-----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, Apl+wq/i1HFnFp5NxTKKUoBklBHIm221CZSlIFo1uQe6LPwrj1q5LAH4hem5Dv6z k7SUyEoKN4mJuDZL49s+yQ== 0000013075-97-000012.txt : 19970912 0000013075-97-000012.hdr.sgml : 19970912 ACCESSION NUMBER: 0000013075-97-000012 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970908 SROS: NONE 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: 97676398 BUSINESS ADDRESS: STREET 1: 333 S HOPE ST - 52ND FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90071 BUSINESS PHONE: 2134869200 N-30D 1 SEMI-ANNUAL REPORT FOR THE SIX MONTHS ENDED JUNE 30, 1997 THE BOND FUND OF AMERICA THE AMERICAN FUNDS GROUP (R) [photo and background watermark of various forms of currency] THE BOND FUND OF AMERICA (SM) Seeks as high a level of current income as is consistent with preservation of capital through a diversified portfolio of bonds and other fixed-income obligations. RESULTS AT A GLANCE for periods ended 6/30/97 ASSUMING DISTRIBUTIONS REINVESTED Lifetime OR INTEREST COMPOUNDED (since fund's inception on 5/28/74) 6-Month 12-Month Total Average Annual Return Return Return Compound Return The Bond Fund of America +3.9% +10.4% +885.8% +10.4% Lehman Brothers Aggregate Bond Index +3.1 +8.2 +740.7 +9.7 /1/ Lipper Corporate A-Rated Bond Funds Average /2/ +2.7 +7.7 +705.5 +9.5 Average savings institution/3/ +2.1 +4.2 +351.1 +6.7 Consumer Price Index /4/ +1.1 +2.3 +229.8 +5.3 The bond market indexes are unmanaged. /1/From May 31, 1974 through December 31, 1975, the Lehman Brothers Corporate Bond Index was used because the Lehman Brothers Aggregate Bond Index did not yet exist. /2/Lipper results do not reflect the effect of sales charges. /3/Based on figures from U.S. League of Savings Institutions and the Federal Reserve Board, reflecting all kinds of savings deposits (maximum allowable interest rates were 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. Fund results in this report were computed without a sales charge unless otherwise indicated. Here are the average annual compound returns with all distributions reinvested for periods ended June 30, 1997, assuming payment of the 4.75% maximum sales charge at the beginning of the stated periods (sales charges are lower for accounts of $25,000 or more): 10 years: +8.79%; 5 years: +7.49%; 12 months: +5.15%. The fund's 30-day yield as of July 31, 1997, calculated in accordance with the Securities and Exchange Commission formula, was 6.19%. THE FIGURES IN THIS REPORT REFLECT PAST RESULTS AND ARE NOT PREDICTIVE OF FUTURE RESULTS. SHARE PRICE AND RETURN WILL VARY, SO YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE SHORTER THE TIME PERIOD OF YOUR INVESTMENT, THE GREATER THE POSSIBILITY OF LOSS. FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY, THE U.S. GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON. FELLOW SHAREHOLDERS: During the first half of 1997, shareholders continued to benefit from The Bond Fund of America's research-driven, value-oriented investment approach and its flexibility to seek attractive opportunities throughout the fixed-income marketplace. Interest rates followed a familiar seesaw pattern over the first half of the year, rising and falling as the pace of economic activity waxed and waned. Over the first three months, low unemployment, coupled with reports that business activity was accelerating rapidly, raised concerns that inflationary pressures might begin to build. Last March, that prompted the Federal Reserve Board to increase the federal funds rate, a key short-term interest rate, to 5.5% from 5.25%. Longer term interest rates rose as well, and bond prices, which move inversely to interest rates, declined. As the second quarter began, indications that the economy was cooling suggested that additional credit tightening on the part of the Federal Reserve was not imminent and bond prices rallied. As a result, bond yields ended the six-month period about where they were when it began. Inflation all the while remained remarkably benign. [begin sidebar] Interest rates followed a seesaw pattern....inflation, meanwhile, remained remarkably benign.[end sidebar] In this environment, the value of your holdings in The Bond Fund of America increased 3.9% over the six months ended June 30 if, like most shareholders, you reinvested monthly dividends totaling 47 cents a share. By comparison, the Salomon Brothers Broad Investment-Grade (BIG) Index and the Lehman Brothers Aggregate Bond Index both rose 3.1%, also with income reinvested (the indexes are unmanaged). Meanwhile, the 123 comparable bond funds tracked by Lipper Analytical Services gained 2.7% on average. [begin sidebar] The fund's relatively strong showing reflects good individual bond selection.[end sidebar] The fund's relatively strong showing reflects to a significant degree good individual bond selection. Many of the high-grade and high-yield corporate bonds in the portfolio continued to do well relative to Treasuries with comparable maturities, due in part to healthy corporate earnings. Mortgage-backed and asset-backed securities again provided the fund with a yield advantage and strong relative total returns. And a number of our investments in non-U.S. bonds also made a positive contribution to results in an otherwise challenging environment for such issues. In each of these areas we have continued to strengthen and intensify our research efforts in recent years. In keeping with BFA's quality standards, more than 60% of the portfolio is invested in securities rated A or better by Moody's or Standard & Poor's. While BFA did better than the broad market indexes and most comparable funds over the past six months and 12 months, we should note that there have been and will be periods in which BFA lags these benchmarks and also periods in which the value of an investment in the fund declines. But as you can see in the table on the inside front cover, the fund's record since its inception in 1974 is a testament to the potential for extensive research and professional management to add value over time. We look forward to reporting to you again in six months. Cordially, [/s/ Paul G. Haaga, Jr.] [/s/ Abner D. Goldstine] Paul G. Haaga, Jr. Abner D. Goldstine Chairman of the Board President August 14, 1997 [watermark of various forms of currency throughout report] THE BOND FUND OF AMERICA Principal Market Percent of INVESTMENT PORTFOLIO JUNE 30, 1997 Amount Value Net Assets (000) (000) ELECTRICAL & GAS UTILITIES Utilities: Electrical & Gas Big Rivers Electric Corp. 10.70% 2017 17,000 18,042 .24% CMS Energy 9.50% 1997 2,000 2,015 .03 Colorado Interstate Gas Co. 6.85% 2037 2,500 2,474 .04 Columbia Gas System, Inc. Series A, 6.39% 2000 10,000 9,890 .13 Long Island Lighting Co. 8.90% 2019 5,000 5,211 .07 ---------- ---------- 37,632 .51 ---------- ---------- INDUSTRIAL & SERVICE Appliances & Household Goods Knoll Group, Inc. 10.875% 2006 811 892 .01 Lifestyle Furnishings International Ltd. 10.875% 2006 5,500 6,160 .09 ---------- ---------- 7,052 .10 ---------- ---------- Beverages & Tobacco Canandaigua Wine Co., Inc.: 8.75% 2003 3,000 3,022 .09 Series C, 8.75% 2003 4,000 4,010 Dr Pepper Bottling Co. of Texas 10.25% 2000 6,500 6,711 .09 RJR Nabisco, Inc. 7.625% 2003 8,000 7,880 .11 ---------- ---------- 21,623 .29 ---------- ---------- Broadcasting & Publishing American Media Operations, Inc. 11.625% 2004 14,500 15,805 .21 American Radio Systems Corp. 9.00% 2006 5,550 5,661 .08 Chancellor Radio Broadcasting Co.: 9.375% 2004 12,500 12,812 .37 8.75% 2007 14,625 14,406 Grupo Televisa, SA: 