N-30D 1 bfasr.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] Semi-Annual Report For The Six Months Ended June 30, 2001 THE BOND FUND OF AMERICA/SM/ is one of the 29 American Funds,/SM/ 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. RESULTS AT A GLANCE (assuming distributions reinvested or interest compounded for periods ended June 30, 2001) Lifetime (since inception on May 28, 1974) 6-month 12-month Total Average annual return return return compound return The Bond Fund of America +4.1% +8.5% +1,131.6% +9.7% Lehman Brothers Aggregate Bond Index/1/ +3.6 +11.2 +1,017.4 +9.3 Lipper Corporate A-Rated Bond Funds Average/2/ +3.4 +10.2 + 959.7 +9.1 /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. Fund results in this report were calculated for Class A shares at net asset value (without a sales charge) unless otherwise indicated. Here are the average annual compound returns on a $1,000 investment with all distributions reinvested for periods ended June 30, 2001: 1 year 5 years 10 years CLASS A SHARES reflecting 3.75% maximum sales charge +4.40% +5.84% +7.82% Results for other share classes can be found on the inside back cover. The fund's 30-day yield for Class A shares as of July 31, 2001, calculated in accordance with the Securities and Exchange Commission formula, was 6.88%. Please see back cover for important information about other share classes. 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 continued to do well in the first half of 2001, as economic growth tapered off in the U.S. and around the world, and as interest rates fell sharply. Investors taking cover from roiling stock markets also helped boost returns for fixed-income securities. The Bond Fund of America benefited from this environment, delivering a steady stream of generous current income and enjoying a slight rise in share value. Shareholders who reinvested monthly dividends totaling 43.8 cents a share saw an income return of 3.5% (7.0% annualized) as of June 30; an increase in net asset value to $12.87 from $12.79 resulted in a total return of 4.1%. The Bond Fund of America's flexible investment approach served it well during the six-month period. The fund did better than the bond market as a whole, which rose 3.6%, as measured by the unmanaged Lehman Brothers Aggregate Bond Index. It also finished ahead of the 3.4% average total return for the 181 corporate A-rated bond funds tracked by Lipper Inc. Although the fund trailed both benchmarks for the 12 months, its results compare favorably over its lifetime, as the chart at left shows. [BEGIN CAPTION] AS BONDS RALLIED DURING THE SIX MONTHS, THE FUND'S FLEXIBILITY PROVED TO BE AN ADVANTAGE. [END CAPTION] THE FED TAKES ACTION The U.S. economy languished in the first half of 2001, leading to disappointing corporate earnings and continuing weakness in stock prices. Consumer spending held fairly steady, but manufacturing and industrial production slackened and layoffs became fairly widespread. In an effort to overcome recessionary pressures, the Federal Reserve Board embarked on a series of interest-rate cuts in the new year. The federal funds rate - the rate at which banks lend each other money overnight - was notched down six times in as many months, from 6.00% to 3.75%. The rate is at its lowest level in nearly seven years. The steps taken by the Federal Reserve had little immediate effect on the economy, but declining interest rates boosted prices for existing bonds, particularly those with shorter maturities. (Bond prices generally move inversely to the rise and fall in interest rates.) U.S. Treasuries were strengthened early in the year by investors fleeing equity markets, but corporate issues generally did better during the period. STRENGTH FROM CORPORATE HOLDINGS While the majority of The Bond Fund of America's portfolio is in securities rated A or better, it does have considerable latitude to invest in other bonds. As bonds rallied during the six months, that breadth proved to be an advantage. Among corporate bonds, a range of sectors did well during the period, including auto components, metals, paper and forest products, finance, insurance and health care. A number of large positions in these areas posted strong price gains in addition to delivering relatively high current yields. Countering a slide in stock prices is a benefit the fund has delivered in every major stock market setback since its inception in 1974. [BEGIN CAPTION] COUNTERING A SLIDE IN STOCK PRICES IS A BENEFIT THE FUND HAS DELIVERED IN EVERY MAJOR STOCK MARKET SETBACK SINCE ITS INCEPTION IN 1974. [END CAPTION] Other investments also contributed positively to results during the period. These included mortgage-backed securities, which stabilized after a wave of refinancing activity early in the year, as well as asset-backed and U.S. Treasury securities. At the other end of the spectrum, most telecommunications bonds suffered from a pullback in capital investments by businesses. While the downturn adversely affected a number of longtime holdings, including Nextel, the fund's largest telecom position, it also created attractive buying opportunities in companies with good long-term fundamentals. A BREAK IN THE CLOUDS? Looking forward, shorter term yields are sinking in response to interest-rate cuts by the Federal Reserve. Yields on 30-year Treasury bonds have likewise begun trending lower - a signal that a pick-up in economic activity may be more gradual than had been anticipated. Currently, we are focusing on securities that we believe will be resilient if difficult times continue. We are also keeping our eyes open for overlooked gems. In the meantime, the current stock market turbulence is a useful reminder of the balancing role bond funds can play in a financial plan. Stock and bond market cycles rarely move in lockstep, making diversification a critical tool for investors seeking steady returns over the long term. Indeed, in the first half of this year Standard & Poor's 500 Composite Index fell nearly 7%, while The Bond Fund of America increased more than 4%. 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 August 13, 2001 Investment Portfolio, June 30, 2001 [begin pie chart] Corporate Bonds 53.6% U.S. Government Notes & Bonds 9.0% Federal Agency Mortgage Pass-Through Securities 9.5% Other Mortgage-/Asset-Backed Securities 13.4% Government & Government Bodies (Excluding U.S.) 6.3% Equity-Related Securities 0.1% Cash & Equivalents 8.1% [end pie chart] (Unaudited) Shares or Principal Market Percent Amount Value of Net Bonds, Notes & Preferred Stocks (000) (000) Assets BANKS - 7.89% HSBC Capital Funding LP: /1/ 8.03% noncumulative preferred (undated) Euro 20,000 $ 18,644 Series 1, 9.547% noncumulative $ 33,250 37,644 preferred (undated) /2/ Series 2, 10.176% noncumulative 32,000 39,407 preferred (undated) /2/ Midland Bank 4.00% Eurodollar Note 15,000 11,991 1.02% (undated) /1/ SocGen Real Estate Co. LLC, Series A, 83,375 81,776 7.64%/8.406% (undated) /1/ /2/ Societe Generale 7.85% (undated) /1//2/ 11,105 11,460 .88 BNP U.S. Funding LLC, Series A, 7.738% 41,500 42,478 noncumulative preferred (undated)/1/ /2/ BNP Paribas Capital Trust, 9.003% 15,000 16,451 noncumulative trust preferred (undated) /2/ Banque Nationale de Paris 4.412% 12,500 12,008 .67 (undated) /1/ Fuji JGB Investment LLC, Series A, 40,500 38,272 9.87% noncumulative preferred (undated) /1/ /2/ IBJ Preferred Capital Co. LLC, Series A, 19,480 17,767 .53 8.79% noncumulative preferred (undated) /1/ /2/ Washington Mutual Bank, FA 6.875% 2011 20,000 19,941 Washington Mutual Finance, 8.25% 2005 12,000 12,859 Washington Mutual Capital I Subordinated 10,000 10,112 Capital Income Securities 8.375% 2027 Great Western Financial Trust II, 7,600 7,630 Series A, 8.206% 2027 Ahmanson Capital Trust I Capital 2,030 2,061 .50 Securities, Series A, 8.36% 2026 /2/ Bank of Scotland 7.00% (undated)/1/ /2/ 30,000 29,598 National Westminster Bank PLC 7.75% 16,000 16,641 .44 (undated) /1/ Skandinaviska Enskilda Banken AB:/1/ 6.50% (undated) /2/ 17,500 17,616 7.50% (undated) 23,000 22,643 .38 NB Capital Corp. 8.35% exchangeable 1,200,000 shares 31,008 depositary shares National Bank of Canada 5.188% $ 5,000 3,649 .33 (undated) /1/ Standard Chartered Bank: 8.00% 2031 /2/ 17,990 18,269 4.088% (undated) /1/ 5,000 3,464 5.625% Eurodollar Note (undated) /1/ 15,000 9,570 .30 GS Escrow Corp. 7.125% 2005 12,000 11,680 Golden State Holdings, Inc. 7.00% 2003 10,450 10,442 .21 DBS Bank Ltd. 7.875% 2009 /2/ 10,000 10,439 Development Bank of Singapore Ltd. 10,000 9,891 .19 7.125% 2011 /2/ Canadian Imperial Bank of Commerce 25,000 19,787 .19 Eurodollar Note 5.188% 2085 /1/ Barclays Bank PLC: /1/ /2/ 7.375% (undated) 10,875 10,824 8.55% (undated) 8,000 8,620 .18 AB Spintab: 6.00% 2009 SKr 23,000 2,122 6.80% (undated) /1/ /2/ $ 6,500 6,584 7.50% (undated) /1/ /2/ 11,000 10,718 .18 Abbey National PLC: /1/ 6.70% (undated) 7,500 7,178 7.35% (undated) 9,500 9,624 .16 Tokai Preferred Capital Co. LLC, Series 16,500 15,794 .15 A, 9.98%/11.091% noncumulative preferred (undated) /1/ /2/ Regional Diversified Funding Ltd. 9.25% 13,250 13,502 .13 2030 /2/ Bank One Texas, NA 6.25% 2008 7,250 7,159 BANK ONE CORP.: 6.50% 2006 2,500 2,535 7.875% 2010 3,000 3,216 .12 Chevy Chase Preferred Capital Corp. 228,300 shares 12,362 .12 10.375% Royal Bank of Scotland Group: 8.375% 2007 Euro 4,900 7,540 6.625% (undated) /1/ Euro 4,700 4,037 .11 Imperial Capital Trust I, Imperial $ 10,200 11,100 .10 Bancorp 9.98% 2026 Bank of America Corp.: 7.80% 2010 3,000 3,187 7.40% 2011 7,000 7,271 .10 BCI U.S. Funding Trust I 8.01% 10,000 10,051 .09 (undated) /1/ /2/ J.P. Morgan & Co. Inc., Series A, 10,000 9,091 6.655% 2012 /1/ J.P. Morgan Chase & Co. 6.75% 2011 750 752 .09 Allfirst Preferred Capital Trust 6.26% 10,000 9,618 .09 2029 /1/ BankUnited Capital Trust, BankUnited 10,000 8,925 .08 Financial Corp., 10.25% 2026 Riggs Capital Trust II 8.875% 2027 7,500 5,052 Riggs National Corp. 8.625% 2026 4,400 3,243 .08 Komercni Finance BV: /1/ 9.00%/10.75% 2008 3,100 3,216 9.00%/10.75% 2008 /2/ 4,620 4,793 .08 Bank of Nova Scotia 5.188% Eurodollar 10,000 7,805 .07 Note (undated) /1/ Lloyds Bank (#2) 