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: 811-2444
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, 2004
Date of reporting period: June 30, 2004
Julie F. Williams
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071
(name and address of agent for service)
Copies to:
Michael Glazer, Esq.
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(R)]
The right choice for the long term(R)
The Bond Fund of America
[front cover - photo of a stack of papers on a desk near a gentleman's hand with
a pen writing on paper]
Semi-annual report for the six months ended June 30, 2004
The Bond Fund of AmericaSM 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 29 American Funds, the nation's third-largest mutual
fund family. For more than seven decades, 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.
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 THE MOST 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.
Here are the average annual total returns on a $1,000 investment with all
distributions reinvested for periods ended June 30, 2004:
CLASS A SHARES 1 YEAR 5 YEARS 10 YEARS
reflecting 3.75% maximum sales charge -0.37% +5.80% +6.86%
The fund's 30-day yield for Class A shares as of July 31, 2004, reflecting the
3.75% maximum sales charge and calculated in accordance with the Securities and
Exchange Commission formula, was 4.00%.
Results for other share classes can be found on page 64. Please see the inside
back cover for important information about other share classes.
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.
Investing for short periods makes losses more likely. Investments are not
FDIC-insured, nor are they deposits of or guaranteed by a bank or other entity.
Investing outside the United States is subject to additional risks, such as
currency fluctuations and differing securities regulations, which are detailed
in the fund's prospectus.
[photo: corner view of U.S. currency]
[photo: a gentleman's hands, one on a calculator, the other holding a pen, with
an open daily planner on a desk]
FELLOW SHAREHOLDERS:
During the first half of 2004, the U.S. bond market rallied, then retreated
later in the period as the employment picture improved and investors anticipated
a new era of rising interest rates.
For the six months ended June 30, 2004, The Bond Fund of America recorded a
total return of +0.3%. This was in line with the +0.2% return of the unmanaged
Lehman Brothers Aggregate Bond Index, a benchmark for the fund and the broader
bond market. In comparison, Lipper reported that the 211 corporate A-rated debt
funds it monitors posted an average return of -0.2% for the period. Results for
longer time periods are shown below.
Despite the weaker bond market, the fund continued to deliver a steady stream of
income for its shareholders. During the six-month period, shareholders received
dividends totaling 30 cents a share. This represents an income return of 2.3%
(4.6% annualized). Over the same time period, the net asset value of fund shares
declined 2.0%.
RESULTS AT A GLANCE
(assuming distributions reinvested or interest compounded)
AVERAGE ANNUAL TOTAL RETURNS
(for periods ended June 30, 2004)
1 year 5 years 10 years Lifetime*
The Bond Fund of America 3.5% 6.6% 7.3% 9.5%
Lehman Brothers Aggregate Bond Index (1) 0.3% 6.9% 7.4% 9.0%
Lipper Corporate A-Rated Debt Funds Average (2) 0.0% 6.1% 6.7% 8.9%
*Since May 28, 1974
(1) The Lehman Brothers Aggregate Bond Index began on January 1, 1976. From May
31, 1974, through December 31, 1975, the Lehman Brothers
Government/Corporate Bond Index was used. The indexes serve as proxies for
the broad U.S. investment-grade bond market and are unmanaged.
(2) Source: Lipper. Lipper averages do not include the effects of sales
charges.
BONDS AND THE ECONOMY
On June 30, the final day of this reporting period, the Federal Reserve Board
raised the federal funds rate a quarter point to 1.25%. It was the first rate
hike in four years and a likely harbinger of generally higher rates for
investors. How much higher and how soon rates rise remain a matter of much
debate among market professionals.
Early in the year, doubts about the sustainability of economic growth led to
lower yields and higher bond prices. (The price of a bond rises as yields
decline.) By mid-March, yields on the bellwether 10-year Treasury reached 3.68%,
a level close to the 45-year low last seen in June 2003. Shortly thereafter,
however, this trend reversed and yields climbed by more than a percentage point
as evidence of solid job growth and a strengthening economy increased the
likelihood of a continuing string of rate hikes by the Federal Reserve. The
10-year Treasury ended the reporting period at a yield of 4.58%.
For more than a year, the Federal Reserve has kept short-term rates at historic
lows in an attempt to stimulate sustainable economic growth. Going forward, the
size and timing of rate increases will likely depend on the rate of economic
growth and the pace of inflation as the economy expands.
RESPONDING TO RISING RATES
The Bond Fund of America has two primary objectives: high current income and
preservation of capital. The latter is a paramount consideration for the fund's
portfolio counselors during this cycle of rising rates and has prompted a more
defensive investment posture on our part.
Rising interest rates affect the value of all bonds to varying degrees. Bonds
with short maturities, for example, tend to hold more of their value when rates
are rising than do long-term bonds. During the reporting period, the fund's
portfolio counselors reduced the average maturity of portfolio holdings to 5.77
years at June 30 from 6.03 years at the start.
Overall, the mix of the types of securities held in the portfolio (see pie chart
on page 4 for details) changed little from our previous report. Rather than
shifting assets among sectors, counselors looked for investment opportunities in
all sectors of the bond market, guided by the highest convictions of the fund's
research analysts. Our analysts identified several attractive opportunities,
including select bonds issued by automobile finance companies, some insurance
bonds and certain types of mortgage-secured debt. Each security that goes into
the portfolio is carefully evaluated not just for the income it provides, but
also for its ability to retain value under rising rate conditions.
[photo: corner view of U.S. currency]
OUR FOCUS ON LONG-TERM VALUE
Additional interest rate increases in the months ahead could weigh further on
the fund's share price. Nonetheless, higher yields from new securities added to
the portfolio should help to buffer somewhat the decline in value and could lead
to higher income returns over time.
As always, we take a long-term view on every bond that goes into the fund's
portfolio. We encourage all shareholders to develop a similar long-term
perspective and not lose sight of their investment goals or the role that The
Bond Fund of America plays in helping to reach those goals.
We appreciate your continued confidence and support.
Cordially,
/s/ Paul G. Haaga, Jr. /s/ Abner D. Goldstine
Paul G. Haaga, Jr. Abner D. Goldstine
Chairman of the Board President
August 9, 2004
For current information about the fund, visit americanfunds.com.
INVESTMENT PORTFOLIO, June 30, 2004 unaudited
[begin pie chart]
Corporate bonds 51.7 %
U.S. Treasury notes & bonds 12.3
Cash & equivalents 3.6
Federal agency mortgage pass-through securities 7.9
Asset-backed securities 6.6
Governments & governmental bodies (Non-U.S.) 5.5
Commercial & other mortgage-backed securities 8.5
Federal agency notes & bonds 1.8
Municipal obligations 1.7
Equity-related securities 0.4
[end pie chart]
Principal amount Market
(000) or shares value (000)
BONDS, NOTES & PREFERRED STOCKS - 96.01%
COMMERCIAL BANKS - 8.29%
HSBC Capital Funding LP: (1)
8.03% noncumulative preferred (undated) Euro 20,000 29,337
Series 1, 9.547% noncumulative step-up perpetual preferred preferred (undated)(2) $ 78,000 95,315
Series 2, 10.176% noncumulative step-up perpetual preferred (undated)(2) 32,000 44,690
Household Finance Corp.:
5.75% 2007 10,000 10,511
7.875% 2007 32,000 35,377
4.125% 2008 1,000 987
6.40% 2008 10,000 10,767
4.75% 2009 20,000 20,132
6.375% 2011 10,250 10,957
6.75% 2011 31,500 34,471
6.375% 2012 4,250 4,513
7.00% 2012 10,000 11,063
Midland Bank 2.125% Eurodollar note (undated) (1) 15,000 12,712
HSBC Holdings PLC 5.25% 2012 10,000 9,950
HSBC Bank USA 4.625% 2014 (2) 4,000 3,731
Fuji JGB Investment LLC, Series A, 9.87% noncumulative preferred (undated) (1)(2) 71,025 80,410
IBJ Preferred Capital Co. LLC, Series A, 8.79% noncumulative preferred (undated)(1)(2) 57,000 62,700
Mizuho Financial Group (Cayman) Ltd.:
4.75% 2014 (1) Euro 7,475 9,135
5.79% 2014 (2) $ 21,000 20,681
SocGen Real Estate Co. LLC, Series A, 7.64% (undated) (1) (2) 79,250 87,547
Societe Generale 7.85% (undated) (1) (2) 17,705 19,498
HBOS Treasury Services PLC 3.75% 2008 (2) 34,750 34,261
Bank of Scotland 7.00% (undated) (1) (2) 25,000 27,324
HBOS PLC 5.375% (undated) (1) (2) 24,000 23,171
HBOS Capital Funding LP, Series A, 6.461% non-cumulative preferred (undated) (1) Lira 3,000 5,635
Halifax Building Society 8.75% 2006 2,500 4,810
Royal Bank of Scotland Group PLC:
8.375% 2007 6,500 12,573
5.00% 2014 $ 3,000 2,894
6.625% (undated) (1) Euro 4,700 6,361
Series 3 Preference Shares, 7.816% (undated) $ 18,000 19,169
National Westminster Bank PLC 7.75% (undated) (1) 17,000 18,844
RBS Capital Trust I noncumulative trust preferred 4.709%
(undated) (1) 18,550 17,133
Tokai Preferred Capital Co. LLC, Series A, 9.98% noncumulative
preferred (undated) (1) (2) 39,250 44,218
UFJ Finance Aruba AEC 6.75% 2013 30,655 31,753
J.P. Morgan Chase & Co.:
5.35% 2007 3,285 3,445
4.00% 2008 12,500 12,513
4.50% 2010 12,000 11,696
5.75% 2013 31,000 31,560
Abbey National PLC:
Series 1-B, 6.69% 2005 5,000 5,248
6.70% (undated) (1) 15,000 16,111
7.35% (undated) (1)(3) 28,000 29,988
BNP U.S. Funding LLC, Series A, 7.738% noncumulative preferred (undated) (1) (2) 21,750 24,185
BNP Paribas Capital Trust 9.003% noncumulative trust preferred (undated) (1)(2) 15,000 18,275
BNP Paribas 5.125% 2015 (2) 5,100 4,964
Standard Chartered Capital Trust I 8.16% (undated) (1) Euro 16,750 23,885
Standard Chartered Bank:
1.375% Eurodollar note (undated) (1) $ 15,000 11,794
2.07% (undated) (1) 5,000 3,937
NB Capital Corp., Series A, 8.35% exchangeable preferred depositary shares 1,200,000 shares 32,004
National Bank of Canada 1.313% (undated) (1) $ 5,000 4,056
Bank of America Corp.:
3.625% 2008 Euro 7,500 9,142
3.875% 2008 $ 2,000 1,998
4.375% 2010 10,000 9,760
4.875% 2012 2,000 1,952
5.25% 2015 5,000 4,831
BankAmerica Corp.:
Series I, 7.125% 2005 1,500 1,559
7.125% 2011 1,750 1,958
Development Bank of Singapore Ltd.: (2)
7.875% 2009 10,000 11,409
7.125% 2011 3,500 3,876
DBS Capital Funding Corp., Series A, 7.657% noncumulative guaranteed
preference shares (undated) (1) (2) 11,250 12,579
Bayer Hyop- und Vereinsbank AG 6.00% 2014 Euro 10,000 12,941
HVB Funding Trust III 9.00% 2031 (2) $ 7,000 8,314
HVB Funding Trust VIII 7.055% (undated) Euro 2,930 3,910
HVB Funding Trust I 8.741% 2031 (2) $ 1,000 1,157
Bayerische Landesbank, Series F, 2.50% 2006 26,000 25,871
SB Treasury Co. LLC, Series A, 9.40% noncumulative preferred (undated) (1) (2) 20,321 22,963
Wells Fargo & Co. 3.50% 2008 21,310 21,018
Canadian Imperial Bank of Commerce 1.313% Eurodollar note 2085 (1) 25,000 20,594
Barclays Bank PLC: (1) (2)
6.86% callable perpetual core tier one notes (undated) 9,790 10,151
7.375% (undated) 5,375 6,046
8.55% (undated) 3,500 4,151
BANK ONE CORP:
2.625% 2008 (3) 6,000 5,656
4.90% 2015 4,000 3,756
BANK ONE, Texas, NA 6.25% 2008 7,250 7,781
Kazkommerts International BV:
7.375% 2014 (1) (2) 2,250 2,115
7.875% 2014 (2) 15,500 14,570
Credit Suisse First Boston (USA), Inc. 6.50% 2012 15,000 16,143
Skandinaviska Enskilda Banken AB: (1)
4.958% (undated) (2) 2,050 1,920
7.50% (undated) 12,500 13,910
Woori Bank 5.75% 2014 (1) (2) 14,865 14,696
Comerica, Inc., Imperial Capital Trust I, Imperial Bancorp,
Series B, 9.98% 2026 10,200 12,004
AB Spintab 6.00% 2009 SKr 73,000 10,373
Unicredito Italiano SpA, Series B, 8.048% (undated) (1) Euro 7,000 10,104
Bank of Nova Scotia 1.313% Eurodollar note (undated) (1) $ 10,000 8,527
BCI U.S. Funding Trust I 8.01% noncumulative preferred (undated) (1) (2) 6,500 7,287
Lloyds Bank, Series 2, 1.50% (undated) (1) 8,000 6,921
Allied Irish Banks Ltd. 1.67% (undated) (1) 7,000 5,978
Wachovia Corp. 3.50% 2008 5,000 4,877
Industrial Bank of Korea 4.00% 2014 (1) (2) 5,000 4,683
Westpac Capital Trust IV 5.256% (undated) (1) (2) 4,500 4,154
Bergen Bank 1.295% (undated) (1) 5,000 4,075
Christiana Bank Og Kreditkasse 1.75% (undated) (1) 4,000 3,247
Zions Bancorporation 6.00% 2015 2,675 2,702
UnionBanCal Corp. 5.25% 2013 2,000 1,973
1,459,923
AUTOMOBILES - 5.03%
General Motors Acceptance Corp.:
7.50% 2005 40,000 41,795
6.125% 2007 5,000 5,221
6.15% 2007 7,500 7,837
5.625% 2009 15,000 14,986
5.75% 2010 (2) Euro 7,000 8,713
7.75% 2010 $ 100,000 108,680
