lifetime: 9.00%³

¹As outlined in the prospectus, the sales charge is reduced for accounts (and aggregated investments) of $100,000 or more and is eliminated for purchases of $1 million or more. There is no sales charge on dividends or capital gain distributions that are reinvested in additional shares.

²The maximum initial sales charge was 8.5% prior to December 15, 1986, when it became 4.75% until January 9, 2000.

³Includes reinvested dividends of $151,292 and reinvested capital gain distributions of $4,573.

⁴From May 28, 1974, through December 31, 1975, the Lehman Brothers Government/Credit Bond Index was used because the Lehman Brothers Aggregate Bond Index did not yet exist. Since January 1, 1976, the Lehman Brothers Aggregate Bond Index has been used. These indexes are unmanaged and do not reflect sales charges, commissions or expenses.

⁵Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.

⁶For the period May 28, 1974 (when fund operations began), through December 31, 1974.

The results shown are before taxes on fund distributions and sale of fund shares.

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Research expanding our reach

Access to the bond market can be difficult and frustrating, sometimes even for investment professionals. The enormous variety of issues available today can be daunting, as can be the terms and provisions of individual securities. Much of the difficulty stems from the increasing complexity of debt securities, as more and more bonds are tailored to the specific needs of issuers and buyers. The result is a spectrum of debt instruments that exceeds the grasp of the average investor.

The Bond Fund of America simplifies the investing process for individuals by offering easy access to a highly diversified portfolio of debt securities. The fund’s reach extends to every sector of the U.S. bond market and beyond its borders to include a handful of non-U.S. issuers. This extraordinary variety is made possible by the extensive research efforts of the fund’s fixed-income analysts, portfolio counselors and other dedicated professionals who rigorously monitor the market forces and trends that influence bond prices, as well as the minute details of individual issues and their issuers. This multilayered approach to research helps the fund choose securities that we believe offer the best long-term value for our shareholders.

On the following pages, we take a closer look at three sub-sectors of the bond market — airline bonds, commercial mortgage-backed securities and hybrid securities — that have recently provided attractive investment opportunities for the fund. These niche markets contain relatively sophisticated financings that require in-depth research to adequately assess the potential risks and rewards for investors. We hope that these three focuses give you a better understanding of the people, the process, the skills and the dedication that go into building the fund’s portfolio. With that insight, we also hope that you gain a better appreciation for the fund and how it can contribute to your long-term investment plans.

[Begin Photo Caption]

[photo of Tara Torrens]

Tara Torrens

[End Photo Caption]

High-yield airlines

The high-yield sector has delivered some of the best bond market returns in recent years, and select holdings have made important contributions to fund results. Airline bonds, in particular, have contributed to this year’s gains, despite ongoing industry troubles. Thorough research is a must before investing in any of these securities, because the sector’s higher return potential is also laden with higher risks.

Tara Torrens is one of our fixed-income analysts who covers the airline industry. Her research and expertise have helped the fund benefit from an industry that is both on the mend and under pressure. Essential to her research recommendations is a comprehensive understanding of the airline business and the various classes of debt available.

“The airline industry was dealt a crippling blow by the 2001 recession and the events of 9/11,” explains Tara. “More recently, its recovery has been stymied by rising fuel and security costs, intense competition and difficult labor relations. As a result, several major airlines have been forced into bankruptcy protection.” Despite these obstacles, Tara saw reasons for cautious optimism. “From a cyclical perspective, airline revenues and profits were steadily improving, while pending and proposed mergers among carriers pointed to likely structural improvements in the industry.” On balance, Tara felt the positives outweighed the negatives, and the fund began increasing its exposure to airline bonds in late 2005, focusing primarily on classes of debt most likely to hold their value through the inevitable turbulence ahead.

Airline bonds fall into two major categories: unsecured debt and collateralized bonds. The latter are typically issued as equipment trust certificates (ETCs) or enhanced equipment trust certificates (EETCs); these constitute the lion’s share of the fund’s holdings in airline bonds. Both ETCs and EETCs are secured by specific airplanes, as well as airline leases on these planes. A typical EETC bond will have about 30 leased airplanes securing the debt. The leases afford some measure of protection against default, because as long as the airline continues to lease the plane, cash flow from the leases are passed along to bondholders. In a worst-case scenario, the lease is vacated and bondholders take possession of the airplane.

Of course, no bondholder wants to have a plane delivered to the front door in lieu of payments. To avert that scenario, Tara carefully evaluates the quality of the collateral securing these bonds. This involves several tiers of analysis ranging from fundamental credit and business assessments of each carrier, to the age and make of each plane securing the bond, to the use of the plane in the carrier’s overall service territory. Tara explains, “A newer plane leased by a major airline to serve its vital routes is far less likely to be vacated than an older plane that serves the less-trafficked routes of a struggling airline.”

Tara’s understanding of airlines, aircraft and the industry’s business cycles allowed the fund to take advantage of a high-risk segment of the bond market in a reasonable and measured fashion. Though airlines are only a small portion of the high-yield market and account for only 2.3% of the fund’s holdings, they help illustrate how in-depth research can afford access to niche markets, helping to bolster diversification and enhance returns for our shareholders.

[Begin Sidebar]

[begin bar chart]

Airlines’ operating profits

Year	$	billions
1999		8.34
2000		7.00
2001		-10.33
2002		-8.57
2003		-2.11
2004		-1.49
2005		0.30
2006*		2.60
* Estimated
Source: Air Transport Association (1999-2005) and Capital Research and Management Company estimate.

[end bar chart]

[End Sidebar]

[Begin Photo Caption]

[photo of Mark Macdonald]

Mark Macdonald

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Commercial mortgages — the other real estate

Mortgage-backed securities are the largest sector of the U.S. bond market and one of the fastest growing. Federal agency mortgages have been key holdings in The Bond Fund of America for decades. The vast majority of those bonds were created from pools of residential mortgages. More recently, the fund has broadened its exposure with investments in commercial mortgage-backed securities (CMBS) — a burgeoning sub-sector of the mortgage market that barely existed 10 years ago.

Like their residential counterparts, CMBS are created by pooling mortgages in a package to form a collateralized security. “These may be loans on office buildings, hotels, shopping centers or apartment complexes,” explains portfolio counselor and CMBS specialist Mark Macdonald. “By creating securities from these commercial loan pools, banks and other financial institutions are able to free up capital and better manage loan exposure in order to expand their lending activities.” Unlike federal agency mortgages, CMBS are typically issued by investment banks, commercial banks or finance companies, and are not guaranteed. Mark adds, “CMBS tend to offer higher yields, but are also more complicated than most agency-backed mortgages. This means a potential investor must first carefully analyze the structure of each security, as well as the contents of the loan pool, before purchasing bonds.”

Most CMBS are structured in tiers (called classes), which distribute the risks inherent in the bonds in rank order to various layers of debt. The senior classes are the highest rated (typically AAA) and offer the greatest protection against investment risks arising from losses in the loan pool. As a result, senior classes carry a lower yield than other tiers. The reverse is true for the subordinated classes, the junior tiers of these securities. The most subordinate classes typically absorb losses from the underlying loans, but are awarded a higher yield to assume that risk. “The tiered structure of these securities provides considerable credit enhancement,” explains Mark, “especially for buyers of the senior classes, which is where we tend to find the best opportunities for the fund.”

Assessing the structure of these securities is but one aspect of the research required. Our analysts must also thoroughly evaluate the underlying collateral. The individual mortgages that constitute CMBS loan pools reflect the broad diversity of today’s mortgage market: some may have a 30-year maturity, others allow for a 10-year balloon payment; some have a floating rate, others are fixed. Mark points out, “The particular terms of the underlying mortgages can have a significant effect on the projected cash flow of the bond, as can the concentration or diversification of mortgages.”

Evaluating the collateral also extends to the buildings in question. Where are they located? Who are the tenants? What type of property is involved? Each particular must be assessed to develop a complete picture of the potential risks involved and the relative value of the security.

“All CMBS require various layers of investigation,” notes Mark. “We are fortunate that we can utilize the expertise of our equity counterparts to help us evaluate the credit strength of property owners and users. We also rely on the insights of our proprietary trading team to help determine the relative value of these bonds. By doing our homework and incorporating the perspectives of fellow associates, we have been able to find attractive investments for our shareholders from this thriving segment of the mortgage market.”

[Begin Sidebar]

[begin bar chart]

Commercial mortgages outstanding

Year	$	billions
1997		0.84
1998		0.92
1999		1.06
2000		1.17
2001		1.28
2002		1.38
2003		1.51
2004		1.68
2005		1.94
2006*		2.06
*As of September 2006
Source: Federal Reserve Bulletin

[end bar chart]

[End Sidebar]

[Begin Photo Caption]

[photo of Louise Moriarty]

Louise Moriarty

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Hybrid capital — a new layer of complexity

Innovation has been a driver of growth in the bond market over the past two decades. This has been evident in structured securities, such as CMBS and asset-backed bonds, but also among more traditional bond issuers. Banks and other financial institutions are perennial issuers of debt, which they use to fund ongoing operations and acquisitions and to maintain healthy capital reserves. Banks are also highly credit conscious; most are rated A, or better, and strive to uphold solid investment-grade ratings. For these frequent issuers, innovative financings such as hybrids afford them an opportunity to reduce their overall cost of capital and at the same time remain in good standing with both the regulators and the rating agencies.

“Today’s hybrid capital is a new twist on an older form of bank hybrid capital — trust preferred securities,” explains Louise Moriarty, our U.S. bank analyst. “In current form, hybrid securities are deeply subordinated bonds with long final maturity dates and coupon payments that may be deferred. It is these characteristics that have given the rating and regulatory agencies reason to consider them as partial alternatives to common equity. This has allowed companies to more efficiently manage their capital structures [their layers of debt and equity] by replacing some of their more costly common equity with hybrid securities.”

Yet, each issuer is different and all hybrid structures are not alike. “We need to take a close look at each issue,” cautions Louise, “to examine the features and fully understand how they fit into the overall capital structure of the issuing company and how they compare to other issues in the marketplace.”

Hybrid securities come with many variations. They typically have either very long final maturities (up to 60 years) or no fixed maturity (perpetuals). Most have call features, however, that allow them to be redeemed at a future date, which can range from 5 to 30 years from issuance. While call provisions vary among issues, nearly all hybrids trade relative to an expected call date. These complexities can make hybrids difficult to evaluate and may pose risks for unsuspecting buyers.

Nonetheless, hybrids remain an attractive option for issuers and informed buyers. “The advantage to investors is the relatively high yield these securities offer for mainly high-quality companies,” observes Louise. “Yet, investors must be mindful of their deeply subordinated position and the complexity of the issue’s structure. We examine the financial strength of each issuer carefully, as well as the specific terms of the hybrid issue, to fully understand the potential risks. We only buy hybrids from well-managed companies with solid credit metrics and a demonstrated ability to weather weak business cycles. Both U.S. and non-U.S. banks as well as insurance companies have been active issuers of hybrids, presenting us with many attractive opportunities.”

Hybrid securities have grown in popularity because of their attractive yields. Additionally, many trust preferred securities issued in the mid-1990s are now eligible to be called. This new generation of securities attests to the adage that everything old is new again — but with a twist. They also underscore the need for scrupulous research when investing in today’s bond market. With its deep bench of experience and research talent, The Bond Fund of America has been able to access these niche areas of the market and harness innovations for the benefit of its shareholders.

[Begin Sidebar]

[begin bar chart]

Growth of U.S. hybrid security issuance

Year	$	billions
2001		28.3
2002		22.2
2003		30.3
2004		36.5
2005		42.5
2006		69.6
Source: Lehman Brothers, Hybrid Capital Advisor, December 19, 2006 (updated January 2007).

[end bar chart]

[End Sidebar]

Summary investment portfolio, December 31, 2006

The following summary investment portfolio is designed to streamline the report and help investors better focus on a fund’s principal holdings. For details on how to obtain a complete schedule of portfolio holdings, please see the inside back cover.

[begin pie chart]

Corporate bonds & notes	43.5
Mortgage-backed obligations		20.4
U.S. government & government agency bonds & notes		10.9
Non-U.S. government & government agency bonds & notes		6.6
Asset-backed obligations		6.0
Preferred securities		3.8
Municipals		0.6
Convertible securities		0.4
Common stocks & warrants		0.3
Short-term securities & other assets less liabilities		7.5

[end pie chart]

	Principal			Market			Percent
		amount			value			of net
Bonds & notes - 88.08%		(000	)		(000	)		assets
Corporate bonds & notes - 43.51%
Financials - 19.00%
General Motors Acceptance Corp.:
7.569% 2014 (1)	$	75,000		$	78,576
5.85%-7.75% 2007-2014 (1)		149,435			154,095
Residential Capital Corp.:
6.375% 2010		78,250			79,222
6.00%-7.204% 2009-2015 (1) (2)		85,780			86,913			1.42	%
International Lease Finance Corp. 3.125%-5.875% 2007-2013		152,565			151,361
American General Finance Corp. 5.40%-5.85% 2011-2016 (1)		82,500			83,084
ILFC E-Capital Trust II 6.25% 2065 (1) (2)		44,975			45,766
AIG SunAmerica Global Financing VII 5.85% 2008 (2)		24,250			24,451
American International Group, Inc. 6.25% 2036		8,750			9,329
ASIF Global Financing XVIII 3.85% 2007 (2)		5,785			5,709
ASIF Global Financing XXVIII 5.41% 2007 (1) (2)		2,000			2,001			1.15
Washington Mutual Preferred Funding I Ltd. 6.534% (undated) (1) (2)		89,500			88,787
Washington Mutual Preferred Funding II Ltd. 6.665% (undated) (1) (2)		74,800			75,514
Washington Mutual, Inc. 4.375%-5.95% 2008-2017 (1)		85,735			85,190
Washington Mutual Bank 5.795% 2013 (1)		35,000			35,045			1.02
Ford Motor Credit Co.:
4.875% 2007		€13,950			18,407
9.75% 2010 (2)	$	94,500			100,608
7.20%-10.61% 2007-2012 (1) (2)		116,925			121,371			.86
Household Finance Corp. 4.125%-7.875% 2007-2011		109,000			110,334
HSBC Finance Corp. 4.625%-5.724% 2010-2015 (1)		78,230			77,507
Midland Bank 5.688% Eurodollar note (undated) (1)		15,000			13,013
HSBC Bank USA 4.625% 2014 (2)		6,550			6,253
HSBC Holdings PLC 6.50% 2036		1,950			2,105			.75
Sumitomo Mitsui Banking Corp. 6.078% (undated) (1) (2)		99,800			99,396			.35
SocGen Real Estate Co. LLC, Series A, 7.64% (undated) (1) (2)		76,250			77,442			.28
HBOS PLC, Series B, 5.92% (undated) (1) (2)		76,400			75,071			.27
World Savings Bank, FSB, Bank Notes, Series 2008-FXR, 4.125% 2008		34,250			33,661
Wachovia Corp. 5.30%-5.625% 2011-2016		12,000			12,077			.16
Other securities					3,569,321			12.74
					5,321,609			19.00
Consumer discretionary - 5.61%
Ford Capital BV 9.50% 2010		5,543			5,543			.02
Other securities					1,564,862			5.59
					1,570,405			5.61
Industrials - 4.74%
Northwest Airlines, Inc., Term Loan A, 7.116% 2018 (1) (3)		75,150			75,150			.27
Other securities					1,252,622			4.47
					1,327,772			4.74
Telecommunication services - 4.51%
Nextel Communications, Inc.:
Series E, 6.875% 2013		109,480			110,723
Series D, 7.375% 2015		98,705			101,312			.76
AT&T Wireless Services, Inc. 8.125% 2012		87,630			98,715			.35
France Télécom 7.75% 2011 (1)		85,050			92,725			.33
Other securities					860,804			3.07
					1,264,279			4.51
Utilities - 2.61%
Other securities					731,125			2.61
Energy - 2.57%
Energy Transfer Partners, LP 5.95% 2015		72,670			73,198			.26
Other securities					646,817			2.31
					720,015			2.57
Other corporate bonds & notes - 4.47%
Other securities					1,251,880			4.47
Mortgage-backed obligations (3) - 20.37%
Fannie Mae:
5.50% 2035		79,710			78,888
5.50% 2036		79,036			78,123
0%-12.046% 2009-2042 (1)		934,533			929,530			3.88
Freddie Mac:
6.00% 2036		308,540			310,805
0%-11.00% 2007-2036 (1)		472,600			459,178			2.75
CS First Boston Mortgage Securities Corp. 0%-7.791% 2018-2041 (1) (2)		452,947			442,641			1.58
Countrywide Alternative Loan Trust:
Series 2005-46CB, Class A-8, 5.50% 2035		87,742			87,613
4.75%-6.00% 2019-2036 (1)		313,552			311,775			1.43
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP1, Class A-2, 4.625% 2046		91,455			89,923			.32
Other securities					2,916,322			10.41
					5,704,798			20.37
U.S. government & government agency bonds & notes - 10.93%
U.S. Treasury:
3.625% 2007		96,945			96,301
6.25% 2007		143,385			143,597
3.50% 2011 (4)		81,206			84,546
4.50% 2011		108,000			107,055
3.625% 2013		100,000			94,250
4.25% 2013		793,650			773,936
11.25% 2015		90,000			129,333
4.50% 2016		146,495			144,207
8.875% 2017		80,000			107,050
6.875% 2025		129,700			160,544
4.50% 2036		76,975			73,235
0%-12.00% 2007-2032 (4) (5)		519,234			510,808			8.66
Fannie Mae:
4.25% 2007		210,731			209,610
5.25% 2007		103,500			103,485
4.75%-5.25% 2007-2012		115,210			115,287			1.53
Federal Home Loan Bank 3.70%-5.625% 2007-2016		77,830			77,900			.28
Freddie Mac 4.125%-6.25% 2009-2012		73,250			72,627			.26
Other securities					55,992			.20
					3,059,763			10.93
Non-U.S. government & government agency bonds & notes - 6.63%
Israeli Government 7.50% 2014		ILS539,902			141,977			.51
Polish Government 5.75% 2010		PLN259,820			91,990			.33
Japanese Government 0.50% 2007		¥10,511,900			88,346			.32
Korean Government 5.25% 2015		KRW72,471,970			79,117			.28
Canadian Government 4.25% 2026 (4)		C$64,829			78,733			.28
German Government 4.50% 2009		€55,000			73,570			.26
Other securities					1,302,364			4.65
					1,856,097			6.63
Asset-backed obligations - 6.02%
Other securities					1,686,937			6.02
Municipals - 0.62%
Other securities					174,950			.62
Total bonds & notes (cost: $24,331,753,000)					24,669,630			88.08
Convertible securities - 0.37%
Other - 0.32%
Ford Motor Co. Capital Trust II 6.50% cumulative convertible trust preferred 2032		228,100			7,801			.03
Other securities					81,952			.29
					89,753			.32
Miscellaneous - 0.05%
Other convertible securities in initial period of acquisition					12,640			.05
Total convertible securities (cost: $89,079,000)					102,393			.37
					Market			Percent
					value			of net
Preferred securities - 3.75%		Shares			(000	)		assets
Financials - 3.71%
HSBC Capital Funding LP:
Series 1, 9.547% noncumulative step-up perpetual preferred (1) (2)		85,750,000			96,683
Series 2, 10.176% noncumulative step-up perpetual preferred (1) (2)		25,000,000			37,044
8.03% noncumulative preferred (1)		20,000,000			30,750			.59
Fuji JGB Investment LLC, Series A, 9.87% noncumulative preferred (1) (2)		121,238,000			128,522			.46
MUFG Capital Finance 1 Ltd. 6.346% noncumulative preferred (1)		105,720,000			107,570			.38
Fannie Mae:
Series O, 7.00% preferred (1) (2)		900,000			48,206
Series E, 5.10% preferred		150,000			6,787			.20
Wachovia Capital Trust III 5.80% preferred (1)		45,000,000			45,413			.16
Freddie Mac, Series U, 5.90% preferred		500,000			13,075			.05
Other securities					526,533			1.87
					1,040,583			3.71
Other - 0.00%
Other securities					475			.00
Miscellaneous - 0.04%
Other preferred securities in initial period of acquisition					9,987			.04
Total preferred securities (cost: $973,016,000)					1,051,045			3.75
Common stocks - 0.32%
Other - 0.31%
Other securities					85,359			.31
Miscellaneous - 0.01%
Other common stocks in initial period of acquisition					2,615			.01
Total common stocks (cost: $53,405,000)					87,974			.32
Warrants - 0.00%
Telecommunication services - 0.00%
Other securities					18			.00
Total warrants (cost: $143,000)					18			.00
		Principal			Market			Percent
		amount			value			of net
Short-term securities - 6.44%		(000	)		(000	)		assets
Federal Home Loan Bank 5.15%-5.195% due 1/10-3/28/2007	$	231,900		$	230,678			.82	%
Variable Funding Capital Corp. 5.24%-5.27% due 1/5-1/16/2007 (2)		214,900			214,615			.77
Abbott Laboratories 5.20%-5.24% due 1/16-3/15/2007 (2) (5)		154,000			152,978			.55
Hewlett-Packard Co. 5.28%-5.29% due 2/6-2/9/2007 (2)		148,500			147,658			.53
Clipper Receivables Co., LLC 5.24%-5.28% due 1/23-2/5/2007 (2)		145,800			145,218			.52
Three Pillars Funding, LLC 5.27%-5.32% due 1/16-3/19/2007 (2) (5)		145,522			144,779			.52
CAFCO, LLC 5.24%-5.25% due 1/16-1/19/2007 (2)		90,800			90,569
Ciesco LLC 5.25% due 1/30/2007 (2)		50,000			49,783			.50
Procter & Gamble International Funding S.C.A. 5.23%-5.26% due 1/8-2/9/2007 (2)		120,400			120,056			.43
CIT Group, Inc. 5.25%-5.26% due 1/24-2/23/2007 (2) (5)		100,200			99,684			.35
HSBC Finance Corp. 5.23% due 1/12/2007		63,000			62,890			.22
American General Finance Corp. 5.22% due 1/4/2007		50,000			49,971			.18
FCAR Owner Trust I 5.27% due 1/9/2007		50,000			49,934			.18
Other securities					245,472			.87
Total short-term securities (cost: $1,804,217,000)					1,804,285			6.44
Total investment securities (cost: $27,251,613,000)					27,715,345			98.96
Other assets less liabilities					292,455			1.04
Net assets				$	28,007,800			100.00	%
"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.
"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

Investments in affiliates

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

Company	Beginning shares	Purchases	Sales	Ending shares	Dividend income (000)		Market value of affiliates at 12/31/06 (000)
ZiLOG, Inc. (6)	879,000	-	-	879,000	-	$	3,850
ZiLOG, Inc. - MOD III Inc., units	1,447	-	1,447	-	-		-
Clarent Hospital Corp. (6) (7)	331,291	-	-	331,291	-		83
					-	$	3,933

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

(1) Coupon rate may change periodically.

(2) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $6,559,882,000, which represented 23.42% of the net assets of the fund.

(3) Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.

(4) Index-linked bond whose principal amount moves with a government retail price index.

(5) This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future.

(6) Security did not produce income during the last 12 months.

(7) Valued under fair value procedures adopted by authority of the board of directors. The total value of all such securities, including those in “Miscellaneous” and “Other securities,” was $24,582,000.

The industry classifications shown in the summary investment portfolio were obtained from sources believed to be reliable and are not covered by the Report of Independent Registered Public Accounting Firm.

See Notes to Financial Statements

Financial statements

Statement of assets and liabilities
at December 31, 2006	(dollars and shares in thousands, except per-share amounts					)
Assets:
Investment securities at market:
Unaffiliated issuers (cost: $27,235,506)		$	27,711,412
Affiliated issuers (cost: $16,107)			3,933	$	27,715,345
Cash					21,328
Receivables for:
Sales of investments			84,267
Sales of fund's shares			98,512
Open forward currency contracts			29
Dividends and interest			325,994		508,802
					28,245,475
Liabilities:
Payables for:
Purchases of investments			149,373
Repurchases of fund's shares			68,536
Open forward currency contracts			55
Closed forward currency contracts			2,444
Investment advisory services			5,185
Services provided by affiliates			11,024
Deferred directors' compensation			467
Other			591		237,675
Net assets at December 31, 2006				$	28,007,800
Net assets consist of:
Capital paid in on shares of capital stock				$	28,074,131
Undistributed net investment income					9,082
Accumulated net realized loss					(540,592	)
Net unrealized appreciation					465,179
Net assets at December 31, 2006				$	28,007,800

Total authorized capital stock - 5,000,000 shares, $.001 par value (2,103,404 total shares outstanding)
		Net assets	Shares outstanding		Net asset value per share*
Class A	$	20,670,101	1,552,338	$	13.32
Class B		1,458,357	109,524		13.32
Class C		1,847,118	138,720		13.32
Class F		1,610,750	120,969		13.32
Class 529-A		387,879	29,130		13.32
Class 529-B		68,588	5,151		13.32
Class 529-C		169,734	12,747		13.32
Class 529-E		21,000	1,577		13.32
Class 529-F		14,523	1,091		13.32
Class R-1		29,193	2,192		13.32
Class R-2		499,561	37,517		13.32
Class R-3		570,174	42,820		13.32
Class R-4		324,874	24,398		13.32
Class R-5		335,948	25,230		13.32
(*) Maximum offering price and redemption price per share were equal to the net asset value per share for all share classes, except for Class A and 529-A, for which the maximum offering prices per share were $13.84 each.
See Notes to Financial Statements

Statement of operations
for the year ended December 31, 2006		(dollars in thousands				)
Investment income:
Income:
Interest (net of non-U.S. taxes of $594)	$	1,397,817
Dividends		22,223		$	1,420,040
Fees and expenses(*):
Investment advisory services		62,421
Distribution services		89,142
Transfer agent services		24,571
Administrative services		9,569
Reports to shareholders		872
Registration statement and prospectus		1,232
Postage, stationery and supplies		2,513
Directors' compensation		192
Auditing and legal		136
Custodian		1,253
State and local taxes		184
Other		274
Total fees and expenses before reimbursements/waivers		192,359
Less reimbursements/waivers of fees and expenses:
Investment advisory services		6,242
Administrative services		993
Total fees and expenses after reimbursements/waivers					185,124
Net investment income					1,234,916
Net realized loss and unrealized appreciation on investments and non-U.S. currency:
Net realized loss on:
Investments (including $791 net loss from affiliate)		(40,050	)
Non-U.S. currency transactions		(47,624	)		(87,674	)
Net unrealized appreciation (depreciation) on:
Investments		265,200
Non-U.S. currency translations		(855	)		264,345
Net realized loss and unrealized appreciation on investments and non-U.S. currency					176,671
Net increase in net assets resulting from operations				$	1,411,587
(*) Additional information related to class-specific fees and expenses is included in the Notes to Financial Statements.
See Notes to Financial Statements
Statements of changes in net assets		(dollars in thousands				)
		Year ended December 31
		2006			2005
Operations:
Net investment income	$	1,234,916		$	965,151
Net realized (loss) gain on investments and non-U.S. currency transactions		(87,674	)		193,485
Net unrealized appreciation (depreciation) on investments and non-U.S. currency translations		264,345			(753,973	)
Net increase in net assets resulting from operations		1,411,587			404,663
Dividends paid to shareholders from net investment income		(1,214,994	)		(1,081,144	)
Capital share transactions		4,835,584			3,822,696
Total increase in net assets		5,032,177			3,146,215
Net assets:
Beginning of year		22,975,623			19,829,408
End of year (including undistributed net investment income: $9,082 and $13,350, respectively)	$	28,007,800		$	22,975,623
See Notes to Financial Statements

Notes to financial statements     

1.    Organization and significant accounting policies

Organization - The Bond Fund of America, Inc. (the "fund") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. The fund seeks as high a level of current income as is consistent with preservation of capital through a diversified portfolio of bonds and other fixed-income obligations.

The fund offers 14 share classes consisting of four retail share classes, five CollegeAmerica® savings plan share classes and five retirement plan share classes. The CollegeAmerica savings plan share classes (529-A, 529-B, 529-C, 529-E and 529-F) can be utilized to save for college education. The five retirement plan share classes (R-1, R-2, R-3, R-4 and R-5) are sold without any sales charges and do not carry any conversion rights.The fund’s share classes are described below:

Share class	Initial sales charge	Contingent deferred sales charge upon redemption	Conversion feature
Class A and 529-A	Up to 3.75%	None (except 1% for certain redemptions within one year of purchase without an initial sales charge)	None
Class B and 529-B	None	Declines from 5% to 0% for redemptions within six years of purchase	Class B and 529-B convert to Class A and 529-A, respectively, after eight years
Class C	None	1% for redemptions within one year of purchase	Class C converts to Class F after 10 years
Class 529-C	None	1% for redemptions within one year of purchase	None
Class 529-E	None	None	None
Class F and 529-F	None	None	None
Class R-1, R-2, R-3, R-4 and R-5	None	None	None

Holders of all share classes have equal pro rata rights to assets, dividends and liquidation proceeds.Each share class has identical voting rights, except for the exclusive right to vote on matters affecting only its class. Share classes have different fees and expenses ("class-specific fees and expenses"), primarily due to different arrangements for distribution, administrative and shareholder services. Differences in class-specific fees and expenses will result in differences in net investment income and, therefore, the payment of different per-share dividends by each class.

Significant accounting policies - The financial statements have been prepared to comply with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the fund:

Security valuation - Equity securities are valued at the official closing price of, or 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. Prices for each security are taken from the principal exchange or market in which the security trades. Fixed-income securities, including short-term securities purchased with more than 60 days left to maturity, are valued at prices obtained from an independent pricing service when such prices are available. However, where the investment adviser deems it appropriate, such securities will be valued at the mean quoted bid and asked prices (or bid prices, if asked prices are not available) or at prices for securities of comparable maturity, quality and type. Securities with both fixed-income and equity characteristics, or equity securities traded principally among fixed-income dealers, are valued in the manner described above for either equity or fixed-income securities, depending on which method is deemed most appropriate by the investment adviser. Short-term securities purchased within 60 days to maturity are valued at amortized cost, which approximates market value. The value of short-term securities originally purchased with maturities greater than 60 days is determined based on an amortized value to par when they reach 60 days or less remaining to maturity. The ability of the issuers of the debt securities held by the fund to meet their obligations may be affected by economic developments in a specific industry, state or region. Forward currency contracts are valued at the mean of representative quoted bid and asked prices. Securities and other assets for which representative market quotations are not readily available or are considered unreliable by the investment adviser are fair valued as determined in good faith under procedures adopted by authority of the fund's board of directors. Various factors may be reviewed in order to make a good faith determination of a security’s fair value. These factors include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; significant events occurring after the close of trading in the security; and changes in overall market conditions.

Security transactions and related investment income - Security transactions are recorded by the fund as of the date the trades are executed with brokers. Realized gains and losses from security transactions are determined based on the specific identified cost of the securities. In the event a security is purchased with a delayed payment date, the fund will segregate liquid assets sufficient to meet its payment obligations. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Market discounts, premiums and original issue discounts on fixed-income securities are amortized daily over the expected life of the security.

Class allocations - Income, fees and expenses (other than class-specific fees and expenses) are allocated daily among the various share classes based on the relative value of their settled shares. Realized and unrealized gains and losses are allocated daily among the various share classes based on their relative net assets. Class-specific fees and expenses, such as distribution, administrative and shareholder services, are charged directly to the respective share class.