4.188% (undated) /1/ 8,000 6,548 .06 UBS Preferred Funding Trust 1 8.622% 5,500 5,955 .06 (undated) Allied Irish Banks Ltd. 4.875% 7,000 5,480 .05 (undated) /1/ Bay View Capital 9.125% 2007 5,500 5,005 .05 Halifax Building Society 8.75% 2006 Euro 3,000 4,663 .04 Bergen Bank 5.188%(undated) /1/ $ 5,000 3,725 .03 Christiana Bank Og Kreditkasse 4.25% 4,000 3,083 .03 (undated) /1/ Banco General, SA 7.70% 2002 /2/ 500 497 .00 836,073 7.89 MEDIA - 7.66% Charter Communications Holdings, LLC: 10.75% 2009 4,000 4,230 0%/11.75% 2010 /3/ 5,600 3,752 0%/9.92% 2011 /3/ 48,000 32,640 11.125% 2011 16,763 17,769 0%/11.75% 2011 /2/ /3/ 54,750 32,029 0%/13.50% 2011 /3/ 48,500 30,555 Avalon Cable Holdings LLC 0%/11.875% 5,625 4,219 1.18 2008 /3/ Liberty Media Corp.: 7.875% 2009 39,880 38,118 8.50% 2029 11,500 10,309 8.25% 2030 39,500 33,925 .78 Fox/Liberty Networks, LLC, FLN Finance, Inc.: 8.875% 2007 25,550 26,700 0%/9.75% 2007 /3/ 36,325 34,145 .57 Comcast UK Cable Partners Ltd. 32,790 21,969 11.20% 2007 NTL Communications Corp.: 11.50% 2008 6,750 4,455 12.375% 2008 Euro 6,500 4,080 12.375% 2008 /2/ 750 459 9.875% 2009 3,350 1,819 0%/11.50% 2009 /3/ 21,000 6,769 11.875% 2010 $ 3,000 1,995 NTL Inc.: 12.75% 2005 17,750 13,135 0%/9.75% 2008 /3/ 7,250 3,226 .55 Adelphia Communications Corp.: 10.50% 2004 2,000 2,050 8.375% 2008 5,000 4,575 Series B, 13.00% preferred 2009 /4/ 62,385 shares 5,958 10.875% 2010 $ 1,250 1,259 10.25% 2011 27,350 27,077 Century Communications Corp. 8.75% 2007 2,200 2,079 FrontierVision 11.00% 2006 700 726 .41 Young Broadcasting Inc.: Series B, 9.00% 2006 2,250 2,137 Series B, 8.75% 2007 14,250 13,252 10.00% 2011 /2/ 21,000 20,055 .33 Emmis Communications Corp. 0%/12.50% 54,750 31,207 .30 2011 /2/ /3/ Fox Family Worldwide, Inc.: 9.25% 2007 5,095 5,120 0%/10.25% 2007 /3/ 28,387 25,264 .29 Chancellor Media Corp. of Los Angeles: Series B, 8.75% 2007 8,625 8,905 8.00% 2008 5,000 5,200 Clear Channel Communications, Inc. 10,000 10,366 .23 7.65% 2010 TeleWest PLC 9.625% 2006 4,700 3,995 Telewest Communications PLC: 11.25% 2008 1,300 1,183 9.875% 2010 15,200 12,844 0%/11.375% 2010 /3/ 12,500 6,187 .23 Antenna TV SA: 9.00% 2007 9,750 9,616 9.75% 2008 Euro 16,000 13,639 .22 Key3Media Group, Inc. 11.25% 2011 $ 21,550 21,442 .20 Viacom Inc.: 6.40% 2006 5,000 5,070 7.70% 2010 8,000 8,415 6.625% 2011 /2/ 8,000 7,843 .20 Telemundo Holdings, Inc., Series A, 25,375 20,681 .20 0%/11.50% 2008 /3/ British Sky Broadcasting Group PLC 19,500 19,309 .18 8.20% 2009 American Media Operations, Inc. 17,320 17,840 .17 10.25% 2009 Cablevision Industries Corp.: 8.125% 2009 9,250 9,156 9.875% 2013 2,000 2,100 CSC Holdings, Inc., Series B, 8.125% 5,000 4,950 .15 2009 Cox Radio, Inc. 6.375% 2005 16,000 15,882 .15 Penton Media, Inc. 10.375% 2011 /2/ 15,775 15,617 .15 Lenfest Communications, Inc.7.625% 2008 6,750 6,934 Comcast Cable Communications, Inc. 3,500 3,428 .10 6.75% 2011 TransWestern Publishing Co. LLC: 9.625% 2007 7,250 7,304 9.625% 2007 /2/ 2,250 2,267 .09 A.H. Belo Corp.: 7.75% 2027 8,000 7,171 7.25% 2027 2,500 2,112 .09 News America Holdings Inc.: 6.625% 2008 4,000 3,882 8.625% 2014 A$ 3,250 1,657 8.875% 2023 $ 1,800 1,901 8.15% 2036 1,600 1,572 .09 The Ackerley Group, Inc., Series B, 10,000 8,900 .08 9.00% 2009 Cumulus Media Inc. 13.75% preferred 9,210 shares 8,657 .08 2009 /4/ /5/ ACME Television, LLC, Series A, $ 8,000 7,720 .07 10.875% 2004 Carmike Cinemas, Inc., Series B, 11,425 6,855 .07 9.375% 2009 /6/ Multicanal Participacoes SA, Series B, 6,875 6,789 .06 12.625% 2004 United Pan-Europe Communications NV: 10.875% 2009 12,525 4,509 10.875% 2009 Euro 2,500 786 11.50% 2010 $ 2,675 1,023 0%/13.75% 2010 /3/ 2,500 400 .06 RBS Participacoes SA 11.00% 2007 /2/ 7,250 6,108 .06 Radio One, Inc. 8.875% 2011 /2/ 5,500 5,527 .05 Hearst-Argyle Television, Inc. 6,050 5,400 .05 7.00% 2018 Sun Media Corp. 9.50% 2007 5,139 5,139 .05 STC Broadcasting, Inc. 11.00% 2007 3,250 3,234 .03 Sinclair Capital 11.625% preferred 2009 33,750 shares 3,206 .03 V2 Music Holdings PLC 6.50% convertible $ 11,633 3,141 .03 debentures 2012 /2/ /7/ Globo Comunicacoes e Participacoes Ltd.: 10.50% 2006 /2/ 2,860 2,452 10.50% 2006 690 592 .03 Big City Radio, Inc. 11.25% 2005 5,425 2,333 .02 Gray Communications Systems, Inc. 2,000 2,030 .02 10.625% 2006 Time Warner Companies, Inc.: 9.15% 2023 500 576 6.95% 2028 500 463 .01 811,365 7.66 WIRELESS TELECOMMUNICATION SERVICES - 4.44% Nextel Communications, Inc.: 0%/9.75% 2007 /3/ 64,450 41,892 0%/10.65% 2007 /3/ 9,000 6,120 0%/9.95% 2008 /3/ 75,825 48,528 12.00% 2008 5,000 4,500 Series D, 13.00% exchangeable 1,250 shares 775 preferred 2009 /4/ /5/ 5.25% convertible senior notes 2010 $ 10,000 6,100 Series E, 11.125% exchangeable 616 shares 339 preferred, redeemable 2010 /4/ /5/ Nextel Partners, Inc.: 0%/14.00% 2009 /3/ $ 28,314 16,510 11.00% 2010 10,400 8,216 11.00% 2010 14,566 11,507 McCaw International, Ltd. 0%/13.00% 34,350 11,335 2007 /3/ Nextel International, Inc.: 0%/12.125% 2008 /3/ 15,500 4,650 12.75% 2010 6,000 2,100 1.53 Dobson Communications Corp.: 12.25% exchangeable preferred, 39,495 shares 36,335 redeemable 2008 /4/ /5/ 13.00% echangeable preferred stock 4,759 4,521 2009 /4/ /5/ 10.875% 2010 $ 17,500 17,500 Dobson/Sygnet Communications Co. 7,500 7,575 12.25% 2008 American Cellular Corp. 9.50% 2009 /2/ 4,250 4,016 .66 AT&T Wireless Services, Inc.: /2/ 7.35% 2006 11,000 11,240 7.875% 2011 43,975 44,064 8.75% 2031 10,000 10,390 .62 Leap Wireless International, Inc.: 12.50% 2010 23,525 15,762 0%/14.50% 2010 /3/ /8/ 42,487 12,920 Cricket Communications, Inc. 9.438% 18,535 12,881 .39 2007 /1/ Vodafone Group PLC 7.75% 2010 27,125 28,544 .27 Centennial Cellular Corp. 10.75% 2008 24,275 23,061 .22 CFW Communications Co. 13.00% 2010 /8/ 30,155 22,190 .21 TeleCorp PCS, Inc.: 0%/11.625% 2009 /3/ 10,750 6,772 10.625% 2010 2,000 1,860 Tritel PCS, Inc. 10.375% 2011 6,000 5,475 .13 PanAmSat Corp.: 6.00% 2003 2,400 2,394 6.125% 2005 5,250 5,047 6.375% 2008 1,250 1,114 6.875% 2028 1,000 767 .09 Cellco Finance NV: 12.75% 2005 6,000 4,860 15.00% 2005 500 419 .05 PTC International Finance BV 5,950 4,775 .05 0%/10.75% 2007 /3/ Price Communications Wireless, Inc., 4,625 4,717 .04 Series B, 9.125% 2006 Mannesmann Financials 4.75% 2009 Euro 6,000 4,661 .04 Triton PCS, Inc. 9.375% 2011 $ 4,000 3,900 .04 Microcell Telecommunications Inc., 4,065 3,069 .03 Series B, 0%/14.00% 2006 /3/ AirGate PCS, Inc. 0%/13.50% 2009 /3/ 5,123 2,971 .03 PageMart Wireless, Inc.: 15.00% 2005 /6/ 14,750 1,180 0%/11.25% 2008 /3/ 40,500 1,316 .02 Telesystem International Wireless Inc. 6,000 1,320 .01 0%/13.25% 2007 /3/ Teletrac, Inc. 9.00% 2004 /2/ /5/ /7/ 822 658 .01 470,846 4.44 DIVERSIFIED TELECOMMUNICATION SERVICES - 3.53% France Telecom: /2/ 7.20% 2006 13,050 13,442 7.75% 2011 47,250 48,135 8.50% 2031 26,000 27,191 Orange PLC 8.75% 2006 8,000 8,500 .92 Voicestream Wireless Corp.: 10.375% 2009 20,456 23,208 0%/11.875% 2009 /3/ 17,000 13,978 Omnipoint Corp. 11.50% 2009 /2/ /7/ 13,650 15,288 Deutsche Telecom International Finance 8,500 8,795 .58 BV 8.00% 2010 British Telecommunications PLC: 8.125% 2010 22,500 23,737 6.875% 2011 Euro 2,000 1,716 8.625% 2030 $ 25,500 27,671 .50 TELUS Corp.: 7.50% 2007 25,650 25,961 8.00% 2011 10,450 10,664 .35 Bell Atlantic Financial Services, Inc. 35,750 35,035 .33 4.25% convertible debentures 2005 /2/ TCI Communications, Inc.: 8.00% 2005 10,000 10,640 8.75% 2015 5,000 5,607 .15 Allegiance Telecom, Inc.: 0%/11.75% 2008 /3/ 10,000 5,900 12.875% 2008 10,610 9,337 .15 CenturyTel, Inc., Series H, 8.375% 2010 14,000 14,625 .14 Hellenic Telecommunications Organization Euro 16,000 13,571 .13 SA 2.00% convertible note 2005 SBC Communications Inc. 5.75% 2006 $ 10,000 9,918 .09 COLT Telecom Group PLC: 0%/12.00% 2006 /3/ 5,250 4,882 8.875% 2007 DM 5,000 1,952 7.625% 2008 4,575 1,667 .08 WCG Note Trust 8.25% 2004 /2/ $ 3,500 3,492 .03 Hyperion Telecommunications, Inc., 4,250 3,230 .03 Series B, 13.00% 2003 BellSouth Capital Funding Corp., 2,000 2,158 .02 7.75% 2010 NEXTLINK Communications, Inc.: 12.50% 2006 3,000 990 0%/12.125% 2009 /3/ 3,975 596 XO Communications, Inc. (formerly 710 shares 4 .01 NEXTLINK Communications, Inc.) 14.00% preferred 2009 /4/ /5/ VersaTel Telecom International NV 4.00% Euro 5,075 1,291 .01 convertible notes 2005 IMPSAT Corp. 12.375% 2008 $ 2,500 831 .01 Viatel, Inc.: /6/ 11.15% 2008 DM 7,000 61 0%/12.40% 2008 /3/ 3,500 30 0%/12.50% 2008 /3/ $ 8,950 201 .00 374,304 3.53 AIRLINES - 3.19% Continental Airlines, Inc., pass-through certificates: /9/ Series 1998-3, Class C-1, 7.08% 2004 2,320 2,381 Series 1998-3, Class C-2, 7.25% 2005 12,000 12,285 Series 1999-2, Class C-2, 7.434% 2006 2,000 2,050 Series 1997-1, Class C, 7.42% 2007 /1/ 1,933 1,984 Series 1998-3, Class A-2, 6.32% 2008 15,000 14,588 Series 1999-2, Class A-2, 7.056% 2011 2,000 1,982 Series 2000-2, Class C, 8.312% 2011 4,000 4,193 Series 1996-2, Class B, 8.56% 2014 1,701 1,790 Series 1999-1, 10.22% 2014 5,216 5,740 Series 1997-1, Class B, 7.461% 2014 928 936 Series 1996, Class B, 7.82% 2015 11,307 11,830 Series 2001-1, Class B, 7.373% 2015 3,025 3,016 Series 1996-2, Class D, 11.50% 2016 2,171 2,341 Series 1997-1 Class A, 7.461% 2016 15,047 15,513 Series 1997-4, Class A, 6.90% 2018 27,882 27,699 Series 2000-2, Class B, 8.307% 2018 2,000 2,082 Series 1998-1, Class A, 6.648% 2019 34,198 33,333 Series 1999-1, Class B, 6.795% 2020 16,881 16,293 Series 1999-1, Class A, 6.545% 2020 5,616 5,438 Series 2000-1, Class A-1, 8.048% 2020 11,671 12,451 Series 2000-1, Class B, 8.388% 2020 4,444 4,731 1.72 US Airways, Pass Through Trust, pass-through certificates: /9/ Series 2000-2G, 8.02% 2019 14,000 14,840 Series 2000-3G, 7.89% 2020 25,400 26,556 Series 2001-1G, 7.076% 2021 15,775 15,638 USAir, Inc., Pass Through Trust, 2,250 2,096 .56 pass-through certificates, Series 1993-A3, 10.375% 2013 /9/ Jet Equipment Trust: /2/ Series 1994-A, Class B1, 11.79% 2013 4,000 4,175 Series 1995-B, 10.91% 2014 5,000 5,002 Series 1995-D, 11.44% 2014 10,000 10,287 Series 1995-B, Class A, 7.63% 2015 /9/ 3,837 3,838 Series 1995-B, Class C, 9.71% 2015 /9/ 5,500 5,619 Series 1995-A, Class C, 10.69% 2015 /9/ 2,750 2,912 .30 Delta Air Lines, Inc., 1990 Equipment trust