-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FakD7w+XqCA9HDpAceemG0K+YQb/1APACd3V1gLRV5RplEEQgkYhiQ3vQg4qI4p2 9nMkBF/kM96mdjZT8kvPAQ== 0000013075-01-000004.txt : 20010308 0000013075-01-000004.hdr.sgml : 20010308 ACCESSION NUMBER: 0000013075-01-000004 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010307 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOND FUND OF AMERICA INC CENTRAL INDEX KEY: 0000013075 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 952884967 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-02444 FILM NUMBER: 1562581 BUSINESS ADDRESS: STREET 1: 333 S HOPE ST - 52ND FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90071 BUSINESS PHONE: 2134869200 N-30D 1 0001.txt The American Funds Group/R/ THE BOND FUND OF AMERICA [4 images: (1) a pair of hands holding eye glasses, (2) list of investing terms, (3) a globe, (4) a shareholder certificate] The Fruits of Diversification Annual Report For The Year Ended December 31, 2000 THE BOND FUND OF AMERICA/SM/ THE BOND FUND OF AMERICA is one of 29 American Funds, the nation's third-largest mutual fund family. For seven decades, Capital Research and Management Company, the American Funds adviser, has invested with a long-term focus based on thorough research and attention to risk. THE BOND FUND OF AMERICA 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. [begin chart] RESULTS AT A GLANCE (assuming distributions reinvested or interest compounded for periods ended December 31, 2000)
AVERAGE ANNUAL COMPOUND RETURNS 2000 5 10 LIFETIME YEARS YEARS (SINCE MAY 28, 1974) The Bond Fund of America +6.2% +5.9% +8.7% +9.7% Lehman Brothers Aggregate Bond Index /1/ +11.6 +6.5 +8.0 +9.4 Lipper Corporate A-Rated Bond Funds Average /2/ +9.8 +5.2 +7.6 +9.1 Average savings institution /3/ +3.7 +4.0 +4.1 +6.3 Consumer Price Index (inflation) /4/ +3.4 +2.5 +2.7 +4.9
/1/ The 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. The indexes serve as proxies for the broad U.S. investment-grade bond market and are unmanaged. /2/ Source: Lipper, Inc. Lipper averages do not include the effects of sales charges. /3/ Based on figures from the U.S. League of Savings Institutions and the Federal Reserve Board, which reflect all kinds of savings deposits (maximum allowable interest rates imposed by law until 1983). Savings accounts are guaranteed; the fund is not. /4/ Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics. [end chart] Fund results in this report were calculated for Class A shares at net asset value (without a sales charge) unless otherwise indicated. The fund's 30-day yield as of January 31, 2001, calculated in accordance with the Securities and Exchange Commission formula, was 7.42%. FIGURES SHOWN ARE PAST RESULTS AND ARE NOT PREDICTIVE OF FUTURE RESULTS. SHARE PRICE AND RETURN WILL VARY, SO YOU 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. HIGH-YIELD BONDS ARE SUBJECT TO GREATER DEFAULT RISK THAN INVESTMENT-GRADE BONDS. INVESTING OUTSIDE THE UNITED STATES IS SUBJECT TO ADDITIONAL RISKS, SUCH AS CURRENCY FLUCTUATIONS AND DIFFERING SECURITIES REGULATIONS, WHICH ARE DETAILED IN THE FUND'S PROSPECTUS. FELLOW SHAREHOLDERS: Bonds provided a harbor of relative calm during calendar 2000, as a long run-up in stock prices came to an abrupt end. U.S. Treasury securities - particularly those with longer maturities - captured the investment spotlight; other high-grade bonds held up well, too, although bond prices at the lower end of the credit spectrum declined. The U.S. economy was likewise buffeted by shifting trends. Roused by soaring oil prices and renewed wage pressures, the specter of inflation reared its head early in the year, only to beat a retreat as the economy cooled later in the year. Throughout the turbulence, The Bond Fund of America continued to produce a generous income stream for shareholders. For those who reinvested monthly dividends totaling 96 cents a share, a slight decline in net asset value was more than offset by the fund's income return of 7.6%. The result was a 12-month total return (income minus the change in capital value) of 6.2%. The fund's return was outstripped by the unmanaged Lehman Brothers Aggregate Bond Index, which rose 11.6%, and the 181 corporate A-rated bond funds tracked by Lipper, Inc., which posted a 9.8% average 12-month return. There were two primary reasons for these differences. First, The Bond Fund of America held a relatively small part of the portfolio in longer term Treasuries, which this year produced modest income but one of the best total returns of any bond market sector. Second, difficulties among lower rated issues held back the fund's total return. Although it slowed returns in 2000, your fund's flexibility has helped sustain its excellent record over meaningful time frames. As the table at left shows, The Bond Fund of America compares very favorably with its peers over five- and 10-year periods. It ranks second among the 14 corporate A-rated bond funds in existence over its lifetime. (Rankings for other periods can be found in the table on page 3.) Since beginning operations more than 26 years ago, The Bond Fund of America has achieved a cumulative total return of 1,083.5% - an average compound return of 9.7% a year - and outpaced both the Lehman index and the Lipper average. In that time, it has also provided shareholders with an ample cushion against inflation. TRENDS DIVERGE IN 2000 In an effort to forestall a possibly overheating economy, the Federal Reserve Board embarked on a series of tightening measures during the first half of the year, notching up short-term interest rates a full percentage point by May. The moves jolted bond markets, but matters improved by early summer when it became clear that economic growth was moderating. The sharp Nasdaq selloff and declines in broader equity markets made bonds more compelling to skittish investors. The rally proved to be selective. Government bonds were the biggest beneficiaries, thanks to the confluence of a rising federal budget surplus, a decline in government borrowing and an unprecedented buyback of outstanding debt. The combination shrank the supply of U.S. Treasury securities and sent prices soaring. Other high-quality issues also rose, but not as strongly. Lower rated bonds, meanwhile, were squeezed by the slowing economy, higher default rates and tightening credit conditions. A WIDE NET AND A LONG VIEW Your fund's portfolio is by design exceptionally well-diversified. Because bond sectors frequently do not move in lockstep, the ability to invest throughout the fixed-income universe has enabled fund shareholders to participate in upswings in some areas while mitigating downturns in others. That flexibility has helped produce consistent returns over full market cycles and has played an important role in the fund's good showing. (We discuss the fund's broad mandate in the article that begins on page 4.) At the end of 2000, U.S. Treasuries accounted for 11% of net assets, while mortgage- and asset-backed securities, which also did well, represented some 27% of net assets. Among corporate issues, which represent close to half of the portfolio, insurance companies, European banks and higher quality airline issues contributed positively. Below-investment-grade instruments (those rated BB and below) restrained 12-month results. That said, many of these bonds - which typically pay higher yields to compensate for greater risk - are longtime holdings, and we remain encouraged by their prospects. Indeed, in a number of cases, valuations among neglected sectors fell into very attractive ranges, and we added to our positions accordingly. A CUSHION AGAINST UNCERTAINTY The once-torrid pace of U.S. economic growth has slowed significantly. Growth in consumer spending has moderated, perhaps due in part to lower stock prices. Manufacturers in some industries have seen inventories build up, shrinking production and putting pressure on earnings expectations. Rising energy prices have also been a drag on business activity. Within this environment, in an attempt to engineer a "soft landing," the Federal Reserve took some dramatic steps in January, twice reducing short-term interest rates a half-point, from 6.5% to 5.5%. Times of uncertainty can be useful reminders of the role that balance plays in a sound financial program. For many investors, the recent stock market shocks demonstrated the value of a steady income flow from a portfolio of bonds. In managing your fund, we also strive to strike a balance - between providing generous income and protecting the value of your investment. Over the years, through a quarter-century's worth of market and economic cycles, that dual focus has added up in impressive ways for shareholders. We look forward to reporting to you again in six months. Cordially, /s/ Paul G. Haaga, Jr. Paul G. Haaga, Jr. Chairman of the Board /s/ Abner D. Goldstine Abner D. Goldstine President February 12, 2001 THE VALUE OF A LONG-TERM PERSPECTIVE How a $10,000 investment has grown 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 BFA's year-by-year total returns into their income and capital components. [begin chart] Average Annual Compound Returns on a $10,000 investment for periods ended December 31, 2000
10 Years 5 Years 1 Year CLASS A SHARES +8.28% +5.09% +2.17% reflecting 3.75%maximum sales charge CLASS B SHARES (FROM MARCH 15, 2000, WHEN -0.62%* B SHARES FIRST BECAME AVAILABLE) reflecting 5% maximum contingent deferred sales charge (CDSC) (payable only if shares are sold) not reflecting CDSC +4.33%*
* Reflects total return for the period March 15 to December 31, 2000. [end chart] [begin mountain chart] $113,906 /1/, /2/ BFA with dividends reinvested $107,840 /3/ Lehman Brothers Aggregate Bond Index $35,802 /4/ Consumer Price Index (inflation) $10,000 /1/ original investment Year ended BFA with dividends Lehman Brothers Consumer Price December 31,2001 reinvested/1/,/2/ Bond Index/3/ Index/4/ original investment $10,000 $10,000 $10,000 1974* 9,988 10,318 10,679 1975 11,254 11,587 11,420 1976 13,294 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 36,251 22,737 1987 39,324 37,248 23,745 1988 43,533 40,186 24,794 1989 47,942 46,026 25,946 1990 49,509 50,149 27,531 1991 59,927 58,174 28,374 1992 66,722 62,480 29,197 1993 76,155 68,571 30,000 1994 72,335 66,571 30,802 1995 85,536 78,870 31,584 1996 91,273 81,733 32,634 1997 99,708 89,624 33,189 1998 104,863 97,410 33,724 1999 107,265 96,609 34,630 2000 113,906 107,840 35,802
Year ended 1974* 1975 1976 1977 1978 1979 1980 1981 1982 1983 December 31 TOTAL VALUE Dividends $418 907 1,020 1,126 1,211 1,401 1,725 2,118 2,435 2,526 Reinvested Value at $9,988 11,254 13,294 13,977 14,261 14,710 15,230 16,242 21,586 23,628 Year-End/1/ BFA's Total (0.1)% 12.7 18.1 5.1 2.0 3.1 3.5 6.6 32.9 9.5 Return Year ended 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 December 31 TOTAL VALUE Dividends 2,869 3,227 3,604 3,787 3,954 4,472 4,698 4,908 5,274 5,326 Reinvested Value at 26,450 33,488 38,568 39,324 43,533 47,942 49,509 59,927 66,722 76,155 Year-End/1/ BFA's Total 11.9 26.6 15.2 2.0 10.7 10.1 3.3 21.0 11.3 14.1 Return Year ended 1994 1995 1996 1997 1998 1999 2000 December 31 TOTAL VALUE Dividends 5,733 6,180 6,473 6,703 7,008 7,398 8,187 Reinvested Value at 72,335 85,536 91,273 99,708 104,863 107,265 113,906 Year-End/1/ BFA's Total (5.0) 18.2 6.7 9.2 5.2 2.3 6.2