11.375% 2003 5,000 5,482 .18 0%/13.25% 2008 /1/ 12,000 8,340 Newsquest Capital PLC 11.00% 2006 4,750 5,178 .07 RBS Participacoes SA 11.00% 2007 /2/ 10,000 10,538 .14 STC Broadcasting, Inc. 11.00% 2007 /2/ 3,250 3,461 .05 Sun Media Corp. 9.50% 2007 /2/ 3,500 3,535 .05 Young Broadcasting Inc. 10.125% 2005 2,500 2,600 .04 ---------- ---------- 87,818 1.19 ---------- ---------- Construction & Housing Geberit International SA 10.125% 2007 /2/ DM2,750 1,712 .02 Kaufman and Broad Home Corp. 10.375% 1999 7,500 7,556 .10 M.D.C. Holdings, Inc. 11.125% 2003 10,050 10,854 .15 ---------- ---------- 20,122 .27 ---------- ---------- Data Processing & Reproduction Apple Computer, Inc. 6.50% 2004 3,000 2,520 .03 AST Research, Inc. convertible notes 0% 2013 31,500 12,915 .17 Data General Corp. 7.75% convertible debentures 2001 5,400 7,236 .10 Maxtor Corp. 5.75% convertible debentures 2012 3,000 2,100 .03 Unisys Corp.: 8.25% convertible debentures 2000 20,000 20,450 .37 11.75% 2004 6,000 6,555 ---------- ---------- 51,776 .70 ---------- ---------- Diversified Media & Cable Television Bell Cablemedia PLC 0%/11.95% 2004 /1/ 43,500 39,259 .53 Cablevision Industries Corp.: 10.75% 2004 1,000 1,034 .08 9.875% 2013 5,000 5,175 Comcast Cable Communications, Inc.: /2/ 8.375% 2007 12,000 12,694 .28 8.875% 2017 3,000 3,270 8.50% 2027 5,000 5,395 Comcast Corp.: 10.25% 2001 13,000 14,170 .39 1.125% convertible debentures 2007 25,000 14,500 Comcast UK Cable Partners Ltd. 0%/11.20% 2007 /1/ 21,000 15,750 .21 Esat Holdings Ltd. 0%/12.50% 2007 /1/ /2/ 4,000 2,375 .03 Globo Comunicacoes E Partcipacoes Ltd.: 10.50% 2006 /2/ 13,100 13,919 .22 10.50% 2006 2,000 2,125 Heartland Wireless Communications, Inc. Units, 13.00% 2003 /2/ 4,500 1,553 .02 International CableTel Inc.: /1/ 0%/10.875% 2003 9,500 8,075 .44 0%/12.75% 2005 17,750 13,668 0%/12.75% 2007 /2/ 10,000 10,300 Multicanal Participacoes SA, 12.625% 2004 9,250 10,573 .14 News America Holdings Inc.: 8.625% 2014 3,250 2,372 .31 7.43% 2026 20,500 20,816 Rogers Communications Inc.: 10.875% 2004 3,500 3,666 .22 0% convertible debentures 2004 30,000 12,450 TCI Communications, Inc.: 8.00% 2005 20,000 20,320 .39 debentures 8.75% 2015 7,500 7,861 Tele-Communications, Inc.: 9.80% 2012 10,000 11,446 .48 8.75% 2023 13,000 12,973 9.25% 2023 10,000 10,424 Tele West PLC: 9.625% 2006 4,700 4,841 .31 0%/11.00% 2007 /1/ 25,000 18,000 Time Warner Inc.: 6.10% 2001 24,000 22,989 1.41 8.18% 2007 10,000 10,411 10.15% 2012 7,500 9,100 9.125% 2013 25,000 27,643 0% convertible debentures 1997 10,000 3,925 0% convertible debentures 2013 67,500 31,134 TKR Cable I, Inc. 10.50% 2007 27,500 30,328 .41 Vanguard Cellular Systems, Inc. 9.375% 2006 6,000 6,060 .08 Viacom International Inc.: 9.125% 1999 5,000 5,125 .16 10.25% 2001 6,100 6,670 Videotron Holdings PLC 0%/11.125% 2004 /1/ 20,500 18,450 .25 ---------- ---------- 470,839 6.36 ---------- ---------- Electrical & Electronics Fairchild Semiconductor Corp. 10.125% 2007 /2/ 3,000 3,180 .04 Hyundai Semiconductor America, Inc.: 8.25% 2004 /2/ 2,500 2,527 .35 8.625% 2007 22,500 22,914 Pan Pacific Industrial Investments PLC 0% 2007 /2/ 33,500 15,052 .20 ---------- ---------- 43,673 .59 ---------- ---------- Energy & Related Companies Benton Oil and Gas Co. 11.625% 2003 5,750 6,332 .09 BP America Inc. 10.00% 2018 4,000 4,305 .06 California Energy Co., Inc.: 9.875% 2003 14,000 14,898 .67 0%/10.25% 2004 /1/ 32,100 34,514 Cliffs Drilling Co. 10.25% 2003 15,750 16,774 .23 Falcon Drilling Co., Inc.: 9.75% 2001 1,000 1,040 .07 8.875% 2003 4,500 4,556 Forcenergy Inc.: 9.50% 2006 2,500 2,563 .10 8.50% 2007 5,000 4,875 Global Marine, Inc. 12.75% 1999 3,250 3,404 .05 Gulf Canada Resources Ltd. 9.25% 2004 5,000 5,238 .07 Kelley Oil & Gas Corp. 10.375% 2006 8,750 9,013 .12 Mariner Energy, Inc. 10.50% 2006 3,500 3,675 .05 McDermott Inc.: 9.375% 2002 14,250 14,941 .33 9.375% 2006 9,500 9,643 Mesa Operating Co. 10.625% 2006 17,750 20,146 .27 Ocean Energy 8.875% 2007 /2/ 11,000 10,959 .15 Oil Co. Ltd. 8.90% 2000 /2/ 20,000 20,400 .27 OXYMAR 7.50% 2016 8,500 8,146 .11 Parker & Parsley Petroleum Co. 8.875% 2005 5,000 5,448 .07 Petrozuata Finance Inc. 7.63% 2009 /2/ 16,000 16,101 .22 Pogo Producing Co. 8.75% 2007 /2/ 2,250 2,261 .03 YPF SA 8.00% 2004 1,404 1,430 .02 ---------- ---------- 220,662 2.98 ---------- ---------- Food Retailing Allied Supermarkets Inc. 6.625% 1998 1,729 1,720 .02 Bruno's Inc. 10.50% 2005 9,250 9,319 .13 Carr-Gottstein Co. 12.00% 2005 9,000 9,990 .13 Quality Food Centers, Inc. 8.70% 2007 /2/ 9,500 9,405 .13 Stater Bros. Holdings Inc. 11.00% 2001 1,500 1,622 .02 ---------- ---------- 32,056 .43 ---------- ---------- Forest Products & Paper Container Corp. of America: 10.75% 2002 4,800 5,184 .54 9.75% 2003 25,000 26,250 11.25% 2004 8,000 8,640 Copamex Industrias, SA de CV 11.375% 2004 /2/ 11,675 12,609 .17 Grupo Industrial Durango, SA de CV: 12.00% 2001 3,000 3,274 .19 12.625% 2003 9,375 10,570 Pacific Lumber Co. 10.50% 2003 500 515 .01 ---------- ---------- 67,042 .91 ---------- ---------- General Retailing & Merchandising Barnes & Noble, Inc. 11.875% 2003 1,000 1,085 .01 Loehmann's Inc. 11.875% 2003 3,000 3,030 .04 Woolworth Corp.: 6.98% 2001 12,000 11,929 .27 7.00% 2001 6,865 6,798 8.50% 2022 1,000 1,050 ---------- ---------- 23,892 .32 ---------- ---------- Health & Personal Care Allegiance Corp. 7.00% 2026 5,000 4,996 .07 Integrated Health Services, Inc.: /2/ 10.25% 2006 9,350 9,981 .21 9.50% 2007 5,425 5,547 Mariner Health Group, Inc. 9.50% 2006 6,500 6,695 .09 Merit Behaviorial Care Corp. 11.50% 2005 3,000 3,330 .04 Paracelsus Healthcare Corp. 10.00% 2006 20,825 21,242 .29 Regency Health Services, Inc. 9.875% 2002 2,000 2,050 .03 Revlon Worldwide Corp. 10.75% 2001 11,450 7,672 .10 Unison Health 13.00% 2006 /2/ 5,000 4,050 .06 Universal Health Services, Inc. 8.75% 2005 1,500 1,575 .02 ---------- ---------- 67,138 .91 ---------- ---------- Leisure & Tourism AMF Group Inc.: 10.875% 2006 4,750 5,130 .15 0%/12.25% 2006 /1/ 8,250 5,868 Boyd Gaming Corp. 9.25% 2003 6,500 6,500 .09 California Hotel Finance Corp. 11.00% 2002 13,250 13,946 .19 Discovery Zone 0% convertible debentures 2013 28,500 71 .00 Foodmaker, Inc.: 9.25% 1999 2,000 2,060 .10 9.75% 2002 4,780 4,923 Four Seasons Hotels Inc. 9.125% 2000 6,000 6,405 .09 Rio Hotel & Casino, Inc. 9.50% 2007 10,500 10,815 .14 Station Casinos, Inc.: Series A, 9.625% 2003 10,250 10,122 .15 Series B, 9.625% 2003 1,325 1,312 Sun International Hotels Ltd., Sun International North America, Inc. 9.00% 2007 5,250 5,348 .07 Wyndham Hotel Corp. 10.50% 2006 4,000 4,480 .06 ---------- ---------- 76,980 1.04 ---------- ---------- Machinery & Engineering John Deere Capital Corp. 8.625% 2019 16,850 17,908 .24 Newport News Shipbuilding Inc. 9.25% 2006 5,000 5,225 .07 Westinghouse Air Brake Co. 9.375% 2005 3,750 3,825 .05 ---------- ---------- 26,958 .36 ---------- ---------- Metals Acme Metals Inc.: 12.50% 2002 4,500 4,927 .20 0%/13.50% 2004 /1/ 9,000 9,945 AK Steel Corp.: 10.75% 2004 6,125 6,584 .22 9.125% 2006 9,500 9,690 Altos Hornos De Mexico: /2/ 11.375% 2002 1,000 1,062 .04 11.875% 2004 2,000 2,150 Inco Ltd.: 9.875% 2019 7,500 8,090 .34 9.60% 2022 16,000 17,353 Kaiser Aluminum and Chemical Corp.: 9.875% 2002 8,000 8,200 .43 12.75% 2003 12,000 13,035 Series B, 10.875% 2006 1,000 1,070 Series C, 10.875% 2006 8,000 8,600 UCAR Global Enterprises Inc. 12.00% 2005 3,430 3,859 .05 ---------- ---------- 94,565 1.28 ---------- ---------- Miscellaneous Materials & Commodities Anchor Glass Container Corp. 11.25% 2005 /2/ 7,000 7,525 .10 Consumers International Inc. 10.25% 