-----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, F335yMyR8UIqyJS3hZUhaoh7IJtwTuMbzjlS0fIHtsIXKUX1FY45hjaK16Cu9NPP VoOKxQ24LlLhb6hRE6cMRQ== 0000013075-98-000019.txt : 19980909 0000013075-98-000019.hdr.sgml : 19980909 ACCESSION NUMBER: 0000013075-98-000019 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980908 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: 98705579 BUSINESS ADDRESS: STREET 1: 333 S HOPE ST - 52ND FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90071 BUSINESS PHONE: 2134869200 N-30D 1 [THE AMERICAN FUNDS GROUP(R)] THE BOND FUND OF AMERICA SEMI-ANNUAL REPORT FOR THE SIX MONTHS ENDED JUNE 30, 1998 [cover: BFA certificate rolled up] 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 assuming distributions reinvested or interest compounded for periods ended 6/30/98
Lifetime (since inception on 5/28/74) 6-month 12-month Total return Average return return annual compound return The Bond Fund of America +3.7% +9.0% +974.6%+ 10.4% Lehman Brothers +3.9 +10.5 +831.4 (1) +9.7 (1) Aggregate Bond Index Lipper Corporate A-Rated +3.8 +10.4 +805.1 +9.6 Bond Funds Average(2) Average savings institution(3) +1.9 +3.8 + 341.5 +6.4 Consumer Price Index(4) +1.1 +1.7 +235.4 +5.2
The bond market index is unmanaged. 1 The Lehman Brothers Aggregate Bond Index began on January 1, 1976. From May 31, 1974, through December 31, 1975, the Lehman Brothers Government/Corporate Bond Index was used. 2 Lipper averages do not include the effects 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 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, 1998, 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: +8.86%; 5 years: +6.17%; 12 months: +3.82% The fund's 30-day yield as of July 31, 1998, calculated in accordance with the Securities and Exchange Commission formula, was 6.29%. 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: Domestic bond markets continued to gain momentum during the first half of 1998. With inflation barely visible on the economic horizon, optimistic investors pushed bond prices higher, sending yields on longer term securities to their lowest levels in decades. U.S. bonds were also the beneficiaries of a so-called "flight to quality" in which investors around the world, encouraged by a strong U.S. dollar and fearful of turbulent markets overseas, sought the relative safety of dollar-denominated assets. Foreign investors have been enthusiastic buyers of U.S. bonds; they now own about one-third of all U.S. Treasury securities outstanding. Throughout the period, The Bond Fund of America continued to produce a generous stream of current income. Shareholders who reinvested monthly dividends totaling 48.5 cents a share received an income return of 3.5% for the six months ended June 30. That return, and a modest increase in share value, contributed to a total return of 3.7%. On a relative basis, the fund's 3.7% total return just about kept pace with the 3.8% average for the 150 corporate A-rated bond funds tracked by Lipper Analytical Services during the period and the 3.9% return for the Lehman Brothers Aggregate Bond Index, which is unmanaged and has no expenses. [Begin sidebar] GOOD BOND SELECTION AND WIDE DIVERSIFICATION HAVE BEEN KEY TO BFA'S LONG TERM RECORD. [End sidebar] Over the past 12 months, BFA produced a total return of 9.0%, bringing its total return since beginning operations in 1974 to 974.6% - an average compound return of 10.4% a year. A look at the portfolio While broad market movements obviously influence overall results, good individual bond selection and wide diversification have been key to the fund's long-term record. BFA's portfolio