Average annual compound return for 26-1/2 years: 9.58% /1/,/2/ * For the period May 28 through December 31, 1974. /1/ Results reflect payment of the maximum sales charge of 3.75% on the $10,000 investment. Thus, the net amount invested was $9,625. As outlined in the prospectus, the sales charge is reduced for larger investments. /2/ Includes reinvested dividends of $104,718 and reinvested capital gain distributions of $4,571. /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. /4/ Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics. Past results are not predictive of future results. [end mountain chart] THE BOND FUND OF AMERICA VERSUS COMPARABLE FUNDS Over meaningful time frames, The Bond Fund of America has done significantly better than most other similar mutual funds. Over its 26 1/2-year lifetime, the fund ranked SECOND AMONG 14 A-rated corporate bond funds in existence throughout that span, according to Lipper, Inc. Here's how it ranked over other periods: 10 years: Four of 45 funds 5 years: 19 of 116 funds 1 year: 174 of 181 funds Rankings are based on total return and do not reflect the effect of sales charges. OUT OF MANY, ONE: THE FRUITS OF DIVERSIFICATION [4 images: (1) two men walking and carrying briefcases, (2) chess pieces (3) a globe, (4) list of investing terms] Variety may be the spice of life, but as most investors know it is also an essential ingredient for a sensible financial program. As stock markets tumbled this past year, many bond investors learned firsthand why it makes good sense to spread investments across several types of assets. The current income from bonds can be reassuringly predictable when stock markets are flat or retreating. Longer term, their relative steadiness can help anchor an overall portfolio. The Bond Fund of America takes the concept of diversification a step further by investing in an exceptionally wide range of fixed-income investments - both in terms of the types of bonds it holds and the sheer number of securities in the portfolio. That breadth, which is the result of an intensive global research effort, has allowed shareholders to participate in upswings throughout the bond market while avoiding some of the pitfalls of concentrating too heavily in one or two areas. Over longer periods, flexibility has been an important factor in The Bond Fund of America's excellent record. [Begin Sidebar] The Bond Fund of America provided a reassuring cushion during every stock market decline over its lifetime. [End Sidebar] CUSHIONING THE BUMPS On the principle of not putting all your eggs in one basket, financial advisers generally recommend that their clients diversify investments across different asset classes. While many investors look to stock funds for their long-term growth potential, they often choose to include bond funds in their portfolios to offset some of the volatility equities may experience. A balance of stocks and bonds will not eliminate the risk that the value of your account could go down, but it can reduce the possibility that severe market gyrations will impede progress toward your financial goals. Much of the stability of bonds can be attributed to the relatively steady flow of income they pay out - indeed, nearly all of your fund's return over longer periods has come from dividends. In addition, bond prices typically fluctuate less dramatically than stocks, and because they respond somewhat differently to economic circumstances they frequently move in a different direction from equities. That can help reduce overall portfolio volatility and mitigate losses when stock markets tumble. Over The Bond Fund of America's 26-year lifetime, there were seven periods during which stocks dropped between 14% and 33% on a reinvested basis, as you can see from the chart to the right. In five of those intervals, the fund recorded a positive return; in the remaining two, it experienced very modest declines. Active management also adds value for shareholders, particularly over longer periods. "Part of our task as investment professionals is striking a balance between the quest for high current income and the need to protect principal," notes Abner Goldstine, president of The Bond Fund of America and a portfolio counselor. "That emphasis presents different challenges in different market environments." [image of a shareholder certificate] [Begin Sidebar] THE BOND FUND OF AMERICA DURING MAJOR STOCK MARKET DECLINES [begin chart]
S&P 500 BFA 5/28-10/3/1974* -27.8% +2.5% 9/21/1976-3/6/1978 -13.8 +9.2 11/28/1980-8/12/1982 -19.9 +22.5 8/25-12/4/1987 -33.0 +0.6 7/16-10/11/1990 -19.1 -3.4 7/17-8/31/1998 -19.3 -2.2 3/24-12/20/2000 -16.5 +4.1
[end chart] Declines are based on price drops of 15% or more for the S&P 500 Stock Composite Index, although figures shown include reinvestment of dividends. Returns are cumulative for each period. * The full S&P decline was 1/11/1973-10/31/1974. Unlike funds that concentrate on a narrow band of the bond market, your fund's investment panorama has always been exceptionally broad. [end sidebar] A focus on both components of total return - income and capital value - has also helped produce consistent, positive returns over the fund's lifetime. As the "mountain chart" on page 2 shows, an investment in the fund has gone up in value every calendar year but one. Those gains have added up impressively: $10,000 invested at inception in May 1974 would have grown to nearly $114,000 at the end of 2000, if all distributions were reinvested. A PANORAMIC VIEW Unlike funds that concentrate on a narrow band of the bond market, The Bond Fund of America's investment panorama has always been extremely broad, encompassing virtually every area of the fixed-income universe. The portfolio contains bonds of more than 300 issuers around the world across dozens of industries. Some, like Bank of America, Time Warner and Delta Airlines, are household names; others are less well-known. The fund also has substantial positions in U.S. Treasury securities and bonds of governments abroad, and large holdings in mortgage- and asset-backed securities made up of home, credit card or auto loans. At the end of 2000, the fund's $9.5 billion of net assets represented some 1,100 securities. [Begin Sidebar] KEEPING YOUR BALANCE An asset allocation strategy generally takes into consideration your goals, time horizon and tolerance for risk. As those factors change, most financial advisers suggest that investors revisit their initial strategies to ensure they are still on target. Market movements can also affect the balance of your investments. The strong stock gains in recent years increased the wealth of many investors, but they also left many portfolios overweight in equities, a distortion that can have unintended consequences over the long term. The chart below shows what happened to a hypothetical $10,000 investment made six years ago in a portfolio of 70% in stocks, as measured by the S&P 500, and 30% in The Bond Fund of America - representing the overall U.S. equity and bond markets, respectively. That portfolio would have grown considerably, to nearly $29,000, by the end of 1999, due in no small part to the surge in stock prices during most of that time. It would have also reshaped the initial allocation: At the end of 1999, close to the stock market peak, the proportion would have changed to 85% in stocks and only 15% in bonds. While few investors would have complained if stock prices had continued to soar, that imbalance proved to be a problem over the next year, as market levels dropped precipitously and bonds rose. As the chart shows, the portfolio that was realigned at the end of 1999 was better cushioned than the one that wasn't. The smaller bond exposure of the latter had a negative impact on overall returns. Of course, rebalancing doesn't ensure a profit or protect against a loss, and no one can predict the perfect time to rebalance. Some investors choose to rebalance annually, while others wait until their allocations are off-target by a certain percentage. There may also be tax consequences, so it's a good idea to discuss these issues with your financial adviser. THE COST OF IMBALANCE A portfolio in 1995 consisting of 70% stocks and 30% in The Bond Fund of America... [begin pie chart] Stocks 70% Bonds 30% [end pie chart] ...would have become 85% stocks and 15% in The Bond Fund of America by the end of 1999... [begin pie chart] Bonds 15% Stocks 85% [end pie chart] ...leaving fewer bonds to cushion against declining stocks in 2000. [begin chart]
YEAR NOT REBALANCED REBALANCED ON 12/31/99 1994 $10,000 $10,000 1995 13,168 13,168 1996 15,610 15,610 1997 19,899 19,899 1998 24,609 24,609 1999 28,965 28,965 2000 27,007 27,656
[end chart] Source for stocks: Standard and Poor's 500 Stock Composite Index. Hypothetical investment assumes $10,000 invested on 12/31/1994, with all distributions reinvested. [End Sidebar] Although a change in the direction of interest rates will affect broad market movements, other factors - including business conditions in particular industries, currency valuations, and supply and demand - can boost or hamper a particular sector. In the past year, for example, a shrinking supply of U.S. Treasuries pushed government bonds to the fore; at other times, lower rated or global bonds have led the pack. Changes in relationships among sectors can create pockets of opportunity for investors, with shifts in portfolio holdings into the more attractive parts of the bond market. Your fund is further diversified within sectors. The portfolio contains a large number of holdings, a strategy that serves a dual purpose, explains portfolio counselor John Smet. "On the one hand, the fund's flexibility gives us the freedom to investigate any opportunity that seems promising. At the same time, it is also an effective risk-control device. No matter how careful you are, mistakes will happen - a downturn in the economy, a shift in the business cycle, fraud, even a fire in the warehouse. If a bond blows up, it will have less of an impact if it's only 1% of assets than if it's 10%." THE BENEFIT OF RESEARCH Understanding the need for diversification may be straightforward, but accomplishing it effectively is another matter altogether. Many of the most rewarding fixed-income instruments are complicated; a number are available primarily to institutional investors. Liquidity can be of particular concern; bonds are often sold in blocks of a million or more. Foreign instruments carry special risks, as do those of lower rated bonds. The latter also tend to be issued by less familiar companies, often in innovative industries. [Begin Sidebar] At the end of 2000, BFA's $9.5 billion of net assets represented some 1,100 securities. [begin chart] MARCHING TO A DIFFERENT BEAT Annual total returns for various bond market sectors
U.S. TREASURY/ HIGH-GRADE INTERNATIONAL HIGH-YIELD MORTGAGE-BACKED CORPORATE BONDS BONDS BONDS SECURITIES 1991 15.5% 19.9% 16.2% 43.8% 1992 7.1 9.4 4.8 16.7 1993 9.3 13.2 15.1 18.9 1994 -2.8 -5.7 6.0 -1.0 1995 17.8 27.2 19.6 17.4 1996 3.7 1.4 4.1 12.4 1997 9.5 13.0 -4.3 12.6 1998 8.7 10.7 17.8 0.6 1999 -0.5 -7.4 -5.1 3.3 2000 12.3 12.9 -2.6 -5.2
Sources: Lehman Brothers Govt./Mortgage-Backed Securities Index; Salomon Brothers High-Grade Corporate and World Govt. (Non-U.S.) indexes; and Credit Suisse First Boston High-Yield Index. [End Sidebar] [image of a list of investing terms] To penetrate this global, byzantine marketplace, the fund's portfolio counselors and research analysts draw on one of the industry's most globally integrated research networks. There are 26 investment professionals devoted to fixed-income investment for The Bond Fund of America and other American Funds. These men and women conduct thousands of research visits, analyze securities and identify their potential value as long-term investments for the fund. Going the extra mile helps them skirt danger zones and spot gems that other investors may overlook. Research is especially important in the high-yield sector. Finding appropriate issues among lower rated bonds is time consuming, but the rewards can make it worthwhile and mitigate some of the risks associated with these bonds. To cite one example, we first invested in Clearnet Communications, a Canadian wireless service provider, in 1997. We were optimistic about the prospects for telecommunications bonds in general, and research analyst David Daigle was particularly impressed by Clearnet's management team. "The company was one of two new wireless entrants after Canada deregulated its market in 1996," explains David. "In short order, it had captured a desirable subscriber base and a sizable share of the Canadian wireless market. Management also made their balance sheets transparent to investors." Our research convinced us that this company had strong asset value that could be realized down the road. And indeed, the company was recently acquired by Telus, a large telecom provider in Western Canada, which has assumed the bulk of Clearnet's debt. As a result, Clearnet's rating has been upgraded, and its bond price has risen appreciably. [Begin Sidebar] Going the extra mile helps us skirt danger zones and spot gems other investors may overlook. [End Sidebar] [image of a globe] [Begin Sidebar] A long view may make the fund seem out of step at times, but it has helped shareholders reap the real benefits down the line. [End Sidebar] Airline equipment trust certificates have been another success story for the fund. These bonds are secured by airplanes, which today are in strong demand in the industry and have a high resale value. The securities themselves are very sophisticated and can be difficult to understand, notes Mark Macdonald, a portfolio counselor, "but we began looking at these issues in the early 1990s and were impressed by their potential. Because most investors, including many professionals, did not fully understand these securities when they were first issued, they were selling at higher yields than investments of comparable quality. As the value of these instruments became more widely recognized, the bonds appreciated and we were in a position to do quite well." A DIVERSE MANAGEMENT APPROACH If research encourages diversity among holdings, the multiple portfolio counselor system - the management approach used by all of the American Funds - further broadens the process. The Bond Fund of America has six portfolio counselors, each of whom independently manages a portion of assets, within the fund's objectives. They also bring a