Dividends and distributions to shareholders - Dividends paid to shareholders are declared daily from net investment income and are paid to shareholders monthly. Distributions paid to shareholders are recorded on the ex-dividend date.

Non-U.S. currency translation - Assets and liabilities, including investment securities, denominated in non-U.S. currencies are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investment securities and income and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. In the accompanying financial statements, the effects of changes in non-U.S. exchange rates on investment securities are included with the net realized gain or loss and net unrealized appreciation or depreciation on investments. The realized gain or loss and unrealized appreciation or depreciation resulting from all other transactions denominated in non-U.S. currencies are disclosed separately.

Forward currency contracts - The fund may enter into forward currency contracts, which represent agreements to exchange non-U.S. currencies on specific future dates at predetermined rates. The fund enters into these contracts to manage its exposure to changes in non-U.S. exchange rates arising from investments denominated in non-U.S. currencies. Upon entering into these contracts, risks may arise from the potential inability of counterparties to meet the terms of their contracts and from possible movements in non-U.S. exchange rates. Due to these risks, the fund could incur losses up to the entire contract amount, which may exceed the net unrealized value shown on the accompanying financial statements. On a daily basis, the fund values forward currency contracts based on the applicable exchange rates and records unrealized gains or losses. The fund records realized gains or losses at the time the forward contract is closed or offset by another contract with the same broker for the same settlement date and currency.

Mortgage dollar rolls - The fund may enter into mortgage dollar roll transactions in which the fund sells a mortgage-backed security to a counterparty and simultaneously enters into an agreement with the same counterparty to buy back a similar security on a specific future date at a predetermined price. Each mortgage dollar roll is treated as a financing transaction;therefore, any gain or loss is considered unrealized until the roll reaches completion. Risks may arise due to the delayed payment date and the potential inability of counterparties to complete the transaction. Income is generated as consideration for entering into these transactions and is included in interest income on the accompanying financial statements.

Loan transactions - The fund may enter into loan transactions in which the fund acquires a loan either through an agent, by assignment from another holder, or as a participation interest in another holder's portion of a loan. The loan is often administered by a financial institution that acts as agent for the holders of the loan, and the fund may be required to receive approval from the agent and/or borrower prior to the sale of the investment. The loan's interest rate and maturity date may change based on the terms of the loan, including potential early payments of principal. Risks may arise due to the delayed settlement date of the loan transaction and the ability of the agent and/or the borrower to meet the obligations of the loan.

2.    Non-U.S. investments

Investment risk - The risks of investing in securities of non-U.S.issuers may include, but are not limited to, investment and repatriation restrictions; revaluation of currencies; adverse political, social and economic developments; government involvement in the private sector; limited and less reliable investor information; lack of liquidity; certain local tax law considerations; and limited regulation of the securities markets.

Taxation - Dividend and interest income is recorded net of non-U.S. taxes paid. Realized and unrealized gains on securities in certain countries are subject to non-U.S. taxes. The fund records a liability based on realized and unrealized gains to provide for potential non-U.S. taxes payable on these securities. For the year ended December 31, 2006, non-U.S. taxes paid on unrealized gains were $29,000. As of December 31, 2006, there were no non-U.S. taxes provided on realized and unrealized gains.

3. Federal income taxation and distributions

The fund complies with the requirements under Subchapter M of the Internal Revenue Code applicable to mutual funds and intends to distribute substantially all of its net taxable income and net capital gains each year. The fund is not subject to income taxes to the extent such distributions are made. Therefore, no federal income tax provision is required.

Distributions - Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences are due primarily to differing treatment for items such as non-U.S. currency gains and losses; short-term capital gains and losses; capital losses related to sales of certain securities within 30 days of purchase; unrealized appreciation of certain investments in non-U.S. securities; cost of investments sold; and net capital losses. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund for financial reporting purposes.

During the year ended December 31, 2006, the fund reclassified $24,173,000 from undistributed net investment income to accumulated net realized loss and $17,000 from undistributed net investment income to capital paid in on shares of capital stock to align financial reporting with tax reporting.

As of December 31, 2006, the tax basis components of distributable earnings, unrealized appreciation (depreciation) and cost of investments were as follows:

		(dollars in thousands)
Undistributed ordinary income				$	19,605
Capital loss carryforwards*:
Expiring 2010	$	(183,032	)
Expiring 2011		(243,982	)
Expiring 2014		(69,196	)		(496,210	)
Gross unrealized appreciation on investment securities					631,724
Gross unrealized depreciation on investment securities					(221,776	)
Net unrealized appreciation on investment securities					409,948
Cost of investment securities					27,305,397
*The capital loss carryforwards will be used to offset any capital gains realized by the fund in future years through the expiration dates. The fund will not make distributions from capital gains while capital loss carryforwards remain.

Ordinary income distributions paid to shareholders from net investment income were as follows (dollars in thousands):

	Year ended December 31
Share class		2006		2005
Class A	$	941,317	$	867,764
Class B		59,893		61,634
Class C		66,720		55,743
Class F		55,145		33,288
Class 529-A		16,173		11,711
Class 529-B		2,569		2,278
Class 529-C		5,889		4,413
Class 529-E		840		618
Class 529-F		550		295
Class R-1		943		629
Class R-2		17,973		13,142
Class R-3		21,268		14,060
Class R-4		12,290		7,048
Class R-5		13,424		8,521
Total	$	1,214,994	$	1,081,144

4. Fees and transactions with related parties

Capital Research and Management Company ("CRMC"), the fund’s investment adviser, is the parent company of American Funds Service Company ^SM ("AFS"), the fund’s transfer agent, and American Funds Distributors, Inc.^SM ("AFD"), the principal underwriter of the fund’s shares.

Investment advisory services - The Investment Advisory and Service Agreement with CRMC provides for monthly fees accrued daily. These fees are based on a declining series of annual rates beginning with 0.30% on the first $60 million of daily net assets and decreasing to 0.12% on such assets in excess of $20 billion. The agreement also provides for monthly fees, accrued daily, based on a declining series of rates beginning with 2.25% on the first $8,333,333 of the fund's monthly gross income and decreasing to 1.75% on such income in excess of $41,666,667. During the year ended December 31, 2006, CRMC reduced investment advisory service rates to a proposed rate that would continue the series of rates to include an additional annual rate of 0.115% on daily net assets in excess of $28 billion. CRMC is currently waiving 10% of investment advisory services fees. During the year ended December 31, 2006, total investment advisory services fees waived by CRMC were $6,242,000. As a result, the fee shown on the accompanying financial statements of $62,421,000, which was equivalent to an annualized rate of 0.250%, was reduced to $56,179,000, or 0.225% of average daily net assets.

Class-specific fees and expenses - Expenses that are specific to individual share classes are accrued directly to the respective share class. The principal class-specific fees and expenses are described below:

Distribution services - The fund has adopted plans of distribution for all share classes, except Class R-5. Under the plans, the board of directors approves certain categories of expenses that are used to finance activities primarily intended to sell fund shares and service existing accounts. The plans provide for payments, based on an annualized percentage of average daily net assets, ranging from 0.25% to 1.00% as noted below. In some cases, the board of directors has limited the amounts that may be paid to less than the maximum allowed by the plans. All share classes may use up to 0.25% of average daily net assets to pay service fees, or to compensate AFD for paying service fees, to firms that have entered into agreements with AFD to provide certain shareholder services. The remaining amounts available to be paid under each plan are paid to dealers to compensate them for their sales activities.

For Class A and 529-A, the board of directors has also approved the reimbursement of dealer and wholesaler commissions paid by AFD for certain shares sold without a sales charge. These classes reimburse AFD for amounts billed within the prior 15 months but only to the extent that the overall annual expense limit of 0.25% is not exceeded. As of December 31, 2006, unreimbursed expenses subject to reimbursement totaled $7,759,000 for Class A. There were no unreimbursed expenses subject to reimbursement for Class 529-A.

Share class	Currently approved limits	Plan limits
Class A	0.25%	0.25%
Class 529-A	0.25	0.50
Class B and 529-B	1.00	1.00
Class C, 529-C and R-1	1.00	1.00
Class R-2	0.75	1.00
Class 529-E and R-3	0.50	0.75
Class F, 529-F and R-4	0.25	0.50

Transfer agent services -The fund has a transfer agent agreement with AFS for Class A and B. Under this agreement, these share classes compensate AFS for transfer agent services including shareholder recordkeeping, communications and transaction processing. AFS is also compensated for certain transfer agent services provided to all other share classes from the administrative services fees paid to CRMC described below.

Administrative services - The fund has an administrative services agreement with CRMC to provide transfer agent and other related shareholder services for all share classes other than Class A and B. Each relevant share class pays CRMC annual fees up to 0.15% (0.10% for Class R-5) based on its respective average daily net assets. Each relevant share class also pays AFS additional amounts for certain transfer agent services. CRMC and AFS may use these fees to compensate third parties for performing these services. CRMC has agreed to pay AFS on the fund's behalf for a portion of the transfer agent services fees for some of the retirement plan share classes. For the year ended December 31, 2006, the total administrative services fees paid by CRMC were $8,000 and $985,000 for Class R-1 and R-2, respectively. Administrative services fees are presented gross of any payments made by CRMC. Each 529 share class is subject to an additional annual administrative services fee of 0.10% of its respective average daily net assets; this fee is payable to the Commonwealth of Virginia for the maintenance of the CollegeAmerica plan.Although these amounts are included with administrative services fees on the accompanying financial statements, the Commonwealth of Virginia is not considered a related party.

Expenses under the agreements described on the previous page for the year ended December 31, 2006, were as follows (dollars in thousands):

Share class	Distribution services	Transfer agent services	Administrative services
			CRMC administrative services	Transfer agent services	Commonwealth of Virginia administrative services
Class A	$47,213	$22,923	Not applicable	Not applicable	Not applicable
Class B	14,221	1,648	Not applicable	Not applicable	Not applicable
Class C	15,929	Included in administrative services	$2,143	$488	Not applicable
Class F	2,712		903	264	Not applicable
Class 529-A	622		285	74	$325
Class 529-B	625		55	35	62
Class 529-C	1,417		124	61	141
Class 529-E	90		16	4	18
Class 529-F	-		9	2	11
Class R-1	221		28	20	Not applicable
Class R-2	3,194		622	2,118	Not applicable
Class R-3	2,287		645	486	Not applicable
Class R-4	611		351	22	Not applicable
Class R-5	Not applicable		247	10	Not applicable
Total	$89,142	$24,571	$5,428	$3,584	$557

Deferred directors’ compensation - Since the adoption of the deferred compensation plan in 1993, directors who are unaffiliated with CRMCmay elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Directors’ compensation of $192,000, shown on the accompanying financial statements, includes $122,000 in current fees (either paid in cash or deferred) and a net increase of $70,000 in the value of the deferred amounts.

Affiliated officers and directors - Officers and certain directors of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated officers or directors received any compensation directly from the fund.

5. Capital share transactions

Capital share transactions in the fund were as follows (dollars and shares in thousands):

Share class	Sales(*)			Reinvestments of dividends			Repurchases(*)					Net increase
		Amount	Shares		Amount	Shares		Amount		Shares			Amount	Shares
Year ended December 31, 2006
Class A	$	5,447,659	413,075	$	828,398	62,824	$	(3,488,816	)	(264,831	)	$	2,787,241	211,068
Class B		211,762	16,071		50,434	3,825		(228,925	)	(17,385	)		33,271	2,511
Class C		676,419	51,255		56,789	4,305		(327,868	)	(24,894	)		405,340	30,666
Class F		981,606	74,277		44,262	3,353		(228,643	)	(17,352	)		797,225	60,278
Class 529-A		124,278	9,418		16,139	1,224		(28,777	)	(2,183	)		111,640	8,459
Class 529-B		11,920	903		2,563	195		(4,252	)	(323	)		10,231	775
Class 529-C		58,933	4,463		5,874	445		(17,057	)	(1,294	)		47,750	3,614
Class 529-E		6,627	502		837	64		(1,969	)	(149	)		5,495	417
Class 529-F		7,487	568		549	42		(945	)	(72	)		7,091	538
Class R-1		16,185	1,224		931	71		(5,750	)	(436	)		11,366	859
Class R-2		228,880	17,369		17,884	1,355		(102,796	)	(7,797	)		143,968	10,927
Class R-3		295,955	22,433		21,159	1,604		(112,658	)	(8,548	)		204,456	15,489
Class R-4		187,503	14,206		12,269	929		(58,770	)	(4,461	)		141,002	10,674
Class R-5		171,087	12,937		11,226	851		(52,805	)	(3,994	)		129,508	9,794
Total net increase
(decrease)	$	8,426,301	638,701	$	1,069,314	81,087	$	(4,660,031	)	(353,719	)	$	4,835,584	366,069
Year ended December 31, 2005
Class A	$	4,739,784	353,095	$	753,982	56,328	$	(3,046,419	)	(227,453	)	$	2,447,347	181,970
Class B		210,741	15,691		51,049	3,814		(196,388	)	(14,642	)		65,402	4,863
Class C		539,360	40,179		46,353	3,465		(239,621	)	(17,876	)		346,092	25,768
Class F		439,809	32,789		26,293	1,966		(129,966	)	(9,713	)		336,136	25,042
Class 529-A		99,048	7,386		11,692	874		(17,655	)	(1,317	)		93,085	6,943
Class 529-B		11,021	821		2,274	170		(3,178	)	(237	)		10,117	754
Class 529-C		43,687	3,257		4,404	330		(10,279	)	(767	)		37,812	2,820
Class 529-E		5,516	411		616	46		(1,102	)	(82	)		5,030	375
Class 529-F		3,351	250		295	22		(383	)	(28	)		3,263	244
Class R-1		10,761	802		627	46		(3,762	)	(281	)		7,626	567
Class R-2		185,712	13,833		13,048	976		(75,678	)	(5,646	)		123,082	9,163
Class R-3		211,778	15,775		14,002	1,047		(68,049	)	(5,080	)		157,731	11,742
Class R-4		130,864	9,741		7,037	526		(29,203	)	(2,180	)		108,698	8,087
Class R-5		121,222	9,076		5,937	444		(45,884	)	(3,422	)		81,275	6,098
Total net increase
(decrease)	$	6,752,654	503,106	$	937,609	70,054	$	(3,867,567	)	(288,724	)	$	3,822,696	284,436
(*) Includes exchanges between share classes of the fund.

6. Forward currency contracts

As of December 31, 2006, the fund had open forward currency contracts to sell non-U.S. currencies as follows (amounts in thousands):

	Contract amount				U.S. valuations at December 31, 2006
Non-U.S. currency contracts		Non-U.S.		U.S.		Amount		Unrealized appreciation (depreciation)	)
Sales:
British pounds expiring3/22/2007		£1,070		2,102		2,096	$	6
Euros expiring1/12 to 3/20/2007		€9,302	$	12,282	$	12,314		(32	)
Forward currency contracts			$	14,384	$	14,410	$	(26	)

7. Investment transactions

The fund made purchases and sales of investment securities, excluding short-term securities, of $15,964,863,000 and $12,214,952,000, respectively, during the year ended December 31, 2006.

Financial highlights(1)

			Income from investment operations(2)
		Net asset value, beginning of period			Net investment income		Net gains (losses) on securities (both realized and unrealized	)		Total from investment operations		Dividends (from net investment income	)		Net asset value, end of period	Total return(3	)		Net assets, end of period (in millions	)			Ratio of expenses to average net assets before reimbursements/ waivers				Ratio of expenses to average net assets after reimbursements/ waivers		(4	)	Ratio of net income to average net assets
Class A:
Year ended 12/31/2006	$	13.22		$	.67	$	.09		$	.76	$	(.66	)	$	13.32	5.88	%	$	20,670				.65	%			.62	%			5.07	%
Year ended 12/31/2005		13.65			.62		(.36	)		.26		(.69	)		13.22	1.94			17,738				.65				.62				4.60
Year ended 12/31/2004		13.51			.61		.16			.77		(.63	)		13.65	5.85			15,822				.65				.65				4.54
Year ended 12/31/2003		12.70			.68		.84			1.52		(.71	)		13.51	12.22			13,991				.67				.67				5.15
Year ended 12/31/2002		12.79			.82		(.08	)		.74		(.83	)		12.70	6.11			12,600				.71				.71				6.59
Class B:
Year ended 12/31/2006		13.22			.57		.09			.66		(.56	)		13.32	5.09			1,458				1.40				1.37				4.33
Year ended 12/31/2005		13.65			.52		(.36	)		.16	��	(.59	)		13.22	1.19			1,415				1.38				1.36				3.87
Year ended 12/31/2004		13.51			.51		.16			.67		(.53	)		13.65	5.07			1,394				1.39				1.38				3.80
Year ended 12/31/2003		12.70			.58		.84			1.42		(.61	)		13.51	11.38			1,274				1.41				1.41				4.37
Year ended 12/31/2002		12.79			.72		(.08	)		.64		(.73	)		12.70	5.28			939				1.47				1.47				5.77
Class C:
Year ended 12/31/2006		13.22			.56		.09			.65		(.55	)		13.32	5.04			1,847				1.45				1.42				4.27
Year ended 12/31/2005		13.65			.51		(.36	)		.15		(.58	)		13.22	1.12			1,429				1.44				1.42				3.81
Year ended 12/31/2004		13.51			.50		.16			.66		(.52	)		13.65	4.99			1,123				1.46				1.45				3.71
Year ended 12/31/2003		12.70			.57		.84			1.41		(.60	)		13.51	11.29			848				1.49				1.49				4.26
Year ended 12/31/2002		12.79			.71		(.08	)		.63		(.72	)		12.70	5.20			554				1.55				1.55				5.66
Class F:
Year ended 12/31/2006		13.22			.67		.09			.76		(.66	)		13.32	5.90			1,611				.63				.60				5.07
Year ended 12/31/2005		13.65			.62		(.36	)		.26		(.69	)		13.22	1.92			803				.65				.63				4.60
Year ended 12/31/2004		13.51			.60		.16			.76		(.62	)		13.65	5.80			487				.70				.69				4.46
Year ended 12/31/2003		12.70			.67		.84			1.51		(.70	)		13.51	12.15			292				.72				.72				5.02
Year ended 12/31/2002		12.79			.81		(.08	)		.73		(.82	)		12.70	6.04			180				.77				.77				6.44
Class 529-A:
Year ended 12/31/2006		13.22			.66		.09			.75		(.65	)		13.32	5.85			388				.68				.66				5.05
Year ended 12/31/2005		13.65			.61		(.36	)		.25		(.68	)		13.22	1.88			273				.69				.67				4.57
Year ended 12/31/2004		13.51			.60		.16			.76		(.62	)		13.65	5.80			187				.70				.70				4.48
Year ended 12/31/2003		12.70			.67		.84			1.51		(.70	)		13.51	12.21			110				.68				.68				5.05
Period from 2/15/2002 to 12/31/2002		12.76			.69		(.04	)		.65		(.71	)		12.70	5.33			50				.75		(5	)	.75		(5	)	6.46		(5	)
Class 529-B:
Year ended 12/31/2006		13.22			.55		.09			.64		(.54	)		13.32	4.97			69				1.53				1.50				4.20
Year ended 12/31/2005		13.65			.50		(.36	)		.14		(.57	)		13.22	1.02			58				1.54				1.52				3.71
Year ended 12/31/2004		13.51			.48		.16			.64		(.50	)		13.65	4.86			49				1.59				1.58				3.60
Year ended 12/31/2003		12.70			.55		.84			1.39		(.58	)		13.51	11.18			35				1.61				1.61				4.13
Period from 2/15/2002 to 12/31/2002		12.76			.60		(.04	)		.56		(.62	)		12.70	4.55			17				1.64		(5	)	1.64		(5	)	5.57		(5	)
Class 529-C:
Year ended 12/31/2006		13.22			.55		.09			.64		(.54	)		13.32	4.99			170				1.51				1.49				4.22
Year ended 12/31/2005		13.65			.50		(.36	)		.14		(.57	)		13.22	1.03			121				1.53				1.51				3.74
Year ended 12/31/2004		13.51			.48		.16			.64		(.50	)		13.65	4.88			86				1.57				1.57				3.61
Year ended 12/31/2003		12.70			.55		.84			1.39		(.58	)		13.51	11.19			56				1.59				1.59				4.15
Period from 2/19/2002 to 12/31/2002		12.73			.60		(.02	)		.58		(.61	)		12.70	4.75			28				1.63		(5	)	1.63		(5	)	5.58		(5	)
Class 529-E:
Year ended 12/31/2006		13.22			.62		.09			.71		(.61	)		13.32	5.53			21				.99				.97				4.74
Year ended 12/31/2005		13.65			.57		(.36	)		.21		(.64	)		13.22	1.56			15				1.01				.99				4.25
Year ended 12/31/2004		13.51			.55		.16			.71		(.57	)		13.65	5.43			11				1.05				1.05				4.13
Year ended 12/31/2003		12.70			.62		.84			1.46		(.65	)		13.51	11.77			7				1.06				1.06				4.68
Period from 3/7/2002 to 12/31/2002		12.70			.61		.02			.63		(.63	)		12.70	5.14			3				1.13		(5	)	1.13		(5	)	6.06		(5	)
Class 529-F:
Year ended 12/31/2006		13.22			.69		.09			.78		(.68	)		13.32	6.05			14				.49				.46				5.25
Year ended 12/31/2005		13.65			.62		(.36	)		.26		(.69	)		13.22	1.98			7				.58				.56				4.69
Year ended 12/31/2004		13.51			.59		.16			.75		(.61	)		13.65	5.69			4				.80				.80				4.36
Year ended 12/31/2003		12.70			.64		.84			1.48		(.67	)		13.51	11.96			2				.82				.82				4.72
Period from 9/26/2002 to 12/31/2002		12.31			.19		.40			.59		(.20	)		12.70	4.81			-		(6	)	.30				.30				1.51
Class R-1:
Year ended 12/31/2006	$	13.22		$	.56	$	.09		$	.65	$	(.55	)	$	13.32	5.05	%	$	29				1.49	%			1.42	%			4.28	%
Year ended 12/31/2005		13.65			.51		(.36	)		.15		(.58	)		13.22	1.11			18				1.51				1.43				3.82
Year ended 12/31/2004		13.51			.50		.16			.66		(.52	)		13.65	4.98			11				1.55				1.47				3.70
Year ended 12/31/2003		12.70			.57		.84			1.41		(.60	)		13.51	11.29			5				1.65				1.49				4.13
Period from 6/11/2002 to 12/31/2002		12.65			.38		.06			.44		(.39	)		12.70	3.59			1				2.53		(5	)	1.52		(5	)	5.55		(5	)
Class R-2:
Year ended 12/31/2006		13.22			.56		.09			.65		(.55	)		13.32	5.06			500				1.67				1.41				4.30
Year ended 12/31/2005		13.65			.51		(.36	)		.15		(.58	)		13.22	1.14			352				1.74				1.41				3.84
Year ended 12/31/2004		13.51			.50		.16			.66		(.52	)		13.65	5.02			238				1.85				1.43				3.73
Year ended 12/31/2003		12.70			.57		.84			1.41		(.60	)		13.51	11.33			111				1.94				1.46				4.20
Period from 5/31/2002 to 12/31/2002		12.72			.40		(.01	)		.39		(.41	)		12.70	3.23			21				1.67		(5	)	1.48		(5	)	5.56		(5	)
Class R-3:
Year ended 12/31/2006		13.22			.62		.09			.71		(.61	)		13.32	5.49			570				1.02				.99				4.71
Year ended 12/31/2005		13.65			.56		(.36	)		.20		(.63	)		13.22	1.53			361				1.05				1.02				4.23
Year ended 12/31/2004		13.51			.55		.16			.71		(.57	)		13.65	5.42			213				1.06				1.05				4.12
Year ended 12/31/2003		12.70			.62		.84			1.46		(.65	)		13.51	11.76			95				1.12				1.07				4.59
Period from 6/4/2002 to 12/31/2002		12.73			.42		(.02	)		.40		(.43	)		12.70	3.31			18				1.20		(5	)	1.10		(5	)	5.95		(5	)
Class R-4:
Year ended 12/31/2006		13.22			.66		.09			.75		(.65	)		13.32	5.86			325				.67				.65				5.06
Year ended 12/31/2005		13.65			.61		(.36	)		.25		(.68	)		13.22	1.91			182				.67				.65				4.61
Year ended 12/31/2004		13.51			.60		.16			.76		(.62	)		13.65	5.81			77				.68				.68				4.48
Year ended 12/31/2003		12.70			.67		.84			1.51		(.70	)		13.51	12.15			18				.72				.72				5.05
Period from 5/20/2002 to 12/31/2002		12.67			.47		.04			.51		(.48	)		12.70	4.21			11				.77		(5	)	.74		(5	)	6.20		(5	)
Class R-5:
Year ended 12/31/2006		13.22			.70		.09			.79		(.69	)		13.32	6.17			336				.37				.35				5.36
Year ended 12/31/2005		13.65			.66		(.36	)		.30		(.73	)		13.22	2.21			204				.37				.35				4.91
Year ended 12/31/2004		13.51			.65		.16			.81		(.67	)		13.65	6.14			127				.37				.37				4.81
Year ended 12/31/2003		12.70			.71		.84			1.55		(.74	)		13.51	12.52			106				.40				.40				5.39
Period from 5/15/2002 to 12/31/2002		12.66			.52		.05			.57		(.53	)		12.70	4.66			78				.42		(5	)	.42		(5	)	6.75		(5	)

	Year ended December 31
		2006		2005		2004		2003		2002
Portfolio turnover rate for all classes of shares		53	%	50	%	45	%	60	%	50	%

(1) Based on operations for the periods shown (unless otherwise noted) and, accordingly, may not be representative of a full year.

(2) Based on average shares outstanding.

(3) Total returns exclude all sales charges, including contingent deferred sales charges.

(4) The ratios in this column reflect the impact, if any, of certain reimbursements/waivers from CRMC. During some of the periods shown,

CRMC reduced fees for investment advisory services for all share classes. In addition, during the start-up period for the retirement plan

share classes (except Class R-5), CRMC agreed to pay a portion of the fees related to transfer agent services.

(5) Annualized.

(6) Amount less than $1 million.

See Notes to Financial Statements

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of The Bond Fund of America, Inc.:

We have audited the accompanying statement of assets and liabilities of The Bond Fund of America, Inc. (the “Fund”), including the summary investment portfolio, as of December 31, 2006, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2006, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Bond Fund of America, Inc. as of December 31, 2006, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

Costa Mesa, California

February 12, 2007

Expense example

unaudited

As a shareholder of the fund, you incur two types of costs: (1) transaction costs such as initial sales charges on purchase payments and contingent deferred sales charges on redemptions (loads); and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2006, through December 31, 2006).

Actual expenses:

The first line of each share class in the table on the next page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period. There are some account fees that are charged to certain types of accounts, such as Individual Retirement Accounts and CollegeAmerica accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually) that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F and 529-F shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would also be lower by the amount of these fees.

Hypothetical example for comparison purposes:

The second line of each share class in the table on the next page provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio for the share class and an assumed rate of return of 5.00% per year before expenses, which is not the actual return of the share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5.00% hypothetical example with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds. There are some account fees that are charged to certain types of accounts, such as Individual Retirement Accounts and CollegeAmerica accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually) that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F and 529-F shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would also be lower by the amount of these fees.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of each share class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Beginning account value 7/1/2006		Ending account value 12/31/2006		Expenses paid during period*		Annualized expense ratio
Class A -- actual return	$	1,000.00	$	1,053.47	$	3.21		.62	%
Class A -- assumed 5% return		1,000.00		1,022.08		3.16		.62
Class B -- actual return		1,000.00		1,049.52		7.03		1.36
Class B -- assumed 5% return		1,000.00		1,018.35		6.92		1.36
Class C -- actual return		1,000.00		1,049.24		7.28		1.41
Class C -- assumed 5% return		1,000.00		1,018.10		7.17		1.41
Class F -- actual return		1,000.00		1,053.55		3.11		.60
Class F -- assumed 5% return		1,000.00		1,022.18		3.06		.60
Class 529-A -- actual return		1,000.00		1,053.29		3.36		.65
Class 529-A -- assumed 5% return		1,000.00		1,021.93		3.31		.65
Class 529-B -- actual return		1,000.00		1,048.84		7.69		1.49
Class 529-B -- assumed 5% return		1,000.00		1,017.69		7.58		1.49
Class 529-C -- actual return		1,000.00		1,048.92		7.64		1.48
Class 529-C -- assumed 5% return		1,000.00		1,017.74		7.53		1.48
Class 529-E -- actual return		1,000.00		1,051.68		4.96		.96
Class 529-E -- assumed 5% return		1,000.00		1,020.37		4.89		.96
Class 529-F -- actual return		1,000.00		1,054.30		2.38		.46
Class 529-F -- assumed 5% return		1,000.00		1,022.89		2.35		.46
Class R-1 -- actual return		1,000.00		1,049.24		7.28		1.41
Class R-1 -- assumed 5% return		1,000.00		1,018.10		7.17		1.41
Class R-2 -- actual return		1,000.00		1,049.31		7.23		1.40
Class R-2 -- assumed 5% return		1,000.00		1,018.15		7.12		1.40
Class R-3 -- actual return		1,000.00		1,051.55		5.07		.98
Class R-3 -- assumed 5% return		1,000.00		1,020.27		4.99		.98
Class R-4 -- actual return		1,000.00		1,053.32		3.31		.64
Class R-4 -- assumed 5% return		1,000.00		1,021.98		3.26		.64
Class R-5 -- actual return		1,000.00		1,054.92		1.76		.34
Class R-5 -- assumed 5% return		1,000.00		1,023.49		1.73		.34
*Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the period (184), and divided by 365 (to reflect the one-half year period).

Tax information

unaudited

We are required to advise you within 60 days of the fund’s fiscal year-end regarding the federal tax status of certain distributions received by shareholders during such fiscal year. The fund hereby designates the following amounts for the fund’s fiscal year ended December 31, 2006:

Qualified dividend income	$	13,957,000
Corporate dividends received deduction		6,581,000
U.S. government income that may be exempt from state taxation		95,619,000

Individual shareholders should refer to their Form 1099 or other tax information, which was mailed in January 2007, to determine the calendar year amounts to be included on their 2006 tax returns. Shareholders should consult their tax advisers.

Approval of Investment Advisory and Service Agreement

The fund’s board has approved the fund’s Investment Advisory and Service Agreement (the “agreement”) with Capital Research and Management Company (“CRMC”) for an additional one-year term through October 31, 2007. The board approved the agreement following the recommendation of the fund’s Contracts Committee (the “committee”), which is composed of all of the fund’s independent board members. The information, material facts and conclusions that formed the basis for the committee’s recommendation and the board’s subsequent approval are described below.

1. Information reviewed

Materials reviewed— During the course of each year, board members review a wide variety of materials relating to the services provided by CRMC, including reports on the fund’s investment results, portfolio composition, portfolio trading practices, shareholder services, and other information relating to the nature, extent and quality of services provided by CRMC to the fund. In addition, the committee requests and reviews supplementary information that includes extensive materials regarding the fund’s investment results, advisory fee and expense comparisons, financial and profitability information regarding CRMC, descriptions of various functions such as compliance monitoring and portfolio trading practices, and information about the personnel providing investment management and administrative services to the fund.