is the product of extensive, ongoing research into the health of bond issuers, the relative value of securities in the marketplace and their appropriateness for the fund. BFA is unusually well-diversified. The lion's share of the portfolio is held in a combination of investment-grade and lower rated corporate bonds, many of which have continued to do well in the current low-interest-rate environment. Another sector that contributed to results was U.S. Treasury securities, which account for 18% of net assets. These bonds appreciated considerably during the period, in part on expectations that a reduced federal budget deficit should slow the pace of bond issuance by the government. Mortgage- and asset-backed securities, at 21% of net assets, continued to provide a yield advantage, although a recent upsurge in the rate of refinancing has raised concerns about the market prices of these instruments relative to other bonds. Meanwhile, the strong dollar pared returns somewhat on securities denominated in non-U.S. currencies. At 8% of net assets, however, they constitute a relatively small portion of BFA's holdings. Going forward Looking ahead, the fundamentals underpinning the bond market appear quite solid. Despite strong consumer demand and a tight labor market, inflationary pressures have thus far been offset by an Asia-induced slowdown in business activity that has helped take some steam out of the U.S. economy. While we are cautiously optimistic, it is difficult to predict how global events will influence the economic outlook and the prospect for bonds. As always, we will continue to monitor developments that may affect the holdings in your fund. We also wish to report that, reflecting the general decline of interest rates over the past few years, the monthly dividend was decreased to 7.75 cents a share from the 8.25 cents a share that had been paid since August 1995. The new dividend took effect with the July payment. 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, 1998 THE BOND FUND OF AMERICA INVESTMENT PORTFOLIO JUNE 30, 1998 (Unaudited) [graphic: pie chart divided into seven pieces] Corporate Bonds 44.6% Mortgage-/Asset-Backed Securities 20.6% U.S. Treasuries 18.1% Non-U.S. Government Bonds and Governmental Authorities 7.2% Federal Agency Notes & Bonds* 1.3% Stocks 0.2% Cash & Equivilents 8.0% Shares or Market Percent Principal Value of Amount Net Assets (000) (000) BONDS, NOTES, & PREFERRED STOCKS INDUSTRIALS, SERVICES & UTILITIES Telecommunications NEXTEL Communications, Inc.: $14,000 13,615 1.43 0%/9.75% 2004(1) 12,750 12,527 0%/10.125% 2004(1) 66,000 43,065 9.75% 2007(1,2) 3,250 2,194 10.65% 2007(1) 28,750 18,328 9.95% 2008(1,3) 15000 shares 16,708 Series D, 13.00% exchangeable preferred, redeemable 2009 (USA)(4) 22000 shares 22,947 11.25%, exchangeable preferred, redeemable, 2010(3,4) $78,787 45,562 0.50 CellNet Data Systems, Inc. Units 0%/14.00% 2007(1,5) Omnipoint Corp.: 12,778 18,877 0.48 Units 12.00% 2000(2,5,6) 18,200 19,292 11.625% 2006 120 5,700 7.00% convertible preferred(3) Clearnet Communications Inc.:(1) C$45825 20,595 0.46 0%/11.75% 2007 53,500 21,495 0%/10.40% 2008 QWest Communications International Inc.: $26,000 19,500 0.40 0%/9.47% 2007(1) 5,000 5,763 10.875% 2007 15,000 10,800 0%/8.29% 2008(1,3) 28,530 32,250 0.36 Orion Network Systems, Inc. Units 11.25% 2007(5) Viatel, Inc.: 16,750 10,134 0.31 Units 0%/12.50% 2008(1,3) DM8500 4,936 Units 11.15% 2008(2,3) $12,750 13,388 11.25% 2008(3) 37,881 25,190 0.28 McCaw International, Ltd. Units 0%/13.00% 2007(1,5) 21,000 21,787 0.24 Comcast Cellular 9.50% 2007 Centennial Cellular Corp.: 15,500 16,120 0.24 8.875% 2001 5,000 