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: December 31, 2004
Julie F. Williams
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 9007
(name and address of agent for service)
Copies to:
Michael Glazer
Paul, Hastings, Janofsky &Walker LLP
515 South Flower Street
Los Angeles, California 90071
(Counsel for the Registrant)
ITEM 1 - Reports to Stockholders
[logo - American Funds(R)]
The right choice for the long term(R)
THE BOND FUND OF AMERICA
A tradition of income: Our 30th anniversary
[close-up photo of Bond Fund of America symbol on a certificate]
Annual report for the year ended December 31, 2004
THE BOND FUND OF AMERICA(SM) seeks as high a level of current income as is
consistent with preservation of capital through a diversified portfolio of bonds
and other fixed-income obligations.
This fund is one of the 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.
Contents
Letter to shareholders 1
The value of a long-term perspective 4
A tradition of income: Our 30th anniversary 6
Summary investment portfolio 11
Financial statements 15
Directors and officers 28
What makes American Funds different? back cover
FIGURES SHOWN ARE PAST RESULTS FOR CLASS A SHARES AND ARE NOT PREDICTIVE OF
RESULTS IN FUTURE PERIODS. CURRENT AND FUTURE RESULTS MAY BE LOWER OR HIGHER
THAN THOSE SHOWN. SHARE PRICES AND RETURNS WILL VARY, SO INVESTORS MAY LOSE
MONEY. INVESTING FOR SHORT PERIODS MAKES LOSSES MORE LIKELY. INVESTMENTS ARE NOT
FDIC-INSURED, NOR ARE THEY DEPOSITS OF OR GUARANTEED BY A BANK OR ANY OTHER
ENTITY. FOR 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.
Please see page 4 for Class A share average annual total returns with relevant
sales charges deducted. Other share class results and important information can
be found on page 3.
The fund's investment adviser is waiving a portion of management fees. Results
shown reflect the waiver. Please see the Financial Highlights table on page 23
or in the fund's prospectus for details.
The fund's 30-day yield for Class A shares as of January 31, 2005, calculated in
accordance with the Securities and Exchange Commission formula, was 3.73%, which
reflects a fee waiver (3.72% without the fee waiver). The fund's distribution
rate for Class A shares as of that date was 4.46%. Both reflect the 3.75%
maximum sales charge. The SEC yield reflects the rate at which the fund is
earning income on its current portfolio of securities while the distribution
rate reflects the fund's past dividends paid to shareholders. Accordingly, the
fund's SEC yield and distribution rate may differ.
Investing in non-U.S. bonds is subject to additional risks. They include
currency fluctuations, political and social instability, differing securities
regulations and accounting standards, higher transaction costs, possible changes
in taxation and illiquidity. The return of principal in bond funds is not
guaranteed. Bond funds have the same interest rate, inflation and credit risks
that are associated with the underlying bonds owned by the fund. High-yield
bonds are subject to greater fluctuations in value and risk of loss of income
and principal. For more complete information, please read the prospectus.
[photo of a portion of a bond certificate]
FELLOW SHAREHOLDERS:
For the fiscal year ended December 31, 2004, The Bond Fund of America produced a
total return of 5.8%, which topped the 4.1% average of its Lipper peer group,
corporate A-rated bond funds. For reference, the Lehman Brothers Aggregate Bond
Index, a broad measure of the U.S. bond market, returned 4.3%. The index is
unmanaged, and its return does not reflect any operational or transaction
expenses.
During the year, shareholders received monthly dividends totaling 62.9 cents a
share. Those who reinvested dividends recorded an income return of 4.8%, while
those who elected to take dividends in cash had an income return of 4.7%. All
shareholders should note that a portion of the January 2005 dividend was paid in
December 2004. As a result, the December dividend was slightly larger, while the
January dividend was reduced by the same amount.
BOND MARKET OVERVIEW
The most notable bond market event of 2004 may well be something that did not
happen. Specifically, long-term bond yields did not rise in conjunction with
short-term yields, contrary to the expectations of many. In fact, the yield on
the 10-year U.S. Treasury bond, which serves as a bellwether for the overall
bond market, ended 2004 at almost the same level it ended 2003.
In contrast, short-term bond yields rose steadily as the Federal Reserve Board
progressively raised its overnight lending rate, beginning June 30. Altogether,
the Fed raised rates five times, a quarter point each, bringing its key lending
rate to 2.25% by year-end. (On February 2, after the close of the fiscal year,
the Fed raised this key rate another quarter point, bringing it to 2.50%.)
Yields on short-term Treasuries and similar maturity high-quality bonds rose in
step with the Fed actions.
During the second half of the year, long-term interest rate movements were held
in check by slow employment growth, stubbornly high oil prices, relatively mild
inflation and strong foreign demand for U.S. government debt. This provided a
more favorable environment for long- and intermediate-term bonds. By year end,
the yield difference between short-term and long-term bonds narrowed
significantly.
[Begin Sidebar]
RESULTS AT A GLANCE
(for periods ended December 31, 2004, with all distributions reinvested)
Average annual total returns
1 year 5 years 10 years Lifetime*
The Bond Fund of America +5.8% +7.5% +7.8% +9.5%
Lehman Brothers Aggregate Bond Index(1) +4.3 +7.7 +7.7 +9.0
Lipper Corporate A-Rated Bond Funds Average(2) +4.1 +7.0 +7.2 +8.9
*Since May 28, 1974.
(1) The unmanaged Lehman Brothers Aggregate Bond Index began on January 1, 1976.
From May 31, 1974, through December 31, 1975, the Lehman Brothers
Government/Credit Bond Index was used.
(2) Source: Lipper. Lipper averages do not include the effects of sales charges.
[End Sidebar]
BENEFITS FROM DIVERSIFICATION
The Bond Fund of America offers shareholders a broadly diverse portfolio that
includes bonds from virtually every major sector of the bond market. This
diversity has helped the fund produce consistently attractive income returns
through a variety of market conditions. During the past year, the fund benefited
both from income generated by its portfolio holdings and from rising prices in
several sectors of the market.
During the year, corporate obligations, which represent more than 50% of the
fund's assets, produced some of the best returns in the bond market. In general,
lower rated issues, especially those below investment grade, enjoyed strong
demand as investors increasingly reached for yield, driving up prices on these
securities. About 9% of portfolio assets are classified as high yield. Most of
the remaining corporate holdings are rated A or BBB.
Non-U.S. dollar bonds also posted strong returns for the year. A strengthening
of major currencies against the U.S. dollar during the second half of the year
gave an additional boost to those bonds denominated in yen, euros, sterling and
Canadian dollars, to name a few. The fund's non-U.S. dollar holdings (about 7%
of assets) include both corporate and government debt and span the credit
spectrum from AAA to high yield.
The fund's highest quality holdings -- U.S. Treasuries, government agency
obligations and federal agency mortgage pass-through securities -- accounted for
some 20% of fund assets at year end. These bonds provide a reliable source of
income for the fund, while their high credit quality serves to counterbalance
the fund's more credit-sensitive holdings.
For more information on types of bonds held by the fund, please see the summary
investment portfolio beginning on page 11.
OUR FOCUS ON LONG-TERM VALUE
This past May, The Bond Fund of America marked its 30th anniversary. Since its
inception, the fund has grown to become one of the largest and most broadly
diversified fixed-income funds available to shareholders. Then, as now, we
believed that an actively managed portfolio of carefully researched bonds could
provide important long-term benefits for our shareholders -- namely high current
income and relative stability of principal. To learn more about how the fund has
achieved these objectives over the past three decades, we invite you to read our
feature article, "A tradition of income," which begins on page 6.
Time has wrought many changes to the bond market and the world of fixed-income
investing. Investors no longer clip coupons to collect interest payments, and
virtually all transactions are processed electronically. Technology has not only
transformed how bonds are traded, it has given rise to generations of bond
issues barely conceivable at the fund's inception. Yet through years of change,
one certainty persists: Bonds remain an essential component of a long-term
investment plan. If anything, steady income and relative stability are more
dearly prized in this world of increasing volatility.
Our enthusiasm for The Bond Fund of America has grown stronger with each passing
year. As the fund begins its fourth decade, we look forward to new market
challenges and to new investment possibilities for our shareholders. We are
grateful to count you as part of our shareholder family, and we hope that you
will be with us when we mark the fund's 40th anniversary.
Cordially,
/s/ Paul G. Haaga /s/ Abner D. Goldstine
Paul G. Haaga, Jr. Abner D. Goldstine
Chairman of the Board President
February 10, 2005
For current information about the fund, visit americanfunds.com.
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 December 31, 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 +0.07% +6.41%(1)
Not reflecting CDSC +5.07% +6.74%(1)
CLASS C SHARES
Reflecting CDSC, maximum of 1%, payable only if shares
are sold within one year of purchase +3.99% +6.36%(2)
Not reflecting CDSC +4.99% +6.36%(2)
CLASS F SHARES(3)
Not reflecting annual asset-based fee charged by sponsoring firm +5.80% +7.16%(2)
CLASS 529-A SHARES
Reflecting 3.75% maximum sales charge +1.81% +6.65%(4)
Not reflecting maximum sales charge +5.80% +8.09%(4)
CLASS 529-B SHARES
Reflecting applicable CDSC, maximum of 5%, payable
only if shares are sold within six years of purchase -0.14% +5.89%(4)
Not reflecting CDSC +4.86% +7.13%(4)
CLASS 529-C SHARES
Reflecting CDSC, maximum of 1%, payable only if shares
are sold within one year of purchase +3.88% +7.24%(5)
Not reflecting CDSC +4.88% +7.24%(5)
CLASS 529-E SHARES(3) +5.43% +7.90%(6)
CLASS 529-F SHARES(3)
Not reflecting annual asset-based fee charged by sponsoring firm +5.69% +9.98%(7)
The fund's investment adviser is waiving a portion of management fees. Results
shown reflect the waiver. Please see the Financial Highlights table on page 23
or in the fund's prospectus for details.
(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.
There are several ways to invest in The Bond Fund of America. Class A shares are
subject to a 3.75% maximum up-front sales charge that declines for accounts (and
aggregated investments) of $100,000 or more and is eliminated for purchases of
$1 million or more. Other share classes, which are generally not available for
certain employer-sponsored retirement plans, have no up-front sales charges but
are subject to additional annual expenses and fees. Annual expenses for Class B
shares were 0.73 percentage points higher than for Class A shares; Class B
shares convert to Class A shares after eight years of ownership. If redeemed
within six years, Class B shares may also be subject to a contingent deferred
sales charge ("CDSC") of up to 5% that declines over time. Class C shares were
subject to annual expenses 0.80 percentage points higher than those for Class A
shares and a 1% CDSC if redeemed within the first year after purchase. Class C
shares convert to Class F shares after 10 years. Class F shares, which are
available only through certain fee-based programs offered by broker-dealer firms
and registered investment advisers, had higher annual expenses (by 0.04
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.
THE VALUE OF A LONG-TERM PERSPECTIVE
HOW A $10,000 INVESTMENT HAS GROWN
Figures shown are past results for Class A shares and are not predictive of
results in future periods. Current and future results may be lower or higher
than those shown. Share prices and returns will vary, so investors may lose
money. For the most current information and month-end results, visit
americanfunds.com. Fund figures reflect deduction of the maximum sales charge of
3.75% on the $10,000 investment.(1) Thus, the net amount invested was $9,625.
There have always been reasons not to invest. You will find, however, that
despite occasional stumbles, financial markets have tended to reward investors
over the long term. Active management -- bolstered by experience and careful
research -- can add even more value: As the chart below shows, over its
lifetime, The Bond Fund of America has done demonstrably better than its
relevant benchmarks.
Dividends, particularly when reinvested, have accounted for virtually all of the
fund's overall results. The table beneath the chart breaks down The Bond Fund of
America's year-by-year total returns into their income and capital components.
Average annual total returns (based on a $1,000 investment with all
distributions reinvested)*
Class A shares for periods ended December 31, 2004
1 year +1.85%
5 years +6.65
10 years +7.43
*Assumes payment of the 3.75% maximum initial sales charge. The maximum initial
sales charge was 4.75% from December 15, 1986, to January 9, 2000.
The fund's investment adviser is waiving a portion of management fees. Results
shown reflect the waiver. Please see the Financial Highlights table on page 23
or in the fund's prospectus for details.
[Begin Mountain Chart]
<table>
<s> <c> <c> <c>
Lehman Brothers Consumer Price
Year ended BFA with dividends Aggregate Index(4)
December 31,2004 reinvested(2) Bond Index(3) (inflation)
original investment $10,000 $10,000 $10,000
1974 9,988 10,318 10,679
1975 11,254 11,587 11,420
1976 13,293 13,395 11,975
1977 13,977 13,802 12,778
1978 14,261 13,994 13,930
1979 14,710 14,264 15,782
1980 15,230 14,650 17,757
1981 16,242 15,565 19,342
1982 21,586 20,643 20,082
1983 23,628 22,368 20,844
1984 26,450 25,756 21,667
1985 33,488 31,449 22,490
1986 38,568 36,250 22,737
1987 39,324 37,248 23,745
1988 43,533 40,186 24,794
1989 47,942 46,025 25,947
1990 49,509 50,149 27,531
1991 59,927 58,174 28,374
1992 66,722 62,480 29,198
1993 76,155 68,571 30,000
1994 72,335 66,572 30,802
1995 85,536 78,870 31,584
1996 91,274 81,733 32,634
1997 99,709 89,624 33,189
1998 104,863 97,409 33,724
1999 107,265 96,609 34,630
2000 113,906 107,841 35,802
2001 122,051 116,946 36,358
2002 129,514 128,939 37,222
2003 145,335 134,231 37,922
2004 153,837 140,055 39,156
</table>
[End Mountain Chart]
Year ended December 31 1974+ 1975 1976 1977 1978 1979 1980
TOTAL VALUE
Dividends reinvested $418 907 1,020 1,126 1,211 1,401 1,724
Value at year-end $9,988 11,254 13,293 13,977 14,261 14,710 15,230
BFA's total return (0.1)% 12.7 18.1 5.1 2.0 3.1 3.5
Year ended December 31 1981 1982 1983 1984 1985 1986 1987
TOTAL VALUE
Dividends reinvested 2,118 2,434 2,556 2,869 3,227 3,604 3,787
Value at year-end 16,242 21,586 23,628 26,450 33,488 38,568 39,324
BFA's total return 6.6 32.9 9.5 11.9 26.6 15.2 2.0
Year ended December 31 1988 1989 1990 1991 1992 1993 1994
TOTAL VALUE
Dividends reinvested 3,953 4,471 4,699 4,909 5,275 5,325 5,733
Value at year-end 43,533 47,942 49,509 59,927 66,722 76,155 72,335
BFA's total return 10.7 10.1 3.3 21.0 11.3 14.1 (5.0)
Year ended December 31 1995 1996 1997 1998 1999 2000 2001
TOTAL VALUE
Dividends reinvested 6,178 6,473 6,704 7,007 7,398 8,190 8,228
Value at year-end 85,536 91,274 99,709 104,863 107,265 113,906 122,051
BFA's total return 18.2 6.7 9.2 5.2 2.3 6.2 7.2
Year ended December 31 2002 2003 2004
TOTAL VALUE
Dividends reinvested 8,189 7,370 6,913
Value at year-end 129,514 145,335 153,837
BFA's total return 6.1 12.2 5.8
Average annual total return for 30-1/2 years: 9.35%(2)
+ For the period May 28, 1974 (when fund operations began), through December
31, 1974.
Past results are not predictive of future results. The results shown are before
taxes on fund distributions and sale of fund shares.
(1) As outlined in the prospectus, the sales charge is reduced for accounts
(and aggregated investments) of $100,000 or more and is eliminated for
purchases of $1 million or more. There is no sales charge on dividends or
capital gain distributions that are reinvested in additional shares.
(2) Includes reinvested dividends of $135,419 and reinvested capital gain
distributions of $4,573.
(3) From May 31, 1974, through December 31, 1975, the Lehman Brothers
Government/Credit Bond Index was used because the Lehman Brothers Aggregate
Bond Index did not yet exist. Since January 1, 1976, the Lehman Brothers
Aggregate Bond Index has been used. These indexes are unmanaged and do not
reflect sales charges, commissions or expenses.
(4) Computed from data supplied by the U.S. Department of Labor, Bureau of
Labor Statistics.
A TRADITION OF INCOME: OUR 30TH ANNIVERSARY
[Begin Sidebar]
"The bond market itself has changed considerably over 30 years: Once a blue-chip
forum largely comprised of high-quality corporate issuers, it has become a
multifaceted market where increasingly complex financings command a growing
share of investor dollars."
[photo of a portion of a bond certificate]
[End Sidebar]
The track record of any investment is an important reference for the
conscientious investor: the longer the record, the more meaningful the data.
While past performance is no guarantee of future results, the history of an
investment -- in this case, The Bond Fund of America -- provides important clues
as to its strengths and its ability to weather changing market conditions.
In this report, then, we'll take a look at how the fund has fared over the past
three decades. We'll highlight some of the challenges the fund has faced and see
how it has responded. Our intent is this: to show how the fund's income
objective has served shareholders over the long term and how time itself is an
important ally in the pursuit of attractive returns.
CYCLES OF CHANGE
Over the past 30 years, bond investors have faced a wide spectrum of investment
conditions: double-digit inflation and periods of low inflation, episodes of
historically high and low interest rates, extended periods of strong economic
growth, as well as five recessions. This ever-changing environment has produced
sharp fluctuations in bond prices and bond yields (which move in opposite
directions), because bonds are highly sensitive to economic expectations. The
bond market itself has changed considerably over 30 years: Once a blue-chip
forum largely comprised of high-quality corporate issuers, it has become a
multifaceted market where increasingly complex financings, such as
mortgage-backed securities and asset-backed bonds, command a growing share of
investor dollars. "Decades at a glance" (on page 8) offers a sketch of market
conditions and trends that have influenced each of the fund's three decades.
Despite enormous changes in the market and economic conditions, The Bond Fund of
America has rewarded its long-term shareholders, largely through the steady
stream of income it has generated. After all, bonds are fundamentally
income-producing investments. The income produced by the fund's portfolio of
bonds has, over time, played a dominant role in the total returns produced by
the fund. Those who reinvest their dividends, as do more than 90% of the fund's
shareholders, have an opportunity to benefit further from the effects of
compounding. Reinvested income helps boost future income by increasing the
number of shares owned.
During the fund's first decade, a trend toward higher interest rates helped lift
the fund's income return. This benefited the fund's income stream well into the
1980s, even after interest rates began to decline, because the fund had invested
in bonds with relatively long maturities. Since the early 1980s, the fund has
experienced several smaller cycles of rising and falling interest rates. During
each of these cycles, the fund's counselors carefully adjusted the mix of
portfolio holdings, as necessary, to help safeguard shareholder principal while
continuing to offer an attractive level of current income.
[photo of a portion of a bond certificate]
[Begin Sidebar]
THE PULSE OF THE BOND MARKET
This chart depicts the changing yield on 10-year U.S. Treasury bonds. It serves
as a barometer for the broader market, indicating periods of rising and falling
yields. Shaded areas reflect periods of economic recession.
10-year Treasury yields (6/30/74 through 12/31/04)
06/30/1974 7.54
09/30/1974 8.04
12/31/1974 7.43
03/31/1975 7.73
06/30/1975 7.86
09/30/1975 8.43
12/31/1975 8.00
03/31/1976 7.73
06/30/1976 7.86
09/30/1976 7.59
12/31/1976 6.87
03/31/1977 7.46
06/30/1977 7.28
09/30/1977 7.34
12/31/1977 7.69
03/31/1978 8.04
06/30/1978 8.46
09/30/1978 8.42
12/31/1978 9.01
03/31/1979 9.12
06/30/1979 8.91
09/30/1979 9.33
12/31/1979 10.39
03/31/1980 12.75
06/30/1980 9.78
09/30/1980 11.51
12/31/1980 12.84
03/31/1981 13.12
06/30/1981 13.47
09/30/1981 15.32
12/31/1981 13.72
03/31/1982 13.86
06/30/1982 14.30
09/30/1982 12.34
12/31/1982 10.54
03/31/1983 10.51
06/30/1983 10.85
09/30/1983 11.65
12/31/1983 11.83
03/31/1984 12.32
06/30/1984 13.56
09/30/1984 12.52
12/31/1984 11.50
03/31/1985 11.86
06/30/1985 10.16
09/30/1985 10.37
12/31/1985 9.26
03/31/1986 7.78
06/30/1986 7.80
09/30/1986 7.45
12/31/1986 7.11
03/31/1987 7.25
06/30/1987 8.40
09/30/1987 9.42
12/31/1987 8.99
03/31/1988 8.37
06/30/1988 8.92
09/30/1988 8.98
12/31/1988 9.11
03/31/1989 9.36
06/30/1989 8.28
09/30/1989 8.19
12/31/1989 7.84
03/31/1990 8.59
06/30/1990 8.48
09/30/1990 8.89
12/31/1990 8.08
03/31/1991 8.11
06/30/1991 8.28
09/30/1991 7.65
12/31/1991 7.09
03/31/1992 7.54
06/30/1992 7.26
09/30/1992 6.42
12/31/1992 6.77
03/31/1993 5.98
06/30/1993 5.96
09/30/1993 5.36
12/31/1993 5.77
03/31/1994 6.48
06/30/1994 7.10
09/30/1994 7.46
12/31/1994 7.81
03/31/1995 7.20
06/30/1995 6.17
09/30/1995 6.20
12/31/1995 5.71
03/31/1996 6.27
06/30/1996 6.91
09/30/1996 6.83
12/31/1996 6.30
03/31/1997 6.69
06/30/1997 6.49
09/30/1997 6.21
12/31/1997 5.81
03/31/1998 5.65
06/30/1998 5.50
09/30/1998 4.81
12/31/1998 4.65
03/31/1999 5.23
06/30/1999 5.90
09/30/1999 5.92
12/31/1999 6.28
03/31/2000 6.26
06/30/2000 6.10
09/30/2000 5.80
12/31/2000 5.24
03/31/2001 4.89
06/30/2001 5.28
09/30/2001 4.73
12/31/2001 5.09
03/31/2002 5.28
06/30/2002 4.93
09/30/2002 3.87
12/31/2002 4.03
03/31/2003 3.81
06/30/2003 3.33
09/30/2003 4.27
12/31/2003 4.27
03/31/2004 3.83
06/30/2004 4.73
09/30/2004 4.13
12/31/2004 4.23
Sources: Federal Reserve Board; National Bureau of Economic Research
[End Sidebar]
[Begin Sidebar]
DECADES AT A GLANCE
[close-up photo of Bond Fund of America symbol on a certificate]
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.
1974 - 1984
The fund's first decade was marked by high oil prices, a severe energy shortage,
rising inflation and the worst recession since the 1940s. Long-term bond yields
in the fund's portfolio began the decade around 8% and ended at about 11.5% in
1984. Bond yields actually peaked in the early 1980s at around 15% following two
years of double-digit inflation (1979 and 1980). Shortly thereafter, bond yields
began a long-term downward trend.
Despite the adverse environment -- bond prices weakened as rising inflation
pushed interest rates higher -- shareholders who reinvested dividends recorded a
10.0% average annual total return for the decade (5/28/74-12/31/84). By
reinvesting their dividends, shareholders acquired additional fund shares at
lower prices -- shares that, in effect, earned them higher income returns. This
compounding effect helped raise their overall income return, as well as their
total returns over the 10-year period.
1984 - 1994
During the fund's second decade, many unfavorable trends of the prior decade
began to correct. Bond prices improved as the Federal Reserve succeeded in
curbing inflation, thus lowering interest rates. The bond market itself
flourished as volume increased and newer types of financings, such as
mortgage-backed securities, private placements and high-yield bonds, gained
broad appeal.
The steady decline in interest rates served to lower the fund's income return
during this decade. But to a large degree, rising bond prices, which boosted the
fund's share price, offset the decline. Overall, the fund produced an average
annual total return of 10.6% for the 10 years ended 12/31/94.
1994 - 2004
1994 was one of the worst years in history for the bond market and the only year
to produce a negative total return for the fund. Bond yields rose (and prices
fell) rapidly that year as the Federal Reserve moved quickly to stifle a threat
of inflation. The following year inflation subsided and yields began to decline
once again. Overall, a trend toward lower bond yields dominated this decade,
with the exception of 1994 and 1999. By 2003, yields on U.S. Treasury bonds had
declined to levels not seen since 1958. Not all sectors of the bond market moved
in tandem, however. The increasing size and diversity of the market coupled with
a handful of highly publicized crises in the global sovereign and corporate
sectors led to less uniformity in market behavior, but also greater
opportunities for the fund.
During this recent decade, the fund recorded an average annual total return of
7.8% (for the 10 years ended 12/31/04). Once again, the fund's income was an
important part of the total return to our shareholders. With the Federal Reserve
currently raising the federal funds rate, we may soon be transitioning to a
period of higher bond yields.
[End Sidebar]
THE SEARCH FOR INCOME
Because income is such an important part of the fund's long-term returns, the
portfolio counselors actively search for bonds that contribute to a healthy
stream of income. At the same time, they pay close attention to the risks
associated with each bond they choose. The fixed-income analysts of Capital
Research and Management Company, the fund's investment adviser, are an integral
and invaluable part of this search and evaluation process.
The scope of bonds available to the fund in its early days was relatively
limited, consisting mainly of high-quality corporate bonds and Treasuries.
Corporate debt continues to play a leading role in the portfolio. But as the
bond market grew over the years, so, too, grew the variety of debt instruments
available to the fund. The fund has benefited from a greater variety of credit
quality in corporate offerings, including the high-yield corporate bonds held in
the portfolio. The fund has also extended its reach to include more
sophisticated financings, such as commercial mortgage-backed securities,
asset-backed obligations and non-U.S. government debt. These bonds not only
increase the diversity of the fund's holdings, they also offer attractive
investment opportunities.
Finding a bond with attractive income is only one part of the investment
equation; monitoring the health of the income stream is another. With the
growing number of debt instruments available, Capital Research has steadily
increased its team of fixed-income analysts to meet the demands of this
expanding universe. These analysts -- each specializing in industries or sectors
of the bond market -- work closely with the fund's portfolio counselors to
identify the potential risks and rewards of each bond that goes into the
portfolio. And they continue to monitor every bond held by the fund to guard
against events that could impair its credit quality or the stream of income it
produces. In addition, portfolio counselors and analysts work closely with the
economists of Capital Research to help identify and respond to market threats,
such as rising interest rates, which can have an adverse effect on bond prices.
Our fixed-income traders provide additional valuable market information.
[Begin Sidebar]
INCOME HAS BEEN THE BACKBONE OF THE FUND'S RETURNS
This chart shows both the income return and total return for each of the fund's
30 years. As shown, the income return varied much less than the total return,
which includes income plus price fluctuations.
THE BOND FUND OF AMERICA: INCOME AND TOTAL RETURNS (years ended December 31)
Income return Total
Year for BFA Return
1974* 4.34% 3.73%
1975 9.08 12.68
1976 9.06 18.11
1977 8.47 5.14
1978 8.66 2.03
1979 9.83 3.14
1980 11.72 3.54
1981 13.91 6.64
1982 14.99 32.90
1983 11.84 9.46
1984 12.14 11.94
1985 12.20 26.61
1986 10.76 15.17
1987 9.82 1.96
1988 10.05 10.70
1989 10.27 10.13
1990 9.80 3.27
1991 9.92 21.04
1992 8.80 11.34
1993 7.98 14.13
1994 7.53 -5.02
1995 8.54 18.25
1996 7.57 6.71
1997 7.34 9.24
1998 7.03 5.17
1999 7.06 2.29
2000 7.63 6.19
2001 7.22 7.15
2002 6.71 6.11
2003 5.69 12.22
2004 4.76 5.85
*Partial time period (5/28/74, when the fund began operations, through 12/31/74)
[End Sidebar]
[Begin Sidebar]
[photo of a portion of a bond certificate]
"In 29 of its 30 years, the fund's annual yield has exceeded that of its peer
group average, according to Lipper. The fund's higher yield is largely due to
the rigorous bond selection made by portfolio counselors and analysts."