Review process— The committee received assistance and advice regarding legal and industry standards from independent counsel to the board. The committee discussed the approval of the agreement with CRMC representatives and in a private session with counsel at which no representatives of CRMC were present. In deciding to recommend approval of the agreement, the committee did not identify any single issue or particular piece of information that, in isolation, was the controlling factor. This summary describes the most important, but not all, of the factors considered by the board and the committee.

2. Nature, extent and quality of services

CRMC, its personnel and its resources— The board and the committee considered the depth and quality of CRMC’s investment management process, including its global research capabilities; the experience, capability and integrity of its senior management and other personnel; the low turnover rates of its key personnel; the overall financial strength and stability of its organization; and the ability of its organizational structure to address growth in assets under management. The board and the committee also considered that CRMC made available to its investment professionals a variety of resources and systems relating to investment management, compliance, trading, investment results and portfolio accounting. They considered CRMC’s commitment to investing in information technology supporting investment management and compliance. They further considered CRMC’s continuing need to attract and retain qualified personnel and to maintain and enhance its resources and systems. The board and the committee also considered the benefits to fund shareholders from investing in a fund that is part of a larger family of funds offering a variety of investment objectives.

Other services— The board and the committee considered CRMC’s policies, procedures and systems designed to comply with applicable laws and regulations and its commitment to compliance; its efforts to keep the board members informed; and its attention to matters that may involve potential conflicts of interest with the fund. The board and the committee also considered the nature, extent, quality and cost of administrative, distribution and shareholder services provided by CRMC to the fund under the agreement and other agreements, including the information technology, legal, and fund accounting and treasury functions.

3. Investment results

The board and the committee considered the investment results of the fund in light of its objective of maximizing current income and preserving capital by investing primarily in bonds. They reviewed the fund’s absolute investment results, and compared the fund’s total returns with the total returns of the Lipper A-Rated Bond Funds Index (composed of the 30 largest funds in the category each year), the averages of the funds included in the index as of May 31, 2006 (the “selected large funds”), the Lipper BBB-Rated Fund Index, and the Lehman Brothers Aggregate Bond Index. The board and the committee noted that, although the fund’s investment results lagged all of these comparative measures for 2005, the fund’s investment results exceeded all the comparative measures for the first six months of 2006 and for the three-, five- and 10-year periods ended June 30, 2006.

4. Advisory fees and total expenses

The board and the committee reviewed the advisory fees and total expenses of the fund (each as a percentage of average net assets) and compared such amounts with the median fee and expense levels of all other selected large funds. The board and the committee observed that the fund’s advisory fee was among the lowest of all such funds in that comparison group for the fiscal year ended December 31, 2005, and had been below the median of the other funds included in the index for the entire nine-year period ended on that date. They also observed that its total expenses were below the median for such other funds for the fiscal year ended December 31, 2005, and had been at or below the median for the entire nine-year period ended on that date. The board and the committee also noted the 10% advisory fee waiver that CRMC put into effect on April 1, 2005.

The board and the committee also reviewed information regarding the advisory fees paid by institutional clients of an affiliate of CRMC with similar investment mandates. They noted that, although the fees paid by those clients generally were lower than those paid by American Funds, the differences appropriately reflected the significant investment, operational and regulatory differences between advising mutual funds and institutional clients.

5. Adviser financial information

The board and the committee reviewed information regarding CRMC’s costs of providing services to the American Funds, as well as the resulting level of profits to CRMC, comparing those to the reported results of several large, publicly held investment management companies. The committee also received information during previous periods regarding the structure and manner in which CRMC’s investment professionals were compensated and CRMC’s view of the relationship of such compensation to the attraction and retention of quality personnel. The board and the committee considered CRMC’s willingness to invest in technology, infrastructure and staff to reinforce and offer new services and to accommodate changing regulatory requirements. They further considered that breakpoint discounts in the fund’s advisory fee structure reduce the level of fees charged by CRMC to the fund as fund assets increase. They also considered the impact of CRMC’s current 10% advisory fee waiver.

6. Ancillary benefits

The board and the committee considered a variety of other benefits received by CRMC and its affiliates as a result of CRMC’s relationship with the fund and the other American Funds, including fees for administrative services provided to certain share classes; fees paid to the investment adviser’s affiliated transfer agent; sales charges and distribution fees received and retained by the fund’s principal underwriter, an affiliate of CRMC; and possible ancillary benefits to CRMC’s institutional management affiliates. The board and the committee reviewed CRMC’s portfolio trading practices, noting that, while CRMC receives the benefit of research provided by broker-dealers executing portfolio transactions on behalf of the fund, it does not obtain third-party research or other services in return for allocating brokerage to such broker-dealers.

7. Conclusions

Based on their review, including their consideration of each of the factors referred to above, the board and the committee concluded that the agreement is fair and reasonable to the fund and its shareholders, that the fund’s shareholders receive reasonable value in return for the advisory fees and other amounts paid to CRMC by the fund, that each of the factors discussed above supported approval of the agreement, and that approval of the agreement was in the best interests of the fund and its shareholders.

Other share class results

unaudited

Class B, Class C, Class F and Class 529

Figures shown are past results and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For current information and month-end results, visit americanfunds.com.

Average annual total returns for periods ended December 31, 2006:

	1 year		5 years		Life of class
Class B shares— first sold 3/15/00
Reflecting applicable contingent deferred sales charge
(CDSC), maximum of 5%, payable only if shares
are sold within six years of purchase	+0.09	%	+5.23	%	+5.66	%
Not reflecting CDSC	+5.09	%	+5.55	%	+5.66	%
Class C shares— first sold 3/15/01
Reflecting CDSC, maximum of 1%, payable only if
shares are sold within one year of purchase	+4.04	%	+5.48	%	+5.21	%
Not reflecting CDSC	+5.04	%	+5.48	%	+5.21	%
Class F shares*— first sold 3/15/01
Not reflecting annual asset-based fee charged by
sponsoring firm	+5.90	%	+6.31	%	+6.02	%
Class 529-A shares†— first sold 2/15/02
Reflecting 3.75% maximum sales charge	+1.84	%	—		+5.49	%
Not reflecting maximum sales charge	+5.85	%	—		+6.33	%
Class 529-B shares†— first sold 2/15/02
Reflecting applicable CDSC, maximum of 5%, payable
only if shares are sold within six years of purchase	-0.03	%	—		+5.07	%
Not reflecting CDSC	+4.97	%	—		+5.41	%
Class 529-C shares†— first sold 2/19/02
Reflecting CDSC, maximum of 1%, payable only if
shares are sold within one year of purchase	+3.99	%	—		+5.47	%
Not reflecting CDSC	+4.99	%	—		+5.47	%
Class 529-E shares*†— first sold 3/7/02	+5.53	%	—		+6.06	%
Class 529-F shares*†— first sold 9/26/02
Not reflecting annual asset-based fee charged by
sponsoring firm	+6.05	%	—		+7.13	%

The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased it to 10% on April 1, 2005. Fund results shown reflect the waiver, without which they would have been lower. Please see the Financial Highlights table on pages 23 to 24 for details.

*These shares are sold without any initial or contingent deferred sales charge.

^†Results shown do not reflect the $10 initial account setup fee and an annual $10 account maintenance fee.

Board of directors and other officers

“Independent” directors
	Year first
	elected
	a director
Name and age	of the fund1	Principal occupation(s) during past five years
Ambassador
Richard G. Capen, Jr., 72	1999	Corporate director and author; former U.S. Ambassador to Spain; former Vice Chairman, Knight-Ridder, Inc. (communications company); former Chairman and Publisher, The Miami Herald
H. Frederick Christie, 73	1974	Private investor; former President and CEO, The Mission Group (non-utility holding company, subsidiary of Southern California Edison Company)
Diane C. Creel, 58	1994	Chairman of the Board, President and CEO, Ecovation, Inc. (organic waste management); former President and CEO, The Earth Technology Corporation (international consulting engineering)
James G. Ellis, 60	2006	Vice Provost, Globalization, University of Southern California; Vice Dean, Marshall School of Business, University of Southern California; Professor, Marshall School of Business, University of Southern California
Martin Fenton, 71		Chairman of the Board, Senior Resource Group LLC
Chairman of the Board		(development and management of senior living
(Independent and Non-Executive)	1989	communities)
Leonard R. Fuller, 60	1994	President and CEO, Fuller Consulting (financial management consulting firm)
R. Clark Hooper, 60	2005	President, Dumbarton Group LLC (consulting); former Executive Vice President — Policy and Oversight, NASD
Richard G. Newman, 72	1991	Chairman of the Board, AECOM Technology Corporation (engineering, consulting and professional technical services)
Frank M. Sanchez, 63	1999	Principal, The Sanchez Family Corporation dba McDonald’s Restaurants (McDonald’s licensee)
“Independent” directors
	Number of
	portfolios
	in fund
	complex2
	overseen by
Name and age	director	Other directorships3 held by director
Ambassador
Richard G. Capen, Jr., 72	15	Carnival Corporation
H. Frederick Christie, 73	21	Ducommun Incorporated; IHOP Corporation; Southwest Water Company
Diane C. Creel, 58	13	Allegheny Technologies; BF Goodrich; Foster Wheeler Ltd.
James G. Ellis, 60	12	Genius Products; Professional Business Bank
Martin Fenton, 71	18	None
Chairman of the Board
(Independent and Non-Executive)
Leonard R. Fuller, 60	16	None
R. Clark Hooper, 60	18	JPMorgan Value Opportunities Fund
Richard G. Newman, 72	14	Sempra Energy; Southwest Water Company
Frank M. Sanchez, 63	13	None
“Interested” directors4
	Year first
	elected a
	director or	Principal occupation(s) during past five years and
Name, age and	officer of	positions held with affiliated entities or the principal
position with fund	the fund1	underwriter of the fund
Paul G. Haaga, Jr., 58	1985	Vice Chairman of the Board, Capital Research and
Vice Chairman of the Board		Management Company; Director, The Capital Group Companies, Inc.5
Abner D. Goldstine, 77	1974	Senior Vice President and Director, Capital
President		Research and Management Company
“Interested” directors4
	Number of
	portfolios
	in fund
	complex2
Name, age and	overseen by
position with fund	director	Other directorships3 held by director
Paul G. Haaga, Jr., 58	15	None
Vice Chairman of the Board
Abner D. Goldstine, 77	13	None
President

The statement of additional information includes additional information about fund directors and is available without charge upon request by calling American Funds Service Company at 800/421-0180. The address for all directors and officers of the fund is 333 South Hope Street, Los Angeles, CA 90071, Attention: Fund Secretary.

Please see page 32 for footnotes.

Other officers

	Year first
	elected	Principal occupation(s) during past five years
Name, age and	an officer	and positions held with affiliated entities or the
position with fund	of the fund1	principal underwriter of the fund
David C. Barclay, 50	1997	Senior Vice President, Capital Research and
Senior Vice President		Management Company; Director, The Capital Group Companies, Inc.5
Mark R. Macdonald, 47	2001	Senior Vice President and Director, Capital Research
Senior Vice President		and Management Company
John H. Smet, 50	1994	Senior Vice President, Capital Research and
Senior Vice President		Management Company; Director, American Funds Distributors, Inc.5
Kristine M. Nishiyama, 36	2003	Vice President and Counsel — Fund Business
Vice President		Management Group, Capital Research and Management Company; Vice President and Counsel, Capital Bank and Trust Company5
Kimberly S. Verdick, 42	1994	Vice President — Fund Business Management
Secretary		Group, Capital Research and Management Company
Susi M. Silverman, 36	2001	Vice President — Fund Business Management
Treasurer		Group, Capital Research and Management Company
Courtney R. Taylor, 32	2006	Senior Compliance Specialist — Fund Business
Assistant Secretary		Management Group, Capital Research and Management Company
Sharon G. Moseley, 39	2003	Vice President — Fund Business Management
Assistant Treasurer		Group, Capital Research and Management Company

¹Directors and officers of the fund serve until their resignation, removal or retirement.

²Capital Research and Management Company manages the American Funds, consisting of 30 funds. Capital Research and Management Company also manages American Funds Insurance Series,^® which serves as the underlying investment vehicle for certain variable insurance contracts, American Funds Target Date Retirement Series,^SM Inc., which is available to investors in tax-deferred retirement plans and IRAs, and Endowments, whose shareholders are limited to certain nonprofit organizations.

³This includes all directorships (other than those in the American Funds) that are held by each director 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 fund’s investment adviser, Capital Research and Management Company, or affiliated entities (including the fund’s principal underwriter).

⁵Company affiliated with Capital Research and Management Company.

Offices of the fund and of the investment adviser

Capital Research and Management Company

333 South Hope Street

Los Angeles, CA 90071-1406

135 South State College Boulevard

Brea, CA 92821-5823

Custodian of assets

JPMorgan Chase Bank

270 Park Avenue

New York, NY 10017-2070

Transfer agent for shareholder accounts

American Funds Service Company

(Please write to the address nearest you.)

P.O. Box 25065

Santa Ana, CA 92799-5065

P.O. Box 659522

San Antonio, TX 78265-9522

P.O. Box 6007

Indianapolis, IN 46206-6007

P.O. Box 2280

Norfolk, VA 23501-2280

Counsel

Paul, Hastings, Janofsky & Walker LLP

515 South Flower Street

Los Angeles, CA 90071-2228

Independent registered public accounting firm

Deloitte & Touche LLP

695 Town Center Drive

Suite 1200

Costa Mesa, CA 92626-7188

Principal underwriter

American Funds Distributors, Inc.

333 South Hope Street

Los Angeles, CA 90071-1406

There are several ways to invest in The Bond Fund of America. Class A shares are subject to a 3.75% maximum up-front sales charge that declines for accounts (and aggregated investments) of $100,000 or more and is eliminated for purchases of $1 million or more. Other share classes, which are generally not available for certain employer-sponsored retirement plans, have no up-front sales charges but are subject to additional annual expenses and fees. Annual expenses for Class B shares were 0.75 percentage points higher than for Class A shares; Class B shares convert to Class A shares after eight years of ownership. If redeemed within six years, Class B shares may also be subject to a contingent deferred sales charge (“CDSC”) of up to 5% that declines over time. Class C shares were subject to annual expenses 0.80 percentage points higher than those for Class A shares and a 1% CDSC if redeemed within the first year after purchase. Class C shares convert to Class F shares after 10 years. Class F shares, which are available only through certain fee-based programs offered by broker-dealer firms and registered investment advisers, had lower annual expenses (by 0.02 percentage points) than did Class A shares, and an annual asset-based fee charged by the sponsoring firm. Expenses are deducted from income earned by the fund. As a result, dividends and investment results will differ for each share class.

Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in the fund’s prospectus, which can be obtained from your financial adviser and should be read carefully before investing. You may also call American Funds Service Company (AFS) at 800/421-0180 or visit the American Funds website at americanfunds.com.

“American Funds Proxy Voting Guidelines” — which describes how we vote proxies relating to portfolio securities — is available free of charge on the U.S. Securities and Exchange Commission (SEC) website at sec.gov, on the American Funds website or upon request by calling AFS. The fund files its proxy voting record with the SEC for the 12 months ended June 30 by August 31. The report also is available on the SEC and American Funds websites.

A complete December 31, 2006, portfolio of The Bond Fund of America’s investments is available free of charge by calling AFS or visiting the SEC website (where it is part of Form N-CSR).

The Bond Fund of America files a complete list of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. This filing is available free of charge on the SEC website. You may also review or, for a fee, copy this filing at the SEC’s Public Reference Room in Washington, D.C. (800/SEC-0330). Additionally, the list of portfolio holdings also is available by calling AFS.

This report is for the information of shareholders of The Bond Fund of America, but it also may be used as sales literature when preceded or accompanied by the current prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. If used as sales material after March 31, 2007, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter.

[logo - American Funds^®]

The right choice for the long term^®

What makes American Funds different?

For 75 years, we have followed a consistent philosophy that we firmly believe is in our investors’ best interests. The range of opportunities offered by our family of just 30 carefully conceived, broadly diversified funds has attracted over 40 million shareholder accounts.

Our unique combination of strengths includes these five factors:

•A long-term, value-oriented approach

We seek to buy securities at reasonable prices relative to their prospects.

•An extensive global research effort

Our investment professionals travel the world to find the best investment opportunities and gain a comprehensive understanding of companies and markets.

•The multiple portfolio counselor system

Our unique method of portfolio management, developed nearly 50 years ago, blends teamwork with individual accountability and has provided American Funds with a sustainable method of achieving fund objectives.

•Experienced investment professionals

American Funds portfolio counselors have an average of 24 years of investment experience, providing a wealth of knowledge and experience that few organizations have.

•A commitment to low operating expenses

The American Funds provide exceptional value for shareholders, with operating expenses that are among the lowest in the mutual fund industry.

American Funds span a range of investment objectives

•Growth funds

Emphasis on long-term growth through stocks

AMCAP Fund^®

EuroPacific Growth Fund^®

The Growth Fund of America^®

The New Economy Fund^®

New Perspective Fund^®

New World Fund^SM

SMALLCAP World Fund^®

•Growth-and-income funds

Emphasis on long-term growth and dividends through stocks

American Mutual Fund^®

Capital World Growth and Income Fund^SM

Fundamental Investors^SM

The Investment Company of America^®

Washington Mutual Investors Fund^SM

•Equity-income funds

Emphasis on above-average income and growth through stocks and/or bonds

Capital Income Builder^®

The Income Fund of America^®

•Balanced fund

Emphasis on long-term growth and current income through stocks and bonds

American Balanced Fund^®

•Bond funds

Emphasis on current income through bonds

American High-Income Trust^SM

>The Bond Fund of America^SM

Capital World Bond Fund^®

Intermediate Bond Fund of America^®

Short-Term Bond Fund of America^SM

U.S. Government Securities Fund^SM

•Tax-exempt bond funds

Emphasis on tax-free current income through municipal bonds

American High-Income Municipal Bond Fund^®

Limited Term Tax-Exempt Bond Fund of America^SM

The Tax-Exempt Bond Fund of America^®

State-specific tax-exempt funds

The Tax-Exempt Fund of California^®

The Tax-Exempt Fund of Maryland^®

The Tax-Exempt Fund of Virginia^®

•Money market funds

The Cash Management Trust of America^®

The Tax-Exempt Money Fund of America^SM

The U.S. Treasury Money Fund of America^SM

•American Funds Target Date Retirement Series^SM

The Capital Group Companies

American FundsCapital Research and ManagementCapital InternationalCapital GuardianCapital Bank and Trust

Lit. No. MFGEAR-908-0207P

Litho in USA BG/AC/8053-S7516

Printed on recycled paper

ITEM 2 - Code of Ethics

The Registrant has adopted a Code of Ethics that applies to its Principal Executive Officer and Principal Financial Officer. The Registrant undertakes to provide to any person without charge, upon request, a copy of the Code of Ethics. Such request can be made to American Funds Service Company at 800/421-0180 or to the Secretary of the Registrant, 333 South Hope Street, Los Angeles, California 90071.

ITEM 3 - Audit Committee Financial Expert

The Registrant’s board has determined that Leonard R. Fuller, a member of the Registrant’s audit committee, is an “audit committee financial expert” and "independent," as such terms are defined in this Item. This designation will not increase the designee’s duties, obligations or liability as compared to his or her duties, obligations and liability as a member of the audit committee and of the board, nor will it reduce the responsibility of the other audit committee members. There may be other individuals who, through education or experience, would qualify as "audit committee financial experts" if the board had designated them as such. Most importantly, the board believes each member of the audit committee contributes significantly to the effective oversight of the Registrant’s financial statements and condition.

ITEM 4 - Principal Accountant Fees and Services

Registrant:
	a) Audit Fees:
		2005	$91,000
		2006	$98,000
	b) Audit-Related Fees:
		2005	$7,000
		2006	$7,000
		The audit-related fees consist of assurance and related services relating to the examination of the Registrant’s investment adviser conducted in accordance with Statement on Auditing Standards Number 70 issued by the American Institute of Certified Public Accountants.
	c) Tax Fees:
		2005	$6,000
		2006	$6,000
		The tax fees consist of professional services relating to the preparation of the Registrant’s tax returns.
	d) All Other Fees:
		2005	None
		2006	None
Adviser and affiliates (includes only fees for non-audit services billed to the adviser and affiliates for engagements that relate directly to the operations and financial reporting of the Registrant and were subject to the pre-approval policies described below):
	a) Not Applicable
	b) Audit-Related Fees:
		2005	$355,000
		2006	$708,000
		The audit-related fees consist of assurance and related services relating to the examination of the Registrant’s transfer agent, principal underwriter and investment adviser conducted in accordance with Statement on Auditing Standards Number 70 issued by the American Institute of Certified Public Accountants.
	c) Tax Fees:
		2005	None
		2006	9,000
		The tax fees consist of consulting services relating to the Registrant’s investments.
	d) All Other Fees:
		2005	$36,000
		2006	None
		The other fees consist of consulting services related to the Registrant’s compliance program.

The Registrant’s Audit Committee will pre-approve all audit and permissible non-audit services that the Committee considers compatible with maintaining the auditors’ independence. The pre-approval requirement will extend to all non-audit services provided to the Registrant, the investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant, if the engagement relates directly to the operations and financial reporting of the Registrant. The Committee will not delegate its responsibility to pre-approve these services to the investment adviser. The Committee may delegate to one or more Committee members the authority to review and pre-approve audit and permissible non-audit services. Actions taken under any such delegation will be reported to the full Committee at its next meeting. The pre-approval requirement is waived with respect to non-audit services if certain conditions are met. The pre-approval requirement was not waived for any of the non-audit services listed above provided to the Registrant, adviser, and affiliates.

Aggregate non-audit fees paid to the Registrant’s auditors, including fees for all services billed to the Registrant and the adviser and affiliates that provide ongoing services to the Registrant were $924,000 for fiscal year 2005 and $1,005,000 for fiscal year 2006. The non-audit services represented by these amounts were brought to the attention of the Committee and considered to be compatible with maintaining the auditors’ independence.

ITEM 5 - Audit Committee of Listed Registrants

Not applicable to this Registrant, insofar as the Registrant is not a listed issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934.

ITEM 6 - Schedule of Investments

[logo - American Funds®]