2005 /2/ 4,000 4,300 .06 Freeport-McMoRan Copper & Gold: 7.50% 2006 35,000 34,749 .71 7.20% 2026 18,000 17,771 Millennium America Inc. 7.00% 2006 10,000 9,708 .13 Printpack Inc.: Series B, 9.875% 2004 2,000 2,080 .07 10.625% 2006 3,250 3,413 Sterling Chemicals, Inc.: 11.75% 2006 2,750 2,970 .09 0%/13.50% 2008 /1/ 5,000 3,488 Texas Petrochemicals Corp. 11.125% 2006 8,500 9,180 .12 ---------- ---------- 95,184 1.28 ---------- ---------- Multi-Industry New Tenneco Inc. 8.075% 2002 3,000 3,148 .04 Perez Companc SA 9.00% 2004 2,000 2,083 .03 Reliance Industries Ltd.: /2/ 8.25% 2027 10,000 10,147 .30 10.25% 2097 10,750 11,686 Wharf International Finance Ltd. Series A, 7.625% 2007 /2/ 10,000 9,955 .14 ---------- ---------- 37,019 .51 ---------- ---------- Other Allied Waste North America, Inc. 10.25% 2006 /2/ 7,500 7,987 .11 EarthWatch Inc. Units, 12.50% 2001 /3/ /4/ 12,000 12,000 .16 Fage Dairy Industry SA 9.00% 2007 /2/ 10,000 9,550 .13 Verio Inc. Units, 13.50% 2004 /2/ /3/ 11,000 11,110 .15 ---------- ---------- 40,647 .55 ---------- ---------- Protection Services Borg-Warner Security Corp. 9.625% 2007 /2/ 2,250 2,261 .03 Protection One Alarm Monitoring, Inc. Units, 0%/13.625% 2005 /1/ /2/ /3/ 17,000 18,047 .24 ---------- ---------- 20,308 .27 ---------- ---------- Telecommunications Brooks Fiber Properties, Inc.: 0%/10.875% 2006 /1/ 3,500 2,380 .08 10.00% 2007 /2/ 4,000 4,040 CCPR Services, Inc. 10.00% 2007 /2/ 13,750 13,544 .18 CEI Citicorp Holdings 11.25% 2007 /2/ 13,750 13,958 .19 CellNet Data Systems, Inc. 0% /13.00% 2005 /1/ 49,750 32,213 .43 Cellular Communications International, Inc.: 0% 2000 1,000 775 .17 Units, 0% 2000 /3/ 15,071 11,831 Cellular, Inc. 0%/11.75% 2003 /1/ 1,000 972 .01 CenCall Communications Corp. 0%/10.125% 2004 /1/ 30,000 23,700 .32 Centennial Cellular Corp.: 8.875% 2001 19,000 18,905 .33 10.125% 2005 5,000 5,200 COLT Telecom Group PLC Units, 0/12.00% 2006 /1/ /3/ 5,250 3,373 .05 Comcast Cellular 9.50% 2007 /2/ 24,500 24,622 .33 Comunicacion Celular SA Units, 0%/13.125% 2003 /1/ /2/ /3/ 17,550 13,513 .18 Dial Call Communications, Inc. 0%/12.25% 2004 /1/ 8,000 6,360 .09 Geotek Communications, Inc. 0%/15.00% 2005 /1/ 7,750 4,660 .06 Globalstar, LP Units, 11.375% 2004 /2/ /3/ 4,500 4,511 .06 ICG Communications, Inc., ICG Holdings, Inc.: /1/ 0%/13.50% 2005 2,500 1,825 .06 0%/11.625% 2007 /2/ 4,500 2,700 InterCel, Inc. 11.125% 2007 /2/ 2,250 2,264 .03 McCaw International, Ltd. Units, 0%/13.00% 2007 /1/ /2/ /3/ 29,000 13,775 .19 MFS Communications Co., Inc.: 9.375% 2004 28,750 26,761 .43 8.875% 2006 6,500 5,147 MobileMedia Communications, Inc.: 0%/10.50% 2003 /1/ 6,600 858 .03 9.375% 2007 7,800 1,287 Mobile Telecomm 13.50% 2002 7,530 8,057 .11 NEXTEL Communications, Inc.: /1/ 0%/11.50% 2003 29,000 25,085 .46 0%/9.75% 2004 12,000 9,180 Nextlink Capital, Inc. 12.50% 2006 3,000 3,195 .04 Northern Telecom Ltd. 8.75% 2001 3,500 3,745 .05 Omnipoint Corp.: Units, 12.00% 2000 /3/ /4/ 12,500 15,878 .51 11.625% 2006 23,700 22,397 Orion Network Systems, Inc. Units, 11.25% 2007 /3/ 30,000 30,750 .42 PriCellular Wireless Corp.: 0%/14.00% 2001 /1/ 9,000 9,540 .45 0%/12.25% 2003 /1/ 17,750 16,685 10.75% 2004 6,700 6,985 PTC International Finance BV 0%/10.75% 2007 /1/ /2/ 3,200 1,920 .03 Qwest Communications International 10.875% 2007 /2/ 8,500 9,223 .13 Rogers Cantel Communications Inc. 9.375% 2008 3,000 3,165 .04 Sprint Spectrum LP, Sprint Spectrum Finance Corp. 11.00% 2006 6,000 6,645 .09 Telecom Argentina STET - France Telecom SA 12.00% 1999 2,500 2,933 .04 Telefonica De Argentina 11.875% 2004 1,500 1,793 .03 Teleport Communications 9.875% 2006 6,500 6,923 .09 U S WEST Capital Funding, Inc. 6.95% 2037 17,500 17,462 .24 U S WEST, Inc. 0% convertible debentures 2011 80,000 30,600 .41 ---------- ---------- 471,335 6.36 ---------- ---------- Textiles & Apparel Tultex Corp.: 10.625% 2005 2,750 3,028 .13 9.625% 2007 /2/ 6,000 6,375 WestPoint Stevens Inc. 8.75% 2001 2,500 2,575 .03 ---------- ---------- 11,978 .16 ---------- ---------- Transportation Airplanes Pass Through Trust, pass-through certificates: /5/ Series 1, Class B, 6.596% 2019 7,127 7,174 1.01 Series 1, Class C, 8.15% 2019 50,000 52,000 Series 1, Class D, 10.875% 2019 13,750 15,830 Alaska Airlines: Series A, 9.50% 2010 2,328 2,389 .18 Series B, 9.50% 2010 2,950 3,027 Series C, 9.50% 2010 2,846 2,925 Series D, 9.50% 2012 4,778 4,915 American Airlines, Inc., Series 1991-C2, mortgage pass- through certificates, 9.73% 2014 /5/ 6,000 6,917 .09 Continental Airlines, Inc.: 9.50% 2001 11,500 12,018 pass-through certificates: /5/ Series 1996-C, 9.50% 2015 4,902 5,500 Series 1996-A, 6.94% 2015 3,922 3,845 Series 1996-B, 7.82% 2015 13,236 13,630 .59 Series 1996-2B, 8.56% 2014 1,944 2,100 Series 1996-2D, 11.5% 2016 4,430 4,961 Series 1997-1, Class C-1, 7.42% 2008 /2/ 2,500 2,517 Delta Air Lines, Inc.: 9.875% 2000 2,000 2,155 1990 Equipment trust certificates: /2/ Series F, 10.79% 2014 1,700 2,109 Series I, 10.00% 2014 5,000 5,854 Series J, 10.00% 2014 10,000 11,709 .61 pass-through certificates: /5/ Series 1992-A2, 9.20% 2014 11,750 13,277 Series 1992-B1, 9.375% 2007 8,830 9,653 Jet Equipment Trust: /2/ /4/ Series 1994-A, 10.91% 2006 6,806 7,850 Series 1994-A, 11.79% 2006 4,000 5,085 Series 1995-A, 10.69% 2015 10,500 12,644 .92 Series 1995-A, 11.44% 2014 10,000 12,393 Series 1995-B, 10.91% 2014 5,000 5,957 Series 1995B-A, 7.63% 2015 17,744 18,148 Series 1995B-C, 9.71% 2015 5,500 6,288 MC-Cuernavaca Trust 9.25% 2001 /2/ 4,363 4,101 .06 Teekay Shipping Corp. 8.32% 2008 6,000 6,030 .08 United Air Lines, Inc., pass-through certificates: /5/ Series 1995-A1, 9.02% 2012 10,863 11,808 Series 1995-A2, 9.56% 2018 8,000 9,119 .35 Series 1996-A2, 7.87% 2019 5,000 4,899 USAir, Inc.: Series 1993-A1, 8.625% 1998 5,000 5,063 1990 Equipment Trust Certificates: Series A, 10.28% 2001 754 781 Series B, 10.28% 2001 754 781 .93 Series C, 10.28% 2001 530 549 9.625% 2001 3,996 4,096 10.00% 2003 19,000 19,475 pass-through trust: /5/ Series 1989-A1, 9.33% 2006 4,796 4,892 Series 1993-A2, 9.625% 2003 8,125 8,450 Series 1993-A3, 10.375% 2013 7,250 7,830 Class B, 7.50% 2009 8,178 8,210 Class C, 8.93% 2009 7,890 8,510 ---------- ---------- 357,464 4.82 ---------- ---------- FINANCE Banking & Thrifts Banco Nacional de Mexico 11.00% convertible debentures 2003 /2/ 4,425 4,724 .06 BankAmerica Capital III, BankAmerica Corp. Series 3, 6.386% 2027 /6/ 22,500 22,117 .30 BTC Capital Trust I 6.344% 2026 /6/ 17,500 17,360 .23 Central Fidelity Capital Trust I, Central Fidelity Banks, Inc. 6.832% 2027 /2/ /6/ 14,500 14,839 .20 Chase Capital II, Global Floating Rate Capital Securities, Series B, 6.35% 2027 /6/ 15,000 14,625 .20 Chevy Chase Bank, FSB 9.25% 2008 2,000 2,005 .03 Daiwa America Corp. 5.951% 1997 /2/ /4/ /5/ /6/ 19,044 19,044 .26 Den Danske Bank 7.40% 2010 /2/ 6,000 6,022 .08 First Nationwide 12.25% 2001 9,000 9,990 .13 First Nationwide Holdings Inc.: 9.125% 2003 6,000 6,180 10.625% 2003 12,750 13,961 .40 12.50% 2003 9,000 10,035 Imperial Capital Trust I, Imperial Bancorp 9.98% 2026 /2/ 9,000 9,308 .13 Kansallis-Osake-Pankki: 9.75% 1998 5,000 5,226 .09 10.00% 2002 1,000 1,121 Midland American Capital 12.75% 2003 12,150 13,140 .18 National Westminister Bank PLC 7.75% 2049 10,000 10,279 .14 Ocwen Federal Bank FSB 12.00% 2005 6,000 6,585 .09 Skandinaviska Enskilda Banken (N.Y. City) 6.875% 2009 8,250 7,922 .11 Washington Mutual Capital I, Washington Mutual Inc. 8.375% 2027 10,000 10,162 .14 ---------- ---------- 204,645 2.77 ---------- ---------- Financial Services Advanta Corp. Series D, 6.60% 2000 6,000 5,853 .08 Advanta