[End Sidebar]
STRIKING A BALANCE BETWEEN INCOME AND RISK
The increasing diversity of portfolio holdings leaves The Bond Fund of America
better equipped to respond to a variety of market conditions. Bonds with
differing characteristics respond differently to changes in the economic or
market environment. This flexibility has been helpful in both high and low
interest rate environments. Throughout the fund's history, bonds have retained
their appeal by continuing to offer higher yields than are generally available
in the stock market -- and they do so with a significantly lower level of
volatility.
Even in the current low interest rate environment, The Bond Fund of America was
able to produce a yield of 4.61% for the year just ended, compared with an
average of 3.77% for its Lipper peer group. (As per Lipper, fund yields reflect
dividends paid over the previous 12-month period divided by the current share
price.) In 29 of its 30 years, the fund's annual yield has exceeded that of its
peer group average, according to Lipper. The fund's higher yield is largely due
to the rigorous bond selection made by portfolio counselors and analysts.
Markets change, but the relative stability of a carefully managed bond portfolio
can endure. Over the past 30 years, The Bond Fund of America has served the
fund's objectives and rewarded its shareholders by providing a high level of
current income through its widely diversified portfolio. Over time, that income
has been key to providing our shareholders with above averge total returns.
SUMMARY INVESTMENT PORTFOLIO, December 31, 2004
Beginning with this report, a summary portfolio, approved under rules adopted by
the Securities and Exchange Commission this year, will replace the complete
listing of portfolio holdings used in previous shareholder reports. This summary
portfolio is designed to streamline the report and help investors better focus
on a fund's principal holdings. The schedule includes each of the fund's 50
largest holdings and investments of any issuer for which the total value of all
holdings in that issuer exceeds 1% of the fund's net assets. A complete schedule
of portfolio holdings is available upon request, free of charge, by calling
American Funds Service Company at 800/421-0180 or accessing the U.S. Securities
and Exchange Commission website at www.sec.gov.
[begin pie chart]
Corporate bonds & notes 47.9
Mortgage-backed obligations 15.8
U.S. government & government agency bonds & notes 13.4
Non-U.S. government bonds & notes 5.6
Asset-backed obligations 5.6
Cash & equivalents 4.8
Preferred stocks 3.9
Municipals 1.5
Convertible securities 1.0
Common stocks 0.5
[end pie chart]
Principal Market Percent
amount value of net
BONDS & NOTES - 89.79% (000) (000) assets
CORPORATE BONDS & NOTES - 47.85%
FINANCIALS - 14.09%
Household Finance Corp. 4.125%-7.875% 2007-2012 $ 139,000 $ 148,649
HSBC Holdings PLC 5.25% 2012 10,000 10,383
HSBC Bank USA 4.625% 2014 (1) 9,000 8,842
Midland Bank 3.063% Eurodollar note (undated) (2) 15,000 13,050 0.91%
SocGen Real Estate Co. LLC, Series A, 7.64% (undated) (1) (2) 74,250 81,495 .41
Prudential Holdings, LLC, Series C, 8.695% 2023 (1) (3) 57,035 72,613 .37
Other securities 2,457,940 12.40
2,792,972 14.09
CONSUMER DISCRETIONARY - 10.74%
Ford Motor Credit Co.:
7.375% 2009 87,920 94,933
7.875% 2010 94,100 103,791
3.93%-7.375% 2006-2011 (2) 137,875 143,163
Ford Motor Co. 7.45% 2031 10,370 10,460 1.78
General Motors Acceptance Corp.:
7.75% 2010 68,825 73,948
4.56% 2014 (2) 61,000 59,949
5.75%-8.00% 2005-2031 174,690 182,182
General Motors Corp. 7.20%-8.375% 2011-2033 7,060 9,616 1.64
DaimlerChrysler North America Holding Corp. 8.00% 2010 56,500 65,376 .33
Cox Communications, Inc. 5.45% 2014 (1) 59,870 59,982 .30
Other securities 1,326,804 6.69
2,130,204 10.74
TELECOMMUNICATION SERVICES - 6.25%
Verizon Wireless Capital LLC and Cellco Partnership 5.375% 2006 116,830 121,069 .61
SBC Communications Inc.:
5.10% 2014 76,010 76,862
4.125%-6.45% 2006-2034 38,070 38,425 .58
British Telecommunications PLC 8.375% 2010 (2) 75,749 91,073 .46
France Telecom 8.50% 2011 (2) 58,300 69,632 .35
Vodafone Group PLC 7.75% 2010 55,210 64,138 .32
AT&T Corp. 9.05% 2011 (2) 52,500 60,703 .31
Other securities 717,749 3.62
1,239,651 6.25
INDUSTRIALS - 5.13% 1,017,875 5.13
UTILITIES - 3.93% 779,868 3.93
MATERIALS - 2.52% 500,287 2.52
OTHER CORPORATE BONDS - 5.19% 1,030,008 5.19
MORTGAGE-BACKED OBLIGATIONS - 15.76% (3)
Freddie Mac:
6.00% 2034 314,363 324,947
1.876%-11.00% 2007-2036 (2) 282,759 290,677 3.10
Fannie Mae:
5.50% 2033 110,529 112,339
6.00% 2035 193,388 199,884
2.869%-12.018% 2009-2042 (2) 284,294 296,235 3.07
CS First Boston Mortgage Securities Corp. 2.76%-7.841% 2010-2041 (1) (2) 273,056 283,571 1.43
Realkredit Danmark A/S, Series 23D, 5.00% 2035 DKr 503,768 92,283 .47
Banc of America Commercial Mortgage Inc., Series 2001-1, Class A-2, 6.503% 2036 $ 56,200 62,394 .32
Other securities 1,462,138 7.37
3,124,468 15.76
U.S. GOVERNMENT AND GOVERNMENT AGENCY BONDS & NOTES - 13.40%
U.S. Treasury Obligations:
5.75% 2005 111,000 113,862
6.75% 2005 213,245 216,527
6.875% 2006 281,990 296,904
3.00% 2007 70,500 70,071
3.375% 2007 (4) 156,611 165,893
3.625% 2008 (4) 124,878 136,099
3.875% 2009 (4) 73,321 82,202
3.50% 2011 (4) 54,833 62,290
11.250% 2015 70,000 110,009
6.875% 2025 263,250 331,324
5.25% 2028 77,165 80,770
0%-12.00% 2005-2030 (4) 495,116 532,129 11.09
Fannie Mae:
7.00% 2005 90,000 92,057
5.25%-7.25% 2011-2030 73,000 83,151 .88
Federal Home Loan Bank:
2.00% 2006 67,775 66,941
2.375% 2006 62,695 62,123 .65
Freddie Mac 1.875%-6.75% 2005-2031 103,680 110,395 .56
Other securities 44,122 .22
2,656,869 13.40
NON-U.S. GOVERNMENT BONDS & NOTES - 5.63%
German Government:
5.00% 2005 Euro 55,270 76,110
4.50% 2006 41,920 58,657
4.50% 2009 55,000 79,189
6.25% 2030 43,630 77,020 1.47
Japanese Government:
0.50% 2007 Yen 2,266,150 22,242
0.90% 2008 11,030,000 109,442
0.50% 2013 7,890,800 72,347 1.03
Canadian Government 4.25% 2026 (4) C$ 67,142 78,027 .39
Korean Government 4.50% 2008 KRW 70,438,000 70,840 .36
Other securities 472,609 2.38
1,116,483 5.63
ASSET-BACKED OBLIGATIONS - 5.60% (3) 1,110,596 5.60
MUNICIPALS - 1.55%
State of California, Golden State Tobacco Securitization Corp., Tobacco
Settlement Asset-backed Bonds, Series 2003 A1, 6.25% 2033 64,975 65,076 .33
Other securities 241,619 1.22
306,695 1.55
TOTAL BONDS & NOTES (cost: $17,016,321,000) 17,805,976 89.79
Shares or principal Market Percent
amount value of net
CONVERTIBLE SECURITIES - 0.97% (000) assets
CONSUMER DISCRETIONARY - 0.34%
Ford Motor Co. Capital Trust II 6.50% cumulative convertible trust
preferred 2032 351,600 18,561 .10
General Motors Corp., Series B, 5.25% convertible debentures 2032 $ 13,125,000 12,112 .06
Other securities 36,060 .18
66,733 .34
OTHER - 0.63% 124,976 .63
TOTAL CONVERTIBLE SECURITIES (cost: $138,215,000) 191,709 .97
Market Percent
value of net
WARRANTS - 0.00% (000) assets
TOTAL WARRANTS (cost: $190,000) 17 .00
Shares Market Percent
value of net
PREFERRED STOCKS - 3.94% (000) assets
FINANCIALS - 3.91%
HSBC Capital Funding LP: (2)
Series 1, 9.547% noncumulative step-up perpetual preferred (undated) (1) 85,750,000 106,951
Series 2, 10.176% noncumulative step-up perpetual preferred (undated) (1) 32,000,000 49,692
8.03% noncumulative preferred (undated) 20,000,000 34,136 .96
Fuji JGB Investment LLC, Series A, 9.87% noncumulative preferred
(undated) (1) (2) 93,375,000 109,317
IBJ Preferred Capital Co. LLC, Series A, 8.79% noncumulative preferred
(undated) (1) (2) 57,500,000 65,176 .88
Fannie Mae, Series O, 7.0% preferred 2007 (1) (5) 1,314,000 73,584 .37
Other securities 337,291 1.70
776,147 3.91
OTHER - 0.03% 5,773 .03
TOTAL PREFERRED STOCKS (cost: $664,844,000) 781,920 3.94
Market Percent
value of net
COMMON STOCKS - 0.51% (000) assets
TOTAL COMMON STOCKS (cost: $102,168,000) 100,416 .51
Principal Market Percent
amount value of net
SHORT-TERM SECURITIES - 4.55% (000) (000) assets
Proctor & Gamble Co. 2.08%-2.35% due 1/21-3/9/2005 (1) (6) $ 133,000 132,692 .67
CAFCO, LLC 2.05%-2.32% due 1/21-2/10/2005 (1) (6) 130,000 129,696 .65
SBC Communications Inc. 2.22%-2.34% due 1/24-2/15/2005 (1) (6) 90,500 90,281 .46
U.S. Treasury Bills 1.705%-2.045% due 1/6-3/10/2005 (6) 80,200 79,933 .40
Clipper Receivables Co., LLC 2.31%-2.35% due 1/28-2/11/2005 (1) (6) 65,000 64,836 .33
Other securities 405,106 2.04
TOTAL SHORT-TERM SECURITIES (cost: $902,570,000) 902,544 4.55
TOTAL INVESTMENT SECURITIES (cost: $18,824,308,000) 19,782,582 99.76
OTHER ASSETS LESS LIABILITIES 46,826 .24
NET ASSETS $19,829,408 100.00%
"Other securities" includes all issues that are not required to be disclosed
in the summary investment portfolio.
INVESTMENTS IN AFFILIATES
A company is considered to be an affiliate of the fund under the Investment
Company Act of 1940 if the fund's holdings in that company represent 5% or more
of the outstanding voting shares of that company. The market value of the fund's
holdings in affiliated companies is included in "Other securities" under their
respective industry sectors in the preceding summary investment portfolio.
Further details on these holdings and related transactions during the year ended
December 31, 2004 appear below.
Dividend Market
Company Beginning Purchases Sales Ending income value
shares shares (000) (000)
NTELOS Inc. (1) (5) (7) 1,020,970 602,599 - 1,623,569 $- $59,341
Beverly Hills Bancorp Inc. 1,601,967 - - 1,601,967 601 16,180
ZiLOG, Inc. (5) 2,555,000 - 1,676,000 879,000 - 7,032
ZiLOG, Inc. - MOD III Inc., units (7) 2,555 - 1,108 1,447 659 0
Clarent Hospital Corp. (5) (7) 331,291 - - 331,291 - 166
$ 1,260 $ 82,719
The following footnotes to the summary investment portfolio apply to either the
individual securities noted or one or more of the securities aggregated and
listed as a single line item.
(1) Purchased in a private placement transaction; resale may be limited to
qualified institutional buyers; resale to the public may require
registration. The total value of all such restricted securities, including
those included in "Other securities" in the summary investment portfolio,
was $3,738,854,000, which represented 18.86% of the net assets of the fund.
(2) Coupon rate may change periodically.
(3) 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.
(4) Index-linked bond whose principal amount moves with a government retail
price index.
(5) Security did not produce income during the last 12 months.
(6) This security, or a portion of this security, has been segregated to cover
funding requirements on investment transactions settling in the future.
(7) Valued under fair value procedures adopted by authority of the Board of
Directors.
See Notes to Financial Statements
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
at December 31, 2004 (dollars and shares in thousands,
except per-share amounts)
ASSETS:
Investment securities at market:
Unaffiliated issuers (cost: $18,749,079) $19,699,863
Affiliated issuers (cost: $75,229) 82,719 $19,782,582
Cash 15,052
Receivables for:
Sales of investments 11,299
Sales of fund's shares 57,572
Open forward currency contracts 47
Dividends and interest 234,363 303,281
20,100,915
LIABILITIES:
Payables for:
Purchases of investments 218,948
Repurchases of fund's shares 33,460
Open forward currency contracts 5,986
Closed forward currency contracts 1,793
Investment advisory services 3,880
Services provided by affiliates 6,762
Deferred Directors' compensation 318
Other fees and expenses 360 271,507
NET ASSETS AT DECEMBER 31, 2004 $19,829,408
NET ASSETS CONSIST OF:
Capital paid in on shares of capital stock $19,415,819
Undistributed net investment income 24,684
Accumulated net realized loss (565,902)
Net unrealized appreciation 954,807
NET ASSETS AT DECEMBER 31, 2004 $19,829,408
Total authorized capital stock - 2,500,000 shares, $.001 par value (1,452,899
total shares outstanding)
Net asset value
Net assets Shares outstanding per share (1)
Class A $15,822,324 1,159,300 $13.65
Class B 1,394,158 102,150 13.65
Class C 1,123,060 82,286 13.65
Class F 486,539 35,649 13.65
Class 529-A 187,358 13,728 13.65
Class 529-B 49,440 3,622 13.65
Class 529-C 86,163 6,313 13.65
Class 529-E 10,715 785 13.65
Class 529-F 4,222 309 13.65
Class R-1 10,452 766 13.65
Class R-2 237,846 17,427 13.65
Class R-3 212,754 15,589 13.65
Class R-4 76,932 5,637 13.65
Class R-5 127,445 9,338 13.65
(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 $14.18 for each.
See Notes to Financial Statements
STATEMENT OF OPERATIONS
for the year ended December 31, 2004 (dollars in thousands)
INVESTMENT INCOME:
Income:
Interest (net of non-U.S. withholding
tax of $402) $922,486
Dividends (includes $1,260 from affiliates) 15,008 $937,494
Fees and expenses:
Investment advisory services 45,595
Distribution services 64,185
Transfer agent services 19,054
Administrative services 5,310
Reports to shareholders 904
Registration statement and prospectus 762
Postage, stationery and supplies 1,934
Directors' compensation 143
Auditing and legal 183
Custodian 648
State and local taxes 157
Other 107
Total expenses before reimbursement/waiver 138,982
Reimbursement/waiver of expenses 1,534 137,448
Net investment income 800,046
NET REALIZED GAIN AND UNREALIZED
APPRECIATION ON INVESTMENTS
AND NON-U.S. CURRENCY:
Net realized gain (loss) on:
Investments (including $2,120 net loss from affiliates) 212,803
Non-U.S. currency transactions (21,034) 191,769
Net unrealized appreciation (depreciation) on:
Investments 33,845
Non-U.S. currency translations (956) 32,889
Net realized gain and
unrealized appreciation
on investments and non-U.S. currency 224,658
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $1,024,704
See Notes to Financial Statements
STATEMENT OF CHANGES IN NET ASSETS (dollars in thousands)
Year ended December 31
2004 2003
OPERATIONS:
Net investment income $800,046 $804,752
Net realized gain on investments and
non-U.S. currency transactions 191,769 10,312
Net unrealized appreciation
on investments and non-U.S. currency translations 32,889 983,905
Net increase in net assets
resulting from operations 1,024,704 1,798,969
DIVIDENDS PAID TO
SHAREHOLDERS FROM NET INVESTMENT INCOME (822,839) (836,446)
CAPITAL SHARE TRANSACTIONS 2,677,089 1,487,583
TOTAL INCREASE IN NET ASSETS 2,878,954 2,450,106
NET ASSETS:
Beginning of year 16,950,454 14,500,348
End of year (including undistributed net investment income and distributions
in excess of net investment income: $24,684 and $2,806, respectively) $19,829,408 $16,950,454
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - The Bond Fund of America, Inc. (the "fund") is registered under
the Investment Company Act of 1940 as an open-end, diversified management
investment company. The fund seeks as high a level of current income as is
consistent with preservation of capital through a diversified portfolio of bonds
and other fixed-income obligations.
The fund offers 14 share classes consisting of four retail share classes, five
CollegeAmerica(R) 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:
- ---------------------------------------------------------------------------------------------------------
Share class Initial sales charge Contingent deferred sales Conversion feature
charge upon redemption
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes A and 529-A Up to 3.75% None (except 1% for None
certain redemptions
within one year of
purchase without an
initial sales charge)
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes B and 529-B None Declines from 5% to zero Classes B and 529-B convert to
for redemptions within classes A and 529-A,
six years of purchase respectively, after eight years
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Class C None 1% for redemptions within Class C converts to Class F
one year of purchase after 10 years
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Class 529-C None 1% for redemptions within None
one 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 bid prices,
if asked prices are not available) or at prices for securities of
comparable maturity, quality and type. Securities with both
fixed-income and equity characteristics, or equity securities traded
principally among fixed-income dealers, are valued in the manner
described above for either equity or fixed-income securities,
depending on which method is deemed most appropriate by the investment
adviser. Short-term securities purchased within 60 days to maturity
are valued at amortized cost, which approximates market value. The
value of short-term securities purchased with greater than 60 days to
maturity with 60 days or less remaining to maturity is determined
based on the market value on the 61st day. The ability of the issuers
of the debt securities held by the fund to meet their obligations may
be affected by economic developments in a specific industry, state or
region. Forward currency contracts are valued at the mean of
representative quoted bid and asked prices. Securities and other
assets for which representative market quotations are not readily
available are fair valued as determined in good faith under procedures
adopted by authority of the fund's Board of Directors. Various factors
may be reviewed in order to make a good faith determination of a
security's fair value. These factors include, but are not limited to,
the type and cost of the security; contractual or legal restrictions
on resale of the security; relevant financial or business developments
of the issuer; actively traded similar or related securities;
conversion or exchange rights on the security; related corporate
actions; significant events occurring after the close of trading in
the security; and changes in overall market conditions.
CollegeAmerica is a registered trademark of the Virginia College
Savings Plan./SM/
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 certain securities within 30 days of purchase;
unrealized appreciation of certain investments in non-U.S. securities; deferred
expenses; 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 December 31, 2004, the cost of investment securities, excluding
forward currency contracts, for federal income tax purposes was $18,885,300,000.
During the year ended December 31, 2004, the fund reclassified $50,303,000 from
undistributed net realized gains to undistributed net investment income and
reclassified $20,000 from undistributed net investment income to additional
paid-in capital to align financial reporting with tax reporting.
As of December 31, 2004, the components of distributable earnings on a tax basis
were as follows (dollars in thousands):
Undistributed net investment income and currency gains $30,203
Short-term and long-term capital loss deferrals (514,781)
Gross unrealized appreciation on investment securities 1,039,952
Gross unrealized depreciation on investment securities (142,670)
Net unrealized appreciation on investment securities 897,282
Undistributed net investment income and currency gains above include currency
losses of $7,763,000 that were realized during the period November 1, 2003
through December 31, 2003. Short-term capital loss deferrals above include
capital loss carryforwards of $243,982,000, $254,538,000 and $16,261,000
expiring in 2011, 2010 and 2009, respectively. These numbers reflect the
utilization of a capital loss carryforward of $108,272,000. The remaining
capital loss carryforwards will be used to offset any capital gains realized by
the fund in future years through the expiration dates. The fund will not make
distributions from capital gains while capital loss carryforwards remain. During
the year ended December 31, 2004, the fund realized, on a tax basis, a net
capital gain of $134,335,000, which was offset by capital losses of $26,063,000
that were realized during the period November 1, 2003 through December 31, 2003.
Ordinary income distributions paid to shareholders from net investment income
and currency gains were as follows (dollars in thousands):
Share class Year ended December 31, 2004 Year ended December 31, 2003
Class A $ 683,482 $ 720,504
Class B 51,745 52,350
Class C 37,239 32,059
Class F 17,193 11,977
Class 529-A 6,705 4,034
Class 529-B 1,568 1,127
Class 529-C 2,641 1,805
Class 529-E 375 249
Class 529-F 135 48
Class R-1 297 122
Class R-2 6,883 3,030
Class R-3 6,674 2,906
Class R-4 2,053 605
Class R-5 5,849 5,630
Total $ 822,839 $ 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. During the year
ended December 31, 2004, CRMC reduced investment advisory services fees by
$788,000. As a result, the fee shown on the accompanying financial statements of
$45,595,000, which was equivalent to an annualized rate of 0.252%, was reduced
to $44,807,000, or 0.248% 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
December 31, 2004, unreimbursed expenses subject to reimbursement
totaled $8,519,000 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 year ended December
31, 2004, CRMC agreed to pay a portion of these fees for classes R-1,
R-2 and R-3. For the year ended December 31, 2004, the total fees paid
by CRMC were $5,000, $733,000 and $8,000 for Class R-1, Class R-2 and
Class R-3, respectively. Administrative services fees are presented
gross of any payments made by CRMC. Each 529 share class is subject to
an additional annual administrative services fee of 0.10% of its
respective average daily net assets; this fee is payable to the
Commonwealth of Virginia for the maintenance of the CollegeAmerica
plan. Although these amounts are included with administrative services
fees in the accompanying financial statements, the Commonwealth of
Virginia is not considered a related party.
Expenses under the agreements described on the previous page for the
year ended December 31, 2004, were as follows (dollars in thousands):
--------------------------------------------------------------------------------------------------------------
Share class Distribution Transfer agent Administrative services
services services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
CRMC Transfer agent Commonwealth of
administrative services Virginia
services administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class A $36,668 $17,649 Not applicable Not applicable Not applicable
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class B 13,187 1,405 Not applicable Not applicable Not applicable
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class C 9,700 Included $1,455 $294 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class F 936 Included 561 97 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-A 216 Included 217 32 $145
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-B 421 Included 63 24 42
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-C 705 Included 106 32 70
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-E 44 Included 13 2 9
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-F 8 Included 4 1 3
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-1 77 Included 12 9 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-2 1,330 Included 266 1,206 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-3 782 Included 235 218 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-4 111 Included 67 6 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-5 Not applicable Included 118 3 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Total $64,185 $19,054 $3,117 $1,924 $269
--------------------------------------------------------------------------------------------------------------
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 of $143,000 shown on the accompanying
financial statements includes $104,000 in current fees (either paid in cash or
deferred) and a net increase of $39,000 in the value of the deferred amounts.
AFFILIATED OFFICERS AND DIRECTORS - Officers and certain Directors of the fund
are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated
officers or Directors received any compensation directly from the fund.
5. CAPITAL SHARE TRANSACTIONS
Capital share transactions in the fund were as follows (dollars and shares in
thousands):
Share class Sales(1) Reinvestments of dividends
Amount Shares Amount Shares
Year ended December 31, 2004
Class A $ 4,113,288 304,709 $ 585,100 43,375
Class B 290,080 21,493 42,293 3,135
Class C 452,065 33,472 30,241 2,242
Class F 276,299 20,471 13,677 1,014
Class 529-A 81,558 6,041 6,689 496
Class 529-B 15,159 1,123 1,564 116
Class 529-C 34,537 2,558 2,635 195
Class 529-E 3,881 287 374 28
Class 529-F 2,019 150 135 10
Class R-1 7,762 575 295 22
Class R-2 163,885 12,152 6,838 507
Class R-3 149,741 11,099 6,643 493
Class R-4 70,820 5,252 2,044 151
Class R-5 39,652 2,956 3,979 295
Total net increase
(decrease) $ 5,700,746 422,338 $ 702,507 52,079
Year ended December 31, 2003
Class A $ 3,914,006 298,503 $ 606,086 46,021
Class B 447,795 34,182 41,587 3,155
Class C 439,411 33,447 25,135 1,906
Class F 247,799 18,925 9,380 711
Class 529-A 58,345 4,428 4,025 305
Class 529-B 17,719 1,348 1,125 85
Class 529-C 29,195 2,219 1,798 136
Class 529-E 4,019 306 247 19
Class 529-F 1,906 145 48 3
Class R-1 5,828 442 121 9
Class R-2 113,952 8,680 3,007 227
Class R-3 99,210 7,575 2,884 218
Class R-4 19,077 1,446 604 46
Class R-5 49,613 3,802 3,594 272
Total net increase
(decrease) $ 5,447,875 415,448 $ 699,641 53,113
Share class Repurchases(1) Net increase
Amount Shares Amount Shares
Year ended December 31, 2004
Class A $ (3,028,423) (224,803) $ 1,669,965 123,281
Class B (226,378) (16,819) 105,995 7,809
Class C (218,016) (16,201) 264,290 19,513
Class F (100,016) (7,438) 189,960 14,047
Class 529-A (12,466) (925) 75,781 5,612
Class 529-B (3,056) (228) 13,667 1,011
Class 529-C (8,033) (597) 29,139 2,156
Class 529-E (721) (54) 3,534 261
Class 529-F (119) (9) 2,035 151
Class R-1 (2,382) (176) 5,675 421
Class R-2 (46,485) (3,445) 124,238 9,214
Class R-3 (41,099) (3,048) 115,285 8,544
Class R-4 (15,251) (1,131) 57,613 4,272
Class R-5 (23,719) (1,764) 19,912 1,487
Total net increase
(decrease) $ (3,726,164) (276,638) $ 2,677,089 197,779
Year ended December 31, 2003
Class A $ (3,944,314) (300,701) $ 575,778 43,823
Class B (222,252) (16,906) 267,130 20,431
Class C (213,329) (16,240) 251,217 19,113
Class F (159,243) (12,222) 97,936 7,414
Class 529-A (7,496) (567) 54,874 4,166
Class 529-B (1,780) (134) 17,064 1,299
Class 529-C (5,184) (392) 25,809 1,963
Class 529-E (969) (74) 3,297 251
Class 529-F (38) (3) 1,916 145
Class R-1 (2,261) (172) 3,688 279
Class R-2 (30,794) (2,338) 86,165 6,569
Class R-3 (28,674) (2,178) 73,420 5,615
Class R-4 (12,668) (971) 7,013 521
Class R-5 (30,931) (2,348) 22,276 1,726
Total net increase
(decrease) $ (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 December 31, 2004, the fund had outstanding forward currency contracts to
sell non-U.S. currencies as follows:
U.S. valuations
Non-U.S. Contract amount at December 31, 2004
currency
contracts Unrealized
Non-U.S. U.S. Amount (depreciation)
appreciation
(000) (000) (000) (000)
Sales:
Euros expiring 1/20 to 3/29/2005 Euro 175,887 $233,602 $238,453 ($4,851)
Japanese Yen expiring 3/14/2005 JPY 4,629,127 44,139 45,274 (1,135)
British pounds expiring 3/9/2005 Pound 1,920 3,711 3,664 47
Forward currency contracts - net $281,452 $287,391 ($5,939)
7. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding short-term
securities, of $9,767,170,000 and $7,824,192,000, respectively, during the year
ended December 31, 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
year ended December 31, 2004, the custodian fee of $648,000, shown on the
accompanying financial statements, included $118,000 that was offset by this
reduction, rather than paid in cash.