certificates: /2/ /9/ Series I, 10.00% 2014 5,000 5,165 Series J, 10.00% 2014 5,000 5,165 Series F, 10.79% 2014 1,700 1,845 Delta Air Lines, Inc., pass-through 11,500 11,277 .22 certificates, Series 1992-A2, 9.20% 2014 /9/ American Airlines, Inc., pass-through certificates: /9/ Series 2001-1, Class B, 7.377% 2009 /2/ 10,000 10,051 Series 1991-C2, 9.73% 2014 6,410 6,908 .16 United Air Lines, Inc., pass-through certificates: Series 2000-1, Class A-2, 7.73% 2010 4,000 4,206 Series 1995-A2, 9.56% 2018 8,000 8,101 .12 AIR 2 US, Series A, 8.027% 2020 /2/ /9/ 11,283 12,020 .11 338,357 3.19 ELECTRIC UTILITIES - 2.22% Israel Electric Corp. Ltd.: /2/ 7.75% 2009 26,125 26,055 7.95% 2011 9,050 9,113 7.70% 2018 8,500 7,850 7.875% 2026 15,000 13,584 7.75% 2027 15,545 13,864 8.10% 2096 14,405 11,455 .77 Edison Mission Energy: 7.73% 2009 12,550 10,542 9.875% 2011 28,750 26,352 Edison Mission Holdings Co. 8.734% 20,200 18,636 2026 /9/ Midwest Generation, LLC, pass-through 8,000 7,495 certificates, Series B, 8.56% 2016 /9/ Mission Energy Holdings Co. 13.50% 6,000 5,955 2008 /2/ Edison International 6.875% 2004 3,375 2,784 .68 Exelon Generation Co., LLC 6.95% 23,775 23,665 2011 /2/ Exelon Corp. 6.75% 2011 10,200 10,058 Commonwealth Edison Co. 6.40% 2005 1,079 1,085 .33 AES Drax Holdings Ltd., Series A, 30,750 33,631 .32 10.41% 2020 /9/ Progress Energy, Inc. 7.10% 2011 5,000 5,055 .05 American Electric Power Co., Inc., 3,705 3,648 .03 Series A, 6.125% 2006 AES Ironwood, LLC 8.857% 2025 /9/ 3,500 3,592 .03 TXU Corp., Series J, 6.375% 2006 1,000 989 .01 235,408 2.22 COMMUNICATIONS EQUIPMENT - 2.18% Crown Castle International Corp.: 0%/10.625% 2007 /3/ 18,500 14,615 12.75% exchangeable preferred 2010 36,996 shares 34,406 /4/ /5/ (senior?) 0%/11.25% 2011 /3/ $ 7,500 4,950 10.75% 2011 28,500 28,215 .78 SpectraSite Holdings, Inc., Series B: 0%/12.00% 2008 /3/ 12,500 7,125 0%/11.25% 2009 /3/ 11,750 5,464 0%/12.875% 2010 /3/ 13,750 6,188 12.50% 2010 26,250 24,938 .41 Motorola, Inc.: 6.75% 2006 20,000 18,673 7.625% 2010 6,500 5,975 7.50% 2025 2,000 1,700 6.50% 2028 1,200 891 5.22% 2097 1,200 638 .26 SBA Communications Corp.: 0%/12.00% 2008 /3/ 6,525 5,090 10.25% 2009 23,500 21,150 .25 American Tower Corp. 9.375% 2009 /2/ 23,000 21,563 .20 Corning Inc. 0% convertible debentures 35,000 19,731 .19 2015 Adaptec, Inc. 4.75% convertible 10,000 8,712 .08 subordinated notes 2004 Lucent Technologies Inc. 7.25% 2006 2,000 1,480 .01 231,504 2.18 HOTELS, RESTAURANTS & LEISURE - 2.14% Royal Caribbean Cruises Ltd.: 7.00% 2007 13,850 12,582 6.75% 2008 7,050 6,200 8.75% 2011 29,825 28,437 7.50% 2027 7,500 5,759 .50 MGM Mirage Inc. 8.50% 2010 30,750 32,038 Mirage Resorts, Inc.: 6.625% 2005 1,000 986 6.75% 2008 6,750 6,397 7.25% 2017 10,075 8,810 .45 Premier Parks Inc.: 9.25% 2006 8,375 8,417 9.75% 2007 3,875 3,953 0%/10.00% 2008 /3/ 8,250 6,683 Six Flags Entertainment Corp. 5,000 5,100 8.875% 2006 Six Flags Inc. 9.50% 2009 /2/ 5,000 5,019 .28 Boyd Gaming Corp.: 9.25% 2003 13,475 13,643 9.50% 2007 6,500 6,305 .19 International Game Technology: 7.875% 2004 8,500 8,585 8.375% 2009 2,000 2,040 .10 William Hill Finance 10.625% 2008 Pound 6,243 9,481 .09 Ameristar Casinos, Inc. 10.75% 2009 /2/ $ 8,250 8,663 .08 Hollywood Casino Corp. 11.25% 2007 7,500 7,950 .07 Station Casinos, Inc.: 8.375% 2008 4,500 4,523 8.375% 2008 /2/ 2,500 2,513 .07 KSL Recreation Group, Inc. 10.25% 2007 6,600 6,699 .06 Horseshoe Gaming Holding Corp., 5,000 5,050 Series B, 8.625% 2009 Horseshoe Gaming, LLC, Series B, 1,000 1,065 .06 9.375% 2007 Harrah's Operating Co., Inc.: 7.875% 2005 5,000 5,075 7.125% 2007 /2/ 1,000 992 .06 Mandalay Resort Group 10.25% 2007 5,000 5,200 .05 Jupiters Ltd. 8.50% 2006 3,000 2,993 .03 Argosy Gaming Co. 10.75% 2009 2,000 2,150 .02 Carnival Corp. 6.15% 2008 2,000 1,878 .02 AMF Bowling Worldwide, Inc.: /6/ 10.875% 2006 3,239 259 12.25% 2006 13,550 1,084 0% convertible debentures 2018 /2/ /7/ 11,084 1 .01 226,530 2.14 INSURANCE - 1.88% ReliaStar Financial Corp.: 8.625% 2005 5,000 5,396 8.00% 2006 23,250 25,124 ING Capital Funding Trust III 8.439% 24,750 26,309 .54 (undated) /1/ Conseco Financing Trust II, Capital 39,600 27,126 Trust Pass-Through Securities (TRUPS), 8.70% 2026 /9/ Conseco Financing Trust III 8.796% 2027 9,275 6,353 .32 Royal & Sun Alliance Insurane Group PLC 22,750 24,327 .23 8.95% 2029 Equitable Life Assurance Society (USA) 11,500 11,883 6.95% 2005 /2/ AXA 6.75% 2020 /1/ Euro 12,200 10,625 .21 Allstate Corp. 6.75% 2018 $ 22,500 21,692 .21 UnumProvident Corp. 7.625% 2011 15,700 16,103 Unum Corp. 6.75% 2028 5,000 4,276 .19 Transamerica Corp. 9.375% 2008 7,500 8,394 .08 Aflac Inc. 6.50% 2009 5,875 5,769 .05 Lindsey Morden Group Inc., Series B, C$ 8,970 4,147 .04 7.00% 2008 /2/ /7/ American General Corp. 6.625% 2029 $ 1,285 1,216 .01 198,740 1.88 MULTILINE RETAIL - 1.68% J.C. Penney Co., Inc.: 7.375% 2004 3,500 3,325 7.05% 2005 21,000 19,635 6.00% 2006 1,600 1,360 6.50% 2007 3,750 3,225 7.60% 2007 18,500 17,020 7.375% 2008 4,975 4,428 6.875% 2015 5,725 4,466 7.65% 2016 14,300 11,440 7.95% 2017 39,325 31,460 9.75% 2021 /9/ 550 490 8.25% 2022 /9/ 12,275 9,575 8.125% 2027 2,175 1,631 7.40% 2037 7,825 7,160 7.625% 2097 18,055 12,761 1.21 Dillard's, Inc.: 5.79% 2001 4,500 4,475 6.125% 2003 7,435 7,034 6.43% 2004 4,450 4,152 6.17% REPS 2011 /1/ 7,500 7,490 6.625% 2018 1,500 1,137 7.13% 2018 4,000 3,181 7.00% 2028 1,500 1,146 .27 Kmart Corp. 9.78% 2020 /9/ 12,250 10,535 DR Securitized Lease Trust, pass- 8,000 6,720 .16 through certificates, Series 1994 K-2, 9.35% 2019 /9/ Saks Inc. 7.375% 2019 4,500 3,330 .03 Federated Department Stores, Inc. 1,250 1,200 .01 6.625% 2011 178,376 1.68 HEALTH CARE PROVIDERS & SERVICES - 1.25% Columbia/HCA Healthcare Corp.: 7.15% 2004 1,500 1,474 6.91% 2005 22,910 22,337 7.00% 2007 11,750 11,280 8.85% 2007 24,105 25,792 8.70% 2010 4,250 4,441 9.00% 2014 5,650 5,975 7.69% 2025 5,000 4,500 .72 Aetna Inc.: 7.375% 2006 15,000 14,901 7.875% 2011 24,250 23,501 .36 UnitedHealth Group Inc. 7.50% 2005 10,000 10,433 .10 Paracelsus Healthcare Corp. 10.00% 20,575 6,790 .06 2006 /6/ Integrated Health Services, Inc.:/6//7/ 10.25% 2006 /1/ 9,350 94 Series A, 9.50% 2007 12,175 122 Series A, 9.25% 2008 32,657 327 .01 Mariner Health Group, Inc. 9.50% 7,300 73 .00 2006 /6/ /7/ 132,040 1.25 PAPER & FOREST PRODUCTS - 1.23% Georgia-Pacific Corp.: 7.50% 2006 10,300 10,329 8.125% 2011 39,050 39,116 8.875% 2031 7,000 7,005 .53 Scotia Pacific Co. LLC, Series B: Class A-1, 6.55% 2028 /9/ 1,153 1,147 Class A-2, 7.11% 2028 31,400 26,745 Class A-3, 7.71% 2028 19,143 14,357 .40 Potlatch Corp. 10.00% 2011 /2/ 9,700 9,797 .09 Kappa Beheer BV: 10.625% 2009 Euro 3,500 3,170 0%/12.50% 2009 /3/ 9,500 6,158 .09 Grupo Industrial Durango, SA de CV $ 7,625 7,949 .08 12.625% 2003 Indah Kiat Finance Mauritius Ltd.: /6/ 11.875% 2002 3,800 1,036 10.00% 2007 12,075 2,506 .03 Pindo Deli Finance Mauritius Ltd.: /6/ 10.25% 2002 6,000 855 10.75% 2007 3,625 517 .01 APP International Finance Co. BV 275 69 .00 11.75% 2005 /6/ 130,756 1.23 CONSUMER FINANCE - 1.16% Capital One Bank: 8.25% 2005 4,500 4,646 6.875% 2006 22,500 22,013 Capital One Financial Corp.: 7.25% 2006 16,508 15,937 7.125% 2008 2,000 1,829 Capital One Capital I 5.864% 10,000 8,024 .49 2027 /1/ /2/ Household Finance Corp.: 7.875% 2007 20,000 21,425 6.75% 2011 3,000 2,960 .23 MBNA Corp., Capital B, Series B, 32,800 24,179 .23 5.14% 2027 /1/ Providian Financial Corp. 9.525% 16,750 13,397 .13 2027 /2/ Advanta Capital Trust I, Series B, 12,500 8,672 .08 8.99% 2026 123,082 1.16 COMMERCIAL SERVICES & SUPPLIES - 1.16% Waste Management, Inc.: 4.00% convertible debentures 2002 6,000 5,912 7.70% 2002 3,500 3,580 7.00% 2006 14,750 14,817 6.875% 2009 5,000 4,868 7.375% 2010 5,600 5,608 USA Waste Services, Inc.: 6.50% 2002 2,000 2,016 7.00% 2004 5,500 5,565 7.125% 2007 4,000 3,981 6.125% 2011 /1/ 8,428 8,429 WMX Technologies, Inc. 6.375% 2003 1,000 1,005 .53 Allied Waste North America, Inc. 28,475 29,258 10.00% 2009 Allied Waste Industries, Inc. 8.875% 5,250 5,368 .33 2008 /2/ Sotheby's Holdings, Inc. 6.875% 2009 20,000 16,000 .15 KinderCare Learning Centers, Inc., 7,650 7,574 .07 Series B, 9.50% 2009 Protection One Alarm Monitoring, Inc.: 6.75% convertible debentures 2003 5,000 3,256 13.625% 2005 /1/ 3,560 2,759 .06 Stericycle, Inc., Series B, 2,250 2,531 .02 12.375% 2009 122,527 1.16 REAL ESTATE - 1.05% CarrAmerica Realty Corp.: Series C, 8.55% cumulative redeemable 373,100 shares 9,253 .20 preferred Series B, 8.57% cumulative redeemable 473,600 11,674 preferred Irvine Co. 7.46% 2006 /2/ /7/ $ 15,000 14,810 Irvine Apartment Communities, LP 5,000 4,675 .18 7.00% 2007 ERP Operating LP: 6.95% 2011 3,000 2,979 7.125% 2017 5,000 4,683 7.57% 2026 8,000 8,327 .15 EOP Operating LP 6.75% 2008 11,500 11,320 .11 ProLogis Trust, Series D, 7.92% 342,000 shares 8,105 .08 preferred Simon DeBartolo Group, Inc., Series C, 150,000 6,600 .06 7.89% preferred cumulative step-up premium rate FelCor Suites LP 7.375% 2004 $ 6,250 6,062 .06 IAC Capital Trust, Series A, 8.25% 220,000 shares 5,390 .05 TOPRS preferred Archstone Communities Trust, Series C, 200,000 5,100 .05 8.625% convertible preferred New Plan Realty Trust, Series D, 7.80% 112,500 4,725 .04 preferred cumulative step-up premium rate Duke-Weeks Realty Corp., Series B, 100,000 4,300 .04 7.99% preferred cumulative step-up premium rate Nationwide Health Properties, Inc., 50,000 3,650 .03 Series A, 7.677% preferred cumulative step-up premium rate 111,653 1.05 METALS & MINING - 1.04% Freeport-McMoRan Copper & Gold Inc.: 7.50% 2006 $ 34,000 22,695 7.20% 2026 24,000 18,900 .39 BHP Finance Ltd.: 6.69% 2006 10,000 10,116 8.50% 2012 20,000 21,917 .30 Inco Ltd. 9.60% 2022 16,000 15,649 .15 Kaiser Aluminum & Chemical Corp.: 9.875% 2002 4,250 4,208 12.75% 2003 7,250 6,561 .10 Doe Run Resources Corp., Series B: 11.181% 2003 /1/ 3,000 904 11.25% 2005 14,950 4,504 .05 Phelps Dodge Corp. 8.75% 2011 4,000 3,935 .04 Oregon Steel Mills, Inc. 11.00% 2003 1,250 1,175 .01 110,564 1.04 OIL & GAS - 0.86% Clark Refining Term Loan 6.813% 16,000 12,480 2004 /1/ /7/ Clark USA, Inc., Series B, 10.875% 2005 8,100 6,642 Clark Oil & Refining Corp. 9.50% 2004 5,795 5,331 Clark Refining & Marketing, Inc. 200 