National Bank 6.45% 2000 5,000 4,847 .06 Beneficial Corp. 12.875% 2013 3,800 4,234 .06 Capital One Capital I, Capital One Bank 7.409% 2027 /2/ /6/ 10,000 9,608 .13 Capital One Bank: 6.97% 2002 5,000 4,930 .23 7.15% 2006 12,500 12,646 Ford Motor Credit Co. 9.50% 2000 7,350 7,877 .11 General Motors Acceptance Corp.: 7.00% 2000 5,000 5,049 .29 debentures 8.10% 2024 15,800 16,203 Indah Kiat Finance Mauritius Ltd. 10.00% 2007 /2/ 13,750 13,750 .18 ---------- ---------- 84,997 1.14 ---------- ---------- Insurance Aetna Services, Inc. 6.97% 2036 12,500 12,623 .17 American Re Corp. 10.875% 2004 10,000 10,562 .14 Fidelity National Financial 0% 2009 20,000 10,300 .14 Integon Capital I, Integon Corp., Series A, 10.75% 2027 /2/ 6,000 7,230 .10 Terra Nova Insurance (UK) Holdings PLC 10.75% 2005 3,000 3,338 .04 ---------- ---------- 44,053 .59 ---------- ---------- Real Estate Beverly Finance Corp. 8.36% 2004 /2/ 10,000 10,420 .14 B.F. Saul REIT 11.625% 2002 19,000 20,235 .27 Corporate Property Investors: /2/ 9.00% 2002 2,000 2,138 .09 7.75% 2004 4,250 4,372 ERP Operating LP: 7.95% 2002 3,750 3,874 .23 7.57% 2026 13,000 13,380 Irvine Co. 7.46% 2006 /2/ /4/ 17,000 16,425 .22 New World China Finance Ltd. 4.0% 1999 /2/ 4,000 4,060 .05 Security Capital Industrial Trust: 7.25% 2002 1,000 1,010 7.95% 2008 1,000 1,038 .14 7.875% 2009 7,500 7,711 Security Capital Pacific Trust: 7.15% 2010 2,000 1,979 .06 7.90% 2016 2,100 2,126 Shopping Center Associates: /2/ 6.75% 2004 500 506 .17 7.625% 2005 12,000 11,701 Wellsford Residential Property Trust: 7.75% 2005 1,000 1,023 .02 7.25% 2000 1,000 1,008 ---------- ---------- 103,006 1.39 ---------- ---------- COLLATERALIZED MORTGAGE/ASSET-BACKED OBLIGATIONS /5/ (Excluding Those Issued by Federal Agencies) Aames Mortgage Trust: 1996 Series D, Class A-1B, 6.34% 2012 22,000 21,973 1996 Series D, Class A-1C, 6.52% 2020 9,000 8,966 .68 1996 Series D, Class A-1E, 6.87% 2024 19,500 19,403 AFC Home Equity Loan Trust, Series 1995-5, Class 1A4, 6.87% 2027 9,000 8,989 .12 Asset Securitization Corp.: Series 1996-D3, Class A-1B, 7.21% 2026 3,000 3,049 .20 Series 1997-D4, Class A-1A, 7.35% 2027 11,689 11,948 Banco Nacional de Mexico 0.00% 2002 /2/ 16,598 13,290 .18 Blackrock Capital Finance LP: /2/ Series 1996-C2, Class A, 7.641% 2026 4,999 5,053 .08 Series 1996-C2 Class C, 7.901% 2026 1,000 1,021 Capstead Securities Corp. IV, collateralized mortgage obligations, Series 1992-4, Class J, 19.607% 2022 /7/ 8,750 9,625 .13 Chase Commercial Mortgage Securities Corp., Series 1997-1, Class A1, 7.27% 2004 10,000 10,159 .14 Chase Manhattan Bank, NA: Series 93-I, Class 2A5, 7.60% 2024 10,000 9,975 .20 Series 96-1, Class A1, 7.60% 2005 4,881 5,030 Collateralized Mortgage Obligation Trust, Series 63, Class Z, 9.00% 2020 6,466 7,044 .10 ContiMortgage Home Equity Loan Trust, Series 1996-4A, Class A4, 6.37% 2011 1,500 1,489 .02 CSFB Finance Co. Ltd., Series 1995-A, 5.00%/7.00% 2005 /6/ 20,500 20,750 .28 CS First Boston Mortgage Securities Corp., mortgage pass-through certificates: Series 1995-AEW1, 6.665% 2027 159 159 .13 Series 1995-MBL1, 6.425% 2030 9,565 9,574 DLJ Mortgage Acceptance Corp.: /2/ Series 1996-CF2, Class A2, 7.28% 2021 5,000 5,042 .17 Series 1997-CF1, Class A1A, 7.40% 2006 7,000 7,161 EquiCredit Funding Asset Backed Certificates Series 1996-A, Class A2, 6.95% 2012 21,000 21,166 .29 FIRSTPLUS Home Loan Owner Trust: Series 1996-4, Class A3, 6.28% 2009 1,000 992 .14 Series 1997-1, Class A7, 7.16% 2018 10,000 9,913 GCC Home Equity Trust, asset-backed certificates, Series 1990-1, 10.00% 2005 2,074 2,106 .03 G E Capital Mortgage Services: Series 1994-9, Class A9, 6.50% 2024 4,201 3,643 .25 Series 1994-15, Class A10, 6.00% 2009 16,376 14,882 GMAC Commercial Mortgage Securities Inc., Series 1996-C1, Class A2A, 6.79% 2028 988 982 .01 Green Tree Financial Corp., pass-through certificates: Series 1993-2, Class B, 8.00% 2018 2,250 2,303 Series 1994-A, Class NIM, 6.90% 2004 5,895 5,881 Series 1995-A, Class NIM, 7.25% 2005 20,256 20,288 Series 1995-9, Class A-5, 6.80% 2027 8,000 7,952 .63 Series 1996-10, Class A-6, 7.30% 2028 8,500 8,306 Series 1997-A, Class HI-M1, 7.47% 2023 1,000 1,009 Series 1997-1, Class A5, 6.86% 2028 1,500 1,482 IMC Home Equity Loan Trust: Series 1996-2, Class A2, 6.78% 2011 12,000 12,007 Series 1996-4, Class A1, 6.59% 2011 5,803 5,800 .50 Series 1996-4, Class A1, 6.81 2011 18,972 19,002 J.P. Morgan & Co. Inc., Series A, 4.928% 2012 /8/ 10,000 9,600 .13 J.P. Morgan Commercial Mortgage Finance Corp., pass- through certificates: /6/ Series 1995-C1, Class A-2, 7.399% 2010 1,000 1,016 Series 1996-C3, Class A-1, 7.33% 2028 970 984 .04 Series 1997-C4, Class A-1, 6.939% 2028 1,439 1,446 Merrill Lynch Mortgage Investors, Inc.: Series 1995-C2, Class D, 8.266% 2021 /6/ 838 856 Series 1995-C3, Class A1, 6.789% 2025 /6/ 2,766 2,766 .24 Series 1996-C2, Class A1, 6.69% 2028 14,154 14,121 Money Store Trust: Series 1996-C, Class A-3, 7.07% 2017 3,000 3,026 Series 1996-D, Class A-12, 6.37% 2011 20,000 19,844 Series 1996-D, Class A-14, 6.985% 2016 4,000 3,965 .59 Series 1997-1, Class A-2, 6.81% 2011 17,000 17,056 Morgan Stanley Capital Inc. Series 1995-GA1, Class A-1, 7.00% 2002 /2/ 12,525 12,624 .18 Morgan Stanley Capital I Inc.: Series 1996-WF1, Class A-1, 6.58% 2028 /2/ /6/ 13,850 13,844 Series 1996-WF1, Class D, 6.58% 2028 /6/ 2,000 1,901 .35 Series 1997-WF1, Class A-1, 6.83% 2029 /2/ 10,000 10,019 Prudential-Bache CMO Trust, Series 3, Class F, 9.44% 2018 1,000 1,053 .01 Prudential Home Mortgage Securities Co., Inc.: Series 1993-7, Class A-4, 8.00% 2003 9,323 9,373 Series 1993-7, Class A-5, 8.00% 2003 456 454 Series 1993-48, Class A-6, 6.25% 2008 4,466 4,156 .39 Series 1992-37, Class A-6, 7.00% 2022 970 968 Series 1993-34, Class A-1, 7.00% 2023 13,096 13,174 Residential Funding Mortgage Securities I, Inc., Series 1992-S6, Class A-10, 12.858% 2022 /7/ 9,170 9,170 .12 Resolution Trust Corp.: Series 1991-M5, Class B, 9.00% 2017 2,324 2,369 Series 1992-6, Class A-2B, 8.40% 2024 4,774 4,776 Series 1993-C1, Class D, 9.45% 2024 9,352 9,477 Series 1993-C1, Class E, 9.50% 2024 407 412 .31 Series 1993-C2, Class C, 8.00% 2025 3,000 3,031 Series 1993-C2, Class D, 8.50% 2025 3,290 3,341 Series 1993-C2, Class E, 8.50% 2025 146 146 Standard Credit Card Master Trust I, credit card participation certificates, Series 1994-2A, 7.25% 2008 5,000 5,066 .07 Standard Credit Card Trust, credit card participation certificates, Series 1991-3A, 8.875% 1999 5,500 5,646 .08 Structured Asset Notes Transaction, Ltd. Series 1996-A, Class A1, 7.156% 2003 /2/ 8,137 8,120 .11 Structured Asset Securities Corp., pass-through certificates: Series 1995-C1, Class A1A, 7.375% 2024 436 438 Series 1996-CFL, Class D, 7.034% 2028 2,950 2,927 .06 Series 1996-CFL, Class E, 7.034% 2028 1,569 1,589 UCFC Acceptance Corp. pass-through Certificates: Series 1995-B1, Class A3, 6.75% 2017 2,000 2,005 Series 1996-B1, Class A3, 7.30% 2013 500 506 Series 1996-C1, Class A4, 7.748% 2020 9,500 9,678 .34 Series 1996-D, Class A4, 6.776% 2016 2,400 2,395 Series 1996-B1, Class A2, 7.075% 2010 10,000 10,076 ---------- ---------- 540,828 7.30 ---------- ---------- GOVERNMENTAL Governments (Excluding U.S. Government) Argentina (Republic of): 11.00% 2006 4,450 4,956 11.75% 2007 /2/ 16,000 17,819 11.375% 2017 6,500 7,238 .51 Eurobond 6.8125% 2005 /6/ 7,814 7,348 Australia Commonwealth 7.00% 2000 A$12,000 9,317 .13 Australian Government: 7.00% 1998 12,000 9,234 .25 9.50% 2003 11,000 9,457 Brazil (Federal Republic of): Debt Conversion Bond, Series L, 6.937% 2012 /6/ $500 413 .01 Bearer, 8.00 2014 280 225 