6.875% 2011 80,350 82,499
7.25% 2011 17,000 17,865
6.875% 2012 34,100 34,742
7.00% 2012 14,500 14,928
8.00% 2031 15,000 15,412
General Motors Corp.:
7.20% 2011 5,500 5,770
7.25% 2013 Euro 9,000 11,870
8.375% 2033 $ 160 170
Series B, 5.25% convertible debentures 2032 525 12,973
Ford Motor Credit Co.:
6.875% 2006 46,000 48,267
6.75% 2008 Euro 3,750 4,890
5.625% 2008 $ 10,000 10,096
5.80% 2009 10,000 10,104
7.375% 2009 65,500 69,980
7.875% 2010 64,600 70,373
7.25% 2011 29,500 30,850
7.375% 2011 82,625 87,263
Ford Motor Co., Capital Trust II 6.50% cumulative convertible trust preferred 2032 351,600 shares 19,254
Ford Motor Co. 7.45% 2031 $ 9,180 8,775
DaimlerChrysler North America Holding Corp.:
7.75% 2005 18,462 19,323
6.40% 2006 19,000 20,006
4.05% 2008 34,750 34,104
4.75% 2008 4,800 4,844
7.20% 2009 5,000 5,449
8.00% 2010 15,000 16,879
7.75% 2011 4,000 4,476
7.30% 2012 19,750 21,588
6.50% 2013 16,750 17,203
887,185
INSURANCE - 4.53%
International Lease Finance Corp.:
Series P, 3.125% 2007 4,000 3,938
3.75% 2007 15,000 14,946
4.35% 2008 21,000 20,973
4.50% 2008 29,500 30,009
3.50% 2009 16,000 15,231
Series O, 4.55% 2009 20,600 20,546
4.75% 2009 18,000 18,018
5.875% 2013 9,700 9,962
AIG SunAmerica Global Financing VII 5.85% 2008 (2)(3) 16,750 17,825
American International Group, Inc. 4.25% 2013 3,500 3,247
ASIF Global Financing XXVIII 1.219% 2007 (1) (2) 2,000 2,000
Prudential Holdings, LLC, Series C, 8.695% 2023 (2) (4) 66,035 79,476
PRICOA Global Funding I: (2)
Series 2003-2, 3.90% 2008 7,500 7,371
Series 2004-4, 4.35% 2008 2,500 2,514
Prudential Financial, Inc., Series B, 4.75% 2014 5,500 5,136
Prudential Insurance Co. of America 6.375% 2006 (2) 4,000 4,248
Prudential Funding LLC 6.60% 2008 (2) 3,000 3,274
ReliaStar Financial Corp.:
8.625% 2005 5,000 5,176
8.00% 2006 23,160 25,581
6.50% 2008 6,016 6,475
ING Capital Funding Trust III 8.439% noncumulative preferred (undated) (1) 19,750 22,968
Ing Verzekeringen NV 6.25% 2021 (1) Euro 3,750 4,977
ING Bank NV 5.50% 2012 3,750 4,836
ING Security Life Institutional Funding 2.70% 2007 (2) $ 4,730 4,656
ACE INA Holdings Inc.:
5.875% 2014 31,310 31,735
8.875% 2029 2,450 3,081
ACE Ltd., Series C, preferred depositary shares 680,000 shares 17,898
ACE Capital Trust II 9.70% 2030 9,368 12,352
Allstate Financial Global Funding LLC: (2)
5.25% 2007 (3) $ 26,500 27,677
4.25% 2008 7,500 7,513
Allstate Life Global Funding Trust:
Series 2004-2, 1.35% 2007 (1) 3,000 2,999
Series 2004-1, 4.50% 2009 18,000 18,129
Monumental Global Funding Trust II: (2)
2001-B, Series B, 6.05% 2006 11,025 11,645
2002-A, Series A, 5.20% 2007 17,500 18,308
AEGON NV:
4.625% 2008 Euro 7,750 9,725
6.125% 2031 Lira 1,600 3,022
Transamerica Corp. 9.375% 2008 $ 7,500 8,713
Monumental Global Funding Ltd., Series 2001-N, 5.75% 2007 Lira 1,840 3,338
Mangrove Bay Pass Through Trust 6.102% 2033 (1) (2) (4) $ 30,670 30,358
XL Capital Finance (Europe) PLC 6.50% 2012 11,455 12,271
MetLife, Inc. 3.911% 2005 31,730 32,159
Metropolitan Life Global Funding I, Series 2004-2, 1.611% 2007 (1) (2) 1,500 1,502
Hartford Financial Services Group, Inc.:
2.375% 2006 2,000 1,968
4.70% 2007 14,250 14,613
4.625% 2013 5,000 4,738
4.75% 2014 5,000 4,715
Assurant, Inc.:
5.625% 2014 14,000 13,770
6.75% 2034 11,000 10,920
Jackson National Life Global Funding, Series 2002-1, 5.25% 2007 (2) 23,125 24,329
John Hancock Global Funding II: (2)
Series 2002-G, 5.00% 2007 5,000 5,201
Series 2004-A, 3.50% 2009 18,000 17,433
Principal Life Global Funding I 4.40% 2010 (2) 16,600 16,397
CNA Financial Corp.:
6.75% 2006 3,000 3,178
6.60% 2008 3,458 3,650
7.25% 2023 9,350 9,412
Genworth Financial, Inc.:
1.619% 2007 (1) 2,500 2,500
4.75% 2009 10,345 10,452
5.75% 2014 3,000 3,035
Nationwide Mutual Insurance Co.: (2)
7.875% 2033 8,000 9,117
6.60% 2034 2,000 1,903
Nationwide Life Insurance Co. 5.35% 2007 (2) 4,250 4,435
Travelers Property Casualty Corp.:
3.75% 2008 5,500 5,435
5.00% 2013 10,000 9,703
MassMutual Global Funding II, Series 2002-1, 3.50% 2010 (2) 12,000 11,389
United Energy Distribution Pty Ltd., AMBAC insured, 4.70% 2011 (2) 10,000 9,852
Lincoln National Corp. 7.00% 2018 7,625 8,522
Munich Re Finance BV 6.75% 2023 (1) Euro 3,670 4,940
797,415
DIVERSIFIED TELECOMMUNICATION SERVICES - 4.21%
Sprint Capital Corp.:
4.78% 2006 $ 27,000 27,536
6.00% 2007 14,500 15,194
6.375% 2009 21,565 22,863
7.625% 2011 54,855 60,721
8.375% 2012 12,625 14,531
6.90% 2019 42,275 42,625
6.875% 2028 6,810 6,565
British Telecommunications PLC: (1)
8.375% 2010 75,749 88,573
7.125% 2011 Euro 10,420 14,479
AT&T Corp.:
6.00% 2009 $ 28,680 27,344
8.05% 2011 (1) (3) 58,500 60,146
France Telecom: (1)
8.20% 2006 6,050 6,489
7.50% 2008 Euro 3,500 4,724
8.75% 2011 $ 58,300 67,647
Deutsche Telekom International Finance BV:
7.50% 2007 (1) Euro 3,500 4,717
3.875% 2008 $ 1,100 1,083
8.50% 2010 (1) 24,000 28,079
8.125% 2012 (1) Euro 3,910 5,789
9.25% 2032 (1) $ 7,750 10,243
Telecom Italia SpA:
Series A, 4.00% 2008 (2) $ 1,270 1,249
6.25% 2012 Euro 15,000 19,835
Series B, 5.25% 2013 (2) $ 23,300 22,592
Sogerim SA 7.00% 2011 Euro 1,400 1,936
Koninklijke KPN NV:
8.25% 2008 Lira 1,000 1,955
8.00% 2010 $ 35,945 41,672
Hellenic Exchangeable Finance SCA 2.00% exchangeable bonds 2005 Euro 22,000 29,381
Qwest Services Corp.: (2)
13.00% 2007 $ 5,334 6,107
13.50% 2010 8,491 9,913
14.00% 2014 5,451 6,528
Verizon Global Funding Corp.:
7.25% 2010 5,000 5,597
7.375% 2012 4,335 4,883
Verizon New York Inc., Series A, 6.875% 2012 5,250 5,637
Singapore Telecommunications Ltd.:
6.375% 2011 3,475 3,704
7.375% 2031 (2) 10,000 11,134
PCCW-HKT Capital Ltd. 7.75% 2011 (2) 12,375 13,774
NTELOS Inc. 9.00% convertible notes 2013 (2) (5) (6) 11,915 13,556
ALLTEL Corp. 7.00% 2012 10,000 11,032
Telefonica Europe BV 5.125% 2013 Euro 7,600 9,501
TELUS Corp. 8.00% 2011 $ 5,250 5,975
Cincinnati Bell Inc. 7.25% 2013 6,000 5,640
iPCS Escrow Co. 11.50% 2012 (2) 1,000 1,030
XO Communications, Inc. 14.00% preferred 2009 (7) (8) 24 shares -
GT Group Telecom Inc., units, 0%/13.25% 2010 (2) (5) (9) (10) (11) $ 2,753 -
741,979
WIRELESS TELECOMMUNICATION SERVICES - 2.91%
Verizon Wireless Capital LLC and Cellco Partnership 5.375% 2006 (3) 120,815 126,026
AT&T Wireless Services, Inc.:
7.875% 2011 (3) 15,355 17,489
8.125% 2012 (3) 61,385 71,076
8.75% 2031 4,440 5,429
Tritel PCS, Inc. 10.375% 2011 12,954 14,969
TeleCorp PCS, Inc. 10.625% 2010 1,000 1,129
American Tower Corp.:
9.375% 2009 (3) 49,410 52,992
5.00% convertible debentures 2010 21,000 20,737
Vodafone Group PLC:
4.25% 2009 Euro 7,000 8,579
7.75% 2010 $ 55,210 63,377
Dobson Communications Corp.:
Series F, 6.00% convertible preferred (2) 15,400 shares 1,578
13.00% senior exchangeable preferred 2009 11,704 8,193
10.875% 2010 $ 750 649
8.875% 2013 16,320 12,485
Crown Castle International Corp.:
10.75% 2011 5,000 5,625
7.50% 2013 4,475 4,475
Series B, 7.50% 2013 11,200 11,200
Nextel Communications, Inc.:
6.875% 2013 3,000 2,989
7.375% 2015 16,325 16,570
Centennial Cellular Corp. 10.75% 2008 13,348 13,882
Centennial Communications Corp., Centennial Cellular Operating
Co. LLC and Centennial Puerto Rico Operating Corp. 8.125% 2014 (2) 5,000 4,662
Nextel Partners, Inc.:
12.50% 2009 677 792
8.125% 2011 10,870 11,142
8.125% 2011 (2) 3,000 3,075
AirGate PCS, Inc. 9.375% 2009 (2) 9,167 9,052
SK Telecom Co., Ltd. 4.25% 2011 (2) 9,550 8,934
Triton PCS, Inc.:
8.75% 2011 2,000 1,660
9.375% 2011 6,500 5,590
Cellco Finance NV 12.75% 2005 3,500 3,771
Millicom International Cellular SA 10.00% 2013 (2) 1,500 1,530
Rogers Cantel Inc. 9.75% 2016 1,250 1,422
US Unwired Inc. 10.00% 2012 (2) 1,000 1,015
512,094
MEDIA - 2.85%
Tele-Communications, Inc.:
9.80% 2012 17,500 21,971
7.875% 2013 10,750 12,267
Comcast Cable Communications, Inc.:
8.375% 2007 7,000 7,828
6.875% 2009 7,194 7,859
Comcast Corp. 6.50% 2015 8,000 8,307
Lenfest Communications, Inc. 7.625% 2008 6,750 7,406
AOL Time Warner Inc.:
6.875% 2012 45,000 48,701
7.625% 2031 10,500 11,396
Liberty Media Corp.:
7.75% 2009 8,250 9,222
7.875% 2009 38,020 42,798
5.70% 2013 750 740
Viacom Inc.:
6.40% 2006 5,000 5,261
5.625% 2007 6,600 6,937
7.70% 2010 13,000 14,859
6.625% 2011 13,000 14,163
Clear Channel Communications, Inc.:
6.00% 2006 3,550 3,728
6.625% 2008 5,375 5,760
7.65% 2010 10,000 11,280
Chancellor Media Corp. of Los Angeles 8.00% 2008 10,000 11,363
Univision Communications Inc. 7.85% 2011 21,950 25,348
Antenna TV SA:
9.00% 2007 4,799 4,877
9.75% 2008 Euro 15,000 17,930
Charter Communications Operating, LLC and Charter Communications
Operating Capital Corp. 8.00% 2012 (2) $ 8,125 7,902
Charter Communications Holdings, LLC and Charter Communications Holdings Capital Corp.:
10.75% 2009 1,000 845
10.25% 2010 (2) 5,000 5,063
9.92% 2011 1,700 1,352
CCO Holdings, LLC and CCO Holdings Capital Corp.
8.75% 2013 (2) 4,000 3,850
News America Holdings Inc.:
6.625% 2008 12,900 13,962
8.625% 2014 A$ 5,150 3,483
Young Broadcasting Inc.:
8.50% 2008 (2) $ 3,500 3,701
10.00% 2011 12,317 12,594
Cinemark USA, Inc. 9.00% 2013 9,925 10,880
Cinemark, Inc. 0%/9.75% 2014 (2) (9) 8,000 5,260
Cox Communications, Inc.:
7.75% 2010 5,000 5,675
4.625% 2013 10,000 9,247
Telenet Group Holding NV 0%/11.50% 2014 (2) (9) 22,300 14,272
AMC Entertainment Inc. 8.00% 2014 (2) 14,175 13,608
Hollinger Participation Trust 12.125% 2010 (1) (2) (8) 9,451 11,058
Cox Radio, Inc.:
6.375% 2005 8,000 8,203
6.625% 2006 1,965 2,070
Century Communications Corp. 0% 2003 (12) 5,000 4,763
Adelphia Communications Corp.:
10.25% 2006 (10) 3,500 3,483
Series B, 13.00% preferred 2009 (7) 50,565 shares 721
FrontierVision 11.00% 2006 (10) $ 700 858
Kabel Deutschland GmbH 10.625% 2014 (2) 9,025 9,318
Regal Cinemas Corp., Series B, 9.375% 2012 7,250 8,483
Gannett Co., Inc. 4.95% 2005 8,000 8,146
RBS Participacoes SA 11.00% 2007 (2) 7,250 6,344
NTL Cable PLC 8.75% 2014 (1) (2) 5,375 5,536
Radio One, Inc., Series B, 8.875% 2011 4,000 4,385
Carmike Cinemas, Inc. 7.50% 2014 (2) 4,200 4,032
DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. 8.375% 2013 2,300 2,556
LBI Media, Inc. 10.125% 2012 2,250 2,520
Videotron Ltee 6.875% 2014 2,375 2,322
NextMedia Operating, Inc. 10.75% 2011 1,750 1,962
Globo Comunicacoes e Participacoes Ltda., Series B: (10)
10.50% 2006 (2) 1,990 1,164
10.50% 2006 690 404
Atlantic Broadband Finance, LLC and Atlantic Broadband Finance, Inc. 9.375% 2014 (2) 1,300 1,235
Reader's Digest Association, Inc. 6.50% 2011 1,000 981
502,239
ELECTRIC UTILITIES - 2.30%
Edison Mission Energy:
10.00% 2008 5,200 5,577
7.73% 2009 9,375 9,164
9.875% 2011 34,160 35,783
Homer City Funding LLC 8.734% 2026 (4) 20,189 21,400
Midwest Generation, LLC, Series B, 8.56% 2016 (4) 8,000 7,885
Midwest Generation, LLC and Midwest Finance Corp. 8.75% 2034 (2) 7,600 7,714
Mission Energy Holding Co. 13.50% 2008 925 1,039
Israel Electric Corp. Ltd.: (2)
7.75% 2009 17,000 18,759
7.95% 2011 3,250 3,638
7.70% 2018 8,500 9,191
7.875% 2026 15,000 15,792
7.75% 2027 15,545 15,989
8.10% 2096 12,000 11,725
Exelon Generation Co., LLC 6.95% 2011 22,975 25,191
Commonwealth Edison Co.:
Series 99, 3.70% 2008 7,125 7,051
First Mortgage Bonds, Series 102, 4.74% 2010 12,500 12,530
Series 101, 4.70% 2015 3,000 2,827
PECO Energy Co., First and Refunding Mortgage Bonds:
3.50% 2008 5,000 4,910
4.75% 2012 3,900 3,811
Exelon Corp. 6.75% 2011 6,200 6,752
Alabama Power Co.:
Series U, 2.65% 2006 (3) 20,500 20,419
Series R, 4.70% 2010 2,250 2,244
Southern Power Co., Series B, 6.25% 2012 2,500 2,630
SP PowerAssets Ltd.: (2)
3.80% 2008 10,000 9,794
5.00% 2013 8,000 7,804
Cilcorp Inc.:
8.70% 2009 1,000 1,171
9.375% 2029 12,265 16,162
Niagara Mohawk Power Corp., Series G, 7.75% 2008 14,460 16,292
Pacific Gas and Electric Co., First Mortgage Bonds:
4.20% 2011 13,000 12,396
6.05% 2034 4,000 3,775
PacifiCorp, First Mortgage Bonds:
4.30% 2008 3,060 3,063
5.45% 2013 9,775 9,935
Progress Energy Florida, Inc., First Mortgage Bonds 4.80% 2013 7,000 6,772
Progress Energy, Inc.:
5.85% 2008 2,500 2,619
7.10% 2011 2,900 3,182
Consolidated Edison Co. of New York, Inc.:
Series 2003-A, 3.625% 2008 6,000 5,884
Series B, 3.85% 2013 5,000 4,515
Series 2003-C, 5.10% 2033 1,000 866
Series 2003-A, 5.875% 2033 1,000 971
Oncor Electric Delivery Co. 6.375% 2012 10,700 11,469
Tri-State Generation and Transmission Assn., Inc., Pass Through Trust,
Series 2003-A, 6.04% 2018 (2) (4) 8,700 8,709
MidAmerican Energy Co. 5.125% 2013 7,500 7,466
E.ON International Finance BV 5.75% 2009 Euro 5,000 6,580
Red Electrica de Espana Finance BV 4.75% 2013 4,000 4,898
Korea East-West Power Co., Ltd. 4.875% 2011 (2) $ 5,000 4,837
Wisconsin Gas Co. 5.20% 2015 2,025 1,988
Enersis SA 7.375% 2014 (2) 2,000 1,972
405,141
INDUSTRIAL CONGLOMERATES - 1.76%
Hutchison Whampoa International Ltd.: (2)
7.00% 2011 33,125 35,062
6.50% 2013 47,200 47,328
6.25% 2014 10,000 9,715
General Electric Capital Corp., Series A:
5.00% 2007 21,500 22,341
5.375% 2007 13,250 13,908
7.25% 2007 Lira 1,030 1,961
3.50% 2008 $ 20,000 19,695
6.00% 2012 15,000 15,854
General Electric Co. 5.00% 2013 12,750 12,570
Tyco International Group SA:
6.125% 2008 14,500 15,441
6.125% 2009 12,500 13,284
6.375% 2011 46,765 49,820