166 .23 8.375% 2007 Petrozuata Finance, Inc., Series A, 19,750 17,626 .17 7.63% 2009 /2/ /9/ Pogo Producing Co. 10.375% 2009 14,500 15,660 .15 Pemex Finance Ltd.: /9/ 8.875% 2010 7,000 7,580 9.03% 2011 2,000 2,184 Series 1999-2, Class A3, 10.61% 4,000 4,753 .14 2017 /9/ PDVSA Finance Ltd.: /9/ 8.75% 2004 1,380 1,400 9.75% 2010 9,000 9,518 .10 OXYMAR 7.50% 2016 /2/ 8,500 6,715 .06 Newfield Exploration Co. 7.625% 2011 1,000 972 .01 91,027 .86 AUTOMOBILES - 0.83% Ford Motor Credit Co.: 5.25% 2008 DM 32,000 13,231 5.80% 2009 $ 37,000 34,134 7.375% 2011 5,625 5,699 .50 General Motors Acceptance Corp.: 5.85% 2009 15,000 14,097 7.75% 2010 9,750 10,190 .23 DaimlerChrysler North America Holding 10,000 10,241 .10 Corp. 7.25% 2006 87,592 .83 INDUSTRIAL CONGLOMERATES - 0.75% Swire Pacific Capital Ltd. 8.84% 1,670,000 shares 40,498 cumulative guaranteed perpetual capital securities /2/ Swire Pacific Offshore Financing Ltd. 230,000 5,808 .44 9.33% cumulative guaranteed perpetual preferred capital securities /2/ Hutchison Whampoa International Ltd. $ 33,125 32,962 .31 7.00% 2011 /2/ 79,268 .75 SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.74% Hyundai Semiconductor America, Inc.: /2/ 8.25% 2004 6,750 5,539 8.625% 2007 20,070 14,468 .19 Analog Devices, Inc. 4.75% convertible 11,850 10,881 .10 subordinated notes 2005 Vitesse Semiconductor Corp. 4.00% 12,675 10,096 .10 convertible subordinated debentures 2005 Micron Technology, Inc. 6.50% 2005 /2/ 11,000 9,900 .09 TriQuint Semiconductor, Inc. 4.00% 12,775 9,011 .09 convertible subordinated notes 2007 Cypress Semiconductor Corp. 3.75% 8,281 6,996 .07 convertible subordinated notes 2005 Conexant Systems, Inc. 4.00% 14,700 6,707 .06 convertible subordinated notes 2007 Zilog, Inc. 9.50% 2005 25,550 3,322 .03 Fairchild Semiconductor Corp. 1,550 1,496 .01 10.50% 2009 78,416 .74 CONTAINERS & PACKAGING - 0.73% Container Corp. of America: 10.75% 2002 4,800 4,908 9.75% 2003 32,409 33,219 Stone Container Corp. 9.75% 2011 /2/ 6,750 6,986 .43 Printpack, Inc.: Series B, 9.875% 2004 8,950 9,241 10.625% 2006 11,590 11,836 .20 Tekni-Plex, Inc., Series B, 12.75% 2010 7,000 5,705 .05 Packaging Corp. of America, Series B, 3,250 3,469 .03 9.625% 2009 Graham Packaging Co. 0%/10.75% 2009 /3/ 3,650 1,825 .02 77,189 .73 AEROSPACE & DEFENSE - 0.58% BAE SYSTEMS 2001 Asset Trust Pass Through Trusts, pass through certificates, Series 2001: /2/ /9/ Class B, 7.156% 2011 13,625 13,538 Class G, 6.664% 2013 23,000 23,012 .34 Raytheon Co. 8.30% 2010 13,000 13,613 .13 Loral Orion Network Systems, Inc. 20,760 9,134 .09 11.25% 2007 Earthwatch Inc., Series B, 7.00% 1,064,981 shares 2,437 .02 convertible preferred 2009 /2/ /4/ /5/ /7/ 61,734 .58 FOOD & DRUG RETAILING - 0.58% Rite Aid Corp.: 7.125% 2007 $ 3,250 2,730 11.25% 2008 /2/ 5,750 5,829 6.875% 2013 12,000 9,120 7.70% 2027 15,100 11,250 6.875% 2028 /2/ 16,450 11,186 .38 Delhaize America, Inc.: /2/ 7.375% 2006 4,500 4,596 8.125% 2011 12,000 12,472 .16 The Kroger Co. 6.80% 2011 4,425 4,331 .04 61,514 .58 FOOD PRODUCTS - 0.47% Nabisco, Inc.: 7.05% 2007 8,500 8,647 7.55% 2015 9,000 9,156 6.375% 2035 /1/ 14,900 14,915 .31 Gruma, SA de CV 7.625% 2007 8,000 7,140 .07 Fage Dairy Industry SA 9.00% 2007 4,000 3,780 .03 Aurora Foods Inc.: Series B, 9.875% 2007 1,250 1,113 Series D, 9.875% 2007 2,800 2,457 .03 Kellogg Co.: /2/ 6.60% 2011 1,400 1,356 7.45% 2031 1,800 1,775 .03 50,339 .47 AIR FREIGHT & COURIERS - 0.47% Atlas Air Inc., Pass Through Trust, pass-through certificates: /9/ Series 2000-1, Class B, 9.057% 2017 3,242 3,402 Series 1998-1, Class A, 7.38% 2019 40,758 40,556 Series 1999-1, Class A-1, 7.20% 2020 2,539 2,480 Series 2000-1, Class A, 8.707% 2021 3,519 3,800 .47 50,238 .47 TEXTILES & APPAREL - 0.47% VF Corp. 8.50% 2010 36,000 37,998 .36 Levi Strauss & Co: 6.80% 2003 4,850 4,292 11.625% 2008 8,425 7,625 .11 49,915 .47 MACHINERY - 0.34% John Deere Capital Corp. 8.625% 2019 16,850 17,667 .17 Cummins Capital Trust I 7.00% QUIPS 160,000 shares 8,180 .08 convertible preferred 2031 /2/ /4/ Terex Corp. 10.375% 2011 /2/ $ 7,750 7,789 .07 AGCO Corp. 9.50% 2008 /2/ 2,750 2,695 .02 36,331 .34 AUTO COMPONENTS - 0.27% TRW Inc.: 8.75% 2006 13,000 13,897 7.125% 2009 5,000 4,846 .18 Cooper Tire & Rubber Co. 7.25% 2002 4,000 4,077 .04 Tower Automotive, Inc. 5.00% 4,525 3,728 .03 convertible subordinated notes 2004 Tenneco Automotive Inc. 11.625% 2009 4,000 2,180 .02 28,728 .27 LEISURE PRODUCTS - 0.27% Hasbro, Inc.: 7.95% 2003 16,750 16,289 8.50% 2006 12,500 12,125 .27 28,414 .27 DIVERSIFIED FINANCIALS - 0.20% Heller Financial, Inc. 6.375% 2006 12,500 12,609 .12 AT&T Capital Corp. 6.60% 2005 9,000 9,148 .08 21,757 .20 CHEMICALS - 0.19% Equistar Chemicals LP: 6.50% 2006 7,800 6,859 8.75% 2009 5,000 4,594 .11 Reliance Industries Ltd.: /2/ 10.50% 2046 250 226 10.25% 2097 10,750 8,730 .08 20,409 .19 PHARMACEUTICALS - 0.17% Lilly Del Mar Inc. 5.499% 2029 /1/ /2/ 18,000 18,024 .17 MARINE - 0.17% International Shipholding Corp.: 9.00% 2003 5,750 5,750 Series B, 7.75% 2007 8,750 8,225 .13 Teekay Shipping Corp. 8.875% 2011 /2/ 3,500 3,553 .04 17,528 .17 SPECIALTY RETAIL - 0.16% Sunglass Hut International Ltd. 5.25% 11,150 10,373 .10 convertible debentures 2003 Office Depot Inc. 10.00% 2008 /2/ 6,500 6,435 .06 16,808 .16 ENERGY EQUIPMENT & SERVICES - 0.14% Colonial Pipeline Co. 7.75% 2010 /2/ 14,650 15,011 .14 BEVERAGES - 0.14% Canandaigua Wine Co., Inc.: Series C, 8.75% 2003 7,500 7,603 8.75% 2003 6,650 6,741 .14 14,344 .14 INTERNET & CATALOG RETAIL - 0.13% Amazon.com, Inc. 6.875% PEACS Euro 31,400 13,516 .13 convertible subordinated notes 2010 HOUSEHOLD DURABLES - 0.10% Salton/Maxim Housewares, Inc. $ 7,375 7,375 10.75% 2005 Salton, Inc. 12.25% 2008 /2/ 1,500 1,560 .08 Boyds Collection, Ltd. 9.00% 2008 1,806 1,801 .02 10,736 .10 CONSTRUCTION & ENGINEERING - 0.09% McDermott Inc. 9.375% 2002 11,250 9,338 .09 ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.08% Celestica Inc. 0% convertible 20,150 8,795 .08 debenture 2020 COMPUTERS & PERIPHERALS - 0.08% Compaq Computer Corp. 6.20% 2003 4,750 4,736 .05 First International Computer Corp. 3,000 3,570 .03 1.00% convertible debentures 2004 /2/ 8,306 .08 INTERNET SOFTWARE & SERVICES - 0.05% GT Group Telecom Inc., units 0%/13.25% $ 13,864 4,848 .04 2010 /2/ /3/ /7/ /8/ Exodus Communications, Inc. 11.625% 2010 1,500 540 .01 5,388 .05 ROAD & RAIL - 0.05% Union Pacific Capital Trust 6.25% TIDES 111,100 shares 5,229 .05 convertible preferred 2028 /2/ MULTI-UTILITIES - 0.05% Williams Companies, Inc. 7.625% 2019 $ 5,000 4,814 .05 PERSONAL PRODUCTS - 0.01% Elizabeth Arden, Inc., Series B, 625 661 .01 11.75% 2011 MORTGAGE-BACKED OBLIGATIONS /9/ PRIVATE ISSUE COMMERCIAL MORTGAGE-BACKED SECURITIES - 5.00% DLJ Commercial Mortgage Corp.: Series 1997-CF1, Class A1A, 7.40% 3,079 3,194 2006 /2/ Series 1998-CF1, Class A-1B, 6.41% 2008 10,000 9,993 Series 1999-CG1, Class A1B, 6.46% 2009 10,000 9,967 Series 1996-CF2, Class A1, 7.29% 10,000 10,408 2021 /2/ Series 1995-CF2, Class A1B, 6.85% 35,845 36,815 2027 /2/ Series 1998-CF1, Class A-1A, 6.14% 2031 16,691 16,902 Series 1998-CF2, Class A-1B, 6.24% 2031 10,000 9,862 .92 GMAC Commercial Mortgage Securities, Inc.: Series 1997-C1, Class A1, 6.83% 2003 3,354 3,405 Series 1997-C1, Class A3, 6.869% 2007 20,000 20,411 Series 1997-C1, Class D, 6.997% 2008 8,300 8,421 Series 1997-C2, Class C, 6.50% 2008 9,000 8,834 Series 1997-C2, Class E, 7.624% 2011 27,703 25,732 Series 1997-C2, Class C, 6.91% 2029 8,900 8,698 .71 Chase Commercial Mortgage Securities Corp.: Series 1996-1, Class A1, 7.60% 2005 2,365 2,472 Series 1999-1, Class B, 7.619% 2031 7,000 7,363 Series 1999-1, Class C, 7.625% 2031 5,000 5,205 Series 1998-1, Class A1, 6.34% 2030 12,714 12,952 Series 1998-2, Class A-2, 6.39% 2030 18,000 17,925 Series 1998-2, Class E, 6.39% 2030 10,000 9,240 Series 2000-1, Class A-1, 7.656% 2032 12,352 13,037 .64 Morgan Stanley Capital I Inc.: Series 1998-HF1, Class A-1, 6.19% 2007 20,752 21,040 Series 1998-WF2, Class A-1, 6.34% 2030 7,977 8,109 Series 1998-HF2, Class A-2, 6.48% 2030 17,000 17,054 Series 1999-FNV1, Class A-1 6.12% 2031 10,691 10,735 Series 1999-FNV1, Class A-2, 6.53% 2031 10,000 10,018 .63 L.A. Arena Funding, LLC, Series 1, 35,375 36,158 .34 Class A, 7.656% 2026 /2/ GS Mortgage Securities Corp. II, pass- through certificates, Series 1998-C1: /1/ Class D, 7.45% 2030 3,750 3,655 Class E, 7.45% 2030 31,076 29,610 .31 Merrill Lynch Mortgage Investors, Inc., pass-through certificates: /1/ Series 1995-C2, Class D, 8.216% 2021 354 357 Series 1995-C3, Class A-3, 7.058% 2025 25,555 26,326 Series 1996-C2, Class A-1, 6.69% 2028 5,771 5,804 .31 Bear Stearns Commercial Mortgage Securities Inc.: Series 1999-WF2, Class X, interest 307,920 5,924 only, 0.430% 2019 /1/ Series 1998-C1, Class A-1, 6.34% 2030 6,858 6,946 Series 1999-C1, Class X, interest only, 168,337 10,212 .22 1.287% 2031 /1/ Prudential Securities Secured Financing 18,000 17,818 .17 Corp., Commercial Mortgage Pass-Through Certificates, Series 1999-NRF1, Class C, 6.746% 2009 Commercial Mortgage, pass-through 13,776 13,744 .13 certificate, Series 2000-FL3A, Class D, 3.315% 2012 /1/ /2/ Commercial Mortgage Acceptance Corp.: Series 1998-C1, Class A-1, 6.23% 2007 8,338 8,437 Series 1998-C2, Class A-1, 5.80% 2030 3,748 3,762 .12 LB-UBS Commercial Mortgage Trust, 10,000 10,786 .10 Series 2000-C3, Class A-2, 7.95% 2010 Starwood Asset Receivables Trust, 10,000 10,032 .10 Series 2000-1, Class D, 5.256% 2022 /1/ /2/ Nomura Asset Securities Corp., 8,750 8,881 .08 Series 1998-D6, Class A-A1, 6.28% 2030 Mortgage Capital Funding, Inc., Series 6,589 6,701 .06 1998-MC1, Class A-1 6.417% 2030 Chase Manhattan Bank - First Union 5,000 5,252 .05 National Bank, Commercial Mortgage Trust, Pass -Through Certificates, Series 1999-1, Class A-2, 7.439% 2031 Asset Securitization Corp.: Series 1996-D3, Class A-1B, 7.21% 2026 3,000 3,112 Series 1997-D4, Class A-1A, 7.35% 2029 598 612 .04 J.P. Morgan Commercial Mortgage Finance Corp.: Series 1995-C1, Class A-2, 7.473% 2,637 2,685 2010 /1/ Series 1996-C3, Class A-1, 7.33% 2028 542 551 .03 Government Lease Trust Series 1999-GSA1, 2,422 2,448 .02 Class A1, 5.86% 2003 /2/ Structured Asset Securities Corp., pass- 2,199 