5,600 10.125% 2005 19,250 19,250 0.21 American Cellular Corp. 10.50% 2008(1) 7,500 18,375 0.20 Global TeleSystems Group 8.75% convertible debentures 2000(1,2) COLT Telecom Group PLC: 5,255 5,092 0.20 Units 0%/12.00% 2006(1,6) DM9500 5,582 8.875% 2007 L4000 7,080 10.125% 2007 $15,125 15,617 0.17 US Xchange 15.00% 2008(3) Omnipoint Communications Inc.: 6,000 6,000 0.17 Loan Tranche B 8.875% 2006(2,3) 9,336 9,336 Loan Tranche A Unit 8.875% 2006(2) 17,568 14,531 0.16 Comunicauiaen CelulAr SA Units 0%/13.125% 2003(1,6) 13,250 13,221 0.15 US WEST Capital Funding, Inc. 6.25% 2005 12,750 12,367 0.14 CCPR Services, Inc. 10.00% 2007 WorldCom, Inc.: 4,796 5,217 0.12 8.875% 2006 5,500 5,966 7.75% 2007 8,530 9,767 0.11 MobileTelecomm 13.50% 2002 13,400 8,777 0.10 Pinnacle Holdings Inc. 0%/10.00% 2008(1,3) ARP10500 8,716 0.10 CEI Citicorp Holdings SA 11.25% 2007(3) 8,250 8,250 0.09 NEXTLINK Communications, Inc. 9.00% 2008(3) 11,000 7,590 0.08 Crown Castle International Corp. 0%/10.625% 2007(1) 11,750 7,109 0.08 PageMart Wireless, Inc. 11.25% 2008(1) 6,000 6,945 0.08 Sprint Spectrum LP, Sprint Spectrum Finance Corp. 11.00% 2006 6,857 6,439 0.07 Teletrac Holdings, Inc. Units 14.00% 2007(5) 4,500 3,307 0.07 Esat Telecom Group PLC 0%/12.50% 2007!1) 4,004 3,080 Esat Holdings Ltd. Units 0%/12.50% 2007(1,5) 5,980 5,863 0.06 Conecel Holdings Ltd., Units Series A, 14.00% 2000(3,5) 6,000 4,380 0.05 Intermedia Communications Inc. 0%/11.25% 2007(1) 4,505 4,956 0.05 Globalstar LP Units 11.375% 2004(5) 6,000 3,990 0.05 Telesystem International Wireless Inc. 13.25% 2007(1) 3,500 3,736 0.04 Northern Telecom Ltd. 8.75% 2001 3,000 3,375 0.04 Nextlink Capital, Inc. 12.50% 2006 5,750 3,213 0.03 SpectraSite Holdings, Inc. 12.00% 2008(1,3) 4,200 2,856 0.03 PTC International Finance BV 10.75% 2007(1) 2,750 2,674 0.03 Level 3 Communications, Inc. 9.125% 2008(3) MobileMedia Communications, Inc.:(7) 6,600 1,848 0.03 0%/10.50% 2003(1) 2,450 809 9.375% 2007 2,500 2,534 0.03 IMPSAT Corp. 12.375% 2008(3) RCN Corp.: 2,750 1,767 0.03 0%/11.125% 2007(1) 750 773 10.00% 2007 2,500 2,531 0.03 Teligent, Inc. 11.50% 2007 2,500 2,487 0.03 PanAmSat Corporation 6.125% 2005(3) 4,000 2,355 0.03 NEXTEL International, Inc. 12.125% 2008(1,3) 6,994 874 0.01 Geotek Communications, Inc. 0%/15.00% 2005(1,7) 685,008 7.57 Transportation Continental Airlines, Inc., pass-through certificates:(8) 2,454 2,519 0.96 Series 1997-1C, 7.42% 2007 990 1,056 Series 1997-1B, 7.46% 2014 1,898 2,132 Series 1996-2B, 8.56% 2014 3,844 3,999 Series 1996-A, 6.94% 2015 12,975 13,901 Series 1996-B, 7.82% 2015 4,805 5,587 Series 1996-C, 9.50% 2015 4,385 4,867 Series 1996-2D, 11.50% 2016 30,000 31,127 Series 1997-4A, 6.90% 2018 21,000 21,428 Series 1198-1A, 6.648% 2019 Jet Equipment Trust:(3) Series 1994-A, Class B1, 10.91% 2006 6,535 7,760 0.65 Series 1994-A, 11.79% 2013 4,000 5,541 Series 1995-B, 10.91% 2014 5,000 6,613 Series 1995-D, 11.44% 2014 10,000 13,684 Series 1995-B, Class A, 7.63% 2015 4,204 4,499 Series 1995-B, Class C, 9.71% 2015 5,500 6,755 Series 1995-A, Class C 10.69% 2015 10,500 13,970 Airplanes Pass Through Trust, pass-through certificates, 41,798 44,041 0.49 Series 1, Class C, 8.15% 2019(8) Atlas Air, Inc., Pass-Through Trusts, Series 1998-1, Class A, 7.38% 2018(3,8) 41,000 42,085 0.46 USAir, Inc.: Series 1993-A1, pass-through certificate, 8.625% 1998(8) 5,000 5,015 0.46 9.625% 2001 3,996 4,156 1990 Equipment Trust Certificates: Series A, 10.28% 2001 754 802 Series B, 10.28% 2001 754 802 Series C, 10.28% 2001 530 563 Series 1993-A2, pass-through trust, 9.625% 2003(8) 2,500 2,713 Enhanced Equipment Notes: Class B, 7.50% 2009 9,161 9,702 Class C, 8.93% 2009 8,409 9,542 