British Columbia Hydro & Power Authority 12.50% 2013 4,000 4,426 .06 Bundesrepublik 7.125% 2002 DM65,000 41,358 .56 Canadian Government: 9.75% 2001 C$10,000 8,379 10.50% 2001 5,000 4,213 9.00% 2004 36,000 30,469 8.75% 2005 15,000 12,630 1.52 4.618% 2021 /8/ 19,000 14,883 4.421% 2026 /8/ 57,000 42,105 Deutschland Republic 8.00% 2002 DM34,050 22,411 .30 Ecuador(Republic of)Past Due Interest Bonds: /6/ Bearer: 6.50% 2015 $1,211 779 .01 6.50% 2025 250 178 Registered, 6.50% 2015 269 173 Export-Import Bank of Japan 2.875% 2005 Yen800,000 7,238 .10 Hydro-Quebec, Series HKF, 9.375% 2030 $3,250 3,885 .05 International Bank for Reconstruction and Development: 4.50% 2003 1,800,000 17,849 .35 4.75% 2004 800,000 8,177 Irish Government IEP 8.00% 2000 IR Pounds10,000 16,061 6.25% 2004 2,750 4,159 .65 8.00% 2006 16,700 27,733 Italian Government National: 9.50% 2001 Lr21,400,000 13,889 .34 10.50% 2005 15,000,000 10,813 Italy (Republic of) 6.875% 2023 1,000 938 .01 New Zealand Government: 8.00% 2004 NZ13,500 9,685 .37 4.50% 2016 /8/ 26,500 17,566 Ontario Hydro (Province of Ontario) 3.165% 1999 /6/ C$3,000 2,174 .03 Ontario (Province of) 7.75% 2002 $3,500 3,657 .05 Panama (Republic of): /2/ /6/ Interest Reduction Bond, 3.50% 2014 6,500 5,029 .09 Past Due Interest Bond, 6.563% 2016 1,521 1,339 Poland (Republic of)Past Due Interest Bond: /6/ Bearer, 3.75% 2014 4,000 3,426 .13 Registered, 3.75% 2014 7,000 5,996 Quebec (Province of): 8.625% 2005 6,750 7,352 .19 13.25% 2014 5,500 6,452 South Africa (Republic of) 13.00% 2010 ZAR96,000 19,405 .26 Spain (Kingdom of): 8.40% 2001 Pta2,225,000 16,677 .40 8.00% 2004 1,750,000 13,094 Swedish Government 10.250% 2003 SKr58,000 9,053 .12 Treuhandanstalt 7.125% 2003 DM33,000 20,984 .28 United Kingdom 8.50% 2005 Pounds18,500 33,495 .45 United Mexican States Government Eurobonds: Global, 11.375% 2016 $2,015 2,265 Global, 7.875% 2001 /2/ /6/ 14,000 14,024 Global, 11.50% 2026 825 942 Series A, 6.25% 2019 1,000 774 .26 Series A, 6.398% 2019 /5/ /6/ 1,250 1,165 Series B, 6.835% 2019 /5/ /6/ 500 466 Venezuela (Republic of): /6/ 6.75% 2007 $11,250 10,434 Front Loaded Interest Reduction Bond Series A 6.75% 2007 952 886 .15 Series B 6.75% 2007 238 221 ---------- ---------- 565,314 7.63 ---------- ---------- Federal Agency Obligations - Mortgage Pass-Throughs /5/ Federal Home Loan Mortgage Corp.: 6.65% 2027 3,000 2,761 8.00% 2003-2010 4,814 4,895 8.25% 2007 2,536 2,608 8.50% 2002-2020 30,815 31,994 8.75% 2008 3,304 3,441 9.00% 2021 966 1,033 10.00% 2011-2019 361 388 10.50% 2020 2,573 2,845 .75 10.75% 2010 103 113 11.50% 2000 35 38 12.00% 2010-2015 1,392 1,571 12.50% 2009-2019 1,665 1,935 12.75% 2015-2019 649 746 13.00% 2014 74 87 13.50% 2018 13 15 13.75% 2014 20 23 Federal National Mortgage Assn.: 6.084% 2033 /5/ 35,355 34,946 6.50% 2021-2025 16,348 15,476 7.00% 2009-2010 4,220 4,226 7.50% 2009-2024 12,182 12,320 7.50% 2009 3,757 3,811 8.00% 2023 3,066 3,163 8.50% 2009-2024 13,013 13,562 9.00% 2018-2025 6,227 6,583 1.72 9.50% 2009-2025 5,938 6,391 10.00% 2018-2025 16,856 18,346 10.50% 2012 4,544 4,980 11.00% 2015-2020 2,922 3,234 11.25% 2014 51 57 11.50% 2010-2014 278 311 12.00% 2015-2019 83 94 12.50% 2015 287 334 13.00% 2014 54 64 15.00% 2013 65 77 Government National Mortgage Assn.: 5.00% 2025-2026 /6/ 16,372 16,233 5.50% 2023-2024 123,467 125,969 6.00% 2024 /6/ 52,804 54,170 6.125% 2022 /6/ 7,700 7,913 6.50% 2008-2026 41,837 40,820 6.875% 2023 /6/ 14,388 14,734 7.00% 2008-2027 /6/ 74,158 73,718 7.125% 2023-2024 /6/ 21,073 21,178 7.50% 2007-2024 74,169 74,884 8.00% 2017-2025 18,514 19,127 7.35 8.50% 2020-2026 37,731 39,485 9.00% 2016-2022 20,404 21,887 9.50% 2009-2025 18,835 20,375 10.00% 2017-2019 10,245 11,293 10.50% 2015-2019 591 658 11.00% 2013-2016 1,366 1,549 11.50% 2015 61 70 12.00% 2014 135 157 12.50% 2010-2015 821 963 13.25% 2014 82 94 ---------- ---------- 727,745 9.82 ---------- ---------- Federal Agency Obligation - Other Federal Home Loan Bank Bonds: /5/ 6.16% 2004 24,000 22,984 6.27% 2004 5,000 4,821 6.38% 2003 3,000 2,914 1.12 6.41% 2003 18,580 18,034 7.00% 2005 35,000 34,256 Federal Home Loan Mortgage Notes: 5.74% 2003 6,500 6,160 5.78% 2003 14,520 13,771 6.185% 2003 19,845 19,116 6.19% 2004 11,000 10,527 6.24% 2003 2,900 2,798 6.27% 2004 3,500 3,376 6.28% 2003 3,000 2,908 1.54 6.30% 2003 2,000 1,945 6.375% 2003 5,820 5,674 6.39% 2003 10,330 10,049 6.50% 2003 6,200 6,059 7.00% 2002 25,000 24,754 7.29% 2004 6,000 5,957 Federal National Mortgage Association Notes: 7.70% 2004 12,500 12,678 medium-term notes: 5.54% 1997 30,000 30,000 1.14 6.14% 2004 13,000 12,419 7.43% 2005 30,000 29,747 FNSM Callable Principal STRIPS 0%/8.25% 2022 /1/ 4,500 4,020 .05 ---------- ---------- 284,967 3.85 ---------- ---------- Collateralized Mortgage Obligations - Federal Agencies /5/ Federal Home Loan Mortgage Corp.: Series 178, Class Z, 9.25% 2021 4,189 4,419 Series 1716, Class A, 6.50% 2009 4,750 4,591 Series 1657, Class SA, 6.766% 2023 /7/ 7,520 4,686 .24 Series 1673, Class SA, 5.078% 2024 /7/ 7,879 4,356 Federal National Mortgage Assn.: Series 90-93, Class G, 5.50% 2020 1,561 1,461 Series 91-146, Class Z, 8.00% 2006 7,070 7,203 .17 Series 93-247, Class Z, 7.00% 2023 3,809 3,562 ---------- ---------- 30,278 .41 ---------- ---------- U.S. Treasury Obligations 9.25% August 1998 117,200 121,393 1.64 8.875% November 1998 1,000 1,038 .01 8.875% February 1999 23,500 24,521 .33 9.125% May 1999 16,250 17,111 .23 6.875% July 1999 94,000 95,366 1.29 5.875% November 1999 30,000 29,808 .40 8.875% May 2000 30,000 32,077 .43 8.750% August 2000 28,000 29,947 .40 8.50% November 2000 30,000 31,973 .43 7.75% February 2001 26,000 27,190 .37 8.00% May 2001 17,500 18,484 .25 13.125% May 2001 21,500 26,438 .36 6.25% October 2001 8,000 7,962 .11 14.25% February 2002 7,000 9,172 .12 11.625% November 2002 92,000 113,462 1.53 10.750% May 2003 12,500 15,096 .20 11.875% November 2003 10,000 12,786 .17 7.25% May 2004 164,000 170,944 2.31 7.25% August 2004 3,000 3,128 .04 7.875% November 2004 6,000 6,475 .09 11.625% November 2004 109,500 141,870 1.92 6.50% May 2005 15,000 14,972 .20 3.404% January 2007 /8/ 33,000 32,596 .44 10.375% November 2009 12,500 15,191 .21 10.00% May 2010 7,500 9,023 .12 10.375% November 2012 15,000 19,040 .26 12.00% August 2013 10,000 14,077 .19 8.875% August 2017 176,000 214,363 2.89 8.125% May 2021 29,000 33,196 .45 ---------- ---------- 1,288,699 17.39 ---------- ---------- FLOATING RATE EURODOLLAR NOTES (UNDATED) /6/ Allied Irish Banks Ltd. 6.438% 7,000 6,576 .09 Bank of Nova Scotia 6.00% 10,000 8,900 .12 Bergen Bank 6.00% 5,000 4,429 .06 Canadian Imperial Bank of Commerce 6.125% 25,000 22,219 .30 Christiana Bank Og Kreditkasse 6.063% 6,000 5,430 .07 Hongkong and Shanghai Banking Corp. 6.25% 10,000 9,037 .12 Lloyds Bank (#2) 6.062% 8,000 7,329 .10 Midland Bank 5.813% 5,000 4,516 .06 National Bank of Canada 3.031% 5,000 4,125 .06 Standard Chartered Bank: 5.775% 5,000 4,363 .23 5.813% 15,000 13,025 ---------- ---------- 89,949 1.21 ---------- ---------- EQUITY-TYPE SECURITIES & MISCELLANEOUS Equity-Type Securities IntelCom Group Inc., warrants expire 8/8/05 /9/ 47,850 263 .00 Nextel Corp., warrants /9/ 38,750 0 .00 Swire Pacific Capital Ltd. 8.84% /2/ 780,000 20,085 .27 Swire Pacific Offshore Financing Ltd. 9.33% /2/ 180,000 4,928 .07 ---------- ---------- 25,276 .34 ---------- ---------- Miscellaneous Investment securities in the initial period of acquisition 52,446 .71 ---------- ---------- TOTAL BONDS, NOTES AND EQUITY-TYPE SECURITIES (cost: $6,316,369,000) 6,425,966 86.74 ---------- ---------- SHORT-TERM SECURITIES Commercial Paper