6.00% 2013 1,750 1,802
Swire Pacific Capital Ltd. 8.84% cumulative guaranteed perpetual capital securities (2) 1,670,000 shares 44,756
Swire Pacific Offshore Financing Ltd. 9.33% cumulative guaranteed perpetual
preferred capital securities (2) 230,000 6,210
309,747
MULTI-UTILITIES & UNREGULATED POWER - 1.62%
Duke Capital Corp.:
4.37% 2009 $ 7,500 7,295
7.50% 2009 25,325 27,962
6.25% 2013 9,000 9,140
5.50% 2014 10,000 9,518
Duke Energy Corp. First and Refunding Mortgage Bonds 4.50% 2010 4,500 4,431
PSEG Power LLC:
3.75% 2009 6,825 6,537
7.75% 2011 14,975 16,982
5.00% 2014 15,000 14,018
Virginia Electric and Power Co.:
Series 2002-A, 5.375% 2007 14,140 14,749
Series 2003-A, 4.75% 2013 22,000 21,003
Dominion Resources, Inc., Series 2002-C, 5.70% 2012 (1) 1,000 1,019
AES Trust VII 6.00% convertible preferred 2008 351,450 shares 15,991
AES Corp.:
10.00% 2005 (2) (4) $ 562 578
9.50% 2009 4,677 5,022
9.375% 2010 4,803 5,145
Drax Group Ltd.: (1) (2)
Class A-1, 7.538% 2015 Lira 4,603 8,266
Class B, 7.02% 2025 3,894 5,933
Drax Group Ltd., Class A-2, unit, 9.02% 2015 (1) (2) (13) 5,293 12,385
Constellation Energy Group, Inc. 6.125% 2009 $ 10,500 11,136
Baltimore Gas and Electric Co. 5.20% 2033 3,000 2,585
Old Dominion Electric Cooperative, Series 2003-A, 5.676% 2028 (4) 13,500 13,455
Veolia Environnement 4.875% 2013 Euro 8,000 9,714
AES Gener SA 7.50% 2014 (2) $ 10,000 9,500
NGG Finance PLC 6.125% 2011 Euro 6,980 9,272
Dynegy Holdings Inc. 10.125% 2013 (2) $ 6,675 7,259
Nevada Power Co.:
Series I, 6.50% 2012 (2) 700 669
Series G, 9.00% 2013 3,600 3,933
Sierra Pacific Resources 8.625% 2014 (2) 900 882
RWE Finance BV 5.50% 2007 Euro 4,000 5,176
Southern California Gas Co., First Mortgage Bonds, Series II, 4.375% 2011 $ 5,000 4,898
Energy East Corp. 6.75% 2012 2,955 3,182
Equitable Resources, Inc. 5.15% 2018 2,500 2,368
284,629
REAL ESTATE - 1.46%
EOP Operating LP:
7.75% 2007 2,000 2,221
6.75% 2008 24,500 26,588
6.75% 2012 8,250 8,871
7.50% 2029 3,420 3,651
Equity Office Properties Trust, Series B, 5.25% convertible preferred 2008 70,400 shares 3,531
Kimco Realty Corp.:
Series B, 7.68% 2005 $ 4,250 4,523
Series C, 3.95% 2008 5,000 4,925
6.00% 2012 13,500 14,067
Price REIT, Inc. 7.50% 2006 2,760 3,027
Rouse Co.:
3.625% 2009 5,200 4,945
7.20% 2012 18,450 20,139
5.375% 2013 1,000 968
Irvine Co., Class A, 7.46% 2006 (2) (5) 15,000 15,820
Irvine Apartment Communities, LP 7.00% 2007 5,000 5,390
Hospitality Properties Trust:
7.00% 2008 1,000 1,068
6.75% 2013 19,370 20,142
United Dominion Realty Trust, Inc., Series E, 4.50% 2008 19,000 19,222
Developers Diversified Realty Corp. 3.875% 2009 19,500 18,651
Weingarten Realty Investors, Series A:
5.263% 2012 5,000 4,981
4.857% 2014 11,080 10,520
Colonial Realty LP:
6.15% 2013 10,000 10,177
6.25% 2014 5,000 5,006
Simon Property Group, LP 4.875% 2010 12,000 11,893
New Plan Excel Realty Trust, Inc., Series D, 7.80% preferred
cumulative step-up premium rate 112,500 shares 5,780
iStar Financial Inc.:
Series B, 4.875% 2009 $ 2,500 2,433
5.125% 2011 (2) 1,500 1,434
5.70% 2014 (2) 1,750 1,651
PLD International Finance LLC 4.375% 2011 Euro 4,150 4,926
Nationwide Health Properties, Inc., Series A, 7.677% preferred
cumulative step-up premium rate 50,000 shares 4,827
FelCor Lodging LP 9.00% 2011 (1) $ 4,500 4,669
ERP Operating LP:
4.75% 2009 2,225 2,230
6.625% 2012 2,000 2,164
Federal Realty Investment Trust 4.50% 2011 3,500 3,340
Host Marriott, LP:
Series G, 9.25% 2007 625 692
Series K, 7.125% 2013 2,000 1,970
Crescent Real Estate LP 7.50% 2007 1,190 1,211
257,653
PAPER & FOREST PRODUCTS - 1.38%
Weyerhaeuser Co.:
5.95% 2008 16,125 17,035
5.25% 2009 17,625 17,979
6.75% 2012 20,000 21,692
SCA Coordination Center NV 4.50% 2015 (2) 39,500 35,985
Scotia Pacific Co. LLC, Series B:
Class A-2, 7.11% 2028 (4) 27,100 23,035
Class A-3, 7.71% 2028 17,043 12,782
Georgia-Pacific Corp.:
7.50% 2006 4,800 5,112
8.125% 2011 7,000 7,770
9.50% 2011 1,850 2,183
7.70% 2015 1,900 2,019
8.00% 2024 (2) 5,000 5,025
8.625% 2025 5,000 5,312
Norske Skogindustrier ASA: (2)
7.625% 2011 13,210 14,604
6.125% 2015 8,370 8,271
7.125% 2033 4,100 4,163
International Paper Co.:
5.375% 2006 Euro 4,500 5,696
4.00% 2010 $ 15,000 14,325
Potlatch Corp. 10.00% 2011 8,950 9,979
UPM-Kymmene Corp. 6.125% 2012 Euro 7,500 9,859
Kappa Beheer BV 0%/12.50% 2009 (9) 6,000 7,811
MeadWestvaco Corp. 2.75% 2005 $ 5,180 5,164
Ainsworth Lumber Co. Ltd., 6.75% 2014 (2) 4,000 3,770
Pindo Deli Finance Mauritius Ltd. 10.25% 2002 (12) 6,000 1,605
Indah Kiat Finance Mauritius Ltd. 10.00% 2007 (10) 2,250 1,181
APP International Finance Co. BV 11.75% 2005 (10) 275 139
242,496
CONSUMER FINANCE - 1.31%
SLM Corp., Series A:
3.625% 2008 5,500 5,429
3.95% 2008 27,500 27,207
4.00% 2009 5,000 4,916
5.375% 2013 5,450 5,456
5.375% 2014 10,000 9,867
USA Education, Inc. 5.625% 2007 45,150 47,477
MBNA Global Capital Funding, Series B, 1.979% 2027 (1) 34,800 32,916
MBNA Capital A, Series A, 8.278% 2026 7,500 8,069
MBNA Europe Funding PLC 6.50% 2007 Euro 5,000 6,545
MBNA Corp., Series F, 7.50% 2012 1,200 1,362
Capital One Financial Corp:
7.25% 2006 $ 9,625 10,217
8.75% 2007 5,250 5,813
7.125% 2008 4,250 4,583
6.25% 2013 10,000 10,125
Capital One Bank:
6.875% 2006 2,000 2,110
5.75% 2010 11,500 11,834
Providian Financial Corp., Series A, 9.525% 2027 (2) 16,750 16,834
Advanta Capital Trust I, Series B, 8.99% 2026 12,500 11,187
American Express Credit Corp. 3.00% 2008 9,060 8,730
230,677
OIL & GAS - 1.29%
Pemex Finance Ltd.:
8.875% 2010 (4) 24,000 28,073
Series 1999-2, Class A-3, 10.61% 2017 (4) 11,700 15,883
Pemex Project Funding Master Trust 8.625% 2022 750 784
Ras Laffan Liquefied Natural Gas Co. Ltd.: (2) (4)
3.437% 2009 38,360 37,522
8.294% 2014 4,500 5,062
ConocoPhillips:
3.625% 2007 14,500 14,459
4.75% 2012 26,750 26,184
Premcor Refining Group Inc.:
6.125% 2011 3,000 3,000
7.75% 2012 3,875 4,040
9.50% 2013 7,625 8,826
6.75% 2014 3,000 2,985
Port Arthur Finance Corp. 12.50% 2009 (4) 1,326 1,538
El Paso Corp. 7.75% 2032 15,000 12,112
Reliance Industries Ltd. 10.25% 2097 (2) 8,750 9,874
Devon Financing Corp., ULC 6.875% 2011 8,500 9,267
ChevronTexaco Capital Co. 3.50% 2007 7,000 6,997
Western Oil Sands Inc. 8.375% 2012 5,255 5,728
OXYMAR 7.50% 2016 (2) 5,500 5,610
Petrozuata Finance, Inc., Series B, 8.22% 2017 (2) (4) 5,750 5,434
Newfield Exploration Co.:
7.625% 2011 2,500 2,725
8.375% 2012 2,150 2,344
Teekay Shipping Corp. 8.875% 2011 4,250 4,723
Williams Companies, Inc.:
8.625% 2010 750 829
7.125% 2011 500 510
7.875% 2021 2,000 1,935
Overseas Shipholding Group, Inc. 8.25% 2013 2,500 2,700
General Maritime Corp. 10.00% 2013 2,305 2,550
PETRONAS Capital Ltd. 7.00% 2012 (2) 2,250 2,458
PDVSA Finance Ltd., Series 1998-1B, 6.65% 2006 (4) 2,250 2,357
226,509
DIVERSIFIED FINANCIAL SERVICES - 1.04%
CIT Group Inc.:
4.125% 2006 25,000 25,438
5.75% 2007 20,500 21,620
7.375% 2007 12,500 13,684
4.00% 2008 14,000 13,895
3.375% 2009 5,000 4,753
6.875% 2009 (3) 31,000 34,101
7.75% 2012 (3) 26,875 30,695
AT&T Capital Corp., Series F, 6.60% 2005 11,750 12,062
Citigroup Inc.:
3.50% 2008 20,000 19,741
5.625% 2012 5,675 5,843
Principal Life Insurance Co. 3.20% 2009 2,000 1,908
183,740
HEALTH CARE PROVIDERS & SERVICES - 0.97%
HCA Inc.:
7.125% 2006 9,065 9,580
5.25% 2008 4,700 4,675
6.95% 2012 3,000 3,135
6.25% 2013 24,860 24,752
6.75% 2013 7,000 7,183
5.75% 2014 14,500 13,810
Columbia/HCA Healthcare Corp.:
6.91% 2005 14,410 14,841
7.00% 2007 1,160 1,235
8.85% 2007 5,990 6,561
8.70% 2010 1,750 1,986
7.69% 2025 5,000 4,971
HCA - The Healthcare Co. 8.75% 2010 2,725 3,115
UnitedHealth Group Inc.:
7.50% 2005 13,000 13,799
5.20% 2007 8,000 8,328
3.75% 2009 2,500 2,444
Humana Inc.:
7.25% 2006 5,000 5,362
6.30% 2018 12,000 11,895
Aetna Inc.:
7.375% 2006 4,930 5,257
7.875% 2011 4,635 5,353
Tenet Healthcare Corp. 9.875% 2014 (2) 7,000 7,158
Health Net, Inc. 8.375% 2011 4,000 4,683
Quintiles Transnational Corp. 10.00% 2013 3,500 3,482
Pharma Services Intermediate Holding Corp. 0%/11.50% 2014 (2) (9) 1,750 901
Triad Hospitals, Inc. 7.00% 2012 2,875 2,911
Team Health, Inc. 9.00% 2012 (2) 1,750 1,689
Concentra Operating Corp. 9.125% 2012 (2) 1,500 1,575
170,681
HOTELS, RESTAURANTS & LEISURE - 0.93%
Carnival Corp.:
3.75% 2007 8,500 8,410
6.15% 2008 17,663 18,816
Six Flags, Inc.:
9.50% 2009 3,375 3,485
8.875% 2010 11,850 11,791
9.75% 2013 10,250 10,353
Harrah's Operating Co., Inc. 5.50% 2010 (2) 25,110 25,268
Hilton Hotels Corp.:
7.625% 2008 1,000 1,083
8.25% 2011 7,385 8,253
7.625% 2012 9,045 9,769
Circus and Eldorado Joint Venture and Silver Legacy Resort Casino 10.125% 2012 12,025 12,145
Buffets, Inc. 11.25% 2010 7,500 7,875
MGM Mirage, Inc. 8.50% 2010 6,850 7,432
Royal Caribbean Cruises Ltd.:
7.00% 2007 1,400 1,481
8.75% 2011 4,825 5,368
Mandalay Resort Group, Series B, 10.25% 2007 5,000 5,575
Perkins Family Restaurants, LP, Perkins Finance Corp., Series B, 10.125% 2007 4,793 4,961
Argosy Gaming Co.:
9.00% 2011 1,250 1,387
7.00% 2014 (2) 3,000 2,940
Boyd Gaming Corp. 9.25% 2009 3,500 3,841
Hyatt Equities, LLC 6.875% 2007 (2) 3,185 3,388
Mohegan Tribal Gaming Authority 6.375% 2009 2,975 2,997
YUM Brands, Inc. 7.70% 2012 2,500 2,866
Horseshoe Gaming Holding Corp., Series B, 8.625% 2009 2,000 2,095
Sbarro, Inc. 11.00% 2009 2,015 1,773
Coast Hotels and Casinos, Inc. 9.50% 2009 1,000 1,055
Starwood Hotels & Resorts Worldwide, Inc. 7.375% 2007 250 264
164,671
CHEMICALS - 0.74%
Dow Chemical Co.:
5.75% 2008 11,100 11,659
5.75% 2009 8,750 9,142
6.00% 2012 37,500 38,813
Dow Chemical Pass Through Trust, Series 2004, 4.027% 2009 (2) (4) 20,500 19,566
Equistar Chemicals, LP:
10.125% 2008 5,400 5,940
8.75% 2009 12,800 13,408
ICI Wilmington, Inc.:
4.375% 2008 200 196
5.625% 2013 18,765 18,376
Millennium America Inc.:
9.25% 2008 4,990 5,389
9.25% 2008 (2) 2,000 2,160
7.625% 2026 2,100 1,806
Nalco Finance Holding Co. 0%/9.00% 2014 (2) (9) 1,250 834
Nalco Co. 7.75% 2011 (2) 775 816
Georgia Gulf Corp. 7.125% 2013 (2) 770 783
Huntsman LLC: (2)
8.80% 2011 (1) 275 280
11.50% 2012 425 432
E.I. du Pont de Nemours and Co. 4.125% 2010 700 689
Airgas, Inc. 6.25% 2014 (2) 450 433
130,722
FOOD & STAPLES RETAILING - 0.69%
CVS Corp.: (2)(4)
6.117% 2013 28,472 29,865
5.789% 2026 15,360 15,021
Wal-Mart Stores, Inc.:
5.45% 2006 10,000 10,472
3.375% 2008 12,000 11,675
SUPERVALU INC 7.50% 2012 14,260 16,011
Ahold Finance U.S.A., Inc.:
6.25% 2009 4,500 4,433
8.25% 2010 5,330 5,650
Ahold Lease Pass Through Trust, Series 2001-A-2, 8.62% 2025 (4) 3,595 3,463
Pathmark Stores, Inc. 8.75% 2012 10,850 10,904
Winn Dixie Stores, Inc., 8.875% 2008 2,000 1,900
Winn Dixie Pass-Through Trust, Series 1999-1, Class A-1, 7.803% 2017 (2) (4) 2,134 1,794
Rite Aid Corp.:
6.875% 2013 2,675 2,474
9.25% 2013 1,025 1,081
Petro Stopping Centers, LP and Petro Financial Corp. 9.00% 2012 (2) 2,425 2,413
Stater Bros. Holdings Inc.: (2)
5.06% 2010 (1) 475 485
8.125% 2012 1,800 1,816
Delhaize America, Inc. 8.125% 2011 1,500 1,645
Great Atlantic & Pacific Tea Co., Inc.:
9.125% 2011 300 257
9.375% QUIBS preferred 2039 18,500 shares 393
121,752
AEROSPACE & DEFENSE - 0.68%
BAE SYSTEMS 2001 Asset Trust, Series 2001: (2) (4)
Class B, 7.156% 2011 $ 33,766 35,961
Class G, MBIA insured, 6.664% 2013 30,908 33,352
Bombardier Inc. 6.30% 2014 (2) 26,500 22,547
Goodrich Corp. 7.625% 2012 6,000 6,763
Northrop Grumman Systems Corp. 7.125% 2011 5,000 5,626
Lockheed Martin, 8.20% 2009 4,500 5,279
General Dynamics Corp. 4.50% 2010 5,000 4,983
Raytheon Co. 6.55% 2010 4,500 4,902
119,413
COMMERCIAL SERVICES & SUPPLIES - 0.62%
Cendant Corp.:
6.875% 2006 16,505 17,644
6.25% 2008 9,250 9,872
7.375% 2013 22,910 25,595
Allied Waste North America, Inc.:
Series B, 7.625% 2006 2,000 2,108
8.50% 2008 7,500 8,241
Series B, 8.875% 2008 5,250 5,775
6.50% 2010 (2) 4,000 3,980
5.75% 2011 (2) 3,500 3,334
6.125% 2014 (2) 3,500 3,220
7.375% 2014 (2) 4,250 4,154
Waste Management, Inc.:
6.875% 2009 5,000 5,496
5.00% 2014 6,000 5,714
KinderCare Learning Centers, Inc., Series B, 9.50% 2009 6,141 6,264
United Rentals (North America), Inc., Series B:
6.50% 2012 3,250 3,087
7.00% 2014 2,700 2,416
Stericycle, Inc., Series B, 12.375% 2009 1,461 1,600
108,500
MULTILINE RETAIL - 0.61%
J.C. Penney Co., Inc.:
7.375% 2008 2,000 2,167
6.875% 2015 1,425 1,470
7.65% 2016 7,500 8,194
7.95% 2017 38,575 43,059
8.25% 2022 (4) 1,147 1,199
7.625% 2097 13,055 13,447
Target Corp. 3.375% 2008 20,830 20,504
Kohl's Corp.:
6.30% 2011 5,000 5,388
7.375% 2011 1,500 1,726
Kmart Corp. Pass Through Trust, Series 1995-K-2, 9.78% 2020 (4) (14) 10,510 5,051
Saks Inc. 7.50% 2010 4,500 4,702
Dillard's, Inc.:
6.43% 2004 150 151
6.625% 2018 1,000 920
107,978
METALS & MINING - 0.55%
BHP Finance (USA) Ltd.:
6.69% 2006 10,000 10,585
8.50% 2012 10,000 12,344
Corporacion Nacional del Cobre de Chile:
6.375% 2012 (2) 7,625 8,086
6.375% 2012 300 318
5.50% 2013 (2) 12,000 11,941
Phelps Dodge Corp.:
8.75% 2011 7,000 8,324
6.125% 2034 7,500 6,960
Alcan, Inc. 5.20% 2014 13,000 12,737
Freeport-McMoRan Copper & Gold Inc. 10.125% 2010 5,000 5,425
Ispat Inland ULC 9.75% 2014 (2) 4,825 4,994
Luscar Coal Ltd. 9.75% 2011 4,000 4,520
Earle M. Jorgensen Co. 9.75% 2012 3,600 3,960