FINANCIAL HIGHLIGHTS (1)
Income from investment operations(2)
Net
Net asset gains (losses)
value, Net on securities Total from
beginning investment (both realized investment
of period income and unrealized) operations
Class A:
Year ended 12/31/2004 $13.51 $.61 $.16 $.77
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
Class B:
Year ended 12/31/2004 13.51 .51 .16 .67
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:
Year ended 12/31/2004 13.51 .50 .16 .66
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:
Year ended 12/31/2004 13.51 .60 .16 .76
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:
Year ended 12/31/2004 13.51 .60 .16 .76
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:
Year ended 12/31/2004 13.51 .48 .16 .64
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:
Year ended 12/31/2004 13.51 .48 .16 .64
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:
Year ended 12/31/2004 13.51 .55 .16 .71
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:
Year ended 12/31/2004 13.51 .59 .16 .75
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
FINANCIAL HIGHLIGHTS (1) (continued)
Income from investment operations(2)
Net
Net asset gains (losses)
value, Net on securities Total from
beginning investment (both realized investment
of period income and unrealized) operations
Class R-1:
Year ended 12/31/2004 13.51 .50 .16 .66
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:
Year ended 12/31/2004 13.51 .50 .16 .66
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:
Year ended 12/31/2004 13.51 .55 .16 .71
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:
Year ended 12/31/2004 13.51 .60 .16 .76
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:
Year ended 12/31/2004 13.51 .65 .16 .81
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
FINANCIAL HIGHLIGHTS (1)
Dividends
(from net Net asset Net assets,
investment value, end Total end of period
income) of period return(3) (in millions)
Class A:
Year ended 12/31/2004 $(.63) $13.65 5.85% $15,822
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
Class B:
Year ended 12/31/2004 (.53) 13.65 5.07 1,394
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:
Year ended 12/31/2004 (.52) 13.65 4.99 1,123
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:
Year ended 12/31/2004 (.62) 13.65 5.80 487
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:
Year ended 12/31/2004 (.62) 13.65 5.80 187
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:
Year ended 12/31/2004 (.50) 13.65 4.86 49
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:
Year ended 12/31/2004 (.50) 13.65 4.88 86
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:
Year ended 12/31/2004 (.57) 13.65 5.43 11
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:
Year ended 12/31/2004 (.61) 13.65 5.69 4
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 - (6)
FINANCIAL HIGHLIGHTS (1) (continued)
Dividends
(from net Net asset Net assets,
investment value, end Total end of period
income) of period return (in millions)
Class R-1:
Year ended 12/31/2004 (.52) 13.65 4.98 11
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:
Year ended 12/31/2004 (.52) 13.65 5.02 238
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:
Year ended 12/31/2004 (.57) 13.65 5.42 213
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:
Year ended 12/31/2004 (.62) 13.65 5.81 77
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:
Year ended 12/31/2004 (.67) 13.65 6.14 127
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
FINANCIAL HIGHLIGHTS (1)
Ratio of expenses Ratio of expenses
to average to average Ratio of
net assets net assets net income
before reimbursement/ after reimbursement/ to average
waiver waiver (4) net assets
Class A:
Year ended 12/31/2004 .65% .65% 4.54%
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
Class B:
Year ended 12/31/2004 1.39 1.38 3.80
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 (5) 1.42 (5) 6.65 (5)
Class C:
Year ended 12/31/2004 1.46 1.45 3.71
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 (5) 1.57 (5) 6.25 (5)
Class F:
Year ended 12/31/2004 .70 .69 4.46
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 (5) .79 (5) 7.03 (5)
Class 529-A:
Year ended 12/31/2004 .70 .70 4.48
Year ended 12/31/2003 .68 .68 5.05
Period from 2/15/2002 to 12/31/2002 .75 (5) .75 (5) 6.46 (5)
Class 529-B:
Year ended 12/31/2004 1.59 1.58 3.60
Year ended 12/31/2003 1.61 1.61 4.13
Period from 2/15/2002 to 12/31/2002 1.64 (5) 1.64 (5) 5.57 (5)
Class 529-C:
Year ended 12/31/2004 1.57 1.57 3.61
Year ended 12/31/2003 1.59 1.59 4.15
Period from 2/19/2002 to 12/31/2002 1.63 (5) 1.63 (5) 5.58 (5)
Class 529-E:
Year ended 12/31/2004 1.05 1.05 4.13
Year ended 12/31/2003 1.06 1.06 4.68
Period from 3/7/2002 to 12/31/2002 1.13 (5) 1.13 (5) 6.06 (5)
Class 529-F:
Year ended 12/31/2004 .80 .80 4.36
Year ended 12/31/2003 .82 .82 4.72
Period from 9/26/2002 to 12/31/2002 .30 .30 1.51
FINANCIAL HIGHLIGHTS (1) (continued)
Ratio of expenses Ratio of expenses
to average to average Ratio of
net assets net assets net income
before reimbursement/ after reimbursement/ to average
waiver waiver (4) net assets
Class R-1:
Year ended 12/31/2004 1.55 1.47 3.70
Year ended 12/31/2003 1.65 1.49 4.13
Period from 6/11/2002 to 12/31/2002 2.53 (5) 1.52 (5) 5.55 (5)
Class R-2:
Year ended 12/31/2004 1.85 1.43 3.73
Year ended 12/31/2003 1.94 1.46 4.20
Period from 5/31/2002 to 12/31/2002 1.67 (5) 1.48 (5) 5.56 (5)
Class R-3:
Year ended 12/31/2004 1.06 1.05 4.12
Year ended 12/31/2003 1.12 1.07 4.59
Period from 6/4/2002 to 12/31/2002 1.20 (5) 1.10 (5) 5.95 (5)
Class R-4:
Year ended 12/31/2004 .68 .68 4.48
Year ended 12/31/2003 .72 .72 5.05
Period from 5/20/2002 to 12/31/2002 .77 (5) .74 (5) 6.20 (5)
Class R-5:
Year ended 12/31/2004 .37 .37 4.81
Year ended 12/31/2003 .40 .40 5.39
Period from 5/15/2002 to 12/31/2002 .42 (5) .42 (5) 6.75 (5)
Year ended December 31
2004 2003 2002 2001 2000
Portfolio turnover rate for all classes of shares 45% 60% 50% 64% 62%
(1) Based on operations for the period shown (unless otherwise noted) and,
accordingly, may not be representative of a full year.
(2) Based on average shares outstanding.
(3) Total returns exclude all sales charges, including contingent deferred
sales charges.
(4) The ratios in this column reflect the impact, if any, of certain
reimbursements/waivers from CRMC. During some of the periods shown, CRMC
reduced fees for investment advisory services for all share classes. In
addition, during the start-up period for the retirement plan share classes
(except Class R-5), CRMC agreed to pay a portion of the fees related to
transfer agent services.
(5) Annualized.
(6) Amount less than $1 million.
See Notes to Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of The Bond Fund of America, Inc.:
We have audited the accompanying statement of assets and liabilities of The Bond
Fund of America, Inc. (the "Fund"), including the summary investment portfolio,
as of December 31, 2004, and the related statements of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Fund's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2004, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Bond Fund of America, Inc. as of December 31, 2004, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Costa Mesa, CA
February 10, 2005
TAX INFORMATION (unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of certain distributions received by
shareholders during such fiscal year. The information below is provided for the
fund's fiscal year ending December 31, 2004.
Individual shareholders are eligible for reduced tax rates on qualified dividend
income. The fund designates $7,338,000 of the dividends paid by the fund as
qualified dividend income.
Corporate shareholders may exclude up to 70% of qualifying dividends. The fund
designates $7,337,000 of dividends received as qualified dividend income.
For state tax purposes, certain states may exempt from income taxation that
portion of the income dividends paid by the fund that were derived from direct
U.S. government obligations. The fund designates $89,073,000 as interest derived
on direct U.S. government obligations.
INDIVIDUAL SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX
INFORMATION WHICH WAS MAILED IN JANUARY 2005 TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR 2004 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT
THEIR TAX ADVISERS.
EXPENSE EXAMPLE (unaudited)
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs such as initial sales charges on purchase payments and contingent deferred
sales charges on redemptions (loads); and (2) ongoing costs, including
management fees; distribution and service (12b-1) fees; and other expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the fund so you can compare these costs with the ongoing costs of
investing in other mutual funds. The example is based on an investment of $1,000
invested at the beginning of the period and held for the entire period (July 1,
2004 through December 31, 2004).
ACTUAL EXPENSES:
The first line of each share class in the table on the next page provides
information about actual account values and actual expenses. You may use the
information in this line, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first line under the heading entitled
"Expenses paid during period" to estimate the expenses you paid on your account
during this period. There are some account fees that are charged to certain
types of accounts, such as Individual Retirement Accounts and CollegeAmerica
accounts (generally, a $10 fee is charged to set up the account and an
additional $10 fee is charged to the account annually) that would increase the
amount of expenses paid on your account. In addition, retirement plan
participants may be subject to certain fees charged by the plan sponsor, and
Class F and Class 529-F shareholders may be subject to fees charged by financial
intermediaries, typically ranging from 0.50% to 3.00% of assets annually
depending on services offered. You can estimate the impact of these fees by
adding the amount of the fees to the total estimated expenses you paid on your
account during the period as calculated above. In addition, your ending account
value would also be lower by the amount of these fees.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES:
The second line of each share class in the table on the next page provides
information about hypothetical account values and hypothetical expenses based on
the actual expense ratio for the share class and an assumed rate of return of
5.00% per year before expenses, which is not the actual return of the share
class. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in the fund and
other funds. To do so, compare this 5.00% hypothetical example with the 5.00%
hypothetical examples that appear in the shareholder reports of the other funds.
There are some account fees that are charged to certain shareholders, such as
Individual Retirement Accounts and CollegeAmerica accounts (generally, a $10 fee
is charged to set up the account and an additional $10 fee is charged to the
account annually) that would increase the amount of expenses paid on your
account. In addition, retirement plan participants may be subject to certain
fees charged by the plan sponsor, and Class F and Class 529-F shareholders may
be subject to fees charged by financial intermediaries, typically ranging from
0.50% to 3.00% of assets annually depending on services offered. You can
estimate the impact of these fees by adding the amount of the fees to the total
estimated expenses you paid on your account during the period as calculated
above. In addition, your ending account value would also be lower by the amount
of these fees.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of each share class in the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these
transactional costs were included, your costs would have been higher.
Beginning account Ending account Expenses paid Annualized
value 7/1/2004 value 12/31/2004 during period (1) expense ratio
Class A -- actual return $ 1,000.00 $1,055.53 $3.26 .63%
Class A -- assumed 5% return 1,000.00 1,021.97 3.20 .63
Class B -- actual return 1,000.00 1,051.62 7.07 1.37
Class B -- assumed 5% return 1,000.00 1,018.25 6.95 1.37
Class C -- actual return 1,000.00 1,051.21 7.42 1.44
Class C -- assumed 5% return 1,000.00 1,017.90 7.30 1.44
Class F -- actual return 1,000.00 1,055.25 3.51 .68
Class F -- assumed 5% return 1,000.00 1,021.72 3.46 .68
Class 529-A -- actual return 1,000.00 1,055.38 3.46 .67
Class 529-A -- assumed 5% return 1,000.00 1,021.77 3.40 .67
Class 529-B -- actual return 1,000.00 1,050.54 8.09 1.57
Class 529-B -- assumed 5% return 1,000.00 1,017.24 7.96 1.57
Class 529-C -- actual return 1,000.00 1,050.61 8.04 1.56
Class 529-C -- assumed 5% return 1,000.00 1,017.29 7.91 1.56
Class 529-E -- actual return 1,000.00 1,053.40 5.32 1.03
Class 529-E -- assumed 5% return 1,000.00 1,019.96 5.23 1.03
Class 529-F -- actual return 1,000.00 1,054.67 4.08 .79
Class 529-F -- assumed 5% return 1,000.00 1,021.17 4.01 .79
Class R-1 -- actual return 1,000.00 1,051.13 7.53 1.46
Class R-1 -- assumed 5% return 1,000.00 1,017.80 7.41 1.46
Class R-2 -- actual return 1,000.00 1,051.32 7.32 1.42
Class R-2 -- assumed 5% return 1,000.00 1,018.00 7.20 1.42
Class R-3 -- actual return 1,000.00 1,053.36 5.37 1.04
Class R-3 -- assumed 5% return 1,000.00 1,019.91 5.28 1.04
Class R-4 -- actual return 1,000.00 1,055.32 3.46 .67
Class R-4 -- assumed 5% return 1,000.00 1,021.77 3.40 .67
Class R-5 -- actual return 1,000.00 1,056.97 1.86 .36
Class R-5 -- assumed 5% return 1,000.00 1,023.33 1.83 .36
(1) Expenses are equal to the annualized expense ratio, multiplied by the
average account value over the period, multiplied by the number of days in
the period (184), and divided by 366 (to reflect the one-half year period).
BOARD OF DIRECTORS AND OFFICERS
"NON-INTERESTED" DIRECTORS
YEAR FIRST
ELECTED
A DIRECTOR
NAME AND AGE OF THE FUND(1) PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
Ambassador
Richard G. Capen, Jr., 70 1999 Corporate director and author; former U.S. Ambassador to Spain; former
Vice Chairman, Knight-Ridder, Inc. (communications company); former
Chairman and Publisher, The Miami Herald
H. Frederick Christie, 71 1974 Private investor; former President and CEO, The Mission Group
(non-utility holding company, subsidiary of Southern California Edison
Company)
Diane C. Creel, 56 1994 Chairman of the Board and CEO, Ecovation, Inc. (organic waste
management)
Martin Fenton, 69 1989 Chairman of the Board and CEO, Senior Resource Group LLC (development
and management of senior living communities)
Leonard R. Fuller, 58 1994 President and CEO, Fuller Consulting (financial management consulting
firm)
Richard G. Newman, 70 1991 Chairman of the Board and CEO, AECOM Technology Corporation
(engineering, consulting and professional technical services)
Frank M. Sanchez, 61 1999 Principal, The Sanchez Family Corporation dba McDonald's Restaurants
(McDonald's licensee)
"NON-INTERESTED" DIRECTORS
NUMBER OF
PORTFOLIOS
WITHIN FUND
COMPLEX(2)
OVERSEEN BY
NAME AND AGE DIRECTOR OTHER DIRECTORSHIPS(3) HELD BY DIRECTOR
Ambassador
Richard G. Capen, Jr., 70 14 Carnival Corporation
H. Frederick Christie, 71 19 Ducommun Incorporated; IHOP Corporation; Southwest Water Company;
Valero L.P.
Diane C. Creel, 56 12 Allegheny Technologies; BF Goodrich; Foster Wheeler Ltd.; Teledyne
Technologies
Martin Fenton, 69 16 None
Leonard R. Fuller, 58 14 None
Richard G. Newman, 70 13 Sempra Energy; Southwest Water Company
Frank M. Sanchez, 61 12 None
"INTERESTED" DIRECTORS(4)
YEAR FIRST
ELECTED A
DIRECTOR OR PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND
NAME, AGE AND OFFICER OF POSITIONS HELD WITH AFFILIATED ENTITIES OR THE PRINCIPAL
POSITION WITH FUND THE FUND(1) UNDERWRITER OF THE FUND
Paul G. Haaga, Jr., 56 1985 Executive Vice President and Director, Capital
Chairman of the Board Research and Management Company; Director, The Capital Group
Companies, Inc.(5)
Abner D. Goldstine, 75 1974 Senior Vice President and Director, Capital
President Research and Management Company
Don R. Conlan, 69 1996 President (retired), The Capital Group Companies, Inc.(5)
"INTERESTED" DIRECTORS(4)
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX(2)
NAME, AGE AND OVERSEEN BY
POSITION WITH FUND DIRECTOR OTHER DIRECTORSHIPS(3) HELD BY DIRECTOR
Paul G. Haaga, Jr., 56 17 None
Chairman of the Board
Abner D. Goldstine, 75 12 None
President
Don R. Conlan, 69 6 None
THE STATEMENT OF ADDITIONAL INFORMATION INCLUDES ADDITIONAL INFORMATION ABOUT
FUND DIRECTORS AND IS AVAILABLE WITHOUT CHARGE UPON REQUEST BY CALLING AMERICAN
FUNDS SERVICE COMPANY AT 800/421-0180. THE ADDRESS FOR ALL DIRECTORS AND
OFFICERS OF THE FUND IS 333 SOUTH HOPE STREET, LOS ANGELES, CA 90071, ATTENTION:
FUND SECRETARY.
(1) Directors and officers of the fund serve until their resignation, removal
or retirement.
(2) Capital Research and Management Company manages the American Funds,
consisting of 29 funds. Capital Research and Management Company also
manages American Funds Insurance Series,(R) which serves as the underlying
investment vehicle for certain variable insurance contracts, and Endowments,
whose shareholders are limited to certain nonprofit organizations.
(3) This includes all directorships (other than those in the American Funds)
that are held by each Director as a director of a public company or a
registered investment company.
(4) "Interested persons" within the meaning of the 1940 Act, on the basis of
their affiliation with the fund's investment adviser, Capital Research and
Management Company, or affiliated entities (including the fund's principal
underwriter).
(5) Company affiliated with Capital Research and Management Company.
OTHER OFFICERS
YEAR FIRST
ELECTED AN PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND
NAME, AGE AND OFFICER OF POSITIONS HELD WITH AFFILIATED ENTITIES OR THE PRINCIPAL
POSITION WITH FUND THE FUND(1) UNDERWRITER OF THE FUND
David C. Barclay, 48 1997 Senior Vice President and Director, Capital
Senior Vice President Research and Management Company; Director, The Capital Group
Companies, Inc.(5)
Mark R. Macdonald, 45 2001 Senior Vice President and Director, Capital
Senior Vice President Research and Management Company
John H. Smet, 48 1994 Senior Vice President, Capital Research and
Senior Vice President Management Company; Director, American
Funds Distributors, Inc.(5)
Kristine M. Nishiyama, 34 2003 Vice President and Counsel -- Fund Business
Vice President Management Group, Capital Research and Management Company; Vice
President and Counsel, Capital Bank and Trust Company(5)
Julie F. Williams, 56 1982 Vice President -- Fund Business Management
Secretary Group, Capital Research and Management Company
Susi M. Silverman, 34 2001 Vice President -- Fund Business Management
Treasurer Group, Capital Research and Management Company
Kimberly S. Verdick, 40 1994 Assistant Vice President -- Fund Business
Assistant Secretary Management Group, Capital Research and
Management Company
Sharon G. Moseley, 37 2003 Vice President -- Fund Business Management
Assistant Treasurer Group, Capital Research and Management Company
OFFICES OF THE FUND AND OF THE INVESTMENT ADVISER
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1406
135 South State College Boulevard
Brea, CA 92821-5823
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 REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
695 Town Center Drive
Suite 1200
Costa Mesa, CA 92626-7188
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406
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 AND THE COLLEGEAMERICA PROGRAM
DESCRIPTION, WHICH CAN BE OBTAINED FROM YOUR FINANCIAL ADVISER AND SHOULD BE
READ CAREFULLY BEFORE INVESTING. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE
COMPANY (AFS) AT 800/421-0180 OR VISIT THE AMERICAN FUNDS WEBSITE AT
AMERICANFUNDS.COM.
"AMERICAN FUNDS PROXY VOTING GUIDELINES" -- WHICH DESCRIBES HOW WE VOTE PROXIES
RELATING TO PORTFOLIO SECURITIES -- IS AVAILABLE FREE OF CHARGE ON THE U.S.
SECURITIES AND EXCHANGE COMMISSION (SEC) WEBSITE AT WWW.SEC.GOV, ON THE AMERICAN
FUNDS WEBSITE OR UPON REQUEST BY CALLING AFS. THE FUND'S PROXY VOTING RECORD FOR
THE 12 MONTHS ENDED JUNE 30, 2004, IS ALSO AVAILABLE ON THE SEC AND AMERICAN
FUNDS WEBSITES.
A complete portfolio of The Bond Fund of America's investments is available free
of charge on the SEC website or upon request by calling AFS.
The Bond Fund of America files a complete list of its portfolio holdings with
the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms
N-Q are available free of charge on the SEC website or upon request by calling
AFS. You may also review or, for a fee, copy the forms at the SEC's Public
Reference Room in Washington, D.C. (800/SEC-0330).
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
March 31, 2005, 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 30 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. More than half 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
Emphasis on long-term growth through stocks
AMCAP Fund(R)
EuroPacific Growth Fund(R)
The Growth Fund of America(R)
The New Economy Fund(R)
New Perspective Fund(R)
New World Fund(SM)
SMALLCAP World Fund(R)
o GROWTH-AND-INCOME FUNDS
Emphasis on long-term growth and dividends through stocks
American Mutual Fund(R)
Capital World Growth and Income Fund(SM)
Fundamental Investors(SM)
The Investment Company of America(R)
Washington Mutual Investors Fund(SM)
o EQUITY-INCOME FUNDS
Emphasis on above-average income and growth through stocks and/or bonds
Capital Income Builder(R)
The Income Fund of America(R)
o BALANCED FUND
Emphasis on long-term growth and current income through stocks and bonds
American Balanced Fund(R)
o BOND FUNDS
Emphasis on current income through bonds
American High-Income Trust(SM)
> THE BOND FUND OF AMERICA(SM)
Capital World Bond Fund(R)
Intermediate Bond Fund of America(R)
U.S. Government Securities Fund(SM)
o TAX-EXEMPT BOND FUNDS
Emphasis on tax-free current income through municipal bonds
American High-Income Municipal Bond Fund(R)
Limited Term Tax-Exempt Bond Fund of America(SM)
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 America(SM)
The U.S. Treasury Money Fund of America(SM)
THE CAPITAL GROUP COMPANIES
American Funds
Capital Research and Management
Capital International
Capital Guardian
Capital Bank and Trust
Lit. No. MFGEAR-908-0205
Litho in USA BG/LPT/8053-S1905
Printed on recycled paper
ITEM 2 - Code of Ethics
The Registrant has adopted a Code of Ethics that applies to its Principal
Executive Officer and Principal Financial Officer. The Registrant undertakes to
provide to any person without charge, upon request, a copy of the Code of
Ethics. Such request can be made to American Funds Service Company at
800/421-0180 or to the Secretary of the Registrant, 333 South Hope Street, Los
Angeles, California 90071.
ITEM 3 - Audit Committee Financial Expert
The Registrant's Board has determined that Leonard R. Fuller, a member of the
Registrant's Audit Committee, is an "audit committee financial expert" and
"independent," as such terms are defined in this Item. This designation will not
increase the designee's duties, obligations or liability as compared to his
duties, obligations and liability as a member of the Audit Committee and of the
Board; nor will it reduce the responsibility of the other Audit Committee
members. There may be other individuals who, through education or experience,
would qualify as "audit committee financial experts" if the Board had designated
them as such. Most importantly, the Board believes each member of the Audit
Committee contributes significantly to the effective oversight of the
Registrant's financial statements and condition.
ITEM 4 - Principal Accountant Fees and Services
Registrant:
a) Audit Fees:
2003 $77,000
2004 $85,000
b) Audit- Related Fees:
2003 none
2004 $12,000
The audit-related fees consist of assurance
and related services relating to the
examination of the Registrant's investment
adviser conducted in accordance with
Statement on Auditing Standards Number 70
issued by the American Institute of
Certified Public Accountants.
c) Tax Fees:
2003 $5,000
2004 $6,000
The tax fees consist of professional
services relating to the preparation of the
Registrant's tax returns.
d) All Other Fees:
2003 none
2004 none
Adviser and affiliates (includes only fees for non-audit
services billed to the adviser and affiliates for engagements
that relate directly to the operations and financial reporting
of the Registrant and were subject to the pre-approval
policies described below):
a) Not Applicable b) Audit- Related Fees:
2003 $305,000
2004 $323,000
The audit-related fees consist of assurance
and related services relating to the
examination of the Registrant's transfer
agency and investment adviser conducted in
accordance with Statement on Auditing
Standards Number 70 issued by the American
Institute of Certified Public Accountants.
c) Tax Fees:
2003 none
2004 none
d) All Other Fees:
2003 none
2004 none
The Registrant's Audit Committee will pre-approve all audit and permissible
non-audit services that the Committee considers compatible with maintaining the
auditors' independence. The pre-approval requirement will extend to all
non-audit services provided to the Registrant, the investment adviser, and any
entity controlling, controlled by, or under common control with the investment
adviser that provides ongoing services to the Registrant, if the engagement
relates directly to the operations and financial reporting of the registrant.
The Committee will not delegate its responsibility to pre-approve these services
to the investment adviser. The Committee may delegate to one or more Committee
members the authority to review and pre-approve audit and permissible non-audit
services. Actions taken under any such delegation will be reported to the full
Committee at its next meeting. The pre-approval requirement is waived with
respect to non-audit services if certain conditions are met. The pre-approval
requirement was not waived for any of the services listed above under paragraphs
b, c and d.
Aggregate non-audit fees paid to the Registrant's auditors, including fees for
all services billed to the Registrant and the adviser and affiliates that
provide ongoing services to the Registrant were $315,000 for fiscal year 2003
and $1,130,000 for fiscal year 2004. The non-audit services represented by these
amounts were brought to the attention of the Committee and considered to be
compatible with maintaining the auditors' independence.
ITEM 5 - Audit Committee of Listed Registrants
Not applicable.