Bond Fund of AmericaSM

Investment portfolio

December 31, 2006

Bonds & notes — 88.08%	Principal  amount (000)			Market  value (000)
CORPORATE BONDS & NOTES — 43.51%
FINANCIALS — 19.00%
General Motors Acceptance Corp. 6.15% 2007	$	2,750		$	2,750
General Motors Acceptance Corp. 6.274% 20071		2,000			2,000
General Motors Acceptance Corp. 5.85% 2009		7,790			7,764
Residential Capital Corp. 6.474% 20091		17,500			17,687
Residential Capital Corp. 7.204% 20091,2		6,000			6,033
Residential Capital Corp. 6.375% 2010		78,250			79,222
General Motors Acceptance Corp. 7.75% 2010		4,355			4,561
Residential Capital Corp. 6.00% 2011		19,500			19,481
General Motors Acceptance Corp. 7.25% 2011		44,790			46,620
General Motors Acceptance Corp. 6.875% 2012		10,000			10,280
General Motors Acceptance Corp. 7.00% 2012		34,000			35,114
Residential Capital Corp. 6.50% 2013		30,000			30,442
General Motors Acceptance Corp. 6.75% 2014		43,750			45,006
General Motors Acceptance Corp. 7.569% 20141		75,000			78,576
Residential Capital Corp. 6.875% 2015		12,780			13,270
International Lease Finance Corp., Series P, 3.125% 2007		2,000			1,986
ASIF Global Financing XVIII 3.85% 20072		5,785			5,709
ASIF Global Financing XXVIII 5.41% 20071,2		2,000			2,001
International Lease Finance Corp. 4.35% 2008		20,500			20,159
AIG SunAmerica Global Financing VII 5.85% 20082		24,250			24,451
International Lease Finance Corp. 3.50% 2009		13,000			12,512
International Lease Finance Corp. 4.75% 2009		22,000			21,744
International Lease Finance Corp. 5.00% 2010		4,565			4,518
International Lease Finance Corp. 5.125% 2010		25,000			24,826
International Lease Finance Corp., Series Q, 5.45% 2011		15,000			15,064
American General Finance Corp., Series J, 5.653% 20111		32,500			32,646
International Lease Finance Corp. 5.00% 2012		13,500			13,242
International Lease Finance Corp., Series R, 5.40% 2012		12,000			12,024
International Lease Finance Corp., Series R, 5.625% 2013		20,000			20,174
American General Finance Corp., Series I 5.85% 2013		27,500			28,065
International Lease Finance Corp. 5.875% 2013		5,000			5,112
American General Finance Corp., Series I, 5.40% 2015		20,000			19,833
American General Finance Corp., Series J, 5.75% 2016		2,500			2,540
American International Group, Inc. 6.25% 2036		8,750			9,329
ILFC E-Capital Trust II 6.25% 20651,2		44,975			45,766
Washington Mutual, Inc. 4.375% 2008		11,735			11,617
Washington Mutual, Inc. 5.55% 2010		4,000			4,031
Washington Mutual, Inc. 5.00% 2012		14,000			13,660
Washington Mutual, Inc. 5.665% 20121		41,000			41,131
Washington Mutual Bank 5.795% 20131		35,000			35,045
Washington Mutual, Inc. 5.95% 2013		5,000			5,089
Washington Mutual, Inc. 5.25% 2017		10,000			9,662
Washington Mutual Preferred Funding I Ltd. 6.534% (undated)1,2		89,500			88,787
Washington Mutual Preferred Funding II Ltd. 6.665% (undated)1,2		74,800			75,514
Ford Motor Credit Co. 4.875% 2007		€13,950			18,407
Ford Motor Credit Co. 7.20% 2007	$	3,000			3,003
Ford Motor Credit Co. 7.875% 2010		43,500			43,894
Ford Motor Credit Co. 9.75% 20102		94,500			100,608
Ford Motor Credit Co. 7.375% 2011		2,150			2,130
Ford Motor Credit Co. 10.61% 20111,2		60,275			64,407
Ford Motor Credit Co. 8.11% 20121		8,000			7,937
J.P. Morgan Chase & Co. 5.35% 2007		3,285			3,284
J.P. Morgan Chase & Co. 4.00% 2008		12,500			12,337
BANK ONE, Texas, NA 6.25% 2008		7,250			7,325
J.P. Morgan Chase & Co. 6.75% 2011		15,000			15,784
J.P. Morgan Chase & Co. 4.875% 2014		18,340			17,822
J.P. Morgan Chase & Co. 4.75% 2015		7,500			7,217
J.P. Morgan Chase & Co. 4.891% 2015		55,000			53,938
Bank One Corp. 4.90% 2015		9,000			8,651
J.P. Morgan Chase & Co. 5.15% 2015		11,000			10,813
Chase Capital II, Global Floating Rate Capital Securities, Series B, 5.871% 20271		20,000			19,222
J.P. Morgan Chase Capital XX, Series T, 6.55% 2036		40,750			42,219
JPMorgan Chase Capital XVIII, Series R, 6.95% 2036		25,150			27,293
Household Finance Corp. 5.75% 2007		10,000			10,003
Household Finance Corp. 7.875% 2007		32,000			32,123
Household Finance Corp. 4.125% 2008		1,000			981
Household Finance Corp. 6.40% 2008		10,000			10,157
Household Finance Corp. 4.125% 2009		25,000			24,322
HSBC Finance Corp. 4.625% 2010		11,500			11,260
Household Finance Corp. 6.375% 2011		7,250			7,589
Household Finance Corp. 6.75% 2011		23,750			25,159
HSBC Finance Corp. 5.71% 20121		20,000			20,196
HSBC Finance Corp. 5.724% 20121		15,000			15,145
HSBC Bank USA 4.625% 20142		6,550			6,253
HSBC Finance Corp. 5.00% 2015		31,730			30,906
HSBC Holdings PLC 6.50% 2036		1,950			2,105
Midland Bank 5.688% Eurodollar note (undated)1		15,000			13,013
CIT Group Inc. 3.65% 2007		10,720			10,570
CIT Group Inc. 4.00% 2008		14,000			13,762
CIT Group Inc. 3.375% 2009		5,000			4,803
CIT Group Inc. 6.875% 2009		31,000			32,271
CIT Group Inc. 4.25% 2010		30,000			29,076
CIT Group Inc. 5.656% 20111		30,000			30,063
CIT Group Inc. 7.75% 2012		26,875			29,662
CIT Group Inc. 5.40% 2013		15,000			14,906
Sumitomo Mitsui Banking Corp. 5.625% (undated)1,2		58,025			56,818
Sumitomo Mitsui Banking Corp. 6.078% (undated)1,2		99,800			99,396
Westfield Capital Corp. Ltd., WT Finance (Australia) Pty Ltd. and WEA Finance LLC 4.375% 20102		57,950			55,942
Westfield Group 5.40% 20122		50,000			49,866
Westfield Capital Corp. Ltd., WT Finance (Australia) Pty Ltd. and WEA Finance LLC 5.125% 20142		26,600			25,881
Westfield Group 5.70% 20162		7,000			7,039
WT Finance (Australia) Pty Ltd., Westfield Europe Finance PLC, and WEA Finance LLC 5.50% 2017		£3,470			6,638
HBOS PLC 5.375% (undated)1,2	$	25,000			24,654
HBOS PLC, Series B, 5.92% (undated) 1,2		76,400			75,071
Bank of Scotland 7.00% (undated)1,2		25,000			25,250
Bayerische Hypo- und Vereinsbank AG 6.00% 2014		€10,370			14,953
UniCredito Italiano SpA 5.584% 20171,2		57,590			57,975
HVB Funding Trust I 8.741% 20312		19,564			24,872
HVB Funding Trust III 9.00% 20312		12,530			16,342
Santander Issuances, SA Unipersonal 5.725% 20161,2		21,500			21,539
Santander Issuances, SA Unipersonal 5.805% 20161,2		62,000			62,593
Abbey National PLC 6.70% (undated)1		18,380			18,673
Abbey National PLC 7.50% (undated)1		£2,975			6,509
PRICOA Global Funding I, Series 2003-2, 3.90% 20082	$	7,500			7,292
PRICOA Global Funding I, Series 2004-4, 4.35% 20082		2,500			2,461
PRICOA Global Funding I 4.20% 20102		17,000			16,445
Prudential Financial, Inc., Series D, 5.10% 2011		2,000			1,985
Prudential Financial, Inc., Series B, 4.75% 2014		4,000			3,817
Prudential Holdings, LLC, Series C, 8.695% 20232,3		57,035			69,907
Prudential Financial, Inc., Series D, 5.70% 2036		3,000			2,930
Simon Property Group, LP 4.875% 2010		12,000			11,862
Simon Property Group, LP 5.375% 2011		12,500			12,514
Simon Property Group, LP 5.60% 2011		32,060			32,351
Simon Property Group, LP 5.00% 2012		16,000			15,736
Simon Property Group, LP 5.75% 2012		4,000			4,046
Simon Property Group, LP 5.75% 2015		3,250			3,303
Simon Property Group, LP 5.25% 2016		1,000			976
Simon Property Group, LP 6.10% 2016		4,750			4,932
Simon Property Group, LP 5.875% 2017		17,250			17,605
USA Education, Inc. 5.625% 2007		16,100			16,111
SLM Corp., Series A, 3.95% 2008		17,500			17,128
SLM Corp., Series A, 4.00% 2010		5,500			5,309
SLM Corp., Series A, 4.50% 2010		38,000			37,018
SLM Corp., Series A, 5.40% 2011		5,000			5,010
SocGen Real Estate Co. LLC, Series A, 7.64% (undated)1,2		76,250			77,442
Citigroup Inc. 3.50% 2008		20,000			19,645
Citigroup Inc. 4.25% 2009		15,000			14,688
Citigroup Inc. 4.125% 2010		26,000			25,239
Citigroup Inc. 5.125% 2011		10,000			9,981
Citigroup Inc. 5.625% 2012		5,675			5,764
Bank of America Corp. 3.875% 2008		2,000			1,970
Bank of America Corp. 4.375% 2010		13,000			12,647
Bank of America Corp. 4.50% 2010		9,000			8,806
BankAmerica Corp. 7.125% 2011		1,750			1,885
Bank of America Corp. 4.875% 2012		2,000			1,962
MBNA Corp., Series F, 7.50% 2012		1,800			1,974
Bank of America Corp. 5.25% 2015		5,000			4,935
MBNA Capital A, Series A, 8.278% 2026		7,500			7,818
MBNA Global Capital Funding, Series B, 6.171% 20271		33,000			32,962
Kimco Realty Corp., Series C, 3.95% 2008		9,200			8,991
Kimco Realty Corp., Series C, 4.82% 2011		10,000			9,772
Kimco Realty Corp. 6.00% 2012		18,500			19,064
Kimco Realty Corp., Series C, 4.82% 2014		12,000			11,464
Kimco Realty Corp., Series C, 4.904% 2015		3,000			2,859
Kimco Realty Corp., Series C, 5.783% 2016		19,500			19,784
Standard Chartered Bank 5.50% Eurodollar note (undated)1		15,000			12,412
Standard Chartered Bank 5.525% (undated)1		5,000			4,162
Standard Chartered PLC 6.409% (undated)2		52,400			52,079
Resona Bank, Ltd. 3.75% 20151		€9,740			12,585
Resona Bank, Ltd. 5.85% (undated)1,2	$	56,660			55,424
Capital One Bank 4.25% 2008		8,000			7,846
Capital One Financial Corp. 5.633% 20091		30,000			30,158
Capital One Financial Corp. 5.70% 2011		12,000			12,190
Capital One Financial Corp. 6.25% 2013		7,000			7,324
Capital One Financial Corp. 6.15% 2016		10,000			10,361
Royal Bank of Scotland Group PLC 8.375% 2007		£6,500			12,750
Royal Bank of Scotland Group PLC 5.00% 2014	$	3,000			2,916
Royal Bank of Scotland Group PLC 5.512% noncumulative trust preferred (undated)1		35,000			34,648
National Westminster Bank PLC 7.75% (undated)1		17,000			17,233
PNC Funding Corp. 4.20% 2008		6,750			6,625
PNC Funding Corp. 5.125% 2010		4,000			3,980
PNC Funding Corp., Series I, 6.517% (undated)1,2		49,500			50,409
CNA Financial Corp. 5.85% 2014		8,500			8,548
CNA Financial Corp. 6.50% 2016		24,625			25,734
CNA Financial Corp. 7.25% 2023		24,145			26,243
Lazard Group LLC 7.125% 2015		56,765			58,891
American Express Credit Corp. 3.00% 2008		9,060			8,796
American Express Co. 6.80% 20661		46,500			49,673
Lincoln National Corp. 7.00% 20661		54,895			58,283
XL Capital Finance (Europe) PLC 6.50% 2012		12,455			12,989
XL Capital Ltd. 5.25% 2014		4,925			4,834
XL Capital Ltd. 6.375% 2024		3,000			3,127
Mangrove Bay Pass Through Trust 6.102% 20331,2		27,380			26,794
Twin Reefs Asset Trust (XLFA), Series B, 6.35% (undated)1,2		10,200			10,219
EOP Operating LP 6.75% 2008		24,500			24,897
EOP Operating LP 4.65% 2010		17,010			16,906
EOP Operating LP 7.00% 2011		2,500			2,708
EOP Operating LP 6.75% 2012		8,250			8,919
EOP Operating LP 7.50% 2029		1,710			1,933
EOP Operating LP 7.875% 2031		2,000			2,364
Liberty Mutual Group Inc. 6.50% 20352		34,965			34,188
Liberty Mutual Group Inc. 7.50% 20362		20,500			22,499
ACE INA Holdings Inc. 5.875% 2014		26,775			27,330
ACE Capital Trust II 9.70% 2030		12,423			17,078
ACE INA Holdings Inc. 6.70% 2036		9,980			10,771
TuranAlem Finance BV 7.75% 20132		11,000			11,234
TuranAlem Finance BV 8.00% 2014		9,710			9,941
TuranAlem Finance BV 8.00% 20142		5,000			5,119
TuranAlem Finance BV 8.50% 20152		20,560			21,408
TuranAlem Finance BV 8.50% 2015		6,890			7,174
Hospitality Properties Trust 7.00% 2008		1,000			1,016
Hospitality Properties Trust 6.75% 2013		17,845			18,700
Hospitality Properties Trust 5.125% 2015		6,850			6,518
Hospitality Properties Trust 6.30% 2016		24,175			24,783
Mizuho Capital Investment (EUR) 1 Ltd. 5.02% (undated)1		€4,650			6,108
Mizuho Capital Investment (USD) 1 Ltd. and Mizuho Capital Investment (EUR) 1 Ltd. 6.686%
noncumulative preferred (undated)1,2	$	41,262			41,703
World Savings Bank, FSB, Bank Notes, Series 2008-FXR, 4.125% 2008		34,250			33,661
Wachovia Corp. 5.30% 2011		5,000			5,003
Wachovia Corp. 5.625% 2016		7,000			7,074
Developers Diversified Realty Corp. 3.875% 2009		19,500			18,894
Developers Diversified Realty Corp. 5.00% 2010		2,500			2,468
Developers Diversified Realty Corp. 5.375% 2012		3,450			3,421
Developers Diversified Realty Corp. 5.50% 2015		19,500			19,236
Allstate Financial Global Funding LLC 5.25% 20072		26,500			26,498
Allstate Life Global Funding Trust, Series 2004-2, 5.43% 20071		3,000			3,002
Allstate Financial Global Funding LLC 4.25% 20082		7,500			7,383
Allstate Life Global Funding Trust, Series 2004-1, 4.50% 2009		5,000			4,929
ProLogis 5.25% 2010		10,884			10,831
PLD International Finance LLC 4.375% 2011		€4,150			5,435
ProLogis 5.625% 2015	$	25,000			24,920
Monumental Global Funding II, Series 2002-A, 5.20% 20072		17,500			17,497
AEGON NV 4.625% 2008		€7,750			10,298
Transamerica Corp. 9.375% 2008	$	7,500			7,775
Monumental Global Funding II, Series 2004-F, 4.375% 20092		2,000			1,958
AEGON NV 6.125% 2031		£1,600			3,577
Kazkommerts International BV 7.00% 20092	$	5,500			5,596
Kazkommerts International BV 8.50% 2013		8,500			9,169
Kazkommerts International BV 7.875% 20142		9,200			9,602
Kazkommerts International BV 8.00% 20152		15,500			16,197
ORIX Corp. 5.48% 2011		36,175			36,151
Nationwide Life Insurance Co. 5.35% 20072		4,250			4,250
North Front Pass Through Trust 5.81% 20241,2		19,085			18,819
Nationwide Mutual Insurance Co. 7.875% 20332		8,000			9,518
Nationwide Mutual Insurance Co. 6.60% 20342		2,000			1,964
Skandinaviska Enskilda Banken AB 5.471% (undated)1,2		22,000			21,375
Skandinaviska Enskilda Banken AB 7.50% (undated)1		12,500			13,126
American Honda Finance Corp. 5.125% 20102		34,350			34,219
Development Bank of Singapore Ltd. 7.875% 20092		20,000			21,261
DBS Bank Ltd. 5.984% 20211,2		12,500			12,702
ING Security Life Institutional Funding 2.70% 20072		4,730			4,713
ReliaStar Financial Corp. 6.50% 2008		6,016			6,132
ING Bank NV 5.50% 2012		€3,750			5,208
ING Groep NV 5.775% (undated)1	$	15,500			15,364
Principal Life Global Funding I 2.80% 20082		11,625			11,215
Principal Life Global Funding I 4.40% 20102		16,600			16,065
Principal Life Income Fundings Trust, Series 2005-34, 5.20% 2010		2,000			1,997
Berkshire Hathaway Finance Corp. 4.125% 2010		20,000			19,451
Berkshire Hathaway Finance Corp. 4.75% 2012		10,000			9,812
Plum Creek Timberlands, LP 5.875% 2015		29,000			28,546
Brandywine Operating Partnership, LP 5.75% 2012		27,110			27,327
Lloyds Bank, Series 2, 5.563% (undated)1		8,000			6,963
Lloyds TSB Group PLC 6.267% (undated)1,2		20,000			20,036
Hartford Financial Services Group, Inc. 4.70% 2007		16,250			16,172
Hartford Financial Services Group, Inc. 5.55% 2008		875			879
Hartford Financial Services Group, Inc. 5.25% 2011		5,625			5,618
Hartford Financial Services Group, Inc. 4.625% 2013		4,000			3,823
iStar Financial, Inc. 5.375% 2010		10,675			10,596
iStar Financial, Inc., Series B, 5.125% 2011		1,500			1,470
iStar Financial, Inc. 6.05% 2015		14,285			14,390
Rouse Co. 3.625% 2009		5,200			4,948
Rouse Co. 7.20% 2012		17,700			18,196
Rouse Co. 6.75% 20132		2,465			2,488
UnionBanCal Corp. 5.25% 2013		2,000			1,966
Union Bank of California, NA 5.95% 2016		22,000			22,587
Jackson National Life Global Funding, Series 2002-1, 5.25% 20072		23,125			23,141
ZFS Finance (USA) Trust II 6.45% 20651,2		22,500			22,988
Metropolitan Life Global Funding I, Series 2004-2, 5.431% 20071,2		1,500			1,501
Metropolitan Life Global Funding I 2.60% 20082		20,000			19,150
MetLife, Inc. 5.00% 2015		2,000			1,943
John Hancock Global Funding II, Series 2002-G, 5.00% 20072,4		5,000			4,985
John Hancock Global Funding II, Series 2004-A, 3.50% 20092		18,000			17,368
United Overseas Bank Ltd. 5.375% 20191,2		22,250			22,065
Assurant, Inc. 5.625% 2014		22,000			21,972
Zions Bancorporation 5.50% 2015		21,625			21,312
Canadian Imperial Bank of Commerce 5.625% Eurodollar note 20851		25,000			20,875
Assured Guaranty US Holdings Inc., Series A, 6.40% 20661		19,700			19,752
Countrywide Home Loans, Inc., Series M, 4.125% 20093		20,000			19,436
United Dominion Realty Trust, Inc., Series E, 4.50% 2008		17,000			16,701
Financial Security Assurance Holdings Ltd. 6.40% 20661,2		16,000			16,127
Wells Fargo & Co. 3.50% 2008		3,310			3,242
Wells Fargo & Co. 4.125% 2008		8,000			7,898
Wells Fargo Capital X 5.95% 20861		5,000			4,917
Credit Suisse First Boston (USA), Inc. 6.50% 2012		15,000			15,781
Protective Life Insurance Co., Series 2005-C, 4.85% 2010		15,000			14,839
Downey Financial Corp. 6.50% 2014		14,380			14,434
BOI Capital Funding (No. 2) LP 5.571% (undated)1,2		14,420			14,107
ERP Operating LP 4.75% 2009		2,225			2,190
ERP Operating LP 6.625% 2012		5,000			5,278
ERP Operating LP 5.375% 2016		6,000			5,948
Advanta Capital Trust I, Series B, 8.99% 2026		12,500			12,813
E*TRADE Financial Corp. 8.00% 2011		1,025			1,076
E*TRADE Financial Corp. 7.375% 2013		925			967
E*TRADE Financial Corp. 7.875% 2015		9,720			10,376
Genworth Financial, Inc. 4.75% 2009		10,345			10,249
Genworth Financial, Inc. 6.15% 20661		1,670			1,671
Independence Community Bank Corp. 4.90% 2010		12,000			11,729
MassMutual Global Funding II, Series 2002-1, 3.50% 20102		12,000			11,430
AB Spintab 6.00% 2009		SKr73,000			11,139
Banco Santander-Chile 5.375% 20142	$	11,200			11,048
Comerica, Inc., Imperial Capital Trust I, Imperial Bancorp, Series B, 9.98% 2026		10,200			10,901
United Energy Distribution Pty Ltd., AMBAC insured, 4.70% 20112		10,000			9,761
Post Apartment Homes, LP 7.70% 2010		1,400			1,503
Post Apartment Homes, LP 5.125% 2011		7,720			7,535
Shinsei Bank, Ltd. 3.75% 20161		€6,865			8,801
Banco Mercantil del Norte 6.135% 20162	$	8,600			8,646
Bank of Nova Scotia 5.125% 20851		10,000			8,489
Host Marriott, LP, Series M, 7.00% 2012		7,130			7,273
Host Hotels & Resorts LP 6.875% 20142		1,000			1,018
Realogy Corp. 6.50% 20162		7,750			7,949
Chohung Bank 4.50% 20141,2		8,000			7,763
BCI U.S. Funding Trust I 8.01% noncumulative preferred (undated)1,2		6,500			6,722
Goldman Sachs Group, Inc., Series B, 5.455% 20091		2,500			2,503
Goldman Sachs Group, Inc. 5.75% 2016		4,000			4,070
Allied Irish Banks Ltd. 5.626% (undated)1		7,000			6,376
Weingarten Realty Investors, Series A, 4.857% 2014		6,080			5,838
National Australia Bank Ltd. 5.486% (undated)1,2		5,925			5,737
Lehman Brothers Holdings Inc., Series I, 5.475% 20091		5,000			5,004
Irvine Apartment Communities, LP 7.00% 2007		5,000			4,995
Industrial Bank of Korea 4.00% 20141,2		5,000			4,846
St. Paul Travelers Companies, Inc. 6.25% 2016		2,000			2,104
St. Paul Travelers Companies, Inc. 6.75% 2036		2,000			2,218
Bergen Bank 5.563% (undated)1		5,000			4,250
Barclays Bank PLC 4.75% (undated)1		€3,500			4,114
National Bank of Canada 5.625% 20871	$	5,000			4,088
Christiana Bank Og Kreditkasse 5.625% (undated)1		4,000			3,575
Federal Realty Investment Trust 4.50% 2011		3,500			3,369
Principal Financial Group, Inc. 6.05% 2036		3,000			3,082
Merrill Lynch & Co., Inc., Series C, 5.449% 20091		3,000			3,002
FelCor Lodging LP 8.50% 20111		2,270			2,429
Den Danske Bank A/S 7.40% 20101,2		1,950			1,968
UnumProvident Finance Co. PLC 6.85% 20152		1,425			1,484
AXA SA 6.379% (undated)1,2		1,400			1,387
					5,321,609
CONSUMER DISCRETIONARY — 5.61%
DaimlerChrysler North America Holding Corp. 4.05% 2008		4,750			4,650
DaimlerChrysler North America Holding Corp. 4.75% 2008		4,800			4,757
DaimlerChrysler North America Holding Corp. 5.79% 20091		30,000			30,047
DaimlerChrysler North America Holding Corp. 7.20% 2009		5,000			5,190
DaimlerChrysler North America Holding Corp. 4.875% 2010		20,000			19,511
DaimlerChrysler North America Holding Corp. 8.00% 2010		56,500			60,578
DaimlerChrysler North America Holding Corp. 7.75% 2011		26,350			28,229
DaimlerChrysler North America Holding Corp. 6.50% 2013		11,610			11,936
Comcast Cable Communications, Inc. 6.20% 2008		7,150			7,266
Lenfest Communications, Inc. 7.625% 2008		6,750			6,909
Comcast Corp. 5.674% 20091		2,000			2,006
Comcast Cable Communications, Inc. 6.875% 2009		3,000			3,105
Tele-Communications, Inc. 9.80% 2012		17,500			20,657
Comcast Cable Communications, Inc. 7.125% 2013		1,650			1,781
Tele-Communications, Inc. 7.875% 2013		7,500			8,350
Comcast Corp. 5.85% 2015		29,025			29,116
Comcast Corp. 6.50% 2015		23,000			24,002
Comcast Corp. 5.90% 2016		6,570			6,600
Comcast Corp. 6.50% 2017		25,000			26,136
Comcast Corp. 5.65% 2035		6,670			6,075
Time Warner Inc. 8.18% 2007		2,225			2,262
Time Warner Inc. 5.606% 20091		30,000			30,043
Time Warner Inc. 5.50% 2011		1,000			998
AOL Time Warner Inc. 6.875% 2012		27,250			28,828
Time Warner Inc. 5.875% 2016		16,500			16,489
AOL Time Warner Inc. 7.625% 2031		18,575			20,812
Time Warner Inc. 6.50% 2036		750			749
Viacom Inc. 5.75% 2011		2,500			2,504
Viacom Inc. 6.25% 2016		34,110			33,933
Viacom Inc. 6.875% 2036		32,600			32,332
General Motors Nova Scotia Finance Co. 6.85% 2008		300			299
General Motors Corp. 7.20% 2011		22,700			22,076
General Motors Corp. 7.125% 2013		18,475			17,459
General Motors Corp. 7.25% 2013		€700			915
General Motors Corp. 7.70% 2016	$	8,375			7,914
General Motors Corp. 8.80% 2021		15,700			14,915
General Motors Corp. 9.40% 2021		1,875			1,809
General Motors Corp. 8.375% 2033		1,200			1,116
Harrah’s Operating Co., Inc. 5.50% 2010		17,320			16,989
Harrah’s Operating Co., Inc. 5.625% 2015		29,650			25,470
Harrah’s Operating Co., Inc. 6.50% 2016		20,000			17,937
D.R. Horton, Inc. 9.75% 2010		1,150			1,270
D.R. Horton, Inc. 7.875% 2011		800			860
D.R. Horton, Inc. 6.875% 2013		5,385			5,569
D.R. Horton, Inc. 5.25% 2015		20,000			18,698
D.R. Horton, Inc. 6.50% 2016		27,060			27,272
May Department Stores Co. 5.75% 2014		650			637
Federated Retail Holdings, Inc. 5.90% 2016		31,480			31,489
Federated Department Stores, Inc. 7.45% 2017		17,370			18,827
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 8.00% 20122		10,150			10,594
Charter Communications Operating, LLC, Term Loan Facilities B, 8.005% 20131,3		4,400			4,433
CCO Holdings, LLC and CCO Holdings Capital Corp. 8.75% 2013		13,150			13,725
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 8.375% 20142		3,200			3,356
CCH I, LLC and CCH I Capital Corp. 11.00% 2015		13,250			13,664
News America Holdings Inc. 8.00% 2016		1,000			1,151
News America Holdings Inc. 8.25% 2018		9,540			11,204
News America Inc. 6.40% 2035		26,000			25,914
Chancellor Media Corp. of Los Angeles 8.00% 2008		12,500			13,001
Clear Channel Communications, Inc. 5.75% 2013		10,000			8,904
Clear Channel Communications, Inc. 5.50% 2014		2,200			1,859
Clear Channel Communications, Inc. 6.875% 2018		13,000			11,315
Toll Brothers, Inc. 4.95% 2014		19,250			17,641
Toll Brothers, Inc. 5.15% 2015		14,000			12,849
Cox Communications, Inc. 5.91% 20071		5,000			5,022
Cox Communications, Inc. 7.875% 2009		1,000			1,059
Cox Communications, Inc. 7.75% 2010		10,000			10,764
Cox Communications, Inc. 5.45% 2014		12,750			12,441
Carnival Corp. 3.75% 2007		8,500			8,387
Carnival Corp. 6.15% 2008		18,623			18,717
Ryland Group, Inc. 5.375% 2008		2,000			1,987
Ryland Group, Inc. 5.375% 2012		22,500			21,502
Johnson Controls, Inc. 5.25% 2011		7,550			7,497
Johnson Controls, Inc. 5.50% 2016		15,000			14,733
American Media Operations, Inc., Series B, 10.25% 2009		15,865			15,409
American Media Operations, Inc. 8.875% 2011		7,060			6,478
Cinemark USA, Inc., Term Loan B, 7.32% 20131,3		3,417			3,442
Cinemark USA, Inc. 9.00% 2013		8,675			9,239
Cinemark, Inc. 0%/9.75% 20145		8,750			7,558
Target Corp. 3.375% 2008		8,330			8,156
Target Corp. 5.375% 2009		12,000			12,075
J.C. Penney Co., Inc. 8.00% 2010		7,590			8,087
J.C. Penney Co., Inc. 9.00% 2012		995			1,139
J.C. Penney Co., Inc. 6.875% 2015		5,500			5,753
J.C. Penney Co., Inc. 7.65% 2016		2,315			2,549
J.C. Penney Co., Inc. 7.625% 2097		500			512
Mohegan Tribal Gaming Authority 6.375% 2009		14,410			14,482
Mohegan Tribal Gaming Authority 7.125% 2014		2,000			2,038
Delphi Automotive Systems Corp. 6.55% 20066		500			559
Delphi Automotive Systems Corp. 6.50% 20096		6,000			6,750
Delphi Corp. 6.50% 20136		7,020			7,652
Delphi Automotive Systems Corp. 7.125% 20296		1,350			1,499
Michaels Stores, Inc., Term Loan B, 8.375% 20131,3		3,378			3,412
Michaels Stores, Inc. 10.00% 20142		11,975			12,514
K. Hovnanian Enterprises, Inc. 8.875% 2012		7,060			7,201
K. Hovnanian Enterprises, Inc. 7.75% 2013		1,425			1,429
K. Hovnanian Enterprises, Inc. 6.375% 2014		1,475			1,423
K. Hovnanian Enterprises, Inc. 6.25% 2015		500			478
K. Hovnanian Enterprises, Inc. 7.50% 2016		3,735			3,772
K. Hovnanian Enterprises, Inc. 8.625% 2017		1,000			1,070
MGM MIRAGE 6.00% 2009		1,975			1,980
MGM MIRAGE 8.50% 2010		6,850			7,364
MGM MIRAGE 6.75% 2012		1,050			1,040
MGM MIRAGE 6.75% 2013		2,500			2,456
MGM MIRAGE 5.875% 2014		500			465
MGM MIRAGE 6.625% 2015		2,025			1,939
Visteon Corp. 8.25% 2010		15,440			15,131
MDC Holdings, Inc. 5.50% 2013		6,555			6,276
MDC Holdings, Inc. 5.375% 2014		9,475			8,830
Wynn Las Vegas, LLC and Wynn Las Vegas Capital Corp. 6.625% 2014		14,415			14,397
CanWest Media Inc., Series B, 8.00% 2012		13,676			14,343
Royal Caribbean Cruises Ltd. 7.00% 2007		1,400			1,420
Royal Caribbean Cruises Ltd. 8.75% 2011		2,325			2,553
Royal Caribbean Cruises Ltd. 7.25% 2016		10,000			10,228
NTL Cable PLC 8.75% 2014		8,650			9,093
NTL Cable PLC 8.75% 2014		€1,000			1,420
NTL Cable PLC 9.125% 2016	$	2,925			3,104
Seminole Tribe of Florida 5.798% 20132,3		13,220			13,036
Centex Corp. 5.80% 2009		2,500			2,519
Centex Corp. 6.50% 2016		10,000			10,248
Circus and Eldorado Joint Venture and Silver Legacy Resort Casino 10.125% 2012		12,025			12,686
Grupo Posadas, SA de CV 8.75% 20112		10,585			11,141
Grupo Posadas, SA de CV 8.75% 2011		1,050			1,105
Young Broadcasting Inc. 10.00% 2011		12,317			11,763
AMC Entertainment Inc., Series B, 8.625% 2012		3,000			3,154
AMC Entertainment Inc. 8.00% 2014		8,125			8,105
Bon-Ton Department Stores, Inc. 10.25% 2014		10,800			11,097
Burlington Coat Factory Warehouse Corp. 11.125% 20142		10,400			10,192
Technical Olympic USA, Inc. 9.00% 2010		3,240			3,208
Technical Olympic USA, Inc. 9.00% 2010		950			940
Technical Olympic USA, Inc. 7.50% 2011		3,750			3,112
Technical Olympic USA, Inc. 10.375% 2012		3,235			2,928
Pulte Homes, Inc. 4.875% 2009		10,300			10,148
Linens ‘n Things, Inc. 10.999% 20141		9,750			9,506
Toys “R” Us, Inc. 7.625% 2011		3,420			3,163
Toys “R” Us-Delaware, Inc., Term Loan B, 9.625% 20121,3		6,000			6,195
Lowe’s Companies, Inc. 8.25% 2010		8,450			9,241
Century Communications Corp. 0% 20036		5,000			5,337
Adelphia Communications Corp. 10.25% 20066		3,500			3,194
Iesy Repository GmbH 10.375% 20152		8,550			8,347
Standard Pacific Corp. 5.125% 2009		1,000			972
Standard Pacific Corp. 7.75% 2013		6,890			6,873
Standard Pacific Corp. 7.00% 2015		500			484
William Lyon Homes, Inc. 7.625% 2012		5,750			4,931
William Lyon Homes, Inc. 10.75% 2013		2,000			1,915
William Lyon Homes, Inc. 7.50% 2014		1,500			1,256
Kabel Deutschland GmbH 10.625% 2014		7,150			7,963
Neiman Marcus Group, Inc. 9.00% 20157		7,120			7,805
CSC Holdings, Inc., Series B, 8.125% 2009		3,000			3,124
Cablevision Systems Corp., Series B, 8.00% 2012		3,635			3,590
Tenneco Automotive Inc., Series B, 10.25% 2013		750			825
Tenneco Automotive Inc. 8.625% 2014		5,510			5,648
Radio One, Inc., Series B, 8.875% 2011		4,000			4,150
Radio One, Inc. 6.375% 2013		2,450			2,303
Telenet Group Holding NV 0%/11.50% 20142,5		7,100			6,434
Regal Cinemas Corp., Series B, 9.375% 20128		6,125			6,423
Thomson Corp. 5.50% 2035		7,000			6,390
Education Management LLC and Education Management Finance Corp. 10.25% 20162		5,825			6,189
Quebecor Media Inc. 7.75% 2016		5,900			6,055
Walt Disney Co., Series B, 5.375% 2007		3,500			3,503
Walt Disney Co. 5.625% 2016		2,500			2,522
RBS-Zero Editora Jornalística SA 11.00% 20102		5,492			5,945
Dollarama Group LP and Dollarama Corp. 8.875% 2012		5,550			5,772
Idearc Inc. 8.00% 20162		5,625			5,738
Ford Capital BV 9.50% 2010		5,543			5,543
Beazer Homes USA, Inc. 8.625% 2011		2,000			2,070
Beazer Homes USA, Inc. 8.125% 2016		3,000			3,195
Morris Publishing Group, LLC and Morris Publishing Finance Co., Series B, 7.00% 2013		5,140			4,896
Fisher Communications, Inc. 8.625% 2014		4,550			4,846
Liberty Media Corp. 7.875% 2009		2,500			2,620
Liberty Media Corp. 8.25% 2030		2,000			1,970
Goodyear Tire & Rubber Co. 9.14% 20091,2		3,175			3,203
Goodyear Tire & Rubber Co. 8.625% 20112		1,175			1,219
Atlantic Broadband Finance, LLC and Atlantic Broadband Finance, Inc. 9.375% 2014		4,300			4,370
Meritage Homes Corp. 6.25% 2015		3,975			3,796
Seneca Gaming Corp. 7.25% 2012		2,500			2,556
Seneca Gaming Corp. 7.25% 2012		1,000			1,023
Vidéotron Ltée 6.875% 2014		2,525			2,553
Vidéotron Ltée 6.375% 2015		1,000			983
WDAC Intermediate Corp. 8.375% 20142		2,600			2,688
WDAC Intermediate Corp. 8.50% 2014		€500			699
Kingfisher PLC 5.625% 2014		£1,740			3,302
Warner Music Group 7.375% 2014	$	3,300			3,284
Hyatt Equities, LLC 6.875% 20072		3,250			3,264
Sealy Mattress Co. 8.25% 2014		3,025			3,176
WCI Communities, Inc. 9.125% 2012		3,115			2,983
Sally Holdings LLC and Sally Capital Inc. 9.25% 20142		2,875			2,943
Gaylord Entertainment Co. 8.00% 2013		2,300			2,398
Gaylord Entertainment Co. 6.75% 2014		500			499
Hanesbrands Inc. 8.734% 20141,2		2,720			2,781
Boyd Gaming Corp. 7.75% 2012		1,800			1,870
Boyd Gaming Corp. 6.75% 2014		750			752
Aztar Corp. 7.875% 2014		2,250			2,455
R.H. Donnelley Corp., Series A-1, 6.875% 2013		1,000			964
Dex Media, Inc., Series B, 8.00% 2013		525			543
R.H. Donnelley Corp., Series A-3, 8.875% 2016		850			897
LBI Media, Inc. 10.125% 2012		2,250			2,399
Gamestop Corp. 8.00% 2012		2,000			2,100
KB Home 6.25% 2015		2,000			1,878
Kohl’s Corp. 7.375% 2011		1,475			1,580
DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. 8.375% 2013		1,493			1,560
Riddell Bell Holdings Inc. 8.375% 2012		1,430			1,405
XM Satellite Radio Inc. and XM Satellite Radio Holdings Inc. 9.75% 2014		1,175			1,181
TRW Automotive Acquisition Corp. 9.375% 2013		1,075			1,158
Entercom Radio, LLC 7.625% 2014		1,000			1,005
Dillard’s, Inc. 7.13% 2018		1,000			998
Warnaco, Inc. 8.875% 2013		925			987
Carmike Cinemas, Inc., Term Loan B, 8.60% 20121,3		572			581
Starwood Hotels & Resorts Worldwide, Inc. 7.375% 2007		250			251
					1,570,405
INDUSTRIALS — 4.74%
Continental Airlines, Inc., Series 2001-1, Class A-2, 6.503% 20113		14,050			14,480
Continental Airlines, Inc., Series 1999-2, Class A-2, 7.056% 20113		10,000			10,282
Continental Airlines, Inc. 8.75% 2011		2,800			2,835
Continental Airlines, Inc., Series 2000-2, Class A-2, 7.487% 20123		12,500			13,220
Continental Airlines, Inc., Series 2006-1, Class G, FGIC insured, 5.72% 20151,3		6,500			6,468
Continental Airlines, Inc., Series 1997-1, Class A, 7.461% 20163		10,194			10,609
Continental Airlines, Inc., Series 1996-2, Class D, 11.50% 20163		1,668			1,690
Continental Airlines, Inc., Series 2001-1, Class B, 7.373% 20173		189			192
Continental Airlines, Inc., Series 1998-1, Class B, 6.748% 20183		3,249			3,218
Continental Airlines, Inc., Series 1997-4B, Class B, 6.90% 20183		2,465			2,444
Continental Airlines, Inc., Series 1998-1, Class A, 6.648% 20193		26,976			28,004
Continental Airlines, Inc., Series 1997-4, Class A, 6.90% 20193		42,445			43,822
Continental Airlines, Inc., Series 2000-2, Class B, 8.307% 20193		3,629			3,766
Continental Airlines, Inc., Series 1999-1, Class A, 6.545% 20203		29,950			31,020
Continental Airlines, Inc., Series 1999-1, Class B, 6.795% 20203		15,233			15,167
Continental Airlines, Inc., Series 2003-ERJ3, Class A, 7.875% 20203		16,115			16,448
Continental Airlines, Inc., Series 1999-2, Class A-1, 7.256% 20213		330			347
Continental Airlines, Inc., Series 1999-2, Class B, 7.566% 20213		5,478			5,537