American Express Credit Corp. 5.58% due 07/02/97 13,500 13,496 5.55% due 07/07/97 25,000 24,973 1.04 5.57%-5.58% due 08/06/97 38,600 38,381 Ameritech Corp. 5.58% due 07/08/97 32,000 31,961 .97 5.55% due 08/26/97 40,000 39,657 BellSouth Telecommunications Inc. 5.57% due 07/03/97 10,000 9,995 5.52% due 07/24/97 10,000 9,964 .60 5.52% due 07/25/97 25,000 24,905 Beneficial Corp. 5.64% due 07/10/97 29,500 29,454 .73 5.60% due 08/28/97 24,500 24,277 Commercial Credit Co. 5.56%-5.63% due 07/09/97 30,700 30,657 .74 5.60% due 09/03/97 25,000 24,748 E.I. du Pont de Nemours and Co. 5.62% due 07/21/97 34,000 33,890 .76 5.67% due 08/04/97 22,250 22,130 General Electric Capital Corp. 6.15% due 07/01/97 50,600 50,591 .68 IBM Credit Corp. 5.52% due 07/07/97 20,000 19,979 5.59% due 07/22/97 21,000 20,928 1.09 5.63% due 07/28/97 25,000 24,892 5.60% due 08/27/97 15,000 14,866 International Lease Finance Corp. 5.59% due 08/04/97 15,000 14,919 5.68% due 08/15/97 25,000 24,822 .87 5.69% due 08/18/97 25,000 24,811 Lucent Technologies Inc. 5.63% due 07/29/97 22,600 22,499 5.55% due 08/04/97 24,250 24,123 .83 5.55% due 08/19/97 15,000 14,885 Monsanto Co. 5.65% due 07/14/97 20,000 19,956 5.56% due 08/06/97 10,000 9,945 .60 5.65% due 08/25/97 15,000 14,871 Motorola Credit Corp. 5.57% due 07/11/97 20,600 20,565 .62 5.53% due 07/25/97 25,000 24,913 National Rural Utilities Cooperative Finance Corp. 5.61% due 07/01/97 8,000 7,999 5.65% due 07/30/97 20,000 19,907 .57 5.60% due 09/03/97 14,250 14,107 Safeco Credit Co. Inc. 5.62% due 07/17/97 21,000 20,945 5.58% due 08/08/97 9,000 8,946 .72 5.65% due 08/26/97 23,760 23,551 Warner-Lambert Co. 5.57% due 07/08/97 25,000 24,969 .67 5.56% due 08/21/97 25,000 24,799 Xerox Corp. 5.58% 07-23-97 20,000 19,929 5.58% 07-24-97 20,000 19,926 .95 5.53% 07-25-97 5,500 5,479 5.59% 08-05-97 25,200 25,060 ---------- ---------- 921,670 12.44 ---------- ---------- TOTAL SHORT-TERM SECURITIES 921,670 12.44 (Cost $921,681,000) ---------- ---------- TOTAL INVESTMENT SECURITIES 7,347,636 99.18 (cost $7,238,050,000) Excess of cash and receivables over payables 60,577 .82 ---------- ---------- NET ASSETS 7,408,213 100.00% =========== ========== /1/ Step bond; coupon rate will increase at a later date. /2/ Purchased in a private placement transaction; resale to the public may require registration. /3/ Purchased as a unit; issue was separated but reattached for reporting purposes. /4/ Valued under procedures established by the Board of Directors. /5/ Pass-through security backed by a pool of mortgages or other loans on which principal payments are periodically made. Therefore, the effective maturity is shorter than the stated maturity. /6/ Coupon rate may change periodically. /7/ Inverse floater, which is a floating rate note whose interest rate moves in the opposite direction of prevailing interest rates. /8/ Index-linked bond, which is a floating rate bond whose principal amount moves with a government retail price index. /9/ Non-income-producing security. See Notes to Financial Statements
The Bond Fund of America FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES (Unaudited) June 30, 1997 (dollars in thousands) Assets: Investment securities at market (cost: $7,238,050) $7,347,636 Cash 16,148 Prepaid expense .................... Receivables for-- Sales of investments $29,316 Forward currency contracts 3,653 Sales of Fund's shares 17,863 Dividends and accrued interest 102,282 153,114 ---------- ---------- 7,516,898 Liabilities: Payables for-- Purchases of investments 86,324 Repurchases of fund's shares 11,604 0 Dividends on Fund's shares 7,378 Management services 2,018 Accrued expenses 1,361 108,685 2,057 $110,742 ---------- ---------- Net Assets at July 30, 1997-- Equivalent to $13.81 per share on 536,564,568 shares of $1 par value capital stock outstanding (authorized capital stock - 1,000,000,000 shares) $7,408,213 =========== STATEMENT OF OPERATIONS for the six months ended June 30, 1997 (dollars in thousands) Investment Income: Income: Interest $275,783 Dividends from investment in stocks 280 $276,063 Expenses: Management services fee $11,738 Distribution expenses 8,841 Transfer agent fee 2,330 Reports to shareholders 281 Registration statement and prospectus 395 Postage, stationery and supplies 601 Directors' fees 39 Auditing and legal fees 55 Custodian fee 171 Taxes other than federal income tax 87 Other expenses 31 24,569 ---------- ---------- Net investment income 251,494 =========== Realized Gain and Unrealized Appreciation on Investments: Net realized gain 29,500 Net unrealized appreciation (depreciation) on: Investments (2,637) Open forward currency contracts 4,380 ---------- Net unrealized appreciation 1,743 ---------- Net realized gain and unrealized appreciation on investments 31,243 ---------- Net Increase in Net Assets Resulting $282,737 from Operations ========== STATEMENT OF CHANGES IN NET ASSETS (dollars in thousands) Six months Year ended ended December 31, June 30, 1997* 1996 Operations: Net investment income $251,494 $491,209 Net realized gain (loss)on investments 29,500 (7,778) Net unrealized appreciation (depreciation) on investments 1,743 (45,326) ---------- ---------- Net increase in net assets resulting from operations 282,737 438,105 ---------- ---------- Dividends and Distributions Paid to Shareholders: Dividends from net investment income (253,093) (488,959) ---------- ---------- Capital Share Transactions: Proceeds from shares sold: 72,530,489 and 130,706,510 shares, respectively 993,757 1,780,596 Proceeds from shares issued in reinvestment of net investment income dividends and distributions of net realized gain on investments: 13,309,764 and 26,267,382 shares, respectively 182,352 357,426 Cost of shares repurchased: 58,400,804 and 101,063,959 shares, respectively (799,929) (1,374,955) ---------- ---------- Net increase in net assets resulting from capital share transactions 376,180 763,067 ---------- ---------- Total Increase in Net Assets 405,824 712,213 Net Assets: Beginning of period 7,002,389 6,290,176 ---------- ---------- End of period (including undistributed net investment income: $15,355 and $16,954 respectively) $7,408,213 $7,002,389 =========== =========== *Unaudited See Notes to Financial Statements
(Unaudited) NOTES TO FINANCIAL STATEMENTS 1. 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 following paragraphs summarize the significant accounting policies consistently followed by the fund in the preparation of its financial statements: Stocks and convertible debentures traded on a national securities exchange (or reported on the NASDAQ national market) and securities traded in the over-the-counter market are stated at the last reported sales price on the day of valuation; other securities, and securities for which no sale was reported on that date, are stated at the last quoted bid price. Bonds and notes are valued at prices obtained from a bond-pricing service provided by a major dealer in bonds, 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 of their representative quoted bid and asked prices or, if such prices are not available, at prices for securities of comparable maturity, quality and type. The value of each security denominated in a currency other than U.S. dollars will be translated into U.S. dollars at the prevailing market rate provided by a pricing service in accordance with procedures established by the fund's officers. Short-term securities with more than 60 days remaining to maturity, including forward currency contracts, are valued at the mean of their representative