depth of investment experience, ranging from 13 to 49 years. An additional segment is the responsibility of more than a dozen research analysts, who bring their specialized expertise to bear on investment decisions. The sum of those perspectives has been a consistency of results - through all market cycles. Ultimately, however, perhaps our most gratifying success in diversification has been in the range of shareholders who entrust us with their financial futures. The Bond Fund of America's shareholder family - now more than 275,000 accounts strong - includes individuals of all ages, corporations and foundations, as well as a number of 401(k) plans and other employer-sponsored retirement programs. As we continue to comb the bond universe on your behalf, we look forward to helping you meet your goals. [begin pie chart] Corporate Bonds 45.4% U.S. Government Notes & Bonds 12.1% Federal Agency Mortgage Pass-Through Securities 10.3% Other Mortgage-/Asset-Backed Securities 17.1% Governments & Governmental Bodies (Excluding U.S.) 8.2% Equity-Related Securities 0.1% Cash & Equivalents 6.8% [end pie chart] Bond Fund of America, Inc. Investment Portfolio, December 31, 2000 Shares or Principal Market Percent Amount Value of Net BONDS, NOTES & PREFERRED STOCKS (000) (000) Assets BANKS - 8.56% HSBC Capital Funding LP, Series 1: (2) 8.03% noncumulative preferred (undated) EURO 10000 9,843 9.547% noncumulative 45,250 49,839 preferred (undated) (1) 10.176% noncumulative 36,500 41,910 preferred (undated) (1) Midland Bank 6.50% Eurodollar 15,000 11,845 1.20 Note (undated) (2) SocGen Real Estate Co. LLC, Series A, 7.64%/8.406% (undated) (1) (2) 116,375 112,950 1.19 Banque Nationale de Paris 12,500 11,971 7.161% (undated)(2) BNP Paribas Capital Trust, 9.003% noncumulative trust preferred (undated) (1) 15,000 15,637 Paribas, New York Branch 6.95% 2013 18,000 17,470 BNP U.S. Funding LLC, Series A, 7.738% noncumulative 46,500 44,962 .95 preferred (undated)(1)(2) Washington Mutual Finance, 8.25% 2005 12,000 12,687 Ahmanson Capital Trust I Capital Securities, Series A, 8.36% 2026 (1) 2,030 1,897 Great Western Financial Trust II, 7,600 6,952 Series A, 8.206% 2027 Washington Mutual Capital I Subordinated Capital Income Securities 8.375% 2027 22,000 20,285 .44 Skandinaviska Enskilda Banken AB: (2) 6.50% (undated) (1) 17,500 17,099 7.50% (undated) 23,000 21,620 .41 NB Capital Corp. 8.35% exchangeable 1,200,000 shares 28,440 depositary shares National Bank of Canada 6.65% (undated)(2) 5,000 3,638 .34 Fuji JGB Investment LLC, Series A, 9.87% noncumulative 30,500 29,252 .31 preferred (undated)(1)(2) Bank of Scotland 7.00% (undated) (1) (2) 30,000 28,162 .30 Tokai Preferred Capital Co. LLC, Series A, 9.98%/11.091% noncumulative preferred (undated) (1)(2) 26,500 25,427 .27 GS Escrow Corp. 7.125% 2005 12,000 11,403 Golden State Holdings, Inc. 7.00% 2003 10,450 10,148 .23 AB Spintab: 6.00% 2009 SKr 23,000 2,526 6.80% (undated) (1) (2) $ 6,500 6,477 7.50% (undated) (1) (2) 11,000 10,739 .21 Canadian Imperial Bank of Commerce 7.00% Eurodollar Note (undated) (2) 25,000 19,568 .21 National Westminster Bank PLC 16,000 16,002 .17 7.75% (undated)(2) Regional Diversified Funding Ltd. 13,250 13,162 .14 9.25% 2030 (1) Bayerische Vereinsbank 5.50% 2008 EURO 13,271 12,638 .13 Standard Chartered Bank: (2) 6.65% 2049 $ 5,000 3,173 6.813% Eurodollar Note (undated) 15,000 9,423 .13 UBS Preferred Funding Trust I, 11,000 11,568 .12 8.622% (undated) IBJ Preferred Capital Co. LLC, Series A, 8.79% noncumulative preferred (undated) (1) (2) 11,950 10,874 .11 Bank of America Corp. 7.80% 2010 10,000 10,407 .11 Imperial Capital Trust I, Imperial Bancorp 9.98% 2026 10,200 10,251 .11 BANK ONE CORP. 7.875% 2010 3,000 3,125 Bank One Texas NA 6.25% 2008 7,250 6,905 .11 Allgemeine Hypotheken Bank AG 5.00% 2009 EURO 11,000 9,996 .11 Bankers Trust New York Corp. 6.70% 2007 $ 10,000 9,859 .10 Allfirst Preferred Capital Trust 10,000 9,723 .10 8.298% 2029 (2) Abbey National PLC 7.35% (undated) (2) 9,500 9,286 .10 Barclays Bank PLC 8.55% 2049 (1) (2) 8,000 8,409 .09 Royal Bank of Scotland Group PLC Pound 4,900 8,036 .08 8.375% 2007 BankUnited Capital Trust, BankUnited Financial Corp., 10.25% 2026 $ 10,000 7,750 .08 Bank of Nova Scotia 7.00% Eurodollar 10,000 7,716 .08 Note (undated)(2) Komercni Finance BV: (2) 9.00% 2008 3,100 2,984 9.00%/10.75% 2008 (1) 4,900 4,716 .08 Riggs Capital Trust II 8.875% 2027 7,500 4,693 Riggs National Corp. 8.625% 2026 4,400 2,671 .08 Lloyds Bank (#2) 6.938% (undated) (2) 8,000 6,489 .07 BCI U.S. Funding Trust I 6,000 5,686 .06 8.01% (undated) (1)(2) Hypothekenbank in Essen AG 5.25% 2008 EURO 6,000 5,622 .06 Allied Irish Banks Ltd. $ 7,000 5,436 .06 7.313% (undated) (2) Halifax Building Society 8.75% 2006 Pound 3,000 4,974 .05 Rheinische Hypothekenbank Eurobond EURO 5,000 4,373 .05 4.25% 2008 Bergen Bank 6.938% (undated) (2) $ 5,000 3,680 .04 Bay View Capital 9.125% 2007 5,500 3,630 .04 Christiana Bank Og Kreditkasse 4,000 3,061 .03 6.938% (undated)(2) Banco General, SA 7.70% 2002 (1) 500 485 .01 809,550 8.56 WIRELESS TELECOMMUNICATION SERVICES-7.23% Nextel Communications, Inc.: 0%/9.75% 2007 (3) 64,450 48,337 0%/10.65% 2007 (3) 9,000 7,042 0%/9.95% 2008 (3) 75,825 55,731 12.00% 2008 5,000 5,300 5.25% convertible senior notes 2010 3,000 2,174 Series E, 11.25% exchangeable preferred, redeemable 2010 (USA) (5) 584 shares 491 McCaw International, Ltd. $ 34,350 21,297 0%/13.00% 2007 (3) Nextel International, Inc.: 0%/12.125% 2008 (3) 15,500 8,215 12.75% 2010 (1) 6,000 4,815 Nextel Partners, Inc.: 0%/14.00% 2009 (3) 21,814 14,397 11.00% 2010 (1) 12,000 11,520 11.00% 2010 10,400 9,984 2.00 VoiceStream Wireless Corp.: 10.375% 2009 66,279 71,415 0%/11.875% 2009 (3) 17,000 12,240 Omnipoint Corp.: 11.50% 2009 (1) (6) 13,650 14,537 7.00% convertible preferred 90,000 shares 13,500 1.18 Crown Castle International Corp.: 12.75% Senior Exchangeable $ 34,746 34,746 Preferred 2010(4)(5) 10.75% 2011 17,500 17,938 0%/10.625% 2007 (3) 18,500 14,985 0%/11.25% 2011 (3) 7,500 5,175 .77 Clearnet Communications Inc.: 8.55% 2007 (1) (2) (6) 15,000 15,512 0%/11.75% 2007 (3) C$ 44,575 26,618 0%/10.40% 2008 (3) 53,500 29,984 .76 Dobson Communications Corp.: 12.25% exchangeable preferred, 25,104 shares 21,589 redeemable 2008(4)(5) 10.875% 2010 $ 17,500 17,237 .41 Vodafone Group PLC (formerly Vodafone AirTouch): 7.625% 2005 1,100 1,134 7.75% 2010 31,125 32,441 .36 SpectraSite Holdings, Inc., Series B: 0%/12.00% 2008 (3) 12,500 7,250 0%/11.25% 2009 (3) 6,750 3,696 12.50% 2010 (1) 16,750 16,708 0%/12.875% 2010 (3) 11,000 5,665 .35 Leap Wireless International, Inc., units: (6)(7) 12.50% 2010 23,549 13,880 0%/14.50% 2010 (3) 65,065 13,650 .29 PageMart Wireless, Inc.: 15.00% 2005 $ 12,000 8,880 0%/11.25% 2008 (3) 40,500 11,948 .22 Centennial Cellular Corp. 10.75% 2008 19,275 18,119 .19 Comunicacion Celular SA, units, 17,568 13,735 .15 TeleCorp PCS, Inc.: 0%/11.625% 2009 (3) 9,000 6,120 10.625% 2010 2,000 2,020 .09 Dobson/Sygnet Communications Co. 7,500 7,425 .08 12.25% 2008 PanAmSat Corp.: 6.00% 2003 2,400 2,319 6.125% 2005 5,250 4,920 .08 Cellco Finance NV: 12.75% 2005 (2) 6,000 5,655 15.00% 2005 500 489 .06 Mannesmann Financials 4.75% 2009 EURO 6,000 5,121 .05 SBA Communications Corp. $ 6,525 5,024 .05 0%/12.00% 2008 (3) Price Communications Wireless, Inc., Series B, 9.125% 2006 4,625 4,810 .05 PTC International Finance BV 5,950 4,358 .05 0%/10.75% 2007 (3) Telesystem International Wireless Inc. 0%/13.25% 2007 (3) 6,000 2,700 .03 Teletrac, Inc.: (1) (5) (6) units, 9.00% 2004 (7) 1,351 737 12.00% 2004 99 79 .01 683,662 7.23 MEDIA - 5.25% Charter Communications Holdings, LLC: 8.25% 2007 9,000 8,190 10.25% 2010 7,000 6,755 0%/11.75% 2010 (3) 5,600 3,220 0%/9.92% 2011 (3) 68,250 39,585 Avalon Cable Holdings LLC 5,625 3,783 .65 Fox/Liberty Networks, LLC, FLN Finance, Inc.: 0%/9.75% 2007 (3) 36,325 31,875 8.875% 2007 29,050 29,558 .65 NTL Inc.: 12.75% 2005 17,750 17,040 Series B, 10.00% 2007 10,000 8,600 0%/9.75% 2008 (3) 7,250 4,132 NTL Communications Corp.: 11.50% 2008 5,000 4,400 0%/11.50% 2009 (3) EURO 15,000 7,324 11.875% 2010 (1) $ 3,000 2,655 .47 British Sky Broadcasting Group 29,000 27,479 .29 PLC 8.20% 2009 Fox Family Worldwide, Inc.: 9.25% 2007 5,095 5,146 0%/10.25% 2007 (3) 21,407 17,233 .24 Young Broadcasting Inc.: 11.75% 2004 750 757 10.125% 2005 5,500 5,404 9.00% 2006 2,250 2,115 Series B, 8.75% 2007 14,250 13,181 .23 Viacom Inc. 7.70% 2010 19,750 20,684 .22 Telemundo Holdings, Inc., Series B, 0%/11.50% 2008 (3) 25,375 17,128 .18 Cox Radio, Inc. 6.375% 2005 18,000 17,284 .18 Liberty Media Corp.: 7.875% 2029 16,000 15,769 8.50% 2029 1,000 933 .18 Cablevision Industries Corp.: 8.125% 2009 9,250 9,427 9.875% 2013 2,000 2,080 CSC Holdings, Inc., Series B, 8.125% 2009 5,000 5,018 .17 Chancellor Media Corp. of Los Angeles: Series B, 8.75% 2007 8,625 8,841 8.00% 2008 5,000 5,000 .15 American Media Operation 10.25% 2009 11,820 11,524 .12 United Pan-Europe Communications NV: 10.875% 2009 10,750 7,014 11.50% 2010 4,425 2,921 10.875% 2009 EURO 2,500 1,482 .12 TeleWest PLC: 9.625% 2006 $ 4,700 4,148 11.00% 2007 8,000 7,080 .12 Cumulus Media Inc.: 13.75% preferred 2009 (USA) (5) 7,769 shares 5,438 10.375% 2008 $ 6,750 5,434 .12 Citadel Broadcasting Co.: 10.25% 2007 1,750 1,776 9.25% 2008 6,500 6,272 Series B, 13.25% exchangeable preferred, redeemable 2009 (5) 24,122 shares 2,412 .11 Lenfest Communications, Inc. 7.625% 2008 6,750 7,004 Comcast Cable Communications, 3,500 3,363 .11 Inc. 6.20% 2008 Adelphia Communications Corp.: 10.875% 2010 500 462 Series B, 9.875% 2007 5,000 4,350 8.375% 2008 950 912 Century Communications Corp. 8.75% 2007 2,200 1,914 FrontierVision 11.00% 2006 2,500 2,400 .11 Antenna TV SA 9.00% 2007 9,750 8,726 .09 A. H. Belo Corp. 7.75% 2027 8,000 7,402 .08 Radio One 6.50% TIDES 10 shares 7,334 .08 convertible preferred (1) Multicanal Participacoes SA, Series B, 12.625% 2004 6,875 7,081 .08 TransWestern Publishing Co. 7,250 7,033 .07 LLC 9.625% 2007 ACME Television, LLC, Series B, 8,000 6,920 .07 10.875% 2004 RBS Participacoes SA 11.00% 2007 (1) 7,250 6,036 .06 Hearst-Argyle Television, Inc. 7.00% 2018 6,050 5,219 .06 Sun Media Corp. 9.50% 2007 5,139 4,959 .05 Globo Comunicacoes e Participacoes Ltd.: 10.50% 2006 (1) 2,860 2,567 10.50% 2006 690 619 .03 V2 Music Holding, PLC 6.50% (2012)(1)(6) 11,633 3,141 .03 STC Broadcasting, Inc. 11.00% 2007 3,250 3,120 .03 Carmike Cinemas, Inc., Series B, 11,425 2,971 .03 9.375% 2009 (8) Gray Communications Systems, 2,000 1,980 .02 Inc. 10.625% 2006 News America Holdings Inc. 8.625% 2014 A$ 3,250 1,818 .02 TVN Entertainment Corp., Series B, units, 14.00% 2008 (6) (7) $ 9,760 1,365 .01 Time Warner Companies, Inc.: 9.15% 2023 500 579 6.95% 2028 500 468 .01 Big City Radio, Inc. 0%/11.25% 2005 (3) 1,000 450 .01 Muzak Holdings LLC 0%/13.00% 2010 (3) 250 133 - 496,423 5.25 DIVERSIFIED TELECOMMUNICATION SERVICES - 2.51% Bell Atlantic Financial Services, Inc., senior exchangeable notes: 5.75% 2003 (1) 30,000 29,289 5.75% 2003 5,750 5,614 .37 Allegiance Telecom, Inc.: 0%/11.75% 2008 (3) 20,000 12,200 12.875% 2008 10,610 10,186 .24 Ntelos Inc. 13.00% 2010 (6) 30,125 21,939 .23 COLT Telecom Group PLC: 0%/12.00% 2006 (3) 5,250 4,725 8.875% 2007 DM 9,500 4,424 7.625% 2008 22,825 10,027 .20 Comcast UK Cable Partners Ltd. $ 22,000 18,920 .20 0%/11.20% 2007(3) TCI Communications, Inc.: 8.00% 2005 10,000 10,262 8.75% 2015 5,000 5,350 .17 Qwest Communications International Inc.:(3) 0%/9.47% 2007 10,000 9,001 0%/8.29% 2008 7,500 6,366 .16 Verizon Global Funding Inc.: (1) 7.25% 2010 5,000 5,086 7.75% 2030 9,000 9,224 .15 VersaTel Telecom International NV: 4.00% 2005 EURO 7,825 4,078 13.25% 2008 $ 3,000 1,920 11.875% 2009 EURO 3,875 2,438 11.25% 2010 8,750 5,341 .15 Deutsche Telecom International Finance BV 8.00% 2010 $ 13,000 13,258 .14 Viatel, Inc.: 11.15% 2008 DM 7,000 1,042 11.25% 2008 $ 6,775 2,033 0%/12.40% 2008 (3) DM 3,500 302 0%/12.50% 2008 (3) $ 35,875 6,458 11.50% 2009 1,750 525 .11 CenturyTel, Inc., Series H, 8.375% 2010 9,150 9,547 .10 Maxcom Telecomunicaciones, SA de SV, units, 13.75% 2007 (6) (7) 15,340 7,394 .08 Mpower Holding Corp. 13.00% 2010 11,875 5,344 .06 NEXTLINK Communications, Inc.: 12.50% 2006 3,000 2,670 0%/12.125% 2009 (3) 3,975 1,769 14.00% preferred 2009 (4) (5) 19,607 shares 588 .05 Level 3 Communications, Inc. 11.25% 2010 EURO 4,750 3,724 .04 Hyperion Telecommunications, Inc., Series B, 0%/13.00% 2003 (3) $ 4,250 3,018 .03 BellSouth Capital Funding Corp., 2,000 2,118 .02 7.75% 2010 IMPSAT Corp. 12.375% 2008 2,500 1,431 .01 237,611 2.51 INSURANCE - 2.27% Allstate Corp.: 7.20% 2009 43,000 44,382 6.75% 2018 16,000 14,826 .63 ReliaStar Financial Corp.: 8.625% 2005 5,000 5,351 8.00% 2006 23,250 24,472 ING Capital Funding Trust III 13,750 14,017 .47 8.439% (undated)(2) Royal & Sun Alliance Insurance 37,250 37,387 .40 Group 8.95% 2029 Conseco, Inc. 9.00% 2006 2,000 1,410 Conseco Financing Trust II, Capital Trust (TRUPS) 8.70% 2026 (11) 41,600 15,392 Conseco Financing Trust III 