ITEM 6 - Schedule of Investments
[logo - American Funds (r)]
BOND FUND OF AMERICA
INVESTMENT PORTFOLIO
December 31, 2004
Principal amount Market value
BONDS & NOTES -- 89.79% (000) (000)
CORPORATE BONDS & NOTES -- 47.85%
FINANCIALS -- 14.09%
AT&T Capital Corp., Series F, 6.60% 2005 $11,750 $11,853
CIT Group Inc. 4.125% 2006 25,000 25,261
CIT Group Inc. 3.65% 2007 25,720 25,638
CIT Group Inc. 5.75% 2007 20,500 21,564
CIT Group Inc. 7.375% 2007 12,500 13,504
CIT Group Inc. 4.00% 2008 14,000 14,062
CIT Group Inc. 3.375% 2009 5,000 4,862
CIT Group Inc. 6.875% 2009 31,000 34,481
CIT Group Inc. 7.75% 2012 26,875 31,857
Household Finance Corp. 5.75% 2007 10,000 10,444
Household Finance Corp. 7.875% 2007 32,000 34,839
Household Finance Corp. 4.125% 2008 1,000 1,005
Household Finance Corp. 6.40% 2008 10,000 10,797
Household Finance Corp. 4.125% 2009 25,000 24,893
Household Finance Corp. 4.75% 2009 20,000 20,529
Household Finance Corp. 6.375% 2011 7,250 8,018
Household Finance Corp. 6.75% 2011 23,750 26,688
HSBC Holdings PLC 5.25% 2012 10,000 10,383
Household Finance Corp. 7.00% 2012 10,000 11,436
HSBC Bank USA 4.625% 2014(1) 9,000 8,842
Midland Bank 3.063% Eurodollar note (undated)(2) 15,000 13,050
ASIF Global Financing XXVIII 2.22% 2007(1),(2) 2,000 2,000
International Lease Finance Corp., Series P, 3.125% 2007 4,000 3,954
International Lease Finance Corp. 3.75% 2007 15,000 15,006
International Lease Finance Corp. 4.35% 2008 21,000 21,240
International Lease Finance Corp. 4.50% 2008 29,500 29,900
AIG SunAmerica Global Financing VII 5.85% 2008(1) 16,750 17,858
International Lease Finance Corp. 3.50% 2009 16,000 15,595
International Lease Finance Corp., Series O, 4.55% 2009 20,600 20,838
International Lease Finance Corp. 4.75% 2009 25,000 25,557
American International Group, Inc. 4.25% 2013 3,500 3,387
International Lease Finance Corp. 5.875% 2013 9,700 10,306
Washington Mutual Finance 8.25% 2005 10,000 10,241
Washington Mutual, Inc. 7.50% 2006 12,000 12,753
Washington Mutual, Inc. 5.625% 2007 11,000 11,461
Washington Mutual, Inc. 4.375% 2008 12,500 12,704
Washington Mutual, Inc. 2.81% 2010(2) 31,000 30,997
Washington Mutual, Inc. 4.20% 2010 12,500 12,465
Washington Mutual Bank, FA 6.875% 2011 10,000 11,268
Washington Mutual Bank, FA 5.125% 2015 30,000 29,854
Prudential Financial, Inc. 4.104% 2006 10,000 10,114
Prudential Insurance Co. of America 6.375% 2006(1) 4,000 4,208
PRICOA Global Funding I, Series 2003-2, 3.90% 2008(1) 7,500 7,491
PRICOA Global Funding I, Series 2004-4, 4.35% 2008(1) 2,500 2,539
Prudential Funding LLC 6.60% 2008(1) 3,000 3,249
PRICOA Global Funding I 4.20% 2010(1) 17,000 16,988
Prudential Financial, Inc., Series B, 4.75% 2014 5,500 5,396
Prudential Holdings, LLC, Series C, 8.695% 2023(1),(3) 57,035 72,613
USA Education, Inc. 5.625% 2007 45,150 47,110
SLM Corp., Series A, 3.625% 2008 5,500 5,478
SLM Corp., Series A, 3.95% 2008 27,500 27,551
SLM Corp., Series A, 4.00% 2009 5,000 5,002
SLM Corp., Series A, 4.00% 2010 10,000 9,934
SLM Corp., Series A, 5.375% 2013 5,450 5,647
SLM Corp., Series A, 5.375% 2014 10,000 10,346
SocGen Real Estate Co. LLC, Series A, 7.64% (undated)(1),(2) 74,250 81,495
Societe Generale 7.85% (undated)(1),(2) 17,705 19,199
Halifax Building Society 8.75% 2006 Pound 2,500 5,055
HBOS Treasury Services PLC 3.75% 2008(1) $36,250 36,221
HBOS PLC 5.375% (undated)(1),(2) 22,050 22,648
HBOS Capital Funding LP, Series A, 6.461% non-cumulative preferred (undated)(2) Pound 3,000 6,284
Bank of Scotland 7.00% (undated)(1),(2) $25,000 27,051
Westfield Capital Corp. Ltd. and WT Finance (Aust) Pty Ltd. and WEA Finance
LLC 4.375% 2010(1) 57,950 57,389
Westfield Capital Corp. Ltd. and WT Finance (Aust) Pty Ltd. and WEA Finance
LLC 5.125% 2014(1) 26,600 26,523
J.P. Morgan Chase & Co. 5.35% 2007 3,285 3,412
J.P. Morgan Chase & Co. 4.00% 2008 12,500 12,592
BANK ONE, Texas, NA 6.25% 2008 7,250 7,735
J.P. Morgan Chase & Co. 6.625% 2012 14,165 15,878
J.P. Morgan Chase & Co. 5.75% 2013 31,000 32,902
J.P. Morgan Chase & Co. 5.125% 2014 6,000 6,051
BANK ONE CORP. 4.90% 2015 4,000 3,939
XL Capital Finance (Europe) PLC 6.50% 2012 12,455 13,652
XL Capital Ltd. 5.25% 2014 19,700 19,780
Mangrove Bay Pass Through Trust 6.102% 2033(1),(2),(3) 28,125 28,001
Twin Reefs Pass Through Trust 3.37% (undated)(1),(2),(3) 9,200 9,252
Monumental Global Funding Trust II, Series 2001-B, 6.05% 2006(1) 11,025 11,339
Monumental Global Funding Trust II, Series 2002-A, 5.20% 2007(1) 17,500 18,102
Monumental Global Funding Ltd., Series 2001-N, 5.75% 2007 Pound 1,840 3,584
AEGON NV 4.625% 2008 Euro 7,750 10,985
Transamerica Corp. 9.375% 2008 $7,500 8,686
Monumental Global Funding II, Series 2004-F, 4.375% 2009(1) 2,000 2,010
AEGON NV 6.125% 2031 Pound 1,600 3,401
EOP Operating LP 7.75% 2007 $2,000 2,209
EOP Operating LP 6.75% 2008 24,500 26,497
EOP Operating LP 4.65% 2010 15,300 15,389
EOP Operating LP 6.75% 2012 8,250 9,197
EOP Operating LP 7.50% 2029 3,420 3,976
Allstate Life Global Funding Trust, Series 2004-2, 2.441% 2007(2) 3,000 3,000
Allstate Financial Global Funding LLC 5.25% 2007(1) 26,500 27,406
Allstate Financial Global Funding LLC 4.25% 2008(1) 7,500 7,595
Allstate Life Global Funding Trust, Series 2004-1, 4.50% 2009 18,000 18,349
Abbey National PLC, Series 1-B, 6.69% 2005 5,000 5,126
Abbey National PLC 6.70% (undated)(2) 18,450 19,988
Abbey National PLC 7.35% (undated)(2) 28,000 29,654
ReliaStar Financial Corp. 8.625% 2005 5,000 5,031
ReliaStar Financial Corp. 8.00% 2006 23,160 25,053
ING Security Life Institutional Funding 2.70% 2007(1) 4,730 4,644
ReliaStar Financial Corp. 6.50% 2008 6,016 6,505
ING Bank NV 5.50% 2012 Euro 3,750 5,641
Ing Verzekeringen NV 6.25% 2021(2) 3,750 5,778
MBNA Europe Funding PLC 6.50% 2007 5,000 7,291
MBNA Corp., Series F, 7.50% 2012 $1,200 1,388
MBNA Capital A, Series A, 8.278% 2026 7,500 8,252
MBNA Global Capital Funding, Series B, 2.96% 2027(2) 34,800 33,112
Citigroup Inc. 3.50% 2008 20,000 19,925
Citigroup Inc. 4.25% 2009 15,000 15,175
Citigroup Inc. 5.625% 2012 5,675 6,053
Citigroup Inc. 5.125% 2014 5,000 5,130
BankAmerica Corp., Series I, 7.125% 2005 1,500 1,523
Bank of America Corp. 3.625% 2008 Euro 7,500 10,374
Bank of America Corp. 3.875% 2008 $2,000 2,017
Bank of America Corp. 4.25% 2010 5,000 4,993
Bank of America Corp. 4.375% 2010 17,000 17,073
BankAmerica Corp. 7.125% 2011 1,750 1,997
Bank of America Corp. 4.875% 2012 2,000 2,046
Bank of America Corp. 5.25% 2015 5,000 5,118
Royal Bank of Scotland Group PLC 8.375% 2007 Pound 6,500 13,275
Royal Bank of Scotland Group PLC 5.00% 2014 $6,500 6,578
RBS Capital Trust IV, noncumulative trust preferred 3.35% (undated)(2) 5,000 5,037
National Westminster Bank PLC 7.75% (undated)(2) 17,000 18,613
Kimco Realty Corp., Series B, 7.68% 2005 4,250 4,405
Price REIT, Inc. 7.50% 2006 2,760 2,970
Kimco Realty Corp., Series C, 3.95% 2008 5,000 4,985
Kimco Realty Corp., Series C, 4.82% 2011 10,000 10,059
Kimco Realty Corp. 6.00% 2012 13,500 14,594
Nationwide Life Insurance Co. 5.35% 2007(1) 4,250 4,403
North Front Pass Through Trust 5.81% 2024(1),(2),(3) 18,500 18,721
Nationwide Mutual Insurance Co. 7.875% 2033(1) 8,000 9,561
Nationwide Mutual Insurance Co. 6.60% 2034(1) 2,000 2,009
ACE Ltd. 6.00% 2007 1,000 1,044
ACE INA Holdings Inc. 5.875% 2014 17,260 17,714
ACE INA Holdings Inc. 8.875% 2029 2,450 3,169
ACE Capital Trust II 9.70% 2030 9,368 12,483
MetLife, Inc. 3.911% 2005 31,730 31,874
Metropolitan Life Global Funding I, Series 2004-2, 2.57% 2007(1),(2) 1,500 1,501
Countrywide Home Loans, Inc., Series M, 4.125% 2009 20,000 19,931
Countrywide Home Loans, Inc., Series L, 4.00% 2011 13,000 12,657
Capital One Financial Corp. 7.25% 2006 9,625 10,093
Capital One Financial Corp. 8.75% 2007 1,250 1,373
Capital One Financial Corp. 7.125% 2008 4,250 4,658
Capital One Bank 5.75% 2010 11,500 12,214
Capital One Financial Corp. 6.25% 2013 2,800 3,016
Hartford Financial Services Group, Inc. 2.375% 2006 2,000 1,964
Hartford Financial Services Group, Inc. 4.70% 2007 16,250 16,584
Hartford Financial Services Group, Inc. 4.625% 2013 5,000 4,851
Hartford Financial Services Group, Inc. 4.75% 2014 5,000 4,881
Development Bank of Singapore Ltd. 7.875% 2009(1) 20,000 23,045
Development Bank of Singapore Ltd. 7.125% 2011(1) 3,500 3,995
Assurant, Inc. 5.625% 2014 26,000 26,899
CNA Financial Corp. 6.75% 2006 3,000 3,149
CNA Financial Corp. 6.60% 2008 3,458 3,722
CNA Financial Corp. 5.85% 2014 13,625 13,622
CNA Financial Corp. 7.25% 2023 5,300 5,739
Bayerische Landesbank, Series F, 2.50% 2006 26,000 25,730
Kazkommerts International BV 7.00% 2009(1) 5,500 5,555
Kazkommerts International BV 8.50% 2013 5,000 5,250
Kazkommerts International BV (CGMD) 7.375% 2014(1),(2) 2,250 2,239
Kazkommerts International BV 7.875% 2014(1) 12,500 12,562
Rouse Co. 3.625% 2009 5,200 4,907
Rouse Co. 7.20% 2012 17,700 19,166
Jackson National Life Global Funding, Series 2002-1, 5.25% 2007(1) 23,125 24,052
John Hancock Global Funding II, Series 2002-G, 5.00% 2007(1) 5,000 5,157
John Hancock Global Funding II, Series 2004-A, 3.50% 2009(1) 18,000 17,612
United Overseas Bank Ltd. 5.375% 2019(1),(2) 22,250 22,614
Wells Fargo & Co. 3.50% 2008 21,310 21,192
Irvine Co., Class A, 7.46% 2006(1),(4) 15,000 15,551
Irvine Apartment Communities, LP 7.00% 2007 5,000 5,352
Canadian Imperial Bank of Commerce 2.125% Eurodollar note 2085(2) 25,000 20,844
Colonial Realty LP 6.15% 2013 10,000 10,404
Colonial Realty LP 6.25% 2014 9,700 10,215
Hospitality Properties Trust 7.00% 2008 1,000 1,069
Hospitality Properties Trust 6.75% 2013 17,095 18,906
Developers Diversified Realty Corp. 3.875% 2009 19,500 19,154
UFJ Finance Aruba AEC 6.75% 2013 17,045 19,026
Bayerische Hypo- und Vereinsbank AG 6.00% 2014 Euro 10,000 15,231
HVB Funding Trust III 9.00% 2031(1) $1,990 2,636
United Dominion Realty Trust, Inc., Series E, 4.50% 2008 17,000 17,362
Providian Financial Corp., Series A, 9.525% 2027(1) 16,750 17,252
Credit Suisse First Boston (USA), Inc. 6.50% 2012 15,000 16,719
Principal Life Global Funding I 4.40% 2010(1) 16,600 16,580
Genworth Financial, Inc. 2.64% 2007(2) 2,500 2,499
Genworth Financial, Inc. 4.75% 2009 10,345 10,601
Genworth Financial, Inc. 5.75% 2014 3,000 3,179
Weingarten Realty Investors, Series A, 5.263% 2012 5,000 5,161
Weingarten Realty Investors, Series A, 4.857% 2014 11,080 10,992
Skandinaviska Enskilda Banken AB, 4.958% (undated)(1),(2) 2,050 2,020
Skandinaviska Enskilda Banken AB, 7.50% (undated)(2) 12,500 14,116
Standard Chartered Bank 2.838% (undated)(2) 5,000 4,025
Standard Chartered Bank 2.875% Eurodollar note (undated)(2) 15,000 11,872
Simon Property Group, LP 4.875% 2010 12,000 12,239
Advanta Capital Trust I, Series B, 8.99% 2026 12,500 12,187
AB Spintab 6.00% 2009 SKr73,000 12,091
Comerica, Inc., Imperial Capital Trust I, Imperial Bancorp, Series B, 9.98% 2026 $10,200 11,945
Barclays Bank PLC 6.86% callable perpetual core tier one notes (undated)(1),(2) 5,000 5,641
Barclays Bank PLC 7.375% (undated)(1),(2) 5,375 6,245
MassMutual Global Funding II, Series 2002-1, 3.50% 2010(1) 12,000 11,582
Unicredito Italiano SpA, Series B, 8.048% (undated)(2) Euro 7,000 11,557
Banco Santander Chile 5.375% 2014(1) $11,200 11,414
United Energy Distribution Pty Ltd., AMBAC insured, 4.70% 2011(1) 10,000 10,076
Sumitomo Mitsui Banking Corp. 4.375% 2014(2) Euro 6,670 9,331
American Express Credit Corp. 3.00% 2008 $9,060 8,855
Bank of Nova Scotia 2.115% Eurodollar note (undated)(2) 10,000 8,358
Chohung Bank 4.50% 2014(1),(2) 8,000 7,966
Post Apartment Homes, LP 5.125% 2011 7,720 7,743
BCI U.S. Funding Trust I 8.01% noncumulative preferred (undated)(1),(2) 6,500 7,272
Lloyds Bank, Series 2, 2.563% (undated)(2) 8,000 7,104
Allied Irish Banks Ltd. 2.63% (undated)(2) 7,000 6,145
Munich Re Finance BV 6.75% 2023(2) Euro 3,670 5,772
PLD International Finance LLC 4.375% 2011 4,150 5,771
Travelers Property Casualty Corp. 3.75% 2008 $5,500 5,450
BNP Paribas 5.125% 2015(1) 5,100 5,216
FelCor Lodging LP 9.00% 2011(2) 4,500 5,119
Host Marriott, LP, Series G, 9.25% 2007 625 700
Host Marriott, LP, Series L, 7.00% 2012(1) 4,000 4,250
Wachovia Corp. 3.625% 2009 5,000 4,947
Industrial Bank of Korea 4.00% 2014(1),(2) 5,000 4,896
Westpac Capital Trust IV 5.256% (undated)(1),(2) 4,500 4,466
Bergen Bank 2.115% (undated)(2) 5,000 4,169
National Bank of Canada 2.125% (undated)(2) 5,000 4,125
iStar Financial, Inc., Series B, 4.875% 2009 2,500 2,540
iStar Financial, Inc., Series B, 5.125% 2011 1,500 1,518
Federal Realty Investment Trust 4.50% 2011 3,500 3,411
Christiana Bank Og Kreditkasse 2.66% (undated)(2) 4,000 3,357
Zions Bancorporation 6.00% 2015 2,675 2,857
Downey Financial Corp. 6.50% 2014 2,500 2,607
ERP Operating LP 4.75% 2009 2,225 2,274
Deutsche Bank Financial LLC 5.375% 2015 2,000 2,073
UnionBanCal Corp. 5.25% 2013 2,000 2,031
Principal Life Insurance Co. 3.20% 2009 2,000 1,936
LaBranche & Co Inc. 9.50% 2009 1,500 1,537
Crescent Real Estate LP 7.50% 2007 1,190 1,282
2,792,972
CONSUMER DISCRETIONARY -- 10.74%
Ford Motor Credit Co. 6.875% 2006 46,000 47,401
Ford Motor Credit Co. 7.20% 2007 3,000 3,202
Ford Motor Credit Co. 5.80% 2009 8,500 8,696
Ford Motor Credit Co. 7.375% 2009 87,920 94,933
Ford Motor Credit Co. 3.93% 2010(2) 27,500 27,497
Ford Motor Credit Co. 5.70% 2010 10,000 10,102
Ford Motor Credit Co. 7.875% 2010 94,100 103,791
Ford Motor Credit Co. 7.375% 2011 42,875 46,265
Ford Motor Co. 7.45% 2031 10,370 10,460
General Motors Acceptance Corp. 7.50% 2005 40,000 40,829
General Motors Acceptance Corp. 6.125% 2007 5,000 5,151
General Motors Acceptance Corp. 6.15% 2007 7,500 7,712
General Motors Acceptance Corp. 5.75% 2010 Euro 7,000 9,696
General Motors Acceptance Corp. 7.75% 2010 $68,825 73,948
General Motors Acceptance Corp. 6.875% 2011 57,000 58,491
General Motors Corp. 7.20% 2011 1,650 1,694
General Motors Acceptance Corp. 7.25% 2011 17,000 17,820
General Motors Acceptance Corp. 7.00% 2012 26,190 27,022
General Motors Corp. 7.25% 2013 Euro 5,250 7,756
General Motors Acceptance Corp. 4.56% 2014(2) $61,000 59,949
General Motors Acceptance Corp. 8.00% 2031 15,000 15,461
General Motors Corp. 8.375% 2033 160 166
DaimlerChrysler North America Holding Corp. 7.75% 2005 18,462 18,857
DaimlerChrysler North America Holding Corp. 6.40% 2006 19,000 19,772
DaimlerChrysler North America Holding Corp. 4.05% 2008 9,750 9,738
DaimlerChrysler North America Holding Corp. 4.75% 2008 4,800 4,906
DaimlerChrysler North America Holding Corp. 7.20% 2009 17,500 19,497
DaimlerChrysler North America Holding Corp. 8.00% 2010 56,500 65,376
DaimlerChrysler North America Holding Corp. 7.75% 2011 23,600 27,247
DaimlerChrysler North America Holding Corp. 7.30% 2012 19,750 22,453
DaimlerChrysler North America Holding Corp. 6.50% 2013 5,000 5,432
DaimlerChrysler North America Holding Corp. 8.50% 2031 1,610 2,018
Cox Communications, Inc. 7.75% 2006 2,325 2,474
Cox Communications, Inc. 0% 2007(1),(2) 5,000 5,013
Cox Communications, Inc. 7.875% 2009 1,000 1,136
Cox Communications, Inc. 4.625% 2010(1) 27,500 27,467
Cox Communications, Inc. 7.75% 2010 10,000 11,469
Cox Communications, Inc. 4.625% 2013 10,000 9,583
Cox Communications, Inc. 5.45% 2014(1) 59,870 59,982
Clear Channel Communications, Inc. 6.625% 2008 5,375 5,749
Chancellor Media Corp. of Los Angeles 8.00% 2008 10,000 11,237
Clear Channel Communications, Inc. 7.65% 2010 33,000 37,592
Clear Channel Communications, Inc. 5.75% 2013 10,000 10,349
Clear Channel Communications, Inc. 5.50% 2014 44,155 44,408
Comcast Cable Communications, Inc. 8.375% 2007 7,000 7,746
Comcast Cable Communications, Inc. 6.20% 2008 2,300 2,486
Lenfest Communications, Inc. 7.625% 2008 6,750 7,444
Comcast Cable Communications, Inc. 6.875% 2009 15,194 16,896
Comcast Cable Communications, Inc. 6.75% 2011 8,000 8,995
Tele-Communications, Inc. 9.80% 2012 17,500 22,588
Comcast Cable Communications, Inc. 7.125% 2013 1,375 1,596
Tele-Communications, Inc. 7.875% 2013 10,750 12,910
Comcast Corp. 6.50% 2015 8,000 8,909
J.C. Penney Co., Inc. 7.375% 2008 2,000 2,205
J.C. Penney Co., Inc. 6.875% 2015 1,425 1,550
J.C. Penney Co., Inc. 7.65% 2016 7,500 8,625
J.C. Penney Co., Inc. 7.95% 2017 38,575 45,326
J.C. Penney Co., Inc. 7.625% 2097 7,500 8,025
Time Warner Inc. 8.18% 2007 2,225 2,472
AOL Time Warner Inc. 6.875% 2012 43,000 49,042
AOL Time Warner Inc. 7.625% 2031 10,500 12,742
Viacom Inc. 6.40% 2006 5,000 5,168
Viacom Inc. 5.625% 2007 6,600 6,904
Viacom Inc. 7.70% 2010 13,000 15,232
Viacom Inc. 6.625% 2011 25,000 28,108
Liberty Media Corp. 7.75% 2009 6,250 6,941
Liberty Media Corp. 7.875% 2009 32,380 36,121
Liberty Media Corp. 5.70% 2013 2,500 2,485
Toys "R" Us, Inc. 7.875% 2013 22,410 22,354
Toys "R" Us, Inc. 7.375% 2018 22,195 20,641
Pulte Homes, Inc. 4.875% 2009 25,300 25,666
Pulte Homes, Inc. 7.625% 2017 7,500 8,721
Harrah's Operating Co., Inc. 5.50% 2010 30,260 31,360
Toll Brothers, Inc. 6.875% 2012 9,875 11,023
Toll Brothers, Inc. 4.95% 2014 19,250 18,880
Carnival Corp. 3.75% 2007 8,500 8,516
Carnival Corp. 6.15% 2008 17,663 18,933
Six Flags, Inc. 9.50% 2009 3,375 3,527
Six Flags, Inc. 8.875% 2010 8,850 9,005
Six Flags, Inc. 9.75% 2013 10,250 10,455
Antenna TV SA 9.75% 2008 Euro 15,000 21,230
Charter Communications Holdings, LLC and Charter Communications Holdings
Capital Corp. 10.75% 2009 $1,000 915
CCH II, LLC and CCH II Capital Corp. 10.25% 2010 4,000 4,260
Charter Communications Operating, LLC and Charter Communications Operating
Capital Corp. 8.00% 2012(1) 9,650 10,084
CCO Holdings, LLC and CCO Holdings Capital Corp. 8.75% 2013 5,500 5,706
May Department Stores Co. 4.80% 2009 14,185 14,438
May Department Stores Co. 5.75% 2014 6,180 6,363
Target Corp. 3.375% 2008 20,830 20,666
Delphi Corp. 6.50% 2013 6,000 5,943
Delphi Trust II, trust preferred securities, 6.197% 2033(2) 14,810 13,873
Visteon Corp. 8.25% 2010 17,940 18,882
Visteon Corp. 7.00% 2014 525 504
Young Broadcasting Inc. 8.50% 2008 5,200 5,590
Young Broadcasting Inc. 10.00% 2011 12,317 13,210
News America Holdings Inc. 6.625% 2008 12,900 13,932
News America Holdings Inc. 8.625% 2014 A$ 5,150 4,370
Telenet Group Holding NV 0%/11.50% 2014(1),(5) $22,300 17,059
Univision Communications Inc. 7.85% 2011 13,250 15,653
AMC Entertainment Inc. 8.00% 2014 14,175 14,175
Cinemark USA, Inc. 9.00% 2013 6,925 7,938
Cinemark, Inc. 0%/9.75% 2014(5) 8,000 6,080
CanWest Media Inc. 8.00% 2012(1) 12,426 13,389
Circus and Eldorado Joint Venture and Silver Legacy Resort Casino 10.125% 2012 12,025 13,137
Hilton Hotels Corp. 7.625% 2008 1,000 1,108
Hilton Hotels Corp. 8.25% 2011 3,485 4,128
Hilton Hotels Corp. 7.625% 2012 6,555 7,677
Ryland Group, Inc. 5.375% 2008 7,000 7,315
Ryland Group, Inc. 9.75% 2010 4,500 4,916
Kohl's Corp. 6.30% 2011 9,000 9,873
Kohl's Corp. 7.375% 2011 1,500 1,758
Centex Corp. 4.75% 2008 8,000 8,167
Centex Corp. 5.80% 2009 3,000 3,165
Kabel Deutschland GmbH 10.625% 2014(1) 9,650 11,146
Lowe's Companies, Inc. 8.25% 2010 8,450 10,145
Mohegan Tribal Gaming Authority 6.375% 2009 7,700 7,950
Mohegan Tribal Gaming Authority 7.125% 2014 1,500 1,586
William Lyon Homes, Inc. 7.625% 2012(1) 5,250 5,152
William Lyon Homes, Inc. 10.75% 2013 2,000 2,257
William Lyon Homes, Inc. 7.50% 2014 2,000 1,930
Century Communications Corp. 0% 2003(6) 5,000 5,325
Adelphia Communications Corp. 10.25% 2006(7) 3,500 3,421
NTL Cable PLC 8.75% 2014(1),(2) 5,825 6,597
NTL Cable PLC 8.75% 2014 Euro 1,000 1,514
Cox Radio, Inc. 6.375% 2005 8,000 8,075
Gannett Co., Inc. 4.95% 2005 8,000 8,040
Regal Cinemas Corp., Series B, 9.375% 2012(4) 7,250 7,902
MGM MIRAGE 8.50% 2010 6,850 7,826
Technical Olympic USA, Inc. 9.00% 2010 1,950 2,096
Technical Olympic USA, Inc. 9.00% 2010 1,550 1,666
Technical Olympic USA, Inc. 7.50% 2011 3,750 3,797
Payless ShoeSource, Inc. 8.25% 2013 7,000 7,184
Buffets, Inc. 11.25% 2010 6,500 6,987
PETCO Animal Supplies, Inc. 10.75% 2011 5,750 6,756
Royal Caribbean Cruises Ltd. 7.00% 2007 1,400 1,508
Royal Caribbean Cruises Ltd. 8.75% 2011 4,325 5,131
Tenneco Automotive Inc., Series B, 10.25% 2013 3,850 4,562
Tenneco Automotive Inc. 8.625% 2014(1) 850 888
RBS-Zero Editora Jornalistica SA 11.00% 2010(1) 5,492 5,217
Blockbuster Inc. 9.00% 2012(1) 5,025 4,987
Perkins Family Restaurants, LP, Perkins Finance Corp., Series B, 10.125% 2007 4,793 4,925
Radio One, Inc., Series B, 8.875% 2011 4,000 4,375
Carmike Cinemas, Inc. 7.50% 2014 4,200 4,321
Lear Corp., Series B, 8.11% 2009 3,580 4,064
Wynn Las Vegas, LLC and Wynn Las Vegas Capital Corp. 6.625% 2014(1) 4,075 4,055
Jones Apparel Group, Inc. 4.25% 2009(1) 3,910 3,901
Boyd Gaming Corp. 9.25% 2009 3,500 3,780
Hyatt Equities, LLC 6.875% 2007(1) 3,185 3,353
MDC Holdings, Inc. 5.50% 2013 3,000 3,051
TRW Automotive Acquisition Corp. 9.375% 2013 1,925 2,243
TRW Automotive Acquisition Corp. 11.00% 2013 650 786
YUM! Brands, Inc. 7.70% 2012 2,500 2,966
Argosy Gaming Co. 7.00% 2014 2,650 2,941
Office Depot, Inc. 6.25% 2013 2,750 2,939
DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. 8.375% 2013 2,300 2,590
Dex Media West LLC and Dex Media West Finance Co. 5.875% 2011(1) 2,000 2,000
Dex Media, Inc., Series B, 8.00% 2013 525 571
Globo Comunicacoes e Participacoes Ltda., Series B, 10.50% 2006(1),(7) 1,990 1,900
Globo Comunicacoes e Participacoes Ltda., Series B, 10.50% 2006(7) 690 659
LBI Media, Inc. 10.125% 2012 2,250 2,523
Dana Corp. 5.85% 2015(1) 2,500 2,487
WCI Communities, Inc. 9.125% 2012 2,000 2,230
ArvinMeritor, Inc. 8.75% 2012 1,725 2,001
Standard Pacific Corp. 5.125% 2009 1,000 990
Standard Pacific Corp. 6.25% 2014 1,000 985
NextMedia Operating, Inc. 10.75% 2011 1,750 1,969
Stoneridge, Inc. 11.50% 2012 1,360 1,588
D.R. Horton, Inc. 6.125% 2014 1,500 1,552
Jostens IH Corp. 7.625% 2012(1) 1,475 1,541
Bombardier Recreational Products Inc. 8.375% 2013 1,425 1,528
Boyds Collection, Ltd., Series B, 9.00% 2008 1,501 1,433
Starwood Hotels & Resorts Worldwide, Inc. 7.375% 2007 250 268
Starwood Hotels & Resorts Worldwide, Inc. 7.875% 2012 1,000 1,147
Warner Music Group 7.375% 2014(1) 1,250 1,288
Atlantic Broadband Finance, LLC and Atlantic Broadband Finance, Inc.