Series 1993-A3, pass-through trust, 10.375% 2013(8) 7,250 8,177 Delta Air Lines, Inc.:(8) pass-through certificates, Series 1992-A2, 9.20% 2014 11,500 13,811 0.38 1990 Equipment trust certificates:(3) Series I, 10.00% 2014 5,000 6,237 Series J, 10.00% 2014 10,000 12,474 Series F, 10.79% 2014 1,700 2,294 United Air Lines, Inc., pass-through certificates:(8) Series 1995-A1, 9.02% 2012 10,638 12,053 0.24 Series 1995-A2, 9.56% 2018 8,000 9,967 Alaska Airlines: Series A, 9.50% 2010 2,252 2,576 0.16 Series B, 9.50% 2010 2,869 3,277 Series C, 9.50% 2010 2,757 3,180 Series D, 9.50% 2012 4,657 5,406 Ford Motor Co. Credit Co. 5.25% 2008 DM16000 8,837 0.10 American Airlines, Inc., pass-through certificates, Series 1991-C2, 9.73% 2014(8) $6,000 7,484 0.08 Teekay Shipping Corp. 8.32% 2008 6,000 6,210 0.07 Union Pacific Capital Trust 6.25% TIDES convertible preferred(3) 111000 shares 5,194 0.06 MC-Cuernavaca Trust 9.25% 2001(3) 3,556 3,405 0.04 375,441 4.15 Diversified Media & Cable Television NTL Inc.: 0%/10.875% 2003(1) 9,500 9,500 0.52 0%/12.75% 2005(1) 17,750 15,709 Series B, 10.00% 2007 10,000 10,700 9.50% 2008(3) L2000 3,269 9.75% 2008(1,3) $12,500 8,156 TKR Cable I, Inc. 10.50% 2007 36,500 40,157 0.45 Tele-Communications, Inc.: 8.75% 2023 $8,000 8,486 0.44 9.25% 2023 10,000 11,665 TCI Communications, Inc.: 8.00% 2005 10,000 10,919 8.75% 2015 7,500 9,029 Time Warner Inc.: 9.125% 2013 7,000 8,519 0.37 7.25% 2017 16,000 16,688 6.95% 2028 8,500 8,524 News America Holdings Inc.: 8.625% 2014 A$3250 2,243 0.27 7.43% 2026 $20,500 21,840 Hearst-Argyle Television, Inc. 7.00% 2018 18,500 18,748 0.21 Comcast UK Cable Partners Ltd. 0%/11.20% 2007(1) 21,000 17,535 0.19 Cablevision Industries Corp.: 8.125% 2009 9,250 9,921 0.17 9.875% 2013 5,000 5,525 Comcast Corp. 10.25% 2001 13,000 14,282 0.16 Globo Comunicacoes E Partcipacoes Ltd.: 10.50% 2006(3) 13,100 11,987 0.15 10.50% 2006 2,000 1,830 TeleWest PLC: 9.625% 2006 4,700 4,959 0%/11.00% 2007(1) 8,000 6,600 0.13 Multicanal Participacoes SA 12.625% 2004 9,250 9,250 0.10 Vanguard Cellular Systems, Inc. 9.375% 2006 6,000 6,300 0.07 Comcast Cable Communications, Inc. 8.375% 2007 5,000 5,592 0.06 FrontierVision 11.00% 2006 2,500 2,763 0.03 300,696 3.32 Broadcasting & Publishing Chancellor Media Corp. of Los Angeles: 8.125% 2007 21,000 21,289 0.41 8.75% 2007 15,125 15,768 Falcon Holding Group, L.P.:(3) 0%/9.285% 2010(1) 30,250 19,133 0.37 8.375% 2010 14,750 14,602 Fox/Liberty Networks, LLC, FLN Finance, Inc.: 0%/9.75% 2007(1) 19,250 13,283 0.29 8.875% 2007 12,750 13,005 Lenfest Communications, Inc.: 8.375% 2005 9,000 9,563 0.22 7.625% 2008(3) 6,750 6,893 8.25% 2008(3) 3,250 3,372 Cox Radio, Inc.:(3) 6.25% 2003 2,000 1,991 0.18 6.375% 2005 14,000 14,082 Young Broadcasting Inc.: 10.125% 2005 3,500 3,798 0.15 8.75% 2007 9,250 9,666 Chancellor Radio Broadcasting Co. 9.375% 2004 12,500 13,187 0.15 Adelphia Communications Corp.: 9.25% 2002 4,000 4,140 0.13 8.375% 2008 7,500 7,425 V2 Music (Holdings) PLC:(1,3) Dollar Units 0%/14.00% 2008 8,250 4,249 0.12 Sterling Units 0%/14.00% 2008 7,875 6,772 American Radio Systems Corp. 9.00% 2006 10,080 10,786 0.12 Century Communications Corp.: 8.75% 2007 6,200 6,525 0.12 0.00% 2008 8,900 4,038 Ziff-Davis Inc. 8.50% 2008 9,500 9,595 0.10 RBS Participacoes SA 11.00% 2007(3) 10,000 9,000 0.10 Sun Media Corp.: 9.50% 2007 3,834 4,045 0.06 9.50% 2007 1,305 1,370 Grupo Televisa, SA 0%/13.25% 2007(1) 5,500 4,400 0.05 STC Broadcasting, Inc. 11.00% 2007 3,250 3,551 0.04 Newsquest Capital PLC 11.00% 2006 2,850 3,221 0.03 Fox Family Wordwide, Inc.: 0%/10.25% 2007(1) 1,250 813 0.03 9.25% 2007 1,750 1,759 EZ Communications, Inc. 9.75% 2005 1,250 1,366 