8.796% 2027 9,275 3,432 Green Tree Financial Corp. 6.50% 2002 9,000 6,210 .28 Jefferson-Pilot Capital Trust 8,500 7,910 8.285% 2046 (1) Jefferson Pilot Corp. 8.14% 2046 (1) 6,000 5,581 .14 Equitable Life Assurance 11,500 11,576 .12 Society USA 6.95% 2005(1) Aflac Inc. 6.50% 2009 8,750 8,498 .09 Lindsey Morden Group Inc., C$ 13,000 7,472 .08 Series B, 7.00% 2008 AEGON NV 9.375% 2008 $ 3,500 3,917 .04 Lincoln National Corp. 7.00% 2018 1,400 1,287 .01 American General Corp. 6.625% 2029 1,285 1,152 .01 214,272 2.27 HOTELS, RESTAURANTS & LEISURE - 1.62% Mirage Resorts, Inc.: 6.625% 2005 6,000 5,773 6.75% 2008 6,750 6,296 8.50% 2010 14,000 14,376 .28 Premier Parks Inc.: 9.25% 2006 8,375 7,956 9.75% 2007 3,875 3,798 9.75% 2007 1,250 1,263 0%/10.00% 2008 (3) 8,250 5,693 Six Flags Entertainment Corp. 8.875% 2006 5,000 4,775 .25 Royal Caribbean Cruises Ltd.: 7.00% 2007 16,350 15,014 6.75% 2008 9,383 8,425 .25 Boyd Gaming Corp.: 9.25% 2003 13,475 13,071 9.50% 2007 5,500 5,005 .19 William Hill Finance 10.625% 2008 Pound 7,243 11,198 .12 International Game Technology: 7.875% 2004 $ 8,500 8,415 8.375% 2009 2,000 1,980 .11 KSL Recreation Group, Inc. 10.25% 2007 7,100 6,887 .07 Station Casinos Inc. 9.875% 2010 5,650 5,791 .06 Hollywood Casino Corp. 11.25% 2007 5,000 5,175 .06 Harrah's Operating Co., Inc. 7.875% 2005 5,000 4,950 .06 Mandalay Resort Group 10.25% 2007 5,000 4,937 .05 Horseshoe Gaming Holding Corp., Series B: 9.375% 2007 2,000 2,000 8.625% 2009 3,000 2,895 .05 Jupiters Ltd. 8.50% 2006 3,000 2,910 .03 AMF Bowling Worldwide, Inc.: (8) 0%/12.25% 2006 (3) 13,550 1,795 10.875% 2006 3,239 453 0% convertible debentures 2018 (1) 11,084 3 .02 Carnival Corp. 6.15% 2008 2,000 1,869 .02 152,703 1.62 COMMERCIAL SERVICES & SUPPLIES - 1.53% USA Waste Services, Inc.: 4.00% 2002 24,000 22,980 6.50% 2002 2,000 1,961 7.00% 2004 5,500 5,353 7.125% 2007 7,505 7,218 6.125% 2011 (2) 8,428 8,371 Waste Management, Inc.: 6.00% 2001 750 746 7.70% 2002 3,500 3,516 6.375% 2003 1,000 968 7.00% 2006 14,750 14,320 6.875% 2009 5,000 4,701 .74 Allied Waste North America, Inc., Series B, 10.00% 2009 43,175 40,369 .43 Sotheby's Holdings, Inc. 6.875% 2009 (6) 20,000 14,354 .15 KinderCare Learning Centers, Inc., Series B, 9.50% 2009 7,650 6,809 .07 Protection One Alarm Monitoring, Inc.: 6.75% convertible debentures 2003 5,000 3,000 13.625% 2005 (2) 3,560 2,421 .06 Cendant Corp. 7.75% 2003 5,000 4,926 .05 Stericycle, Inc., Series B, 12.375% 2009 2,250 2,320 .03 144,333 1.53 ELECTRIC UTILITIES - 1.44% Israel Electric Corp. Ltd.: (1) 7.75% 2009 26,125 25,944 7.70% 2018 8,500 7,768 .74 7.875% 2026 15,000 13,432 7.75% 2027 13,000 11,463 8.10% 2096 14,405 11,046 AES Drax Holdings Ltd. 10.41% 2020 (1) 34,750 37,204 .39 Edison Mission Holdings Co. 8.734% 2026 12,200 11,946 Edison Mission Energy 7.73% 2009 7,000 5,961 Midwest Generation LLC Inc. 8.56% 2016 (1) 8,000 7,387 .27 AES Ironwood, LLC 8.857% 2025 3,500 3,463 .04 Compania de Transporte de Energia de Alta Transener SA, 9.25% 2008 (1) 530 431 .00 136,045 1.44 CONSUMER & BUSINESS FINANCE - 1.44% MBNA Corp.: Capital A, Series A, 8.278% 2026 24,000 18,405 Capital B, Series B, 7.559% 2027 (2) 32,800 27,675 .49 Household Finance Corp.: 8.00% 2005 6,000 6,292 7.875% 2007 20,000 21,017 6.40% 2008 5,500 5,245 5.875% 2009 2,150 1,976 .37 Capital One Financial Corp. 7.25% 2006 13,425 12,493 Capital One Capital I 8.309% 2027 (1)(2) 10,000 7,994 Capital One Bank 8.25% 2005 4,500 4,565 .05 Advanta Corp.: Series B, 7.00% 2001 4,000 3,900 Series D, 6.833% 2002 5,000 4,582 Series D, 6.925% 2002 2,500 2,327 6.925% 2002 2,000 1,862 Advanta Capital Trust I 8.99% 2026 11,000 5,610 .19 Providian Financial Corp. 9.525% 2027(1) 16,750 10,873 .11 134,816 1.44 OIL & GAS - 1.28% Clark Refining Term Loan 21,000 17,157 9.50% 2004 (2) (6) Clark Oil & Refining Corp. 9.50% 2004 7,825 6,514 Clark Refining & Marketing, 2,365 1,797 Inc. 8.375% 2007 Premcor USA Inc., Series B, 10.875% 2005 9,000 4,860 .32 PDVSA Finance Ltd.: 8.75% 2004 1,628 1,645 9.75% 2010 19,250 19,828 7.40% 2016 9,700 8,081 .31 Petrozuata Finance, Inc.: (1) Series A, 7.63% 2009 21,250 18,169 Series B, 8.22% 2017 9,885 7,537 .27 Pogo Producing Co. 10.375% 2009 14,500 15,116 .16 Pemex Finance Ltd.: 8.875% 2010 7,000 7,205 9.03% 2011 2,000 2,113 .10 OXYMAR 7.50% 2016 (1) 8,500 6,323 .07 Cross Timbers Oil Co. 8.75% 2009 4,750 4,798 .05 121,143 1.28 REAL ESTATE - 1.24% Irvine Co. 7.46% 2006 (1) (6) 15,000 14,566 Irvine Apartment Communities, 5,000 4,714 .20 LP 7.00% 2007 CarrAmerica Realty Corp.: Series B, 8.57% cumulative 500,100 shares 10,299 redeemable preferred Series C, 8.55% cumulative 413,100 8,623 .20 redeemable preferred Chevy Chase Preferred Capital Corp. 242,900 12,661 .13 10.375% (USA) ERP Operating LP: 7.95% 2002 $ 3,750 3,795 7.57% 2026 8,000 8,210 .13 EOP Operating LP 6.75% 2008 11,500 11,145 .12 ProLogis Trust, Series D, 7.92% preferred 380,000 shares 7,624 .08 FelCor Suites LP 7.375% 2004 $ 6,250 5,925 .06 Nationwide Health Properties, Inc., Series A, 7.677% preferred cumulative 100,000 shares 5,700 .06 step-up premium rate Duke-Weeks Realty Corp., Series B, 7.99% preferred cumulative 150,000 5,573 .06 step-up premium rate Simon DeBartolo Group, Inc., Series C, 7.89% preferred cumulative 150,000 5,363 .06 step-up premium rate IAC Capital Trust, Series A, 220,000 4,771 .05 8.25% TOPRS preferred Archstone Communities Trust, Series C, 8.625% convertible preferred 200,000 4,650 .05 New Plan Realty Trust, Series D, 7.80% preferred cumulative 112,500 3,713 .04 step-up premium rate 117,332 1.24 HEALTH CARE PROVIDERS & SERVICES - 1.23% Columbia/HCA Healthcare Corp.: 7.60% 2001 $ 1,750 1,747 7.15% 2004 1,500 1,464 6.91% 2005 22,910 22,165 7.00% 2007 12,750 12,176 8.85% 2007 24,105 24,888 9.00% 2014 5,650 5,805 7.69% 2025 5,000 4,419 8.70% 2010 4,250 4,346 .81 Concentra Operating Corp. 13.00% 2009 15,500 13,485 .14 UnitedHealth Group Inc. 7.50% 2005 12,300 12,708 .14 Paracelsus Healthcare Corp. 10.00% 2006(8) 20,575 8,153 .09 Omnicare, Inc. 5.00% convertible 5,150 4,135 .04 debentures 2007 Integrated Health Services, Inc.: (6)(8) 5.75% convertible debentures 2001 12,750 1 10.25% 2006 (2) 9,350 94 Series A, 9.50% 2007 12,175 122 Series A, 9.25% 2008 32,657 327 .01 Mariner Health Group, Inc. 7,300 73 - 9.50% 2006 (6)(8) 116,108 1.23 MULTILINE RETAIL - 1.17% J. C. Penney Co., Inc.: 7.375% 2004 5,000 3,450 7.05% 2005 14,000 8,680 6.50% 2007 3,750 2,025 7.60% 2007 19,000 11,400 7.625% 2007 18,055 7,233 7.375% 2008 4,975 2,736 6.875% 2015 1,500 773 7.65% 2016 12,800 6,592 7.95% 2017 38,325 19,737 8.25% 2022 4,000 1,800 7.125% 2023 1,250 600 .69 Kmart Corp. 9.78% 2020 12,250 8,993 DR Securitized Lease Trust, pass-through certificates, Series 1994 K-2, 8,000 5,880 9.35% 2019 (11) Kmart Financing I Trust 7.75% convertible preferred 2016 218 shares 5,805 .22 Dillard's, Inc.: 5.79% 2001 $ 4,500 4,292 6.125% 2003 1,885 1,552 .20 6.43% 2004 5,000 3,898 6.17% REPS 2011 (2) 7,500 7,281 7.13% 2018 2,750 1,767 Saks Inc.: 7.00% 2004 5,000 3,600 7.25% 2004 3,500 2,450 .06 110,544 1.17 METALS & MINING - 0.99% Freeport-McMoRan Copper & Gold Inc.: 7.50% 2006 34,000 20,145 7.20% 2026 24,000 15,222 .38 BHP Finance Ltd.: 6.69% 2006 10,000 10,022 8.50% 2012 20,000 22,033 .34 Inco Ltd. 9.60% 2022 16,000 16,126 .17 Doe Run Resources Corp., Series B: 11.25% 2005 15,325 7,203 13.07% 2003 (2) 3,000 1,410 .09 Kaiser Aluminum & Chemical Corp. 2,000 1,360 .01 12.75% 2003 93,521 .99 CONTAINERS & PACKAGING - 0.85% Container Corp. of America: 10.75% 2002 4,800 4,824 9.75% 2003 30,865 30,826 Series A, 11.25% 2004 8,000 7,980 .46 Printpack, Inc.: Series B, 9.875% 2004 8,950 8,883 10.625% 2006 11,590 10,779 .21 Tekni-Plex Inc., Series B, 12.75% 2010 7,000 5,635 .06 Graham Packaging Co.: 8.75% 2008 4,625 2,775 0%/10.75% 2009 (3) 7,975 2,552 .06 Packaging Corp. of America, Series B, 3,250 3,364 .03 9.625% 2009 Anchor Glass Container Corp. 11.25% 2005 4,000 2,820 .03 80,438 .85 AUTOMOBILES - 0.84% Ford Motor Credit Co.: 5.25% 2008 DM 32,000 14,595 5.80% 2009 $ 47,000 42,349 7.45% 2031 2,000 1,851 .62 General Motors Acceptance Corp.: 0.614% 2002 (2) Yen 800,000 6,979 5.85% 2009 $ 15,000 13,747 .22 79,521 .84 PAPER & FOREST PRODUCTS - 0.77% Scotia Pacific Co. LLC, Series B: Class A-2, 7.11% 2028 31,400 25,905 Class A-1, 6.55% 2028 1,276 1,242 Class A-3, 7.71% 2028 10,143 7,423 .37 Kappa Beheer BV: 0%/12.50% 2009 (3) EURO 15,755 10,134 10.625% 2009 5,500 5,294 .16 Grupo Industrial Durango, SA de CV: 12.625% 2003 $7625 7,606 12.00% 2001 3,000 3,038 .11 Indah Kiat Finance Mauritius Ltd.: 10.00% 2007 12,075 4,770 11.875% 2002 3,800 2,603 .08 Pindo Deli Finance Mauritius Ltd.: 10.25% 2002 6,000 3,540 10.75% 2007 3,625 1,378 .05 APP International Finance Co. 275 116 .00 BV 11.75% 2005 73,049 .77 SEMICONDUCTOR EQUIPMENT & PRODUCTS-0.74% Hyundai Semiconductor America, Inc.: (1) 8.625% 2007 22,600 17,897 8.25% 2004 13,895 12,030 8.25% 2004 870 753 .33 Zilog, Inc. 9.50% 2005 24,650 13,558 .14 Micron Technology, Inc. 6.50% 2005 (1) 11,000 9,240 .10 Adaptec, Inc. 4.75% convertible subordinated notes 2004 10,000 7,963 .09 Conexant Systems, Inc. 4.00% convertible subordinated notes 2007 14,700 7,957 .08 69,398 .74 AIR FREIGHT & COURIERS - 0.62% Atlas Air, Inc.: (11) Pass-through certificates, Series 2000-1, Class B, 9.057% 2017 4,000 4,242 Pass-through Trusts, Series 1998-1, Class A, 7.38% 2019 41,572 40,862 Series 1999-1, Class A-1, 7.20% 2020 2,552 2,410 Pass-through certificates, Series 2000-1, Class A, 8.707% 2021 4,000 4,430 .55 Eletson Holdings Inc. 9.25% 2003 6,750 6,548 .07 58,492 .62 DIVERSIFIED FINANCIALS - .60% Associates Corp. of North America: 5.85% 2001 2,500 2,500 5.80% 2004 15,000 14,745 .18 Heller Financial, Inc. 6.00% 2004 12,500 12,185 .13 CEI Citicorp Holdings SA 11.25% 2007 ARP 9,500 9,301 .10 J.P. Morgan & Co. Inc., Series A, 8.08% 2012 (2) $ 10,000 8,855 .10 AT&T Capital Corp. 6.60% 2005 9,000 8,794 .09 56,380 .60 FOOD PRODUCTS - 0.45% Nabisco, Inc.: 7.05% 2007 8,500 8,361 7.55% 2015 9,000 8,722 6.125% 2033 (2) 2,500 2,454 6.375% 2035 (2) 14,900 14,452 .36 Gruma, SA de CV 7.625% 2007 8,000 6,180 .07 New World Pasta Co. 9.25% 2009 3,400 1,445 .01 Fage Dairy Industry SA 9.00% 2007 1,750 1,278 .01 42,892 .45 INDUSTRIAL CONGLOMERATES - 0.45% Swire Pacific Capital Ltd. 8.84% cumulative guaranteed perpetual capital securities(1) 1,670,000 shares 37,575 Swire Pacific Offshore Financing Ltd. 9.33% cumulative guaranteed perpetual preferred capital securities (1) 230,000 5,261 .45 42,836 .45 TEXTILES & APPAREL - 0.44% VF Corp. 8.5% 2010 (1) $ 36,000 37,531 .40 Levi Strauss & Co 6.80% 2003 4,850 4,098 .04 41,629 .44 AUTO COMPONENTS - 0.30% TRW Inc.: 8.75% 2006 10,000 9,962 7.125% 2009 10,500 9,376 .20 Delphi Automotive Systems Corp. 6.50% 2009 5,000 4,618 .05 Cooper Tire & Rubber Co. 7.25% 2002 4,000 3,830 .04 Tenneco Automotive Inc. 11.625% 2009 2,000 945 .01 28,731 .30 GAS UTILITIES - 0.26% NiSource Finance Corp.: (1) 7.625% 2005 500 515 7.875% 2010 15,100 15,794 .17 KeySpan Corp. 8.00% 2030 7,500 8,074 .09 24,383 .26 LEISURE EQUIPMENT & PRODUCTS - 0.25% Hasbro, Inc.: 7.95% 2003 13,500 11,610 8.50% 2006 15,315 12,099 .25 23,709 .25 AEROSPACE & DEFENSE - 0.24% Earthwatch Inc.: 0%/12.50% 2005 (1) (6) 17,280 13,036 Series B, 7.00% convertible preferred 2009 (4) (5) 1,028,663 shares 2,462 Series C, 8.50% convertible preferred 2099 (4) (5) 88,869 1 .16 Loral Orion Network Systems, Inc. 11.25% 2007 $ 20,760 7,474 .08 22,973 .24 CHEMICALS - 0.22% Equistar Chemicals LP: 6.50% 2006 7,800 6,910 8.75% 2009 5,000 4,585 .12 Reliance Industries Ltd.: 10.50% 2046 (1) 250 223 10.25% 2097 (1) 10,750 8,928 .10 20,646 .22 BEVERAGES - 0.20% Canandaigua Wine Co., Inc.: Series C, 8.75% 2003 8.75% 2003 7,500 7,434 Delta Beverage Group, Inc. 9.75% 2003 6,650 6,592 .15 4,750 4,982 .05 19,008 .20 PHARMACEUTICALS - 0.19% Lilly Del Mar Inc. 7.95% 2029 (1) (2) 18,000 18,021 .19 MACHINERY - 0.19% John Deere Capital Corp. 8.625% 2019 16,850 17,528 .19 ENERGY EQUIPMENT & SERVICES - 0.16% Colonial Pipeline Co. 7.75% 2010 (1) 14,650 15,017 .16 CONSTRUCTION & ENGINEERING - 0.13% McDermott Inc. 9.375% 2002 15,000 12,600 .13 FOOD & DRUG RETAILING - 0.12% Friendly Ice Cream Corp. 10.50% 2007 10,340 6,101 .06 Fred Meyer, Inc. 7.45% 2008 5,500 5,602 .06 11,703 .12 HOUSEHOLD DURABLES - 0.10% Salton/Maxim Housewares, Inc. 10.75% 2005 8,250 8,003 .08 Boyds Collection, Ltd., Series B, 9.00% 2008 1,806 1,707 .02 9,710 .10 INTERNET SOFTWARE & SERVICES - 0.10% GT Group Telecom Inc., units, 0%/13.25% 2010 (3) (6) (7) 13,864 5,124 Exodus Communications Inc. 11.625% 2010(1) 5,000 4,575 .10 9,699 .10 SPECIALTY RETAIL - 0.09% Sunglass Hut International Ltd. 5.25% convertible debentures 2003 11,150 8,223 .09 ROAD & RAIL - 0.06% Union Pacific Capital Trust 6.25% TIDES convertible preferred (1) 111,100 shares 5,111 .06 COMPUTERS & PERIPHERALS - 0.04% First International Computer Corp. 1.00% $ 3,000 3,510 .04 convertible debentures 2004 (1) HOUSEHOLD PRODUCTS - 0.02% Copamex Industrias, SA de CV, Series B, 