2,216 .02 through certificates, Series 1996-CFL, Class D, 7.034% 2028 529,821 5.00 COLLATERALIZED MORTGAGE OBLIGATIONS - 1.89% Structured Asset Securities Corp.: /1/ /2/ Series 1998-RF1, Class A, 8.656% 2027 11,574 12,254 Series 1998-RF2, Class A, 8.574% 2027 33,402 35,239 Series 1999-RF1, Class A, 7.86% 2028 8,067 8,274 .53 CSFB Finance Co. Ltd., Series 1995-A, 42,400 41,128 .39 10.00% 2005 /1/ /2/ GE Capital Mortgage Services, Inc.: Series 1994-15, Class A10, 6.00% 2009 16,376 15,680 Series 1994-9, Class A9, 6.50% 2024 5,437 5,281 .20 Structured Asset Notes Transaction, Ltd., 13,782 14,035 .13 Series 1996-A, Class A1, 7.156% 2003 /2/ Residential Funding Mortgage Securities I, Inc.: Series 2001-S1, Class A-1, 7.00% 2016 6,146 6,316 Series 1998-S17, Class M-1, 6.75% 2028 3,879 3,787 .09 Ocwen Residential MBS Corp., Series 10,135 9,496 .09 1998-R1, Class AWAC, 5.487% 2040 /1/ /2/ Residential Asset Securitization Trust, 8,957 9,196 .09 Series 1997-A3, Class B1, 7.75% 2027 Security National Mortgage Loan Trust, 6,800 7,055 .07 Series 2000-1, Class A-2, 8.75% 2024 /2/ PNC Mortgage Securities Corp., Series 9,323 8,879 .08 1998-10, Class 1-B1, 6.50% 2028 /2/ First Nationwide, Series 1999-2, 4,918 4,862 .05 Class 1PA1, 6.50% 2029 Prudential Home Mortgage Securities Co., 3,763 3,771 .04 Inc., Series 1993-48, Class A-6, 6.25% 2008 Collateralized Mortgage Obligation 3,325 3,449 .03 Trust, Series 63, Class Z, 9.00% 2020 Travelers Mortgage Securities Corp., 2,936 3,245 .03 Series 1, Class Z2, 12.00% 2014 Financial Asset Securitization, Inc., 2,493 2,558 .02 Series 1997-NAM1, Class B1, 7.75% 2027 Nationsbanc Montgomery Funding Corp., 2,181 2,148 .02 Series 1998-5, Class A-1, 6.00% 2013 Bear Stearns Structured Securities Inc., 1,369 1,454 .01 Series 1997-2, Class AWAC, 6.262% 2036 /1/ /2/ GS Mortgage Securities Corp., 1,113 1,121 .01 Series 1998-2, Class M, 7.75% 2027 /2/ Chase Manhattan Bank, NA, Series 1993-I, 692 693 .01 Class 2A5, 7.25% 2024 199,921 1.89 OTHER - 0.43% Bayerische Vereinsbank 5.50% 2008 Euro 13,271 11,417 .11 Nykredit 6.00% 2029 DKr 103,769 11,300 .11 Allgemeine Hypotheken Bank AG 5.00% 2009 Euro 11,000 9,025 .08 Hypothekenbank in Essen AG 5.25% 2008 6,000 5,086 .05 ARENA BV, Series 2000-1, Class A, 6.10% 5,500 4,782 .03 2062 /1/ Rheinische Hypothekenbank Eurobond 5,000 3,970 .04 4.25% 2008 First Boston Mortgage Securities Corp., Series D: Class P-O, 0% 2017 $ 493 425 interet only, 10.965% 2017 481 106 .01 46,111 .43 AGENCY PASS-THROUGHS GOVERNMENT NATIONAL MORTGAGE ASSN. - 6.23% 6.00% 2029 83,980 81,277 .77 6.50% 2008 - 2031 45,493 45,031 .41 7.00% 2008 - 2031 248,875 251,059 2.37 7.50% 2007 - 2030 68,220 69,993 .66 8.00% 2017 - 2030 158,282 163,969 1.55 8.50% 2020 - 2029 7,738 8,087 .08 9.00% 2009 - 2022 7,550 7,956 .08 9.50% 2009 - 2021 6,309 6,654 .06 10.00% 2019 - 2022 23,511 26,084 .25 660,110 6.23 FANNIE MAE - 2.56% 6.00% 2029 9,826 9,430 .09 6.50% 2016 - 2031 89,500 89,120 .84 7.00% 2009 - 2031 65,997 66,402 .63 7.50% 2009 - 2030 41,149 42,015 .40 7.979% 2026 /1/ 4,983 5,129 .05 8.00% 2023 - 2031 43,375 44,813 .42 8.297% 2002 /1/ 3,820 3,828 .04 8.50% 2009 - 2027 1,526 1,601 .01 9.00% 2018 - 2022 1,396 1,498 .01 9.50% 2009 148 159 .00 10.00% 2018 3,874 4,280 .04 12.00% 2019 2,430 2,784 .03 271,059 2.56 FREDDIE MAC - 0.14% 8.00% 2003 - 2026 2,801 2,882 .03 8.25% 2007 884 919 .01 8.50% 2002 - 2027 8,184 8,616 .08 8.75% 2008 1,130 1,192 .01 11.00% 2018 700 785 .01 14,394 .14 AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS - 0.61% Fannie Mae: Series 90-93, Class G, 5.50% 2020 392 387 Series 93-247, Class Z, 7.00% 2023 5,036 5,066 Series 1994-4, Class ZA, 6.50% 2024 4,448 4,316 Series 2001-4, Class GA, 10.02% 4,977 5,358 2025 /1/ Series 2001-4, Class NA, 11.669% 22,850 25,625 2025 /1/ 6.50% 2028 /2/ 4,742 4,294 Series 2001-20, Class E, 9.610% 2031 1,098 1,169 Series 2001-20, Class C, 11.473% 2031 1,226 1,378 .45 Freddie Mac: Series 1849, Class Z, 6.00% 2008 6,778 6,628 Series 2310, Class A, 10.531% 2017 7,031 7,655 Series 41, Class F, 10.00% 2020 1,297 1,361 Series 178, Class Z, 9.25% 2021 1,093 1,149 .16 64,386 .61 ASSET-BACKED OBLIGATIONS /9/ CREDIT CARD - 1.42% Metris Master Trust: /1/ Series 1998-1A, Class C, 4.934% 15,000 14,791 2005 /2/ Series 1997-2, Class C, 5.134% 2006 /2/ 14,400 14,352 Series 2001-2, Class B, 5.16% 2009 10,000 10,001 .37 First Consumer Master Trust, Series 35,000 35,591 .34 1999-A, Class A, 5.80% 2005 /2/ NextCard Credit Card Master Note Trust: /1/ /2/ Series 2000-1, Class B, 4.78% 2006 14,125 14,091 Series 2001-1A, Class B, 4.78% 2007 6,000 5,999 .19 H.S. Receivables Corp., Series 1999-1, 15,469 15,886 .15 Class A, 8.13% 2006 /2/ MBNA Master Credit Card Trust: /2/ Series 1999-D, Class B, 6.95% 2008 4,700 4,725 Series 1998-E, Class C, 6.60% 2010 5,000 4,900 .09 Providian Master Trust, Series 2000-3, 8,750 9,001 .08 Class C, 7.60% 2007 /2/ Capital One Secured Note Trust, Series 4,250 4,228 1999-2, 4.58% 2005 /1/ /2/ Capital One Master Trust, Series 1999-1, 2,500 2,541 .06 Class C, 6.60% 2007 /2/ First USA Credit Card Master Trust, 6,630 6,463 .06 Class A Floating Rate, Series 1997-4, 4.97% 2010 /1/ /2/ BA Master Credit Card Trust, Series 6,000 5,987 .06 1998-A, Class B, 4.393% 2005 /1/ Hitachi Shinpan Co. Ltd., Series 1999-3, 1,708 1,792 .02 Class A, 9.60% 2006 /2/ 150,348 1.42 AIRPLANE ETC - 1.33% Pegasus Aviation Lease Securitization: /2/ Series 2000-1, Class A-2, 8.37% 2030 51,000 53,382 Series 2001-1, Class B-1, 5.511% 9,916 9,903 .60 2031 /1/ Airplanes Pass Through Trust, pass- 57,840 55,093 .52 through certificates, Class 1-C, 8.15% 2019 /9/ Lease Investment Flight Trust, Series 15,000 14,981 .14 2001-1, Class A3 4.41% 2016 /1/ /2/ Triton Aviation Finance, Series 1a, 7,381 7,382 .07 Class A2, 4.68% 2025 /1/ /2/ 140,741 1.33 ASSET-BACKED SECURITIES - 0.77% NPF XII, Inc.: /2/ Series 1999-3, Class B, 5.013% 2003 /1/ 3,000 2,999 Series 1999-2, Class A, 7.05% 2003 15,000 15,272 Health Care Receivables Securitization 7,000 7,003 Program, Series 2001-1, Class A, 4.613% 2004 /1/ NPF VI, Inc., Series 1999-1, Class A, 5,000 5,049 .29 6.25% 2003 /2/ Garanti Trade Payment Rights Master 26,296 26,202 .25 Trust, Series 1999-B, Class 1, 10.81% 2004 /2/ Puerto Rico Public Financing Corp., 21,484 21,376 .20 Series 1999-1, Class A, 6.15% 2008 Grupo Financiero Banamex Accival, 3,952 3,635 .03 SA de CV 0% 2002 /2/ 81,536 .77 MANUFACTURED HOUSING - 0.68% Green Tree Financial Corp., pass-through certificates: Series 1995-A, Class NIM, 7.25% 2005 1,077 1,076 Series 1993-2, Class B, 8.00% 2018 2,250 2,112 Series 1995-3, Class B-2, 8.10% 2025 5,000 3,047 Series 1995-8, Class B2, 7.65% 2026 8,197 4,553 Series 1995-6, Class B2, 8.00% 2026 2,790 1,673 Series 1996-7, Class A6, 7.65% 2027 2,093 2,161 Series 1996-6, Class B2, 8.35% 2027 10,309 6,085 Series 1996-5, Class B-2, 8.45% 2027 6,742 4,037 Series 1996-10, Class A-6, 7.30% 2028 8,489 8,544 Series 1997-8, Class B-2, 7.75% 2028 3,120 1,692 Series 1998-4, Class B2, 8.11% 2028 13,350 7,555 Series 1997-6, Class A7, 7.14% 2029 15,699 16,131 Series 1997-6, Class B-2, 7.75% 2029 4,991 2,927 Series 1999-3, Class A-7, 6.74% 2031 10,500 10,211 .68 71,804 .68 AUTO LOAN - 0.61% MMCA Auto Owner Trust: Series 2000-2, Class B Asset Backed 7,000 7,336 Notes, 7.42% 2005 Series 2000-1, Class B Asset Backed 14,750 15,358 Notes, 7.55% 2005 Series 2001-2, Class B Asset Backed 9,000 8,964 .30 Notes, 5.75% 2007 Prestige Auto Receivables Trust, Series 10,707 10,694 .10 2001-1A, Class A, 5.26% 2009 /2/ Drive Auto Receivables Trust, Series 6,811 6,939 .07 2000-1, Class A, 6.672% 2006 /2/ Continental Auto Receivables Owner 5,261 5,431 .05 Trust, Series 2000-B, Class CTFS, 7.11% 2007 /2/ Team Fleet Financing Corp., 5,271 5,324 .05 Series 1996-1, Class A, 6.65% 2002 /2/ Triad Auto Receivables Owner Trust, 2,413 2,456 .02 Series 1999-1, Class A2, 6.09% 2005 FACTA Securitization LLC, Series 2000-A: /2/ Class A, 8.00% 2004 890 902 Class B, 8.96% 2004 1,219 1,226 .02 64,630 .61 HOME EQUITY - 0.56% Residential Funding Mortgage Securities II: Series 2001-HS2, Class AIO, interest 16,250 2,633 only, 7.25% 2003 Series 2000-HI5, Class AI4, 6.94% 2014 9,000 9,185 Series 2001-HS2, Class A4, 6.43% 2016 11,500 11,346 .22 Chase Funding Mortgage Loan Asset-Backed Certificates: Series 2001-2, Class IA-3, 5.923% 2016 7,000 6,940 Series 2001-1, Class IA-4, 6.573% 2026 6,500 6,500 .13 Ditech Home Loan Owner Trust, Series 10,500 10,149 .09 1998-1, Class B1, 9.50% 2029 Asset-Backed Securities Corp. Home 82,960 6,695 .06 Equity Loan, Series 2001-HE2, Class AIO, interest only, 4.50% 2031 Impac Secured Assets Corp., mortgage 20,230 2,816 .03 pass through certificates, Series 2001-4, Class A-IO, interest only, 8.00% 2003 GMACM Home Equity Loan Trust, Series 2001-HE1, Class A-IO, interest only, 16,500 2,756 .03 8.00% 2003 59,020 .56 STRANDED ASSET - 0.38% PP&L Transition Bond Co. LLC, Series 27,500 28,888 .27 1999-1, Class A-7, 7.05% 2009 Peco Energy Transition Trust, Series 8,000 8,033 .08 1999-A, Class A6, 6.05% 2009 ComEd Transitional Funding Trust, 3,500 3,541 .03 Transitional Funding Trust Note, Series 1998, Class A-4, 5.39%, 2005 40,462 .38 FRANCHISE/EQUIPMENT - 0.19% GRCT Consumer Loan Trust, Series 14,988 14,953 .14 2001-1A, Class 2BRV, 6.251% 2020 /2/ Green Tree Recreational, Equipment and 8,500 5,364 .05 Consumer Trust, Series 1997-D, Class CTFS, 7.25% 2029 20,317 .19 HOME IMPROVEMENT - 0.18% FIRSTPLUS Home Loan Owner Trust: Series 1997-1, Class A-7, 7.16% 2018 10,000 10,168 Series 1997-3, Class B-1, 7.79% 2023 3,778 3,608 .13 The Money Store Trust, Series 1996-D, 4,000 4,086 .04 Class A-14, 6.985% 2016 Green Tree Financial Corp., Series 1,000 1,004 .01 1997-A, Class HI-M1, 7.47% 2023 18,866 .18 GOVERNMENT OBLIGATIONS U.S. GOVERNMENT U.S. TREASURY NOTES & BONDS - 8.75% 3.625% July 2002 /10/ 3,865 3,937 5.75% April 2003 20,000 20,516 10.75% May 2003 7,500 8,358 11.875% November 2003 37,100 43,129 5.25% May 2004 48,180 49,008 11.625% November 2004 91,500 110,644 7.50% February 2005 15,000 16,324 7.00% July 2006 1,500 1,627 3.375% January 2007 /10/ 283,807 287,089 9.125% May 2009 18,000 20,087 10.375% November 2009 12,500 14,582 10.00% May 2010 12,500 14,652 5.00% February 