quoted bid and asked prices. Where pricing service or market quotations are not readily available, securities will be valued at fair value by the Board of Directors or a committee thereof. Short-term securities with 60 days or less remaining to maturity are valued at amortized cost, which approximates market value. As is customary in the mutual fund industry, securities transactions are accounted for on the date the securities are purchased or sold. In the event the fund purchases securities on a delayed-delivery or "when-issued" basis, it will segregate with its custodian liquid assets in an amount sufficient to meet its payment obligations in these transactions. Realized gains and losses from securities transactions are reported on an identified cost basis. Interest income is reported on the accrual basis. Discounts and premiums on securities purchased are amortized over the life of the respective securities. Dividends to shareholders are declared daily after determination of the fund's net asset value and paid to shareholders monthly. Investment securities and other assets and liabilities, including forward currency contracts, denominated in non-U.S. currencies are recorded in the financial statements after translation into U.S. dollars utilizing rates of exchange on the last business day of the year. The Fund records realized gains or losses at the time the forward contract is offset by entry into a closing transaction or extinguished by delivery of the currency. Purchases and sales of investment securities and income are calculated using the prevailing exchange rate. The effects of changes in foreign currency exchange rates on investment securities are included with the net realized and unrealized gain or loss on investment securities. Pursuant to the custodian agreement, the fund receives credit against its custodian fee for imputed interest on certain balances with the custodian bank. The custodian fee of $171,000 includes $95,000 that was paid by these credits rather than in cash. 2. It is the fund's policy to continue to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its net taxable income, including any net realized gain on investments, to its shareholders. Therefore, no federal income tax provision is required. As of June 30, 1997, net unrealized appreciation on investments, excluding forward currency contracts, for book and federal income tax purposes aggregated $109,585,000, of which $196,911,000 related to appreciated securities and $87,326,000 related to depreciated securities. During the period ended June 30, 1997, the fund realized, on a tax basis, a net capital gain of $32,531,000 on securities transactions. Net losses related to non-U.S. currency transactions of $3,031,000 were treated as ordinary income for tax purposes. The fund has available at June 30, 1997 a net capital loss carryforward totaling $50,492,000 which may be used to offset capital gains realized during subsequent years through 2003 and thereby relieve the fund and its shareholders of any federal income tax liability with respect to the capital gains that are so offset. It is the intention of the fund not to make distributions from capital gains while there is a capital loss carryforward. The cost of portfolio securities, excluding foreign currency contracts, for book and federal income tax purposes was $7,238,050,000 at June 30, 1997. 3. The fee of $11,738,0000 for management services was paid 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 an annual rate of 0.30% of the first $60 million of average net assets; 0.21% of such assets in excess of $60 million but not exceeding $1 billion; 0.18% of such assets in excess of $1 billion but not exceeding $3 billion; 0.16% of such assets in excess of $3 billion but not exceeding $6 billion; .15% of average net assets in excess of $6 billion; plus 3.00% on the first $450,000 of the fund's monthly gross investment income; 2.25% of such income in excess of $450,000 but not exceeding $8,333,333; and 2.00% of such income in excess of $8,333,333. Pursuant to a Plan of Distribution, the fund may expend up to 0.25% of its average net assets annually for any activities primarily intended to result in sales of fund shares, provided the categories of expenses for which reimbursement is made are approved by the fund's Board of Directors. Fund expenses under the Plan include payments to dealers to compensate them for their selling and servicing efforts. During the six months ended June 30, 1997, distribution expenses under the Plan were $8,841,000. As of June 30, 1997, accrued and unpaid distribution expenses were $1,132,000. American Funds Service Company (AFS), the transfer agent for the fund, was paid a fee of $2,830,000. American Funds Distributors, Inc. (AFD), the principal underwriter of the fund's shares, received $2,497,000 (after allowances to dealers) as its portion of the sales charges paid by purchasers of the fund's shares. Such sales charges are not an expense of the fund and, hence, are not reflected in the accompanying statement of operations. 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 June 30, 1997, aggregate amounts deferred and earnings thereon were $104,000. CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both wholly owned subsidiaries of CRMC. Certain Directors and officers of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No such persons received any remuneration directly from the fund. 4. As of June 30, 1997, accumulated net realized loss on investments was $17,960,000 and paid-in capital was $6,770,615,000. The fund made purchases and sales of investment securities, excluding short-term securities, of $1,991,606,000 and $1,716,518,000, respectively, during the period ended June 30, 1997. The fund purchases and sells forward currency contracts in anticipation of, or to protect itself against, fluctuations in exchange rates. The contracts are recorded in the statement of assets and liabilities at their net unrealized value; the fund's maximum potential liability in these contracts is equal to the full contract amounts. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and from the possible movements in foreign exchange rates and securities values underlying these instruments. At June 30, 1997 the fund had an outstanding forward currency contract to sell non-U.S. currency as follows: Contract Amount U.S. Valuations at 6/30/97 --------- --------- --------- --------- Unrealized Appreciation Non-U.S. Currency Sales Contracts Non-U.S. U.S. Amount (Depreciation) Deutsche Marks expiring 7/8/97 to 9/18/97 DM 101,823,000 $61,955,000 $58,521,000 $3,434,000 Great Britain Pounds expiring 8/12/97 Pounds 5,513,000 8,925,000 9,172,000 (24 Irish Pounds expiring 8/27/97 IR Pounds 11,799,000 17,800,000 17,864,000 ( Japanese Yen expiring 8/13/97 to 9/22/97 Yen 3,577,561,000 31,939,000 31,606,000 33 Spanish Pesetas expiring 9/19/97 to 9/30/97 Pta 2,320,975,000 15,863,000 15,764,000 Swedish Kronor expiring 7/28/97 SKr 70,000,000 9,161,000 9,063,000 --------- --------- --------- $145,643,000 $141,990,000 $3,653,000 ========= ========= =========