9.375% 2014(1) 1,300 1,264
La Quinta Properties, Inc. 7.00% 2012 1,000 1,063
Reader's Digest Association, Inc. 6.50% 2011 1,000 1,050
Videotron Ltee 6.875% 2014 1,000 1,039
Warnaco, Inc. 8.875% 2013 925 1,022
Dillard's, Inc. 6.625% 2018 1,000 1,005
Grupo Posadas, SA de CV 8.75% 2011(1) 250 268
2,130,204
TELECOMMUNICATION SERVICES -- 6.25%
Verizon Wireless Capital LLC and Cellco Partnership 5.375% 2006 116,830 121,069
Sprint Capital Corp. 4.78% 2006 27,225 27,758
Sprint Capital Corp. 6.375% 2009 8,880 9,653
Sprint Capital Corp. 7.625% 2011 39,760 46,220
Sprint Capital Corp. 6.90% 2019 21,615 24,237
Sprint Capital Corp. 6.875% 2028 7,550 8,291
SBC Communications Inc. 5.75% 2006 3,575 3,691
SBC Communications Inc. 4.125% 2009 31,345 31,321
SBC Communications Inc. 6.25% 2011 1,150 1,263
SBC Communications Inc. 5.10% 2014 76,010 76,862
SBC Communications Inc. 6.45% 2034 2,000 2,150
British Telecommunications PLC 8.375% 2010(2) 75,749 91,073
British Telecommunications PLC 7.125% 2011(2) Euro 6,170 9,895
BellSouth Corp. 4.20% 2009 $37,530 37,668
BellSouth Corp. 4.75% 2012 27,725 27,941
BellSouth Corp. 5.20% 2014 3,150 3,217
BellSouth Corp. 5.20% 2016 22,000 22,073
AT&T Corp. 6.00% 2009 23,000 24,121
AT&T Corp. 9.05% 2011(2) 52,500 60,703
France Telecom 7.50% 2008(2) Euro 3,500 5,310
France Telecom 8.50% 2011(2) $58,300 69,632
Vodafone Group PLC 4.25% 2009 Euro 7,000 9,865
Vodafone Group PLC 7.75% 2010 $55,210 64,138
Cingular Wireless LLC 5.625% 2006 5,000 5,196
AT&T Wireless Services, Inc. 7.875% 2011 15,355 18,120
AT&T Wireless Services, Inc. 8.125% 2012 37,630 45,554
Deutsche Telekom International Finance BV 7.50% 2007(2) Euro 3,500 5,232
Deutsche Telekom International Finance BV 3.875% 2008 $1,100 1,099
Deutsche Telekom International Finance BV 8.50% 2010(2) 24,000 28,625
Deutsche Telekom International Finance BV 8.125% 2012(2) Euro 3,910 6,722
Deutsche Telekom International Finance BV 9.25% 2032(2) $7,750 11,063
Telecom Italia Capital SA, Series A, 4.00% 2008 1,270 1,266
Sogerim SA 7.25% 2011 Euro 1,400 2,236
Telecom Italia SpA 6.25% 2012 15,000 23,066
Telecom Italia Capital SA, Series B, 5.25% 2013 $6,300 6,379
Telecom Italia Capital SA 4.95% 2014(1) 20,000 19,632
Koninklijke KPN NV, Series 7, 8.25% 2008 Pound 1,000 2,093
Koninklijke KPN NV 8.00% 2010 $35,945 42,477
Qwest Services Corp. 13.50% 2010(1) 12,175 14,701
Qwest Services Corp. 14.00% 2014(1) 9,550 12,129
Verizon Global Funding Corp. 6.125% 2007 2,550 2,702
Verizon Global Funding Corp. 7.25% 2010 7,690 8,821
Verizon New York Inc., Series A, 6.875% 2012 5,250 5,902
Verizon Global Funding Corp. 7.375% 2012 7,360 8,674
Crown Castle International Corp. 10.75% 2011 5,000 5,450
Crown Castle International Corp., Series B, 7.50% 2013 11,200 12,096
Crown Castle International Corp. 7.50% 2013 4,475 4,833
Nextel Communications, Inc. 6.875% 2013 875 954
Nextel Communications, Inc. 7.375% 2015 17,420 19,249
American Tower Corp. 9.375% 2009 1,820 1,934
American Tower Corp. 7.125% 2012(1) 17,275 17,750
Singapore Telecommunications Ltd. 6.375% 2011 3,475 3,846
Singapore Telecommunications Ltd. 7.375% 2031(1) 10,000 12,252
PCCW-HKT Capital Ltd. 8.00% 2011(1),(2) 12,375 14,500
ALLTEL Corp. 7.00% 2012 10,000 11,532
Dobson Communications Corp. 10.875% 2010 50 39
Dobson Cellular Systems, Inc. 9.875% 2012(1) 8,500 8,415
Dobson Communications Corp. 8.875% 2013 4,000 2,830
Rogers Wireless Inc. 7.25% 2012(1) 1,275 1,358
Rogers Wireless Inc. 7.50% 2015(1) 6,925 7,341
Rogers Cantel Inc. 9.75% 2016 1,250 1,500
Nextel Partners, Inc. 12.50% 2009 677 770
Nextel Partners, Inc. 8.125% 2011 5,370 5,988
Nextel Partners, Inc. 8.125% 2011 3,000 3,345
AirGate PCS, Inc. 9.375% 2009(1) 6,692 7,244
Cincinnati Bell Inc. 7.25% 2013 6,800 7,021
Triton PCS, Inc. 8.75% 2011 2,000 1,590
Triton PCS, Inc. 9.375% 2011 6,000 4,830
TELUS Corp. 8.00% 2011 5,250 6,230
Centennial Cellular Corp. 10.75% 2008 786 819
Centennial Communications Corp. and Centennial Cellular Operating Co. LLC and
Centennial Puerto Rico Operations Corp. 8.625% 2014(2) 5,000 5,163
SK Telecom Co., Ltd. 4.25% 2011(1) 6,000 5,873
Telefonica Europe BV 5.125% 2013 Euro 3,600 5,299
Cellco Finance NV 12.75% 2005 $3,500 3,658
SpectraSite, Inc. 8.25% 2010 2,100 2,252
Millicom International Cellular SA 10.00% 2013(1) 1,500 1,577
iPCS Escrow Co. 11.50% 2012(1) 1,000 1,140
US Unwired Inc., Series B, 10.00% 2012 1,000 1,133
GT Group Telecom Inc., units, 0%/13.25% 2010(1),(4),(5),(7),(9) 2,753 0
1,239,651
INDUSTRIALS -- 5.13%
Continental Airlines, Inc., Series 1998-3, Class C-2, 7.25% 2005 12,000 11,300
Continental Airlines, Inc., MBIA insured, 3.338% 2009(2) 2,000 2,019
Continental Airlines, Inc., Series 2001-1, Class A-2, 6.503% 2011 14,050 13,791
Continental Airlines, Inc., Series 1999-2, Class A-2, 7.056% 2011(3) 10,000 10,281
Continental Airlines, Inc., Series 1997-1, Class A, 7.461% 2016(3) 10,668 10,333
Continental Airlines, Inc., Series 1996-2, Class D, 11.50% 2016(3) 1,888 1,362
Continental Airlines, Inc., Series 2001-1, Class B, 7.373% 2017(3) 4,308 3,639
Continental Airlines, Inc., Series 1998-1, Class A, 6.648% 2019(3) 22,837 22,196
Continental Airlines, Inc., Series 1997-4, Class A, 6.90% 2019(3) 28,409 28,496
Continental Airlines, Inc., Series 1999-1, Class B, 6.795% 2020(3) 15,833 13,846
Continental Airlines, Inc., Series 2001-1, Class A-1, 6.703% 2021(3) 8,872 8,630
Continental Airlines, Inc., Series 2000-1, Class A-1, 8.048% 2022(3) 4,210 4,267
Hutchison Whampoa International Ltd. 7.00% 2011(1) 33,125 37,062
Hutchison Whampoa International Ltd. 6.50% 2013(1) 40,000 43,190
Hutchison Whampoa International Ltd. 6.25% 2014(1) 17,200 18,151
General Electric Capital Corp., Series A, 5.00% 2007 21,500 22,238
General Electric Capital Corp., Series A, 5.375% 2007 13,250 13,770
General Electric Capital Corp., Series A, 7.25% 2007 Pound 1,030 2,085
General Electric Capital Corp., Series A, 3.50% 2008 $20,000 19,866
General Electric Capital Corp., Series A, 6.00% 2012 15,000 16,375
General Electric Co. 5.00% 2013 12,750 13,103
Tyco International Group SA 6.125% 2008 14,500 15,636
Tyco International Group SA 6.125% 2009 5,500 5,940
Tyco International Group SA 6.375% 2011 47,765 52,808
Tyco International Group, SA 6.50% 2031 Pound 3,250 7,003
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class B, 7.156% 2011(1),(3) $32,936 35,771
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class G, MBIA insured,
6.664% 2013(1),(3) 32,411 35,933
Delta Air Lines, Inc. 8.00% 2007(1) 7,710 5,725
Delta Air Lines, Inc. 10.00% 2008 1,500 1,114
Delta Air Lines, Inc., Series 2003-1, Class G, AMBAC insured, 2.85% 2009(2),(3) 14,575 14,675
Delta Air Lines, Inc., Series 2001-1, Class A-1, 6.619% 2011(3) 11,229 11,039
Delta Air Lines, Inc., Series 2000-1, Class A-2, 7.57% 2012 3,500 3,455
Delta Air Lines, Inc., Series 2001-1, Class A-2, 7.111% 2013 15,000 14,749
Delta Air Lines, Inc., Series 2002-1, Class C, 7.779% 2013(3) 12,105 7,917
Delta Air Lines, Inc., Series 1992-A2, 9.20% 2014(3) 11,500 6,325
Delta Air Lines, Inc., 1991 Equipment Certificates Trust, Series J,
10.00% 2014(1),(3) 5,000 2,400
Delta Air Lines, Inc., 1990 Equipment Certificates Trust, Series F,
10.79% 2014(1),(3) 1,700 935
Delta Air Lines, Inc. 10.375% 2022 2,577 1,327
American Airlines, Inc., Series 1999-1, Class A-1, 6.855% 2010(3) 12,726 13,027
American Airlines, Inc., Series 2001-2, Class A-1, 6.978% 2012(3) 32,764 33,583
American Airlines, Inc., Series 2001-2, Class B, 8.608% 2012 9,000 8,287
American Airlines, Inc., Series 2001-2, Class A-2, 7.858% 2013 5,000 5,171
American Airlines, Inc., Series 1991-C2, 9.73% 2014(3) 6,410 4,218
American Airlines, Inc., Series 2001-1, Class B, 7.377% 2019(3) 7,640 5,361
Cendant Corp. 6.875% 2006 11,755 12,372
Cendant Corp. 6.25% 2008 9,500 10,146
Cendant Corp. 7.375% 2013 23,660 27,413
Bombardier Inc. 6.75% 2012(1) 10,000 9,225
Bombardier Inc. 6.30% 2014(1) 45,000 39,263
Northwest Airlines, Inc. 7.625% 2005 1,100 1,107
Northwest Airlines, Inc. 8.875% 2006 875 844
Northwest Airlines, Inc. 8.70% 2007 400 356
Northwest Airlines, Inc. 9.875% 2007 14,325 13,000
Northwest Airlines, Inc. 10.00% 2009 6,025 5,106
Northwest Airlines, Inc., Series 2001-1, Class A-2, 6.841% 2012 9,955 10,027
Northwest Airlines, Inc., Series 1999-2, Class A, 7.575% 2020(3) 6,079 6,284
Northwest Airlines, Inc., Series 2002-1, Class G-2, MBIA insured,
6.264% 2021(3) 7,672 7,909
Northwest Airlines, Inc., Series 2001-1, Class A-1, 7.041% 2023(3) 2,170 2,182
Allied Waste North America, Inc., Series B, 7.625% 2006 2,000 2,070
Allied Waste North America, Inc. 8.50% 2008 7,500 7,988
Allied Waste North America, Inc., Series B, 8.875% 2008 5,250 5,644
Allied Waste North America, Inc., Series B, 6.50% 2010 4,000 3,940
Allied Waste North America, Inc., Series B, 5.75% 2011 2,500 2,363
Allied Waste North America, Inc., Series B, 6.125% 2014 3,000 2,835
Allied Waste North America, Inc., Series B, 7.375% 2014 3,750 3,609
Southwest Airlines Co., Series 2001-1, Class A-2, 5.496% 2006(3) 5,000 5,152
Southwest Airlines Co., Series 2001-1, Class B, 6.126% 2006(3) 7,500 7,835
Southwest Airlines Co. 5.25% 2014 13,000 13,072
Union Pacific Railroad Co. Pass Through Trust, Series 2001-1, 6.63% 2022(3) 8,000 9,010
Union Pacific Railroad Co. Pass Through Trust, Series 2002-1, 6.061% 2023(3) 11,500 12,496
Union Pacific Railroad Co. Pass Through Trust, Series 2003-1, 4.698% 2024(3) 2,978 2,905
Burlington Northern and Santa Fe Railway Co. Pass Through Trust, Series 1996-B,
6.96% 2009(3) 2,301 2,426
Burlington Northern and Santa Fe Railway Co. Pass Through Trust, Series 2002-2,
5.14% 2021(3) 12,500 12,590
Burlington Northern and Santa Fe Railway Co. Pass Through Trust, Series 2002-1,
5.943% 2022(3) 6,694 7,196
John Deere Capital Corp. 3.90% 2008 15,000 15,117
Deere & Co. 8.95% 2019 5,000 5,902
Goodrich Corp. 7.50% 2008 2,000 2,216
Goodrich Corp. 7.625% 2012 9,000 10,688
Caterpillar Financial Services Corp., Series F, 2.35% 2006 5,000 4,920
Caterpillar Financial Services Corp. 2.70% 2008 4,845 4,671
Caterpillar Inc. 4.50% 2009 2,500 2,555
Caterpillar Inc. 7.25% 2009 300 340
Northrop Grumman Corp. 4.079% 2006 2,000 2,021
Northrop Grumman Systems Corp. 7.125% 2011 8,000 9,192
Terex Corp. 9.25% 2011 6,625 7,470
Terex Corp., Class B, 10.375% 2011 2,725 3,066
Raytheon Co. 6.55% 2010 6,000 6,610
Raytheon Co. 8.30% 2010 3,000 3,559
Jacuzzi Brands, Inc. 9.625% 2010 9,000 10,035
Southern Capital Corp. Pass Through Trust, Series 2002-1, Class G, MBIA insured,
5.70% 2023(1),(3) 8,271 8,596
United Air Lines, Inc. 9.00% 2003(6) 2,000 185
United Air Lines, Inc., Series 2000-1, Class A-2, 7.73% 2012(3),(7) 8,998 8,003
Horizon Lines, LLC and Horizon Lines Holding Corp. 9.00% 2012(1) 7,350 7,938
AIR 2 US, Series A, 8.027% 2020(1),(3) 8,515 7,679
American Standard Inc. 7.625% 2010 6,000 6,867
Waste Management, Inc. 6.50% 2008 5,220 5,688
Waste Management, Inc. 5.00% 2014 765 772
United Rentals (North America), Inc., Series B, 6.50% 2012 3,250 3,185
United Rentals (North America), Inc., Series B, 7.00% 2014 2,700 2,538
General Dynamics Corp. 4.50% 2010 5,000 5,115
TFM, SA de CV 11.75% 2009 1,855 1,899
TFM, SA de CV 12.50% 2012 2,145 2,515
Nortek, Inc. 8.50% 2014(1) 4,025 4,226
KinderCare Learning Centers, Inc., Series B, 9.50% 2009 3,071 3,098
Standard Aero Holdings, Inc. 8.25% 2014(1) 2,200 2,387
Synagro Technologies, Inc. 9.50% 2009 2,025 2,217
AGCO Corp. 6.875% 2014 Euro 700 1,010
Argo-Tech Corp. 9.25% 2011 $450 496
Laidlaw International, Inc. 10.75% 2011 285 334
Jet Equipment Trust, Series 1994-A, 11.79% 2013(1),(7) 4,000 -
Jet Equipment Trust, Series 1995-B, 10.91% 2014(1),(7) 5,000 1
Jet Equipment Trust, Series 1995-D, 11.44% 2014(1),(7) 2,500 -
1,017,875
UTILITIES -- 3.93%
Edison Mission Energy 10.00% 2008 2,000 2,305
Edison Mission Energy 7.73% 2009 10,125 10,935
Edison Mission Energy 9.875% 2011 34,160 40,650
Midwest Generation, LLC, Series B, 8.56% 2016(3) 8,000 8,885
Homer City Funding LLC 8.734% 2026(3) 20,178 23,608
Midwest Generation, LLC and Midwest Finance Corp. 8.75% 2034 7,600 8,664
Duke Capital LLC 4.331% 2006 20,000 20,260
Duke Capital Corp. 4.37% 2009 7,500 7,556
Duke Capital Corp. 7.50% 2009 25,325 28,692
Duke Energy Corp., First and Refunding Mortgage Bonds, 4.50% 2010 4,500 4,558
Duke Capital Corp. 6.25% 2013 9,000 9,743
Duke Capital Corp. 5.50% 2014 10,000 10,235
Duke Capital LLC 5.668% 2014 5,000 5,169
PECO Energy Co., First and Refunding Mortgage Bonds, 3.50% 2008 5,000 4,969
Commonwealth Edison Co., Series 99, 3.70% 2008 7,125 7,176
Commonwealth Edison Co., First Mortgage Bonds, Series 102, 4.74% 2010 12,500 12,888
Exelon Corp. 6.75% 2011 2,200 2,464
Exelon Generation Co., LLC 6.95% 2011 22,975 25,967
PECO Energy Co., First and Refunding Mortgage Bonds, 4.75% 2012 3,900 3,945
Dominion Resources, Inc., Series A, 3.66% 2006 3,000 3,006
Virginia Electric and Power Co., Series 2002-A, 5.375% 2007 14,140 14,654
Dominion Resources, Inc., Series 2002-C, 5.70% 2012(2) 1,000 1,060
Virginia Electric and Power Co., Series 2003-A, 4.75% 2013 25,000 25,045
Drax Group Ltd., Class A-1, 7.418% 2015(1),(2) Pound 4,603 8,870
Drax Group Ltd., Class A-2, unit, 8.918% 2015(1),(2),(10) 5,293 25,865
Drax Group Ltd., Class B, 6.918% 2025(1),(2) 3,894 8,022
Israel Electric Corp. Ltd. 7.75% 2009(1) $17,000 18,947
Israel Electric Corp. Ltd. 7.70% 2018(1) 8,500 9,705
Israel Electric Corp. Ltd. 8.10% 2096(1) 12,000 12,304
TXU Corp., Series O, 4.80% 2009(1) 25,000 25,072
Oncor Electric Delivery Co. 6.375% 2012 10,700 11,818
Cilcorp Inc. 8.70% 2009 1,000 1,179
Union Electric Co. 4.65% 2013 11,000 10,889
Cilcorp Inc. 9.375% 2029 12,265 16,866
PSEG Power LLC 3.75% 2009 6,825 6,727
PSEG Power LLC 7.75% 2011 18,700 21,832
Alabama Power Co., Series U, 2.65% 2006 20,500 20,393
Alabama Power Co., Series R, 4.70% 2010 2,250 2,286
Southern Power Co., Series B, 6.25% 2012 2,500 2,736
AES Corp. 9.50% 2009 4,677 5,343
AES Corp. 9.375% 2010 4,803 5,608
AES Gener SA 7.50% 2014(1) 9,000 9,495
Niagara Mohawk Power Corp., Series G, 7.75% 2008 17,460 19,658
SP PowerAssets Ltd. 3.80% 2008(1) 10,000 10,004
SP PowerAssets Ltd. 5.00% 2013(1) 8,000 8,132
Empresa Nacional de Electricidad SA, Series B, 8.50% 2009 4,455 5,075
Empresa Nacional de Electricidad SA 8.35% 2013 5,000 5,805
Empresa Nacional de Electricidad SA 8.625% 2015 3,000 3,600
Constellation Energy Group, Inc. 6.125% 2009 10,500 11,373
Baltimore Gas and Electric Co. 5.20% 2033 3,000 2,798
Old Dominion Electric Cooperative, Series 2003-A, 5.676% 2028(3) 13,500 14,087
PacifiCorp, First Mortgage Bonds, 4.30% 2008 3,060 3,093
PacifiCorp, First Mortgage Bonds, 5.45% 2013 9,775 10,249
MidAmerican Energy Co. 5.125% 2013 7,500 7,766
MidAmerican Energy Co. 4.65% 2014 5,000 4,949
Consolidated Edison Co. of New York, Inc., Series 2003-A, 3.625% 2008 6,000 5,949
Consolidated Edison Co. of New York, Inc., Series B, 3.85% 2013 5,000 4,726
Consolidated Edison Co. of New York, Inc., Series 2003-C, 5.10% 2033 2,000 1,889
Progress Energy Florida, Inc., First Mortgage Bonds 4.80% 2013 7,000 7,041
Carolina Power & Light Co. d/b/a Progress Energy Carolinas, Inc., First
Mortgage Bonds, 5.125% 2013 5,000 5,124
Essent NV 4.50% 2013 Euro 8,410 11,792
Anglian Water Services Financing PLC 4.625% 2013 8,250 11,709
Veolia Environnement 4.875% 2013 8,000 11,520
Pacific Gas and Electric Co., First Mortgage Bonds, 4.20% 2011 $7,000 6,930
Pacific Gas and Electric Co., First Mortgage Bonds, 6.05% 2034 4,000 4,169
NGG Finance PLC 6.125% 2011 Euro 6,980 10,758
Reliant Energy Resources Corp. 7.75% 2011 $7,000 8,170
Centerpoint Energy Resources Corp., Series B, 7.875% 2013 2,000 2,381
Kern River Funding Corp. 4.893% 2018(1),(3) 10,208 10,418
Dynegy Holdings Inc. 10.125% 2013(1) 6,675 7,676
E.ON International Finance BV 5.75% 2009 Euro 5,000 7,477
Edison SpA 5.125% 2010 4,730 6,906
Nevada Power Co., Series I, 6.50% 2012 $700 744
Nevada Power Co., General and Refunding Mortgage Notes, Series G, 9.00% 2013 3,600 4,230
Sierra Pacific Resources 8.625% 2014 900 1,022
Nevada Power Co. 5.875% 2015(1) 550 557
NiSource Finance Corp. 6.15% 2013 5,600 6,080
Red Electrica de Espana Finance BV 4.75% 2013 Euro 4,000 5,776
Korea East-West Power Co., Ltd. 4.875% 2011(1) $5,000 5,050
Southern California Gas Co., First Mortgage Bonds, Series II, 4.375% 2011 5,000 5,022
Tri-State Generation and Transmission Association Inc., Pass Through Trust,
Series 2003-A, 6.04% 2018(1),(3) 3,500 3,700
Energy East Corp. 6.75% 2012 2,955 3,318
Equitable Resources, Inc. 5.15% 2018 2,500 2,502
Enersis SA 7.375% 2014 2,000 2,184
Wisconsin Gas Co. 5.20% 2015 2,025 2,068
779,868
MATERIALS -- 2.52%
Dow Chemical Co. 5.75% 2008 11,100 11,830
Dow Chemical Pass Through Trust, Series 2004, 4.027% 2009(1),(3) 31,000 30,306
Dow Chemical Co. 5.75% 2009 13,250 14,188
Weyerhaeuser Co. 5.95% 2008 8,596 9,213
Weyerhaeuser Co. 5.25% 2009 15,104 15,788
Weyerhaeuser Co. 6.75% 2012 20,750 23,416
Norske Skogindustrier ASA 7.625% 2011(1) 28,415 32,581
Norske Skogindustrier ASA 6.125% 2015(1) 6,370 6,615
Norske Skogindustrier ASA 7.125% 2033(1) 4,100 4,489
Scotia Pacific Co. LLC, Series B, Class A-2, 7.11% 2028(3) 27,100 23,442
Scotia Pacific Co. LLC, Series B, Class A-3, 7.71% 2028 17,043 12,441
Millennium America Inc. 9.25% 2008 4,840 5,530
Equistar Chemicals, LP 10.125% 2008 5,400 6,251
Equistar Chemicals, LP 8.75% 2009 12,800 14,400
SCA Coordination Center NV 4.50% 2015(1) 27,000 25,922
International Paper Co. 5.375% 2006 Euro 4,500 6,327
International Paper Co. 4.00% 2010 $16,000 15,705
International Paper Co. 5.85% 2012 1,500 1,601
BHP Finance (USA) Ltd. 6.69% 2006 10,000 10,379
BHP Finance (USA) Ltd. 8.50% 2012 10,000 12,505
ICI Wilmington, Inc. 4.375% 2008 200 201
ICI Wilmington, Inc. 5.625% 2013 19,165 19,884
Stone Container Corp. 9.25% 2008 1,000 1,110
Stone Container Corp. 9.75% 2011 3,250 3,575
Jefferson Smurfit Corp. (U.S.) 8.25% 2012 11,625 12,729
Owens-Illinois, Inc. 8.10% 2007 5,750 6,153
Owens-Illinois, Inc. 7.35% 2008 5,250 5,539
Owens-Brockway Glass Container Inc. 8.875% 2009 3,000 3,274
Owens-Illinois, Inc. 7.50% 2010 2,250 2,399
Phelps Dodge Corp. 8.75% 2011 7,000 8,546
Phelps Dodge Corp. 6.125% 2034 7,500 7,685
Packaging Corp. of America 4.375% 2008 1,500 1,508
Packaging Corp. of America 5.75% 2013 13,000 13,430
Alcan Inc. 5.20% 2014 13,000 13,363
UPM-Kymmene Corp. 6.125% 2012 Euro 7,500 11,504
Longview Fibre Co. 10.00% 2009 $5,500 6,036
Freeport-McMoRan Copper & Gold Inc. 10.125% 2010 5,000 5,738
Crystal US Holdings 3 LLC and Crystal US Sub 3 Corp., Series B,
0%/10.50% 2014(1),(5) 5,675 3,916
BCP Caylux Holdings Luxembourg SCA 9.625% 2014(1) 1,575 1,784
Koppers Inc. 9.875% 2013 4,370 5,004
KI Holdings Inc. 0%/9.875% 2014(1),(5) 800 516
MeadWestvaco Corp. 2.75% 2005 5,180 5,165
Temple-Inland Inc. 7.875% 2012 3,900 4,622
Ainsworth Lumber Co. Ltd. 7.25% 2012(1) 650 665
Ainsworth Lumber Co. Ltd. 6.75% 2014 2,250 2,213
Ainsworth Lumber Co. Ltd. 6.75% 2014 1,750 1,722
Luscar Coal Ltd. 9.75% 2011 4,000 4,560
Kappa Beheer BV 12.50% 2009 Euro 3,000 4,393
Building Materials Corp. of America 7.75% 2014(1) $4,250 4,308
Georgia-Pacific Corp. 7.50% 2006 4,050 4,263
Earle M. Jorgensen Co. 9.75% 2012 3,600 4,068
Yara International ASA 5.25% 2014(1) 4,000 4,033
INVISTA 9.25% 2012(1) 3,600 4,032
Ispat Inland ULC 9.75% 2014 3,132 3,884
Associated Materials Inc. 9.75% 2012 3,100 3,480
Graphic Packaging International, Inc. 9.50% 2013 3,000 3,428
Crompton Corp. 7.67% 2010(1),(2) 2,400 2,622
Crompton Corp. 9.875% 2012(1) 500 575
E.I. du Pont de Nemours and Co. 4.125% 2010 2,700 2,725
Gerdau Ameristeel Corp. and GUSAP Partners 10.375% 2011 2,100 2,473
Inco Ltd. 7.20% 2032 2,000 2,339
Sino-Forest Corp., 9.125% 2011(1) 2,065 2,266
Huntsman LLC 9.32% 2011(1),(2) 275 308
Huntsman LLC 11.50% 2012(1) 1,475 1,752
Praxair, Inc. 3.95% 2013 2,100 1,999
Foundation PA Coal Co. 7.25% 2014(1) 1,800 1,926
Pindo Deli Finance Mauritius Ltd. 10.25% 2002(6) 6,000 1,890
Steel Dynamics, Inc. 9.50% 2009 1,250 1,375
Indah Kiat Finance Mauritius Ltd. 10.00% 2007(7) 2,250 1,204
Norampac Inc. 6.75% 2013 1,000 1,058
AK Steel Corp. 7.75% 2012 1,000 1,035
Nalco Co. 7.75% 2011 775 841
Georgia Gulf Corp. 7.125% 2013 770 835
Nalco Finance Holdings LLC and Nalco Finance Holdings Inc. 0%/9.00% 2014(5) 829 618
Airgas, Inc. 6.25% 2014 450 461
Rockwood Specialties Group, Inc. 7.50% 2014(1) 175 182
APP International Finance Co. BV 11.75% 2005(7) 275 144
500,287
ENERGY -- 1.42%
Ras Laffan Liquefied Natural Gas Co. Ltd. 3.437% 2009(1),(3) 49,794 48,948
Ras Laffan Liquefied Natural Gas Co. Ltd. 3.437% 2009(3) 2,748 2,701
Ras Laffan Liquefied Natural Gas Co. Ltd. 8.294% 2014(1),(3) 4,500 5,340
Pemex Finance Ltd. 8.875% 2010(3) 24,000 28,208
Pemex Finance Ltd., Series 1999-2, Class A-2, MBIA insured, 7.33% 2012(3) 8,105 9,232