0.01 242,687 2.68 Health & Personal Care Columbia/HCA Healthcare Corp.: 6.50% 1999 7,000 6,966 0.80 6.125% 2000 8,500 8,256 6.41% 2000 1,000 984 7.60% 2001 1,750 1,761 7.15% 2004 1,500 1,470 6.91% 2005 11,410 11,082 7.00% 2007 12,750 12,221 8.85% 2007 20,830 22,306 8.70% 2010 1,250 1,317 9.00% 2014 5,650 6,056 Integrated Health Services, Inc.: 5.75% convertible debentures 2001 3,500 4,034 0.56 10.25% 2006(2) 9,350 10,063 Series A, 9.50% 2007 11,175 11,706 Series A, 9.25% 2008 24,000 24,930 Paracelsus Healthcare Corp. 10.00% 2006 20,575 20,369 0.22 Nationwide Health Properties Inc., preferred, 7.677% set-up 100000 shares 9,565 0.11 Tenet Healthcare Corp.: 8.00% 2005 6,000 6,165 0.10 8.125% 2008(3) 3,000 3,008 McKesson Corp.: 6.30% 2005 1,750 1,739 0.08 6.40% 2008 5,500 5,461 Mariner Health Group, Inc. 9.50% 2006 6,500 6,890 0.08 Unison HealthCare Corp. 13.00% 2006(2,3,7) 5,000 2,250 0.02 178,599 1.97 Energy & Related Companies Pioneer Natural Resources Company 7.20% 2028 27,500 26,753 0.30 McDermott Inc. 9.375% 2002 13,250 14,188 0.27 J. Ray McDermott, S.A. 9.375% 2006 9,500 10,023 Petrozuata Finance, Inc., Series A, 7.63% 2009(3) 21,280 21,359 0.24 Oil Co. Ltd. 8.90% 2000 13,905 14,113 0.15 California Energy Co., Inc. 9.875% 2003 11,000 11,770 0.13 Benton Oil and Gas Co.: 11.625% 2003 6,000 6,390 0.13 9.375% 2007 5,250 5,119 YPF SA 7.750% 2007 10,000 10,033 0.11 Kelley Oil & Gas 10.375% 2006 8,750 8,706 0.10 OXYMAR 7.50% 2016(3) 8,500 8,575 0.09 Ocean Energy 8.875% 2007 8,000 8,360 0.09 Forcenergy Inc.: 9.50% 2006 2,500 2,500 0.08 8.50% 2007 5,000 4,763 Lukinter Finance BV 3.50% convertible debentures 2002(3) 6,400 5,696 0.06 BP America Inc. 10.00% 2018 4,000 4,187 0.05 Pogo Producing Co. 8.75% 2007 2,250 2,284 0.02 Clark Refining & Marketing, Inc. 8.375% 2007 1,500 1,515 0.02 166,334 1.84 Miscellaneous Materials & Commodities Freeport-McMoRan Copper & Gold Inc.: 7.50% 2006 35,000 25,900 0.44 7.20% 2026 18,000 14,040 Doe Run Company:(3) Floating Interest Rate Senior Note 2003(2) 5,000 5,062 0.23 11.25% 2005 16,000 16,240 Texas Petrochemicals Corp. 11.125% 2006 10,500 11,445 0.13 Printpack, Inc.: Series B, 9.875% 2004 2,775 2,962 0.09 10.625% 2006 4,500 4,826 Anchor Glass Container Corp.: 11.25% 2005 7,000 7,507 0.09 9.875% 2008 1,000 1,000 Consumers International Inc. 10.25% 2005(2,3) 6,875 7,408 0.08 Impress Metal Packaging Holdings B.V. 9.875% 2007 DM12000 7,009 0.08 Key Plastics, Inc. 10.25% 2007 $1,000 1,030 0.01 104,429 1.15 Forest Products & Paper Container Corp. of America: 10.75% 2002 4,800 5,232 0.38 9.75% 2003 18,815 20,226 11.25% 2004 8,000 8,620 Copamex Industrias, SA de CV 11.375% 2004 11,880 12,518 0.14 Grupo Industrial Durango, SA de CV: 12.00% 2001 3,000 3,165 0.12 12.625% 2003 7,625 8,121 Indah Kiat Finance Mauritius Ltd.: 11.875% 2002 600 480 0.11 10.00% 2007 13,050 9,266 Norampac Inc.:(3) 9.375% 2008 C$5000 3,541 0.10 9.50% 2008 $5,750 5,851 Pindo Deli Finance Mauritius Ltd.: 10.25% 2002 6,000 4,215 0.08 10.75% 2007 4,375 3,073 Fort James Corp.: 6.625% 2004 3,000 3,045 0.08 6.875% 2007 4,000 4,103 Paperboard Industries International Inc. 8.375% 2007 4,750 4,798 0.05 Domtar Inc. 8.75% 2006 3,000 3,160 0.03 99,414 1.10 Multi-Industry Wharf International Finance Ltd., Series A, 7.625% 2007 25,000 20,000 0.22 Reliance Industries Ltd.:(3) 8.25% 2027 10,000 9,160 0.21 10.50% 2046 250 226 Series B, 10.25% 2097 10,750 9,458 Hutchison Whampoa Finance (CI) Ltd., Series D, 6.988% 2037 18,000 14,895 0.16 PDVSA Finance Ltd. 7.40% 2016(3) 10,000 9,829 0.11 Hayes Wheels Int'l Inc. 9.125% 2007 9,000 9,405 0.10 Antenna TV SA 9.00% 2007 7,000 7,044 0.08 Hermes Euro Railtel BV 11.50% 2007 5,000 