11.375% 2004 1,950 1,916 .02 ELECTRICAL EQUIPMENT - 0.01% Actuant Corp. 13.00% 2009 1,100 1,007 .01 MORTGAGE BACKED OBLIGATIONS (11) PRIVATE ISSUE COMMERCIAL MORTGAGE BACKED SECURITIES-5.32% DLJ Commercial Mortgage Corp.: Series 1997-CF1, Class A1A, 7.40% 2006(1) 4,865 5,024 Series 1998-CF1, Class A-1B, 6.41% 2008 10,000 10,062 Series 1996-CF2, Class A1B, 7.29% 2021 (1) 11,200 11,640 Series 1995-CF2, Class A1B, 6.85% 2027 (1) 35,845 36,563 Series 1998-CF1, Class A-1A, 6.14% 2031 19,089 19,104 Series 1998-CF2, Class A-1B, 6.24% 2031 10,000 9,920 .98 GMAC Commercial Mortgage Securities Inc.: Series 1997-C1, Class A1, 6.83% 2003 5,432 5,468 Series 1997-C1, Class A3, 6.869% 2007 20,000 20,498 Series 1997-C2, Class C, 6.50% 2008 9,000 8,870 Series 1997-C1, Class D, 6.997% 2008 8,300 8,387 Series 1997-C2, Class E, 7.624% 2011 27,703 25,694 Series 1997-C2, Class C, 6.91% 2029 8,900 8,674 .82 Morgan Stanley Capital I Inc.: Series 1998-HF1, Class A-1, 6.19% 2007 22,222 22,276 Series 1998-WF2, Class A-1, 6.34% 2030 8,351 8,427 Series 1998-HF2, Class A-2, 6.48% 2030 17,000 17,153 Series 1999-FNV1, Class A-1, 6.12% 2032 8,857 8,853 Series 1999-FNV1, Class A-2, 6.53% 2031 10,000 10,107 .71 Chase Commercial Mortgage Securities Corp.: Series 1996-1, Class A1, 7.60% 2005 2,654 2,743 Series 1998-1, Class A1, 6.34% 2030 13,514 13,610 Series 1998-2, Class A-2, 6.39% 2030 8,000 8,035 Series 1998-2, Class E, 6.39% 2030 10,000 9,271 Series 1999-1, Class B, 7.619% 2031 7,000 7,435 Series 1999-1, Class C, 7.625% 2031 5,000 5,249 Series 2000-1, Class A-1, 7.656% 2032 9,718 10,297 .60 L.A. Arena Funding, LLC, Series 1, Class A, 7.656% 2026 (1) 35,375 35,745 .38 Merrill Lynch Mortgage Investors, Inc., pass-through certificates: (2) Series 1995-C2, Class D, 7.784% 2021 382 381 Series 1995-C3, Class A-1, 6.771% 2025 54 54 Series 1995-C3, Class A-3, 7.071% 2025 25,555 26,280 Series 1996-C2, Class A-1, 6.69% 2028 7,433 7,491 .36 GS Mortgage Securities Corp. II, pass-through certificates, Series 1998-C1: (2) Class D, 7.242% 2030 3,750 3,672 Class E, 7.242% 2030 31,076 29,356 .35 Bear Stearns Commercial Mortgage Securities Inc.: Series 1999-WF2, Class X, interest only, .26% 2019 (2) 310,442 6,144 Series 1998-C1, Class A-1, 6.34% 2030 7,207 7,258 Series 1999-C1, Class X, interest only, 1.053% 2031 (2) 169,643 10,680 .25 Prudential Securities Secured Financing Corp., Series 1999-NRF1, Class C, 6.746% 2009 18,000 17,912 .19 Commercial Mortgage, pass-through certificate, Series 2000-FL3A, Class D, 8.04% 2011 (1)(2) 13,776 13,755 .14 Commercial Mortgage Acceptance Corp.: Series 1998-C1, Class A-1, 6.23% 2007 9,011 9,038 Series 1998-C2, Class A-1, 5.80% 2030 3,937 3,902 .14 Starwood Asset Receivables Trust, Series 2000-1, Class D, 8.09% 2022 (1) (2) 10,000 10,023 .11 Nomura Asset Securities Corp., Series 1998-D6, Class A-A1, 6.28% 2030 9,292 9,341 .10 Mortgage Capital Funding, Inc., Series 1998-MC1, Class A-1 6.417% 2030 6,932 6,989 .07 Asset Securitization Corp.: Series 1996-D3, Class A-1B, 7.21% 2026 3,000 3,080 Series 1997-D4, Class A-1A, 7.35% 2029 758 769 .04 Government Lease Trust Series 1999-GSA1, Class A1, 5.86% 2003 (1) 3,043 3,032 .03 Structured Asset Securities Corp., pass-through certificates, Series 1996-CFL, Class D, 7.034% 2028 2,950 2,957 .03 J.P. Morgan Commercial Mortgage Finance Corp.: Series 1995-C1, Class A-2, 7.41% 2010 (2) 1,000 1,018 Series 1996-C3, Class A-1, 7.33% 2028 823 846 .02 503,083 5.32 COLLATERALIZED MORTGAGE OBLIGATIONS-2.05% CSFB Finance Co. Ltd., Series 1995-A, 10.00% 2005 (1) (2) 42,400 38,160 .40 Structured Asset Securities Corp.: (1)(2) Series 1998-RF1, Class A, 8.665% 2027 2,613 2,768 Series 1998-RF2, Class A, 8.535% 2027 26,724 28,202 .33 G E Capital Mortgage Services, Series 1994-15, Class A10, 6.00% 2009 16,376 15,731 .17 Structured Asset Notes Transaction, Ltd., Series 1996-A, Class A1, 7.156% 2003 (1) 14,398 14,267 .15 Nykredit 6.00% 2029 DKr 104,523 12,631 .13 Ocwen Residential MBS Corp., Series 1998-R1,Class AWAC, 5.494% 2040 (1) (2) $ 11,203 10,475 .11 Residential Asset Securitization Trust, Series 1997-A3, Class B1, 7.75% 2027 9,013 9,108 .10 PNC Mortgage Securities Corp., Series 1998-10, 9,381 8,884 .09 Class 1-B1, 6.50% 2028 (1) Norwest Asset Securities Corp., Series 1998-31, Class A-1, 6.25% 2014 7,571 7,469 .08 Security National Mortgage Loan Trust, Series 2000-1, Class A-2, 8.75% 2024(1) 6,800 6,815 .07 First Nationwide, Series 1999-2, Class 1PA1, 6.50% 2029 5,212 5,092 .05 GE Capital Mortgage Services, Inc., Series 1994-9, Class A9, 6.50% 2024 5,265 5,033 .05 Ryland Acceptance Corp. Four, Series 88, Class E, 7.95% 2019 4,424 4,431 .05 Series 1993-48, Class A-6, 6.25% 2008 Prudential Home Mortgage 4,466 4,430 .05 Securities Co., Inc., Collateralized Mortgage Obligation Trust, Series 63, Class Z, 9.00% 2020 3,757 3,875 .04 Residential Funding Mortgage Securities I, Inc., Series 1998-S17, Class M-1, 6.75% 2028 3,903 3,774 .04 Travelers Mortgage Securities Corp., Series 1, Class Z2, 12.00% 2014 3,230 3,427 .04 Financial Asset Securitization, Inc., Series 1997-NAM1, Class B1, 7.75% 2027 2,509 2,543 .03 Nationsbanc Montgomery Funding Corp., Series 1998-5, Class A-1, 6.00% 2013 2,387 2,325 .03 Bear Stearns Structured Securities Inc., Series 1997-2, 1,711 1,746 .02 Class AWAC, 5.484% 2036(1)(2) Chase Manhattan Bank, NA, Series 1993-I, Class 2A5, 7.25% 2024 1,346 1,348 .01 GS Mortgage Securities Corp., Series 1998-2, Class M, 7.75% 2027 (1) 1,140 1,180 .01 193,714 2.05 AGENCY PASS-THRU GOVERNMENT NATIONAL MORTGAGE ASSN.-7.10% 6.00% 2028-2029 $ 92,420 89,676 6.50% 2008-2029 32,779 32,441 7.00% 2008-2031 240,741 241,795 7.50% 2007-2030 77,791 79,180 8.00% 2017-2030 165,580 169,924 8.50% 2020-2029 9,314 9,608 9.00% 2009-2022 9,712 10,059 9.50% 2009-2021 7,068 7,330 10.00% 2017-2022 27,438 29,788 10.50% 2016-2019 124 138 12.00% 2015 1,495 1,702 7.10 671,641 7.10 FANNIE MAE - 2.33% 6.00% 2029 10,209 9,883 6.50% 2028-2029 12,675 12,492 7.00% 2009-2030 51,863 52,087 7.50% 2009-2029 9,512 9,675 8.00% 2023-2030 92,930 95,242 8.255% 2026 (2) 5,404 5,561 8.261% 2002 (2) 4,096 4,177 8.50% 2009-2030 3,431 3,528 9.00% 2018-2025 1,935 2,015 9.50% 2009-2025 1,808 1,908 10.00% 2018-2025 5,204 5,649 10.50% 2012-2019 1,634 1,774 11.00% 2015-2029 1,783 2,002 11.25% 2014 16 17 11.50% 2014 76 85 12.00% 2015-2029 3,557 4,060 12.50% 2015-2019 3,307 3,803 13.00% 2015-2028 5,487 6,379 15.00% 2013 23 28 2.33 220,365 2.33 FREDDIE MAC PARTICIPATING CERTIFICATES - 0.54% 6.00% 2029 922 893 6.50% 2029 13,678 13,499 7.00% 2015 7,697 7,779 8.00% 2003-2026 3,398 3,472 8.25% 2007 1,008 1,030 8.50% 2002-2027 9,675 9,995 8.75% 2008 1,303 1,335 9.00% 2021 326 342 10.00% 2011-2019 120 125 10.50% 2020 1,370 1,501 10.75% 2010 40 42 11.00% 2018 2,459 2,698 12.00% 2016-2017 4672 5284 12.50% 2015-2019 1105 1257 12.75% 2019 241 275 13.00% 2014-2015 1,553 1,805 13.50% 2018 5 6 13.75% 2014 7 8 .54 51,346 .54 AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS-0.35% Freddie Mac: Series 1849, Class Z, 6.00% 2008 6,578 6,405 Series 41, Class F, 10.00% 2020 1,602 1,699 Series 178, Class Z, 9.25% 2021 1,222 1,273 Series 1657, Class SA, 7,520 5,139 4.665% 2023 (2) (10) Series 1673, Class SA, 7,879 4,705 .20 3.502% 2024 (2) (10) Fannie Mae: Series 90-93, Class G, 5.50% 2020 459 444 Series 93-247, Class Z, 7.00% 2023 4,863 4,911 Series 1994-4, Class ZA, 6.50% 2024 4,306 4,113 Series 1998-W5, Class B3, 6.50% 2028(1) 4,782 4,156 .15 32,845 .35 ASSET BACKED OBLIGATIONS (11) AIRPLANE ETC - 4.73% Continental Airlines, Inc., pass-through certificates: Series 1998-3, Class C-1, 7.08% 2004 2,391 2,400 Series 1998-3, Class C-2, 7.25% 2005 12,000 11,991 Series C-2, 7.434% 2006 2,000 1,994 Series 1997-1, Class C, 7.42% 2007 (2) 2,219 2,227 Series 1998-3, Class A-2, 6.32% 2008 15,000 14,381 Series 1999-2, Class A-2, 7.056% 2011 2,000 2,012 Series 2000-2, Class C, 8.312% 2011 4,000 4,189 Series 1996-2, Class B, 8.56% 2014 1,811 1,914 Series 1997-1, Class B, 7.46% 2014 942 931 Series 1999-1, 10.22% 2014 5,552 6,117 Series 1996, Class B, 7.82% 2015 11,682 12,170 Series 1997-1 Class A, 7.461% 2016 15,428 15,988 Series 1996-2, Class D, 11.50% 2016 2,995 3,147 Series 1997-4, Class A, 6.90% 2018 28,698 28,581 Series 2000-2, Class B, 8.307% 2018 2,000 2,077 Series 1998-1, Class A, 6.648% 2019 35,049 34,611 Series 1999-1, Class A, 6.545% 2020 5,832 5,609 Series 1999-1, Class B, 6.795% 2020 16,881 16,282 Series 2000-1, Class A-1, 8.048% 2020 11,892 12,789 Series 2000-1, Class B, 8.388% 2020 4,493 4,740 1.95 Airplanes Pass Through Trust, pass-through certificates, Series 1, Class C, 8.15% 2019 57,840 56,634 .60 Pegasus Aviation Lease Securitization, Series 2000-1, Class A2, 8.37% 2030(1) 51,000 53,953 .57 USAir, Inc.: 1990 Equipment Trust Certificates: Series A, 10.28% 2001 754 750 Series B, 10.28% 2001 754 750 Series C, 10.28% 2001 530 527 US Airways 2000, Series 3G, 7.89% 2020 33,175 34,601 USAir, Inc., pass-through trust, Series 1993-A3, 10.375% 2013 2,250 2,003 .41 Jet Equipment Trust: (1) Series 1994-A, Class B1,11.79% 2013 4,000 4,524 Series 1995-D, 11.44% 2014 10,000 11,173 Series 1995-B, 10.91% 2014 5,000 5,386 Series 1995-B, Class A, 7.63% 2015 3,919 3,992 Series 1995-B, Class C, 9.71% 2015 5,500 5,636 Series 1995-A, Class C, 10.69% 2015 2,750 3,018 .36 Morgan Stanley Air: (2) 7.25% 2025 14,250 14,276 7.76% 2025 9,998 10,023 .26 Delta Air Lines, Inc., pass-through certificates, Series 1992-A2, 11,500 11,836 9.20% 2014 Delta Air Lines, Inc., 1990 Equipment trust certificates: (1) Series I, 10.00% 2014 5,000 5,002 Series J, 10.00% 2014 5,000 5,002 Series F, 10.79% 2014 1,700 1,943 .25 United Air Lines, Inc.: 7.73% 2010 4,000 4,183 Series 1995-A2, 9.56% 2018 8,000 8,406 .13 AIR 2 US, Series A, 8.027% 2020 (1) 11,620 12,223 .13 American Airlines, Inc., Series 1991-C2, 9.73% 2014 6,410 7,114 .07 447,105 4.73 CREDIT CARD - 1.37% First Consumer Master Trust, Series 1999-A, Class A, 5.80% 2005(1) 35,000 34,664 .37 Metris Master Trust: (1) (2) Series 1998-1A, Class C, 7.536% 2005 15,000 14,800 Series 1997-2, Class C, 7.736% 2006 14,400 14,324 .31 H. S. Receivables Corp.: (1) Series 1999-1, Class A, 8.13% 2006 18,281 18,464 Series 1999-3, Class A, 9.60% 2006 2,000 2,055 .22 Nextel, Series 1 B, 7.548% 2006 (1) (2) 14,125 14,067 .15 MBNA Master Credit Card Trust: (1) Series 1999-D, Class B, 6.95% 2008 4,700 4,713 Series 1998-E, Class C, 6.60% 2010 5,000 4,907 .10 Capital One Secured Note Trust, Series 1999-2, 7.31% 2005 (1) (2) 6,250 6,251 Capital One Master Trust, Series 1999-1, Class C, 6.60% 2007 (1) 2,500 2,498 .09 First USA Credit Card Master Trust, Class A Floating Rate Asset Backed Certificates, Series 1997-4, 7.699% 2010 (1)(2) 6,630 6,459 .07 BA Master Credit Card Trust, Series 1998-A, Class B, 6,000 5,987 .06 6.98% 2005(2) 129,189 1.37 ASSET BACKED SECURITIES - 0.81% Garanti Trade Payment Rights Master Trust,Series 1999-B, Class 1, 10.81% 2004 (1) 29,918 28,940 .31 NPF XII, Inc.: (1) Series 1999-3, Class B, 7.575% 2003 (2) 3,000 2,999 Series 1999-2, Class A, 7.05% 2003 15,000 15,075 NPF VI, Inc., Series 1999-1, Class A, 6.25% 2003 (1) 5,000 4,962 .24 Puerto Rico Public Financing Corp., Series 1, Class A, 6.15% 2008 19,970 19,749 .21 Grupo Financiero Banamex Accival, SA de CV 0% 2002 (1) 5,533 5,085 .05 76,810 .81 MANUFACTURED HOUSING - 0.63% Green Tree Financial Corp., pass-through certificates: Series 1995-A, Class NIM, 7.25% 2005 2,315 2,268 Series 1993-2, Class B, 8.00% 2018 2,250 2,146 Series 1995-3, Class B-2, 8.10% 2025 5,000 2,836 Series 1995-8, Class B2, 7.65% 2026 8,197 4,229 Series 1995-6, Class B2, 8.00% 2026 2,450 1,328 Series 1996-7, Class A6, 7.65% 2027 2,096 2,158 Series 1996-6, Class B2, 8.35% 2027 10,309 5,715 Series 1996-5, Class B-2, 8.45% 2027 6,742 3,759 Series 1997-1, Class A-5, 6.86% 2028 1,500 1,512 Series 1996-10, Class A-6, 7.30% 2028 8,495 8,618 Series 1997-8, Class B-2, 7.75% 2028 3,125 1,581 Series 1998-4, Class B2, 8.11% 2028 13,350 7,698 Series 1997-6, Class A7, 7.14% 2029 15,700 15,759 .63 59,607 .63 STRANDED ASSET - 0.50% PP&L Transition Bond Co. LLC, Series 1999-1, Class A-7, 7.05% 2009 27,500 28,520 .30 Peco Energy Transition Trust, Series 1999-A, Class A6, 6.05% 2009 15,000 14,890 .16 ComEd Transitional Funding Trust, Transitional Funding Trust Note, Series 1998, Class A-4, 5.39%, 2005 3,500 3,473 .04 46,883 .50 AUTO LOAN - 0.36% MMCA Auto Owner Trust: Series 2000-2, Class B Asset Backed Notes, 7.42% 2005 7,000 7,249 Series 2000-1, Class B Asset Backed Notes, 7.55% 2005 7,000 7,192 .15 Drive Auto Receivables Trust, Series 2001-1, Class A, 6.672% 2006(1) 8,000 8,010 .09 Continental Auto Receivables Owner Trust, Series 2000-B, Class CTFS, 7.11% 2007 (1) 5,261 5,376 .06 FACTA Securitization LLC, Series 2000-A: (1) Class A, 8.00% 2004 2,019 2,029 Class B, 8.96% 2004 1,208 1,204 .03 Triad Auto Receivables Owner Trust, Series 1999-1, Class A2, 6.09% 2005 3,000 3,004 .03 34,064 .36 HOME EQUITY - 0.25% Ditech Home Loan Owner Trust, Series 1998-1, Class B1, 9.50% 2029 10,500 9,942 .10 