Pemex Finance Ltd., Series 1999-2, Class A-3, 10.61% 2017(3) 11,700 15,721
Pemex Project Funding Master Trust 8.625% 2022 750 875
ConocoPhillips 3.625% 2007 14,500 14,518
ConocoPhillips 4.75% 2012 26,750 27,318
Tengizchevroil Finance Co. S.ar.L., Series A, 6.124% 2014(1),(3) 33,450 33,701
Port Arthur Finance Corp. 12.50% 2009(3) 1,236 1,452
Premcor Refining Group Inc. 6.125% 2011 3,000 3,158
Premcor Refining Group Inc. 7.75% 2012 3,875 4,292
Premcor Refining Group Inc. 9.50% 2013 2,750 3,204
Premcor Refining Group Inc. 6.75% 2014 3,000 3,203
El Paso Corp. 7.75% 2032 12,000 11,550
Reliance Industries Ltd. 10.25% 2097(1) 8,750 9,649
Devon Financing Corp., ULC 6.875% 2011 8,500 9,640
Newfield Exploration Co. 7.625% 2011 2,500 2,825
Newfield Exploration Co. 8.375% 2012 2,150 2,419
Newfield Exploration Co. 6.625% 2014(1) 2,000 2,125
ChevronTexaco Capital Co. 3.50% 2007 7,000 7,036
OXYMAR 7.50% 2016(1) 5,500 5,761
Petrozuata Finance, Inc., Series B, 8.22% 2017(1),(3) 5,250 5,270
Teekay Shipping Corp. 8.875% 2011 4,250 4,951
General Maritime Corp. 10.00% 2013 4,000 4,620
Ultrapetrol Ltd., First Preferred Ship Mortgage Notes, 9.00% 2014(1) 3,225 3,237
Sunoco, Inc. 4.875% 2014 3,100 3,071
Overseas Shipholding Group, Inc. 8.25% 2013 2,500 2,794
Williams Companies, Inc. 7.125% 2011 500 549
Williams Companies, Inc. 7.875% 2021 2,000 2,240
PETRONAS Capital Ltd. 7.00% 2012(1) 2,250 2,582
282,190
HEALTH CARE -- 1.32%
Columbia/HCA Healthcare Corp. 6.91% 2005 9,410 9,549
HCA Inc. 7.125% 2006 9,065 9,413
Columbia/HCA Healthcare Corp. 8.85% 2007 2,000 2,158
Columbia/HCA Healthcare Corp. 8.70% 2010 1,750 1,984
HCA Inc. 6.95% 2012 3,000 3,163
HCA Inc. 6.25% 2013 21,071 21,289
HCA Inc. 6.75% 2013 2,000 2,082
Columbia/HCA Healthcare Corp. 7.69% 2025 5,000 5,138
UnitedHealth Group Inc. 7.50% 2005 13,000 13,420
UnitedHealth Group Inc. 5.20% 2007 8,000 8,291
UnitedHealth Group Inc. 3.75% 2009 2,500 2,462
UnitedHealth Group Inc. 4.125% 2009 8,000 8,003
UnitedHealth Group Inc. 5.00% 2014 5,000 5,040
Cardinal Health, Inc. 6.25% 2008 3,000 3,171
Cardinal Health, Inc. 6.75% 2011 24,750 27,260
Cardinal Health, Inc. 4.00% 2015 3,050 2,723
Wyeth 4.375% 2008(2) 2,125 2,161
Wyeth 5.50% 2013(2) 24,000 24,985
Amgen Inc. 4.00% 2009(1) 24,000 23,952
Humana Inc. 7.25% 2006 5,000 5,266
Humana Inc. 6.30% 2018 12,000 12,336
Schering-Plough Corp. 5.30% 2013 14,250 14,920
Aetna Inc. 7.875% 2011 9,635 11,290
Bristol-Myers Squibb Co. 4.00% 2008 10,000 10,063
Tenet Healthcare Corp. 9.875% 2014(1) 7,000 7,665
Quintiles Transnational Corp. 10.00% 2013 3,500 3,938
Pharma Services Intermediate Holding Corp. 0%/11.50% 2014(1),(5) 1,750 1,251
Hospira, Inc. 4.95% 2009 2,891 2,956
Hospira, Inc. 5.90% 2014 2,000 2,106
Health Net, Inc. 9.875% 2011(2) 4,000 4,831
WellPoint, Inc. 3.75% 2007(1) 4,000 4,001
Elan Finance PLC and Elan Finance Corp. 7.75% 2011(1) 2,100 2,247
Team Health, Inc. 9.00% 2012 1,750 1,719
Concentra Operating Corp. 9.125% 2012(1) 1,500 1,703
262,536
CONSUMER STAPLES -- 1.30%
CVS Corp. 6.117% 2013(1),(3) 27,867 29,565
CVS Corp. 5.789% 2026(1),(3) 15,164 15,759
CVS Corp. 5.298% 2027(1),(3) 28,500 28,490
Nabisco, Inc. 7.05% 2007 6,500 7,014
Nabisco, Inc. 7.55% 2015 5,105 6,156
Nabisco, Inc. 6.375% 2035(2) 12,300 12,323
Wal-Mart Stores, Inc. 5.45% 2006 10,000 10,347
Wal-Mart Stores, Inc. 3.375% 2008 12,000 11,881
Burns Philp Capital Pty Ltd. and Burns Philp Capital (U.S.) Inc., Series B,
10.75% 2011 1,500 1,695
Burns Philp Capital Pty Ltd., Series B, 9.75% 2012 17,750 19,614
Ahold Finance U.S.A., Inc. 6.25% 2009 2,325 2,430
Ahold Finance U.S.A., Inc. 8.25% 2010 4,610 5,244
Ahold Lease Pass Through Trust, Series 2001-A-1, 7.82% 2020(3) 1,891 2,053
Ahold Lease Pass Through Trust, Series 2001-A-2, 8.62% 2025(3) 3,595 3,939
SUPERVALU INC. 7.50% 2012 10,810 12,635
Jean Coutu Group (PJC) Inc. 7.625% 2012(1) 300 319
Jean Coutu Group (PJC) Inc. 8.50% 2014(1) 10,650 10,970
Pepsi Bottling Holdings Inc. 5.625% 2009(1) 9,000 9,604
Anheuser-Busch Cos. Inc. 9.00% 2009 7,750 9,407
Pathmark Stores, Inc. 8.75% 2012 9,290 8,918
Gold Kist Inc. 10.25% 2014 6,783 7,970
Cadbury Schweppes US Finance LLC 5.125% 2013(1) 6,750 6,883
Petro Stopping Centers, LP and Petro Financial Corp. 9.00% 2012 4,760 5,058
Diageo Capital PLC 3.50% 2007 5,000 4,987
Rite Aid Corp. 6.875% 2013 2,675 2,421
Rite Aid Corp. 9.25% 2013 2,075 2,106
Kellogg Co. 6.60% 2011 4,000 4,487
Delhaize America, Inc. 8.125% 2011 3,500 4,098
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(1),(3) 2,087 1,739
WH Holdings (Cayman Islands) Ltd. and WH Capital Corp. 9.50% 2011 2,500 2,763
Fage Dairy Industry SA 9.00% 2007 2,500 2,525
Stater Bros. Holdings Inc. 5.99% 2010(2) 475 490
Stater Bros. Holdings Inc. 8.125% 2012 1,800 1,913
Great Atlantic & Pacific Tea Co., Inc. 9.125% 2011 300 283
257,986
INFORMATION TECHNOLOGY -- 1.15%
Electronic Data Systems Corp. 6.334% 2006 18,000 18,706
Electronic Data Systems Corp. 7.125% 2009 39,245 43,268
Electronic Data Systems Corp., Series B, 6.50% 2013(2) 50,750 53,675
Motorola, Inc. 8.00% 2011 42,380 50,753
Motorola, Inc. 7.50% 2025 6,000 7,026
Motorola, Inc. 6.50% 2028 3,695 3,913
Motorola, Inc. 5.22% 2097 6,250 5,062
Solectron Corp. 9.625% 2009 12,925 14,282
Hyundai Semiconductor America, Inc. 8.625% 2007(1) 10,150 10,375
Micron Technology, Inc. 6.50% 2005(1),(3) 9,952 9,903
Jabil Circuit, Inc. 5.875% 2010 4,750 5,006
Flextronics International Ltd. 9.75% 2010 Euro 1,250 1,862
Flextronics International Ltd. 6.50% 2013 $925 953
Viasystems, Inc. 10.50% 2011 2,550 2,512
Exodus Communications, Inc. 11.625% 2010(3),(4),(7) 1,147 0
227,296
MORTGAGE-BACKED OBLIGATIONS(3) -- 15.76%
Freddie Mac 8.25% 2007 130 135
Freddie Mac 8.25% 2007 35 37
Freddie Mac 8.50% 2007 21 22
Freddie Mac, Series H009, Class A-2, 1.876% 2008(2) 4,018 3,963
Freddie Mac 8.00% 2008 23 24
Freddie Mac 8.50% 2008 62 64
Freddie Mac 8.50% 2008 57 60
Freddie Mac 8.50% 2008 26 27
Freddie Mac 8.50% 2008 9 10
Freddie Mac 8.75% 2008 145 153
Freddie Mac 8.75% 2008 54 56
Freddie Mac 8.75% 2008 24 25
Freddie Mac 8.75% 2008 20 21
Freddie Mac 8.00% 2009 16 17
Freddie Mac 8.50% 2009 265 279
Freddie Mac 8.00% 2010 3 3
Freddie Mac 8.50% 2010 229 243
Freddie Mac 8.50% 2010 188 196
Freddie Mac 6.00% 2017 1,092 1,144
Freddie Mac 6.00% 2017 1,081 1,133
Freddie Mac, Series 2310, Class A, 10.61% 2017(2) 1,740 1,910
Freddie Mac 5.00% 2018 33,311 33,920
Freddie Mac 11.00% 2018 211 239
Freddie Mac 8.50% 2020 402 437
Freddie Mac 8.50% 2020 160 175
Freddie Mac, Series 41, Class F, 10.00% 2020 286 286
Freddie Mac, Series 178, Class Z, 9.25% 2021 203 203
Freddie Mac 8.00% 2026 239 260
Freddie Mac 8.50% 2027 48 52
Freddie Mac 5.00% 2033 12,984 12,931
Freddie Mac 6.00% 2033 19,000 19,640
Freddie Mac 6.00% 2033 5,205 5,380
Freddie Mac 6.00% 2034 314,363 324,947
Freddie Mac 6.00% 2034 28,000 28,943
Freddie Mac 6.00% 2034 26,825 27,728
Freddie Mac 6.00% 2034 22,402 23,156
Freddie Mac 6.00% 2034 20,000 20,673
Freddie Mac 6.00% 2034 20,000 20,673
Freddie Mac 6.00% 2034 16,456 17,010
Freddie Mac 6.00% 2034 14,454 14,941
Freddie Mac 6.00% 2034 14,000 14,471
Freddie Mac 6.00% 2034 13,000 13,438
Freddie Mac 6.00% 2034 11,000 11,370
Freddie Mac, Series T-056, Class A-2A, 2.842% 2036 15,335 15,229
Fannie Mae 7.00% 2009 168 179
Fannie Mae 7.50% 2009 198 210
Fannie Mae 7.50% 2009 155 165
Fannie Mae 7.50% 2009 90 96
Fannie Mae 7.50% 2009 64 66
Fannie Mae 7.50% 2009 63 65
Fannie Mae 7.50% 2009 56 59
Fannie Mae 7.50% 2009 31 33
Fannie Mae 8.50% 2009 222 230
Fannie Mae 9.50% 2009 45 48
Fannie Mae 7.00% 2010 132 140
Fannie Mae 6.00% 2016 6,825 7,163
Fannie Mae 6.00% 2016 3,511 3,685
Fannie Mae 6.00% 2016 3,135 3,290
Fannie Mae 6.00% 2016 1,943 2,039
Fannie Mae 7.00% 2016 481 511
Fannie Mae 11.50% 2016 994 1,146
Fannie Mae 6.00% 2017 2,200 2,309
Fannie Mae 5.00% 2018 23,570 24,025
Fannie Mae 5.00% 2018 12,695 12,940
Fannie Mae 5.50% 2018 4,587 4,750
Fannie Mae 9.00% 2018 65 71
Fannie Mae 10.00% 2018 726 823
Fannie Mae 4.50% 2019 8,874 8,855
Fannie Mae 5.50% 2019 48,643 50,374
Fannie Mae 5.50% 2019 16,817 17,426
Fannie Mae 12.00% 2019 869 1,021
Fannie Mae, Series 90-93, Class G, 5.50% 2020 72 74
Fannie Mae 11.00% 2020 291 334
Fannie Mae 11.259% 2020(2) 802 934
Fannie Mae 9.00% 2022 304 330
Fannie Mae 7.50% 2023 230 248
Fannie Mae 8.00% 2023 79 85
Fannie Mae 8.00% 2023 53 58
Fannie Mae, Series 2001-4, Class GA, 10.239% 2025(2) 1,411 1,608
Fannie Mae, Series 2001-4, Class NA, 11.82% 2025(2) 7,479 8,663
Fannie Mae 4.60% 2026(2) 1,397 1,437
Fannie Mae 7.00% 2026 2,488 2,650
Fannie Mae 8.50% 2027 18 20
Fannie Mae, Series 1998-W5, Class B3, 6.50% 2028 3,633 3,680
Fannie Mae 7.00% 2028 1,165 1,238
Fannie Mae, Series 2002-W3, Class A-5, 7.50% 2028 11,371 12,227
Fannie Mae 8.00% 2028 128 139
Fannie Mae, Series 2003-T3, Class 2A-3, 2.869% 2029 1,744 1,742
Fannie Mae 6.50% 2029 538 564
Fannie Mae, Series 2002-W7, Class A-5, 7.50% 2029 1,704 1,833
Fannie Mae 7.50% 2029 180 193
Fannie Mae 7.50% 2029 147 158
Fannie Mae 7.00% 2030 395 420
Fannie Mae 7.50% 2030 458 491
Fannie Mae 6.50% 2031 2,270 2,383
Fannie Mae 6.50% 2031 1,603 1,683
Fannie Mae 6.50% 2031 773 813
Fannie Mae 6.50% 2031 245 258
Fannie Mae 7.00% 2031 856 909
Fannie Mae 7.50% 2031 1,181 1,266
Fannie Mae 7.50% 2031 143 153
Fannie Mae, Series 2001-20, Class E, 9.594% 2031(2) 274 307
Fannie Mae, Series 2001-20, Class C, 12.018% 2031(2) 326 384
Fannie Mae 6.50% 2032 13,967 14,660
Fannie Mae 6.50% 2032 9,362 9,826
Fannie Mae 7.00% 2032 568 603
Fannie Mae 3.811% 2033(2) 5,874 5,858
Fannie Mae 5.00% 2033 6,099 6,067
Fannie Mae 5.50% 2033 110,529 112,339
Fannie Mae 6.50% 2034 13,919 14,609
Fannie Mae 6.00% 2035 193,388 199,884
Fannie Mae, Series 2003-W10, Class 1A-2B, 3.112% 2037 19,200 19,099
Fannie Mae, Series 2001-T10, Class A-1, 7.00% 2041 16,593 17,502
Fannie Mae, Series 2001-50, Class BA, 7.00% 2041 5,443 5,807
Fannie Mae, Series 2002-W1, Class 2A, 7.50% 2042 12,352 13,203
CS First Boston Mortgage Securities Corp., Series 2002-FL2, Class A-2,
2.76% 2010(1),(2) 5,616 5,610
CS First Boston Mortgage Securities Corp., Series 2002-30, Class I-A-1,
7.50% 2032 5,268 5,395
CS First Boston Mortgage Securities Corp., Series 2002-34, Class I-A-1,
7.50% 2032 469 481
CS First Boston Mortgage Securities Corp., Series 2003-AR20, Class II-A-2,
3.996% 2033(2) 6,800 6,776
CS First Boston Mortgage Securities Corp., Series 2003-AR12, Class II-A-2,
4.334% 2033(2) 2,556 2,575
CS First Boston Mortgage Securities Corp., Series 2003-AR28, Class II-A-1,
4.542% 2033(2) 5,859 5,874
CS First Boston Mortgage Securities Corp., Series 2003-23, Class V-A-1,
6.00% 2033 15,139 15,518
CS First Boston Mortgage Securities Corp., Series 2003-21, Class V-A-1,
6.50% 2033 25,536 26,533
CS First Boston Mortgage Securities Corp., Series 2003-29, Class V-A-1,
7.00% 2033 7,034 7,309
CS First Boston Mortgage Securities Corp., Series 2004-AR5, Class VII-A-2,
4.612% 2034(2) 30,514 30,567
CS First Boston Mortgage Securities Corp., Series 2004-AR7, Class II-A-1,
4.889% 2034(2) 4,530 4,552
CS First Boston Mortgage Securities Corp., Series 2001-CF2, Class A-2,
5.935% 2034 13,000 13,276
CS First Boston Mortgage Securities Corp., Series 2004-5, Class IV-A-1,
6.00% 2034 22,402 22,983
CS First Boston Mortgage Securities Corp., Series 2004-3, Class IV-A-1,
6.00% 2034 1,672 1,719
CS First Boston Mortgage Securities Corp., Series 2001-CF2, Class A-3,
6.238% 2034 9,000 9,575
CS First Boston Mortgage Securities Corp., Series 2002-CP5, Class A-1,
4.106% 2035 1,817 1,818
CS First Boston Mortgage Securities Corp., Series 2001-CK1, Class A-3,
6.38% 2035 53,915 59,293
CS First Boston Mortgage Securities Corp., Series 2001-CK6, Class A-2,
6.103% 2036 19,939 21,190
CS First Boston Mortgage Securities Corp., Series 2004-C5, Class A-1,
3.883% 2037 12,500 12,491
CS First Boston Mortgage Securities Corp., Series 2002-CKN2, Class A-1,
4.637% 2037 3,640 3,695
CS First Boston Mortgage Securities Corp., Series 2004-C4, Class A-4,
4.283% 2039 20,600 20,357
CS First Boston Mortgage Securities Corp., Series 1999-C1, Class D,
7.841% 2041(2) 5,250 5,984
WaMu Mortgage Pass-Through Certificates Trust, Series 2004-CB2, Class VII-A,
5.50% 2019 2,341 2,372
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR7, Class A-7,
3.842% 2033(2) 44,451 43,727
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR8, Class A,
4.03% 2033(2) 9,175 9,084
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR5, Class A-7,
4.208% 2033(2) 8,795 8,826
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR6, Class A-1,
4.362% 2033(2) 31,415 31,431
WaMu Mortgage Pass-Through Certificates Trust, Series 2004-AR1, Class A,
4.229% 2034(2) 3,457 3,429
WaMu Mortgage Pass-Through Certificates Trust, Series 2004-AR11, Class A,
4.669% 2034(2) 57,949 57,790
Bear Stearns ARM Trust, Series 2003-6, Class I-A-2, 4.026% 2033(2) 43,852 43,445
Bear Stearns ARM Trust, Series 2003-3, Class II-A-2, 4.139% 2033(2) 19,026 18,900
Bear Stearns ARM Trust, Series 2003-3, Class III-A-1, 5.135% 2033(2) 9,424 9,433
Bear Stearns ARM Trust, Series 2004-3, Class II-A, 4.334% 2034(2) 23,224 23,140
Bear Stearns ARM Trust, Series 2003-9, Class III-A-2, 5.052% 2034(2) 7,301 7,311
Bear Stearns ARM Trust, Series 2004-9, Class I-2-A-3, 5.077% 2034(2) 7,191 7,273
Bear Stearns ARM Trust, Series 2003-8, Class III-A, 5.173% 2034(2) 6,970 7,033
Chase Commercial Mortgage Securities Corp., Series 1998-2, Class A-2,
6.39% 2030 44,550 48,176
Chase Commercial Mortgage Securities Corp., Series 1998-1, Class A-2,
6.56% 2030 14,588 15,675
Chase Commercial Mortgage Securities Corp., Series 2000-2, Class A-1,
7.543% 2032 17,635 18,985
Chase Commercial Mortgage Securities Corp., Series 2000-1, Class A-1,
7.656% 2032 7,664 7,683
Chase Commercial Mortgage Securities Corp., Series 2000-1, Class A-2,
7.757% 2032 18,350 21,092
CHL Mortgage Pass-Through Trust, Series 2003-HYB3, Class 4-A-1, 3.492% 2033(2) 6,789 6,742
CHL Mortgage Pass-Through Trust, Series 2003-27, Class A-1, 3.784% 2033(2) 19,723 19,647
CHL Mortgage Pass-Through Trust, Series 2004-7, Class 2-A-1, 4.123% 2034(2) 8,458 8,390
CHL Mortgage Pass-Through Trust, Series 2004-22, Class A-2, 4.734% 2034(2) 27,067 27,182
CHL Mortgage Pass-Through Trust, Series 2004-12, Class 12-A-1, 4.889% 2034(2) 13,418 13,515
CHL Mortgage Pass-Through Trust, Series 2004-12, Class 13-A-1, 4.928% 2034(2) 12,233 12,334
CHL Mortgage Pass-Through Trust, Series 2004-HYB6, Class A-3, 5.26% 2034(2) 9,535 9,649
Realkredit Danmark A/S, Series 23D, 5.00% 2035 DKr503,768 92,283
Merrill Lynch Mortgage Investors, Inc., Series 1995-C2, Class D, 7.545% 2021(2) $219 225
Merrill Lynch Mortgage Investors, Inc., Series 2003-A6, Class II-A,
4.265% 2033(2) 7,420 7,391
Merrill Lynch Mortgage Investors, Inc., Series 2003-A4, Class II-A,
4.61% 2033(2) 26,549 26,652
Merrill Lynch Mortgage Investors, Inc., Series 2004-A4, Class A-1,
4.298% 2034(2) 10,539 10,439
Merrill Lynch Mortgage Investors, Inc., Series 2004-A1, Class II-A-1,
4.67% 2034(2) 44,762 44,736
Bear Stearns Commercial Mortgage Securities Inc., Series 1998-C1, Class A-1,
6.34% 2030 3,959 4,111
Bear Stearns Commercial Mortgage Securities Inc., Series 1999-WF2, Class X,
interest only, 0.263% 2031(2) 254,080 3,964
Bear Stearns Commercial Mortgage Securities Inc., Series 1999-C1, Class X,
interest only, 1.034% 2031(1),(2) 156,166 6,696
Bear Stearns Commercial Mortgage Securities Inc., Series 2000-WF2, Class A-2,
7.32% 2032 16,480 18,817
Bear Stearns Commercial Mortgage Securities Inc., Series 2002-PBW1, Class A-1,
3.97% 2035 38,640 38,611
Bear Stearns Commercial Mortgage Securities Inc., Series 2004-PWR6, Class A-1,
3.688% 2041 5,000 4,994
Bear Stearns Commercial Mortgage Securities Inc., Series 2004-PWR6, Class A-4,
4.521% 2041 10,000 9,986
Banc of America Mortgage Securities Trust, Series 2003-F, Class 2-A-1,
3.734% 2033(2) 36,637 36,138
Banc of America Mortgage Securities Trust, Series 2003-G, Class 2-A-1,
4.088% 2033(2) 10,433 10,439
Banc of America Mortgage Securities Trust, Series 2003-D, Class 2-A-1,
4.183% 2033(2) 7,945 7,907
Banc of America Mortgage Securities Trust, Series 2003-I, Class 3-A-1,
4.54% 2033(2) 16,314 16,301
Banc of America Commercial Mortgage Inc., Series 2001-1, Class A-2, 6.503% 2036 56,200 62,394
Morgan Stanley Capital I, Inc., Series 2003-KIDS, Class A, 3.078% 2016(1),(2) 26,135 26,270
Morgan Stanley Capital I, Inc., Series 1998-WF2, Class A-1, 6.34% 2030 956 960
Morgan Stanley Capital I, Inc., Series 1998-HF2, Class A-2, 6.48% 2030 17,000 18,310
Morgan Stanley Capital I, Inc., Series 1999-FNV1, Class A-1, 6.12% 2031 5,766 5,945
Morgan Stanley Capital I, Inc., Series 1999-FNV1, Class A-2, 6.53% 2031 10,000 10,862
Government National Mortgage Assn. 7.50% 2007 59 62
Government National Mortgage Assn. 6.50% 2008 274 292
Government National Mortgage Assn. 6.50% 2008 76 81
Government National Mortgage Assn. 7.50% 2008 84 87
Government National Mortgage Assn. 7.50% 2008 81 84
Government National Mortgage Assn. 7.50% 2008 70 73
Government National Mortgage Assn. 7.50% 2008 50 52
Government National Mortgage Assn. 7.50% 2008 26 27
Government National Mortgage Assn. 6.50% 2009 112 120
Government National Mortgage Assn. 7.50% 2009 106 113
Government National Mortgage Assn. 7.50% 2009 88 94
Government National Mortgage Assn. 7.50% 2009 84 88
Government National Mortgage Assn. 7.50% 2009 81 87
Government National Mortgage Assn. 7.50% 2009 71 74
Government National Mortgage Assn. 7.50% 2009 62 64
Government National Mortgage Assn. 7.50% 2009 59 63
Government National Mortgage Assn. 9.00% 2009 932 989
Government National Mortgage Assn. 9.50% 2009 947 1,017
Government National Mortgage Assn. 9.50% 2009 72 77
Government National Mortgage Assn. 9.00% 2016 176 195
Government National Mortgage Assn. 8.00% 2017 45 49
Government National Mortgage Assn. 9.00% 2017 54 59
Government National Mortgage Assn. 9.00% 2019 201 224
Government National Mortgage Assn. 9.50% 2019 300 335
Government National Mortgage Assn. 8.50% 2020 97 107
Government National Mortgage Assn. 8.50% 2020 49 54
Government National Mortgage Assn. 9.00% 2020 154 171
Government National Mortgage Assn. 9.50% 2020 141 158
Government National Mortgage Assn. 10.00% 2020 1,142 1,308
Government National Mortgage Assn. 7.50% 2021 97 104
Government National Mortgage Assn. 7.50% 2021 13 14
Government National Mortgage Assn. 8.50% 2021 413 454
Government National Mortgage Assn. 8.50% 2021 255 280
Government National Mortgage Assn. 8.50% 2021 134 147
Government National Mortgage Assn. 8.50% 2021 52 57
Government National Mortgage Assn. 9.00% 2021 72 80
Government National Mortgage Assn. 9.00% 2021 47 52
Government National Mortgage Assn. 10.00% 2021 2,739 3,113
Government National Mortgage Assn. 7.00% 2022 174 185
Government National Mortgage Assn. 7.00% 2022 108 116
Government National Mortgage Assn. 7.00% 2022 48 51
Government National Mortgage Assn. 7.50% 2022 130 140
Government National Mortgage Assn. 7.50% 2022 84 90
Government National Mortgage Assn. 7.50% 2022 63 68
Government National Mortgage Assn. 7.50% 2022 63 68
Government National Mortgage Assn. 7.50% 2022 52 56
Government National Mortgage Assn. 7.50% 2022 44 48
Government National Mortgage Assn. 8.00% 2022 356 387
Government National Mortgage Assn. 9.00% 2022 78 87
Government National Mortgage Assn. 7.00% 2023 411 440
Government National Mortgage Assn. 7.50% 2023 698 754
Government National Mortgage Assn. 7.50% 2023 413 446
Government National Mortgage Assn. 7.50% 2023 142 153
Government National Mortgage Assn. 7.50% 2023 139 150
Government National Mortgage Assn. 7.50% 2023 131 141
Government National Mortgage Assn. 7.50% 2023 106 115
Government National Mortgage Assn. 7.50% 2023 104 113
Government National Mortgage Assn. 7.50% 2023 92 100
Government National Mortgage Assn. 7.50% 2023 86 93
Government National Mortgage Assn. 7.50% 2023 69 74
Government National Mortgage Assn. 7.50% 2023 62 67
Government National Mortgage Assn. 7.50% 2023 59 64
Government National Mortgage Assn. 7.50% 2023 48 52
Government National Mortgage Assn. 7.50% 2023 46 50
Government National Mortgage Assn. 7.50% 2023 45 48
Government National Mortgage Assn. 7.50% 2023 43 47
Government National Mortgage Assn. 7.50% 2023 38 41
Government National Mortgage Assn. 7.50% 2023 35 38
Government National Mortgage Assn. 7.50% 2023 33 36
Government National Mortgage Assn. 7.50% 2023 31 34
Government National Mortgage Assn. 7.50% 2023 30 33
Government National Mortgage Assn. 7.50% 2023 30 32
Government National Mortgage Assn. 7.50% 2023 29 31
Government National Mortgage Assn. 7.50% 2023 22 24
Government National Mortgage Assn. 7.50% 2023 8 8
Government National Mortgage Assn. 8.00% 2023 1,332 1,450
Government National Mortgage Assn. 8.00% 2023 796 866
Government National Mortgage Assn. 8.00% 2023 112 122
Government National Mortgage Assn. 8.00% 2023 65 71