5,625 0.06 Federal Mogul 7.75% 2006 5,000 5,004 0.06 Tenneco Inc. 8.075% 2002 (formerly New Tenneco Inc.) 3,000 3,195 0.04 YPF SA 7.25% 2003 2,500 2,419 0.03 Graham Packaging 0%/10.75% 2009(1,3) 3,500 2,196 0.02 98,456 1.09 Other Breed Technologies Inc. 9.25% 2008(3) 27,000 26,392 0.29 Allied Waste North America, Inc. 10.25% 2006 20,250 22,224 0.24 Verio Inc.:(3) Units 13.50% 2004(5) 9,072 12,735 0.23 10.375% 2005 7,500 7,725 EarthWatch Inc. Units 12.50% 2001(3,6,7) 12,000 9,600 0.11 Tekni-Plex, Inc. 9.25% 2008 3,500 3,483 0.04 82,159 0.91 Leisure & Tourism AMF Group Inc.: 0%/12.25% 2006(1) 6,550 5,273 0.23 10.875% 2006 8,500 9,222 AMF Bowling, Inc. 0% convertible debentures 2018(3) 23,100 5,862 Boyd Gaming Corp. 9.25% 2003 13,725 14,274 0.16 Capstar Hotel Co. 8.75% 2007 11,400 11,799 0.13 Premier Parks Inc.:(3) 0%/10.00% 2008(1) 4,500 2,981 0.07 9.25% 2006 3,500 3,623 Royal Caribbean Cruises Ltd.: 7.25% 2018 2,000 2,062 0.07 7.50% 2027 4,000 4,183 Six Flags Entertainment Corp. 8.875% 2006 5,000 5,050 0.06 Mirage Resorts, Incorporated: 6.625% 2005 1,000 983 0.05 6.75% 2007 1,500 1,475 6.75% 2008 1,750 1,714 Rio Hotel & Casino, Inc. 9.50% 2007 3,000 3,180 0.03 Sun International Hotels, Ltd., Sun International North America, Inc. 9.00% 2007 3,000 3,143 0.03 74,824 0.83 Electrical & Electronics Hyundai Semiconductor America, Inc.:(3) 8.25% 2004 7,705 6,357 0.25 8.625% 2007 20,700 16,457 Micron Technology Inc. Convertible Subordinated Note 7.00% 2004 24,000 22,500 0.25 Pan Pacific Industrial Investments PLC 0% 2007(3) 33,500 12,889 0.14 Advanced Micro Devices, Inc. 11.00% 2003 7,000 7,385 0.08 Zilog, Inc. 9.50% 2005(3) 6,000 4,200 0.05 69,788 0.77 General Retailing & Merchandising Woolworth Corp.: 6.98% 2001 9,000 9,189 0.16 Series A, 7.00% 2002 4,000 4,105 8.50% 2022 1,000 1,116 K Mart Corp. 9.78% 2020 12,250 13,857 0.15 Federated Department Stores, Inc.: 8.125% 2002 5,000 5,333 7.45% 2017 2,000 2,148 7.00% 2028 2,000 2,035 0.11 DR Securitized Lease Trust Pass-Through Certificates, Series 1994 K-2, 9.35% 2019(8) 8,000 8,624 0.09 Carr-Gottstein Foods Co. 12.00% 2005 7,500 8,325 0.09 Sunglass Hut Int'l Ltd. 5.25% convertible debentures 2003 10,000 8,150 0.09 Randall's Food Markets, Inc. 9.375% 2007 3,500 3,701 0.04 Boyds Collection Ltd. 9.00% 2008(3) 2,460 2,469 0.03 69,052 0.76 Electrical & Gas Utilities Israel Electric Corp. Ltd.:(3) 7.10% 2007 5,000 4,993 0.48 7.875% 2026 8,000 8,145 7.75% 2027 25,000 24,952 8.10% 2096 5,000 5,141 Energen Corp., Series B, 7.125% 2028 6,000 6,080 0.07 Transener SA 9.25% 2008(3) 6,250 6,016 0.07 Tennessee Gas Pipeline Co. 7.625% 2037 5,000 5,389 0.06 Williams Companies, Inc. 6.25% 2006 5,000 4,925 0.05 Transcontinental Gas Pipe Line Corp. 6.125% 2005 3,000 2,948 0.03 68,589 0.76 Metals Inco Ltd.: 9.875% 2019 7,500 7,925 0.28 9.60% 2022 16,000 17,701 AK Steel Corp. 9.125% 2006 5,000 5,225 0.06 Pohang Iron & Steel Co., Ltd. 6.625% 2003 4,695 3,801 0.04 Kaiser Aluminum and Chemical Corp. 12.75% 2003 2,000 2,125 0.03 36,777 0.41 Beverages & Tobacco Standard Commercial Tobacco Co., Inc. 8.875% 2005 11,750 11,515 0.13 Canandaigua Wine Co., Inc.: Series C, 8.75% 2003 7,500 7,687 8.75% 2003 2,000 2,040 0.11 Punch Taverns 7.567% 2026 L5000 8,630 0.09 Sparkling Spring Water Group Ltd. 11.50% 2007 $3,750 3,956 0.04 Delta Beverage Group, Inc. 9.75% 2003 2,500 2,619 0.03 36,447 0.40 Appliances & Household Goods Friendly Ice Cream Corp. 10.50% 2007 13,000 13,715 0.15 Samsung Electronics Co., Ltd. 7.45% 2002(3) 12,250 10,413 0.12 Lifestyle Furnishings International Ltd. 10.875% 2006 9,000 9,923 0.11 34,051 0.38 Food Retailing Fage Dairy Industry SA 9.00% 2007 10,000 9,650 0.11 Gruma