Residential Funding Mortgage Securities II, Series 2000-HI5, Class AI4, 6.94% 2014 9,000 9,034 .10 EQCC Home Equity Loan Trust, Asset Backed Certificates, Series 1999-3, Class A-3F, 7.067% 2024 5,000 5,071 .05 24,047 .25 HOME IMPROVEMENT - 0.21% FIRSTPLUS Home Loan Owner Trust: Series 1997-1, Class A-7, 7.16% 2018 10,000 10,049 Series 1997-3, Class B-1, 7.79% 2023 4,598 4,323 .15 The Money Store Trust, Series 1996-D, Class A-14, 6.985% 2016 4,000 4,035 .05 Green Tree Financial Corp., Series 1997-A, Class HI-M1, 7.47% 2023 1,000 999 .01 19,406 .21 FRANCHISE/EQUIPMENT - 0.11% Green Tree Recreational, Equipment & Consumer Trust: Series 1999-A, Class A-6, 6.84% 2010 5,000 5,058 Series 1997-D, Class CTFS, 7.25% 2029 8,500 5,244 .11 10,302 .11 GOVERNMENT OBLIGATIONS U.S. GOVERNMENT U.S. TREASURY NOTES & BONDS - 11.17% 13.125% May 2001 11,500 11,796 6.50% May 2002 6,145 6,237 3.625% July 2002 (9) 3,803 3,807 6.375% August 2002 1,140 1,159 11.625% November 2002 8,000 8,889 5.50% February 2003 10,000 10,073 5.75% April 2003 20,000 20,269 10.75% May 2003 7,500 8,405 11.875% November 2003 37,100 43,639 5.25% May 2004 48,180 48,346 5.875% November 2004 19,465 19,973 11.625% November 2004 91,500 111,988 7.50% February 2005 15,000 16,310 5.625% February 2006 5,000 5,116 6.50% October 2006 18,940 20,213 3.375% January 2007 (9) 150,459 147,613 6.25% February 2007 20,000 21,112 5.625% May 2008 20,000 20,525 5.50% May 2009 84,750 86,445 9.125% May 2009 18,000 20,014 6.00% August 2009 4,000 4,221 10.375% November 2009 12,500 14,650 10.00% May 2010 12,500 14,738 10.375% November 2012 24,500 31,498 12.00% August 2013 10,000 14,128 Strip Principal 0% 2015 18,505 8,478 8.875% August 2017 189,500 257,572 8.875% February 2019 16,970 23,321 8.125% May 2021 13,000 16,961 6.125% November 2027 7,000 7,526 5.25% November 2028 32,850 31,444 11.17 1,056,466 11.17 NON-PASS-THRU AGENCY SECURITIES FEDERAL HOME LOAN BANK BONDS & NOTES-0.37% 5.625% 2001 25,000 24,973 7.013% 2007 10,000 9,947 .37 34,920 .37 FANNIE MAE BONDS & NOTES - 0.36% 5.75% 2005 10,000 10,009 5.25% 2009 10,215 9,754 Medium Term Note, 6.75% 2028 15,000 14,032 .36 33,795 .36 FREDDIE MAC BONDS & NOTES - 0.12% 5.75% 2010 EURO 12,000 11,574 .12 GOVERNMENTS & GOVERNMENTAL BODIES (EXCLUDING U.S.) NON-U.S. GOVERNMENT OBLIGATIONS - 7.30% Bundesrepublik: 6.00% 2007 23,827 23,975 5.25% 2010 79,000 76,559 Treuhandanstalt 7.125% 2003 EURO 22,376 22,085 1.29 Deutschland Republic: 8.00% 2002 EURO 29,250 28,859 5.25% 2008 95,000 92,005 1.28 Hellenic Republic: 8.90% 2004 GRD 4,900,000 15,098 2.90% 2007 Yen 1,270,000 12,088 6.95% 2008 $ 4,500 4,666 8.60% 2008 GRD 7,500,000 24,630 7.50% 2013 620,000 1,984 .62 Canadian Government: 9.00% 2004 C$ 10,000 7,517 4.25% 2026 (9) 61,421 46,690 .57 United Mexican States Government Eurobonds, Global: 9.875% 2010 $ 16,000 17,208 11.375% 2016 25,765 30,081 11.50% 2026 2,625 3,196 .53 United Kingdom: 6.50% 2003 Pound 11,750 18,140 8.50% 2005 12,000 20,508 .41 Spanish Government 6.00% 2008 EURO 36,061 35,689 .38 Japanese Government: 0.90% 2008 Yen 1,400,000 11,675 1.50% 2008 2,327,250 20,409 .34 French Treasury Note 4.50% 2003 EURO 28,000 26,295 .28 Kingdom of Denmark 6.00% 2009 DKr 190,000 25,458 .27 Norwegian Government: 6.75% 2007 NOK 90,000 10,575 5.50% 2009 124,500 13,720 .26 Polish Government: 12.00% 2001 PLZ 10,000 2,343 12.00% 2002 8,375 1,919 12.00% 2003 11,000 2,454 8.50% 2004 15,000 3,042 8.50% 2005 50,000 10,217 .21 New South Wales Treasury Corp. A$ 26,000 16,378 .17 8.00% 2008 Italian Government BTPS EURO 16,204 16,088 .17 Eurobond 6.00% 2007 Argentina (Republic of): Series C, 0% 2001 $ 6,250 5,891 Series E, 0% 2003 5,500 4,153 11.00% 2005 3,000 2,820 11.75% 2009 830 774 11.375% 2017 1,500 1,340 .16 Panama (Republic of): 10.75% 2020 210 207 8.875% 2027 250 213 Interest Reduction Bond 4.50% 2014 (2) 7,325 5,796 Past Due Interest Eurobond 1,665 1,266 7.75% 2016 (2)(5) Past Due Interest Eurobond 750 486 .08 4.50% 2017 (2) State of Qatar 9.75% 2030 (1) 7,500 7,519 .08 Brazil (Federal Republic of): Eligible Interest Bond 7.625% 2006 (2) 1,148 1,072 7.688% 2009 (2) 750 656 Bearer 8.00% 2014 (5) 3,215 2,494 7.625% 2024 (2) 1,375 1,060 12.25% 2030 425 394 .06 South Africa (Republic of): 12.00% 2005 ZAR 5,100 675 13.00% 2010 35,000 4,701 .06 Bulgaria (Republic of) Front Loaded Interest Reduction Bond, 3.00% 2012 (2) $ 2,470 1,836 .02 Columbia (Republic of) 7.625% 2007 2,200 1,744 .02 New Zealand Government 4.50% 2016 (9) NZ$ 3,235 1,456 .02 Venezuela (Republic of) $ 1,167 942 .01 Eurobond 7.375% 2007(2) Turkey (Republic of): 12.375% 2009 500 466 11.875% 2030 500 443 .01 Philippines (Republic of) 9.875% 2019 500 403 .00 690,358 7.30 DEVELOPMENT AUTHORITIES - 0.47% The Japan Development Bank 6.50% 2001 Yen 4,300,000 39,128 .41 International Bank for Reconstruction & Development, Series MTN, 0% 2031 $ 40,000 5,348 .06 44,476 .47 NON U.S. AGENCY BONDS - 0.44% KfW International Finance Inc. Yen 4,750,000 41,739 .44 1.00% 2004 TAXABLE MUNICIPAL OBLIGATIONS - .06% California Maritime Infrastructure Authority,Taxable Lease Revenue Bonds (San Diego Unified Port District-South Bay Plant Acquisition), Series 1999, 6.63% 2009 (1) 5,340 5,263 .06 EQUITY-RELATED SECURITIES STOCKS & WARRANTS - 0.12% (4) Price Communications Corp. 313,053 5,263 .06 VoiceStream Wireless Corp. 27,415 2,759 .03 Wilshire Financial 1,601,967 2,002 .02 Services Group, Inc. (12) Global TeleSystems Group, Inc. 750,000 609 .01 NTL Inc., warrants, expire 2008 (1)(6) 26,362 442 - Viatel, Inc. 32,363 120 - McCaw International, Ltd. warrants, expire 2007(1)(6) 30,500 76 - Teletrac Holdings, Inc. warrants, expire 2004(1)(6)(12) 194,624 19 - Discovery Zone, Inc. (8) 13,966 2 - Discovery Zone, Inc., warrants, expire 2007 (6) (8) 1,551 - - Protection One Alarm Monitoring, Inc., warrants, expire 2005 (1)(6) 54,400 - - Tultex Corp., warrants, expire 2007 (6) 1,867,700 - - V2 Music Holdings PLC, warrants, expire 2008 (1)(6) 17,125 - - 11,292 .12 MISCELLANEOUS - Investment securities in initial period of acquisition 52 .00 Total Bonds & Notes & Equity Securities (cost: $9,344,741,000) 8,816,535 93.25 Principal Market SHORT-TERM SECURITIES Amount Value (000) (000) CORPORATE SHORT-TERM NOTES - 5.15% Preferred Receivables Funding Corp.: 6.58% due 1/10/2001 $ 17,000 16,969 6.58% due 1/16/2001 23,000 22,933 6.60% due 1/30/2001 20,000 19,890 .63 SBC Communications Inc.: 6.53% due 1/16/2001 21,400 21,338 6.50% due 1/26/2001 11,500 11,446 6.50% due 2/7/2001 27,100 26,916 .63 Verizon Global Funding Inc.: 6.54% due 1/4/2001 30,150 30,128 6.50% due 1/24/2001 24,500 24,394 .58 Alcoa Inc.: 6.50% due 1/10/2001 24,700 24,655 6.52% due 1/11/2001 24,500 24,451 6.55% due 1/18/2001 800 798 .53 Corporate Asset Funding Co. Inc.: 6.50% due 2/5/2001 15,000 14,902 6.42% due 2/6/2001 27,000 26,822 .44 Motiva Enterprises LLC: 6.51% due 1/16/2001 7,800 7,777 6.50% due 1/26/2001 14,000 13,934 Coca-Cola Co. 6.51% due 1/18/2001 20,000 19,935 .44 Gannett Co., Inc.: 6.55% due 1/8/2001 21,000 20,969 6.54% due 1/12/2001 19,000 18,958 .42 Ford Motor Credit Co. 6.50% 40,000 39,841 .42 due 1/22/2001 Knight Ridder Inc.: 6.51% due 1/23/2001 5,000 4,979 6.44% due 1/25/2001 26,100 25,983 .33 USAA Capital Corp. 6.50% due 1/19/2001 27,100 27,006 .29 Equilon Enterprises, LLC: 6.52% due 1/18/2001 13,400 13,356 6.41% due 2/21/2001 10,000 9,908 .25 Monsanto Co.: 6.50% due 2/13/2001 5,700 5,655 6.32% due 3/16/2001 12,800 12,626 .19 486,569 5.15 FEDERAL AGENCY DISCOUNT NOTES - .85% Federal Home Loan Banks: 6.45% due 1/10/2001 17,070 17,039 6.43% due 1/12/2001 9,600 9,579 .30 Freddie Mac: 6.45% due 1/9/2001 25,000 24,960 6.44% due 1/23/2001 3,790 3,774 6.41% due 1/30/2001 1,900 1,890 .30 Fannie Mae 6.45% due 1/11/2001 23,550 23,503 .25 80,745 .85 Total Short-Term Securities (cost: $567,315,000) 567,314 6.00 Total Investment Securities (cost:$9,912,056,000) 9,383,849 99.25 Excess of cash and receivables over payables NET ASSETS 9,454,454 100.00 (1) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. (2) Coupon rate may change periodically. (3) Step bond; coupon rate will increase at a later date. (4) Non-income-producing security. (5) Payment in kind; the issuer has the option of paying additional securities in lieu of cash. (6) Valued under procedures established by the Board of Directors. (7) Purchased as a unit; issue was separated but reattached for reporting purposes. (8) Company not making interest or dividend payments; bankruptcy proceedings pending. (9) Index-linked bond whose principal amount moves with a government retail price index. (10) Inverse floater, which is a floating-rate note whose interest rate moves in the opposite direction of prevailing interest rates. (11) Pass-through securities backed by a pool of mortgages or other assets on which principal payments are periodically made. Therefore, the effective maturity is shorter than the stated maturity. (12) The fund owns 8.00% and 5.29% of the outstanding securities of Wilshire Financial Services Group, Inc. and Teletrac, Inc., respectively, which are investments in affiliates as defined in the Investment Act of 1940. See Notes to Financial Statements
The Bond Fund of America FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES at December 31, 2000 (dollars in thousands) Assets: Investment securities at market (cost: $9,912,056) $9,383,849 Cash 3,301 Receivables for-- Sales of investments $ 1,593 Sales of fund's shares 31,901 Forward currency contracts - net 1,822 Dividends and accrued interest 153,108 188,424 9,575,574 Liabilities: Payables for-- Purchases of investments 75,567 Repurchases of fund's shares 31,346 Forward currency contracts - net 8,560 Management services 2,660 Other expenses 2,987 121,120 Net Assets at December 31, 2000 $9,454,454 Total authorized capital stock- 2,500,000,000 shares Class A shares, $.001 par value: Net assets $9,365,944 Shares outstanding 732,163,360 Net asset value per share $12.79 Class B shares, $.001 par value: Net assets $88,509 Shares outstanding 6,918,990 Net asset value per share $12.79 STATEMENT OF OPERATIONS for the year ended December 31, 2000 (dollars in thousands) Investment Income: Income: Interest $728,726 Dividends 16,630 $745,356 Expenses: Management services fee 30,566 Distribution expenses - Class A 22,929 Distribution expenses - Class B 309 Transfer agent fee - Class A 9,968 Transfer agent fee - Class B 30 Reports to shareholders 469 Registration statement and prospectus 433 Postage, stationery and supplies 1,221 Directors' fees 84 Auditing and legal fees 82 Custodian fee 478 Taxes other than federal income tax 123 Other expenses 12 66,704 Net investment income 678,652 Realized Loss and Unrealized Depreciation on Investments: Net realized loss (72,414) Net change in unrealized depreciation on: Investments (42,019) Open forward currency contracts (8,327) Net change in unrealized depreciation (50,346) Net realized loss and change in unrealized depreciation on investments (122,760) Net Increase in Net Assets Resulting from Operations $555,892 STATEMENT OF CHANGES IN NET ASSETS (dollars in thousands) Year ended December 31, 2000 1999 Operations: Net investment income $ 678,652 $ 667,232 Net realized loss on investments (72,414) (38,387) Net change in unrealized depreciation on investments (50,346) (411,293) Net increase in net assets resulting from operations 555,892 217,552 Dividends Paid to Shareholders: Dividends from net investment income: Class A (688,050) (671,007) Class B (2,035) - Total Dividends (690,085) (671,007) Capital Share Transactions: Proceeds from shares sold 2,190,967 2,473,751 Proceeds from shares issued in reinvestment of net investment income dividends 550,406 536,631 Cost of shares repurchased (2,630,060) (2,620,186) Net increase in net assets resulting from 111,313 390,196 capital share transactions Total Decrease in Net Assets (22,880) (63,259) Net Assets: Beginning of year 9,477,334 9,540,593 End of year (including distributions in excess of net investment income and undistributed net investment income of: $7,328 and $3,354 respectively) $9,454,454 $9,477,334 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 Class A and Class B shares. Class A shares are sold with an initial sales charge of up to 3.75%. Class B shares are sold without an initial sales charge but subject to a contingent deferred sales charge paid upon redemption. This charge declines from 5% to zero over a period of six years. Class B shares have higher distribution expenses and transfer agent fees than Class A shares. Class B shares are automatically converted to Class A shares eight years after the date of purchase. Holders of both classes of shares have equal pro rata rights to assets and identical voting, dividend, liquidation and other rights, except that each class bears different distribution and transfer agent expenses, and each class shall have exclusive rights to vote on matters affecting only their class. SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared in conformity