Gerdau Ameristeel Corp. and GUSAP Partners 10.375% 2011 2,100 2,352
Inco Ltd. 7.20% 2032 2,000 2,114
Steel Dynamics, Inc. 9.50% 2009 1,250 1,388
AK Steel Corp. 7.75% 2012 1,000 908
96,956
IT SERVICES - 0.51%
Electronic Data Systems Corp.:
7.125% 2005 (2) 9,500 9,803
6.334% 2006 8,000 8,170
7.125% 2009 30,395 31,842
Series B, 6.00% 2013 (1) 42,800 40,948
90,763
SPECIALTY RETAIL - 0.51%
Toys "R" Us, Inc.:
7.875% 2013 22,010 22,203
7.375% 2018 22,195 20,614
Office Depot, Inc.:
10.00% 2008 6,500 7,507
6.25% 2013 7,945 8,197
Lowe's Companies, Inc. 8.25% 2010 8,450 10,047
Boise Cascade Corp. 6.50% 2010 7,500 7,669
Payless ShoeSource, Inc. 8.25% 2013 7,000 6,965
PETCO Animal Supplies, Inc. 10.75% 2011 5,375 6,047
89,249
COMMUNICATIONS EQUIPMENT - 0.47%
Motorola, Inc.:
8.00% 2011 58,530 67,501
7.50% 2025 7,000 7,550
6.50% 2028 3,695 3,590
5.22% 2097 6,250 4,690
83,331
THRIFTS & MORTGAGE FINANCE - 0.44%
Washington Mutual, Inc.:
7.50% 2006 12,000 13,012
5.625% 2007 11,000 11,514
4.375% 2008 12,500 12,590
4.00% 2009 5,000 4,906
Washington Mutual Bank, FA 6.875% 2011 10,000 10,962
Washington Mutual Finance 8.25% 2005 10,000 10,518
Countrywide Home Loans, Inc., Series L, 4.00% 2011 13,000 12,143
Downey Financial Corp. 6.50% 2014 2,500 2,500
78,145
MACHINERY - 0.43%
John Deere Capital Corp. 3.90% 2008 30,000 30,010
Deere & Co. 8.95% 2019 5,000 5,905
Terex Corp.:
9.25% 2011 7,250 7,939
Class B, 10.375% 2011 5,725 6,412
Cummins Capital Trust I 7.00% QUIPS convertible preferred 2031 (2) 180,000 shares 13,027
Caterpillar Financial Services Corp.:
Series F, 2.35% 2006 $ 5,000 4,904
2.70% 2008 4,845 4,590
Caterpillar Inc.:
4.50% 2009 2,500 2,514
7.25% 2009 300 340
AGCO Corp. 6.875% 2014 Euro 700 825
76,466
HOUSEHOLD DURABLES - 0.43%
Toll Brothers, Inc.:
6.875% 2012 $ 9,875 10,559
4.95% 2014 20,250 18,766
Centex Corp.:
4.75% 2008 8,000 8,159
5.80% 2009 5,000 5,165
Ryland Group, Inc.:
5.375% 2008 7,000 7,088
9.75% 2010 4,500 5,018
Pulte Homes, Inc. 7.625% 2017 7,500 8,260
Technical Olympic USA, Inc. 7.50% 2011 3,750 3,506
MDC Holdings, Inc. 5.50% 2013 3,000 2,913
Lennar Corp. 7.625% 2009 2,400 2,660
William Lyon Homes, Inc. 10.75% 2013 2,000 2,220
Standard Pacific Corp. 5.125% 2009 1,000 945
75,259
AUTO COMPONENTS - 0.41%
Visteon Corp.:
8.25% 2010 19,565 20,935
7.00% 2014 2,000 1,930
Delphi Trust II, trust preferred securities, 6.197% 2033 (1) 15,250 15,319
Delphi Corp. 6.50% 2013 6,000 6,117
Tenneco Automotive Inc.:
Series B, 11.625% 2009 7,000 7,560
10.25% 2013 3,850 4,370
ArvinMeritor, Inc. 8.75% 2012 4,185 4,562
Meritor Automotive, Inc. 6.80% 2009 1,000 1,022
Lear Corp., Series B, 8.11% 2009 3,580 4,082
Dana Corp. 9.00% 2011 1,700 1,997
TRW Automotive Acquisition Corp. 9.375% 2013 1,750 1,982
Stoneridge, Inc. 11.50% 2012 1,360 1,608
Dura Operating Corp., Series B, 8.625% 2012 1,500 1,537
73,021
CONTAINERS & PACKAGING - 0.39%
Packaging Corp. of America:
4.375% 2008 3,500 3,467
5.75% 2013 15,000 14,900
Jefferson Smurfit Corp. (U.S.) 8.25% 2012 11,625 12,148
Stone Container Corp.:
9.25% 2008 1,250 1,372
9.75% 2011 3,250 3,591
Owens-Illinois, Inc.:
8.10% 2007 5,750 5,951
7.35% 2008 5,250 5,263
7.50% 2010 2,250 2,216
Owens-Brockway Glass Container Inc. 8.875% 2009 3,000 3,255
Longview Fibre Co. 10.00% 2009 5,500 5,968
Temple-Inland Inc. 7.875% 2012 2,900 3,286
Graphic Packaging International, Inc. 9.50% 2013 3,000 3,270
Smurfit Capital Funding PLC 6.75% 2005 2,000 2,060
Norampac Inc. 6.75% 2013 1,500 1,478
68,225
FOOD PRODUCTS - 0.38%
Nabisco, Inc.:
7.05% 2007 6,500 7,098
7.55% 2015 5,105 5,877
6.375% 2035 (1) 12,300 12,527
Kraft Foods Inc. 6.25% 2012 945 997
Burns Philp Capital Pty Ltd.:
10.75% 2011 1,500 1,605
9.75% 2012 17,125 17,810
Gold Kist Inc. 10.25% 2014 (2) 10,450 11,390
Cadbury Schweppes US Finance LLC 5.125% 2013 (2) 4,750 4,647
Fage Dairy Industry SA 9.00% 2007 2,500 2,550
Tyson Foods, Inc. 8.25% 2011 1,850 2,128
66,629
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.35%
Solectron Corp.:
Series B, 7.375% 2006 2,775 2,886
9.625% 2009 24,325 26,818
SCI Systems, Inc. 3.00% convertible subordinated debentures 2007 12,000 11,280
Celestica Inc. 0% convertible debentures 2020 14,000 7,770
Jabil Circuit, Inc. 5.875% 2010 4,750 4,913
Flextronics International Ltd.:
9.75% 2010 Euro 2,750 3,647
6.50% 2013 $ 925 907
Viasystems, Inc. 10.50% 2011 (2) 3,275 3,455
61,676
ROAD & RAIL - 0.33%
Union Pacific Railroad Co. Pass Through Trust: (4)
Series 2001-1, 6.63% 2022 8,000 8,726
Series 2002-1, 6.061% 2023 11,500 12,107
Series 2003-1, 4.698% 2024 2,978 2,825
Burlington Northern and Santa Fe Railway Co. Pass Through Trust:(4)
Series 1996-B, 6.96% 2009 2,527 2,691
Series 2002-2, 5.14% 2021 12,500 12,110
Series 2002-1, 5.943% 2022 6,735 7,045
Southern Capital Corp. Pass Through Trust, Series 2002-1, Class G,
MBIA insured, 5.70% 2023 (2) (4) 8,932 9,129
TFM, SA de CV:
11.75% 2009 1,855 1,818
12.50% 2012 2,145 2,295
58,746
PHARMACEUTICALS - 0.28%
Wyeth:
5.50% 2013 (1) 4,000 3,867
5.50% 2014 18,000 17,231
Bristol-Myers Squibb Co.: (2)
4.00% 2008 12,695 12,616
5.25% 2013 2,000 1,993
Schering-Plough Corp. 5.30% 2013 14,250 14,020
49,727
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.27%
Conexant Systems, Inc. 4.00% convertible subordinated notes 2007 14,700 14,149
Micron Technology, Inc. 6.50% 2005 (2) 11,000 10,973
Hyundai Semiconductor America, Inc. 8.625% 2007 (2) 10,150 9,773
Amkor Technology, Inc.:
9.25% 2008 500 525
7.75% 2013 3,750 3,572
ON Semiconductor Corp. and Semiconductor Components Industries, LLC:
13.00% 2008 (1) 2,567 2,958
12.00% 2010 176 207
Cypress Semiconductor Corp. 3.75% convertible subordinated notes 2005 2,994 2,975
ZiLOG, Inc. - MOD III Inc., units (5) (6) 2,555 shares 1,871
47,003
AIRLINES - 0.21%
Northwest Airlines, Inc.:
7.625% 2005 1,100 1,084
8.875% 2006 875 748
8.70% 2007 400 308
9.875% 2007 14,325 11,388
10.00% 2009 6,025 4,549
American Airlines, Inc., Series 2001-2, Class B, 8.608% 2012 9,000 8,191
Continental Airlines, Inc., MBIA insured, 2.26% 2009 (1) 2,000 2,015
Delta Air Lines, Inc.:
7.70% 2005 8,250 5,569
10.00% 2008 1,500 840
10.375% 2022 2,577 1,173
United Air Lines, Inc. 9.00% 2003 (12) 2,000 193
Jet Equipment Trust: (2) (10)
Series 1994-A, 11.79% 2013 4,000 20
Series 1995-B, 10.91% 2014 5,000 25
Series 1995-D, 11.44% 2014 10,000 50
36,153
OTHER - 0.51%
Amazon.com, Inc. 6.875% PEACS convertible subordinated notes 2010 Euro 25,975 31,759
Kern River Funding Corp. 4.893% 2018 (2) (4) $ 10,447 10,150
Anglian Water Services Financing PLC 4.625% 2013 Euro 8,250 9,885
Jacuzzi Brands, Inc. 9.625% 2010 $ 7,260 7,804
Horizon Lines, LLC and Horizon Lines Holding Corp. 9.00% 2012 (2) 7,050 7,191
American Standard Inc. 7.625% 2010 6,000 6,630
Koppers Inc. 9.875% 2013 4,445 4,890
Nortek, Inc. 0%/10.00% 2011 (2) (9) 5,750 4,629
Hospira, Inc. 5.90% 2014 (2) 2,250 2,274
Anheuser-Busch Co. Inc. 9.00% 2009 1,750 2,130
Boyds Collection, Ltd., Series B, 9.00% 2008 1,501 1,445
LaBranche and Co., Inc. 9.50% 2009 (2) 1,000 1,015
Warnaco, Inc. 8.875% 2013 925 999
Exodus Communications, Inc. 11.625% 2010 (4) (5) (10) 1,164 -
90,801
MORTGAGE -BACKED OBLIGATIONS
PRIVATE ISSUE
COMMERCIAL MORTGAGE-BACKED SECURITIES - 3.79% (4)
Chase Commercial Mortgage Securities Corp.:
Series 1998-2, Class A-2, 6.39% 2030 (3) 44,550 48,034
Series 1998-1, Class A-2, 6.56% 2030 16,190 17,412
Series 2000-2, Class A-1, 7.543% 2032 (3) 18,307 19,833
Series 2000-1, Class A-1, 7.656% 2032 10,464 10,673
Series 2000-1, Class A-2, 7.757% 2032 18,350 20,873
Morgan Stanley Capital I, Inc.:
Series 2003-KIDS, Class A, 1.891% 2016 (1) (2) 26,449 26,495
Series 1998-WF2, Class A-1, 6.34% 2030 3,070 3,170
Series 1998-HF2, Class A-2, 6.48% 2030 17,000 18,303
Series 1999-FNV1, Class A-1 6.12% 2031 6,625 6,884
Series 1999-FNV1, Class A-2, 6.53% 2031 10,000 10,833
CS First Boston Mortgage Securities Corp.:
Series 2001-CK6, Class A-1, 4.393% 2006 2,274 2,303
Series 2002-FL2, Class A-2, 1.614% 2010 (1) (2) 7,641 7,608
Series 2001-CF2, Class A-2, 5.935% 2034 13,000 13,483
Series 2001-CF2, Class A-3, 6.238% 2034 9,000 9,581
Series 2001-CK6, Class A-2, 6.103% 2036 20,000 21,261
Series 2002-CKN2, Class A-1, 4.637% 2037 4,137 4,227
L.A. Arena Funding, LLC, Series 1, Class A, 7.656% 2026 (2) 43,470 44,793
GMAC Commercial Mortgage Securities, Inc.:
Series 1997-C1, Class A-3, 6.869% 2029 17,810 19,091
Series 1997-C1, Class D, 6.997% 2029 8,300 9,015
Series 1998-C2, Class C, 6.50% 2035 9,000 9,721
GS Mortgage Securities Corp. II, Series 1998-C1: (1)
Class D, 7.421% 2030 3,750 4,069
Class E, 7.421% 2030 31,076 32,203
Morgan Stanley Dean Witter Capital I Trust:
Series 2002-HQ, Class A-1, 4.59% 2034 7,276 7,421
Series 2001-TOP5, Class A-3, 6.16% 2035 17,468 18,665
Series 2003-TOP9, Class A-1, 3.98% 2036 9,450 9,267
Bear Stearns Commercial Mortgage Securities Inc.:
Series 1999-WF2, Class X, interest only, 0.423% 2031 (1) 260,206 4,462
Series 1998-C1, Class A-1, 6.34% 2030 4,402 4,609
Series 1999-C1, Class X, interest only, 1.27% 2031 (1) (2) 157,790 7,334
Series 2000-WF2, Class A-2, 7.32% 2032 16,480 18,576
Chase Manhattan Bank - First Union National Bank, Commercial Mortgage Trust, Series 1999-1:
Class A-2, 7.439% 2031 5,000 5,634
Class B, 7.619% 2031 17,125 19,404
Class C, 7.625% 2031 5,000 5,666
Banc of America Commercial Mortgage Inc., Series 2001-1, Class A-2, 6.503% 2036 (3) 24,450 26,546
Salomon Brothers Commercial Mortgage Trust:
Series 2000-C3, Class A-2, 6.592% 2033 8,750 9,530
Series 2001-C1, Class A-3, 6.428% 2035 13,000 13,854
First Union National Bank Commercial Mortgage Trust:
Series 2000-C1, Class A-1, 7.739% 2032 16,574 18,104
Series 2001-C4, Class A-1, 5.673% 2033 4,365 4,578
Prudential Securities Secured Financing Corp., Series 1999-NRF1, Class C, 6.746% 2031 18,000 19,641
DLJ Commercial Mortgage Corp.:
Series 1998-CF1, Class A-1A, 6.14% 2031 7,895 8,059
Series 1999-CG1, Class A-1B, 6.46% 2032 10,000 10,804
Tower Ventures, LLC, Series 2004-1, Class A, 3.711% 2034 (2) 18,302 17,660
GGP Mall Properties Trust, Series 2001-C1A, Class A-2, 5.007% 2011 (2) 15,400 15,858
DLJ Mortgage Acceptance Corp.:
Series 1996-CF2, Class A-1B, 7.29% 2021 (2) 235 235
Series 1996-CF-1, Class A-2 7.936% 2028 (1) (2) 2,161 2,184
Series 1998-CF1, Class A-1B, 6.41% 2031 10,000 10,713
Commercial Mortgage Trust, Series 2000-FL3A, Class D, 2.569% 2012 (1) (2) 13,776 12,156
LB-UBS Commercial Mortgage Trust, Series 2000-C3, Class A-2, 7.95% 2010 10,000 11,535
Nomura Asset Securities Corp., Series 1998-D6, Class A-1A, 6.28% 2030 4,890 5,121
Opryland Hotel Trust, Series 2001-OPRY, Class C, 2.05% 2011 (1) (2) 5,000 5,007
GE Capital Commercial Mortgage Corp.:
Series 2001-1, Class A-1, 6.079% 2033 451 477
Series 2001-3, Class A-1, 5.56% 2038 3,988 4,165
First Union-Lehman Brothers-Bank of America Commercial Mortgage Trust,
Series 1998-C2, Class A-1, 6.28% 2035 4,383 4,491
Commercial Mortgage Acceptance Corp.:
Series 1998-C2, Class A-1, 5.80% 2030 1,092 1,111
Series 1998-C1, Class A-1, 6.23% 2031 1,919 1,968
Mortgage Capital Funding, Inc., Series 1998-MC1, Class A-1, 6.417% 2030 2,999 3,074
Merrill Lynch Mortgage Investors, Inc.: (1)
Series 1995-C2, Class D, 7.797% 2021 228 241
Series 1995-C3, Class A-3, 7.141% 2025 414 416
668,431
COLLATERIZED MORTGAGE OBLIGATIONS - 4.04% (4)
Bear Stearns ARM Trust: (1)
Series 2003-6, Class I-A-2, 4.05% 2033 (3) 53,502 53,020
Series 2003-3, Class II-A-2, 4.176% 2033 (3) 24,619 24,508
Series 2003-3, Class III-A-1, 5.15% 2033 11,899 11,943
Series 2004-3, Class I-A-2, 4.344% 2034 24,873 24,603
Series 2003-9, Class III-A-2, 5.073% 2034 8,377 8,358
Series 2003-8, Class III-A-1, 5.204% 2034 8,573 8,593
CS First Boston Mortgage Securities Corp.:
Series 2002-30, Class I-A-1, 7.50% 2032 7,866 8,115
Series 2002-34, Class I-A-1, 7.50% 2032 690 711
Series 2003-AR20, Class II-A-2, 4.031% 2033 (1) 9,417 9,370
Series 2003-AR12, Class II-A-2, 4.364% 2033 (1) 3,872 3,883
Series 2003-AR28, Class II-A-1, 4.61% 2033 (1) 7,565 7,623
Series 2003-21, Class V-A-1, 6.50% 2033 40,678 41,857
Series 2003-29, Class V-A-1, 7.00% 2033 10,483 11,052
Series 2004-3, Class IV-A-1, 6.00% 2034 2,192 2,217
Series 2004-AR5, Class VII-A-2, 4.626% 2034 (1) 35,000 34,562
WaMu Mortgage Pass-Through Certificates Trust:
Series 2004-CB2, Class VII-A, 5.50% 2019 2,500 2,540
Series 2003-AR3, Class A-3, 3.57% 2033 (1) 733 733
Series 2003-AR7, Class A-7, 3.84% 2033 (1) 53,287 52,290
Series 2003-AR8, Class A, 4.03% 2033 (1) 10,426 10,319
Series 2003-AR5, Class A-7, 4.21% 2033 (1) 10,537 10,553
Series 2003-AR6, Class A-1, 4.37% 2033 (1) 37,589 37,432
Series 2004-AR1, Class A, 4.23% 2034 (1) 3,986 3,936
Merrill Lynch Mortgage Investors, Inc.: (1)
Series 2003-A6, Class II-A, 4.283% 2033 8,567 8,520
Series 2003-A4, Class II-A, 4.61% 2033 31,984 32,038
Series 2004-A1, Class II-A-1, 4.67% 2034 52,206 52,081
Banc of America Mortgage Securities Trust: (1)
Series 2003-F, Class 2-A-1, 3.734% 2033 (3) 44,765 44,133
Series 2003-G, Class 2-A-1, 4.088% 2033 12,632 12,589
Series 2003-D, Class 2-A-1, 4.183% 2033 9,574 9,513
Series 2003-I, Class 3-A-1, 4.554% 2033 17,654 17,472
CHL Mortgage Pass-Through Trust:
Series 2003-HYB3, Class 4-A-1, 3.519% 2033 (1) 8,355 8,277
Series 2003-27, Class A-1, 3.81% 2033 (1) 24,606 24,423
Series 2004-7, Class 2-A-1, 4.148% 2034 (1) 9,573 9,452
Series 2004-12, Class 12-A1, 4.933% 2034 (1) 14,780 14,802
Series 2004-12, Class 13-A1, 4.937% 2034 (1) 13,000 12,827
Morgan Stanley Mortgage Trust, Series 2004-3, Class 4-A, 5.735% 2034 37,526 37,781
Residential Funding Mortgage Securities I, Inc., Series 2004-SA1,
Class A-II, 4.38% 2034 (1) 15,660 15,319
Citigroup Mortgage Loan Trust Inc., Series 2004-HYB1, Class A-3-1, 4.55% 2034 (1) 14,051 13,944
PNC Mortgage Securities Corp., Series 1998-10, Class 1-B1, 6.50% 2028 7,392 7,458
Bear Stearns Asset Backed Securities I Trust, Series 2004-AC2, Class II-A, 5.00% 2034 5,441 5,392
MASTR Asset Securitization Trust, Series 2003-2, Class 3-A-13, 5.75% 2033 5,000 4,851
Structured Asset Securities Corp., Series 2003-17A, Class 3-A1, 4.01% 2033 (1) 4,665 4,644
Ocwen Residential MBS Corp., Series 1998-R1, Class AWAC, 4.973% 2040 (1) (2) 4,567 4,338
Travelers Mortgage Securities Corp., Series 1, Class Z-2, 12.00% 2014 1,145 1,173
Financial Asset Securitization, Inc., Series 1997-NAM1, Class B-1, 7.75% 2027 1,072 1,072
GS Mortgage Securities Corp., Series 1998-2, Class M, 7.75% 2027 (2) 918 970
Security National Mortgage Loan Trust, Series 2001-3A, Class A-2, 5.37% 2014 (2) 715 723
First Nationwide Trust, Series 1999-2, Class 1PA-1, 6.50% 2029 397 403
Nationsbanc Montgomery Funding Corp., Series 1998-5, Class A-1, 6.00% 2013 154 155
Bear Stearns Structured Securities Inc., Series 1997-2, Class AWAC, 103.725% 2036 (1) (2) 18 37
712,605
OTHER - 0.67%
Realkredit Danmark AS, Series 23D, 5.00% 2035 (4) DKr 507,571 79,965
Structured Asset Securities Corp., Class A: (1) (2) (4)
Series 1998-RF2, 8.524% 2027 $ 13,631 14,699
Series 1998-RF1, 8.723% 2027 4,706 5,076
Series 1999-RF1, 7.903% 2028 3,194 3,406
Hypothekenbank in Essen AG 5.25% 2008 Euro 6,000 7,750
Rheinische Hypothekenbank Eurobond 4.25% 2008 5,000 6,250
First Boston Mortgage Securities Corp., Series D: (4)
principal only, 0% 2017 $ 197 169
interest only, 10.965% 2017 197 47
117,362
AGENCY PASS-THROUGHS (4)
FREDDIE MAC - 3.37%
5.00% 2018 - 2033 51,062 50,743
6.00% 2017 - 2034 528,430 539,441
8.00% 2008 - 2026 367 399
8.25% 2007 224 233
8.50% 2007 - 2027 1,848 1,973
8.75% 2008 303 318
11.00% 2018 250 285
593,392
FANNIE MAE - 3.22%
3.805% 2033 (1) 6,371 6,293
4.50% 2018 18,209 17,853
5.00% 2018 - 2033 46,586 46,568
5.179% 2026 (1) 1,779 1,812
5.50% 2019 - 2033 194,741 196,132
6.00% 2016 - 2034 219,492 224,519
6.50% 2029 - 2034 52,362 54,658
7.00% 2009 - 2032 7,750 8,221
7.50% 2009 - 2031 4,322 4,640
8.00% 2023 - 2031 712 772
8.50% 2009 - 2027 320 335
9.00% 2018 - 2022 445 481
9.50% 2009 53 57
10.00% 2018 866 983
11.00% 2020 346 398
11.269% 2020 (1) 977 1,135
11.50% 2016 1,085 1,255
12.00% 2019 962 1,128
567,240
GOVERNMENT NATIONAL MORTGAGE ASSN. - 0.56%
6.00% 2033 23,203 23,815
6.50% 2008 - 2031 1,601 1,693
7.00% 2022 - 2031 32,416 34,685
7.50% 2007 - 2032 12,211 13,208
8.00% 2017 - 2030 12,749 13,989
8.50% 2020 - 2029 1,633 1,799
9.00% 2009 - 2022 2,134 2,306
9.50% 2009 - 2020 1,752 1,913
10.00% 2020 - 2021 4,638 5,287
98,695
AGENCY (4)
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.76%
Fannie Mae:
Series 90-93, Class G, 5.50% 2020 93 96
Series 2001-4, Class GA, 10.218% 2025 (1) 1,632 1,851
Series 2001-4, Class NA, 11.807% 2025 (1) 8,861 10,236
Series 1998-W5, Class B3, 6.50% 2028 (2) 3,941 3,927
Series 2002-W3, Class A-5, 7.50% 2028 14,176 15,199
Series 2003-T3, Class 2A-3, 2.869% 2029 6,650 6,663
Series 2002-W7, Class A-5, 7.50% 2029 1,991 2,135
Series 2001-20, Class E, 9.595% 2031 (1) 324 360
Series 2001-20, Class C, 11.962% 2031 (1) 381 445
Series 2003-W10, Class 1A-2B, 3.112% 2037 19,200 18,833
Series 2001-T10, Class A-1, 7.00% 2041 20,330 21,501
Series 2001-50, Class BA, 7.00% 2041 6,740 7,159
Series 2002-W1, Class 2A, 7.50% 2042 15,550 16,673
Freddie Mac:
Series H009, Class A-2, 1.876% 2008 (1) 5,823 5,635
Series 2310, Class A, 10.573% 2017 (1) 2,120 2,342
Series 41, Class F, 10.00% 2020 331 332
Series 178, Class Z, 9.25% 2021 309 310
Series T-056, Class A-2A, 2.842% 2036 19,750 19,549
Series T-042, Class A-2, 5.50% 2042 957 958
134,204
ASSET-BACKED OBLIGATIONS (4)
AUTO LOAN - 1.92%
MMCA Auto Owner Trust:
Series 2000-2, Class B, 7.42% 2005 5,778 5,808
Series 2000-1, Class B, 7.55% 2005 9,717 9,761
Series 2001-2, Class B, 5.75% 2007 2,730 2,753
Series 2001-3, Class B, 2.189% 2008 (1) 7,274 7,212
Series 2002-4, Class B, 3.82% 2009 5,447 5,466
Series 2002-2, Class A-4, 4.30% 2010 24,600 24,852
Series 2002-2, Class B, 4.67% 2010 1,509 1,419
CPS Auto Receivables Trust: (2)
Series 2003-A, Class A-2, XLCA insured, 2.89% 2009 33,961 33,679
Series 2002-B, Class A-2, XLCA insured, 3.50% 2009 2,886 2,917
Series 2002-C, Class A-2, XLCA insured, 3.52% 2009 1,499 1,503
Series 2004-A, Class A-2, FSA insured, 3.87% 2010 7,141 7,147
AmeriCredit Automobile Receivables Trust:
Series 2003-A-M, Class A-3-A, MBIA insured, 2.37% 2007 17,000 17,013
Series 2003-A-M, Class A-4-A, MBIA insured, 3.10% 2009 2,000 1,999
Series 2002-C, Class A-4, FSA insured, 3.55% 2009 4,000 4,022
Series 2003-CF, Class A-4, FSA insured, 3.48% 2010 15,500 15,511
WFS Financial Owner Trust:
Series 2002-3, Class A-4, 3.50% 2010 15,000 15,115
Series 2004-1, Class C, 2.49% 2011 6,000 5,938
Series 2004-1, Class A-4, 2.81% 2011 12,000 11,766
First Investors Auto Owners Trust, MBIA insured: (2)
Series 2002-A, Class A, 3.46% 2008 2,980 3,000
Series 2003-A, Class A, 2.58% 2011 27,282 27,248
Triad Automobile Receivables Trust, AMBAC insured:
Series 2002-A, Class A-3, 2.62% 2007 8,993 9,029
Series 2002-1, Class A-3, 3.00% 2009 (2) 10,595 10,658
Drive Auto Receivables Trust: (2)
Series 2004-A, Class A-2, XLCA insured, 1.638% 2006 11,000 10,918
Series 2003-1, Class A-3, MBIA insured, 2.41% 2007 5,000 4,982
Series 2001-2, Class A, MBIA insured, 3.91% 2007 3,292 3,339
Household Automotive Trust, Series 2001-3, Class A-4, 4.37% 2008 16,000 16,269
Prestige Auto Receivables Trust, Series 2003-1, Class A-2, FSA insured, 2.41% 2010 (2) 14,061 14,058
AESOP Funding II LLC, Series 2003-2, Class A-1, MBIA insured, 2.74% 2007 (2) 12,000 11,893
Drivetime Auto Owner Trust, Series 2003-A, Class A-3, XLCA insured, 2.524% 2008 (2) 8,000 8,012
Harley-Davidson Motorcycle Trust:
Series 2001-3, Class B, 3.72% 2009 775 781
Series 2001-3, Class A-2, 4.04% 2009 4,168 4,217
Series 2002-2, Class B, 2.84% 2010 2,371 2,368
Chase Manhattan Auto Owner Trust, Series 2002-B, 4.24% 2009 6,896 7,002
New South Motor Vehicle Trust, Series 2002-A, Class A-3, AMBAC insured, 3.03% 2010 6,367 6,414
PCR Auto Receivables Trust, Series 2004-1, Class A-2, XLCA insured, 3.995% 2010 (2) 6,357 6,357
Continental Auto Receivables Owner Trust, Series 2000-B, Class CTFS,
MBIA insured, 7.11% 2007 (2) 5,261 5,275
Hyundai Auto Receivables Trust: (2)
Series 2001-A, Class C, 5.57% 2006 2,380 2,428
Series 2002-A, Class C, 3.91% 2009 2,000 2,013
SeaWest Securitization, LLC, XLCA insured: (2)
Series 2002-A, Class A-3, 3.58% 2008 2,490 2,508
Series 2003-A, Class A-2, 2.84% 2009 1,072 1,077
Chevy Chase Auto Receivables Trust, Series 2001-2, Class A-4, 4.44% 2007 3,355 3,396
World Omni Auto Receivables Trust, Series 2001-B, Class B, 4.14% 2008 976 988
338,111
AIRPLANE EQUIPMENT TRUST CERTIFICATE-SINGLE LESSEE - 1.57%
Continental Airlines, Inc.:
Series 1998-3, Class C-2, 7.25% 2005 12,000 10,236
Series 2001-1, Class A-2, 6.503% 2011 10,500 9,800
Series 1997-1, Class A, 7.461% 2016 10,722 9,985
Series 1996-2, Class D, 11.50% 2016 1,936 1,384
Series 2001-1, Class B, 7.373% 2017 4,919 3,936
Series 1998-1, Class A, 6.648% 2019 22,997 21,478
Series 1997-4, Class A, 6.90% 2019 28,642 26,935
Series 1999-1, Class B, 6.795% 2020 16,092 12,594
Series 2001-1, Class A-1, 6.703% 2021 9,545 8,908
Series 2000-1, Class A-1, 8.048% 2022 4,240 4,149
Delta Air Lines, Inc.:
Series 2003-1, Class G, AMBAC insured, 1.92% 2009 (1) 15,229 15,323
Series 2001-1, Class A-1, 6.619% 2011 12,313 11,646
Series 2000-1, Class A-2, 7.57% 2012 3,500 3,250
Series 2001-1, Class A-2, 7.111% 2013 15,000 13,931
Series 2002-1, Class C, 7.779% 2013 12,105 6,658
Series 1992-A2, 9.20% 2014 11,500 5,750
1991 Equipment trust certificates, Series J, 10.00% 2014 (2) 5,000 2,500
1990 Equipment trust certificates, Series F, 10.79% 2014 (2) 1,700 884
American Airlines, Inc.:
Series 1999-1, Class A-1, 6.855% 2010 13,480 13,302
Series 2001-2, Class A-1, 6.978% 2012 22,865 22,598
Series 2001-2, Class A-2, 7.858% 2013 5,000 4,977
Series 1991-C2, 9.73% 2014 6,410 4,785
Series 2001-1, Class B, 7.377% 2019 7,982 5,712
Northwest Airlines, Inc.:
Series 2001-1, Class A-2, 6.841% 2012 9,955 9,653
Series 1999-2, Class A, 7.575% 2020 6,165 6,065
Series 2002-1, Class G-2, MBIA insured, 6.264% 2021 7,898 8,043
Series 2001-1, Class A-1, 7.041% 2023 2,238 2,153
Southwest Airlines Co.:
Series 2001-1, Class A-2, 5.496% 2006 5,000 5,185
Series 2001-1, Class B, 6.126% 2006 7,500 7,893
AIR 2 US, Series A, 8.027% 2020 (2) 9,036 7,860
United Air Lines, Inc., Series 2000-1, Class A-2, 7.73% 2012 9,000 7,355
Jet Equipment Trust: (2) (10)
Series 1995-B, Class A, 7.63% 2015 3,625 2,175
Series 1995-B, Class C, 9.71% 2015 5,500 286
Series 1995-A, Class C, 10.69% 2015 2,750 14
277,403
HOME EQUITY - 1.20%
Residential Asset Securities Corp. Trust:
Series 2003-KS2, Class A-I-2, 2.15% 2024 5,200 5,196
Series 2002-KS4, Class A-1-3, AMBAC insured, 4.59% 2026 2,306 2,315
Series 2003-KS2, Class A-I-3, 2.66% 2028 16,750 16,629
Series 1999-KS3, Class A-I-7, AMBAC insured, 7.505% 2030 3,481 3,635
Series 2001-KS3, Class A-I-6, 5.96% 2031 24,400 25,490
Residental Asset Mortgage Products Trust:
Series 2004-RZ1, Class A-I-2, 2.34% 2027 19,000 18,333
Series 2003-RS1, Class A-I-3, 3.495% 2028 3,375 3,381
Series 2004-RS3, Class A-I-2, 3.052% 2029 1,550 1,461
Series 2003-RZ4, Class A-7, 4.79% 2033 (1) 10,000 9,542
Series 2003-RS11, Class A-I-7, 4.828% 2033 9,000 8,600
Ameriquest Mortgage Securities Inc., Series 2004-R4, Class A-4, 1.78% 2034 (1) 22,757 22,755
Centex Home Equity Loan Trust, Series 2003-A, Class AF-3, 2.708% 2026 22,400 22,424
Morgan Stanley Capital I, Inc., Series 2004-NC3, Class M-1, 1.83% 2034 (1) 20,000 20,012
CitiFinancial Mortgage Securities Inc., Series 2003-1, Class AF-2, 2.948% 2033 11,000 11,026
Impac CMB Trust, Series 2004-6, Class M-4, 2.429% 2034 (1) 10,500 10,500
Conseco Finance Home Equity Loan Trust:
Series 2002-B, Class M-1, 2.989% 2033 (1) 4,500 4,591
'Series 2002-B, Class A-2, 5.31% 2033 2,612 2,624
Chase Funding Trust:
Series 2003-1, Class IA-3, 3.14% 2023 3,500 3,512
Series 1999-1, Class IIM-2, 1.88% 2028 (1) 1,577 1,578
Series 1999-3, Class IIM-1, 1.95% 2029 (1) 1,741 1,745
New Century Home Equity Loan Trust, Series 2001-NC2, Class M-1, 2.10% 2031 (1) 5,000 5,069
IndyMac Home Equity Mortgage Loan Asset-backed Trust, Series SPMD 2001-A,
Class AF-6, 6.537% 2030 4,554 4,586
Advanta Mortgage Loan Trust, Series 1999-2, Class A-6, AMBAC insured, 6.82% 2029 3,342 3,455
Option One Mortgage Loan Trust, Series 2002-1, Class M-1, 2.05% 2032 (1) 2,000 1,986
Home Equity Asset Trust, Series 2004-2, Class M-1, 1.83% 2034 (1) 1,000 1,001
Residential Funding Mortgage Securities II, Inc., Series 2001-HS2, Class A-4,
AMBAC insured, 6.43% 2016 (1) 556 557
CS First Boston Mortgage Securities Corp., Series 2001-HE16, Class A-IO,
interest only, 5.64% 2004 2,865
212,003
CREDIT CARD - 0.97%
Metris Master Trust: (1)
Series 2000-1, Class A, 1.58% 2008 41,100 40,947
Series 2000-3, Class A, 1.54% 2009 3,500 3,459
Series 2001-2, Class A, 1.60% 2009 23,000 22,695
Series 2001-2, Class C, 3.18% 2009 (2) 10,000 9,378
MBNA Credit Card Master Note Trust, Series 2002-1, Class B, 5.15% 2009 17,000 17,624
MBNA Master Credit Card Trust II:
Series 1999-B, Class A, 5.90% 2011 3,000 3,217
Series 1999-B, Class B, 6.20% 2011 3,750 4,021
Consumer Credit Reference Index Securities Program Trust:
Series 2002-1A, Class A, AMBAC insured, 3.55% 2007 (1) (2) 10,158 10,291
Series 2002-2A, Class FX, 10.421% 2007 (2) 8,250 8,510
Pass-through Amortizing Credit Card Trusts: (2)
Series 2002-1A, Class A-2FX, 4.685% 2012 4,265 4,308
Series 2002-1A, Class A-3FX, 6.298% 2012 13,575 13,664
NextCard Credit Card Master Note Trust, Series 2000-1, Class B, 2.039% 2006 (1) (2) 8,733 8,711
Nordstrom Credit Card Master Note Trust, Series 2002-1, Class B, 1.939% 2010 (1) (2) 8,000 8,068
First USA Credit Card Master Trust, Series 1997-4, Class C, 2.279% 2010 (1) (2) 6,630 6,642
Capital One Multi-asset Execution Trust, Series 2003-1, Class A, 1.629% 2009 (1) 6,000 6,031
CompuCredit Credit Card Master Note Business Trust, Series 2001-A,
Class B, 2.719% 2008 (1) (2) 1,500 1,499
Capital One Master Trust, Series 2002-1A, Class B, 1.839% 2011 (1) 1,000 1,011
170,076
STRANDED ASSET - 0.28%
PP&L Transition Bond Co. LLC, Series 1999-1, Class A-7, 7.05% 2009 15,000 16,259
PECO Energy Transition Trust, Series 1999-A, Class A-7, 6.13% 2009 14,250 15,307
California Infrastructure and Economic Development Bank, Special Purpose Trust:
SCE-1, Series 1997-1, Class A-6, 6.38% 2008 2,998 3,135
PG&E-1, Series 1997-1, Class A-7, 6.42% 2008 8,939 9,334
West Penn Funding LLC, Series 1999-A, Class A-4, 6.98% 2008 4,500 4,938
48,973
FRANCHISE EQUIPMENT - 0.25%
CNL Funding, Series 2000-AA, Class A-2, MBIA insured, 8.044% 2017 (2) 13,800 14,461
ACLC Business Loan Receivables Trust, Series 2002-1, Class A-2, 7.462% 2022 (2) 8,988 8,674
GRCT Consumer Loan Trust, Series 2001-1A, Class 2BRV, 6.251% 2020 (2) 7,845 7,960
Green Tree Recreational, Equipment & Consumer Trust, Series 1997-D, 7.25% 2029 8,500 6,800
Financial Pacific Funding II, LLC, Series 2003-A, Class A, FSA insured, 2.29% 2009 (2) 4,906 4,873
CIT Equipment Collateral, Series 2002-VT1, Class B, 3.97% 2009 1,162 1,164
43,932
MANUFACTURED HOUSING - 0.24%
Green Tree Financial Corp.:
Series 1993-2, Class B, 8.00% 2018 2,250 2,163
Series 1995-3, Class B-2, 8.10% 2025 (10) 5,000 1,500
Series 1995-8, Class B2, 7.65% 2026 (10) 8,197 1,639
Series 1995-6, Class B-2, 8.00% 2026 (10) 2,785 418
Series 1996-6, Class B-2, 8.35% 2027 (10) 10,174 2,238
Series 1996-5, Class B-2, 8.45% 2027 (10) 6,567 1,445
Series 1996-10, Class A-6, 7.30% 2028 6,184 6,538
Series 1997-8, Class B-2, 7.75% 2028 (10) 3,074 676
Series 1997-6, Class A-7, 7.14% 2029 12,072 12,676
Series 1997-6, Class B-2, 7.75% 2029 (10) 4,958 1,091
Series 1998-4, Class B-2, 8.11% 2030 (10) 12,988 2,857
Conseco Finance Manufactured Housing Contract Trust:
Series 2001-3, Class A-2, 5.16% 2033 (10) 4,131 4,180
Series 2001-3, Class A-3, 5.79% 2033 (10) 5,000 5,108
42,529
OTHER - 0.16%
Banco Itau SA, Series 2002, XLCA insured, 1.85% 2007 (1) (2) 14,900 14,882
PF Export Receivables Master Trust, Series 2001-B, MBIA insured, 6.60% 2011 (2) 10,000 10,741
NPF XII, Inc.: (2) (5)
Series 1999-3, Class B, 2.389% 2003 (1) (12) 3,000 30
Series 2001-1A, Class A, 1.989% 2004 (1) (12) 7,000 627
Series 2001-3A, Class A, 5.52% 2007 (10) 16,000 1,434
27,714
GOVERNMENT OBLIGATIONS
U.S. GOVERNMENT
U.S. TREASURY NOTES AND BONDS - 12.34%
6.00% August 2004 106,000 106,630
11.625% November 2004 30,000 31,111
6.75% May 2005 213,845 222,465
1.125% June 2005 6,270 6,212
5.75% November 2005 111,000 116,064
5.875% November 2005 20,000 20,944
6.875% May 2006 (3) 223,180 240,267
3.375% January 2007 (3) (15) 244,415 261,599
6.25% February 2007 63,725 68,873
4.375% May 2007 32,500 33,597
6.625% May 2007 40,000 43,806
6.125% August 2007 25,000 27,125
3.00% November 2007 70,500 69,839
3.625% January 2008 (15) 116,369 127,023
2.625% May 2008 20,000 19,378
5.625% May 2008 40,000 43,069
4.75% November 2008 40,000 41,781
6.00% August 2009 (3) 9,000 9,890
10.375% November 2009 12,500 12,904
10.00% May 2010 5,000 5,337
5.75% August 2010 20,000 21,806
3.50% January 2011 (15) 75,604 83,825
5.00% February 2011 25,000 26,184
Principal Strip 0% August 2011 10,495 7,659
5.00% August 2011 4,160 4,345
3.00% July 2012 (15) 1,035 1,118
10.375% November 2012 24,500 29,955
12.00% August 2013 (3) 10,000 13,206
11.250% February 2015 70,000 108,018
Principal Strip 0% November 2015 8,000 4,505
9.875% November 2015 10,000 14,406
8.875% August 2017 10,000 13,706
Principal Strip 0% May 2018 24,120 11,449
6.875% August 2025 238,750 284,038
5.25% November 2028 35,545 34,834
0% February 2029 4,950 1,261
3.875% April 2029 (15) 1,818 2,313
6.25% May 2030 3,740 4,189
2,174,731
NON-PASS-THROUGH AGENCY SECURITIES
FANNIE MAE BONDS & NOTES - 0.99%
7.00% 2005 90,000 94,347
6.25% 2011 29,250 31,397
5.25% 2012 20,000 19,992
7.25% 2030 23,750 28,114
173,850
FREDDIE MAC BONDS & NOTES - 0.59%
4.25% 2005 27,250 27,787
5.75% 2010 Euro 12,000 15,951
4.75% 2012 $ 20,000 19,424
6.25% 2012 15,000 15,585
6.75% 2031 22,650 25,354
104,101
FEDERAL HOME LOAN BANK BONDS & NOTES - 0.17%
4.50% 2012 31,500 30,477
OTHER
OTHER - 0.07%
U.S. Government-Guaranteed Certificates of Participation, Overseas
Private Investment Corp., Series 2000-044-A, 3.74% 2015 (4) 13,090 12,793
GOVERNMENTS & GOVERNMENTAL BODIES (NON-U.S.)
NON-U.S. GOVERNMENT OBLIGATIONS - 5.48%
Bundesobligation Eurobond:
5.00% 2005 Eu 93,040 116,409
4.50% 2006 41,920 52,744
Deutschland Republic:
4.50% 2009 55,000 69,602
6.25% 2030 27,270 39,497
Japanese Government:
0.10% 2004 Yen 1,220,000 11,165
0.50% 2007 4,186,100 38,476
0.90% 2008 11,030,000 101,854
0.50% 2013 5,726,450 47,325
Canadian Government:
9.00% 2004 C$ 10,000 7,687
4.25% 2026 (15) 66,455 66,103
United Mexican States Government Eurobonds, Global:
4.625% 2008 $ 11,000 10,860
10.375% 2009 14,500 17,552
11.375% 2016 18,658 26,121
8.30% 2031 8,220 8,631
7.50% 2033 3,750 3,639
Hungarian Government:
8.50% 2006 HUF 4,500,000 21,013
6.25% 2007 5,305,000 23,095
6.25% 2008 300,000 1,282
6.75% 2013 2,270,000 9,692
Polish Government:
8.50% 2006 PLZ 72,000 19,798
6.00% 2010 80,750 20,330
Russian Federation:
8.25% 2010 $ 21,580 23,494
8.25% 2010 (2) 3,300 3,593
5.00% 2030 (2) 13,800 12,670
5.00% 2030 (1) (2) 145 133
Korean Government 4.50% 2008 KRW 45,600,000 39,617
Swedish Government:
5.00% 2009 SKr 105,000 14,524
5.25% 2011 110,000 15,354
United Kingdom:
8.50% 2005 Lira 1,540 2,937
5.00% 2008 6,960 12,616
6.00% 2028 1,800 3,789
4.25% 2032 3,125 5,190
Italian Government BTPS Eurobond 6.00% 2007 Euro 16,204 21,393
New South Wales Treasury Corp. 8.00% 2008 A$ 26,000 19,386
French Government O.A.T. Eurobond:
Strip Principal 0% 2019 Euro 14,000 8,247
5.50% 2029 7,610 10,001
State of Qatar 9.75% 2030 $ 12,220 16,909
Banque Centrale de Tunisie:
4.75% 2011 Euro 3,000 3,595
7.375% 2012 $ 6,250 6,844
Norwegian Government 6.00% 2011 NOK 57,000 9,017
Panama (Republic of):
10.75% 2020 $ 210 236
Global 9.375% 2023 3,837 3,933
8.875% 2027 250 244
Global 9.375% 2029 675 751
Chile (Republic of) 7.125% 2012 3,000 3,329
Peru (Republic of):
9.125% 2012 432 445
8.375% 2016 2,500 2,337
Past Due Interest Eurobond 5.00% 2017 (1) 396 338
Brazil (Federal Republic of):
Bearer 8.00% 2014 (8) 717 660
8.875% 2024 1,375 1,128
12.25% 2030 425 444
11.00% 2040 610 576
Bulgaria (Republic of) 8.25% 2015 2,065 2,417
New Zealand Government 4.50% 2016 (15) NZ$ 3,488 2,356
Dominican Republic 9.50% 2006 (2) $ 2,135 1,473
Guatemala (Republic of) 10.25% 2011 (2) 1,000 1,125
Venezuela (Republic of) 9.25% 2027 915 778
Turkey (Republic of) 12.375% 2009 500 574
Argentina (Republic of): (14)
Series E, 0% 2003 1,000 255
Global 15.50% 2008 725 199
11.75% 2009 60 17
12.25% 2018 (8) 80 22
12.00% 2031 (8) 53 14
965,835
DEVELOPMENT AUTHORITIES - 0.04%
Corporacion Andina de Fomento 6.875% 2012 5,895 6,349
6,349
MUNICIPAL OBLIGATIONS
MUNICIPAL OBLIGATIONS - 1.64%
State of California:
Golden State Tobacco Securitization Corp., Tobacco Settlement
Asset-backed Bonds, Series 2003-A1, 5.00% 2021 8,155 8,006
Golden State Tobacco Securitization Corp., Tobacco Settlement
Asset-backed Bonds, Series 2003-A1, 6.25% 2033 64,975 58,335
State of New Jersey:
Tobacco Settlement Financing Corp., Tobacco Settlement Asset-backed
Bonds, Series 2003, 4.375% 2019 6,000 5,820
Tobacco Settlement Financing Corp., Tobacco Settlement Asset-backed Bonds,
Series 2003, 6.125% 2024 27,290 24,649
Tobacco Settlement Fncg. Corp., Tobacco Settlement Asset-backed Bonds,
Series 2002, 5.75% 2032 31,360 26,969
State of Wisconsin, Badger Tobacco Asset Securitization Corp., Tobacco
Settlement Asset-backed Bonds, 6.125% 2027 (3) 40,480 36,612
State of Louisiana:
Tobacco Settlement Financing Corp., Tobacco Settlement Asset-Backed Bonds,
Series 2001-A, Class A, 6.36% 2025 24,237 23,669
Tobacco Settlement Auth., Asset-backed Bonds, Series 2001-B, 5.50% 2030 10,000 8,389
State of South Dakota, Educational Enhancement Funding Corp. Tobacco
Settlement Asset-backed Bonds, Series 2002-A, Class A, 6.72% 2025 29,508 27,884
California Dept. of Water Resources, Power Supply Revenue Bonds, Series 2002-E:
3.975% 2005 10,000 10,101
4.33% 2006 13,320 13,523
California Maritime Infrastructure Authority, Taxable Lease Revenue Bonds
(San Diego Unified Port District-South Bay Plant Acquisition),
Series 1999, 6.63% 2009 (2) (4) 12,509 13,106
Los Angeles County, California, Metropolitan Transportation Authority,
General Revenue Refunding Bonds (Workers' Compensation Funding Program),
Series 2003, AMBAC insured:
3.83% 2008 5,000 4,968
4.56% 2010 5,000 4,984
State of Arkansas, Chugach Electric Association, Inc., Series 2001-A,
MBIA insured, 6.55% 2011 7,500 8,217
State of South Carolina, Tobacco Settlement Revenue Management Authority,
Tobacco Settlement Asset-backed Bonds, Series 2001-B, 6.00% 2022 6,410 5,688
New York Dormitory Authority, City University System Consolidated Third
General Resolution Revenue Bonds, Series 2003-2, 2.38% 2005 4,500 4,496
New York Housing Finance Agency., State Personal Income Tax Revenue Bonds
(Economic Development and Housing), Series B:
2.88% 2007 2,000 1,972
3.09% 2007 2,200 2,163
289,551
EQUITY-RELATED SECURITIES - 0.39%
Stocks & warrants - 0.39%
NTELOS Inc. (2) (5) (6) (7) 1,020,970 shares 22,972
Wilshire Financial Services Group Inc. (6) 1,601,967 14,882
ZiLOG, Inc. (6) (7) 879,000 9,634
AirGate PCS, Inc. (2) (7) 440,553 8,062
Dobson Communications Corp., Class A (2) (7) 2,432,959 7,931
DigitalGlobe, Inc. (2) (5) (7) 3,984,039 3,984
VersaTel Telecom International NV (7) 779,280 1,517
Clarent Hospital Corp. (6) (7) 331,291 414
XO Communications, Inc.: (7)
Series A, warrants, expire 2010 11,372 17
Series B, warrants, expire 2010 8,529 9
Series C, warrants, expire 2010 8,529 6
XO Communications, Inc. (7) 5,685 23
Protection One, Inc., warrants, expire 2005 (2) (5) (7) 54,400 5
69,456
TOTAL BONDS, NOTES PREFERRED STOCKS &
EQUITY-RELATED SECURITIES (cost: $16,572,937,000) 16,987,107
Principal Market
amount value
SHORT-TERM SECURITIES - 6.01% (000) (000)
CORPORATE SHORT-TERM NOTES - 5.07%
Receivables Capital Co., LLC: (2)
1.08% due 7/9/2004 $ 15,100 15,096
1.25% due 7/22/2004 40,000 39,969
1.28% due 7/30/2004 25,000 24,973
Bank of America Corp. 1.20% due 8/9/2004 20,000 19,973
Variable Funding Capital Corp.: (2)
1.10% due 7/12/2004 25,000 24,991
1.08%-1.09% due 7/14/2004 50,000 49,979
1.22% due 7/20/2004 25,000 24,983
Park Avenue Receivables Co. LLC: (2)
1.07% due 7/8/2004 25,000 24,994
1.21% due 7/21/2004 25,000 24,982
J.P. Morgan Chase & Co.:
1.10% due 7/19/2004 25,000 24,985
1.31% due 8/16/2004 25,000 24,957
Procter & Gamble Co.: (2)
1.10% due 7/15/2004 25,000 24,989
1.16% due 7/23/2004 50,000 49,963
1.26% due 8/18/2004 25,000 24,956
Pfizer Inc: (2)
1.05% due 7/12/2004 23,100 23,092
1.23% due 8/6/2004 50,000 49,937
1.28% due 8/12/2004 26,900 26,859
E.I. DuPont de Nemours & Co.:
1.02%-1.03% due 7/7/2004 38,000 37,992
1.18% due 7/14/2004 37,000 36,983
CAFCO LLC 1.30% due 8/17/2004 (2) 75,000 74,869
Clipper Receivables Co. LLC: (2)
1.08% due 7/13/2004 30,000 29,988
1.09% due 7/26/2004 25,000 24,980
Coca-Cola Co. 1.04%-1.05% due 7/9/2004 50,000 49,987
Edison Asset Securitization LLC 1.10%-1.13% due 7/16/2004 (2) 50,000 49,975
Netjets Inc.: (2)
1.12% due 7/28/2004 25,600 25,578
1.35% due 9/7/2004 24,400 24,335
IBM Credit Corp.:
1.40% due 7/1/2004 13,200 13,199
1.04% due 7/12/2004 25,000 24,991
892,555
CERTIFICATES OF DEPOSIT - 0.57%
Wells Fargo & Co. 1.30% due 8/6/2004 50,000 50,000
State Street Corp. 1.12% due 7/26/2004 50,000 50,000
100,000
U.S. TREASURIES - 0.31%
U.S. Treasury Bills .895%-1.04% due 7/22/2004 55,500 55,465
FEDERAL AGENCY DISCOUNT NOTES - 0.06%
Federal Home Loan Bank 1.04% due 7/21/2004 10,000 9,994
TOTAL SHORT-TERM SECURITIES (cost: $1,058,021,000) 1,058,014
TOTAL INVESTMENT SECURITIES (cost: $17,630,958,000) 18,045,121
Other assets less liabilities -424,570
NET ASSETS $17,620,551
(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.
(3) This security, or a portion of this security, has been segregated to cover
funding requirement on investment transactions settling in the future.
(4) Pass-through securities backed by a pool of mortgages or other loans on
which principal payments are periodically made. Therefore, the effective
maturities are shorter than the stated maturities.
(5) Valued under fair value procedures adopted by authority of the Board of
Directors.
(6) The fund owns 11.77%, 5.24%, 7.58% and 5.43% of the outstanding voting
securities of NTELOS, Inc., ZiLOG Inc., Wilshire Financial Services Group
Inc. and Clarent Hospital Corp., respectively, and thus is considered an
affiliate of these companies under the Investment Act of 1940.
(7) Security did not produce income during the last 12 months.
(8) Payment in kind; the issuer has the option of paying additional securities
in lieu of cash.
(9) Step bond; coupon rate will increase at a later date.
(10) Company not making scheduled interest payments; bankruptcy proceedings
pending.
(11) Purchased as a unit; issue was separated but reattached for reporting
purposes.
(12) Company did not make principal payment upon scheduled maturity date;
reorganization pending.
(13) This unit also contains 999,000 par of Drax Group Ltd., Class A-3, 10.0375%
2020 and 999,000 shares of Drax Group Ltd. common stock.
(14) Scheduled interest or principal payments not made; reorganization pending.
(15) Index-linked bond whose principal amount moves with a government retail
price index.