Continental Airlines, Inc., Series 2001-1, Class A-1, 6.703% 20223		16,607			17,115
Continental Airlines, Inc., Series 2000-2, Class A-1, 7.707% 20223		12,397			13,458
Continental Airlines, Inc., Series 2000-1, Class A-1, 8.048% 20223		10,066			11,205
Continental Airlines, Inc., Series 2000-1, Class B, 8.388% 20223		1,563			1,626
General Electric Capital Corp., Series A, 5.00% 20074		21,500			21,473
General Electric Capital Corp., Series A, 5.375% 20074		13,250			13,252
General Electric Capital Corp., Series A, 3.50% 2008		20,000			19,563
General Electric Capital Corp., Series A, 6.00% 2012		15,000			15,546
General Electric Co. 5.00% 2013		12,750			12,625
General Electric Capital Corp., Series A, 5.00% 2016		5,000			4,895
General Electric Capital Corp., Series A, 5.645% 20181		18,000			18,030
General Electric Capital Corp., Series A, 5.748% 20261		25,000			25,058
Delta Air Lines, Inc. 8.00% 20072,6		4,000			2,670
Delta Air Lines, Inc., Series 2002-1, Class C, 7.779% 20133		3,603			3,583
Delta Air Lines, Inc., Series 2002-1, Class G-2, MBIA insured, 6.417% 20143		53,658			54,362
Delta Air Lines, Inc., Series 1992-A2, 9.20% 20143,6		7,498			7,652
Delta Air Lines, Inc. 10.375% 20226		2,577			1,720
Delta Air Lines, Inc., Series 2002-1, Class G-1, MBIA insured, 6.718% 20243		47,690			48,435
American Airlines, Inc., Series 1999-1, Class A-1, 6.855% 20103		7,334			7,376
AMR Corp., Series B, 10.45% 2011		150			151
American Airlines, Inc., Series 2001-1, Class A-2, 6.817% 20123		3,750			3,812
American Airlines, Inc., Series 2001-2, Class A-1, 6.978% 20123		21,911			22,418
American Airlines, Inc., Series 2001-2, Class B, 8.608% 2012		18,165			19,312
AMR Corp. 9.00% 2012		5,800			6,141
American Airlines, Inc., Series 2001-2, Class A-2, 7.858% 20133		39,130			42,774
American Airlines, Inc., Series 1991-C2, 9.73% 20143		6,410			6,061
American Airlines, Inc., Series 2001-1, Class B, 7.377% 20193		10,486			10,256
Northwest Airlines, Inc. 9.875% 20076		6,000			5,820
Northwest Airlines, Inc. 10.00% 20096		4,000			3,800
Northwest Airlines, Inc., Series 2001-1, Class A-2, 6.841% 20123		9,955			9,949
Northwest Airlines, Inc., Term Loan B, 8.866% 20131,3		3,920			3,949
Northwest Airlines, Inc., Term Loan A, 7.116% 20181,3		75,150			75,150
Northwest Airlines, Inc., Series 2001-1, Class A-1, 7.041% 20233		1,757			1,772
BAE Systems Holding Inc. 4.75% 20102		10,350			10,080
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class B, 7.156% 20112,3		40,513			41,904
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class G, MBIA insured, 6.664% 20132,3		41,961			43,961
Hutchison Whampoa International Ltd. 7.00% 20112		24,300			25,776
Hutchison Whampoa International Ltd. 6.50% 20132		59,200			62,050
United Air Lines, Inc., Series 2001-1, Class A-2, 6.201% 20103		12,271			12,355
United Air Lines, Inc., Series 2000-2, Class B, 7.811% 20113,6		7,335			8,160
UAL Corp., Term Loan B, 9.123% 20121,3		7,538			7,594
UAL Corp., Term Loan B, 9.123% 20121,3		1,078			1,086
United Air Lines, Inc., Series 2001-1, Class A-1, 6.071% 20143		2,073			2,085
United Air Lines, Inc., Series 2001-1, Class A-3, 6.602% 20153		6,710			6,806
Burlington Northern and Santa Fe Railway Co. Pass Through Trust, Series 1996-B, 6.96% 20093		1,314			1,334
Burlington Northern and Santa Fe Railway Co. Pass Through Trust, Series 2002-2, 5.14% 20213		12,280			12,163
Burlington Northern and Santa Fe Railway Co. Pass Through Trust, Series 2002-1, 5.943% 20223		6,264			6,454
BNSF Funding Trust I 6.613% 20551		13,600			13,559
John Deere Capital Corp., Series D, 4.375% 2008		15,000			14,829
John Deere Capital Corp. 5.40% 2011		17,750			17,806
Union Pacific Railroad Co. Pass Through Trust, Series 2001-1, 6.63% 20223		7,586			8,188
Union Pacific Railroad Co. Pass Through Trust, Series 2002-1, 6.061% 20233		11,029			11,489
Union Pacific Railroad Co. Pass Through Trust, Series 2003-1, 4.698% 20243		2,913			2,779
NTK Holdings Inc. 0%/10.75% 20145		15,118			10,658
THL Buildco, Inc. 8.50% 2014		10,650			10,490
Qantas Airways Ltd. 6.05% 20162		23,660			21,094
Bombardier Inc. 6.30% 20142		19,800			18,711
Allied Waste North America, Inc. 8.50% 2008		7,500			7,922
Allied Waste North America, Inc., Series B, 6.50% 2010		500			504
Allied Waste North America, Inc., Series B, 5.75% 2011		2,500			2,431
Allied Waste North America, Inc., Series B, 6.125% 2014		3,000			2,865
Allied Waste North America, Inc., Series B, 7.375% 2014		3,750			3,750
Nielsen Finance LLC, Term Loan B, 8.125% 20131,3		2,000			2,025
Nielsen Finance LLC and Nielsen Finance Co. 10.00% 20142		7,100			7,730
Nielsen Finance LLC and Nielsen Finance Co. 0%/12.50% 20162,5		6,100			4,232
Caterpillar Financial Services Corp. 2.70% 2008		845			814
Caterpillar Inc. 4.50% 2009		9,690			9,535
Caterpillar Financial Services Corp. 4.30% 2010		2,400			2,333
Caterpillar Financial Services Corp., Series F, 5.125% 2011		500			497
Caterpillar Inc. 6.05% 2036		300			310
Tyco International Group SA 6.125% 2008		5,000			5,064
Tyco International Group SA 6.125% 2009		500			508
Tyco International Group SA 7.00% 2028		620			714
Tyco International Group SA 6.875% 2029		6,190			7,058
Embraer Overseas Ltd. 6.375% 20172		10,825			10,852
Raytheon Co. 6.55% 2010		6,000			6,221
Raytheon Co. 8.30% 2010		3,000			3,259
Standard Aero Holdings, Inc. 8.25% 2014		9,050			9,186
USG Corp. 6.30% 20162		9,000			8,937
Goodman Global Holdings, Inc., Series B, 7.875% 2012		8,795			8,685
Northrop Grumman Systems Corp. 7.125% 2011		8,000			8,541
DRS Technologies, Inc. 6.875% 2013		5,035			5,098
DRS Technologies, Inc. 6.625% 2016		475			481
DRS Technologies, Inc. 7.625% 2018		2,725			2,820
Ashtead Group PLC 8.625% 20152		3,875			4,049
Ashtead Capital, Inc. 9.00% 20162		4,000			4,300
DynCorp International and DIV Capital Corp., Series A, 9.50% 2013		7,530			8,019
Horizon Lines, LLC and Horizon Lines Holding Corp. 9.00% 2012		7,071			7,460
TFM, SA de CV 9.375% 2012		4,450			4,773
TFM, SA de CV 12.50% 2012		2,145			2,327
AIR 2 US, Series A, 8.027% 20202,3		6,409			6,477
Southern Capital Corp. Pass Through Trust, Series 2002-1, Class G, MBIA insured, 5.70% 20232,3		6,446			6,392
Lockheed Martin Corp. 6.15% 2036		6,000			6,326
Accuride Corp. 8.50% 2015		6,525			6,313
United Rentals (North America), Inc., Series B, 6.50% 2012		6,250			6,203
Waste Management, Inc. 6.50% 2008		5,220			5,320
Waste Management, Inc. 5.00% 2014		765			736
K&F Industries, Inc. 7.75% 2014		5,375			5,563
General Dynamics Corp. 4.50% 2010		5,000			4,898
RBS Global, Inc. and Rexnord Corp. 9.50% 20142		1,775			1,855
RBS Global, Inc. and Rexnord Corp. 11.75% 20162		1,750			1,838
Argo-Tech Corp. 9.25% 2011		3,395			3,684
Quebecor World Inc. 8.75% 20162		3,755			3,614
Williams Scotsman, Inc. 8.50% 2015		2,900			3,041
RSC Equipment Rental, Second Lien Term Loan B, 8.87% 20131,3		2,875			2,904
CCMG Acquisition Corp. 10.50% 20162		2,250			2,486
FTI Consulting, Inc. 7.625% 2013		2,300			2,386
TransDigm Inc. 7.75% 2014		2,300			2,381
ACIH, Inc. 0%/11.50% 20122,5		3,390			2,356
Mobile Storage Group, Inc. 9.75% 20142		1,725			1,811
UCAR Finance Inc. 10.25% 2012		1,385			1,466
Esco Corp. 8.625% 20132		1,100			1,136
Kansas City Southern Railway Co. 7.50% 2009		1,000			1,014
AGCO Corp. 6.875% 2014		€700			963
H&E Equipment Services, Inc. 8.375% 2016	$	900			947
Terex Corp. 9.25% 2011		375			393
					1,327,772
TELECOMMUNICATION SERVICES — 4.51%
US Unwired Inc., Series B, 10.00% 2012		4,400			4,862
Nextel Communications, Inc., Series E, 6.875% 2013		109,480			110,723
Nextel Communications, Inc., Series D, 7.375% 2015		98,705			101,312
Sprint Capital Corp. 6.875% 2028		10,000			10,038
SBC Communications Inc. 4.125% 2009		19,465			18,917
SBC Communications Inc. 6.25% 2011		1,150			1,188
AT&T Corp. 7.30% 20111		4,734			5,131
SBC Communications Inc. 5.875% 2012		38,460			39,278
SBC Communications Inc. 5.875% 2012		13,000			13,259
SBC Communications Inc. 5.10% 2014		22,745			22,119
SBC Communications Inc. 5.625% 2016		18,000			17,950
SBC Communications Inc. 6.45% 2034		11,175			11,377
AT&T Inc. 6.80% 2036		3,710			3,956
AT&T Wireless Services, Inc. 7.875% 2011		28,855			31,502
AT&T Wireless Services, Inc. 8.125% 2012		87,630			98,715
BellSouth Corp. 4.20% 2009		3,250			3,161
BellSouth Corp. 4.75% 2012		50,000			48,312
BellSouth Capital Funding Corp. 7.875% 2030		10,490			12,216
BellSouth Corp. 6.55% 2034		35,260			36,262
France Télécom 6.75% 20081		€3,500			4,757
France Télécom 7.75% 20111	$	85,050			92,725
Sogerim SA 7.25% 2011		€2,650			3,847
Telecom Italia SpA 6.25% 2012		8,990			12,564
Telecom Italia Capital SA, Series B, 5.25% 2013	$	16,050			15,325
Telecom Italia Capital SA 5.25% 2015		37,000			34,621
Telecom Italia Capital SA 7.20% 2036		17,000			17,816
Telefónica Emisiones, SAU 6.421% 2016		20,000			20,669
Telefónica Emisiones, SAU 7.045% 2036		29,000			30,902
Verizon Global Funding Corp. 6.125% 2007		3,625			3,635
Verizon Global Funding Corp. 7.375% 2012		7,360			8,056
Verizon Global Funding Corp. 4.90% 2015		14,251			13,615
Verizon Global Funding Corp. 7.75% 2030		11,576			13,618
Vodafone Group PLC 7.75% 2010		35,285			37,629
Deutsche Telekom International Finance BV 6.625% 2011		€1,200			1,726
Deutsche Telekom International Finance BV 8.125% 20121		4,420			6,809
Deutsche Telekom International Finance BV 8.25% 20301	$	20,000			24,658
Windstream Corp. 8.125% 20132		18,875			20,527
Valor Telecommunications Enterprises, LLC and Valor Telecommunications Enterprises Finance Corp. 7.75% 2015		6,090			6,585
Windstream Corp. 8.625% 20162		3,300			3,630
Triton PCS, Inc. 8.75% 20118		3,975			3,717
Triton PCS, Inc. 9.375% 20118		10,000			9,450
Triton PCS, Inc. 8.50% 2013		17,825			17,157
Dobson Cellular Systems, Inc. 8.375% 20112		3,600			3,812
Dobson Cellular Systems, Inc. 8.375% 2011		900			953
Dobson Communications Corp. 9.624% 20121		1,650			1,691
Dobson Cellular Systems, Inc. 9.875% 2012		13,300			14,563
Dobson Communications Corp. 8.875% 2013		8,975			9,188
Intelsat (Bermuda), Ltd. 10.484% 20121		4,950			5,018
Intelsat (Bermuda), Ltd. 8.25% 2013		6,725			6,859
Intelsat (Bermuda), Ltd. 8.625% 2015		4,000			4,180
Intelsat PanAmSat Opco 9.00% 20162		3,550			3,776
Intelsat (Bermuda), Ltd. 9.25% 20162		6,500			7,020
Intelsat (Bermuda), Ltd. 11.25% 20162		2,400			2,646
Singapore Telecommunications Ltd. 6.375% 20112		16,250			17,049
Singapore Telecommunications Ltd. 6.375% 2011		3,475			3,646
Embarq Corp. 6.738% 2013		20,000			20,497
PCCW-HKT Capital Ltd. 8.00% 20111,2		15,000			16,529
PCCW-HKT Capital No. 3 Ltd. 5.25% 20152		3,600			3,408
U S WEST Capital Funding, Inc. 6.375% 2008		500			504
Qwest Capital Funding, Inc. 7.90% 2010		950			994
Qwest Communications International Inc. 7.25% 2011		6,000			6,165
Qwest Capital Funding, Inc. 7.25% 2011		4,150			4,259
Qwest Communications International Inc., Series B, 7.50% 2014		3,750			3,881
Qwest Capital Funding, Inc. 7.625% 2021		500			495
U S WEST Capital Funding, Inc. 6.875% 2028		3,250			2,986
American Tower Corp. 7.125% 2012		17,525			18,095
Centennial Cellular Corp. 10.75% 2008		327			329
Centennial Communications Corp. 11.122% 20131		7,500			7,969
Centennial Communications Corp., Centennial Cellular Operating Co. LLC and Centennial Puerto Rico
Operations Corp. 8.125% 20141		9,300			9,591
British Telecommunications PLC 7.125% 20111		€5,500			8,063
British Telecommunications PLC 8.625% 2020		£ 900			2,147
British Telecommunications PLC 5.75% 2028		1,800			3,384
British Telecommunications PLC 8.875% 2030	$	1,600			2,195
Hawaiian Telcom Communications, Inc. 9.75% 2013		6,790			6,841
Hawaiian Telcom Communications, Inc. 10.889% 20131		3,605			3,623
Hawaiian Telcom Communications, Inc., Series B, 12.50% 2015		3,050			3,210
Cricket Communications, Inc. 9.375% 20142		10,375			10,997
Rogers Wireless Inc. 7.25% 2012		1,275			1,358
Rogers Wireless Inc. 7.50% 2015		6,925			7,548
Rogers Cantel Inc. 9.75% 2016		1,250			1,575
Cincinnati Bell Inc. 7.25% 2013		6,800			7,072
Rural Cellular Corp. 9.75% 2010		1,750			1,807
Rural Cellular Corp. 8.25% 2012		750			785
Rural Cellular Corp. 11.121% 20121		3,260			3,415
SK Telecom Co., Ltd. 4.25% 20112		6,000			5,776
Telekom Austria AG 3.375% 2010		€4,200			5,395
NTELOS Inc., Term Loan B, 7.60% 20111,3	$	4,962			4,992
Millicom International Cellular SA 10.00% 2013		3,930			4,303
Koninklijke KPN NV 8.00% 2010		2,950			3,186
Level 3 Financing, Inc. 9.25% 20142		2,500			2,562
América Móvil SA de CV 8.46% 2036		MXP27,000			2,551
Nordic Telephone Co. Holding ApS 8.875% 20162	$	1,000			1,075
					1,264,279
UTILITIES — 2.61%
Abu Dhabi National Energy Co. PJSC (TAQA) 5.875% 20162		37,475			37,810
Abu Dhabi National Energy Co. PJSC (TAQA) 6.50% 20362		28,500			29,494
PECO Energy Co., First and Refunding Mortgage Bonds, 3.50% 2008		5,000			4,883
Commonwealth Edison Co., First Mortgage Bonds, Series 102, 4.74% 2010		12,500			12,200
Commonwealth Edison Co., First Mortgage Bonds, Series 105, 5.40% 2011		9,000			8,938
Exelon Corp. 6.75% 2011		2,200			2,300
Exelon Generation Co., LLC 6.95% 2011		19,475			20,536
PECO Energy Co., First and Refunding Mortgage Bonds, 4.75% 2012		3,900			3,780
Commonwealth Edison Co., First Mortgage Bonds, Series 103, 5.90% 2036		4,000			3,907
Edison Mission Energy 7.73% 2009		4,625			4,810
Southern California Edison Co., First and Refunding Mortgage Bonds, Series 2005-A, 5.00% 2016		4,000			3,867
Edison Mission Energy 7.75% 2016		6,025			6,417
Midwest Generation, LLC, Series B, 8.56% 20163		10,310			11,373
Homer City Funding LLC 8.734% 20263		10,948			12,645
Midwest Generation, LLC and Midwest Finance Corp. 8.75% 2034		7,600			8,284
Southern California Edison Co., First and Refunding Mortgage Bonds, Series 2006-E, 5.55% 2037		3,500			3,357
MidAmerican Energy Holdings Co. 5.875% 2012		15,000			15,288
MidAmerican Energy Co. 5.125% 2013		7,500			7,401
MidAmerican Energy Co. 4.65% 2014		5,000			4,740
MidAmerican Energy Holdings Co. 6.125% 2036		17,750			17,954
NGG Finance PLC 6.125% 2011		€3,480			4,911
National Grid PLC 6.30% 2016	$	37,605			39,017
Consolidated Edison Co. of New York, Inc., Series 2003-A, 3.625% 2008		6,000			5,848
Consolidated Edison Co. of New York, Inc., Series B, 3.85% 2013		5,000			4,587
Consolidated Edison Co. of New York, Inc., Series 2006-C, 5.50% 2016		30,000			30,013
Consolidated Edison Co. of New York, Inc., Series 2003-C, 5.10% 2033		2,000			1,785
PSEG Power LLC 3.75% 2009		6,825			6,595
PSEG Power LLC 7.75% 2011		18,700			20,224
PSEG Power LLC 5.00% 2014		11,690			11,167
PacifiCorp, First Mortgage Bonds, 4.30% 2008		3,060			3,012
PacifiCorp, First Mortgage Bonds, 5.45% 2013		2,875			2,877
Scottish Power PLC 5.375% 2015		31,415			31,048
Ameren Corp. 4.263% 2007		2,500			2,487
Cilcorp Inc. 8.70% 2009		1,000			1,076
Union Electric Co. 5.25% 2012		1,490			1,452
Union Electric Co. 4.65% 2013		11,000			10,312
Union Electric Co. 5.40% 2016		5,750			5,604
Cilcorp Inc. 9.375% 2029		12,265			13,779
Israel Electric Corp. Ltd. 7.95% 20112		10,000			10,835
Israel Electric Corp. Ltd. 7.70% 20182		8,500			9,367
Israel Electric Corp. Ltd. 8.10% 20962		12,000			13,294
Virginia Electric and Power Co., Series 2002-A, 5.375% 2007		14,140			14,137
Dominion Resources, Inc., Series 2002-C, 5.70% 20121		1,000			1,013
Dominion Resources, Inc., Series 2002-B, 6.25% 2012		10,000			10,385
Virginia Electric and Power Co., Series 2003-A, 4.75% 2013		6,000			5,769
Ohio Power Co., Series J, 5.30% 2010		8,000			7,978
Ohio Power Co., Series H, 4.85% 2014		5,965			5,730
Appalachian Power Co., Series I, 4.95% 2015		1,000			950
Ohio Power Co., Series K, 6.00% 2016		15,000			15,430
Southern California Gas Co., First Mortgage Bonds, Series II, 4.375% 2011		5,000			4,843
San Diego Gas & Electric Co., Series CCC, 5.30% 2015		10,000			9,948
San Diego Gas & Electric Co., Series DDD, 6.00% 2026		5,000			5,180
Niagara Mohawk Power Corp., Series G, 7.75% 2008		17,460			18,101
Progress Energy Florida, Inc., First Mortgage Bonds, 4.80% 2013		7,000			6,792
Carolina Power & Light Co. d/b/a Progress Energy Carolinas, Inc., First Mortgage Bonds, 5.125% 2013		5,000			4,922
Carolina Power & Light Co. d/b/a Progress Energy Carolinas, Inc. 5.25% 2015		6,000			5,910
SP PowerAssets Ltd. 3.80% 20082		10,000			9,755
SP PowerAssets Ltd. 5.00% 20132		8,000			7,869
Empresa Nacional de Electricidad SA, Series B, 8.50% 2009		4,455			4,733
Empresa Nacional de Electricidad SA 8.35% 2013		5,000			5,680
Empresa Nacional de Electricidad SA 8.625% 2015		3,000			3,537
AES Corp. 9.50% 2009		927			996
AES Corp. 9.375% 2010		4,803			5,241
AES Corp. 8.75% 20132		1,000			1,076
AES Gener SA 7.50% 2014		5,000			5,305
Old Dominion Electric Cooperative, Series 2003-A, 5.676% 20283		12,375			12,379
Oncor Electric Delivery Co. 6.375% 2012		10,700			11,027
Duke Energy Corp., First and Refunding Mortgage Bonds, 4.50% 2010		4,500			4,396
Duke Energy Corp., First and Refunding Mortgage Bonds, 5.30% 2015		5,000			4,961
Kern River Funding Corp. 4.893% 20182,3		9,240			8,990
Nevada Power Co., General and Refunding Mortgage Notes, Series I, 6.50% 2012		700			722
Nevada Power Co., General and Refunding Mortgage Notes, Series G, 9.00% 2013		2,811			3,050
Sierra Pacific Resources 8.625% 2014		900			971
Nevada Power Co., General and Refunding Mortgage Notes, Series L, 5.875% 2015		2,550			2,551
Nevada Power Co., General and Refunding Mortgage Notes, Series M, 5.95% 2016		1,000			1,003
Anglian Water Services Financing PLC 4.625% 2013		€6,120			8,182
Veolia Environnement 4.875% 2013		6,060			8,141
Energy East Corp. 6.75% 2012	$	7,155			7,513
Constellation Energy Group, Inc. 6.125% 2009		3,500			3,565
Baltimore Gas and Electric Co. 5.20% 2033		3,000			2,633
Pacific Gas and Electric Co., First Mortgage Bonds, 4.20% 2011		2,000			1,917
Pacific Gas and Electric Co., First Mortgage Bonds, 6.05% 2034		4,000			4,048
NRG Energy, Inc. 7.25% 2014		1,500			1,515
NRG Energy, Inc. 7.375% 2016		3,700			3,728
Korea East-West Power Co., Ltd. 4.875% 20112		5,000			4,905
Florida Power & Light Co. 4.85% 2013		5,000			4,899
FPL Energy National Wind, LLC 5.608% 20242,3		4,622			4,548
Tri-State Generation and Transmission Assn. Inc., Pass Through Trust, Series 2003-A, 6.04% 20182,3		3,500			3,538
Enersis SA 7.375% 2014		3,000			3,234
Centerpoint Energy Resources Corp., Series B, 7.875% 2013		2,000			2,222
Alabama Power Co., Series R, 4.70% 2010		2,250			2,204
Wisconsin Gas Co. 5.20% 2015		2,025			1,978
Mirant Americas Generation, Inc. 8.30% 2011		1,700			1,751
					731,125
ENERGY — 2.57%
Energy Transfer Partners, LP 5.65% 2012	$	28,270		$	28,184
Energy Transfer Partners, LP 5.95% 2015		72,670			73,198
Energy Transfer Partners, LP 6.125% 2017		9,800			9,955
Energy Transfer Partners, LP 6.625% 2036		2,650			2,738
Ras Laffan Liquefied Natural Gas Co. Ltd. 3.437% 20092,3		30,985			30,209
Ras Laffan Liquefied Natural Gas Co. Ltd. 3.437% 20093		1,710			1,667
Ras Laffan Liquefied Natural Gas Co. Ltd. 8.294% 20142,3		15,570			17,410
Ras Laffan Liquefied Natural Gas Co. Ltd. 8.294% 20143		1,000			1,118
Ras Laffan Liquefied Natural Gas II 5.298% 20202,3		45,970			44,148
Ras Laffan Liquefied Natural Gas III 5.838% 20272,3		15,000			14,452
Tengizchevroil Finance Co. S.àr.l., Series A, 6.124% 20142,3		59,400			59,549
Tengizchevroil Finance Co. S.àr.l., Series A, 6.124% 20143		6,000			6,015
Enterprise Products Operating LP, Series B, 4.625% 2009		8,000			7,838
Enterprise Products Operating LP 4.95% 2010		8,000			7,871
Enterprise Products Operating LP 7.50% 2011		8,000			8,539
Enterprise Products Operating LP, Series B 6.375% 2013		17,000			17,488
Enterprise Products Partners LP 5.60% 2014		6,855			6,743
Enterprise Products Operating LP, Series B, 5.00% 2015		8,645			8,165
Enterprise Products Operating LP 6.875% 2033		2,000			2,095
Enterprise Products Operating LP 8.375% 20661		2,700			2,930
Pemex Finance Ltd. 8.875% 20103		24,000			25,751
Pemex Project Funding Master Trust 5.75% 2015		10,000			9,942
Pemex Finance Ltd., Series 19990-2, Class A-3, 10.61% 20173		11,700			15,092
Pemex Project Funding Master Trust 8.625% 2022		750			929
Kinder Morgan Energy Partners LP 6.75% 2011		2,500			2,604
Kinder Morgan Energy Partners LP 5.00% 2013		14,029			13,352
Kinder Morgan Energy Partners LP 5.125% 2014		28,552			27,236
Kinder Morgan Energy Partners LP 7.30% 2033		5,000			5,439
Qatar Petroleum 5.579% 20112,3		38,400			38,498
Nakilat Inc. 6.067% 20332,3		5,000			4,905
Petroleum Export Ltd., Class A-1, MBIA insured, 4.623% 20102,3		26,833			26,424
Petroleum Export Ltd., Class A-2, XLCA insured, 4.633% 20102,3		5,056			4,979
Williams Companies, Inc. 6.375% 20102		1,500			1,517
Williams Companies, Inc. 7.372% 20101,2		2,500			2,562
Transcontinental Gas Pipe Line Corp., Series B, 7.00% 2011		300			310
Williams Companies, Inc. 7.125% 2011		500			523
Williams Partners LP 7.50% 20112		5,725			5,997
Transcontinental Gas Pipe Line Corp. 6.40% 2016		200			203
Williams Partners LP 7.25% 20172		1,675			1,717
Williams Companies, Inc. 7.875% 2021		3,025			3,259
Transcontinental Gas Pipe Line Corp. 7.25% 2026		1,750			1,813
Williams Companies, Inc. 8.75% 2032		5,080			5,766
Gulfstream Natural Gas 5.56% 20152		5,000			4,940
Gulfstream Natural Gas 6.19% 20252		12,235			12,329
Apache Corp. 6.25% 2012		16,000			16,632
Delek & Avner-Yam Tethys Ltd. 5.326% 20132,3		15,632			15,237
Sunoco, Inc. 4.875% 2014		14,830			13,906
Pogo Producing Co. 7.875% 2013		6,725			6,859
Pogo Producing Co. 6.625% 2015		300			287
Pogo Producing Co. 6.875% 2017		6,850			6,576
Reliance Industries Ltd. 10.25% 20972		8,750			12,305
Drummond Co., Inc. 7.375% 20162		9,600			9,456
Open Joint Stock Co. Gazprom 9.125% 2007		2,000			2,031
Gaz Capital SA 5.875% 2015		€5,125			7,134
Newfield Exploration Co. 7.625% 2011	$	3,000			3,157
Newfield Exploration Co. 6.625% 2014		2,000			2,010
Newfield Exploration Co. 6.625% 2016		3,775			3,775
El Paso Corp. 6.375% 2009		750			761
El Paso Corp. 7.75% 2010		250			266
El Paso Energy Corp. 7.375% 2012		1,745			1,845
El Paso Corp. 7.875% 2012		875			943
El Paso Corp. 7.75% 2032		4,000			4,400
OPTI Canada Inc. 8.25% 20142		5,975			6,169
Teekay Shipping Corp. 8.875% 2011		5,625			6,068
Devon Financing Corp., ULC 6.875% 2011		4,500			4,763
American Commercial Lines LLC and ACL Finance Corp. 9.50% 2015		3,928			4,385
XTO Energy Inc. 5.65% 2016		4,250			4,209
Encore Acquisition Co. 6.00% 2015		4,450			4,083
OXYMAR 7.50% 20162,3		3,077			3,258
Premcor Refining Group Inc. 9.50% 2013		2,750			2,971
PETRONAS Capital Ltd. 7.00% 20122		2,250			2,430
Sabine Pass LNG, L.P. 7.25% 20132		2,000			1,992
International Coal Group, Inc. 10.25% 2014		1,500			1,507
Overseas Shipholding Group, Inc. 8.25% 2013		1,400			1,479
Peabody Energy Corp., Series B, 6.875% 2013		1,200			1,236
Ultrapetrol (Bahamas) Ltd., First Preferred Ship Mortgage Notes, 9.00% 2014		1,265			1,235
Petrozuata Finance, Inc., Series B, 8.22% 20172,3		250			251
					720,015
MATERIALS— 1.59%
Stora Enso Oyj 5.125% 2014		€4,250			5,725
Stora Enso Oyj 6.404% 20162	$	30,040			30,862
Stora Enso Oyj 7.25% 20362		29,715			31,243
Norske Skogindustrier ASA 7.625% 20112		29,630			31,245
Norske Skogindustrier ASA 7.125% 20332		16,335			15,468
UPM-Kymmene Corp. 5.625% 20142		41,790			40,728
C5 Capital (SPV) Ltd. 6.196% (undated)1,2		15,000			14,979
C10 Capital (SPV) Ltd. 6.722% (undated)1,2		18,695			18,731
JSG Funding PLC 7.75% 2015		€2,000			2,678
JSG Funding PLC 7.75% 2015	$	2,500			2,413
JSG Holdings PLC 11.50% 20157		€10,321			13,842
Weyerhaeuser Co. 5.95% 2008	$	3,000			3,025
Weyerhaeuser Co. 7.375% 2032		12,500			13,086
Scotia Pacific Co. LLC, Series B, Class A-2, 7.11% 20283		21,160			15,883
Dow Chemical Co. 5.75% 2008		11,100			11,193
Dow Chemical Co. 6.00% 2012		2,400			2,469
Jefferson Smurfit Corp. (U.S.) 8.25% 2012		10,775			10,559
Stone Container Corp. 8.375% 2012		1,675			1,650
Jefferson Smurfit Corp. (U.S.) 7.50% 2013		250			236
Owens-Illinois, Inc. 8.10% 2007		3,130			3,153
Owens-Illinois, Inc. 7.35% 2008		5,250			5,309
Owens-Brockway Glass Container Inc. 8.875% 2009		1,319			1,355
Owens-Illinois, Inc. 7.50% 2010		2,250			2,270
BHP Finance (USA) Ltd. 8.50% 2012		10,000			11,558
Associated Materials Inc. 9.75% 2012		9,765			10,107
AMH Holdings, Inc. 0%/11.25% 20145		2,000			1,360
Georgia Gulf Corp. 9.50% 20142		8,300			8,134
Georgia Gulf Corp. 10.75% 20162		3,175			3,064
Building Materials Corp. of America, Series B, 8.00% 2007		1,000			1,019
Building Materials Corp. of America 8.00% 2008		1,975			2,069
Building Materials Corp. of America 7.75% 2014		8,900			8,099
Abitibi-Consolidated Co. of Canada 6.00% 2013		1,310			1,055
Abitibi-Consolidated Co. of Canada 8.375% 2015		9,515			8,278
Equistar Chemicals, LP 10.125% 2008		6,100			6,512
Lyondell Chemical Co. 8.25% 2016		2,400			2,532
Boise Cascade, LLC and Boise Cascade Finance Corp. 7.125% 2014		9,150			8,898
Nalco Co. 7.75% 2011		775			796
Nalco Co. 8.875% 2013		6,200			6,595
Nalco Finance Holdings LLC and Nalco Finance Holdings Inc. 0%/9.00% 20145		1,654			1,348
International Paper Co. 5.85% 2012		8,463			8,647
Graphic Packaging International, Inc. 8.50% 2011		3,325			3,458
Graphic Packaging International, Inc. 9.50% 2013		4,000			4,240
Plastipak Holdings, Inc. 8.50% 20152		6,965			7,278
Momentive Performance Materials Inc. 9.75% 20142		4,750			4,774
Momentive Performance Materials Inc. 11.50% 20162		2,000			1,970
Praxair, Inc. 2.75% 2008		5,000			4,829
FMG Finance Pty Ltd. 10.625% 20162		4,100			4,418
Domtar Inc. 7.125% 2015		4,475			4,408
Rhodia 10.25% 2010		97			111
Rhodia 8.875% 2011		549			582
Rhodia SA 9.25% 2011		€2,511			3,522
Ainsworth Lumber Co. Ltd. 7.25% 2012	$	700			555
Ainsworth Lumber Co. Ltd. 6.75% 2014		2,750			2,104
Ainsworth Lumber Co. Ltd. 6.75% 2014		1,750			1,312
AEP Industries Inc. 7.875% 2013		3,775			3,832
Georgia-Pacific Corp., First Lien Term Loan B, 7.353% 20121,3		3,469			3,495
Arbermarle Corp. 5.10% 2015		3,656			3,473
Chemtura Corp. 6.875% 2016		3,025			2,927
Mosaic Co. 7.375% 20142		2,450			2,527
Mosaic Co. 7.625% 20162		225			234
Rockwood Specialties Group, Inc. 10.625% 2011		218			233
Rockwood Specialties Group, Inc. 7.50% 2014		1,675			1,696
Rockwood Specialties Group, Inc. 7.625% 2014		€500			704
Crystal US Holdings 3 LLC and Crystal US Sub 3 Corp., Series B, 0%/10.50% 20145	$	1,928			1,668
BCP Caylux Holdings Luxembourg SCA 9.625% 2014		735			816
ICI Wilmington, Inc. 4.375% 2008		200			196
ICI Wilmington, Inc. 5.625% 2013		2,000			1,978
E.I. du Pont de Nemours and Co. 4.125% 2010		2,000			1,942
Covalence Specialty Materials Corp. 10.25% 20162		1,750			1,610
Vale Overseas Ltd. 6.25% 2017		1,500			1,514
Packaging Corp. of America 4.375% 2008		1,500			1,473
Neenah Paper, Inc. 7.375% 2014		1,250			1,200
Foundation PA Coal Co. 7.25% 2014		975			997
Potash Corp. of Saskatchewan Inc. 5.875% 2036		1,000			968
Airgas, Inc. 6.25% 2014		550			533
Ispat Inland ULC 9.75% 2014		206			231
					445,981
HEALTH CARE — 1.27%
Cardinal Health, Inc. 6.25% 2008		3,000			3,035
Cardinal Health, Inc. 5.64% 20091,2		3,500			3,504
Cardinal Health, Inc. 6.75% 2011		12,625			13,238
Cardinal Health, Inc. 5.80% 20162		10,000			9,995
Cardinal Health, Inc. 5.85% 2017		12,000			11,956
Allegiance Corp. 7.00% 2026		9,260			9,926
Humana Inc. 6.45% 2016		25,375			26,121
Humana Inc. 6.30% 2018		17,000			17,159
UnitedHealth Group Inc. 5.20% 2007		8,000			7,999
UnitedHealth Group Inc. 3.30% 2008		4,000			3,913
UnitedHealth Group Inc. 4.125% 2009		14,335			13,923
UnitedHealth Group Inc. 5.25% 2011		3,165			3,157
UnitedHealth Group Inc. 5.375% 2016		10,000			9,921
Wyeth 4.375% 20081		7,195			7,121
Wyeth 5.50% 2016		21,165			21,231
HCA Inc., Term Loan B, 8.114% 20131,3		19,325			19,615
HCA Inc. 9.125% 20142		1,570			1,682
HCA Inc. 9.25% 20162		2,180			2,341
HCA Inc. 9.625% 20162,7		2,280			2,457
Aetna Inc. 5.75% 2011		24,000			24,389
Amgen Inc. 4.00% 2009		24,000			23,300
Boston Scientific Corp. 6.00% 2011		1,700			1,717
Boston Scientific Corp. 6.40% 2016		17,675			17,918
WellPoint, Inc. 5.00% 2011		6,500			6,426
WellPoint, Inc. 5.25% 2016		6,455			6,339
HealthSouth Corp. 11.354% 20141,2		4,550			4,869
HealthSouth Corp. 10.75% 20162		6,600			7,136
Hospira, Inc. 4.95% 2009		7,391			7,250
Hospira, Inc. 5.90% 2014		4,100			3,989
Tenet Healthcare Corp. 7.375% 2013		2,375			2,194
Tenet Healthcare Corp. 9.875% 2014		2,830			2,894
Tenet Healthcare Corp. 9.25% 2015		5,500			5,529
Accellent Inc. 10.50% 2013		9,450			9,852
Bristol-Myers Squibb Co. 4.00% 2008		10,000			9,804
Warner Chilcott Corp. 8.75% 2015		9,455			9,739
Universal Health Services, Inc. 7.125% 2016		7,440			7,784
Concentra Operating Corp. 9.50% 2010		3,020			3,186
Concentra Operating Corp. 9.125% 2012		3,835			4,046
Team Finance LLC and Health Finance Corp. 11.25% 2013		3,450			3,588
AMR HoldCo, Inc. and EmCare HoldCo, Inc. 10.00% 2015		2,000			2,175
Mylan Laboratories Inc. 5.75% 2010		2,025			2,030
Elan Corp., PLC 8.875% 20132		1,300			1,306
Angiotech Pharmaceuticals, Inc. 9.12% 20131,2		1,000			1,017
					356,771
INFORMATION TECHNOLOGY — 0.93%
Electronic Data Systems Corp., Series B, 6.50% 20131		55,575			56,023
Electronic Data Systems Corp. 7.45% 2029		13,190			14,475
Cisco Systems, Inc. 5.25% 2011		45,750			45,907
Freescale Semiconductor, Inc., Term Loan B, 7.37% 20131,3		25,000			25,110
Firestone Acquisition Corp. 8.875% 20142		850			851
Sanmina-SCI Corp., Term Loan B, 7.938% 20081,3		4,250			4,266
Sanmina-SCI Corp. 8.125% 2016		13,850			13,469
Hughes Communications, Inc. 9.50% 2014		15,425			16,177
Celestica Inc. 7.875% 2011		11,730			11,671
Celestica Inc. 7.625% 2013		4,170			4,087
NXP BV and NXP Funding LLC 8.118% 20131,2		500			510
NXP BV and NXP Funding LLC 7.875% 20142		3,750			3,895
NXP BV and NXP Funding LLC 9.50% 20152		9,950			10,248
SunGard Data Systems Inc. 9.125% 2013		8,175			8,625
SunGard Data Systems Inc. 10.25% 2015		2,000			2,145
Hyundai Semiconductor America, Inc. 8.625% 20072		10,150			10,184
Sensata Technologies BV 8.25% 20141,2		8,575			8,275
Serena Software, Inc. 10.375% 2016		4,647			4,955
Jabil Circuit, Inc. 5.875% 2010		4,750			4,720
Solectron Global Finance, LTD 8.00% 2016		4,000			4,070
Motorola, Inc. 8.00% 2011		2,750			3,046
Nortel Networks Ltd. 9.624% 20111,2		2,500			2,647
Sabre Holdings Corp. 6.35% 2016		2,875			2,574
Iron Mountain Inc. 7.75% 2015		2,010			2,060
Exodus Communications, Inc. 11.625% 20106,8		1,132			0
					259,990
CONSUMER STAPLES — 0.68%
CVS Corp. 5.298% 20272,3		4,548			4,316
CVS Corp. 6.036% 20282,3		46,825			46,773
Tyson Foods, Inc. 6.85% 20161		43,750			45,142
SUPERVALU INC., Term Loan B, 7.10% 20121,3		6,219			6,250
SUPERVALU INC. 7.50% 2012		365			378
Albertson’s, Inc. 7.25% 2013		3,525			3,603
Albertson’s, Inc. 8.00% 2031		4,000			4,077
Dole Food Co., Inc. 7.25% 2010		2,175			2,083
Dole Food Co., Inc. 8.875% 2011		8,935			8,846
Diageo Capital PLC 3.50% 2007		5,000			4,925
Diageo Capital PLC 4.375% 2010		2,395			2,331
Grand Metropolitan Investment Corp. 7.45% 2035		2,290			2,711
Rite Aid Corp. 6.125% 20082		2,750			2,726
Rite Aid Corp. 9.50% 2011		4,500			4,731
Rite Aid Corp. 7.50% 2015		1,000			995
Vitamin Shoppe 12.874% 20121		7,490			7,864
Petro Stopping Centers, LP and Petro Financial Corp. 9.00% 2012		6,560			6,822
Jean Coutu Group (PJC) Inc. 7.625% 2012		800			846