with accounting principles generally accepted in the United States which require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of the significant accounting policies consistently followed by the fund in the preparation of its financial statements: SECURITY VALUATION - Equity securities, including depositary receipts, are valued at the last reported sale price on the exchange or market on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. In cases where equity securities are traded on more than one exchange, the securities are valued on the exchange or market determined by the investment adviser to be the broadest and most representative market, which may be either a securities exchange or the over-the-counter market. Fixed-income securities are valued at prices obtained from a pricing service, when such prices are available; however, in circumstances where the investment adviser deems it appropriate to do so, such securities will be valued at the mean quoted bid and asked prices or at prices for securities of comparable maturity, quality and type. The ability of the issuers of the fixed-income securities held by the fund to meet their obligations may be affected by economic developments in a specific industry, state or region. Short-term securities maturing within 60 days are valued at amortized cost, which approximates market value. Forward currency contracts are valued at the mean of their representative quoted bid and asked prices. Securities and assets for which representative market quotations are not readily available are valued at fair value as determined in good faith by a committee appointed by the Board of Directors. NON-U.S. CURRENCY TRANSLATION - Assets and liabilities initially expressed in terms of non-U.S. currencies are translated into U.S. dollars at the prevailing market rates at the end of the reporting period. Purchases and sales of securities and income and expenses are translated into U.S. dollars at the prevailing market rates on the dates of such transactions. The effects of changes in non-U.S. currency exchange rates on investment securities and other assets and liabilities are included with the net realized and unrealized gain or loss on investment securities. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions are accounted for as of the trade date. Realized gains and losses from securities transactions are determined based on specific identified cost. In the event securities are purchased on a delayed delivery or when-issued basis, the fund will instruct the custodian to segregate liquid assets sufficient to meet its payment obligations in these transactions. 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. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends to shareholders are declared daily after the determination of the fund's net investment income and are paid to shareholders monthly. Distributions paid to shareholders are recorded on the ex-dividend date. FORWARD CURRENCY CONTRACTS - The fund may enter into forward currency contracts, which represent agreements to exchange currencies of different countries at specified future dates at specified rates. The fund enters into these contracts to manage its exposure to fluctuations in foreign exchange rates arising from investments denominated in non-U.S. currencies. The fund's use of forward currency contracts involves market risk in excess of the amount recognized in the statement of assets and liabilities. The contracts are recorded in the statement of assets and liabilities at their net unrealized value. The fund records realized gains or losses at the time the forward contract is closed or offset by a matching contract. The face or contract amount in U.S. dollars reflects the total exposure the fund has in that particular contract. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and from possible movements in non-U.S. exchange rates and securities values underlying these instruments. Purchases and sales of forward currency exchange contracts having the same settlement date and broker are offset and presented net in the statement of assets and liabilities. ALLOCATIONS - Income, expenses (other than class-specific expenses) and realized and unrealized gains and losses are allocated daily between Class A and Class B based on their relative net asset values. Distribution expenses, certain transfer agent fees and any other applicable class-specific expenses are accrued daily and charged to the respective share class. 2. NON-U.S. INVESTMENTS INVESTMENT RISK - Investments in securities of non-U.S. issuers in certain countries involve special investment risks. These risks 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. CURRENCY GAINS AND LOSSES - Net realized currency gains on dividends, interest, sales of non-U.S. bonds and notes, forward contracts, and other receivables and payables, on a book basis, were $4,644,000 for the year ended December 31, 2000. 3. FEDERAL INCOME TAXATION The fund complies with the requirements of the Internal Revenue Code applicable to regulated investment companies and intends to distribute all of its net taxable income and net capital gains for the fiscal year. As a regulated investment company, the fund is not subject to income taxes if such distributions are made. Required distributions are determined on a tax basis and may differ from net investment income for financial reporting purposes. In addition, 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, 2000, net unrealized depreciation on investments, excluding forward currency contracts, for book and federal income tax purposes aggregated $528,207,000; $229,123,000 related to appreciated securities and $757,330,000 related to depreciated securities. During the year ended December 31, 2000, the fund realized, on a tax basis, a net capital loss of $42,420,000 on securities transactions. The fund had available at December 31, 2000 a net capital loss carryforward totaling $66,959,000 which may be used to offset capital gains realized during subsequent years through 2008 and thereby relieve the fund and its shareholders of any federal income tax liability with respect to the capital gains that are so offset. The fund will not make distributions from capital gains while a capital loss carryforward remains. In addition, the fund has recognized, for tax purposes, capital losses totaling $22,135,000 which were realized during ther period November 1, 1999 through December 31, 1999 and has deferred, for tax purposes, to fiscal year ending December 31, 2001, the recognition of capital losses totaling $51,556,000 which were realized during the period November 1, 2000 through December 31, 2000. Net gains related to non-U.S. currency transactions of $1,392,000 were treated as an adjustment to ordinary income for federal income tax purposes. The cost of portfolio securities, excluding forward currency contracts, for book and federal income tax purposes was $9,912,056,000 at December 31, 2000. 4. FEES AND TRANSACTIONS WITH RELATED PARTIES INVESTMENT ADVISORY FEE - The fee of $30,566,000 for management services was incurred pursuant to an agreement with Capital Research and Management Company (CRMC), with which certain officers and Directors of the fund are affiliated. The Investment Advisory and Service Agreement provides for monthly fees accrued daily, based on the following rates and net asset levels: [begin chart]
NET ASSET LEVEL RATE IN EXCESS OF UP TO 0.30% $0 60 million 0.21% 60 million 1 billion 0.18% 1 billion 3 billion 0.16% 3 billion 6 billion 0.15% 6 billion 10 billion 0.14% 10 billion
[end chart] The agreement also provides for fees based on monthly gross investment income at the following rates:
MONTHLY GROSS INVESTMENT INCOME RATE IN EXCESS OF UP TO 2.25% $0 $8,333,333 2.00 8,333,333
DISTRIBUTION EXPENSES - American Funds Distributors, Inc. ("AFD"), the principal underwriter of the fund's shares, received $3,608,000 (after allowances to dealers) as its portion of the sales charges paid by purchasers of the fund's Class A shares during the year ended December 31, 2000. Such sales charges are not an expense of the fund and, hence, are not reflected in the accompanying Statement of Operations. The fund has adopted plans of distribution under which it may finance activities primarily intended to sell fund shares, provided the categories of expense are approved in advance by the fund's Board of Directors. The plans provide for aggregate annual expense limits of 0.25% of net assets for Class A shares, and 1.00% of net assets for Class B shares. For Class A shares, approved categories of expense include dealer service fees of up to 0.25% of net assets. Also included are reimbursements to AFD for commissions paid to dealers and wholesalers in respect of certain shares sold without a sales charge. These reimbursements are permitted for amounts billed to the fund within the prior 15 months but only to the extent that the fund's overall 0.25% annual expense limit is not exceeded. For the year ended December 31, 2000, aggregate distribution expenses were $22,929,000, or 0.25% of net assets attributable to Class A shares. As of December 31, 2000, unreimbursed expenses which remain subject to reimbursement totaled $3,561,000. For Class B shares, approved categories of expense include fees of 0.75% per annum payable to AFD. AFD sells the rights to receive such payments (as well as any contingent deferred sales charges payable in respect of shares sold during the period) in order to finance the payment of dealer commissions. Also included are service fees of 0.25% per annum. These fees are paid to AFD to compensate AFD for paying service fees to qualified dealers. For the year ended December 31, 2000, aggregate distribution expenses were $309,000, or 1.00% of net assets attributable to Class B shares. As of December 31, 2000, accrued and unpaid distribution expenses payable to AFD for Class A and Class B shares were $1,871,000 and $70,000, respectively. TRANSFER AGENT FEE - A fee of $9,998,000 was incurred during the year ended December 31, 2000, pursuant to an agreement with American Funds Service Company ("AFS"), the transfer agent for the fund. DEFERRED DIRECTORS' FEES - Directors who are unaffiliated with CRMC may elect to defer part or all of the fees earned for services as members of the Board. Amounts deferred are not funded and are general unsecured liabilities of the fund. As of December 31, 2000, aggregate deferred amounts and earnings thereon since the deferred compensation plan's adoption (1993), net of any payments to Directors, were $220,000. AFFILIATED DIRECTORS AND OFFICERS - CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both wholly owned subsidiaries of CRMC. Officers of the fund and certain Directors are or may be considered to be affiliated with CRMC, AFS and AFD. No such persons received any remuneration directly from the fund. 5. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES The fund made purchases and sales of investment securities, excluding short-term securities, of $5,433,478,000 and $5,280,066,000, respectively, during the year ended December 31, 2000. Pursuant to the custodian agreement, the fund receives credits against its custodian fee for imputed interest on certain balances with the custodian bank. During the year ended December 31, 2000, the custodian fee of $478,000 includes $301,000 that was paid by these credits rather than in cash. The fund reclassified $751,000 from undistributed net realized gains to undistributed net realized for the year ended December 31, 2000, as a result of permanent differences between book and tax. As of December 31, 2000, net assets consisted of the following: BFA As of December 31, 2000 Capital paid in on shares of beneficial interest $10,113,602,000 Undistributed net investment income (7,328,000) Accumulated net realized gain (119,839,000) Net unrealized depreciation (531,981,000) Net Assets $9,454,454,000
Capital share transactions in the fund were as follows: Capital share transactions in a fund were as follows: Year ended December 31, 2000 Amount (000) Shares Class A Shares: Sold $2,100,818 164,508,807 Reinvestment of dividends 548,746 43,009,488 Repurchased (2,626,235) (205,443,815) Net increase in Class A 23,329 2,074,480 Class B Shares: * Sold 90,149 7,089,300 Reinvestment of dividends 1,660 130,466 Repurchased (3,825) (300,776) Net increase in Class B 87,984 6,918,990 Total net increase in fund $ 111,313 8,993,470 * Class B shares were not offered before March 15, 2000. Year ended December 31, 1999 Amount (000) Shares Class A Shares: Sold $2,473,751 186,154,681 Reinvestment of dividends 536,631 40,561,069 Repurchased (2,620,186) (197,706,146) Net increase in Class A 390,196 29,009,604 Class B Shares: * Sold - - Reinvestment of dividends - - Repurchased - - Net increase in Class B - - Total net increase in fund $ 390,196 29,009,604 * Class B shares were not offered before March 15, 2000.