Government National Mortgage Assn. 8.00% 2023 50 54
Government National Mortgage Assn. 8.00% 2023 32 35
Government National Mortgage Assn. 8.00% 2023 30 33
Government National Mortgage Assn. 8.00% 2023 15 17
Government National Mortgage Assn. 8.50% 2023 49 54
Government National Mortgage Assn. 7.00% 2024 3,423 3,664
Government National Mortgage Assn. 7.00% 2024 2,978 3,188
Government National Mortgage Assn. 7.50% 2024 341 370
Government National Mortgage Assn. 7.50% 2024 277 301
Government National Mortgage Assn. 7.50% 2024 122 133
Government National Mortgage Assn. 7.50% 2024 88 96
Government National Mortgage Assn. 7.50% 2024 69 74
Government National Mortgage Assn. 7.50% 2024 68 74
Government National Mortgage Assn. 7.50% 2024 64 69
Government National Mortgage Assn. 7.50% 2024 59 64
Government National Mortgage Assn. 7.50% 2024 55 60
Government National Mortgage Assn. 7.50% 2024 46 50
Government National Mortgage Assn. 7.50% 2024 36 39
Government National Mortgage Assn. 7.50% 2024 35 37
Government National Mortgage Assn. 7.50% 2024 25 27
Government National Mortgage Assn. 8.00% 2024 23 26
Government National Mortgage Assn. 8.50% 2024 52 57
Government National Mortgage Assn. 8.50% 2024 28 31
Government National Mortgage Assn. 7.00% 2025 2,692 2,882
Government National Mortgage Assn. 7.00% 2025 1,157 1,239
Government National Mortgage Assn. 7.00% 2026 1,035 1,110
Government National Mortgage Assn. 7.00% 2026 1,022 1,096
Government National Mortgage Assn. 7.00% 2026 288 309
Government National Mortgage Assn. 8.00% 2026 78 85
Government National Mortgage Assn. 8.00% 2026 63 69
Government National Mortgage Assn. 8.00% 2026 34 37
Government National Mortgage Assn. 7.50% 2027 91 98
Government National Mortgage Assn. 8.50% 2027 47 51
Government National Mortgage Assn. 6.50% 2028 899 953
Government National Mortgage Assn. 7.00% 2028 2,994 3,202
Government National Mortgage Assn. 7.00% 2028 678 726
Government National Mortgage Assn. 7.50% 2028 71 77
Government National Mortgage Assn. 7.50% 2028 65 71
Government National Mortgage Assn. 7.50% 2028 24 26
Government National Mortgage Assn. 7.50% 2028 20 22
Government National Mortgage Assn. 7.50% 2028 18 20
Government National Mortgage Assn. 7.50% 2028 17 18
Government National Mortgage Assn. 7.50% 2028 16 17
Government National Mortgage Assn. 8.50% 2028 63 69
Government National Mortgage Assn. 8.50% 2028 26 28
Government National Mortgage Assn. 7.00% 2029 1,956 2,089
Government National Mortgage Assn. 7.00% 2029 1,590 1,698
Government National Mortgage Assn. 7.00% 2029 1,203 1,287
Government National Mortgage Assn. 7.00% 2029 705 754
Government National Mortgage Assn. 7.00% 2029 650 695
Government National Mortgage Assn. 7.50% 2029 125 136
Government National Mortgage Assn. 8.00% 2029 359 391
Government National Mortgage Assn. 8.50% 2029 45 50
Government National Mortgage Assn. 7.50% 2030 998 1,076
Government National Mortgage Assn. 8.00% 2030 1,532 1,670
Government National Mortgage Assn. 8.00% 2030 1,200 1,307
Government National Mortgage Assn. 8.00% 2030 1,140 1,242
Government National Mortgage Assn. 8.00% 2030 844 920
Government National Mortgage Assn. 8.00% 2030 403 439
Government National Mortgage Assn. 8.00% 2030 352 383
Government National Mortgage Assn. 8.00% 2030 49 54
Government National Mortgage Assn. 7.00% 2031 1,053 1,123
Government National Mortgage Assn. 7.00% 2031 689 735
Government National Mortgage Assn. 7.50% 2032 2,376 2,564
L.A. Arena Funding, LLC, Series 1, Class A, 7.656% 2026(1) 42,486 46,103
Salomon Brothers Commercial Mortgage Trust, Series 2000-C3, Class A-1,
6.341% 2033(1) 4,857 5,116
Salomon Brothers Commercial Mortgage Trust, Series 2000-C3, Class A-2,
6.592% 2033 17,250 19,075
Salomon Brothers Commercial Mortgage Trust, Series 2001-C1, Class A-3,
6.428% 2035 16,420 18,094
GS Mortgage Securities Corp. II, Series 1998-C1, Class E, 7.207% 2030(2) 31,076 33,385
GS Mortgage Securities Corp. II, Series 1998-C1, Class D, 7.207% 2030(2) 3,750 4,083
Morgan Stanley Dean Witter Capital I Trust, Series 2002-HQ, Class A-1,
4.59% 2034 5,695 5,755
Morgan Stanley Dean Witter Capital I Trust, Series 2001-TOP5, Class A-3,
6.16% 2035 17,468 18,840
Morgan Stanley Dean Witter Capital I Trust, Series 2003-TOP9, Class A-1,
3.98% 2036 9,229 9,152
Morgan Stanley Dean Witter Capital I Trust, Series 2002-IQ3, Class A-1,
3.48% 2037 3,661 3,647
GMAC Commercial Mortgage Securities, Inc., Series 1997-C1, Class A-3,
6.869% 2029 16,354 17,312
GMAC Commercial Mortgage Securities, Inc., Series 1997-C1, Class D, 6.997% 2029 8,300 8,949
GMAC Commercial Mortgage Securities, Inc., Series 1998-C2, Class C, 6.50% 2035 9,000 9,752
Morgan Stanley Mortgage Trust, Series 2004-3, Class 4-A, 5.718% 2034(2) 35,470 35,956
Commercial Mortgage Trust, Series 2000-FL3A, Class D, 3.733% 2012(1),(2) 13,776 12,131
Commercial Mortgage Trust, Series 2003-LNB1, Class A-2, 4.084% 2038 20,000 19,212
Chase Manhattan Bank - First Union National Bank, Commercial Mortgage Trust,
Series 1999-1, Class A-2, 7.439% 2031 5,000 5,658
Chase Manhattan Bank - First Union National Bank, Commercial Mortgage Trust,
Series 1999-1, Class B, 7.619% 2031 17,125 19,545
Chase Manhattan Bank - First Union National Bank, Commercial Mortgage Trust,
Series 1999-1, Class C, 7.625% 2031 5,000 5,700
GE Capital Commercial Mortgage Corp., Series 2001-1, Class A-1, 6.079% 2033 427 450
GE Capital Commercial Mortgage Corp., Series 2001-1, Class A-2, 6.531% 2033 17,590 19,583
GE Capital Commercial Mortgage Corp., Series 2001-3, Class A-1, 5.56% 2038 3,775 3,955
GE Capital Commercial Mortgage Corp., Series 2001-3, Class A-2, 6.07% 2038 2,500 2,733
Structured Asset Securities Corp., Series 1998-RF2, Class A, 8.551% 2027(1),(2) 11,445 12,192
Structured Asset Securities Corp., Series 1998-RF1, Class A, 8.748% 2027(1),(2) 3,949 4,134
Structured Asset Securities Corp., Series 1999-RF1, Class A, 7.892% 2028(1),(2) 2,630 2,777
Structured Asset Securities Corp., Series 2003-17A, Class 3-A1, 4.01% 2033(2) 3,651 3,621
Bank of America, NA and First Union National Bank Commercial Mortgage Trust,
Series 2001-3, Class A-1, 4.89% 2037 19,775 20,234
Tower Ventures, LLC, Series 2004-1, Class A, 3.711% 2034(1) 19,986 19,903
Prudential Securities Secured Financing Corp., Series 1999-NRF1, Class C,
6.746% 2031 18,000 19,734
First Union National Bank Commercial Mortgage Trust, Series 2000-C1, Class A-1,
7.739% 2032 14,061 15,268
First Union National Bank Commercial Mortgage Trust, Series 2001-C4, Class A-1,
5.673% 2033 4,151 4,371
Countrywide Alternative Loan Trust, Series 2004-14T2, Class A-6, 5.50% 2034 18,703 18,912
MASTR Asset Securitization Trust, Series 2004-10, Class 1-A-1, 4.50% 2019 14,585 14,556
MASTR Asset Securitization Trust, Series 2003-2, Class 3-A-13, 5.75% 2033 2,750 2,776
LB-UBS Commercial Mortgage Trust, Series 2000-C3, Class A-2, 7.95% 2025 14,500 16,845
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2003-ML1,
Class A-1, 3.972% 2039 16,892 16,776
GGP Mall Properties Trust, Series 2001-GGP1, Class A-2, 5.007% 2011(1) 15,321 15,694
Residential Funding Mortgage Securities I, Inc., Series 2004-SA1, Class A-II,
4.361% 2034(2) 14,787 14,660
DLJ Commercial Mortgage Corp., Series 1998-CF1, Class A-1A, 6.14% 2031 2,408 2,414
DLJ Commercial Mortgage Corp., Series 1999-CG1, Class A-1B, 6.46% 2032 10,000 10,853
Citigroup Mortgage Loan Trust Inc., Series 2004-HYB1, Class A-3-1, 4.55% 2034(2) 11,662 11,597
DLJ Mortgage Acceptance Corp., Series 1998-CF1, Class A-1B, 6.41% 2031 10,000 10,687
Hypothekenbank in Essen AG 5.25% 2008 Euro 6,000 8,703
Rheinische Hypothekenbank Eurobond 4.25% 2008 5,000 7,089
PNC Mortgage Securities Corp., Series 1998-10, Class 1-B1, 6.50% 2028 $6,342 6,334
RAAC Mortgage Loan Asset-backed Trust, Series 2004-SP3, Class A-I-5, 4.89% 2032 5,000 4,961
Hilton Hotel Pool Trust, Series 2000-HLTA, Class F, 7.75% 2015(1) 5,000 4,953
Bear Stearns Asset Backed Securities I Trust, Series 2004-AC2, Class II-A,
5.00% 2034 4,786 4,757
Nomura Asset Securities Corp., Series 1998-D6, Class A-1A, 6.28% 2030 4,158 4,310
Ocwen Residential MBS Corp., Series 1998-R1, Class AWAC, 4.997% 2040(1),(2) 3,814 3,661
First Union-Lehman Brothers-Bank of America Commercial Mortgage Trust,
Series 1998-C2, Class A-1, 6.28% 2035 2,525 2,542
Travelers Mortgage Securities Corp., Series 1, Class Z-2, 12.00% 2014 951 963
GS Mortgage Securities Corp., Series 1998-2, Class M, 7.75% 2027(1) 850 901
Financial Asset Securitization, Inc., Series 1997-NAM1, Class B-1, 7.75% 2027 783 782
Commercial Mortgage Acceptance Corp., Series 1998-C2, Class A-1, 5.80% 2030 293 295
Commercial Mortgage Acceptance Corp., Series 1998-C1, Class A-1, 6.23% 2031 322 323
First Boston Mortgage Securities Corp., Series D, interest only, 10.965% 2017 174 43
First Boston Mortgage Securities Corp., Series D, principal only, 0% 2017 174 157
First Nationwide Trust, Series 1999-2, Class 1PA-1, 6.50% 2029 182 184
Nationsbanc Montgomery Funding Corp., Series 1998-5, Class A-1, 6.00% 2013 107 107
3,124,468
U.S. GOVERNMENT & GOVERNMENT AGENCY BONDS & NOTES -- 13.40%
U.S. Treasury Obligations 1.125% 2005 10 10
U.S. Treasury Obligations 5.75% 2005 111,000 113,862
U.S. Treasury Obligations 5.875% 2005 20,000 20,534
U.S. Treasury Obligations 6.75% 2005 213,245 216,527
U.S. Treasury Obligations 5.625% 2006 17,560 18,105
U.S. Treasury Obligations 6.875% 2006 281,990 296,904
U.S. Treasury Obligations 3.00% 2007 70,500 70,071
U.S. Treasury Obligations 3.25% 2007 18,645 18,676
U.S. Treasury Obligations 3.375% 2007(11) 156,611 165,893
U.S. Treasury Obligations 4.375% 2007 32,500 33,401
U.S. Treasury Obligations 6.125% 2007 25,000 26,836
U.S. Treasury Obligations 6.25% 2007 43,885 46,707
U.S. Treasury Obligations 6.625% 2007 40,000 43,150
U.S. Treasury Obligations 2.625% 2008 20,000 19,552
U.S. Treasury Obligations 3.625% 2008(11) 124,878 136,099
U.S. Treasury Obligations 4.75% 2008 40,000 41,894
U.S. Treasury Obligations 5.625% 2008 40,000 42,903
U.S. Treasury Obligations 3.875% 2009(11) 73,321 82,202
U.S. Treasury Obligations Principal Strip 0% 2009 1,250 1,061
U.S. Treasury Obligations 10.00% 2010 5,000 5,134
U.S. Treasury Obligations 3.50% 2011(11) 54,833 62,290
U.S. Treasury Obligations 5.00% 2011 25,000 26,601
U.S. Treasury Obligations Principal Strip 0% 2011 10,495 8,062
U.S. Treasury Obligations 3.00% 2012(11) 2,723 3,040
U.S. Treasury Obligations 10.375% 2012 24,500 29,231
U.S. Treasury Obligations 12.00% 2013 10,000 12,900
U.S. Treasury Obligations 4.00% 2014 4,000 3,944
U.S. Treasury Obligations 11.250% 2015 70,000 110,009
U.S. Treasury Obligations 9.250% 2016 40,000 57,094
U.S. Treasury Obligations 8.875% 2017 20,000 28,328
U.S. Treasury Obligations Principal Strip 0% 2018 24,120 12,713
U.S. Treasury Obligations 7.875% 2021 10,500 14,175
U.S. Treasury Obligations 6.875% 2025 263,250 331,324
U.S. Treasury Obligations 5.25% 2028 77,165 80,770
U.S. Treasury Obligations 3.875% 2029(11) 5,968 8,204
U.S. Treasury Obligations Principal Strip 0% 2029 7,500 2,159
U.S. Treasury Obligations 6.25% 2030 6,460 7,715
Fannie Mae 7.00% 2005 90,000 92,057
Fannie Mae 6.25% 2011 29,250 32,089
Fannie Mae 5.25% 2012 20,000 20,775
Fannie Mae 7.25% 2030 23,750 30,287
Federal Home Loan Bank 2.00% 2006 67,775 66,941
Federal Home Loan Bank 2.375% 2006 62,695 62,123
Federal Home Loan Bank 4.50% 2012 31,500 31,864
Freddie Mac 4.25% 2005 27,250 27,445
Freddie Mac 1.875% 2006 8,780 8,667
Freddie Mac 6.625% 2009 10,000 11,173
Freddie Mac 4.75% 2012 20,000 19,974
Freddie Mac 6.25% 2012 15,000 15,698
Freddie Mac 6.75% 2031 22,650 27,438
U.S. Government-Guaranteed Certificates of Participation, Overseas Private
Investment Corp., Series 2000-044-A, 3.74% 2015(3) 12,430 12,258
2,656,869
NON-U.S. GOVERNMENT BONDS & NOTES -- 5.63%
German Government 5.00% 2005 Euro 55,270 76,110
German Government 4.50% 2006 41,920 58,657
German Government 4.50% 2009 55,000 79,189
German Government 6.25% 2030 43,630 77,020
Japanese Government 0.50% 2007 (Y) 2,266,150 22,242
Japanese Government 0.90% 2008 11,030,000 109,442
Japanese Government 0.50% 2013 7,890,800 72,347
United Mexican States Government Global 4.625% 2008 $11,000 11,151
United Mexican States Government Global 10.375% 2009 14,500 17,763
United Mexican States Government, Series MI10, 8.00% 2013 MXP 171,200 13,770
United Mexican States Government Global 11.375% 2016 $18,658 27,586
United Mexican States Government, Series M20, 8.00% 2023 MXP 303,800 21,477
United Mexican States Government Global 8.30% 2031 $8,220 9,654
United Mexican States Government Global 7.50% 2033 3,750 4,059
Canadian Government 4.25% 2026(11) C$ 67,142 78,027
Korean Government 4.50% 2008 KRW 70,438,000 70,840
Swedish Government 5.00% 2009 SKr 105,000 16,888
Swedish Government 5.25% 2011 311,885 51,254
Polish Government 8.50% 2006 PLZ 72,000 24,387
Polish Government 6.00% 2010 116,750 38,798
Russian Federation 8.25% 2010 $21,580 23,993
Russian Federation 8.25% 2010(1) 3,300 3,669
Russian Federation 5.00% 2030(2) 26,300 27,221
Russian Federation 5.00% 2030(1),(2) 145 150
United Kingdom 8.50% 2005 Pound 4,295 8,538
United Kingdom 5.00% 2008 6,960 13,551
United Kingdom 6.00% 2028 1,800 4,230
United Kingdom 4.25% 2032 10,190 19,006
Italian Government BTPS Eurobond 6.00% 2007 Euro 16,204 23,935
French Government O.A.T. Eurobond Strip Principal 0% 2019 $14,000 10,452
French Government O.A.T. Eurobond 5.50% 2029 7,610 12,261
New South Wales Treasury Corp. 8.00% 2008 A$ 26,000 21,834
State of Qatar 9.75% 2030 $12,220 17,780
Banque Centrale de Tunisie 4.75% 2011 Euro 3,000 4,189
Banque Centrale de Tunisie 7.375% 2012 $6,250 7,172
Corporacion Andina de Fomento 6.875% 2012 5,895 6,636
Panama (Republic of) Global 10.75% 2020 210 274
Panama (Republic of) Global 9.375% 2023 3,837 4,451
Panama (Republic of) Global 8.875% 2027 250 276
Panama (Republic of) Global 9.375% 2029 675 797
Bulgaria (Republic of) 8.25% 2015 4,000 5,040
Hungarian Government 8.50% 2006 HUF 500,000 2,762
Hungarian Government 6.25% 2008 300,000 1,570
Peru (Republic of) 9.125% 2012 $432 505
Peru (Republic of) 8.375% 2016 2,500 2,813
Peru (Republic of) Past Due Interest Eurobond 5.00% 2017(2) 383 369
Brazil (Federal Republic of), Bearer 8.00% 2014(12) 681 697
Brazil (Federal Republic of) Global 8.875% 2024 1,375 1,430
Brazil (Federal Republic of) Global 12.25% 2030 425 563
Brazil (Federal Republic of) Global 11.00% 2040 610 725
New Zealand Government 4.50% 2016(11) NZ$ 3,553 2,792
Dominican Republic 9.50% 2006(1) $2,135 2,015
Guatemala (Republic of) 10.25% 2011(1) 1,000 1,184
Venezuela (Republic of) 9.25% 2027 915 968
El Salvador (Republic of) 7.625% 2034(1) 750 776
Turkey (Republic of) 12.375% 2009 500 630
Argentina (Republic of), Series E, 0% 2003(13) 1,000 260
Argentina (Republic of) Global 15.50% 2008(13) 725 243
Argentina (Republic of) Global 11.75% 2009(13) 60 21
Argentina (Republic of) Global 12.25% 2018(12),(13) 80 26
Argentina (Republic of) Global 12.00% 2031(12),(13) 53 18
1,116,483
ASSET-BACKED OBLIGATIONS(3) -- 5.60%
CWABS, Inc., Series 2004-15, Class AF-2, 3.775% 2024 10,000 9,994
CWABS, Inc., Series 2004-15, Class AF-4, 4.614% 2032 15,000 14,958
CWABS, Inc., Series 2004-15, Class 2-AV-2, 2.69% 2034(2) 30,000 30,000
CWABS, Inc., Series 2004-12, Class 2-AV-2, 2.698% 2033(2) 26,750 26,766
CWABS, Inc., Series 2004-10, Class AF-6, 4.485% 2034 16,000 15,798
Residential Asset Mortgage Products Trust, Series 2004-RZ1, Class A-I-2,
2.34% 2027 19,000 18,735
Residential Asset Mortgage Products Trust, Series 2003-RS1, Class A-I-3,
3.495% 2028 51 51
Residential Asset Mortgage Products Trust, Series 2004-RS3, Class A-I-2,
3.052% 2029 1,550 1,531
Residential Asset Mortgage Products Trust, Series 2004-RS9, Class A-I-4,
AMBAC insured, 4.767% 2032 10,000 10,033
Residential Asset Mortgage Products Trust, Series 2004-RZ3, Class A-I-4,
4.572% 2033 6,038 5,977
Residential Asset Mortgage Products Trust, Series 2003-RZ4, Class A-7,
4.79% 2033(2) 10,000 10,044
Residential Asset Mortgage Products Trust, Series 2003-RS11, Class A-I-7,
4.828% 2033 9,000 9,025
Residential Asset Mortgage Products Trust, Series 2004-RS10, Class A-I-6,
4.55% 2034 26,100 25,727
Metris Master Trust, Series 2000-1, Class A, 2.71% 2008(2) 41,100 41,129
Metris Master Trust, Series 2000-3, Class A, 2.67% 2009(2) 3,500 3,495
Metris Master Trust, Series 2001-2, Class A, 2.73% 2009(2) 23,000 22,957
Residential Asset Securities Corp. Trust, Series 2002-KS4, Class A-1-3,
AMBAC insured, 4.59% 2026 80 80
Residential Asset Securities Corp. Trust, Series 2003-KS2, Class A-I-3,
2.66% 2028 16,236 16,168
Residential Asset Securities Corp. Trust, Series 1999-KS3, Class A-I-7,
AMBAC insured, 7.505% 2030 3,034 3,115
Residential Asset Securities Corp. Trust, Series 2001-KS3, Class A-I-6,
5.96% 2031 24,400 25,037
Residential Asset Securities Corp. Trust, Series 2004-KS12, Class A-I-2,
2.64% 2035(2) 20,000 19,986
CPS Auto Receivables Trust, Series 2003-A, Class A-2, XLCA insured,
2.89% 2009(1) 25,539 25,256
CPS Auto Receivables Trust, Series 2002-B, Class A-2, XLCA insured,
3.50% 2009(1) 2,096 2,104
CPS Auto Receivables Trust, Series 2002-C, Class A-2, XLCA insured,
3.52% 2009(1) 1,105 1,102
CPS Auto Receivables Trust, Series 2004-A, Class A-2, FSA insured,
3.87% 2010(1) 7,141 7,150
CPS Auto Receivables Trust, Series 2004-D, Class A-2, XLCA insured,
3.86% 2011(1) 27,600 27,747
Wells Fargo Home Equity Trust, Series 2004-2, Class AI-5, 4.89% 2028 39,935 40,291
Green Tree Financial Corp., Series 1993-2, Class B, 8.00% 2018 2,156 2,036
Green Tree Financial Corp., Series 1995-3, Class B-2, 8.10% 2025(7) 4,192 1,048
Green Tree Financial Corp., Series 1995-8, Class B-2, 7.65% 2026(7) 7,046 88
Green Tree Financial Corp., Series 1995-6, Class B-2, 8.00% 2026(7) 2,383 119
Green Tree Financial Corp., Series 1996-6, Class B-2, 8.35% 2027(7) 6,984 35
Green Tree Financial Corp., Series 1996-5, Class B-2, 8.45% 2027(7) 4,489 22
Green Tree Financial Corp., Series 1996-10, Class A-6, 7.30% 2028 5,487 5,855
Green Tree Financial Corp., Series 1997-8, Class B-2, 7.75% 2028(7) 2,139 11
Green Tree Financial Corp., Series 1997-6, Class A-7, 7.14% 2029 10,913 11,707
Green Tree Recreational, Equipment & Consumer Trust, Series 1997-D,
7.25% 2029(4) 8,337 7,086
Green Tree Financial Corp., Series 1997-6, Class B-2, 7.75% 2029(7) 3,432 17
Green Tree Financial Corp., Series 1998-4, Class B-2, 8.11% 2030(7) 9,019 -
Conseco Finance Home Equity Loan Trust, Series 2002-B, Class M-1, 4.153% 2033(2) 4,500 4,581
Conseco Finance Manufactured Housing Contract Trust, Series 2001-3, Class A-2,
5.16% 2033 2,117 2,131
Conseco Finance Manufactured Housing Contract Trust, Series 2001-3, Class A-3,
5.79% 2033 5,000 5,093
Vanderbilt Mortgage and Finance, Inc., Series 2002-B, Class A-3, 4.70% 2018 5,100 5,122
Vanderbilt Mortgage and Finance, Inc., Series 2002-C, Class A-4, 6.57% 2024 7,660 8,094
Vanderbilt Mortgage and Finance, Inc., Series 1999-B, Class I-A-6, 6.925% 2024 10,250 10,596
Vanderbilt Mortgage and Finance, Inc., Series 2000-C, Class A-4, 7.905% 2026 5,000 5,454
Vanderbilt Mortgage and Finance, Inc., Series 2000-C, Class A-5, 8.195% 2030 6,889 7,721
Vanderbilt Mortgage and Finance, Inc., Series 2001-C, Class M-1, 6.76% 2032 1,500 1,569
AmeriCredit Automobile Receivables Trust, Series 2003-A-M, Class A-3-A,
MBIA insured, 2.37% 2007 17,000 16,984
AmeriCredit Automobile Receivables Trust, Series 2003-A-M, Class A-4-A,
MBIA insured, 3.10% 2009 2,000 1,991
AmeriCredit Automobile Receivables Trust, Series 2002-C, Class A-4, FSA insured,
3.55% 2009 4,000 4,016
AmeriCredit Automobile Receivables Trust, Series 2003-C-F, Class A-4,
FSA insured, 3.48% 2010 15,500 15,524
MMCA Auto Owner Trust, Series 2001-2, Class B, 5.75% 2007 1,620 1,633
MMCA Auto Owner Trust, Series 2001-3, Class B, 3.353% 2008(2) 4,880 4,876
MMCA Auto Owner Trust, Series 2002-4, Class B, 3.82% 2009 3,933 3,935
MMCA Auto Owner Trust, Series 2002-2, Class A-4, 4.30% 2010 24,221 24,324
WFS Financial Owner Trust, Series 2002-3, Class A-4, 3.50% 2010 15,000 15,063
WFS Financial Owner Trust, Series 2004-1, Class C, 2.49% 2011 4,722 4,669
WFS Financial Owner Trust, Series 2004-1, Class A-4, 2.81% 2011 12,000 11,837
Ameriquest Mortgage Securities Inc., Series 2004-R4, Class A-4, 2.898% 2034(2) 22,757 22,769
Vanderbilt Acquisition Loan Trust, Series 2002-1, Class B-1, 7.30% 2021 10,000 10,491
Vanderbilt Acquisition Loan Trust, Series 2002-1, Class A-4, 6.57% 2027 8,290 8,794
Vanderbilt Acquisition Loan Trust, Series 2002-1, Class A-5, 7.12% 2032 3,000 3,274
First Investors Auto Owners Trust, Series 2002-A, Class A, MBIA insured,
3.46% 2008(1) 1,931 1,932
First Investors Auto Owners Trust, Series 2003-A, Class A, MBIA insured,
2.58% 2011(1) 20,649 20,473
Morgan Stanley Capital I, Inc., Series 2004-NC3, Class M-1, 2.948% 2034(2) 20,000 20,013