Jean Coutu Group (PJC) Inc. 8.50% 2014		5,735			5,800
Nabisco, Inc. 7.05% 2007		6,500			6,559
Stater Bros. Holdings Inc. 8.86% 20101		475			483
Stater Bros. Holdings Inc. 8.125% 2012		5,585			5,697
Cadbury Schweppes Investments PLC, Series 41, 4.25% 2009		€4,250			5,591
Spectrum Brands, Inc. 7.375% 2015	$	3,500			3,045
Kellogg Co. 7.45% 2031		2,310			2,767
Elizabeth Arden, Inc. 7.75% 2014		1,780			1,802
Smithfield Foods, Inc., Series A, 8.00% 2009		1,000			1,050
Winn-Dixie Pass Through Trust, Series 1999-1, Class A-1, 7.803% 20172,3,6,8		1,232			925
					189,138
MORTGAGE-BACKED OBLIGATIONS3— 20.37%
Fannie Mae 7.00% 2009		47			48
Fannie Mae 7.50% 2009		102			103
Fannie Mae 7.50% 2009		98			100
Fannie Mae 7.50% 2009		23			24
Fannie Mae 7.50% 2009		15			15
Fannie Mae 7.50% 2009		14			14
Fannie Mae 7.50% 2009		8			8
Fannie Mae 8.50% 2009		40			40
Fannie Mae 9.50% 2009		20			21
Fannie Mae 7.00% 2010		43			43
Fannie Mae, Series 2000-T5, Class B, 7.30% 2010		57,100			61,213
Fannie Mae, Series 2001-T6B, 6.088% 2011		48,000			49,942
Fannie Mae, Series 2003-T1, Class B, 4.491% 2012		46,225			44,775
Fannie Mae 4.89% 2012		25,000			24,600
Fannie Mae 4.00% 2015		28,809			27,527
Fannie Mae 7.00% 2016		251			257
Fannie Mae 11.50% 2016		557			623
Fannie Mae, Series 2002-15, Class PG, 6.00% 2017		12,425			12,560
Fannie Mae 5.00% 2018		22,784			22,473
Fannie Mae 5.00% 2018		16,159			15,938
Fannie Mae 5.00% 2018		8,837			8,716
Fannie Mae 5.50% 2018		2,857			2,864
Fannie Mae, Series 2003-35, Class FY, 5.75% 20181		17,206			17,322
Fannie Mae 9.00% 2018		41			44
Fannie Mae 10.00% 2018		387			430
Fannie Mae 5.50% 2019		29,785			29,853
Fannie Mae 5.50% 2019		11,655			11,669
Fannie Mae 12.00% 2019		477			541
Fannie Mae 4.50% 2020		6,886			6,642
Fannie Mae, Series 90-93, Class G, 5.50% 2020		38			38
Fannie Mae 11.00% 2020		179			200
Fannie Mae 11.249% 20201		459			520
Fannie Mae 6.00% 2021		10,842			10,994
Fannie Mae 9.00% 2022		109			115
Fannie Mae 7.50% 2023		127			132
Fannie Mae, Series 2001-4, Class GA, 10.269% 20251		817			904
Fannie Mae, Series 2001-4, Class NA, 11.905% 20251		4,083			4,536
Fannie Mae 6.157% 20261		644			652
Fannie Mae 7.00% 2026		1,506			1,561
Fannie Mae 8.50% 2027		17			18
Fannie Mae, Series 1998-W5, Class B3, 6.50% 2028		2,562			2,494
Fannie Mae 7.00% 2028		879			911
Fannie Mae, Series 2002-W3, Class A-5, 7.50% 2028		5,481			5,683
Fannie Mae 6.50% 2029		282			285
Fannie Mae, Series 2002-W7, Class A-5, 7.50% 2029		910			949
Fannie Mae 7.50% 2029		72			75
Fannie Mae 7.50% 2029		68			70
Fannie Mae 7.00% 2030		199			207
Fannie Mae 7.50% 2030		203			210
Fannie Mae, Series 2001-25, Class ZA, 6.50% 2031		8,023			8,221
Fannie Mae 7.00% 2031		339			350
Fannie Mae 7.50% 2031		532			551
Fannie Mae 7.50% 2031		62			64
Fannie Mae, Series 2001-20, Class E, 9.611% 20311		147			159
Fannie Mae, Series 2001-20, Class C, 12.046% 20311		182			203
Fannie Mae 7.00% 2032		255			263
Fannie Mae 3.74% 20331		3,246			3,193
Fannie Mae 5.50% 2033		71,852			71,201
Fannie Mae 4.476% 20351		4,056			3,990
Fannie Mae 4.569% 20351		19,058			18,781
Fannie Mae 5.00% 2035		36,288			35,039
Fannie Mae 5.00% 2035		9,051			8,742
Fannie Mae 5.50% 2035		79,710			78,888
Fannie Mae 5.50% 2035		8,453			8,362
Fannie Mae, Series 2005-68, Class PG, 5.50% 2035		6,859			6,802
Fannie Mae 6.50% 2035		15,216			15,559
Fannie Mae, Series 2006-51, Class PO, principal only, 0% 2036		11,196			8,428
Fannie Mae, Series 2006-32, Class OA, principal only, 0% 2036		9,772			7,056
Fannie Mae, Series 2006-96, Class OP, principal only, 0% 2036		2,266			1,664
Fannie Mae 5.50% 2036		79,036			78,123
Fannie Mae 5.50% 2036		66,188			65,433
Fannie Mae 5.50% 2036		65,906			65,144
Fannie Mae 5.50% 2036		43,262			42,768
Fannie Mae 5.50% 2036		31,708			31,346
Fannie Mae 5.50% 2036		522			516
Fannie Mae 5.50% 2036		46			45
Fannie Mae, Series 2006-96, Class FD, 5.85% 20361		1,809			1,825
Fannie Mae 6.00% 2036		50,000			50,344
Fannie Mae, Series 2006-106, Class HG, 6.00% 2036		27,259			27,585
Fannie Mae, Series 2006-43, Class PX, 6.00% 2036		24,560			24,830
Fannie Mae 6.00% 2036		16,356			16,479
Fannie Mae 6.00% 2036		4,228			4,257
Fannie Mae 6.50% 2036		13,189			13,513
Fannie Mae, Series 2001-T10, Class A-1, 7.00% 2041		8,563			8,802
Fannie Mae, Series 2001-50, Class BA, 7.00% 2041		2,669			2,740
Fannie Mae, Series 2002-W1, Class 2A, 7.50% 2042		6,087			6,316
Freddie Mac 8.25% 2007		15			15
Freddie Mac 8.25% 2007		3			3
Freddie Mac 8.50% 2007		2			2
Freddie Mac 8.00% 2008		1			1
Freddie Mac 8.50% 2008		9			9
Freddie Mac 8.50% 2008		8			8
Freddie Mac 8.50% 2008		2			2
Freddie Mac 8.50% 2008		1			1
Freddie Mac 8.75% 2008		28			28
Freddie Mac 8.75% 2008		10			10
Freddie Mac 8.75% 2008		5			5
Freddie Mac 8.75% 2008		4			4
Freddie Mac 8.00% 2009		3			3
Freddie Mac 8.50% 2009		66			67
Freddie Mac 8.50% 2010		80			82
Freddie Mac 8.50% 2010		19			19
Freddie Mac 4.00% 2015		39,483			37,333
Freddie Mac 6.00% 2017		646			656
Freddie Mac, Series 2310, Class A, 10.518% 20171		818			881
Freddie Mac 5.00% 2018		21,648			21,322
Freddie Mac 11.00% 2018		100			111
Freddie Mac 8.50% 2020		215			230
Freddie Mac 8.50% 2020		68			73
Freddie Mac, Series 41, Class F, 10.00% 2020		147			147
Freddie Mac, Series 178, Class Z, 9.25% 2021		110			117
Freddie Mac, Series 1617, Class PM, 6.50% 2023		2,750			2,825
Freddie Mac 8.00% 2026		127			135
Freddie Mac 8.50% 2027		28			31
Freddie Mac 4.50% 2035		27,857			26,097
Freddie Mac 4.646% 20351		24,153			23,748
Freddie Mac 4.789% 20351		12,425			12,252
Freddie Mac 5.00% 2035		45,807			44,224
Freddie Mac, Series 3061, Class PN, 5.50% 2035		59,206			59,308
Freddie Mac 5.50% 2035		22,522			22,276
Freddie Mac 5.50% 2035		22,366			22,121
Freddie Mac, Series 3136, Class OP, principal only, 0% 2036		9,750			7,327
Freddie Mac, Series 3149, Class AO, principal only, 0% 2036		6,301			4,846
Freddie Mac, Series 3147, Class OD, principal only, 0% 2036		6,309			4,677
Freddie Mac, Series 3149, Class MO, principal only, 0% 2036		6,309			4,662
Freddie Mac, Series 3257, Class PA, 5.50% 2036		57,275			56,975
Freddie Mac 5.50% 2036		39,229			38,800
Freddie Mac 6.00% 2036		308,540			310,805
Freddie Mac, Series 3233, Class PA, 6.00% 2036		49,748			50,464
Freddie Mac, Series 3156, Class NG, 6.00% 2036		16,947			17,281
CS First Boston Mortgage Securities Corp., Series 2003-23, Class II-A-8, 4.50% 2018		14,684			14,086
CS First Boston Mortgage Securities Corp., Series 2003-27, Class VI-A-1, 5.00% 2018		11,756			11,486
CS First Boston Mortgage Securities Corp., Series 2003-23, Class VII-A-1, 5.00% 2018		5,906			5,772
CS First Boston Mortgage Securities Corp., Series 2002-30, Class I-A-1, 7.50% 2032		1,150			1,153
CS First Boston Mortgage Securities Corp., Series 2002-34, Class I-A-1, 7.50% 2032		118			119
CS First Boston Mortgage Securities Corp., Series 2003-AR12, Class II-A-2, 4.326% 20331		849			840
CS First Boston Mortgage Securities Corp., Series 2003-21, Class V-A-1, 6.50% 2033		6,562			6,619
CS First Boston Mortgage Securities Corp., Series 2003-29, Class V-A-1, 7.00% 2033		1,737			1,770
CS First Boston Mortgage Securities Corp., Series 2004-AR5, Class VII-A-2, 4.604% 20341		18,713			18,466
CS First Boston Mortgage Securities Corp., Series 2004-5, Class IV-A-1, 6.00% 2034		10,448			10,416
CS First Boston Mortgage Securities Corp., Series 2001-CF2, Class A-3, 6.238% 2034		5,897			5,924
CS First Boston Mortgage Securities Corp., Series 2001-CF2, Class A-4, 6.505% 2034		460			479
CS First Boston Mortgage Securities Corp., Series 2002-CP5, Class A-1, 4.106% 2035		1,518			1,483
CS First Boston Mortgage Securities Corp., Series 2005-6, Class VI-A-1, 6.00% 2035		17,881			17,895
CS First Boston Mortgage Securities Corp., Series 2005-5, Class IV-A-1, 6.25% 2035		6,899			6,939
CS First Boston Mortgage Securities Corp., Series 2001-CK1, Class A-3, 6.38% 2035		67,122			69,423
CS First Boston Mortgage Securities Corp., Series 2002-CKP1, Class F, 7.067% 20352		1,500			1,611
CS First Boston Mortgage Securities Corp., Series 2006-2R, Class A-PO, principal only, 0% 20362		32,621			22,521
CS First Boston Mortgage Securities Corp., Series 2006-7, Class 6-A-3, 5.50% 2036		32,353			31,959
CS First Boston Mortgage Securities Corp., Series 2006-2, Class 5-A-6, 6.00% 2036		33,750			33,724
CS First Boston Mortgage Securities Corp., Series 2002-CKS4, Class G, 6.006% 20362		500			509
CS First Boston Mortgage Securities Corp., Series 2001-CK6, Class A-3, 6.387% 2036		26,650			27,803
CS First Boston Mortgage Securities Corp., Series 2004-C5, Class A-1A, 3.883% 2037		7,548			7,400
CS First Boston Mortgage Securities Corp., Series 2004-C5, Class A-2, 4.183% 2037		16,000			15,521
CS First Boston Mortgage Securities Corp., Series 2005-C3, Class A-2, 4.512% 2037		1,000			977
CS First Boston Mortgage Securities Corp., Series 2005-C3, Class A-AB, 4.614% 2037		20,000			19,320
CS First Boston Mortgage Securities Corp., Series 2004-C1, Class E, 5.015% 20372		5,000			4,856
CS First Boston Mortgage Securities Corp., Series 2005-C4, Class A-2, 5.017% 2038		10,000			9,916
CS First Boston Mortgage Securities Corp., Series 2005-C5, Class A-AB, 5.10% 2038		12,000			11,853
CS First Boston Mortgage Securities Corp., Series 2004-C4, Class A-4, 4.283% 2039		20,600			19,761
CS First Boston Mortgage Securities Corp., Series 2006-C1, Class A-3, 5.711% 2039		14,000			14,228
CS First Boston Mortgage Securities Corp., Series 2005-C6, Class A-3, 5.23% 2040		42,000			41,690
CS First Boston Mortgage Securities Corp., Series 1999-C1, Class D, 7.791% 20411		5,725			6,122
Countrywide Alternative Loan Trust, Series 2004-5CB, Class 2-A-1, 5.00% 2019		10,155			9,956
Countrywide Alternative Loan Trust, Series 2006-J3, Class 2-A-1, 4.75% 2020		12,963			12,721
Countrywide Alternative Loan Trust, Series 2005-J8, Class 2-A-1, 5.00% 2020		17,406			17,006
Countrywide Alternative Loan Trust, Series 2004-28CB, Class 7-A-1, 5.00% 2020		4,211			4,099
Countrywide Alternative Loan Trust, Series 2005-9CB, Class 2-A-1, 6.00% 2020		7,397			7,401
Countrywide Alternative Loan Trust, Series 2005-46CB, Class A-8, 5.50% 2035		87,742			87,613
Countrywide Alternative Loan Trust, Series 2005-54CB, Class 1-A-7, 5.50% 2035		54,980			54,932
Countrywide Alternative Loan Trust, Series 2005-49CB, Class A-1, 5.50% 2035		34,308			34,018
Countrywide Alternative Loan Trust, Series 2005-40CB, Class A-1, 5.50% 2035		21,086			20,724
Countrywide Alternative Loan Trust, Series 2005-21CB, Class A-9, 5.50% 2035		14,256			14,222
Countrywide Alternative Loan Trust, Series 2004-28CB, Class 5-A-1, 5.75% 2035		2,948			2,914
Countrywide Alternative Loan Trust, Series 2005-62, Class 2-A-1, 5.758% 20351		25,614			25,640
Countrywide Alternative Loan Trust, Series 2005-21CB, Class A-17, 6.00% 2035		33,008			32,893
Countrywide Alternative Loan Trust, Series 2004-36CB, Class 1-A-1, 6.00% 2035		16,196			16,286
Countrywide Alternative Loan Trust, Series 2004-28CB, Class 6-A-1, 6.00% 2035		1,203			1,199
Countrywide Alternative Loan Trust, Series 2006-16CB, Class A-2, 6.00% 2036		32,193			32,146
Countrywide Alternative Loan Trust, Series 2006-24CB, Class A-1, 6.00% 2036		25,628			25,618
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2002-C2, Class F, 5.98% 20342		2,500			2,549
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2002-C3, Class A-1, 4.20% 2035		1,292			1,259
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CIBC11, Class A-2, 5.016% 2037		11,232			11,141
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CIBC12, Class A-3B, 5.333% 20371		45,000			45,218
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2002-C1, Class E, 6.135% 20372		400			413
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2003-ML1, Class A-1, 3.972% 2039		15,439			14,979
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2004-C3, Class A-3, 4.545% 2042		21,000			20,328
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP2, Class A-2, 4.575% 2042		20,058			19,618
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP4, Class A-2, 4.79% 2042		10,508			10,355
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP4, Class A-3A1, 4.871% 2042		25,000			24,591
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP5, Class A-2, 5.198% 2044		10,080			10,065
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP1, Class A-2, 4.625% 2046		91,455			89,923
Bear Stearns Commercial Mortgage Securities Inc., Series 1998-C1, Class A-1, 6.34% 2030		1,361			1,364
Bear Stearns Commercial Mortgage Securities Inc., Series 1999-WF2, Class X, interest only, 0.221% 20311		217,104			2,460
Bear Stearns Commercial Mortgage Securities Inc., Series 1999-C1, Class X, interest only, 1.008% 20311,2		144,478			3,754
Bear Stearns Commercial Mortgage Securities Inc., Series 2000-WF2, Class A-2, 7.32% 2032		16,480			17,512
Bear Stearns Commercial Mortgage Securities Inc., Series 2002-PBW1, Class A-1, 3.97% 2035		20,785			20,302
Bear Stearns Commercial Mortgage Securities Inc., Series 2001-TOP2, Class D, 6.94% 20352		3,000			3,176
Bear Stearns Commercial Mortgage Securities Inc., Series 2004-PWR6, Class A-1, 3.688% 2041		2,752			2,705
Bear Stearns Commercial Mortgage Securities Inc., Series 2004-PWR6, Class A-4, 4.521% 2041		10,000			9,665
Bear Stearns Commercial Mortgage Securities Inc., Series 2005-PWR9, Class A-2, 4.735% 2042		64,000			63,047
Bear Stearns Commercial Mortgage Securities Inc., Series 2005-PWR9, Class A-3, 4.868% 2042		38,825			37,867
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-S12, Class 1-A-1, 4.50% 2018		10,294			9,872
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-S6, Class II-A-3, 4.75% 2018		1,370			1,326
WaMu Mortgage Pass-Through Certificates Trust, Series 2004-CB2, Class VII-A, 5.50% 2019		1,652			1,649
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR7, Class A-7, 3.842% 20331		28,470			27,823
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR8, Class A, 4.03% 20331		6,190			6,122
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR5, Class A-7, 4.208% 20331		5,470			5,419
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR6, Class A-1, 4.337% 20331		14,288			14,112
WaMu Mortgage Pass-Through Certificates Trust, Series 2004-AR11, Class A, 4.564% 20341		31,620			31,117
WaMu Mortgage Pass-Through Certificates Trust, Series 2006-AR2, Class 2-A1, 5.843% 20371		28,652			28,509
WaMu Mortgage Pass-Through Certificates Trust, Series 2005-AR15, Class A-1-A, 5.61% 20451		17,730			17,800
Residential Accredit Loans, Inc., Series 2003-QS16, Class A-1, 5.00% 2018		18,879			18,424
Residential Accredit Loans, Inc., Series 2004-QS6, Class A-1, 5.00% 2019		6,225			6,080
Residential Accredit Loans, Inc., Series 2004-QS16, Class 1-A-1, 5.50% 2034		11,816			11,728
Residential Accredit Loans, Inc., Series 2005-QR1, Class A, 6.00% 2034		39,775			39,861
Residential Accredit Loans, Inc., Series 2004-QS12, Class M-1, 6.00% 2034		2,419			2,375
Residential Accredit Loans, Inc., Series 2005-QS4, Class A-3, 5.50% 2035		37,600			37,114
Residential Accredit Loans, Inc., Series 2005-QS9, Class A-6, 5.50% 2035		1,000			962
Residential Accredit Loans, Inc., Series 2005-QS5, Class A-5, 5.75% 2035		3,000			2,942
Residential Accredit Loans, Inc., Series 2006-QS10, Class I-A, 6.00% 2035		11,142			11,147
Residential Accredit Loans, Inc., Series 2006-QS1, Class A-3, 5.75% 2036		8,400			8,412
SBA CMBS Trust, Series 2005-1, Class A, 5.369% 20352		33,000			33,141
SBA CMBS Trust, Series 2005-1, Class B, 5.565% 20352		3,300			3,324
SBA CMBS Trust, Series 2005-1, Class E, 6.706% 20352		7,460			7,632
SBA CMBS Trust, Series 2006-1A, Class A, 5.314% 20362		48,500			48,614
SBA CMBS Trust, Series 2006-1A, Class B, 5.451% 20362		7,680			7,704
SBA CMBS Trust, Series 2006-1A, Class D, 5.852% 20362		3,200			3,206
SBA CMBS Trust, Series 2006-1A, Class F, 6.709% 20362		375			375
SBA CMBS Trust, Series 2006-1A, Class G, 6.904% 20362		3,375			3,375
SBA CMBS Trust, Series 2006-1A, Class H, 7.389% 20362		3,375			3,375
SBA CMBS Trust, Series 2006-1A, Class J, 7.825% 20362		2,375			2,376
Crown Castle Towers LLC, Series 2005-1, Class A-FX, 4.643% 20352		36,000			35,297
Crown Castle Towers LLC, Series 2005-1, Class C, 5.074% 20352		43,000			42,469
Crown Castle Towers LLC, Series 2006-1, Class E, 6.065% 20362		19,000			18,988
Crown Castle Towers LLC, Series 2006-1, Class F, 6.650% 20362		7,150			7,132
Crown Castle Towers LLC, Series 2006-1, Class G, 6.795% 20362		1,400			1,397
Structured Adjustable Rate Mortgage Loan Trust, Series 2005-22, Class 5-A-1, 6.023% 20351		27,195			27,270
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-4, Class 4-A-1, 5.961% 20361		16,452			16,493
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-4, Class 5-A-1, 5.963% 20361		49,601			49,726
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-2, Class 5-A-1, 6.00% 20361		8,969			8,986
Bear Stearns ARM Trust, Series 2003-6, Class I-A-2, 3.969% 20331		24,939			24,530
Bear Stearns ARM Trust, Series 2003-3, Class II-A-2, 4.043% 20331		5,188			5,125
Bear Stearns ARM Trust, Series 2003-3, Class III-A-1, 5.114% 20331		5,471			5,428
Bear Stearns ARM Trust, Series 2004-3, Class II-A, 4.232% 20341		13,839			13,548
Bear Stearns ARM Trust, Series 2003-9, Class III-A-2, 4.97% 20341		2,381			2,349
Bear Stearns ARM Trust, Series 2005-10, Class A-3, 4.65% 20351		51,800			50,541
Wells Fargo Mortgage-backed Securities Trust, Series 2004-7, Class I-A-1, 4.50% 2019		3,930			3,768
Wells Fargo Mortgage-backed Securities Trust, Series 2004-2, Class A-1, 5.00% 2019		6,863			6,704
Wells Fargo Mortgage-backed Securities Trust, Series 2003-3, Class II-A-1, 5.25% 2033		22,224			21,901
Wells Fargo Mortgage-backed Securities Trust, Series 2006-AR15, Class A-1, 5.697% 2036		67,558			67,493
CHL Mortgage Pass-Through Trust, Series 2003-HYB3, Class 4-A-1, 3.467% 20331		3,810			3,748
CHL Mortgage Pass-Through Trust, Series 2003-27, Class A-1, 3.688% 20331		8,070			7,974
CHL Mortgage Pass-Through Trust, Series 2004-22, Class A-2, 4.629% 20341		9,891			9,756
CHL Mortgage Pass-Through Trust, Series 2004-HYB6, Class A-3, 5.129% 20341		4,063			4,054
CHL Mortgage Pass-Through Trust, Series 2005-HYB8, Class 4-A-1, 5.675% 20351		71,974			71,425
Wachovia Bank Commercial Mortgage Trust, Series 2003-C9, Class A-2, 3.958% 2035		4,200			4,094
Wachovia Bank Commercial Mortgage Trust, Series 2003-C9, Class A-3, 4.608% 2035		1,979			1,931
Wachovia Bank Commercial Mortgage Trust, Series 2004-C14, Class A-2, 4.368% 2041		1,530			1,492
Wachovia Bank Commercial Mortgage Trust, Series 2005-C17, Class A-2, 4.782% 2042		24,000			23,686
Wachovia Bank Commercial Mortgage Trust, Series 2005-C18, Class A-PB, 4.807% 2042		3,000			2,923
Wachovia Bank Commercial Mortgage Trust, Series 2005-C17, Class A-4, 5.083% 2042		35,000			34,392
Wachovia Bank Commercial Mortgage Trust, Series 2006-C22, Class A-PB, 5.446% 2044		8,038			8,032
Wachovia Bank Commercial Mortgage Trust, Series 2006-C23, Class A-PB, 5.446% 2045		16,750			16,862
Banc of America Commercial Mortgage Inc., Series 2001-1, Class A-2, 6.503% 2036		53,475			55,541
Banc of America Commercial Mortgage Inc., Series 2003-2, Class A-2, 4.342% 2041		13,875			13,575
Banc of America Commercial Mortgage Inc., Series 2004-5, Class A-3, 4.561% 2041		9,975			9,679
Banc of America Commercial Mortgage Inc., Series 2004-5, Class A-AB, 4.673% 2041		2,000			1,945
Banc of America Commercial Mortgage Inc., Series 2005-3, Class A-2, 4.501% 2043		1,260			1,231
Chase Commercial Mortgage Securities Corp., Series 1998-2, Class A-2, 6.39% 2030		40,957			41,562
Chase Commercial Mortgage Securities Corp., Series 1998-1, Class A-2, 6.56% 2030		11,607			11,718
Chase Commercial Mortgage Securities Corp., Series 2000-2, Class A-1, 7.543% 2032		8,841			9,029
Chase Commercial Mortgage Securities Corp., Series 2000-1, Class A-2, 7.757% 2032		6,190			6,546
Bear Stearns ALT-A Trust, Series 2005-9, Class II-6A-1, 5.828% 20351		28,902			28,928
Bear Stearns ALT-A Trust, Series 2006-2, Class II-4-A-1, 5.943% 20361		30,305			30,443
GMAC Commercial Mortgage Securities, Inc., Series 1997-C1, Class A-3, 6.869% 2029		6,191			6,215
GMAC Commercial Mortgage Securities, Inc., Series 1997-C1, Class D, 6.997% 2029		8,300			8,366
GMAC Commercial Mortgage Securities, Inc., Series 1997-C1, Class F, 7.222% 2029		1,800			1,929
GMAC Commercial Mortgage Securities, Inc., Series 2001-C1, Class A-2, 6.465% 2034		30,250			31,488
GMAC Commercial Mortgage Securities, Inc., Series 1998-C2, Class C, 6.50% 2035		9,000			9,153
Government National Mortgage Assn. 7.50% 2007		2			2
Government National Mortgage Assn. 6.50% 2008		90			92
Government National Mortgage Assn. 6.50% 2008		26			27
Government National Mortgage Assn. 7.50% 2008		20			21
Government National Mortgage Assn. 7.50% 2008		18			18
Government National Mortgage Assn. 7.50% 2008		15			15
Government National Mortgage Assn. 7.50% 2008		12			12
Government National Mortgage Assn. 7.50% 2008		4			4
Government National Mortgage Assn. 6.50% 2009		32			32
Government National Mortgage Assn. 7.50% 2009		34			34
Government National Mortgage Assn. 7.50% 2009		33			34
Government National Mortgage Assn. 7.50% 2009		28			28
Government National Mortgage Assn. 7.50% 2009		26			27
Government National Mortgage Assn. 7.50% 2009		24			24
Government National Mortgage Assn. 7.50% 2009		20			21
Government National Mortgage Assn. 7.50% 2009		13			13
Government National Mortgage Assn. 9.00% 2009		312			317
Government National Mortgage Assn. 9.50% 2009		373			385
Government National Mortgage Assn. 9.50% 2009		28			29
Government National Mortgage Assn. 9.00% 2016		112			122
Government National Mortgage Assn. 9.00% 2017		31			34
Government National Mortgage Assn. 9.50% 2019		277			308
Government National Mortgage Assn. 8.50% 2020		48			52
Government National Mortgage Assn. 8.50% 2020		30			32
Government National Mortgage Assn. 9.50% 2020		93			103
Government National Mortgage Assn. 10.00% 2020		708			799
Government National Mortgage Assn. 8.50% 2021		236			256
Government National Mortgage Assn. 8.50% 2021		152			164
Government National Mortgage Assn. 8.50% 2021		71			76
Government National Mortgage Assn. 8.50% 2021		41			44
Government National Mortgage Assn. 10.00% 2021		1,544			1,718
Government National Mortgage Assn. 9.00% 2022		27			30
Government National Mortgage Assn. 8.50% 2023		30			33
Government National Mortgage Assn. 8.50% 2024		26			28
Government National Mortgage Assn. 8.50% 2024		24			26
Government National Mortgage Assn. 8.50% 2027		30			32
Government National Mortgage Assn. 8.50% 2028		25			26
Government National Mortgage Assn. 8.50% 2029		28			30
Government National Mortgage Assn. 4.00% 20351		13,625			13,423
Government National Mortgage Assn. 4.00% 20351		6,317			6,208
Government National Mortgage Assn. 4.00% 20351		2,858			2,809
Government National Mortgage Assn. 6.00% 2036		25,510			25,817
Nykredit 4.00% 2035		DKr305,842			50,025
IndyMac INDX Mortgage Loan Trust, Series 2006-AR5, Class 2-A-1, 5.878% 20361	$	49,643			49,458
Tower Ventures, LLC, Series 2006-1, Class A-2, 5.45% 20362		22,500			22,616
Tower Ventures, LLC, Series 2006-1, Class C, 5.707% 20362		3,670			3,696
Tower Ventures, LLC, Series 2006-1, Class D, 6.052% 20362		10,000			10,098
Tower Ventures, LLC, Series 2006-1, Class E, 6.495% 20362		4,000			4,057
Tower Ventures, LLC, Series 2006-1, Class F, 7.036% 20362		8,730			8,887
Banc of America Funding Corp., Series 2005-H, Class 9-A-1, 5.967% 20351		45,716			45,816
J.P. Morgan Alternative Loan Trust, Series 2006-S3, Class A-6, 6.12% 2036		44,563			44,870
L.A. Arena Funding, LLC, Series 1, Class A, 7.656% 20262		39,928			43,929
Salomon Brothers Commercial Mortgage Trust, Series 2000-C3, Class A-1, 6.341% 20332		2,177			2,186
Salomon Brothers Commercial Mortgage Trust, Series 2000-C3, Class A-2, 6.592% 2033		17,250			17,933
Salomon Brothers Commercial Mortgage Trust, Series 2001-C1, Class A-2, 6.226% 2035		3,714			3,727
Salomon Brothers Commercial Mortgage Trust, Series 2001-C1, Class A-3, 6.428% 2035		16,420			17,061
Banc of America Mortgage Securities Trust, Series 2003-10, Class 3-A-1, 5.00% 2019		5,503			5,375
Banc of America Mortgage Securities Trust, Series 2003-F, Class 2-A-1, 3.734% 20331		20,358			20,126
Banc of America Mortgage Securities Trust, Series 2003-G, Class 2-A-1, 4.088% 20331		6,049			5,975
Banc of America Mortgage Securities Trust, Series 2003-I, Class 3-A-1, 4.53% 20331		9,048			8,880
Deutsche Genossen-Hypobank, Series 883, 5.25% 2009		€29,447			40,056
GMAC Mortgage Loan Trust, Series 2006-AR1, Class 2-A-1, 5.647% 20361		38,083			38,002
Merrill Lynch Mortgage Investors, Inc., Series 2003-A4, Class II-A, 4.61% 20331		12,777			12,686
Merrill Lynch Mortgage Investors, Inc., Series 2004-A1, Class II-A-1, 4.582% 20341		23,734			23,488
Bear Stearns Asset-backed Securities I Trust, Series 2005-AC8, Class A-4, 5.50% 2035		15,050			14,966
Bear Stearns Asset-backed Securities I Trust, Series 2006-AC-2, Class II-1A-1, 6.00% 2036		20,951			20,945
GS Mortgage Securities Corp. II, Series 1998-C1, Class E, 7.197% 20301		31,076			32,038
GS Mortgage Securities Corp. II, Series 1998-C1, Class D, 7.197% 20301		3,750			3,860
MASTR Alternative Loan Trust, Series 2004-5, Class 5-A-1, 4.75% 2019		8,216			7,955
MASTR Alternative Loan Trust, Series 2003-2, Class 6-A-1, 6.00% 2033		729			730
MASTR Alternative Loan Trust, Series 2004-2, Class 2-A-1, 6.00% 2034		1,399			1,395
MASTR Alternative Loan Trust, Series 2005-1, Class 1-A-1, 5.50% 2035		16,283			15,962
MASTR Alternative Loan Trust, Series 2005-3, Class 1-A-1, 5.50% 2035		4,021			3,960
MASTR Alternative Loan Trust, Series 2005-3, Class 2-A-1, 6.00% 2035		5,212			5,208
MASTR Alternative Loan Trust, Series 2005-3, Class 3-A-1, 6.50% 2035		565			571
Residential Asset Mortgage Products Trust, Series 2004-RS9, Class A-I-4, AMBAC insured, 4.767% 2032		10,000			9,887
Residential Asset Mortgage Products Trust, Series 2004-RS10, Class A-I-6, 4.55% 2034		26,100			25,213
Structured Asset Securities Corp., Series 2003-29, Class 1-A-1, 4.75% 2018		14,030			13,580
Structured Asset Securities Corp., Series 1998-RF2, Class A, 8.52% 20271,2		6,270			6,296
Structured Asset Securities Corp., Series 1998-RF1, Class A, 8.729% 20271,2		2,330			2,336
Structured Asset Securities Corp., Series 1999-RF1, Class A, 7.851% 20281,2		1,539			1,572
Structured Asset Securities Corp., Series 2003-17A, Class 3-A-1, 4.01% 20331		1,898			1,868
Structured Asset Securities Corp., Series 2005-6, Class 5-A-4, 5.00% 2035		6,814			6,326
Structured Asset Securities Corp., Series 2005-6, Class 5-A-9, 5.00% 2035		2,654			2,613
HarborView Mortgage Loan Trust, Series 2005-15, Class 2-A1A2, 6.15% 20451		32,422			32,734
Residential Asset Securitization Trust, Series 2005-A8CB, Class A-11, 6.00% 2035		19,742			19,689
Residential Asset Securitization Trust, Series 2005-A6CB, Class A-7, 6.00% 2035		12,987			12,999
Banc of America Alternative Loan Trust, Series 2005-4, Class 2-A-1, 5.00% 2020		16,175			15,798
Banc of America Alternative Loan Trust, Series 2005-6, Class 2-CB-2, 6.00% 2035		15,411			15,425
J.P. Morgan Mortgage Trust, Series 2004-S1, Class 1-A-7, 5.00% 2019		24,132			23,560
J.P. Morgan Mortgage Trust, Series 2005-A1, Class 4-A-1, 4.776% 20351		7,903			7,634
Commercial Mortgage Trust, Series 2004-LB3A, Class A-4, 5.234% 2037		10,956			10,933
Commercial Mortgage Trust, Series 2003-LNB1, Class A-2, 4.084% 2038		20,000			18,744
GSR Mortgage Loan Trust, Series 2004-2F, Class XIIIA-1, 5.00% 2019		16,740			16,392
GSR Mortgage Loan Trust, Series 2005-AR1, Class 2-A-1, 4.941% 20351		12,763			12,651
Chase Manhattan Bank - First Union National Bank, Commercial Mortgage Trust, Series 1999-1, Class A-2, 7.439% 2031		5,000			5,230
Chase Manhattan Bank - First Union National Bank, Commercial Mortgage Trust, Series 1999-1, Class B, 7.619% 2031		17,125			18,070
Chase Manhattan Bank - First Union National Bank, Commercial Mortgage Trust, Series 1999-1, Class C, 7.625% 2031		5,000			5,282
Adjustable Rate Mortgage Trust, Series 2006-1, Class 3-A-3, 5.96% 20361		27,487			27,664
LB-UBS Commercial Mortgage Trust, Series 2000-C3, Class A-2, 7.95% 2025		14,500			15,511
LB-UBS Commercial Mortgage Trust, Series 2002-C1, Class A-3, 6.226% 2026		8,300			8,454
LB-UBS Commercial Mortgage Trust, Series 2005-C7, Class A-2, 5.103% 2030		3,468			3,452
GE Commercial Mortgage Corp., Series 2004-C3, Class B, 5.278% 2039		8,000			7,955
GE Commercial Mortgage Corp., Series 2004-C2, Class B, 4.983% 2040		19,193			18,721
Morgan Stanley Mortgage Loan Trust, Series 2004-3, Class 4-A, 5.688% 20341		22,719			22,198
Morgan Stanley Mortgage Loan Trust, Series 2004-3, Class 3-A, 6.00% 2034		2,990			2,981
CSAB Mortgage-backed Trust, Series 2006-2, Class A-6-A, 5.72% 20361		25,000			24,779
Morgan Stanley Dean Witter Capital I Trust, Series 2001-TOP5, Class A-3, 6.16% 2035		17,468			17,784
Morgan Stanley Dean Witter Capital I Trust, Series 2003-TOP9, Class A-1, 3.98% 2036		7,090			6,884
Morgan Stanley Capital I, Inc., Series 1998-HF2, Class A-2, 6.48% 2030		13,131			13,292
Morgan Stanley Capital I, Inc., Series 1999-FNV1, Class A-2, 6.53% 2031		9,779			9,946
GE Capital Commercial Mortgage Corp., Series 2001-1, Class A-1, 6.079% 2033		179			181
GE Capital Commercial Mortgage Corp., Series 2001-1, Class A-2, 6.531% 2033		17,590			18,413
GE Capital Commercial Mortgage Corp., Series 2001-3, Class A-1, 5.56% 2038		1,799			1,811
GE Capital Commercial Mortgage Corp., Series 2001-3, Class A-2, 6.07% 2038		2,500			2,590
Citigroup Mortgage Loan Trust, Inc., Series 2003-UST1, Class A-3, 5.00% 2018		16,733			16,421
Citigroup Mortgage Loan Trust, Inc., Series 2004-HYB1, Class A-3-1, 4.55% 20341		4,548			4,493
Prudential Securities Secured Financing Corp., Series 1999-NRF1, Class C, 6.746% 2031		18,000			18,487
Greenwich Capital Commercial Funding Corp., Series 2005-GG5, Class A-4-1, 5.243% 2037		15,000			14,978
First Horizon Alternative Mortgage Securities Trust, Series 2005-FA8, Class I-A-14, 5.50% 2035		13,339			13,315
Dexia Municipal Agency 3.50% 2009		€10,076			13,124
First Horizon Mortgage Pass-Through Trust, Series 2003-5, Class II-A-2, 5.00% 2018	$	11,951			11,737
DLJ Commercial Mortgage Corp., Series 1999-CG1, Class A-1B, 6.46% 2032		10,000			10,200
Residential Funding Mortgage Securities I, Inc., Series 2004-SA1, Class A-II, 4.319% 20341		10,090			9,886
Washington Mutual Securities Corp., Series 2005-AR1, Class A-1-A, 5.61% 20351		7,495			7,506
Washington Mutual Securities Corp., WMALT Series 2005-1, Class 6-A-1, 6.50% 2035		1,469			1,495
American General Mortgage Loan Trust, Series 2006-1, Class A-5, 5.75% 20352		8,500			8,488
DLJ Mortgage Acceptance Corp., Series 1998-CF1, Class A-1B, 6.41% 2031		8,261			8,317
Hypothekenbank in Essen AG 5.25% 2008		€6,000			8,021
Morgan Stanley Capital I Trust, Series 2005-HQ7, Class A-2, 5.203% 20421	$	7,875			7,865
Rheinische Hypothekenbank Eurobond 4.25% 2008		€5,000			6,629
Merrill Lynch Mortgage Trust, Series 2004-MKB1, Class A-2, 4.353% 2042	$	6,675			6,533
Bank of America, NA and First Union National Bank Commercial Mortgage Trust, Series 2001-3, Class A-1, 4.89% 2037		6,569			6,522
CS First Boston Mortgage Acceptance Corp., Series 2004-7, Class IV-A-1, 4.50% 2019		6,662			6,389