SA de CV 7.625% 2007 8,000 7,680 0.09 Nabisco Inc.: 6.85% 2005 2,750 2,758 0.04 7.55% 2015 1,000 1,012 Home Products International, Inc. 9.625% 2008 3,000 3,000 0.03 24,100 0.27 Textiles & Apparel Tultex Corp.: 10.625% 2005 11,500 11,931 0.13 9.625% 2007 11,500 11,385 0.13 23,316 0.26 Machinery & Engineering John Deere Capital Corp. 8.625% 2019 16,850 18,539 0.21 United Defense 8.75% 2007 2,790 2,811 0.03 21,350 0.24 Protection Services Protection One Alarm Monitoring, Inc.: 6.75% convertible debentures 2003 5,000 5,469 0.20 0%/13.625% 2005(1) 11,074 12,624 Borg-Warner Security Corp. 9.625% 2007 2,250 2,520 0.03 20,613 0.23 Data Processing & Reproduction First International Computer Corp. 1.00% convertible debentures 2004 3,000 3,105 0.03 Maxtor Corp. 5.75% convertible debentures 2012 3,000 1,950 0.02 5,055 0.05 FINANCE Banking & Thrifts Tokai Preferred Capital Co. LLC, Series A, 9.98% noncumulative preferred(2,3) 75,500 69,838 0.77 Capital One Bank: 8.125% 2000 1,500 1,544 0.65 6.97% 2002 5,000 5,096 6.375% 2003 29,000 29,026 6.78% 2005 10,000 10,203 7.15% 2006 12,500 12,662 BNP U.S. Funding LLC, Series A, 7.738% 2049(2,3) 56,750 56,628 0.63 MBNA Corp., MBNA: Capital A, Series A, 8.278% 2026 23,000 24,265 0.58 Capital B, Series B, 6.55% 2027(2) 30,000 28,080 NB Capital Corp.: Series A, 8.35% noncumulative exchangeable preferred (USA) 18000 shares 18,102 0.44 8.35% preferred 500000 shares 13,116 NB Capital Trust IV 8.25% 2027 8,000 8,935 IBJ Preferred Capital Company LLC, Series A 8.79% noncumulative preferred, Series (2,3) 40,450 36,937 0.41 SB Treasury Company LLC, Series A 9.40% noncumulative preferred, Series A(2,3) 33,450 33,244 0.37 Bankers Trust New York Corp. 6.70% 2007 30,000 30,645 0.34 Fuji JGB Investment LLC, Series A 9.87% noncumulative preferred, Series A(3,9) 34,000 30,260 0.34 J.P. Morgan & Co. Inc.: Series A, 5.493% 2012(10) 10,000 9,227 0.28 Trust II 7.95% 2027 15,000 16,214 Washington Mutual Capital I Subordinated Capital Income Securities 8.375% 2027 22,000 24,818 0.27 BankAmerica Capital III, BankAmerica Corp., Series 3, 6.1325% 2027(2) 22,500 22,038 0.24 Barnett Capital I 8.06% 2026 20,000 21,862 0.24 First Nationwide Holdings Inc.: 10.625% 2003 9,750 11,017 0.24 12.50% 2003 9,000 10,215 HSBC America Capital 8.38% 2027(3) 19,375 20,733 0.23 Advanta Corp.: Series D, 6.54% 2000 5,500 5,303 0.12 Series D, 6.60% 2000 6,000 5,794 Capital Trust I 8.99% 2026 10,000 8,027 0.09 BT Capital Trust I 6.656% 2026(2) 17,500 17,430 0.19 Imperial Capital Trust I, Imperial Bancorp 9.98% 2026 15,000 17,130 0.19 Royal Bank of Scotland 8.375% 2007 L9400 17,128 0.19 Riggs National Corp.: 8.625% 2026 $3,900 4,284 0.19 8.625% 2026(3) 1,500 1,648 8.875% 2027(3) 10,000 11,129 Dime Capital Trust I, Dime Bancorp, Inc., Series A, 9.33% 2027 12,500 14,641 0.16 Chase Capital II, Global Floating Rate Capital Securities, Series B, 6.0625% 2027(2) 15,000 14,520 0.16 Bayerische Vereinsbank 5.50% 2008 DM24000 13,783 0.15 Chevy Chase Preferred Capital Corp. 10.375% (USA) $24,3000 shares 13,329 0.15 Midland American Capital 12.75% 2003 12,150 12,432 0.14 Capital One Capital I 7.1125% 2027(2,3) 10,000 9,982 0.11 PNC Institutional Capital B, PNC Financial Corp. 8.315% 2027(3) 8,325 9,275 0.10 Skandinaviska Enskilda Banken 6.875% 2009 8,250 8,454 0.09 Bankers Trust Corp., preferred, 7.875% redeemable 2027 8,000 8,425 0.09 Ocwen Financial Corporation 11.875% 2003 6,000 6,600 0.07 Den Danske Bank 7.40% 2010(3) 6,000 6,364 0.07 Kansallis-Osake-Pankki: 9.75% 1998 5,000 5,079 0.07 10.00% 2002 1,000 1,127 Bay View Capital 9.125% 2007 5,500 5,637 0.06 National Westminster Bank PLC 7.75%(2) 5,000 5,367 0.06 The Korea