At December 31, 2000, the fund had outstanding forward currency contracts to sell non-U.S. currency as follows: Contract Amount U.S. Valuations ------------ --------- -------- ------------- Non-U.S. Unrealized Currency Appreciation Contracts Non-U.S. U.S. Amount (Depreciation) - ------------- ------------- -------- ------------ ------------- Sales: Euros expiring 1/24 to euro 57,097,000 $48,973,000 $53,742,000 $(4,769,000) 3/13/2001 British Pounds expiring 1/26 to 3/19/01 pound 16,048,000 23,208,000 24,000,000 (792,000) Japanese Yen expiring 3/30 to 9/25/01 yen 5,792,764,000 52,688,000 51,926,000 762,000 ---------- ---------- ----------- 124,869,000 129,668,000 (4,799,000) ---------- ---------- ----------
PER-SHARE DATA AND RATIOS (1) Net Net asset gains (losses) value, Net on securities beginning investment (both realized Year ended of year income and unrealized) Class A: 2000 12.98 0.94 (2) (0.17) (2) 1999 13.61 0.93 (0.63) 1998 14 0.94 (0.24) 1997 13.75 0.98 0.25 1996 13.88 1.02 (0.13) Class B: 2000 12.92 0.619 (2) (0.08) (2) PER-SHARE DATA AND RATIOS (1) Dividends Total from (from net Distributions investment investment (from capital Year ended operations income) gains) Class A: 2000 $.77 $(.96) $ - 1999 0.30 (.93) - 1998 0.70 (.95) (.14) 1997 1.23 (.98) - 1996 0.89 (1.02) - Class B: 2000 0.54 (.67) - PER-SHARE DATA AND RATIOS (1) Net asset Total value, end Total Year ended distributions of year return Class A: 2000 $(.96) $12.79 6.19% 1999 (.93) 12.98 2.29 1998 (1.09) 13.61 5.17 1997 (.98) 14.00 9.24 1996 (1.02) 13.75 6.71 Class B: 2000 (.67) 12.79 4.33 PER-SHARE DATA AND RATIOS (1) Ratio of Ratio of Net assets, expenses net income end of year to average to average Year ended (in millions) net assets net assets Class A: 2000 $9,366 .72% 7.35% 1999 9,477 .69 6.96 1998 9,541 .66 6.94 1997 8,176 .68 6.95 1996 7,002 .71 7.47 Class B: 2000 88 1.42 (3) 6.65 (3) PER-SHARE DATA AND RATIOS (1) Portfolio turnover Year ended rate Class A: 2000 62.07% (4) 1999 46.71 1998 66.25 1997 51.96 1996 43.43 Class B: 2000 62.07% (4)
(1) The year 1996 through 2000 represent, for Class A shares, fiscal years ended December 31. The period ended 2000 represents, for Class B shares, the 291-day period ended December 31, 2000. Class B shares were not offered before March 15, 2000. Total return for Class B is based on activity during the period and thus is not representative of a full year. Total returns exclude all sales charges, including contingent deferred sales charges. (2) Based on average shares outstanding. (3) Annualized. (4) Represents portfolio turnover rate (equivalent for all share classes) for the year ended December 31, 2000. INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders 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 investment portfolio, as of December 31, 2000, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the per-share data and ratios for each of the five years in the period then ended for Class A shares and the period March 15, 2000 through December 31, 2000, for Class B shares. These financial statements and per-share data and ratios are the responsibility of the fund's management. Our responsibility is to express an opinion on these financial statements and per-share data and ratios based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and per-share data and ratios are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned at December 31, 2000, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and per-share data and ratios referred to above present fairly, in all material respects, the financial position of The Bond Fund of America, Inc. at December 31, 2000, 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 per-share data and ratios for each of the five years in the period then ended for Class A shares and the period March 15, 2000 through December 31, 2000, for Class B shares, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Los Angeles, California February 1, 2001 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 distributions received by shareholders during such fiscal year. Corporate shareholders may exclude up to 70% of qualifying dividends received during the year. For purposes of computing this exclusion, 1% of the dividends paid by the fund from net investment income represent qualifying dividends. Certain states may exempt from income taxation that portion of the dividends paid from net investment income that was derived from direct U.S. Treasury obligations. For purposes of computing this exclusion, 9% of the dividends paid by the fund from net investment income were derived from interest on direct U.S. Treasury obligations. Dividends and distributions received by retirement plans such as IRAs, Keogh-type plans and 403(b) plans need not be reported as taxable income. However, many retirement plan trusts may need this information for their annual information reporting. Shareholders should refer to their Form 1099-DIV or other tax information which was mailed in January 2001 to determine the amounts to be included on their 2001 tax returns. Shareholders should consult their tax advisers. AMERICAN FUNDS A PORTFOLIO FOR EVERY INVESTOR Most financial advisers urge investors to diversify their portfolios among several types of investments. The American Funds offer 29 mutual funds with an array of objectives to help you and your financial adviser build a portfolio tailored to your individual goals. WHAT MAKES AMERICAN FUNDS DIFFERENT The Bond Fund of America is a member of the American Funds family, the nation's third-largest. All American Funds are managed by Capital Research and Management Company, which was founded in 1931. Thousands of financial advisers recommend the American Funds for their clients' serious money because they endorse our commitment to shareholder interests - a commitment reflected in our investment standards and practices. A LONG-TERM, VALUE-ORIENTED APPROACH We rely on our own intensive research to find well-managed companies with reasonably priced securities and solid, long-term potential. Despite our size, we offer relatively few funds, allowing us to focus on each fund's objectives and enabling you to benefit from economies of scale. AN UNPARALLELED GLOBAL RESEARCH EFFORT We opened our first overseas office in 1962, well before most U.S. investment firms. Today, we operate one of the industry's most globally integrated research networks. THE MULTIPLE PORTFOLIO COUNSELOR SYSTEM Every American Fund is managed by several portfolio counselors, each of whom takes responsibility for a portion of the fund's assets independently in accordance with the fund's objectives; in most cases, research analysts manage a portion as well. Over time, this method fosters consistency of results and continuity of management. EXPERIENCED INVESTMENT PROFESSIONALS More than 75% of our portfolio counselors were in the investment business before the sharp stock market decline in October 1987. Long tenure and experience gained through varied market conditions mean we aren't "practicing" with your money. A COMMITMENT TO LOW OPERATING EXPENSES Our operating expenses are among the lowest in the mutual fund industry, providing exceptional value for shareholders. Our portfolio turnover rates are low as well, keeping transaction costs and tax consequences contained. GROWTH FUNDS AMCAP Fund/R/ EuroPacific Growth Fund/R/ The Growth Fund of America/R/ The New Economy Fund/R/ New Perspective Fund/R/ New World Fund/SM/ SMALLCAP World Fund/R/ GROWTH-AND-INCOME FUNDS 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/ BALANCED FUND American Balanced Fund/R/ EQUITY-INCOME FUNDS Capital Income Builder/R/ The Income Fund of America/R/ INCOME FUNDS 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/ TAX-EXEMPT INCOME FUNDS American High-Income Municipal Bond Fund/R/ Limited Term Tax-Exempt Bond Fund of America/SM/ STATE-SPECIFIC TAX-EXEMPT INCOME FUNDS The Tax-Exempt Bond Fund of America/R/ The Tax-Exempt Fund of California/R/ The Tax-Exempt Fund of Maryland/R/ The Tax-Exempt Fund of Virginia/R/ 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/ We also offer a full line of retirement plans and variable annuities. FOR MORE COMPLETE INFORMATION ABOUT THE FUNDS, PLEASE OBTAIN A PROSPECTUS FROM YOUR FINANCIAL ADVISER OR FROM OUR WEB SITE (WWW.AMERICANFUNDS.COM), OR PHONE AMERICAN FUNDS SERVICE COMPANY AT 800|421-0180. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY. THE BOND FUND OF AMERICA BOARD OF DIRECTORS Ambassador Richard G. Capen, Jr. Rancho Santa Fe, California Corporate director and author; former United States Ambassador to Spain; former Vice Chairman of the Board, Knight-Ridder, Inc.; former Chairman of the Board and Publisher, The Miami Herald H. Frederick Christie Rolling Hills Estates, California Private investor; former President and Chief Executive Officer, The Mission Group; former President, Southern California Edison Company Don R. Conlan South Pasadena, California President (retired), The Capital Group Companies, Inc. Diane C. Creel Long Beach, California President and Chief Executive Officer, The Earth Technology Corporation (international consulting engineering) Martin Fenton San Diego, California Managing Director, Senior Resource Group, LLC (development and management of senior living communities) Leonard R. Fuller Marina del Rey, California President, Fuller Consulting (financial management consulting firm) Abner D. Goldstine Los Angeles, California President of the fund Senior Vice President and Director, Capital Research and Management Company Paul G. Haaga, Jr. Los Angeles, California Chairman of the Board of the fund Executive Vice President and Director, Capital Research and Management Company Richard G. Newman Los Angeles, California Chairman of the Board and Chief Executive Officer, AECOM Technology Corporation (architectural engineering) Frank M. Sanchez Los Angeles, California Chairman of the Board and Chief Executive Officer, The Sanchez Family Corporation dba McDonald's Restaurants (McDonald's licensee) OTHER OFFICERS David C. Barclay Los Angeles, California Vice President of the fund Senior Vice President and Director, Capital Research and Management Company Michael J. Downer Los Angeles, California Vice President of the fund Senior Vice President - Fund Business Management Group, Capital Research and Management Company John H. Smet Los Angeles, California Vice President of the fund Senior Vice President, Capital Research and Management Company Julie F. Williams Los Angeles, California Secretary of the fund Vice President - Fund Business Management Group, Capital Research and Management Company Anthony W. Hynes, Jr. Brea, California Treasurer of the fund Vice President - Fund Business Management Group, Capital Research and Management Company Kimberly S. Verdick Los Angeles, California Assistant Secretary of the fund Assistant Vice President - Fund Business Management Group, Capital Research and Management Company The American Funds Group/R/ OFFICES OFFICES OF THE FUND AND OF THE INVESTMENT ADVISER, CAPITAL RESEARCH AND MANAGEMENT COMPANY 333 South Hope Street Los Angeles, California 90071-1443 135 South State College Boulevard Brea, California 92821-5823 TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS American Funds Service Company (Please write to the address nearest you.) P.O. Box 2205 Brea, California 92822-2205 P.O. Box 659522 San Antonio, Texas 78265-9522 P.O. Box 6007 Indianapolis, Indiana 46206-6007 P.O. Box 2280 Norfolk, Virginia 23501-2280 CUSTODIAN OF ASSETS The Chase Manhattan Bank One Chase Manhattan Plaza New York, New York 10081-0001 COUNSEL Paul, Hastings, Janofsky & Walker LLP 555 South Flower Street Los Angeles, California 90071-2371 INDEPENDENT AUDITORS Deloitte & Touche LLP Two California Plaza 350 South Grand Avenue Los Angeles, California 90071-3462 PRINCIPAL UNDERWRITER American Funds Distributors, Inc. 333 South Hope Street Los Angeles, California 90071-1462 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, 2001, THIS REPORT MUST BE ACCOMPANIED BY AN AMERICAN FUNDS GROUP STATISTICAL UPDATE FOR THE MOST RECENTLY COMPLETED CALENDAR QUARTER. There are two 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 of $100,000 or more. Class B shares, which are not available for certain employer-sponsored retirement plans, have no up-front sales charge. They are, however, subject to additional expenses of approximately 0.75% a year over the first eight years of ownership. If redeemed within six years, they may also be subject to a contingent deferred sales charge (5% maximum) that declines over time. Because expenses are first deducted from income, dividends for Class B shares will be lower. For information about your account or any of the fund's services, or for a prospectus for any of the American Funds, please contact your financial adviser. You may also call American Funds Service Company, toll-free, at 800/421-0180 or visit www.americanfunds.com on the World Wide Web. Please read the prospectus carefully before you invest or send money. Printed on recycled paper Litho in USA BG/GRS/4930 Lit. No. BFA-011-0201 -----END PRIVACY-ENHANCED MESSAGE-----