First Union National Bank Commercial Mortgage Trust, Series 2000-C1, Class A-1, 7.739% 2032		3,209			3,246
First Union National Bank Commercial Mortgage Trust, Series 2001-C4, Class A-1, 5.673% 2033		2,283			2,295
Hilton Hotel Pool Trust, Series 2000-HLTA, Class F, 7.75% 20152		5,000			5,165
RAAC Mortgage Loan Asset-backed Trust, Series 2004-SP3, Class A-I-5, 4.89% 2032		5,000			4,736
Specialty Underwriting and Residential Finance Trust, Series 2004-AA1, Class I-A1, 5.00% 2034		3,047			2,989
Ocwen Residential MBS Corp., Series 1998-R1, Class AWAC, 5.487% 20401,2		2,070			1,993
SACO I Trust, Series 2005-2, Class A, interest only, 4.50% 20071,2		24,546			681
SACO I Trust, Series 2005-1, Class A, interest only, 4.50% 20071,2		16,489			339
SACO I Trust, Series 2005-3, Class A, interest only, 6.00% 20352		29,359			919
GS Mortgage Securities Corp., Series 1998-2, Class M, 7.75% 20272		571			592
Financial Asset Securitization, Inc., Series 1997-NAM1, Class B-1, 7.75% 2027		416			415
First Boston Mortgage Securities Corp., Series D, principal only, 0% 2017		105			84
First Boston Mortgage Securities Corp., Series D, interest only, 10.965% 2017		105			26
					5,704,798
U.S. GOVERNMENT & GOVERNMENT AGENCY BONDS & NOTES — 10.93%
U.S. Treasury 3.125% 2007		150			149
U.S. Treasury 3.625% 2007		96,945			96,301
U.S. Treasury 3.375% 20079		63,719			63,635
U.S. Treasury 6.25% 2007		143,385			143,597
U.S. Treasury 3.375% 2008		10,500			10,231
U.S. Treasury 3.625% 20089		825			834
U.S. Treasury 3.625% 2009		25,000			24,340
U.S. Treasury 5.50% 20094		5,510			5,602
U.S. Treasury 0.875% 20109		21,795			20,669
U.S. Treasury 6.50% 2010		40,000			42,031
U.S. Treasury 2.375% 20119		18,158			18,089
U.S. Treasury 3.50% 20119		81,206			84,546
U.S. Treasury 4.25% 2011		30,000			29,510
U.S. Treasury 4.50% 2011		108,000			107,055
U.S. Treasury 4.50% 2011		275			273
U.S. Treasury 4.875% 2011		23,850			24,020
U.S. Treasury 5.00% 2011		25,000			25,316
U.S. Treasury 4.875% 2012		56,335			56,863
U.S. Treasury 10.375% 2012		24,500			25,595
U.S. Treasury 3.625% 2013		100,000			94,250
U.S. Treasury 4.25% 2013		793,650			773,936
U.S. Treasury 12.00% 2013		10,000			11,094
U.S. Treasury 2.00% 20149		54,254			52,713
U.S. Treasury 4.00% 2014		275			263
U.S. Treasury 4.25% 2014		60,000			58,256
U.S. Treasury 11.25% 2015		90,000			129,333
U.S. Treasury 4.50% 2016		146,495			144,207
U.S. Treasury 9.25% 2016		10,000			13,327
U.S. Treasury 8.875% 2017		80,000			107,050
U.S. Treasury Principal Strip 0% 2018		31,220			18,106
U.S. Treasury 8.00% 2021		200			265
U.S. Treasury 6.875% 2025		129,700			160,544
U.S. Treasury 3.875% 20299		6,786			8,560
U.S. Treasury 3.375% 20329		882			1,067
U.S. Treasury 4.50% 2036		76,975			73,235
Fannie Mae 4.25% 2007		210,731			209,610
Fannie Mae 4.75% 2007		65,210			65,001
Fannie Mae 5.25% 2007		103,500			103,485
Fannie Mae 5.25% 2012		50,000			50,286
Federal Home Loan Bank 3.70% 2007		35,280			34,937
Federal Home Loan Bank 4.625% 2007		25,550			25,460
Federal Home Loan Bank 5.625% 2016		17,000			17,503
Freddie Mac 4.125% 2009		25,000			24,469
Freddie Mac 4.125% 2010		13,250			12,905
Freddie Mac 5.25% 2011		20,000			20,235
Freddie Mac 6.25% 2012		15,000			15,018
Federal Agricultural Mortgage Corp. 4.25% 2008		17,000			16,782
Federal Agricultural Mortgage Corp. 4.875% 20112		15,000			14,945
Federal Agricultural Mortgage Corp. 5.50% 20112		10,000			10,117
United States Government-Guaranteed Certificates of Participation, Overseas Private Investment Corp., Series 2000-044-A, 3.74% 20153		9,790			9,308
United States Agency for International Development, Republic of Egypt 4.45% 2015		5,000			4,840
					3,059,763
NON-U.S. GOVERNMENT & GOVERNMENT AGENCY BONDS & NOTES — 6.63%
Japanese Government 0.50% 2007		¥10,511,900			88,346
Japanese Government 0.90% 2008		7,187,550			60,531
Japanese Government 1.80% 2010		487,350			4,201
Japanese Government 1.30% 2011		1,160,250			9,813
Japanese Government 1.50% 2014		3,150,950			26,426
Japanese Government 2.30% 2035		5,212,000			43,878
United Mexican States Government Global 10.375% 2009	$	9,700			10,718
United Mexican States Government, Series MI10, 9.50% 2014		MXP547,600			57,047
United Mexican States Government Global 11.375% 2016	$	3,750			5,409
United Mexican States Government, Series M20, 8.00% 2023		MXP153,800			14,867
United Mexican States Government, Series M20, 10.00% 2024		489,800			56,310
United Mexican States Government Global 7.50% 2033	$	6,705			7,929
United Mexican States Government Global 6.75% 2034		9,795			10,603
Israeli Government 7.50% 2014		ILS539,902			141,977
Israeli Government 6.50% 2016		66,360			16,724
Polish Government 5.75% 2010		PLN259,820			91,990
Polish Government 6.00% 2010		157,250			56,204
Singapore (Republic of) 3.125% 2011		S$ 94,525			61,929
Singapore (Republic of) 3.625% 2011		11,395			7,623
Singapore (Republic of) 3.75% 2016		105,325			72,727
German Government 4.50% 2009		€55,000			73,570
German Government 4.25% 2014		5,580			7,501
German Government 4.00% 2016		25,290			33,477
German Government 6.25% 2030		11,120			19,259
United Kingdom 4.50% 2007		£ 5,554			10,861
United Kingdom 5.00% 2008		1,380			2,697
United Kingdom 4.75% 2010		11,890			23,031
United Kingdom 4.75% 2015		21,303			41,599
United Kingdom 4.75% 2038		23,305			50,242
Swedish Government 5.00% 2009		SKr422,380			63,260
Swedish Government 5.25% 2011		311,885			48,073
Korean Government 5.00% 2011		KRW12,182,520			13,110
Korean Government 4.25% 2014		15,528,880			15,888
Korean Government 5.25% 2015		72,471,970			79,117
Canadian Government 4.25% 20269		C$64,829			78,733
Thai Government 4.125% 2009		THB1,325,000			36,593
Thai Government 5.25% 2013		100,000			2,844
Thai Government 5.00% 2014		735,810			20,493
Thai Government 5.40% 2016		378,000			10,672
French Government O.A.T. Eurobond Strip Principal 0% 2019		€14,000			11,146
French Government O.A.T. Eurobond 5.50% 2029		7,610			12,031
French Government O.A.T. Eurobond 4.75% 2035		26,150			38,082
Russian Federation 5.00%/7.50% 20303,5	$	45,695			51,807
Russian Federation 5.00%/7.50% 20302,3,5		145			164
Spanish Government 4.25% 2007		€34,030			45,030
Netherlands Government Eurobond 5.75% 2007		17,863			23,622
Netherlands Government Eurobond 5.25% 2008		6,000			8,069
Netherlands Government Eurobond 5.00% 2012		9,560			13,267
Aries Vermögensverwaltungs GmbH, Series C, 9.60% 2014	$	23,000			29,699
Export-Import Bank of China 4.875% 20152		20,000			19,344
Argentina (Republic of) 4.193% 20121,3		4,265			3,025
Argentina (Republic of) 5.83% 20333,7,9		ARS33,653			11,592
Argentina (Republic of) GDP-Linked 2035		53,810			2,093
Argentina (Republic of) 0.63% 20383,9		12,716			1,937
Hungarian Government 6.00% 2011		HUF2,995,150			14,928
Italian Government BTPS Eurobond 6.00% 2007		€10,354			13,896
Brazilian Treasury Bill 6.00% 20109		R$8,579			3,844
Brazil (Federal Republic of) Global 7.875% 2015	$	1,250			1,396
Brazil (Federal Republic of) Global 8.00% 20183		644			718
Brazil (Federal Republic of) Global 8.875% 2024		1,375			1,717
Brazil (Federal Republic of) Global 12.25% 2030		425			707
Brazil (Federal Republic of) Global 11.00% 2040		3,110			4,125
El Salvador (Republic of) 7.65% 20352		8,580			9,760
Banque Centrale de Tunisie 4.75% 2011		€3,000			3,995
Banque Centrale de Tunisie 7.375% 2012	$	4,500			4,896
Corporación Andina de Fomento 6.875% 2012		5,895			6,277
Corporación Andina de Fomento 5.125% 2015		2,000			1,928
State of Qatar 9.75% 2030		5,220			7,804
Panama (Republic of) Global 7.125% 2026		690			749
Panama (Republic of) Global 8.875% 2027		250			319
Panama (Republic of) Global 9.375% 2029		340			456
Panama (Republic of) Global 6.70% 20363		5,748			6,007
Columbia (Republic of) Global 8.25% 2014		2,500			2,850
Colombia (Republic of) Global 12.00% 2015		COP4,600,000			2,445
Egypt (Arab Republic of) Treasury Bill 0% 2007		EGP18,425			2,968
Egypt (Arab Republic of) Treasury Bill 0% 2007		6,175			1,079
Egypt (Arab Republic of) Treasury Bill 0% 2007		EGP1,825			318
Turkey (Republic of) 12.375% 2009	$	500			579
Turkey (Republic of) 15.00% 2010		TRY5,250			3,314
Peru (Republic of) 9.125% 2012	$	432			501
Peru (Republic of) 8.375% 2016		2,500			2,981
Peru (Republic of) Past Due Interest Eurobond 5.00% 20171,3		331			330
Indonesia (Republic of) 11.00% 2020		IDR10,000,000			1,143
Indonesia (Republic of) 12.80% 2021		11,890,000			1,561
Indonesia (Republic of) 12.90% 2022		2,562,000			338
Dominican Republic 9.50% 20112,3	$	2,344			2,530
Venezuela (Republic of) Global 8.50% 2014		245			278
Venezuela (Republic of) 9.25% 2027		780			996
Guatemala (Republic of) 10.25% 20112		1,000			1,184
					1,856,097
ASSET-BACKED OBLIGATIONS3— 6.02%
Drive Auto Receivables Trust, Series 2005-2, Class A-2, MBIA insured, 4.12% 20102		4,915			4,886
Drive Auto Receivables Trust, Series 2006-2, Class A-2, MBIA insured, 5.30% 20112		2,150			2,152
Drive Auto Receivables Trust, Series 2005-1, Class A-4, MBIA insured, 4.01% 2012		28,125			27,688
Drive Auto Receivables Trust, Series 2005-2, Class A-3, MBIA insured, 4.26% 20122		60,520			59,717
Drive Auto Receivables Trust, Series 2005-3, Class A-4, FSA insured, 5.09% 20132		17,500			17,473
Drive Auto Receivables Trust, Series 2006-1, Class A-4, FSA insured, 5.54% 20132		67,000			67,691
Drive Auto Receivables Trust, Series 2006-2, Class A-3, MBIA insured, 5.33% 20142		20,000			20,119
ARG Funding Corp., Series 2005-1, Class A-1, MBIA insured, 4.02% 20092		21,000			20,706
ARG Funding Corp., Series 2005-2, Class A-1, AMBAC insured, 4.54% 20092		51,820			51,385
ARG Funding Corp., Series 2005-1, Class A-3, MBIA insured, 4.29% 20112		55,200			53,827
ARG Funding Corp., Series 2005-2, Class A-4, AMBAC insured, 4.84% 20112		30,000			29,750
CPS Auto Receivables Trust, Series 2003-A, Class A-2, XLCA insured, 2.89% 20092		1,615			1,591
CPS Auto Receivables Trust, Series 2002-C, Class A-2, XLCA insured, 3.52% 20092		208			206
CPS Auto Receivables Trust, Series 2004-A, Class A-2, FSA insured, 3.87% 20102		6,488			6,401
CPS Auto Receivables Trust, Series 2004-D, Class A-2, XLCA insured, 3.86% 20112		13,051			12,859
CPS Auto Receivables Trust, Series 2006-C, Class A-3, XLCA insured, 5.14% 20112		16,300			16,309
CPS Auto Receivables Trust, Series 2005-B, Class A-2, FSA insured, 4.36% 20122		17,605			17,365
CPS Auto Receivables Trust, Series 2005-D, Class A-2, FSA insured, 5.06% 20122		7,600			7,596
CPS Auto Receivables Trust, Series 2006-A, Class 1-A-4, FSA insured, 5.33% 20122		10,000			10,047
CPS Auto Receivables Trust, Series 2006-B, Class A-4, MBIA insured, 5.81% 20122		23,000			23,467
CPS Auto Receivables Trust, Series 2006-C, Class A-4, XLCA insured, 5.14% 20132		26,200			26,252
CWABS, Inc., Series 2006-23, Class 2-A-3, 5.52% 20331		20,000			19,981
CWABS, Inc., Series 2004-12, Class 2-AV-2, 5.63% 20331		1,986			1,988
CWABS, Inc., Series 2004-15, Class 2-AV-2, 5.62% 20341		7,264			7,274
CWABS, Inc., Series 2005-11, Class AF-2, 4.657% 2036		22,666			22,415
CWABS, Inc., Series 2006-24, Class 2-A-3, 5.50% 20361		37,506			37,586
MBNA Credit Card Master Note Trust, Series 2002-1, Class B, 5.15% 2009		17,000			16,997
MBNA Credit Card Master Note Trust, Series 2005-6, Class A, 4.50% 2013		42,500			41,776
Triad Automobile Receivables Trust, Series 2006-C, Class A-3, AMBAC insured, 5.26% 2011		26,000			25,976
Triad Automobile Receivables Trust, Series 2005-A, Class A-4, AMBAC insured, 4.22% 2012		20,000			19,663
Triad Automobile Receivables Trust, Series 2006-C, Class A-4, AMBAC insured, 5.31% 2013		10,000			10,020
AmeriCredit Automobile Receivables Trust, Series 2003-A-M, Class A-4-A, MBIA insured, 3.10% 2009		786			773
AmeriCredit Automobile Receivables Trust, Series 2003-C-F, Class A-4, FSA insured, 3.48% 2010		8,790			8,735
AmeriCredit Automobile Receivables Trust, Series 2005-C-F, Class A-4, FSA insured, 4.63% 2012		16,950			16,759
AmeriCredit Automobile Receivables Trust, Series 2006-B-G, Class A-4, FGIC insured, 5.21% 2013		23,680			23,695
WFS Financial Owner Trust, Series 2003-1, Class A-4, 2.74% 2010		1,849			1,818
WFS Financial Owner Trust, Series 2004-1, Class C, 2.49% 2011		1,426			1,398
WFS Financial Owner Trust, Series 2004-1, Class A-4, 2.81% 2011		11,357			11,105
WFS Financial Owner Trust, Series 2005-1, Class A-4, 3.87% 2012		35,250			34,440
GS Auto Loan Trust, Series 2006-1, Class A-4, 5.38% 2014		20,000			20,153
GS Auto Loan Trust, Series 2006-1, Class A-4, 5.60% 2014		25,312			25,379
Vega ContainerVessel PLC, Series 2006-1, Class A, XLCA insured, 5.562% 20212		45,000			44,930
Long Beach Acceptance Auto Receivables Trust, Series 2005-B, Class A-4, FSA insured, 4.522% 2012		17,000			16,770
Long Beach Acceptance Auto Receivables Trust, Series 2006-B, Class A-4, FSA insured, 5.18% 2013		27,800			27,829
Vanderbilt Mortgage and Finance, Inc., Series 2002-B, Class A-3, 4.70% 2018		4,253			4,227
Vanderbilt Mortgage and Finance, Inc., Series 2002-C, Class A-4, 6.57% 2024		7,660			7,952
Vanderbilt Mortgage and Finance, Inc., Series 1999-B, Class I-A-6, 6.925% 2024		10,250			10,533
Vanderbilt Mortgage and Finance, Inc., Series 2000-C, Class A-4, 7.905% 2026		3,271			3,427
Vanderbilt Mortgage and Finance, Inc., Series 1997-C, Class II-A-1, 5.56% 20271		971			971
Vanderbilt Mortgage and Finance, Inc., Series 2000-D, Class A-4, 7.715% 2027		3,774			3,935
Vanderbilt Mortgage and Finance, Inc., Series 2000-C, Class A-5, 8.195% 2030		6,889			7,335
Vanderbilt Mortgage and Finance, Inc., Series 2001-C, Class M-1, 6.76% 2032		1,473			1,503
Vanderbilt Mortgage and Finance, Inc., Series 2002-C, Class M-1, 7.82% 2032		3,000			3,201
UPFC Auto Receivables Trust, Series 2006-B, Class A-2, AMBAC insured, 5.15% 2009		740			739
UPFC Auto Receivables Trust, Series 2005-A, Class A-3, AMBAC insured, 4.34% 2010		12,166			12,077
UPFC Auto Receivables Trust, Series 2005-B, Class A-3, XLCA insured, 4.98% 2011		20,000			19,922
Hertz Vehicle Financing LLC, Rental Car Asset-backed Notes, Series 2005-1, Class A-5, MBIA insured, 5.08% 20112		18,000			17,897
Hertz Vehicle Financing LLC, Rental Car Asset-backed Notes, Series 2005-2, Class A-6, AMBAC insured, 5.08% 20112		14,500			14,417
Residential Funding Mortgage Securities II, Inc., Series 2005-HI1, Class A-4, FGIC insured, 4.70% 2034		19,594			19,319
Residential Funding Mortgage Securities II, Inc., Series 2005-HS1, Class A-1-2, FGIC insured, 4.66% 2035		12,500			12,203
Drivetime Auto Owner Trust, Series 2004-C, Class A-3, XLCA insured, 3.493% 20102		3,782			3,748
Drivetime Auto Owner Trust, Series 2006-A, Class A-3, XLCA insured, 5.501% 20112		25,460			25,575
Capital Auto Receivables Asset Trust, Series 2004-2, Class A-4, 3.75% 2009		21,750			21,332
Capital Auto Receivables Asset Trust, Series 2005-SN1, Class B-2, 6.10% 20091		2,485			2,503
Capital Auto Receivables Asset Trust, Series 2006-SN1, Class C, 5.77% 20102		3,700			3,743
Spirit Master Funding LLC, Net-Lease Mortgage Notes, Series 2005-1, Class A-1, AMBAC insured, 5.05% 20232		28,152			27,079
Capital One Multi-asset Execution Trust, Series 2006-10, Class A, 5.15% 2014		25,830			25,919
CWHEQ Home Equity Loan Trust, Series 2006-S2, Class A-5, FGIC insured, 5.753% 2027		15,750			15,789
CWHEQ Home Equity Loan Trust, Series 2006-S4, Class A-6, AMBAC insured, 5.834% 2034		9,650			9,700
Chase Issuance Trust, Series 2005-7, Class A, 4.55% 2013		17,500			17,188
Chase Issuance Trust, Series 2006-4, Class C, 5.64% 20141		8,000			8,004
Prestige Auto Receivables Trust, Series 2005-1A, Class A-2, FSA insured, 4.37% 20122		10,000			9,903
Prestige Auto Receivables Trust, Series 2006-1A, Class A-2, FSA insured, 5.25% 20132		15,000			15,012
Residential Asset Securities Corp. Trust, Series 2001-KS3, Class A-I-6, 5.96% 2031		17,055			17,044
Residential Asset Securities Corp. Trust, Series 2004-KS12, Class A-1-2, 5.58% 20351		7,427			7,430
Honda Auto Receivables Owner Trust, Series 2006-2, Class A-4, 5.28% 2012		24,250			24,379
Advanta Business Card Master Trust, Series 2006-A5, Class A, 5.10% 2012		20,000			19,981
Advanta Business Card Master Trust, Series 2005-A2, Class A-2, 5.48% 20131		2,000			1,998
Vanderbilt Acquisition Loan Trust, Series 2002-1, Class B-1, 7.30% 2021		10,148			10,196
Vanderbilt Acquisition Loan Trust, Series 2002-1, Class A-4, 6.57% 2027		8,290			8,539
Vanderbilt Acquisition Loan Trust, Series 2002-1, Class A-5, 7.12% 2032		3,000			3,189
Bear Stearns Asset-backed Securities I Trust, Series 2004-HE11, Class I-A-2, 5.65% 20331		198			198
Bear Stearns Asset-backed Securities I Trust, Series 2005-CL1, Class A-1, 5.85% 20341		20,534			20,614
Morgan Stanley ABS Capital I, Inc., Series 2004-NC3, Class M-1, 5.88% 20341		18,822			18,878
Green Tree Financial Corp., Series 1995-3, Class B-2, 8.10% 20256		3,991			1,348
Green Tree Financial Corp., Series 1996-10, Class A-6, 7.30% 2028		3,332			3,430
Green Tree Financial Corp., Series 1997-6, Class A-7, 7.14% 2029		7,526			7,798
Green Tree Recreational, Equipment & Consumer Trust, Series 1997-D, 7.25% 2029		3,972			3,653
Green Tree Financial Corp., Series 1997-6, Class B-2, 7.75% 20296		3,051			—
Green Tree Financial Corp., Series 1998-4, Class B-2, 8.11% 20306		8,028			80
Conseco Finance Home Equity Loan Trust, Series 2002-B, Class M-1, 7.10% 20331		2,551			2,568
Consumer Credit Reference Index Securities Program Trust, Series 2002-1A, Class A, 7.365% 20071,2		10,158			10,194
Consumer Credit Reference Index Securities Program Trust, Series 2002-2A, Class FX, 10.421% 20072		8,250			8,315
AEP Texas Central Transitioning Funding II LLC, Senior Secured Transition Bonds, Series A, Class A-3, 5.09% 2015		16,545			16,364
Wachovia Auto Loan Owner Trust, Series 2006-1, Class A-4, 5.08% 20122		10,000			9,989
Wachovia Auto Loan Owner Trust, Series 2006-1, Class B, 5.15% 20122		5,000			4,991
Providian Gateway Master Trust, Series 2004-DA, Class A, 3.35% 20112		15,000			14,791
CNL Funding, Series 2000-AA, Class A-2, MBIA insured, 8.044% 20172		13,800			14,508
Cendant Timeshare Receivables Funding, LLC, Series 2005-1, Class A-1, FGIC insured, 4.67% 20172		14,558			14,398
PECO Energy Transition Trust, Series 1999-A, Class A-7, 6.13% 2009		14,250			14,379
American Express Credit Account Master Trust, Series 2005-3, Class B, 5.49% 20111		7,000			7,004
American Express Credit Account Master Trust, Series 2006-3, Class C, 5.63% 20141,2		6,000			5,997
New Century Home Equity Loan Trust, Series 2001-NC2, Class M-1, 6.58% 20311		1,513			1,515
New Century Home Equity Loan Trust, Series 2004-A, Class A-II-5, FGIC insured, 5.25% 2034		11,000			10,924
First Investors Auto Owner Trust, Series 2003-A, Class A, MBIA insured, 2.58% 20112		5,750			5,648
First Investors Auto Owner Trust, Series 2005-A, Class A-2, MBIA insured, 4.23% 20122		6,791			6,716
Franklin Auto Trust, Series 2006-1, Class A-4, 5.03% 2014		10,000			9,981
Franklin Auto Trust, Series 2006-1, Class B, 5.14% 2014		2,000			1,993
MASTR Asset-backed Securities Trust, Series 2006-AB1, Class A-4, 5.719% 2036		11,500			11,374
Lehman ABS Manufactured Housing Contract Trust, Series 2001-B, Class A-3, 4.35% 2014		3,327			3,177
Lehman ABS Manufactured Housing Contract Trust, Series 2001-B, Class A-4, 5.27% 2018		1,706			1,683
Lehman ABS Manufactured Housing Contract Trust, Series 2001-B, Class A-5, 5.873% 2022		5,602			5,614
Providian Master Note Trust, Series 2005-A1A, Class A, 5.41% 20121,2		10,000			10,008
Nordstrom Credit Card Master Note Trust, Series 2002-1, Class B, 6.05% 20101,2		8,000			8,014
PG&E Energy Recovery Funding LLC, Series 2005-1, Class A-2, 3.87% 2011		7,552			7,430
Ford Credit Auto Owner Trust, Series 2006-B, Class B, 5.43% 2012		7,333			7,364
Discover Card Master Trust I, Series 1996-4, Class B, 5.90% 20131		7,000			7,119
MBNA Master Credit Card Trust II, Series 1999-B, Class A, 5.90% 2011		3,000			3,055
MBNA Master Credit Card Trust II, Series 1999-B, Class B, 6.20% 2011		3,750			3,834
First USA Credit Card Master Trust, Series 1997-4, Class C, 6.361% 20101,2		6,630			6,642
Home Equity Asset Trust, Series 2004-7, Class M-1, 5.97% 20351		6,500			6,573
ACLC Business Loan Receivables Trust, Series 2002-1, Class A-2, 7.462% 20222		5,470			5,525
GMAC Mortgage Loan Trust, Series 2006-HE3, Class A-5, FGIC insured, 5.809% 20361		5,000			5,037
Chase Credit Card Owner Trust, Series 2003-6, Class B, 5.70% 20111		5,000			5,023
PP&L Transition Bond Co. LLC, Series 1999-1, Class A-7, 7.05% 2009		4,968			4,999
Origen Manufactured Housing Contract Trust, Series 2004-B, Class M-1, 5.73% 2035		2,500			2,432
Origen Manufactured Housing Contract Trust, Series 2004-B, Class M-2, 6.51% 2035		2,000			2,019
PCR Auto Receivables Trust, Series 2004-1, Class A-2, XLCA insured, 3.995% 20102		3,853			3,854
West Penn Funding LLC, Series 1999-A, Class A-4, 6.98% 2008		3,581			3,629
GreenPoint Credit Manufactured Housing Contract Trust, Series 2000-7, Class A-1, MBIA insured, 5.64% 20221		3,582			3,593
Credit-Based Asset Servicing and Securitization LLC, Series 2005-CB4, Class AF-4, 5.028% 20351		3,490			3,430
Countryplace Manufactured Housing Contract, Series 2005-1, Class A-2, AMBAC insured, 4.42% 20352		3,400			3,353
SLM Student Loan Trust, Series 2003-10, Class A-4, 5.15% 20392		£1,160			2,247
Irwin Home Equity, Series 2006-2, Class 2-A3, FGIC insured, 6.40% 20361,2	$	2,000			2,051
IndyMac Home Equity Mortgage Loan Asset-backed Trust, Series SPMD 2001-A, Class AF-6, 6.537% 2030		1,642			1,638
Chase Auto Owner Trust, Series 2006-B, Class B, 5.24% 2014		1,500			1,497
Specialty Underwriting and Residential Finance Trust, Series 2004-BC4, Class A-2B, 5.66% 20351		1,432			1,432
Capital One Master Trust, Series 2002-1A, Class B, 5.95% 20111		1,000			1,010
Capital One Auto Finance Trust, Series 2004-B, Class A-3, MBIA insured, 2.96% 2009		889			888
NPF XII, Inc., Series 1999-3, Class B, 2.763% 20031,2,6		3,000			0
NPF XII, Inc., Series 2001-1A, Class A, 2.30% 20041,2,6		7,000			193
NPF XII, Inc., Series 2001-3, Class A, 5.52% 20072,6		16,000			440
Option One Mortgage Loan Trust, Series 2002-1, Class M-1, 6.475% 20321		581			581
Harley-Davidson Motorcycle Trust, Series 2002-2, Class B, 2.84% 2010		577			564
New South Motor Vehicle Trust, Series 2002-A, Class A-3, AMBAC insured, 3.03% 2010		442			438
Continental Auto Receivables Owner Trust, Series 2000-B, Class CTFS, MBIA insured, 7.11% 20072		47			47
					1,686,937
MUNICIPALS — 0.62%
State of California, Golden State Tobacco Securitization Corp., Tobacco Settlement Asset-backed Bonds, Series 2003-A-1, 6.25% 2033	$	64,975		$	72,639
State of Wisconsin, Badger Tobacco Asset Securitization Corp., Tobacco Settlement Asset-backed Bonds, 6.125% 2027		26,905			29,067
State of South Dakota, Educational Enhancement Funding Corp., Tobacco Settlement Asset-backed Bonds, Series 2002-A, Class A, 6.72% 2025		27,136			27,072
State of Louisiana, Tobacco Settlement Financing Corp., Tobacco Settlement Asset-backed Bonds, Series 2001-A, Class A, 6.36% 2025		18,067			18,050
State of California, Los Angeles County Metropolitan Transportation Authority, General Revenue Refunding Bonds (Workers’ Compensation Funding Program), Series 2003, AMBAC insured, 3.83% 2008		5,000			4,902
State of California, Los Angeles County Metropolitan Transportation Authority, General Revenue Refunding Bonds (Workers’ Compensation Funding Program), Series 2003, AMBAC insured, 4.56% 2010		5,000			4,905
State of Washington, Tobacco Settlement Authority, Asset-backed Bonds, Series 2002, 6.50% 2026		6,585			7,258
California Maritime Infrastructure Authority, Taxable Lease Revenue Bonds (San Diego Unified Port District-South Bay Plant Acquisition), Series 1999, 6.63% 20092		6,855			6,901
State of New York, Housing Finance Agency, State Personal Income Tax Revenue Bonds
(Economic Development and Housing), Series B, 2.88% 2007		2,000			1,990
State of New York, Housing Finance Agency, State Personal Income Tax Revenue Bonds
(Economic Development and Housing), Series B, 3.09% 2007		2,200			2,166
					174,950
Total bonds & notes (cost: $24,331,753,000)					24,669,630
Convertible securities — 0.37%		Shares or principal  amount
INFORMATION TECHNOLOGY — 0.10%
Conexant Systems, Inc. 4.00% convertible notes 2007	$	14,700,000			14,718
SCI Systems, Inc. 3.00% convertible debentures 2007	$	12,000,000			11,985
					26,703
TELECOMMUNICATION SERVICES — 0.07%
American Tower Corp. 5.00% convertible debentures 2010	$	21,000,000			21,026
CONSUMER DISCRETIONARY — 0.07%
Amazon.com, Inc. 6.875% PEACS convertible notes 2010		€9,005,000			12,089
Ford Motor Co. Capital Trust II 6.50% cumulative convertible trust preferred 2032		228,100			7,801
					19,890
UTILITIES — 0.06%
AES Trust VII 6.00% convertible preferred 2008		351,450			17,397
FINANCIALS — 0.02%
Equity Office Properties Trust, Series B, 5.25% convertible preferred 2008		70,400			4,737
MISCELLANEOUS — 0.05%
Other convertible securities in initial period of acquisition					12,640
Total convertible securities (cost: $89,079,000)					102,393
Preferred securities — 3.75%		Shares			Market value (000	)
FINANCIALS — 3.71%
Fuji JGB Investment LLC, Series A, 9.87% noncumulative preferred1,2		121,238,000		$	128,522
IBJ Preferred Capital Co. LLC, Series A, 8.79% noncumulative preferred1,2		52,000,000			54,410
HSBC Capital Funding LP, Series 1, 9.547% noncumulative step-up perpetual preferred1,2		85,750,000			96,683
HSBC Capital Funding LP, Series 2, 10.176% noncumulative step-up perpetual preferred1,2		25,000,000			37,044
HSBC Capital Funding LP 8.03% noncumulative preferred1		20,000,000			30,750
MUFG Capital Finance 1 Ltd. 6.346% noncumulative preferred1		105,720,000			107,570
Tokai Preferred Capital Co. LLC, Series A, 9.98% noncumulative preferred1,2		12,000,000			12,731
MUFG Capital Finance 2 Ltd. 4.85% noncumulative preferred1		4,650,000			6,000
Shinsei Finance II (Cayman) Ltd. 7.16% noncumulative preferred1,2		57,995,000			59,082
Fannie Mae, Series O, 7.00% preferred1,2		900,000			48,206
Fannie Mae, Series E, 5.10% preferred		150,000			6,787
BNP U.S. Funding LLC, Series A, 7.738% noncumulative preferred1,2		21,750,000			22,144
BNP Paribas Capital Trust 9.003% noncumulative trust preferred1,2		15,000,000			16,781
BNP Paribas 5.186% noncumulative1,2		12,000,000			11,540
Swire Pacific Capital Ltd. 8.84% cumulative guaranteed perpetual capital securities2		1,670,000			48,065
Wachovia Capital Trust III 5.80%1		45,000,000			45,413
Banco Santander Central Hispano, SA 6.80%2,10		1,600,000			41,200
Resona Preferred Global Securities (Cayman) Ltd. 7.191%1,2		33,925,000			35,454
National Bank of Canada, Series A, 8.35% exchangeable preferred depositary shares		1,200,000			31,548
ING Capital Funding Trust III 8.439% noncumulative preferred1		24,750,000			27,341
Chuo Mitsui Trust and Banking Co., Ltd. 5.506%1,2		24,970,000			23,889
RBS Capital Trust I 4.709% noncumulative trust preferred1		16,000,000			15,231
Royal Bank of Scotland Group PLC 6.625%1		4,700,000			6,567
Weingarten Realty Investors, Series D, 6.75% preferred 2008		495,420			12,569
Weingarten Realty Investors, Series E, 6.95% cumulative redeemable preferred depositary shares		250,000			6,435
SB Treasury Co. LLC, Series A, 9.40% noncumulative preferred1,2		17,638,000			18,571
Société Générale 7.85%1,2		17,705,000			17,839
Standard Chartered Capital Trust I 8.16%1		10,000,000			14,628
Freddie Mac, Series U, 5.90%		500,000			13,075
DBS Capital Funding Corp., Series A, 7.657% noncumulative guaranteed preference shares1,2		11,250,000			12,110
HVB Funding Trust VIII 7.055%1		7,400,000			10,847
HBOS Capital Funding LP, Series A, 6.461% noncumulative preferred1		3,000,000			6,192
New Plan Excel Realty Trust, Inc., Series D, 7.80% preferred cumulative step-up premium rate		112,500			6,019
Nationwide Health Properties, Inc., Series A, 7.677% preferred cumulative step-up premium rate		50,000			5,055
Westpac Capital Trust IV 5.256%1,2		4,500,000			4,285
					1,040,583
CONSUMER STAPLES — 0.00%
Great Atlantic & Pacific Tea Co., Inc. 9.375% QUIBS preferred 2039		18,500			475
CONSUMER DISCRETIONARY — 0.00%
Adelphia Communications Corp., Series B, 13.00% preferred 20098,10		50,565			0
TELECOMMUNICATION SERVICES — 0.00%
XO Holdings, Inc. 14.00% preferred 20097,8,10		24			0
MISCELLANEOUS — 0.04%
Other preferred securities in initial period of acquisition					9,987
Total preferred securities (cost: $973,016,000)					1,051,045
Common stocks — 0.32%		Shares			Market value (000	)
UTILITIES — 0.23%
Drax Group PLC		4,014,950		$	64,148
TELECOMMUNICATION SERVICES — 0.03%
Dobson Communications Corp., Class A10		1,051,359			9,157
XO Holdings, Inc.10		7,614			33
					9,190
INDUSTRIALS — 0.02%
DigitalGlobe Inc.2,8,10		3,984,039			3,984
Delta Air Lines, Inc.2,10		312,961			407
					4,391
INFORMATION TECHNOLOGY — 0.02%
ZiLOG, Inc.10,11		879,000			3,850
FINANCIALS — 0.01%
Beverly Hills Bancorp Inc.		446,000			3,697
HEALTH CARE — 0.00%
Clarent Hospital Corp.8,10,11		331,291			83
MISCELLANEOUS — 0.01%
Other common stocks in initial period of acquisition					2,615
Total common stocks (cost: $53,405,000)					87,974
Warrants — 0.00%
TELECOMMUNICATION SERVICES — 0.00%
XO Holdings, Inc., Series A, warrants, expire 201010		15,233			11
XO Holdings, Inc., Series B, warrants, expire 201010		11,424			5
XO Holdings, Inc., Series C, warrants, expire 201010		11,424			2
GT Group Telecom Inc., warrants, expire 20102,8,10		2,750			0
Total warrants (cost: $143,000)					18
		Principal amount			Market  value
Short-term securities — 6.44%		(000	)		(000	)
Federal Home Loan Bank 5.15%-5.195% due 1/10-3/28/2007	$	231,900		$	230,678
Variable Funding Capital Corp. 5.24%-5.27% due 1/5-1/16/20072		214,900			214,615
Abbott Laboratories 5.20%-5.24% due 1/16-2/8/20072		89,200			88,854
Abbott Laboratories 5.20%-5.205% due 3/13-3/15/20072,4		64,800			64,124
Hewlett-Packard Co. 5.28%-5.29% due 2/6-2/9/20072		148,500			147,658
Clipper Receivables Co., LLC 5.24%-5.28% due 1/23-2/5/20072		145,800			145,218
Three Pillars Funding, LLC 5.28%-5.32% due 1/16-1/24/20072		109,747			109,404
Three Pillars Funding, LLC 5.27% due 3/19/20072,4		35,775			35,375
CAFCO, LLC 5.24%-5.25% due 1/16-1/19/20072		90,800			90,569
Ciesco LLC 5.25% due 1/30/20072		50,000			49,783
Procter & Gamble International Funding S.C.A. 5.23%-5.26% due 1/8-2/9/20072		120,400			120,056
CIT Group, Inc. 5.26% due 1/24/20072		50,000			49,832
CIT Group, Inc. 5.25% due 2/15-2/23/20072,4		50,200			49,852
HSBC Finance Corp. 5.23% due 1/12/2007		63,000			62,890
Bank of America Corp. 5.25% due 2/21/2007		60,700			60,266
AT&T Inc. 5.32% due 1/2/20072		54,900			54,868
American General Finance Corp. 5.22% due 1/4/2007		50,000			49,971
FCAR Owner Trust I 5.27% due 1/9/2007		50,000			49,934
Johnson & Johnson 5.18% due 1/19/20072		39,500			39,392
Park Avenue Receivables Co., LLC 5.25% due 1/11/20072		32,031			31,979
Atlantic Industries 5.23% due 2/28/20072,4		30,000			29,750
Kimberly-Clark Worldwide Inc. 5.25% due 1/18/20072		18,000			17,953
Concentrate Manufacturing Co. of Ireland 5.20% due 1/22/20072		11,300			11,264
Total short-term securities (cost: $1,804,217,000)					1,804,285
Total investment securities (cost: $27,251,613,000)					27,715,345
Other assets less liabilities					292,455
Net assets				$	28,007,800