Per-Share Data and Ratios Six Months Ended Year Ended December 31 06/30/97 /1/ 1996 1995 1994 1993 1992 Net Asset Value, Beginning of Period $13.75 $13.88 $12.69 $14.45 $13.99 $13.70 ---------- ---------- ---------- ---------- ---------- ---------- Income from Investment Operations: Net investment income 0.48 1.02 1.05 1.05 1.09 1.15 Net realized and unrealized gain(loss) on investments 0.07 (0.13) 1.18 (1.76) 0.84 0.34 ---------- ---------- ---------- ---------- ---------- ---------- Total from investment operations 0.55 0.89 2.23 (0.71) 1.93 1.49 ---------- ---------- ---------- ---------- ---------- ---------- Less Distributions: Dividends from net investment income (0.49) (1.02) (1.04) (1.05) (1.08) (1.16) Distributions from net capital gains -- -- -- -- (0.39) (0.04) -- -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- Total distributions (0.49) (1.02) (1.04) (1.05) (1.47) (1.20) ---------- ---------- ---------- ---------- ---------- ---------- Net asset value, End of period $13.81 $13.75 $13.88 $12.69 $14.45 $13.99 =========== ======================================================= Total Return /2/ 3.95% /1/ 6.71% 18.25% (5.02%) 14.14% 11.34% Ratios/Supplemental data: Net assets, end of period (in millions) $7,408 $7,002 $6,290 $4,941 $5,285 $3,917 Ratio of expenses to average net assets .34% /1/ .71% .74% .69% .71% .73% Ratio of net income to average net assets 3.52% /1/ 7.47% 7.87% 7.77% 7.53% 8.36% Portfolio turnover rate 27.76% /1/ 43.43% 43.80% 56.98% 44.68% 49.70% /1/ Unaudited /2/ Calculated without deducting a sales charge. The maximum sales charge is 4.75% of the fund's offering price. /3/ Based on the period shown and, accordingly, are not representative of a full year's operations.
THE AMERICAN FUNDS GROUP (R) SHAREHOLDER SERVICES ARE YOU AWARE OF YOUR RIGHTS? Did you know you may be eligible for a sales charge discount when you buy shares of most American Funds? The discounts begin when your investments total $25,000 for bond funds or $50,000 for stock and stock/bond funds - and the good news is you don't have to invest the whole amount at one time. Through your right of accumulation, when you purchase additional shares you can add the purchase amount to the value of shares you already own - in any of our eligible funds* - in order to qualify for a sales charge discount on the new investment. Sales charges are reduced on a sliding scale as the value of your investments increases. You'll find a detailed breakdown of all discounts in your fund's prospectus, which you can obtain from your financial adviser or by calling a Shareholder Services Representative. OTHER WAYS TO REDUCE SALES CHARGES You can establish a statement of intention that allows you to invest at a reduced sales charge immediately, based on purchases you intend to make over a 13-month period.* If you don't invest the intended amount, you will pay the sales charge applicable to the amount invested. Or you can aggregate accounts by adding your purchase amount to the total value of accounts you, your spouse and your children under age 21 have with The American Funds Group. Call a Shareholder Services Representative for details and restrictions. Whether you accumulate, aggregate or establish a statement of intention, it all adds up - to more purchasing power for you. SERVICES TO MATCH YOUR LIFESTYLE Our many free services are designed to accommodate your needs quickly and efficiently. AMERICAN FUNDSLINE (R) AND FUNDSLINE ONLINE (SM) - Handle transactions using your computer or phone 24 hours a day. Obtain current prices and investment returns, exchange shares between funds, redeem shares, check your share balances and confirm your most recent transaction. Request a prospectus (Web site only), duplicate statements and order checks (phone only). All on your timetable. Just call 800/325-3590 or visit our Web site at www.americanfunds.com. AMERICAN FUNDSLINK (SM) - Link your American Funds accounts with your bank account. You can have fund dividends or automatic fund withdrawals deposited directly into your bank account for fast, convenient, worry-free banking. Or you can invest money directly from your bank account into your fund account on either a systematic or on-demand basis. OTHER AUTOMATIC TRANSACTIONS - You can reinvest dividends into the same fund or another fund, make withdrawals, and exchange shares between funds - quarterly, monthly or during the months you specify. DIVIDEND AND CAPITAL GAIN OPTIONS - Use your dividend and capital gain distributions to meet your changing needs. You may: - - Automatically reinvest distributions back into the fund at no sales charge. - - Cross-reinvest dividends into another fund at no sales charge for added diversification. You can cross-reinvest if you have a balance of at least $5,000 in the originating fund or meet the minimum initial investment for the receiving fund. - - Have dividends mailed or sent electronically to you or to someone else to help meet your obligations. EXCHANGE PRIVILEGES - When you and your investment adviser feel it's time to adjust your portfolio to meet your changing investment goals, you can easily exchange shares from one American Fund to another - without paying a sales charge.* If you are opening an account in a different fund, you must meet that fund's minimum investment requirement. Please remember that fund exchanges among many types of accounts constitute a sale and purchase for tax purposes. Please read the prospectus before you exchange shares. OTHER SERVICES - Stay on top of your investments with account statements that keep you abreast of the activity in your account, consolidated quarterly statements to reduce paperwork if you have multiple accounts and year-end tax reports that show the dividends and capital gain distributions paid to you during the year. To reduce paperwork and avoid the problem of lost or destroyed certificates, your shares are credited to your account and certificates are not issued unless specifically requested. *Investments in our money market funds - The Cash Management Trust of America, The Tax-Exempt Money Fund of America and The U.S. Treasury Money Fund of America - which are purchased without a sales charge, generally do not apply when determining your sales charges. If, however, the shares were originally purchased in another American Fund that required a sales charge, then later exchanged into our money market funds, the value of the shares would apply toward reducing sales charges. For more complete information about these services or about any of the American Funds, including charges and expenses, please obtain a prospectus from your financial adviser or American Funds Service Company and read it carefully before you invest or send money. These services are subject to change or termination. TO TALK TO A SHAREHOLDER SERVICES REPRESENTATIVE, CALL TOLL-FREE (8 A.M. TO 8 P.M. ET) FROM ANYWHERE IN THE U.S.: 800/421-0180. VISIT OUR WEB SITE AT WWW.AMERICANFUNDS.COM [illustration: map of the United States of America] WESTERN SERVICE CENTER American Funds Service Company P.O. Box 2205 Brea, California 92822-2205 WEST CENTRAL SERVICE CENTER American Funds Service Company P.O. Box 659522 San Antonio, Texas 78265-9522 EAST CENTRAL SERVICE CENTER American Funds Service Company P.O. Box 6007 Indianapolis, Indiana 46206-6007 EASTERN SERVICE CENTER American Funds Service Company P.O. Box 2280 Norfolk, Virginia 23501-2280 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 92821-5804 TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS (Please write to the address nearest you.) American Funds Service Company 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 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, 1997, this report must be accompanied by an American Funds Group Statistical Update for the most recently completed calendar quarter. Litho in USA KBD/AL/3472 Lit. No. BFA-013-0897 Printed on recycled paper THE AMERICAN FUNDS GROUP (R) -----END PRIVACY-ENHANCED MESSAGE-----