See Notes to Financial Statements
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES unaudited
at June 30, 2004
(dollars and shares in thousands, except per-share amounts)
ASSETS:
Investment securities at market:
Unaffiliated issuers (cost: $17,554,643) $17,981,793
Affiliated issuers (cost: $76,315) 63,328 $18,045,121
Cash 41,235
Receivables for:
Sales of investments 257,590
Sales of fund's shares 45,406
Open forward currency contracts 31
Dividends and interest 221,510 524,537
18,610,893
LIABILITIES:
Payables for:
Purchases of investments 925,693
Repurchases of fund's shares 31,736
Dividends on fund's shares 13,141
Open forward currency contracts 5,483
Closed forward currency contracts 3,318
Investment advisory services 3,662
Services provided by affiliates 6,841
Deferred Directors' compensation 282
Other fees and expenses 186 990,342
NET ASSETS AT JUNE 30, 2004 $17,620,551
NET ASSETS CONSIST OF:
Capital paid in on shares of capital stock $17,767,489
Distributions in excess of net investment income (6,168)
Accumulated net realized loss (549,766)
Net unrealized appreciation 408,996
NET ASSETS AT JUNE 30, 2004 $17,620,551
TOTAL AUTHORIZED CAPITAL STOCK - 2,500,000 SHARES, $.001 PAR VALUE
(1,330,854 total shares outstanding)
Shares Net asset value
Net assets outstanding per share (1)
Class A $14,275,752 1,078,226 $13.24
Class B 1,287,332 97,230 13.24
Class C 941,572 71,115 13.24
Class F 356,342 26,914 13.24
Class 529-A 141,980 10,723 13.24
Class 529-B 41,479 3,133 13.24
Class 529-C 69,890 5,279 13.24
Class 529-E 8,672 655 13.24
Class 529-F 2,871 217 13.24
Class R-1 7,880 595 13.24
Class R-2 173,090 13,074 13.24
Class R-3 152,479 11,517 13.24
Class R-4 44,065 3,328 13.24
Class R-5 117,147 8,848 13.24
(1) Maximum offering price and redemption price per share were equal to the net
asset value per share for all share classes, except for classes A and
529-A, for which the maximum offering prices per share were $13.76 for
each.
See Notes to Financial Statements
STATEMENT OF OPERATIONS unaudited
for the six months ended June 30, 2004 (dollars in thousands)
INVESTMENT INCOME:
Income:
Interest $449,375
Dividends 7,247 $456,622
Fees and expenses:
Investment advisory services 22,116
Distribution services 30,733
Transfer agent services 9,539
Administrative services 2,352
Reports to shareholders 650
Registration statement and prospectus 519
Postage, stationery and supplies 1,073
Directors' compensation 62
Auditing and legal 80
Custodian 318
State and local taxes 157
Other 39
Total expenses before reimbursement 67,638
Reimbursement of expenses 311 67,327
Net investment income 389,295
NET REALIZED GAIN AND UNREALIZED DEPRECIATION
ON INVESTMENTS AND NON-U.S. CURRENCY:
Net realized gain (loss) on:
Investments 158,402
Non-U.S. currency transactions (800) 157,602
Net unrealized depreciation on:
Investments (510,265)
Non-U.S. currency translations (2,657) (512,922)
Net realized gain and unrealized depreciation
on investments and non-U.S. currency (355,320)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $33,975
See Notes to Financial Statements
STATEMENT OF CHANGES IN NET ASSETS (dollars in thousands)
Six months Year ended
ended June 30, December 31,
2004* 2003
OPERATIONS:
Net investment income $389,295 $804,752
Net realized gain on investments and
non-U.S. currency transactions 157,602 10,312
Net unrealized (depreciation) appreciation
on investments and non-U.S. currency translations (512,922) 983,905
Net increase in net assets
resulting from operations 33,975 1,798,969
DIVIDENDS PAID OR ACCRUED TO SHAREHOLDERS
FROM NET INVESTMENT INCOME (392,657) (836,446)
CAPITAL SHARE TRANSACTIONS 1,028,779 1,487,583
TOTAL INCREASE IN NET ASSETS 670,097 2,450,106
NET ASSETS:
Beginning of period 16,950,454 14,500,348
End of period (including distributions in excess of net
investment income: $6,168 and $2,806, respectively) $17,620,551 $16,950,454
*Unaudited
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS unaudited
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) are sponsored by the Commonwealth of Virginia and 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:
- ---------------------------------------------------------------------------------------------------------
CONTINGENT DEFERRED SALES
SHARE CLASS INITIAL SALES CHARGE CHARGE UPON REDEMPTION CONVERSION FEATURE
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes A and 529-A Up to 3.75% None (except 1% for certain None
redemptions within one year
of purchase without an initial
sales charge)
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes B and 529-B None Declines from 5% to zero for Classes B and 529-B convert
redemptions within six years to classes A and 529-A,
of purchase respectively, after eight
years
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Class C None 1% for redemptions within one Class C converts to Class F
year of purchase after 10 years
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Class 529-C None 1% for redemptions within one None
year of purchase
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Class 529-E None None None
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes F and 529-F None None None
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes R-1, R-2, R-3, None None None
R-4 and R-5
- ---------------------------------------------------------------------------------------------------------
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
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 at prices for securities of comparable maturity, quality
and type. Short-term securities maturing within 60 days are valued at
amortized cost, which approximates market value. 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 their representative
quoted bid and asked prices. Securities and other assets for which
representative market quotations are not readily available are fair valued
as determined in good faith 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 at the end of the
reporting period. 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 in 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 in the accompanying financial
statements.
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.
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.
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 securities within 30 days of purchase; unrealized
appreciation of certain investments in non-U.S. securities; cost of investments
sold; paydowns on investments 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. As of June 30, 2004, the
cost of investment securities, excluding forward currency contracts, for federal
income tax purposes was $17,692,292,000.
As of June 30, 2004, the components of distributable earnings on a tax basis
were as follows:
(dollars in thousands)
Undistributed net investment income and currency gains $ 57,183
Accumulated short-term capital losses (638,669)
Accumulated long-term capital gains 102,251
Gross unrealized appreciation on investment securities 675,691
Gross unrealized depreciation on investment securities (322,862)
Accumulated short-term capital losses above include capital loss carryforwards
of $243,982,000, $254,538,000, $57,575,000, $42,420,000 and $24,538,000 expiring
in 2011, 2010, 2009, 2008 and 2007, respectively. The capital loss carryforwards
will be used to offset any capital gains realized by the fund in the current
year or in subsequent years through the expiration dates. During the six months
ended June 30, 2004, the fund realized, on a tax basis, a net capital gain of
$112,698,000. The fund will not make distributions from capital gains while
capital loss carryforwards remain. The numbers above reflect capital losses of
$26,063,000, that were realized during the period November 1, 2003 through
December 31, 2003.
Ordinary income distributions paid or accrued to shareholders from net
investment income and currency gains were as follows (dollars in thousands):
SIX MONTHS ENDED YEAR ENDED
SHARE CLASS JUNE 30, 2004 DECEMBER 31, 2003
Class A $ 328,585 $ 720,504
Class B 25,075 52,350
Class C 17,312 32,059
Class F 7,539 11,977
Class 529-A 2,906 4,034
Class 529-B 718 1,127
Class 529-C 1,186 1,805
Class 529-E 169 249
Class 529-F 55 48
Class R-1 119 122
Class R-2 2,803 3,030
Class R-3 2,723 2,906
Class R-4 748 605
Class R-5 2,719 5,630
Total $ 392,657 $ 836,446
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 ("AFS"), the fund's
transfer agent, and American Funds Distributors, Inc. ("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 0.13% on such assets in excess of $16
billion. The agreement also provides for monthly fees, accrued daily, based on a
declining series of annual 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. The Board of Directors approved an amended agreement effective
April 1, 2004, continuing the series of rates to include an additional annual
rate of 0.12% on daily net assets in excess of $20 billion. For the six months
ended June 30, 2004, the investment advisory services fee was $22,116,000, which
was equivalent to an annualized rate of 0.254% 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. The plans provide for annual
expenses, based on a percentage of average daily net assets, ranging from
0.25% to 1.00% as noted below. In some cases, the Board of Directors has
approved expense amounts lower than plan limits. 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 for providing certain shareholder services. Expenses in
excess of these amounts, up to approved limits, may be used to compensate
dealers and wholesalers for shares sold.
For classes 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. Each class reimburses 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 June 30, 2004,
unreimbursed expenses subject to reimbursement totaled $9,532,000 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
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Classes B and 529-B 1.00 1.00
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Classes C, 529-C and R-1 1.00 1.00
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Class R-2 0.75 1.00
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Classes 529-E and R-3 0.50 0.75
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Classes F, 529-F and R-4 0.25 0.50
--------------------------------------------------------------------------
TRANSFER AGENT SERVICES - The fund has a transfer agent agreement with AFS
for classes 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 classes of shares other than classes A and B. Each relevant class
pays CRMC annual fees of 0.15% (0.10% for Class R-5) based on its
respective average daily net assets. Each relevant 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.
During the six months ended June 30, 2004, CRMC voluntarily agreed to pay a
portion of these fees for classes R-1, R-2 and R-3. 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 in
the accompanying financial statements, the Commonwealth of Virginia is not
considered a related party. Administrative services fees are presented
gross of any payments made by CRMC.
Expenses under the agreements described above for the six months ended June
30, 2004, were as follows (dollars in thousands):
==============================================================================================================
ADMINISTRATIVE SERVICES
------------------------------------------------------------
COMMONWEALTH OF
CRMC VIRGINIA
DISTRIBUTION TRANSFER AGENT ADMINISTRATIVE TRANSFER AGENT ADMINISTRATIVE
SHARE CLASS SERVICES SERVICES SERVICES SERVICES SERVICES
--------------------------------------------------------------------------------------------------------------
Class A $17,763 $8,845 Not applicable Not applicable Not applicable
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class B 6,440 694 Not applicable Not applicable Not applicable
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class C 4,544 Included $682 $154 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class F 412 Included 247 44 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-A 103 Included 95 14 $64
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-B 194 Included 29 11 19
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-C 319 Included 48 14 32
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-E 20 Included 6 1 4
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-F 3 Included 2 -* 1
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-1 31 Included 5 5 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-2 544 Included 109 496 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-3 320 Included 96 92 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-4 40 Included 24 2 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-5 Not applicable Included 55 1 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Total $30,733 $9,539 $1,398 $834 $120
==============================================================================================================
* Amount less than one thousand.
DEFERRED DIRECTORS' COMPENSATION - Since the adoption of the deferred
compensation plan in 1993, Directors who are unaffiliated with CRMC may 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 in the accompanying financial statements
includes $45,000 in current fees (either paid in cash or deferred) and a net
increase of $17,000 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):
REINVESTMENTS
SALES(1) OF DIVIDENDS REPURCHASES(1) NET INCREASE
SHARE CLASS AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
SIX MONTHS ENDED JUNE 30, 2004
Class A $2,030,979 150,400 $ 270,853 20,119 $ (1,727,034) (128,312) $ 574,798 42,207
Class B 151,687 11,233 19,678 1,461 (131,826) (9,805) 39,539 2,889
Class C 226,247 16,743 13,430 998 (126,336) (9,399) 113,341 8,342
Class F 125,258 9,280 5,782 430 (59,014) (4,398) 72,026 5,312
Class 529-A 38,639 2,863 2,790 207 (6,232) (463) 35,197 2,607
Class 529-B 8,110 601 690 51 (1,745) (130) 7,055 522
Class 529-C 17,300 1,281 1,139 85 (3,287) (244) 15,152 1,122
Class 529-E 1,981 147 162 12 (370) (28) 1,773 131
Class 529-F 790 59 53 4 (58) (4) 785 59
Class R-1 4,164 309 113 8 (904) (67) 3,373 250
Class R-2 84,438 6,255 2,678 200 (21,519) (1,594) 65,597 4,861
Class R-3 76,309 5,652 2,600 193 (18,515) (1,373) 60,394 4,472
Class R-4 32,061 2,384 713 53 (6,384) (474) 26,390 1,963
Class R-5 26,246 1,961 1,746 130 (14,633) (1,094) 13,359 997
TOTAL NET INCREASE
(DECREASE) $2,824,209 209,168 $ 322,427 23,951 $ (2,117,857) (157,385) $1,028,779 75,734
YEAR ENDED DECEMBER 31, 2003
Class A $3,914,006 298,503 $ 606,086 46,021 $ (3,944,314) (300,701) $ 575,778 43,823
Class B 447,795 34,182 41,587 3,155 (222,252) (16,906) 267,130 20,431
Class C 439,411 33,447 25,135 1,906 (213,329) (16,240) 251,217 19,113
Class F 247,799 18,925 9,380 711 (159,243) (12,222) 97,936 7,414
Class 529-A 58,345 4,428 4,025 305 (7,496) (567) 54,874 4,166
Class 529-B 17,719 1,348 1,125 85 (1,780) (134) 17,064 1,299
Class 529-C 29,195 2,219 1,798 136 (5,184) (392) 25,809 1,963
Class 529-E 4,019 306 247 19 (969) (74) 3,297 251
Class 529-F 1,906 145 48 3 (38) (3) 1,916 145
Class R-1 5,828 442 121 9 (2,261) (172) 3,688 279
Class R-2 113,952 8,680 3,007 227 (30,794) (2,338) 86,165 6,569
Class R-3 99,210 7,575 2,884 218 (28,674) (2,178) 73,420 5,615
Class R-4 19,077 1,446 604 46 (12,668) (971) 7,013 521
Class R-5 49,613 3,802 3,594 272 (30,931) (2,348) 22,276 1,726
TOTAL NET INCREASE
(DECREASE) $5,447,875 415,448 $ 699,641 53,113 $ (4,659,933) (355,246) $1,487,583 113,315
(1) Includes exchanges between share classes of the fund.
6. FORWARD CURRENCY CONTRACTS
As of June 30, 2004, the fund had outstanding forward currency contracts to sell
non-U.S. currencies as follows:
CONTRACT AMOUNT U.S. VALUATIONS AT JUNE 30, 2004
UNREALIZED
(DEPRECIATION)
NON-U.S. U.S. AMOUNT APPRECIATION
NON-U.S. CURRENCY CONTRACTS (000) (000) (000) (000)
Sales:
Euros expiring 7/15 to 9/17/2004 Euro 210,317 250,256 255,739 (5,483)
British pounds expiring 9/10/2004 Lira 1,920 3,492 3,461 31
Forward currency contracts - net 253,748 259,200 (5,452)
7. RESTRICTED SECURITIES
The fund has invested in certain securities for which resale may be limited to
qualified buyers or which are otherwise restricted. These securities are
identified in the investment portfolio. As of June 30, 2004, the total value of
restricted securities was $3,299,441,000, which represented 18.72% of the net
assets of the fund. Most of these securities are, in practice, as liquid as
unrestricted securities in the portfolio. The total value of restricted
securities determined to be illiquid at June 30, 2004 was $49,612,000, which
represented 0.28% of the net assets of the fund.
8. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding short-term
securities, of $5,284,676,000 and $4,623,545,000, respectively, during the six
months ended June 30, 2004.
The fund receives a reduction in its custodian fee equal to the amount of
interest calculated on certain cash balances held at the custodian bank. For the
six months ended June 30, 2004, the custodian fee of $318,000, included $47,000
that was offset by this reduction, rather than paid in cash.