2011 8,430 8,178 10.375% November 2012 24,500 30,989 12.00% August 2013 10,000 13,839 8.875% August 2017 140,475 184,396 8.125% May 2021 36,250 45,550 6.125% November 2027 25,750 26,506 5.25% November 2028 24,590 22,461 Strip Principal 0% 2030 25,840 5,086 8.75 926,958 8.75 NON-PASS-THROUGH AGENCY SECURITIES FANNIE MAE BONDS & NOTES - 0.13% Medium Term Note, 6.75% 2028 15,000 13,997 .13 FREDDIE MAC BONDS & NOTES - 0.10% 5.75% 2010 Euro 12,000 10,461 .10 GOVERNMENTS & GOVERNMENTAL BODIES (EXCLUDING U.S.) NON-U.S. GOVERNMENT OBLIGATIONS - 5.60% Deutschland Republic 5.25% 2008 82,000 70,957 Bundesrepublik: 6.00% 2007 23,827 21,459 5.25% 2010 34,350 29,604 Treuhandanstalt 7.125% 2003 22,376 19,733 1.34 United Mexican States Government Eurobonds, Global: 9.875% 2010 $ 16,000 17,544 8.375% 2011 8,000 8,072 11.375% 2016 28,445 34,390 .57 Canadian Government: 9.00% 2004 C$ 10,000 7,312 4.25% 2026 /10/ 62,636 45,897 .50 Hellenic Republic: 8.90% 2004 Euro 14,380 13,537 2.90% 2007 Yen 1,270,000 11,273 8.60% 2008 Euro 22,010 22,196 7.50% 2013 1,820 1,774 .46 Japanese Government: 0.90% 2008 Yen 1,400,000 11,313 1.90% 2010 3,850,000 33,120 .42 Polish Government: 12.00% 2003 PLZ 11,000 2,604 8.50% 2004 15,000 3,194 8.50% 2005 37,600 7,929 Series 0605, 8.50% 2005 22,525 4,700 8.50% 2005 50,000 10,418 8.50% 2006 48,000 9,927 .37 United Kingdom: 6.50% 2003 Pound 11,750 16,979 8.50% 2005 12,000 18,917 .34 Spanish Government 6.00% 2008 Euro 36,061 31,943 .30 French Treasury Note 4.50% 2003 28,000 23,828 .22 Kingdom of Denmark 6.00% 2009 DKr 190,000 22,668 .21 Norwegian Government: 6.75% 2007 NOK 75,000 8,021 5.50% 2009 124,500 12,392 .19 New South Wales Treasury Corp. 8.00% A$ 26,000 14,549 .14 2008 Italian Government BTPS Eurobond Euro 16,204 14,367 .13 6.00% 2007 Argentina (Republic of): Series C, 0% 2001 $ 6,250 6,172 Series E, 0% 2003 1,000 753 7.00%/15.50% 2008 /3/ /9/ 3,370 2,553 12.25% 2018 /9/ 912 650 12.00% 2031 1,675 1,198 .11 Panama (Republic of): 9.625% 2011 500 508 Interest Reduction Bond 4.50% 2014 /1/ 8,990 7,979 10.75% 2020 210 223 8.875% 2027 250 229 9.375% 2029 675 699 .09 Brazil (Federal Republic of): Eligible Interest Bond 5.438% 1,044 932 2006 /1/ /9/ 5.50% 2009 /1/ /2/ /9/ 626 512 Bearer 8.00% 2014 /5/ /9/ 2,612 2,391 8.875% 2024 1,375 890 12.25% 2030 425 358 11.00% 2040 915 680 .05 State of Qatar: 9.75% 2030 /2/ 2,750 3,142 9.75% 2030 2,250 2,571 .05 Bulgaria (Republic of) Front Loaded 2,470 2,007 .02 Interest Reduction Bond, 3.00% 2012 /1/ /9/ Columbia (Republic of) 7.625% 2007 2,200 2,002 .02 Turkish Treasury Bill: 0% 2002 TRL 945,000,000 497 0% 2002 121,000,000 52 Turkey (Republic of): 12.375% 2009 $ 500 456 11.875% 2030 500 420 .01 New Zealand Government 4.50% 2016 /10/ NZ$ 3,292 1,298 .01 Venezuela (Republic of) Eurobond 4.75% $ 1,083 903 .01 2007 /1/ /9/ Philippines (Republic of): 9.875% 2019 500 436 10.625% 2025 470 427 .01 Russian Federation: /1/ 5.00% 2030 /2/ 145 69 5.00% 2030 1,355 645 .01 Peru (Republic of):/1/ Front-Loaded Interest Reduction 100 63 Eurobond 4.00% 2017 Past Due Interest Eurobond 4.50% 875 606 .01 2017 /9/ South Africa (Republic of) 12.00% 2005 ZAR 5,100 664 .01 593,602 5.60 NON-U.S. AGENCY BONDS - 0.53% KfW International Finance Inc.: 1.00% 2004 Yen 4,750,000 39,212 5.00% 2011 Euro 20,700 16,950 .53 56,162 .53 DEVELOPMENT AUTHORITIES - 0.14% The Japan Development Bank 6.50% 2001 Yen 1,100,000 8,943 .09 International Bank for Reconstruction & $ 40,000 5,520 .05 Development, Series MTN, 0% 2031 14,463 .14 TAXABLE MUNICIPAL OBLIGATIONS - 0.19% Public Building Commission of Chicago, 7,000 7,359 .07 Special Obligation Taxable Ref. Bonds, Series 2001, 7.125% 2012 Chugach Electric Association, Inc., 2001 7,500 7,343 .07 Series A, MBIA Insured, 6.55% 2011 California Maritime Infrastructure 5,340 5,239 .05 Authority, Taxable Lease Revenue Bonds (San Diego Unified Port District-South Bay Plant Acquisition), Series 1999, 6.63% 2009 /2/ /9/ 19,941 .19 MISCELLANEOUS - 0.53% Investment securities in initial period 56,372 .53 of acquisition Market Percent Shares Value of Net Equity Related Securities (000) Assets STOCKS & WARRANTS - 0.09% /4/ Price Communications Corp. 313,053 6,321 .06 Wilshire Financial Services Group Inc. 1,601,967 3,044 .03 /7/ /11/ Global TeleSystems, Inc. 750,000 135 .00 NTL Inc., warrants, expire 2008 /2/ /7/ 26,362 112 .00 McCaw International, Ltd., warrants, 30,500 76 .00 expire 2007 /2/ /7/ Viatel, Inc. 32,363 2 .00 Comunicacion Celular SA, Class B, 17,550 2 .00 warrants, expire 2003 /2/ /7/ Protection One Alarm Monitoring, Inc., 54,400 1 .00 warrants, expire 2005 /2/ /7/ Tultex Corp., warrants, expire 2007 /7/ 1,867,700 - - V2 Music Holdings PLC, warrants, expire 7,875 - - 2000 /7/ V2 Music Holdings PLC, warrants, expire 9,250 - 2008 /2/ /7/ 9,693 .09 TOTAL BONDS, NOTES & EQUITY SECURITIES: 9,738,669 91.91 (cost: $10,193,880,000) Principal Market Percent Amount Value of Net Short-Term Securities (000) (000) Assets Corporate Short-Term Notes - 3.61% Marsh & McLennan Co. 3.77% due $ 24,000 $ 23,832 9/4/01 /2/ Marsh USA Inc. 4.65% due 7/6/01 /2/ 25,000 24,980 .46 Park Avenue Receivables Corp.: /2/ 3.98% due 7/13/01 12,000 11,983 3.80% due 7/19/01 29,334 29,275 .39 Verizon Global Funding Inc.: 4.05% due 7/17/01 /2/ 20,000 19,962 3.80% due 8/8/01 16,000 15,934 .34 Preferred Receivables Funding Corp.:/2/ 3.88% due 7/23/01 28,800 28,729 3.70% due 7/30/01 6,126 6,107 .33 Household Finance Corp. 3.61% 25,500 25,370 .24 due 8/20/01 Ford Motor Credit Co. 4.05% due 7/6/01 25,000 24,983 .24 American Express Credit Corp. 3.84% 25,000 24,898 .23 due 8/7/01 SBC Communications Inc. 3.97% due 24,200 24,195 .23 7/2/01 /2/ Electronic Data Systems Corp. 3.91% 21,000 20,954 .20 due 7/20/01 /2/ International Lease Finance Corp. 3.73% 20,000 19,856 .19 due 9/6/01 Alcoa Inc. 3.88% due 7/13/01 16,000 15,978 .15 General Electric Capital Corp. 3.80% 15,500 15,433 .14 due 8/10/01 Boeing Capital Corp. 3.88% due 15,000 14,982 .14 7/11/01 /2/ Procter & Gamble Co. 3.75% due 8/3/01 15,000 14,945 .14 E.I. DuPont de Nemours & Co. 3.75% 10,000 9,928 .09 due 9/7/01 E.W. Scripps Co. 3.70% due 9/14/01 /2/ 8,700 8,631 .08 Kimberly-Clark Corp. 3.88% due 2,000 1,996 .02 7/20/01 /2/ 382,951 3.61 Federal Agency Discount Notes - 3.01% Freddie Mac: 4.59% due 7/5/01 20,900 20,887 3.75% due 9/6/01 25,000 24,824 3.88% due 9/7/01 16,600 16,481 3.42% due 9/13/01 22,900 22,723 3.565% due 9/20/01 32,500 32,224 1.11 Fannie Mae: 3.77% due 8/3/01 41,000 40,854 3.87% due 8/9/01 40,400 40,226 4.07% due 8/22/01 5,000 4,970 3.86% due 9/12/01 24,200 24,015 3.54% due 9/13/01 5,800 5,755 4.00% due 10/25/01 1,300 1,284 1.10 Federal Home Loan Banks: 3.895% due 7/25/01 10,200 10,172 3.80% due 8/24/01 10,300 10,240 3.85% due 8/30/01 32,000 31,795 3.57% due 9/14/01 25,000 24,804 3.55% due 9/19/01 7,800 7,734 .80 318,988 3.01 U.S. Treasuries - 0.18% U.S. Treasury Bill 3.395% due 9/27/01 19,400 19,233 .18 TOTAL SHORT-TERM SECURITIES: 721,172 6.80 (cost: $721,192,000) TOTAL INVESTMENT SECURITIES: 10,459,841 98.71 (cost: $10,915,072,000) Excess of cash and receivables over 136,412 1.29 payables NET ASSET $10,596,253 100.00$ /1/ Coupon rate may change periodically. /2/ Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to public may require registration. /3/ Step bond; coupon rate will increase at a later date. /4/ Non-income-producing security. /5/ Payment in kind; the issuer has the option of paying additional securities in lieu of cash. /6/ Company not making interest or dividend payments; bankruptcy proceedings pending. /7/ Valued under procedures established by the Board of Directors. /8/ Purchased as a unit; issue was separated but reattached for reporting purposes. /9/ Pass-through securities backed by a pool of mortgages or other loans on which principal payments are periodically made. Therefore, the effective maturities are shorter than the stated maturities. /10/ Index-linked bond whose principal amount moves with a government retail price index. /11/ The fund owns 7.98% of the outstanding voting securities of Wilshire Financial Services, and thus is considered an affiliate as defined in the Investment Company Act of 1940. See Notes to Financial Statements
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES (Unaudited) at June 30, 2001 (dollars in thousands) Assets: Investment securities at market (cost: $10,915,072) $10,459,841 Cash 12,922 Receivables for - Sales of investments $25,365 Sales of fund's shares 34,876 Forward currency contracts - net 9,282 Dividends and interest 167,460 Other 5 236,988 10,709,751 Liabilities: Payables for - Purchases of investments 78,188 Repurchases of fund's shares 17,039 Forward currency contracts - net 825 Dividends on fund's shares 10,563 Management services 2,839 Other expenses 4,044 113,498 Net Assets at June 30, 2001 $10,596,253 Total authorized capital stock - 2,500,000,000 shares, $.001 par value Class A shares: Net assets $10,275,279 Shares outstanding 798,386,480 Net asset value per share $12.87 Class B shares: Net assets $244,112 Shares outstanding 18,967,460 Net asset value per share $12.87 Class C shares: Net assets $50,936 Shares outstanding 3,957,760 Net asset value per share $12.87 Class F shares: Net assets $25,925 Shares outstanding 2,014,400 Net asset value per share $12.87 See Notes to Financial Statements STATEMENT OF OPERATIONS (Unaudited) for the six months ended June 30, 2001 (dollars in thousands) Investment Income: Income: Interest $387,878 Dividends 6,999 $394,877 Expenses: Management services fee 16,318 Distribution expenses - Class A 12,320 Distribution expenses - Class B 799 Distribution expenses - Class C 67 Distribution expenses - Class F 9 Transfer agent fees - Class A 5,446 Transfer agent fees - Class B 101 Administrative service fees - Class C 25 Administrative service fees - Class F 9 Reports to shareholders 399 Registration statement and prospectus 345 Postage, stationery and supplies 1,005 Directors' fees 34 Auditing and legal fees 76 Custodian fee 363 Taxes other than federal income tax 121 Other expenses 120 37,557 Net investment income 357,320 Realized Loss and Unrealized Appreciation on Investments: Net realized loss (37,499) Net