New Century Home Equity Loan Trust, Series 2001-NC2, Class M-1, 3.23% 2031(2) 5,000 5,005
New Century Home Equity Loan Trust, Series 2004-A, Class A-II-5, FGIC insured,
5.25% 2034 11,000 11,236
New Century Home Equity Loan Trust, Series 2004-A, Class M-II, FGIC insured,
5.65% 2034 3,000 3,048
Consumer Credit Reference Index Securities Program Trust, Series 2002-1A,
Class A, 4.521% 2007(1),(2) 10,158 10,288
Consumer Credit Reference Index Securities Program Trust, Series 2002-2A,
Class FX, 10.421% 2007(1) 8,250 8,624
MBNA Credit Card Master Note Trust, Series 2002-1, Class B, 5.15% 2009 17,000 17,510
Centex Home Equity Loan Trust, Series 2003-A, Class AF-3, 2.708% 2026 17,425 17,396
Household Automotive Trust, Series 2001-3, Class A-4, 4.37% 2008 16,000 16,098
PP&L Transition Bond Co. LLC, Series 1999-1, Class A-7, 7.05% 2009 15,000 15,969
Drive Auto Receivables Trust, Series 2004-A, Class A-2, XLCA insured,
1.638% 2006(1) 8,369 8,323
Drive Auto Receivables Trust, Series 2003-1, Class A-3, MBIA insured,
2.41% 2007(1) 5,000 4,971
Drive Auto Receivables Trust, Series 2001-2, Class A, MBIA insured, 3.91% 2007(1) 2,288 2,301
PECO Energy Transition Trust, Series 1999-A, Class A-7, 6.13% 2009 14,250 15,247
CNL Funding, Series 2000-AA, Class A-2, MBIA Insured, 8.044% 2017(1) 13,800 15,197
Impac CMB Grantor Trust, Series 2004-6, Class M-4, 3.568% 2034(2) 9,742 9,830
Impac CMB Trust, Series 2004-10, Class 1-A-2, FGIC insured, 2.768% 2035(2) 4,978 4,979
Drivetime Auto Owner Trust, Series 2003-A, Class A-3, XLCA insured,
2.524% 2008(1) 7,642 7,626
Drivetime Auto Owner Trust, Series 2004-C, Class A-3, XLCA insured,
3.493% 2010(1) 5,584 5,552
Banco Itau SA, Series 2002, XLCA insured, 2.78% 2007(1),(2) 12,509 12,415
AESOP Funding II LLC, Series 2003-2, Class A-1, MBIA insured, 2.74% 2007(1) 12,000 11,897
Triad Automobile Receivables Trust, Series 2002-1, Class A-3, AMBAC insured,
3.00% 2009(1) 7,976 7,979
Triad Automobile Receivables Trust, Series 2002-A, Class A-3, AMBAC insured,
2.62% 2007 3,899 3,900
PF Export Receivables Master Trust, Series 2001-B, MBIA insured, 6.60% 2011(1) 10,000 10,683
Origen Manufactured Housing Contract Trust, Series 2004-B, Class A-1, 2.87% 2013 5,698 5,657
Origen Manufactured Housing Contract Trust, Series 2004-B, Class M-1, 5.73% 2035 2,500 2,465
Origen Manufactured Housing Contract Trust, Series 2004-B, Class M-2, 6.51% 2035 2,000 1,949
Capital One Auto Finance Trust, Series 2004-B, Class A-3, MBIA insured,
2.96% 2009 10,000 9,923
Prestige Auto Receivables Trust, Series 2003-1, Class A-2, FSA insured,
2.41% 2010(1) 9,905 9,855
IndyMac Home Equity Mortgage Loan Asset-backed Trust, Series 2004-C,
Class II-A-2, 2.66% 2035(2) 5,500 5,500
IndyMac Home Equity Mortgage Loan Asset-backed Trust, Series SPMD 2001-A,
Class AF-6, 6.537% 2030 3,907 3,922
California Infrastructure and Economic Development Bank, Special Purpose Trust,
SCE-1, Series 1997-1, Class A-6, 6.38% 2008 2,292 2,364
California Infrastructure and Economic Development Bank, Special Purpose Trust,
PG&E-1, Series 1997-1, Class A-7, 6.42% 2008 6,788 6,997
Pass-through Amortizing Credit Card Trusts, Series 2002-1A, Class A-2FX,
4.685% 2012(1) 2,146 2,154
Pass-through Amortizing Credit Card Trusts, Series 2002-1A, Class A-3FX,
6.298% 2012(1) 6,830 6,844
ACLC Business Loan Receivables Trust, Series 2002-1, Class A-2, 7.462% 2022(1) 8,988 8,651
Home Equity Asset Trust, Series 2004-2, Class M-1, 2.948% 2034(2) 1,000 1,001
Home Equity Asset Trust, Series 2004-7, Class M-1, 3.038% 2035(2) 7,500 7,539
Nordstrom Credit Card Master Note Trust, Series 2002-1, Class B,
3.103% 2010(1),(2) 8,000 8,060
Specialty Underwriting and Residential Finance Trust, Series 2004-BC4,
Class A-2-B, 2.73% 2035(2) 7,450 7,452
MBNA Master Credit Card Trust II, Series 1999-B, Class A, 5.90% 2011 3,000 3,236
MBNA Master Credit Card Trust II, Series 1999-B, Class B, 6.20% 2011 3,750 4,055
Lehman ABS Manufactured Housing Contract Trust, Series 2001-B, Class A-3,
4.35% 2014 4,788 4,737
Lehman ABS Manufactured Housing Contract Trust, Series 2001-B, Class A-4,
5.27% 2018 2,456 2,461
Bear Stearns Asset Backed Securities I Trust, Series 2004-HE11, Class I-A-2,
2.718% 2033(2) 7,125 7,125
First USA Credit Card Master Trust, Series 1997-4, Class C, 3.41% 2010(1),(2) 6,630 6,655
PCR Auto Receivables Trust, Series 2004-1, Class A-2, XLCA insured,
3.995% 2010(1) 6,357 6,363
GRCT Consumer Loan Trust, Series 2001-1A, Class 2BRV, 6.251% 2020(1) 6,076 6,289
CitiFinancial Mortgage Securities Inc., Series 2003-1, Class AF-2, 2.948% 2033 5,733 5,728
Popular ABS Mortgage Pass Through Trust, Series 2004-4, Class AF-4, 4.628% 2034 5,650 5,656
Harley-Davidson Motorcycle Trust, Series 2001-3, Class B, 3.72% 2009 579 581
Harley-Davidson Motorcycle Trust, Series 2001-3, Class A-2, 4.04% 2009 3,117 3,129
Harley-Davidson Motorcycle Trust, Series 2002-2, Class B, 2.84% 2010 1,862 1,844
Continental Auto Receivables Owner Trust, Series 2000-B, Class CTFS,
MBIA insured, 7.11% 2007(1) 5,261 5,271
Chase Manhattan Auto Owner Trust, Series 2002-B, 4.24% 2009 4,931 4,973
West Penn Funding LLC, Series 1999-A, Class A-4, 6.98% 2008 4,500 4,889
Hyundai Auto Receivables Trust, Series 2001-A, Class C, 5.57% 2006(1) 2,380 2,389
Hyundai Auto Receivables Trust, Series 2002-A, Class C, 3.91% 2009(1) 2,000 2,007
New South Motor Vehicle Trust, Series 2002-A, Class A-3, AMBAC insured,
3.03% 2010 4,337 4,342
Chase Funding Trust, Series 2003-1, Class IA-3, 3.14% 2023 2,303 2,301
Chase Funding Trust, Series 1999-3, Class IIM-1, 3.068% 2029(2) 1,556 1,558
Financial Pacific Funding II, LLC, Series 2003-A, Class A, FSA insured,
2.29% 2009(1) 3,571 3,532
NextCard Credit Card Master Note Trust, Series 2000-1, Class B,
3.203% 2006(1),(2) 3,393 3,405
Advanta Mortgage Loan Trust, Series 1999-2, Class A-6, AMBAC insured, 6.82% 2029 2,771 2,845
SLM Private Credit Student Loan Trust, Series 2003-10, 5.15% 2039(1) Pound 1,160 2,242
SeaWest Securitization, LLC, Series 2002-A, Class A-3, XLCA insured,
3.58% 2008(1) $1,446 1,448
SeaWest Securitization, LLC, Series 2003-A, Class A-2, XLCA insured,
2.84% 2009(1) 766 765
NPF XII, Inc., Series 1999-3, Class B, 2.389% 2003(1),(2),(4),(6) 3,000 30
NPF XII, Inc., Series 2001-1A, Class A, 1.989% 2004(1),(2),(4),(6) 7,000 656
NPF XII, Inc., Series 2001-3, Class A, 5.52% 2007(1),(4),(7) 16,000 1,500
Chevy Chase Auto Receivables Trust, Series 2001-2, Class A-4, 4.44% 2007 2,114 2,125
Option One Mortgage Loan Trust, Series 2002-1, Class M-1, 3.168% 2032(2) 2,000 1,998
CIT Equipment Collateral, Series 2002-VT1, Class B, 3.97% 2009 1,162 1,159
Capital One Master Trust, Series 2002-1A, Class B, 3.003% 2011(2) 1,000 1,012
World Omni Auto Receivables Trust, Series 2001-B, Class B, 4.14% 2008 640 644
1,110,596
MUNICIPALS -- 1.55%
State of California, Golden State Tobacco Securitization Corp., Tobacco
Settlement Asset-backed Bonds, Series 2003-A1, 5.00% 2021 8,055 8,131
State of California, Golden State Tobacco Securitization Corp., Tobacco
Settlement Asset-backed Bonds, Series 2003-A1, 6.25% 2033 64,975 65,076
State of New Jersey, Tobacco Settlement Financing Corp., Tobacco Settlement
Asset-backed Bonds, Series 2003, 4.375% 2019 6,000 5,987
State of New Jersey, Tobacco Settlement Financing Corp., Tobacco Settlement
Asset-backed Bonds, Series 2003, 6.125% 2024 27,290 27,014
State of New Jersey, Tobacco Settlement Financing Corp., Tobacco Settlement
Asset-backed Bonds, Series 2002, 5.75% 2032 31,360 29,965
State of Wisconsin, Badger Tobacco Asset Securitization Corp., Tobacco
Settlement Asset-backed Bonds, 6.125% 2027 40,110 40,059
State of South Dakota, Educational Enhancement Funding Corp., Tobacco Settlement
Asset-backed Bonds, Series 2002-A, Class A, 6.72% 2025 29,321 28,175
State of California, Department of Water Resources, Power Supply Revenue Bonds,
Series 2002-E, 3.975% 2005 14,450 14,503
State of California, Department of Water Resources, Power Supply Revenue Bonds,
Series 2002-E, 4.33% 2006 13,320 13,458
State of Louisianna, Tobacco Settlement Financing Corp., Tobacco Settlement
Asset-backed Bonds, Series 2001-A, Class A, 6.36% 2025 24,095 23,748
California Maritime Infrastructure Authority, Taxable Lease Revenue Bonds
(San Diego Unified Port District-South Bay Plant Acquisition), Series 1999,
6.63% 2009(1),(3) 10,744 11,177
Los Angeles County Metropolitan Transportation Authority, General Revenue
Refunding Bonds (Workers' Compensation Funding Program), Series 2003,
AMBAC insured, 3.83% 2008 5,000 5,002
Los Angeles County Metropolitan Transportation Authority, General Revenue
Refunding Bonds (Workers' Compensation Funding Program), Series 2003,
AMBAC insured, 4.56% 2010 5,000 5,072
State of Louisianna, Tobacco Settlement Authority, Asset-backed Bonds,
Series 2001-B, 5.50% 2030 10,000 9,370
State of South Carolina, Tobacco Settlement Revenue Management Authority,
Tobacco Settlement Asset-backed Bonds, Series 2001-B, 6.00% 2022 6,410 6,345
State of South Carolina, Piedmont Municipal Power Agency, Electric Revenue
Bonds, Refunding Series 2004-A-1, 3.60% 2006 5,000 4,984
State of New York, Dormitory Authority, City University System Consolidated
Third General Resolution Revenue Bonds, Series 2003-2, 2.38% 2005 4,500 4,489
State of New York, Housing Finance Agency, State Personal Income Tax Revenue
Bonds (Economic Development and Housing), Series B, 2.88% 2007 2,000 1,973
State of New York, Housing Finance Agency, State Personal Income Tax Revenue
Bonds (Economic Development and Housing), Series B, 3.09% 2007 2,200 2,167
306,695
TOTAL BONDS & NOTES (cost: $17,016,321,000) $17,805,976
Shares or
CONVERTIBLE SECURITIES -- 0.97% Principal amount
CONSUMER DISCRETIONARY -- 0.34%
Amazon.com, Inc. 6.875% PEACS convertible subordinated notes 2010 Euro 25,975,000 36,060
Ford Motor Co. Capital Trust II 6.50% cumulative convertible trust
preferred 2032 351,600 18,561
General Motors Corp., Series B, 5.25% convertible senior debentures 2032 $13,125,000 12,112
66,733
TELECOMMUNICATION SERVICES -- 0.28%
Hellenic Exchangeable Finance SCA 2.00% exchangeable bonds 2005 Euro 22,000,000 32,829
American Tower Corp. 5.00% convertible debentures 2010 $21,000,000 21,210
Dobson Communications Corp., Series F, 6.00% convertible preferred(1),(4) 15,400 986
55,025
INFORMATION TECHNOLOGY -- 0.16%
Conexant Systems, Inc. 4.00% convertible subordinated notes 2007 $14,700,000 13,377
SCI Systems, Inc. 3.00% convertible subordinated debentures 2007 $12,000,000 11,640
Celestica Inc. 0% convertible debentures 2020 $14,000,000 7,805
32,822
UTILITIES -- 0.09%
AES Trust VII 6.00% convertible preferred 2008 351,450 17,080
INDUSTRIALS -- 0.08%
Cummins Capital Trust I 7.00% QUIPS convertible preferred 2031(1) 180,000 16,447
FINANCIALS -- 0.02%
Equity Office Properties Trust, Series B, 5.25% convertible preferred 2008 70,400 3,602
TOTAL CONVERTIBLE SECURITIES (cost: $138,215,000) 191,709
WARRANTS -- 0.00% Shares
TELECOMMUNICATION SERVICES -- 0.00%
XO Communications, Inc., Series A, warrants, expire 2010(8) 11,372 8
XO Communications, Inc., Series B, warrants, expire 2010(8) 8,529 4
XO Communications, Inc., Series C, warrants, expire 2010(8) 8,529 4
16
INDUSTRIALS -- 0.00%
Protection One, Inc., warrants, expire 2005(1),(4),(8) 54,400 $ 1
TOTAL WARRANTS (cost: $190,000) 17
PREFERRED STOCKS -- 3.94%
FINANCIALS -- 3.91%
HSBC Capital Funding LP, Series 1, 9.547% noncumulative step-up perpetual
preferred (undated)(1),(2) 85,750,000 106,951
HSBC Capital Funding LP, Series 2, 10.176% noncumulative step-up perpetual
preferred (undated)(1),(2) 32,000,000 49,692
HSBC Capital Funding LP 8.03% noncumulative preferred (undated)(2) 20,000,000 34,136
Fuji JGB Investment LLC, Series A, 9.87% noncumulative preferred
(undated)(1),(2) 93,375,000 109,317
IBJ Preferred Capital Co. LLC, Series A, 8.79% noncumulative preferred
(undated)(1),(2) 57,500,000 65,176
Fannie Mae, Series O, 7.00% preferred 2007(1),(8) 1,314,000 73,584
Swire Pacific Capital Ltd. 8.84% cumulative guaranteed perpetual capital
securities(1) 1,670,000 45,299
Swire Pacific Offshore Financing Ltd. 9.33% cumulative guaranteed perpetual
preferred capital securities(1) 230,000 6,296
Royal Bank of Scotland Group PLC, Series 3 Preference Shares, 7.816% (undated) 18,000,000 18,722
RBS Capital Trust I noncumulative trust preferred 4.709% (undated)(2) 18,550,000 18,102
Royal Bank of Scotland Group PLC 6.625% (undated)(2) 4,700,000 7,211
BNP U.S. Funding LLC, Series A, 7.738% noncumulative preferred (undated)(1),(2) 21,750,000 24,058
BNP Paribas Capital Trust 9.003% noncumulative trust preferred (undated)(1),(2) 15,000,000 18,506
Tokai Preferred Capital Co. LLC, Series A, 9.98% noncumulative preferred
(undated)(1),(2) 34,850,000 40,763
ING Capital Funding Trust III 8.439% noncumulative preferred (undated)(2) 29,750,000 35,663
NB Capital Corp., Series A, 8.35% exchangeable preferred depositary shares 1,200,000 33,360
SB Treasury Co. LLC, Series A, 9.40% noncumulative preferred (undated)(1),(2) 26,721,000 30,808
ACE Ltd., Series C, 7.80% preferred depositary shares 680,000 18,054
Standard Chartered Capital Trust I 8.16% (undated)(2) 10,000,000 16,299
DBS Capital Funding Corp., Series A, 7.657% noncumulative guaranteed preference
shares (undated)(1),(2) 11,250,000 13,025
New Plan Excel Realty Trust, Inc., Series D, 7.80% preferred cumulative step-up
premium rate 112,500 5,850
Nationwide Health Properties, Inc., Series A, 7.677% preferred cumulative
step-up premium rate 50,000 5,275
776,147
TELECOMMUNICATION SERVICES -- 0.03%
Dobson Communications Corp. 13.00% senior exchangeable preferred 2009(4) 11,704 5,267
XO Communications, Inc. 14.00% preferred 2009(8),(12) 24 -
5,267
CONSUMER STAPLES -- 0.00%
Great Atlantic & Pacific Tea Co., Inc. 9.375% QUIBS preferred 2039 18,500 443
CONSUMER DISCRETIONARY -- 0.00%
Adelphia Communications Corp., Series B, 13.00% preferred 2009(8) 50,565 63
INFORMATION TECHNOLOGY -- 0.00%
ZiLOG, Inc. - MOD III Inc., units(4),(14) 1,447 0
TOTAL PREFERRED STOCKS (cost: $664,844,000) 781,920
Market value
COMMON STOCKS -- 0.51% Shares (000)
TELECOMMUNICATION SERVICES -- 0.36%
NTELOS Inc.(1),(4),(8),(14) 1,623,569 $ 59,341
AirGate PCS, Inc.(1),(8) 148,128 5,273
Dobson Communications Corp., Class A(1),(8) 2,432,959 4,185
VersaTel Telecom International NV(8) 779,280 2,248
XO Communications, Inc.(8) 5,685 17
71,064
FINANCIALS -- 0.08%
Beverly Hills Bancorp Inc.(14) 1,601,967 16,180
INFORMATION TECHNOLOGY -- 0.04%
ZiLOG, Inc.(8),(14) 879,000 7,032
INDUSTRIALS -- 0.03%
DigitalGlobe, Inc.(1),(4),(8) 3,984,039 3,984
Delta Air Lines, Inc.(1),(4),(8) 312,961 1,990
5,974
HEALTH CARE -- 0.00%
Clarent Hospital Corp.(4),(8),(14) 331,291 166
TOTAL COMMON STOCKS (cost: $102,168,000) 100,416
Principal amount
SHORT-TERM SECURITIES -- 4.55% (000)
Proctor & Gamble Co. 2.08%-2.35% due 1/21-3/9/2005(1),(15) $ 133,000 132,692
CAFCO, LLC 2.05%-2.32% due 1/21-2/10/2005(1) 130,000 129,696
SBC Communications Inc. 2.22%-2.34% due 1/24-2/15/2005(1),(15) 90,500 90,281
U.S. Treasury Bills 1.705%-2.045% due 1/6-3/10/2005(15) 80,200 79,933
Clipper Receivables Co., LLC 2.31%-2.35% due 1/28-2/11/2005(1),(15) 65,000 64,836
Three Pillars Funding, LLC 2.03%-2.39% due 1/7-3/10/2005(1),(15) 55,295 55,187
Coca-Cola Co. 2.15%-2.20% due 1/25-1/27/2005(15) 53,800 53,715
Gannett Co. 2.20%-2.26% due 1/19/2005(1) 51,000 50,939
American Express Credit Corp. 2.15% due 1/5/2005 50,000 49,985
Pfizer Inc 2.23% due 2/2/2005(1) 31,900 31,835
Federal Home Loan Bank 2.21% due 2/4/2005(15) 28,400 28,339
Abbott Laboratories Inc. 2.18% due 1/20/2005(1) 26,200 26,168
BellSouth Corp. 2.30% due 2/7/2005(1) 24,800 24,740
Variable Funding Capital Corp. 2.25% due 1/24/2005(1),(15) 20,000 19,970
General Electric Capital Corp. 2.20% due 1/3/2005 18,100 18,097
Hershey Foods Corp. 2.26% due 2/2/2005(1) 12,600 12,574
NetJets Inc. 1.95% due 1/11/2005(1) 12,500 12,492
3M Co. 1.97% due 1/18/2005(15) 10,000 9,989
Caterpillar Inc. 2.28% due 1/18/2005(1) 10,000 9,989
Triple-A One Funding Corp. 2.08% due 1/7/2005(1) 1,087 1,087
TOTAL SHORT-TERM SECURITIES (cost: $902,570,000) 902,544
TOTAL INVESTMENT SECURITIES (cost: $18,824,308,000) $19,782,582
OTHER ASSETS LESS LIABILITIES 46,826
NET ASSETS $19,829,408
(1) Purchased in a private placement transaction; resale may be limited to
qualified institutional buyers; resale to the public may require
registration. The total value of all such restricted securities was
$3,738,854,000, which represented 18.86% of the net assets of the fund.
(2) Coupon rate may change periodically.
(3) 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.
(4) Valued under fair value procedures adopted by authority of the Board of
Directors.
(5) Step bond; coupon rate will increase at a later date.
(6) Company did not make principal payment upon scheduled maturity date;
reorganization pending.
(7) Company not making scheduled interest payments; bankruptcy proceedings
pending.
(8) Security did not produce income during the last 12 months.
(9) Purchased as a unit; issue was separated but reattached for reporting
purposes.
(10) 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.
(11) Index-linked bond whose principal amount moves with a government retail
price index.
(12) Payment in kind; the issuer has the option of paying additional securities
in lieu of cash.
(13) Scheduled interest or principal payments not made; reorganization pending.
(14) Represents an affiliated company as defined under the Investment Company
Act of 1940.
(15) This security, or a portion of this security, has been segregated to cover
funding requirements on investment transactions settling in the future.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON SCHEDULE OF
INVESTMENTS
To the Shareholders and
Board of Directors of
The Bond Fund of America, Inc.:
We have audited, in accordance with standards of the Public Company Accounting
Oversight Board (United States), the financial statements of The Bond Fund of
America, Inc. (the "Fund") as of December 31, 2004, and for the year then ended
and have issued our report thereon dated Feburary 10, 2005, which report and
financial statements are included in Item 1 of this Certified Shareholder Report
on Form N-CSR. Our audit also included the Fund's investment portfolio (the
"Schedule") as of December 31, 2004 appearing in Item 6 of this Form N-CSR. This
Schedule is the responsibility of the Fund's management. Our responsibility is
to express an opinion based on our audit. In our opinion, the Schedule referred
to above, when considered in relation to the basic financial statements taken as
a whole of the Fund referred to above, presents fairly, in all material
respects, the information set forth therein.
DELOITTE & TOUCHE LLP
February 10, 2005
Costa Mesa, California
ITEM 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end
management investment company.
ITEM 8 - Portfolio Managers of Closed-End Management Investment Companies Not
applicable to this Registrant, insofar as the Registrant is not a closed-end
management investment company.
ITEM 9 - 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, as amended. The committee periodically
reviews such issues as the Board's composition, responsibilities, committees,
compensation and other relevant issues, and recommends any appropriate changes
to the full Board of Directors. While the committee normally is able to identify
from its own resources an ample number of qualified candidates, it will consider
shareholder suggestions of persons to be considered as nominees to fill future
vacancies on the Board. Such suggestions must be sent in writing to the
nominating 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 Registrant's Principal Executive Officer and Principal Financial
Officer have concluded, based on their evaluation of the Registrant's
disclosure controls and procedures (as such term is defined in Rule 30a-3
under the Investment Company Act of 1940), that such controls and
procedures are adequate and reasonably designed to achieve the purposes
described in paragraph (c) of such rule.
(b) There were no changes in the Registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of
1940) that occurred during the Registrant's second fiscal quarter of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the Registrant's internal control
over financial reporting.
ITEM 11 - Exhibits
(a) The Code of Ethics that is the subject of the disclosure required by Item 2
is attached as an exhibit hereto.
(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: March 10, 2005
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: March 10, 2005
By
/s/ Susi M. Silverman
- ----------------------------------------------------
Susi M. Silverman, Treasurer and PFO
Date: March 10, 2005