FINANCIAL HIGHLIGHTS (1)
INCOME (LOSS) FROM INVESTMENT OPERATIONS(2)
NET
NET ASSET (LOSSES) GAINS
VALUE, NET ON SECURITIES TOTAL FROM
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT
OF PERIOD INCOME AND UNREALIZED) OPERATIONS
CLASS A:
Six months ended 6/30/2004 (5) $13.51 $.31 $(.27) $.04
Year ended 12/31/2003 12.70 .68 .84 1.52
Year ended 12/31/2002 12.79 .82 (.08) .74
Year ended 12/31/2001 12.79 .93 (.03) .90
Year ended 12/31/2000 12.98 .94 (.17) .77
Year ended 12/31/1999 13.61 .93 (.63) .30
CLASS B:
Six months ended 6/30/2004 (5) 13.51 .26 (.27) (.01)
Year ended 12/31/2003 12.70 .58 .84 1.42
Year ended 12/31/2002 12.79 .72 (.08) .64
Year ended 12/31/2001 12.79 .83 (.03) .80
Period from 3/15/2000 to 12/31/2000 12.92 .62 (.08) .54
CLASS C:
Six months ended 6/30/2004 (5) 13.51 .26 (.27) (.01)
Year ended 12/31/2003 12.70 .57 .84 1.41
Year ended 12/31/2002 12.79 .71 (.08) .63
Period from 3/15/2001 to 12/31/2001 13.05 .63 (.27) .36
CLASS F:
Six months ended 6/30/2004 (5) 13.51 .31 (.27) .04
Year ended 12/31/2003 12.70 .67 .84 1.51
Year ended 12/31/2002 12.79 .81 (.08) .73
Period from 3/15/2001 to 12/31/2001 13.05 .70 (.27) .43
CLASS 529-A:
Six months ended 6/30/2004 (5) 13.51 .31 (.27) .04
Year ended 12/31/2003 12.70 .67 .84 1.51
Period from 2/15/2002 to 12/31/2002 12.76 .69 (.04) .65
CLASS 529-B:
Six months ended 6/30/2004 (5) 13.51 .25 (.27) (.02)
Year ended 12/31/2003 12.70 .55 .84 1.39
Period from 2/15/2002 to 12/31/2002 12.76 .60 (.04) .56
CLASS 529-C:
Six months ended 6/30/2004 (5) 13.51 .25 (.27) (.02)
Year ended 12/31/2003 12.70 .55 .84 1.39
Period from 2/19/2002 to 12/31/2002 12.73 .60 (.02) .58
CLASS 529-E:
Six months ended 6/30/2004 (5) 13.51 .28 (.27) .01
Year ended 12/31/2003 12.70 .62 .84 1.46
Period from 3/7/2002 to 12/31/2002 12.70 .61 .02 .63
CLASS 529-F:
Six months ended 6/30/2004 (5) 13.51 .30 (.27) .03
Year ended 12/31/2003 12.70 .64 .84 1.48
Period from 9/26/2002 to 12/31/2002 12.31 .19 .40 .59
CLASS R-1:
Six months ended 6/30/2004 (5) $13.51 $.26 $(.27) $(.01)
Year ended 12/31/2003 12.70 .57 .84 1.41
Period from 6/11/2002 to 12/31/2002 12.65 .38 .06 .44
CLASS R-2:
Six months ended 6/30/2004 (5) 13.51 .26 (.27) (.01)
Year ended 12/31/2003 12.70 .57 .84 1.41
Period from 5/31/2002 to 12/31/2002 12.72 .40 (.01) .39
CLASS R-3:
Six months ended 6/30/2004 (5) 13.51 .28 (.27) .01
Year ended 12/31/2003 12.70 .62 .84 1.46
Period from 6/4/2002 to 12/31/2002 12.73 .42 (.02) .40
CLASS R-4:
Six months ended 6/30/2004 (5) 13.51 .31 (.27) .04
Year ended 12/31/2003 12.70 .67 .84 1.51
Period from 5/20/2002 to 12/31/2002 12.67 .47 .04 .51
CLASS R-5:
Six months ended 6/30/2004 (5) 13.51 .33 (.27) .06
Year ended 12/31/2003 12.70 .71 .84 1.55
Period from 5/15/2002 to 12/31/2002 12.66 .52 .05 .57
DIVIDENDS
(FROM NET NET ASSET NET ASSETS,
INVESTMENT VALUE, END TOTAL END OF PERIOD
INCOME) OF PERIOD RETURN (IN MILLIONS)
CLASS A:
Six months ended 6/30/2004 (5) $(.31) $13.24 .28% $14,276
Year ended 12/31/2003 (.71) 13.51 12.22 13,991
Year ended 12/31/2002 (.83) 12.70 6.11 12,600
Year ended 12/31/2001 (.90) 12.79 7.15 11,223
Year ended 12/31/2000 (.96) 12.79 6.19 9,366
Year ended 12/31/1999 (.93) 12.98 2.29 9,477
CLASS B:
Six months ended 6/30/2004 (5) (.26) 13.24 (.08) 1,287
Year ended 12/31/2003 (.61) 13.51 11.38 1,274
Year ended 12/31/2002 (.73) 12.70 5.28 939
Year ended 12/31/2001 (.80) 12.79 6.37 471
Period from 3/15/2000 to 12/31/2000 (.67) 12.79 4.33 88
CLASS C:
Six months ended 6/30/2004 (5) (.26) 13.24 (.12) 942
Year ended 12/31/2003 (.60) 13.51 11.29 848
Year ended 12/31/2002 (.72) 12.70 5.20 554
Period from 3/15/2001 to 12/31/2001 (.62) 12.79 2.83 188
CLASS F:
Six months ended 6/30/2004 (5) (.31) 13.24 .26 356
Year ended 12/31/2003 (.70) 13.51 12.15 292
Year ended 12/31/2002 (.82) 12.70 6.04 180
Period from 3/15/2001 to 12/31/2001 (.69) 12.79 3.35 76
CLASS 529-A:
Six months ended 6/30/2004 (5) (.31) 13.24 .25 142
Year ended 12/31/2003 (.70) 13.51 12.21 110
Period from 2/15/2002 to 12/31/2002 (.71) 12.70 5.33 50
CLASS 529-B:
Six months ended 6/30/2004 (5) (.25) 13.24 (.18) 42
Year ended 12/31/2003 (.58) 13.51 11.18 35
Period from 2/15/2002 to 12/31/2002 (.62) 12.70 4.55 17
CLASS 529-C:
Six months ended 6/30/2004 (5) (.25) 13.24 (.18) 70
Year ended 12/31/2003 (.58) 13.51 11.19 56
Period from 2/19/2002 to 12/31/2002 (.61) 12.70 4.75 28
CLASS 529-E:
Six months ended 6/30/2004 (5) (.28) 13.24 .08 9
Year ended 12/31/2003 (.65) 13.51 11.77 7
Period from 3/7/2002 to 12/31/2002 (.63) 12.70 5.14 3
CLASS 529-F:
Six months ended 6/30/2004 (5) (.30) 13.24 .21 3
Year ended 12/31/2003 (.67) 13.51 11.96 2
Period from 9/26/2002 to 12/31/2002 (.20) 12.70 4.81 - (7)
CLASS R-1:
Six months ended 6/30/2004 (5) $(.26) $13.24 (.13)% $8
Year ended 12/31/2003 (.60) 13.51 11.29 5
Period from 6/11/2002 to 12/31/2002 (.39) 12.70 3.59 1
CLASS R-2:
Six months ended 6/30/2004 (5) (.26) 13.24 (.11) 173
Year ended 12/31/2003 (.60) 13.51 11.33 111
Period from 5/31/2002 to 12/31/2002 (.41) 12.70 3.23 21
CLASS R-3:
Six months ended 6/30/2004 (5) (.28) 13.24 .08 152
Year ended 12/31/2003 (.65) 13.51 11.76 95
Period from 6/4/2002 to 12/31/2002 (.43) 12.70 3.31 18
CLASS R-4:
Six months ended 6/30/2004 (5) (.31) 13.24 .26 44
Year ended 12/31/2003 (.70) 13.51 12.15 18
Period from 5/20/2002 to 12/31/2002 (.48) 12.70 4.21 11
CLASS R-5:
Six months ended 6/30/2004 (5) (.33) 13.24 .42 117
Year ended 12/31/2003 (.74) 13.51 12.52 106
Period from 5/15/2002 to 12/31/2002 (.53) 12.70 4.66 78
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF
TO AVERAGE NET TO AVERAGE NET NET INCOME
ASSETS BEFORE ASSETS AFTER TO AVERAGE
REIMBURSEMENT REIMBURSEMENT (4) NET ASSETS
CLASS A:
Six months ended 6/30/2004 (5) .66% (6) .66% (6) 4.59%(6)
Year ended 12/31/2003 .67 .67 5.15
Year ended 12/31/2002 .71 .71 6.59
Year ended 12/31/2001 .71 .71 7.17
Year ended 12/31/2000 .72 .72 7.35
Year ended 12/31/1999 .69 .69 6.96
CLASS B:
Six months ended 6/30/2004 (5) 1.40 (6) 1.40 (6) 3.86 (6)
Year ended 12/31/2003 1.41 1.41 4.37
Year ended 12/31/2002 1.47 1.47 5.77
Year ended 12/31/2001 1.45 1.45 6.30
Period from 3/15/2000 to 12/31/2000 1.42 (6) 1.42 (6) 6.65 (6)
CLASS C:
Six months ended 6/30/2004 (5) 1.47 (6) 1.47 (6) 3.77 (6)
Year ended 12/31/2003 1.49 1.49 4.26
Year ended 12/31/2002 1.55 1.55 5.66
Period from 3/15/2001 to 12/31/2001 1.57 (6) 1.57 (6) 6.25 (6)
CLASS F:
Six months ended 6/30/2004 (5) .71 (6) .71 (6) 4.53 (6)
Year ended 12/31/2003 .72 .72 5.02
Year ended 12/31/2002 .77 .77 6.44
Period from 3/15/2001 to 12/31/2001 .79 (6) .79 (6) 7.03 (6)
CLASS 529-A:
Six months ended 6/30/2004 (5) .72 (6) .72 (6) 4.53 (6)
Year ended 12/31/2003 .68 .68 5.05
Period from 2/15/2002 to 12/31/2002 .75 (6) .75 (6) 6.46 (6)
CLASS 529-B:
Six months ended 6/30/2004 (5) 1.60 (6) 1.60 (6) 3.66 (6)
Year ended 12/31/2003 1.61 1.61 4.13
Period from 2/15/2002 to 12/31/2002 1.64 (6) 1.64 (6) 5.57 (6)
CLASS 529-C:
Six months ended 6/30/2004 (5) 1.58 (6) 1.58 (6) 3.67 (6)
Year ended 12/31/2003 1.59 1.59 4.15
Period from 2/19/2002 to 12/31/2002 1.63 (6) 1.63 (6) 5.58 (6)
CLASS 529-E:
Six months ended 6/30/2004 (5) 1.06 (6) 1.06 (6) 4.19 (6)
Year ended 12/31/2003 1.06 1.06 4.68
Period from 3/7/2002 to 12/31/2002 1.13 (6) 1.13 (6) 6.06 (6)
CLASS 529-F:
Six months ended 6/30/2004 (5) .81 (6) .81 (6) 4.45 (6)
Year ended 12/31/2003 .82 .82 4.72
Period from 9/26/2002 to 12/31/2002 .30 (6) .30 (6) 1.51 (6)
CLASS R-1:
Six months ended 6/30/2004 (5) 1.57% (6) 1.48% (6) 3.78%(6)
Year ended 12/31/2003 1.65 1.49 4.13
Period from 6/11/2002 to 12/31/2002 2.53 (6) 1.52 (6) 5.55 (6)
CLASS R-2:
Six months ended 6/30/2004 (5) 1.86 (6) 1.45 (6) 3.81 (6)
Year ended 12/31/2003 1.94 1.46 4.20
Period from 5/31/2002 to 12/31/2002 1.67 (6) 1.48 (6) 5.56 (6)
CLASS R-3:
Six months ended 6/30/2004 (5) 1.07 (6) 1.06 (6) 4.19 (6)
Year ended 12/31/2003 1.12 1.07 4.59
Period from 6/4/2002 to 12/31/2002 1.20 (6) 1.10 (6) 5.95 (6)
CLASS R-4:
Six months ended 6/30/2004 (5) .70 (6) .70 (6) 4.57 (6)
Year ended 12/31/2003 .72 .72 5.05
Period from 5/20/2002 to 12/31/2002 .77 (6) .74 (6) 6.20 (6)
CLASS R-5:
Six months ended 6/30/2004 (5) .38 (6) .38 (6) 4.87 (6)
Year ended 12/31/2003 .40 .40 5.39
Period from 5/15/2002 to 12/31/2002 .42 (6) .42 (6) 6.75 (6)
Six months ended
June 30, Year ended December 31
2004(5) 2003 2002 2001 2000 1999
PORTFOLIO TURNOVER RATE FOR ALL CLASSES OF SHARES 27% 60% 50% 64% 62% 47%
(1) Based on operations for the period shown (unless otherwise noted) and,
accordingly, may not be representative of a full year.
(2) Year ended 1999 is based on shares outstanding on the last day of the year;
all other periods are 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 and payments from CRMC. During some of the periods shown,
CRMC voluntarily 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 voluntarily agreed to pay a
portion of the fees related to transfer agent services.
(5) Unaudited.
(6) Annualized.
(7) Amount less than $1 million.
See Notes to Financial Statements
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 the most
current information and month-end results, visit americanfunds.com.
Returns for periods ended June 30, 2004:
1 YEAR LIFE OF CLASS
CLASS B SHARES
Reflecting applicable contingent deferred sales charge (CDSC), maximum
of 5%, payable only if shares are sold within six years of purchase -2.20% +5.92% (1)
Not reflecting CDSC +2.74 +6.31 (1)
CLASS C SHARES
Reflecting CDSC, maximum of 1%, payable only if shares are
sold within one year of purchase +1.67 +5.76 (2)
Not reflecting CDSC +2.66 +5.76 (2)
CLASS F SHARES (3)
Not reflecting annual asset-based fee charged by sponsoring firm +3.44 +6.55 (2)
CLASS 529-A SHARES
Reflecting 3.75% maximum sales charge -0.40 +5.69 (4)
Not reflecting maximum sales charge +3.46 +7.42 (4)
CLASS 529-B SHARES
Reflecting applicable CDSC, maximum of 5%, payable only if
shares are sold within six years of purchase -2.40 +4.91 (4)
Not reflecting CDSC +2.54 +6.47 (4)
CLASS 529-C SHARES
Reflecting CDSC, maximum of 1%, payable only if shares are
sold within one year of purchase +1.56 +6.60 (5)
Not reflecting CDSC +2.55 +6.60 (5)
CLASS 529-E SHARES (3) +3.08 +7.26 (6)
CLASS 529-F SHARES (3)
Not reflecting annual asset-based fee charged by sponsoring firm +3.35 +9.65 (7)
(1) Average annual total return from March 15, 2000, when Class B shares were
first sold.
(2) Average annual total return from March 15, 2001, when Class C and Class F
shares were first sold.
(3) These shares are sold without any initial or contingent deferred sales
charge.
(4) Average annual total return from February 15, 2002, when Class 529-A and
Class 529-B shares were first sold.
(5) Average annual total return from February 19, 2002, when Class 529-C shares
were first sold.
(6) Average annual total return from March 7, 2002, when Class 529-E shares
were first sold.
(7) Average annual total return from September 26, 2002, when Class 529-F
shares were first sold.
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
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
CUSTODIAN OF ASSETS
JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017-2070
COUNSEL
Paul, Hastings, Janofsky & Walker LLP
515 South Flower Street
Los Angeles, CA 90071-2228
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Two California Plaza
350 South Grand Avenue
Los Angeles, CA 90071-3462
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. 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.
Annualized expenses for Class B shares were 0.74 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 annualized expenses 0.81 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 higher
annualized expenses (by 0.05 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 AND COLLEGEAMERICA. 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 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 UPON REQUEST, FREE OF CHARGE,
BY CALLING AMERICAN FUNDS SERVICE COMPANY, VISITING THE AMERICAN FUNDS WEBSITE
OR ACCESSING THE U.S. SECURITIES AND EXCHANGE COMMISSION WEBSITE AT WWW.SEC.GOV.
This report is for the information of shareholders of The Bond Fund of America,
but it may also be used as sales literature when preceded or accompanied by the
current prospectus, which gives details about charges, expenses, investment
objectives and operating policies of the fund. If used as sales material after
September 30, 2004, this report must be accompanied by an American Funds
statistical update for the most recently completed calendar quarter.
[logo - American Funds(R)]
The right choice for the long term(R)
WHAT MAKES AMERICAN FUNDS DIFFERENT?
For more than 70 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 29 carefully conceived, broadly diversified funds has
attracted over 25 million shareholder accounts.
Our unique combination of strengths includes these five factors:
o A LONG-TERM, VALUE-ORIENTED APPROACH
Rather than follow fads, we pursue a consistent strategy, focusing on each
investment's long-term potential.
o AN UNPARALLELED GLOBAL RESEARCH EFFORT
American Funds draws on one of the industry's most globally integrated
research networks.
o THE MULTIPLE PORTFOLIO COUNSELOR SYSTEM
Every American Fund is divided among a number of portfolio counselors. Each
takes responsibility for a portion independently, within each fund's
objectives; in most cases, research analysts manage a portion as well. Over
time this method has contributed to a consistency of results and continuity
of management.
o EXPERIENCED INVESTMENT PROFESSIONALS
The recent market decline was not the first for most of the portfolio
counselors who serve the American Funds. Nearly 70% of them were in the
investment business before the sharp market decline of 1987.
o A COMMITMENT TO LOW OPERATING EXPENSES
American Funds' operating expenses are among the lowest in the mutual fund
industry. Our portfolio turnover rates are low as well, keeping transaction
costs and tax consequences contained.
29 MUTUAL FUNDS, CONSISTENT PHILOSOPHY, CONSISTENT RESULTS
o GROWTH FUNDS
AMCAP Fund(R)
EuroPacific Growth Fund(R)
The Growth Fund of America(R)
The New Economy Fund(R)
New Perspective Fund(R)
New World FundSM
SMALLCAP World Fund(R)
o GROWTH-AND-INCOME FUNDS
American Mutual Fund(R)
Capital World Growth and Income FundSM
Fundamental InvestorsSM
The Investment Company of America(R)
Washington Mutual Investors FundSM
o EQUITY-INCOME FUNDS
Capital Income Builder(R)
The Income Fund of America(R)
o BALANCED FUND
American Balanced Fund(R)
o BOND FUNDS
American High-Income TrustSM
> The Bond Fund of AmericaSM
Capital World Bond Fund(R)
Intermediate Bond Fund of America(R)
U.S. Government Securities FundSM
o TAX-EXEMPT BOND FUNDS
American High-Income Municipal Bond Fund(R)
Limited Term Tax-Exempt Bond Fund of AmericaSM
The Tax-Exempt Bond Fund of America(R)
STATE-SPECIFIC TAX-EXEMPT FUNDS
The Tax-Exempt Fund of California(R)
The Tax-Exempt Fund of Maryland(R)
The Tax-Exempt Fund of Virginia(R)
o MONEY MARKET FUNDS
The Cash Management Trust of America(R)
The Tax-Exempt Money Fund of AmericaSM
The U.S. Treasury Money Fund of AmericaSM
THE CAPITAL GROUP COMPANIES
American Funds
Capital Research and Management
Capital International
Capital Guardian
Capital Bank and Trust
Lit. No. MFGESR-908-0804P
Litho in USA BG/L/6370-S1740
Printed on recycled paper
ITEM 2 - Code of Ethics
Not applicable for filing of Semiannual Reports to Shareholders.
ITEM 3 - Audit Committee Financial Expert
Not applicable for filing of Semiannual Reports to Shareholders.
ITEM 4 - Principal Accountant Fees and Services
Not applicable for filing of Semiannual Reports to Shareholders.
ITEM 5 - Audit Committee of Listed Registrants
Not applicable.
ITEM 6 - Reserved
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 - Reserved
ITEM 9 - 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 committee comprised solely of persons
who are not considered "interested persons" of the registrant within the meaning
of the Investment Company Act of 1940. 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 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 committee.
ITEM 10 - Controls and Procedures
(a) The officers providing the certifications in this report in accordance
with rule 30a-2 under the Investment Company Act of 1940 have
concluded, based on their evaluation of the Registrant's disclosure
controls and procedures (as such term is defined in such rule), 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 last fiscal
half-year (the Registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely
to materially affect, the Registrant's internal control over financial
reporting.
ITEM 11 - Exhibits
(a) The Code of Ethics - not applicable for filing of Semiannual Reports to
Shareholders.
(b) 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 PEO
Date: September 7, 2004
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 PEO
Date: September 7, 2004
By /s/ Susi M. Silverman
-----------------------------------------------------
Susi M. Silverman, Treasurer
Date: September 7, 2004