unrealized appreciation on: Investments 71,117 Open forward currency contracts 7,838 Net unrealized appreciation 78,955 Net realized loss and unrealized appreciation on investments 41,456 Net Increase in Net Assets Resulting from Operations $398,776 See Notes to Financial Statements STATEMENT OF CHANGES IN NET ASSETS (dollars in thousands) Six months Year ended ended June 30, December 31, 2001* 2000 Operations: Net investment income $357,320 $678,652 Net realized loss on investments (37,499) (72,414) Net unrealized appreciation (depreciation) on investments 78,955 (50,346) Net increase in net assets resulting from operations 398,776 555,892 Dividends Paid to Shareholders: Dividends from net investment income: Class A (345,289) (688,050) Class B (4,928) (2,035) Class C (413) - Class F (243) - Total dividends (350,873) (690,085) Capital Share Transactions: Proceeds from shares sold 2,053,875 2,190,967 Proceeds from shares issued in reinvestment of net investment income dividends and distributions of net realized gain on investments 274,839 550,406 Cost of shares repurchased (1,234,818) (2,630,060) Net increase in net assets resulting from capital share transactions 1,093,896 111,313 Total Increase (Decrease) in Net Assets 1,141,799 (22,880) Net Assets: Beginning of period 9,454,454 9,477,334 End of period (including distributions in excess of net investment income and undistributed net investment income: $881 and $7,328, respectively) $10,596,253 $9,454,454 *Unaudited 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 four classes of shares as described below: 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 are subject to a contingent deferred sales charge ("CDSC") paid upon redemption. This charge declines from 5% to zero over a period of six years. Class B shares automatically convert to Class A shares after eight years. Class C shares are sold without an initial sales charge but are subject to a CDSC of 1% for redemptions within one year of purchase. Class C shares automatically convert to Class F shares after ten years. Class F shares, which are sold exclusively through fee-based programs, are sold without an initial sales charge or CDSC. Holders of all classes of shares have equal pro rata rights to assets, dividends, liquidation and other rights. Each class has identical voting rights, except for exclusive rights to vote on matters affecting only its class. Each class of shares may have different distribution, administrative services and transfer agent fees and expenses. Differences in class-specific expenses will result in the payment of different per share dividends by each class. SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. These principles 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. Short-term securities maturing within 60 days are valued at amortized cost, which approximates market value. The ability of the issuers of the debt securities held by the fund to meet their obligations may be affected by economic developments in a specific industry, state or region. Forward currency contracts are valued at the mean of their representative quoted bid and asked prices. Securities and 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 fund's 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 combined with the net realized and unrealized gain or loss on investment securities for financial reporting purposes. 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. CLASS ALLOCATIONS - Income, expenses (other than class-specific expenses) and realized and unrealized gains and losses are allocated daily among the various share classes based on their relative net asset values. Distribution expenses, administrative services fees, certain transfer agent fees and 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. TAXATION - Dividend and interest income is recorded net of non-U.S. taxes paid. For the six months ended June 30, 2001, non-U.S. taxes paid were $95,000. CURRENCY GAINS AND LOSSES - Net realized currency losses on dividends, interest, sales of non-U.S. bonds and notes, forward contracts, and other receivables and payables, on a book basis, were $2,023,000 for the six months ended June 30, 2001. 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 based on net investment income and net realized gains determined on a tax basis and may differ from such amounts for financial reporting purposes. In addition, the year in which amounts are distributed may differ from the year in which the net investment income is earned and the net gains are realized by the fund. As of June 30, 2001, the cost of investment securities, excluding forward currency contracts, for book and federal income tax reporting purposes was $10,918,022,000. Net unrealized depreciation on investments, excluding forward currency contracts, aggregated $458,181,000; $245,114,000 related to appreciated securities and $703,295,000 related to depreciated securities. For the six months ended June 30, 2001, the fund realized tax basis net capital losses of $39,025,000. 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 $51,238,000 which were realized during the period November 1, 2000 through December 31, 2000. Net losses related to non-U.S. currency transactions of $12,614,000 (including losses totaling $19,628,000 which were realized during the period November 1, 2000 through December 31, 2000) are treated as an adjustment to ordinary income for federal income tax purposes. 4. FEES AND TRANSACTIONS WITH RELATED PARTIES INVESTMENT ADVISORY FEE - The fee of $16,318,000 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 a series of rates beginning with 0.30% per annum of the first $60 million of daily net assets decreasing to 0.14% of such assets in excess of $10 billion. The agreement also provides for monthly fees, accrued daily, of 2.25% on the first $8,333,333 of the fund's monthly gross investment income and 2.00% of such income in excess of $8,333,333. For the six months ended June 30, 2001, the management services fee was equivalent to an annualized rate of 0.324% of average daily net assets. DISTRIBUTION EXPENSES - The fund has adopted plans of distribution under which it may finance activities primarily intended to sell fund shares, provided the categories of expenses are approved in advance by the fund's Board of Directors. The plans provide for annual expenses, based on average daily net assets, of up to 0.25% for Class A shares, 1.00% for Class B and Class C shares, and up to 0.50% for Class F shares. All share classes may use up to 0.25% of these expenses to pay service fees, or to compensate American Funds Distributors, Inc. ("AFD"), the principal underwriter of the fund's shares, for paying service fees to firms that have entered into agreements with AFD for providing certain shareholder services. The balance may be used for approved distribution expenses as follows: CLASS A SHARES - Approved categories of expense include reimbursements to AFD for commissions paid to dealers and wholesalers in respect of certain shares sold without a sales charge. Those reimbursements are permitted for amounts billed to the fund within the prior 15 months but only to the extent that the overall 0.25% annual expense limits for Class A share is not exceeded. For the six months ended June 30, 2001, aggregate distribution expenses were limited to $12,320,000, or 0.25% of average daily net assets attributable to Class A shares. As of June 30, 2001, unreimbursed expenses which remain subject to reimbursement totaled $4,433,000. CLASS B SHARES - In addition to service fees of 0.25%, approved categories of expense include fees of 0.75% per annum of average daily net assets attributable to Class B shares 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. For the six months ended June 30, 2001, aggregate distribution expenses were $799,000, or 1.00% of average daily net assets attributable to Class B shares. CLASS C SHARES - In addition to service fees of 0.25%, the Board of Directors has approved the payment of 0.75% per annum of average daily net assets attributable to Class C shares to AFD to compensate firms selling Class C shares of the fund. For the period ended June 30, 2001, aggregate distribution expenses were $67,000, or 1.00% of average daily net assets attributable to Class C shares. CLASS F SHARES - The plan has an expense limit of 0.50%. However, the Board of Directors has presently approved expenses under the plan of 0.25% per annum of average daily net assets attributable to Class F shares. For the period ended June 30, 2001, aggregate distribution expenses were $9,000, or 0.25% of average daily net assets attributable to Class F shares. As of June 30, 2001, aggregate distribution expenses payable to AFD for all share classes were $2,100,000. AFD received $3,305,000 (after allowances to dealers) as its portion of the sales charges paid by purchasers of the fund's Class A shares for the six months ended June 30, 2001. Such sales charges are not an expense of the fund and, hence, are not reflected in the accompanying Statement of Operations. TRANSFER AGENT FEE - A fee of $5,547,000 was incurred during the six months ended June 30, 2001, pursuant to an agreement with American Funds Service Company ("AFS"), the transfer agent for the fund. As of June 30, 2001, aggregate transfer agent fees payable to AFS for Class A and Class B shares were $984,000. ADMINISTRATIVE SERVICES FEES - The fund has an administrative services agreement with CRMC for Class C and Class F shares. Pursuant to this agreement, CRMC provides transfer agency and other related shareholder services. CRMC may contract with third parties to perform these services. Under the agreement, the fund pays CRMC a fee equal to 0.15% per annum of average daily net assets of Class C and Class F shares, plus amounts payable for certain transfer agency services according to a specified schedule. For the period ended June 30, 2001, total fees under the agreement were $34,000. As of June 30, 2001, aggregate administrative services fees payable to CRMC for Class C and Class F shares were $13,000. DEFERRED DIRECTORS' FEES - Since the adoption of the deferred compensation plan in 1993, Directors who are unaffiliated with CRMC may elect to defer the receipt of part or all of their compensation. Deferred compensation amounts, which remain in the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. As of June 30, 2001, the cumulative amount of these liabilities was $165,000. Directors' fees during the six months ended June 30, 2001, were $34,000, comprised of $32,000 in current fees (either paid in cash or deferred), and $2,000, representing the net increase in the value of deferred compensation. 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 $3,961,964,000 and $3,070,791,000, respectively, during the six months ended June 30, 2001. Pursuant to the custodian agreement, the fund receives credits against its custodian fee for imputed interest on certain balances with the custodian bank. For the six months ended June 30, 2001, the custodian fee of $363,000 includes $110,000 that was paid by these credits rather than in cash. As of June 30, 2001, net assets consisted of the following: (dollars in thousand) Capital paid in on shares of capital stock $11,207,498 Distributions in excess of net investment income (881) Accumulated net realized loss (157,338) Net unrealized depreciation (453,026) Net assets $10,596,253