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

¹ Coupon rate may change periodically.

² Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration.

The total value of all such restricted securities was $6,559,882,000, which represented 23.42% of the net assets of the fund.

³ Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.

⁴ This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future.

⁵ Step bond; coupon rate will increase at a later date.

⁶ Scheduled interest and/or principal payment was not received.

⁷ Payment in kind; the issuer has the option of paying additional securities in lieu of cash.

⁸ Valued under fair value procedures adopted by authority of the board of directors. The total value of all such securities, including those in “Miscellaneous,”

was $24,582,000.

⁹ Index-linked bond whose principal amount moves with a government retail price index.

¹⁰Security did not produce income during the last 12 months.

¹¹Represents an affiliated company as defined under the Investment Company Act of 1940.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so you may lose money.

Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in each fund’s prospectus, which can be obtained from a financial adviser and should be read carefully before investing.

MFGEFP-908-0207-S6863

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INVESTMENT PORTFOLIO

To the Shareholders and Board of Directors of

The Bond Fund of America, Inc.:

We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements of The Bond Fund of America, Inc. (the “Fund”) as of December 31, 2006, and for the year then ended and have issued our report thereon dated February 12, 2007, which report and financial statements are included in Item 1 of this Certified Shareholder Report on Form N-CSR. Our audit also included the Fund’s investment portfolio (the “Schedule”) as of December 31, 2006, appearing in Item 6 of this Form N-CSR. This Schedule is the responsibility of the Fund’s management. Our responsibility is to express an opinion based on our audit. In our opinion, the Schedule referred to above, when considered in relation to the basic financial statements taken as a whole of the Fund referred to above, presents fairly, in all material respects, the information set forth therein.

Deloitte & Touche LLP

Costa Mesa, California

February 12, 2007

ITEM 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.

ITEM 8 - Portfolio Managers of Closed-End Management Investment Companies

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.

ITEM 9 - Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.

ITEM 10 - Submission of Matters to a Vote of Security Holders

There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s board of directors since the Registrant last submitted a proxy statement to its shareholders. The procedures are as follows. The Registrant has a nominating and governance committee comprised solely of persons who are not considered ‘‘interested persons’’ of the Registrant within the meaning of the Investment Company Act of 1940, as amended. The committee periodically reviews such issues as the Board’s composition, responsibilities, committees, compensation and other relevant issues, and recommends any appropriate changes to the full board of directors. While the committee normally is able to identify from its own resources an ample number of qualified candidates, it will consider shareholder suggestions of persons to be considered as nominees to fill future vacancies on the board. Such suggestions must be sent in writing to the nominating and governance committee of the Registrant, c/o the Registrant’s Secretary, and must be accompanied by complete biographical and occupational data on the prospective nominee, along with a written consent of the prospective nominee for consideration of his or her name by the nominating and governance committee.

ITEM 11 - Controls and Procedures

(a)	The Registrant’s Principal Executive Officer and Principal Financial Officer have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures (as such term is defined in Rule 30a-3 under the Investment Company Act of 1940), that such controls and procedures are adequate and reasonably designed to achieve the purposes described in paragraph (c) of such rule.
(b)	There were no changes in the Registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

ITEM 12 - Exhibits

(a)(1)	The Code of Ethics that is the subject of the disclosure required by Item 2 is attached as an exhibit hereto.
(a)(2)	The certifications required by Rule 30a-2 of the Investment Company Act of 1940, as amended, and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached as exhibits hereto.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

THE BOND FUND OF AMERICA, INC.

By /s/ Abner D. Goldstine

Abner D. Goldstine, President and

Principal Executive Officer

Date: March 9, 2007

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

By /s/ Abner D. Goldstine

Abner D. Goldstine, President and

Principal Executive Officer

Date: March 9, 2007

By /s/ Susi M. Silverman

Susi M. Silverman, Treasurer and

Principal Financial Officer

Date: March 9, 2007