Capital share transactions in the fund were as follows: Six months Six months ended ended June 30, 2001 June 30, 2001 Amount (000) Shares Class A Shares: Sold $ 1,805,510 139,084,708 Reinvestment of dividends and distributions 270,734 20,889,778 Repurchased (1,215,980) (93,751,366) Net increase in Class A 860,264 66,223,120 Class B Shares: /1/ Sold 164,310 12,665,294 Reinvestment of dividends and distributions 3,647 281,536 Repurchased (11,641) (898,360) Net increase in Class B 156,316 12,048,470 Class C Shares: /2/ Sold 53,132 4,104,716 Reinvestment of dividends and distributions 306 23,624 Repurchased (2,205) (170,580) Net increase in Class C 51,233 3,957,760 Class F Shares: /2/ Sold 30,923 2,388,497 Reinvestment of dividends and distributions 152 11,718 Repurchased (4,992) (385,815) Net increase in Class F 26,083 2,014,400 Total net increase in fund $ 1,093,896 84,243,750 Year ended Year ended December 31, 2000 December 31, 2000 Amount (000) Shares Class A Shares: Sold $ 2,100,818 164,508,807 Reinvestment of dividends and distributions 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: /1/ Sold 90,149 7,089,300 Reinvestment of dividends and distributions 1,660 130,466 Repurchased (3,825) (300,776) Net increase in Class B 87,984 6,918,990 Class C Shares: /2/ Sold - - Reinvestment of dividends and distributions - - Repurchased - - Net increase in Class C - - Class F Shares: /2/ Sold - - Reinvestment of dividends and distributions - - Repurchased - - Net increase in Class F - - Total net increase in fund $ 111,313 8,993,470 /1/ Class B shares were not offered before March 15, 2000. /2/ Class C and Class F shares were not offered before March 15, 2001.
At June 30, 2001, the fund had outstanding forward currency contracts to sell non-U.S. currencies as follows: Non-U.S. Contract Contract Currency Amount Amount Contracts Non-U.S. U.S. (000) -------------------------- Sales: British Pounds expiring 7/26 to 9/19/2001 Pound 15,552,000 $ 21,889 Euros expiring 7/24 to 10/2/2001 Euro 287,202,831 245,873 Japanese Yen expiring 9/13 to 9/26/2001 Yen 4,823,125,320 39,554 ------------------- $ 307,316 ------------------- U.S. Valuations at June 30, 2001 Unrealized Non-U.S. U.S. Valuations at (Depreciation) Currency June 30, 2001 Appreciation Contracts Amount (000) (000) Sales: British Pounds expiring 7/26 to 9/19/2001 $ 21,916 $ (28) Euros expiring 7/24 to 10/2/2001 243,333 2,541 Japanese Yen expiring 9/13 to 9/26/2001 39,028 526 ------------------- ------------------- $ 304,277 $3,039 ------------------- ================
Per-Share Data and Ratios Class A Six months Class A Class A ended Year ended Year ended June 30, December 31, December 31, 2001 /1/,/2/ 2000 1999 Net Asset Value, Beginning of Period $12.79 $12.98 $13.61 Income from Investment Operations : Net investment income .46 /3/ .94 /3/ .93 Net gains/(losses) on securities (both .07 /3/ (.17)/3/ (.63) realized and unrealized) Total from investment operations .53 .77 .30 Less Distributions : Dividends (from net investment income) (.45) (.96) (.93) Distributions (from capital gains) - - - Total distributions (.45) (.96) (.93) Net Asset Value, End of Period $12.87 $12.79 $12.98 Total Return /4/ 4.07% 6.19% 2.29% Ratios/Supplemental Data: Net assets, end of period (in millions) $10,275 $9,366 $9,477 Ratio of expenses to average net assets .73%/5/ .72% .69% Ratio of net income to average net assets 7.13%/5/ 7.35% 6.96% Class A Class A Class A Year ended Year ended Year ended December 31, December 31, December 31, 1998 1997 1996 Net Asset Value, Beginning of Period $14.00 $13.75 $13.88 Income from Investment Operations : Net investment income .94 .98 1.02 Net gains/(losses) on securities (both (.24) .25 (.13) realized and unrealized) Total from investment operations .70 1.23 .89 Less Distributions : Dividends (from net investment income) (.95) (.98) (1.02) Distributions (from capital gains) (.14) - - Total distributions (1.09) (.98) (1.02) Net Asset Value, End of Period $13.61 $14.00 $13.75 Total Return /4/ 5.17% 9.24% 6.71% Ratios/Supplemental Data: Net assets, end of period (in millions) $9,541 $8,176 $7,002 Ratio of expenses to average net assets .66% .68% .71% Ratio of net income to average net assets 6.94% 6.95% 7.47% Class B Six months Class B Class C ended March 15 to March 15 to June 30, December 31, June 30, 2001 /1/,/2/ 2000 /1/ 2001 /1/,/2/ Net Asset Value, Beginning of Period $12.79 $12.92 $13.05 Income from Investment Operations : Net investment income /3/ .40 .62 .21 Net gains/(losses) on securities (both .08 (.08) (.16) realized and unrealized) /3/ Total from investment operations .48 .54 .05 Less Distributions : Dividends (from net investment income) (.40) (.67) (.23) Distributions (from capital gains) - - - Total distributions (.40) (.67) (.23) Net Asset Value, End of Period $12.87 $12.79 $12.87 Total Return /4/ 3.69% 4.33% .31% Ratios/Supplemental Data: Net assets, end of period (in millions) $244 $88 $51 Ratio of expenses to average net assets 1.49%/5/ 1.42%/5/ .50% Ratio of net income to average net assets 6.19%/5/ 6.65%/5/ 1.73% Class F March 15 to June 30, 2001 /1/,/2/ Net Asset Value, Beginning of Period $13.05 Income from Investment Operations : Net investment income /3/ .24 Net gains/(losses) on securities (both (.17) realized and unrealized) /3/ Total from investment operations .07 Less Distributions : Dividends (from net investment income) (.25) Distributions (from capital gains) - Total distributions (.25) Net Asset Value, End of Period $12.87 Total Return /4/ .43% Ratios/Supplemental Data: Net assets, end of period (in millions) $26 Ratio of expenses to average net assets .25% Ratio of net income to average net assets 1.98% Supplemental Data - All Classes Six months ended Year ended Year ended June 30, December 31, December 31, 2001 /1/,/2/ 2000 1999 Portfolio turnover rate 61.12% 62.07% 46.71% Year ended Year ended Year ended December 31, December 31, December 31, 1998 1997 1996 Portfolio turnover rate 66.25% 51.96% 43.43% /1/ Based on operations for the period shown and, accordingly, not representative of a full year. /2/ Unaudited. /3/ Based on average shares outstanding. /4/ Total returns exclude all sales charges, including contingent deferred sales charges. /5/ Annualized.
OTHER SHARE CLASS RESULTS SHARE RESULTS: CLASS B, CLASS C AND CLASS F Average annual compound returns for periods ended June 30, 2001: 1 YEAR LIFE OF CLASS* CLASS B SHARES Reflecting applicable contingent deferred sales charge (CDSC), maximum of 5%, payable only if shares are sold +2.68% +3.23% Not reflecting CDSC +7.68% +6.27% CLASS C AND CLASS F SHARES Results reflecting CDSC for these shares are not shown because of the brief time between their introduction on March 15, 2001 and the end of period. *From March 15, 2000, when B shares first became available. [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 PRINCIPAL UNDERWRITER American Funds Distributors, Inc. 333 South Hope Street Los Angeles, California 90071-1462 There are several ways to invest in The Bond Fund of America. Class A shares are subject to a 3.75% maximum up-front sales charge that declines for accounts of $100,000 or more. Other share classes, which are generally not available for certain employer-sponsored retirements plans, have no up-front sales charges but are subject to additional annual expenses and fees. Annual expenses for Class B Shares were 0.76% higher than for Class A shares; Class B shares convert to Class A shares after eight years of ownership. If redeemed within six years, Class B shares may also be subject to a contingent deferred sales charge (CDSC) of up to 5% that declines over time. Class C shares are subject to annual expenses about 0.82% higher than those for Class A shares and a 1% CDSC if redeemed within the first year after purchase. Class C shares convert to Class F shares after 10 years. Class F shares, which are available only through certain fee-based programs offered by broker-dealer firms and registered investment advisers, have higher expenses (about 0.06% a year) than do Class A shares, and an annual asset-based fee charged by the sponsoring firm. Because expenses are first deducted from income, dividends for each share class will vary. 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 us at americanfunds.com on the World Wide Web. THIS REPORT IS FOR THE INFORMATION OF SHAREHOLDERS OF THE BOND FUND OF AMERICA, BUT IT MAY ALSO BE USED AS SALES LITERATURE WHEN PRECEDED OR ACCOMPANIED BY THE CURRENT PROSPECTUS, WHICH GIVES DETAILS ABOUT CHARGES, EXPENSES, INVESTMENT OBJECTIVES AND OPERATING POLICIES OF THE FUND. IF USED AS SALES MATERIAL AFTER SEPTEMBER 30, 2001, THIS REPORT MUST BE ACCOMPANIED BY AN AMERICAN FUNDS GROUP STATISTICAL UPDATE FOR THE MOST RECENTLY COMPLETED CALENDAR QUARTER. Printed on recycled paper Litho in USA BG/LPT/5196 Lit. No. BFA-013-0801