Development Bank: 7.125% 2001 1,000 889 0.06 Global 7.375% 2001 6,000 4,952 Central Fidelity Capital Trust I, Central Fidelity Banks, Inc. 6.758% 2027(2) 4,350 4,487 0.05 Banco General, SA 7.70% 2002(3) 4,500 4,293 0.05 Merita Bank Ltd. 7.15% (undated)(2,3) 4,000 4,069 0.05 MBI Finance 0% convertible debentures 2001 6,000 3,600 0.04 Great Western Financial Trust III 8.206% 2027 2,055 2,245 0.03 Chevy Chase Bank, FSB 9.25% 2005 2,000 2,030 0.02 Svenska Handelsbanken 8.125% 2007 1,000 1,122 0.01 Dresdner Bank NY 6.625% 2005 1,000 1,013 0.01 796,293 8.80 Real Estate SocGen Real Estate Co. LLC, Series A, 7.64% 2049(3) 57,500 57,851 0.64 CarrAmerica Realty Corp.: 6.875% 2008(3) 16,000 15,863 0.48 Series C, 8.55% cumulative redeemable preferred 400000 shares 9,800 Series B, 8.57% cumulative redeemable preferred 700000 shares 17,281 Land Securities PLC 9.00% 2000 L12000 26,009 0.29 Felcor Suite Hotels, Inc. 7.375% 2004 18,400 18,171 0.20 Irvine Co., Series A, 7.46% 2006(6) 17,000 17,482 0.19 EOP Operating LP:(3) 6.75% 2008 11,500 11,486 0.18 7.25% 2018 5,000 5,001 Security Capital Pacific Trust 7.20% 2013 13,500 13,411 0.15 Shopping Center Associates:(3) 6.75% 2004 12,000 12,144 0.14 7.625% 2005 500 528 ERP Operating LP: 7.95% 2002 3,750 3,949 0.14 7.57% 2026 8,000 8,530 Irvine Apartment Communities, LP 7.00% 2007 11,000 11,001 0.12 Beverly Finance Corp. 8.36% 2004(3) 10,000 10,895 0.12 Security Capital Industrial Trust: 7.25% 2002 $1,000 1,021 0.10 7.875% 2009 7,500 8,007 Duke Realty Investments, Inc., preferred, Series B, 7.99% cumulative step-up premium rate 150000 shares 7,575 0.08 Simon DeBartolo Group, Inc., Series C, preferred, 7.89% cumulative step-up premium rate 150000 shares 7,379 0.08 IAC Capital Trust (USA) 300000 shares 7,237 0.08 New Plan Realty Trust, Series A, preferred, 7.80% cumulative step-up premium rate 113000 shares 5,625 0.06 Security Capital Atlantic, Class A, preferred 8.625% (USA) 200000 shares 4,850 0.06 Wellsford Residential Property Trust: 7.25% 2000 1,000 1,020 0.02 7.75% 2005 1,000 1,064 283,180 3.13 Financial Services Household Finance Corp.: 6.206% 2005(2) 8,000 7,977 6.40% 2008 21,750 21,719 0.33 Swire Pacific Capital Ltd. 8.84% cumulative guaranteed perpetual capital securities(3) 1055000 shares 19,633 0.30 Swire Pacific Offshore Financing Ltd. 9.33% cumulative guaranteed perpetual capital securities(3) 400000 shares 7,916 AT&T Capital Corp. 6.60% 2005 22,500 22,660 0.25 Amresco, Inc. 9.875% 2005(3) 17,750 17,927 0.20 Bell Atlantic Financial Services, Inc. 5.75% 2003(3) 16,025 16,345 0.18 Wilshire Financial Services Group, Inc.: 13.00% 2004 4,000 4,320 0.18 13.00% 2004 11,500 12,420 Nykredit 6.00% 2029 DKr108000 15,352 0.17 Halifax Building Society 8.75% 2006 L5500 10,280 0.11 Executive Risk Inc. 7.125% 2007 $10,000 10,239 0.11 Associates Corporation of North America 5.85% 2001 10,000 9,963 0.11 Wharf Capital International, Ltd. 8.875% 2004 10,457 9,439 0.11 William Hill Finance PLC 10.625% 2008(3) L5093 8,451 0.09 Ocwen Capital Trust I 10.875% 2027 $6,500 7,069 0.08 Fidelity National Financial 0% convertible debentures 2009 7,000 6,877 0.08 Imperial Credit Industries Inc. 9.875% 2007 5,000 4,975 0.06 Bankunited Capital Trust, Bankunited Financial Corp., 10.25% 2026 4,250 4,632 0.05 Beneficial Corp. 12.875% 2013 3,800 4,012 0.05 Green Tree Financial Corp. 6.50% 2002 4,000 3,941 0.04 ContiFinancial Corp. 8.125% 2008 3,500 3,564 0.04 Spintab AB 6.00% 2009 SKr23000 3,031 0.03 Lend Lease Ltd. (US) Finance Inc. 6.75% 2005 $1,500 1,504 0.02 Fleet Capital Trust II 7.92% 2026 1,000 1,071 0.01 Deutsche Bank Financial 6.70% 2006 1,000 1,026 0.01 Fleet Financial Group, Inc. 6.375% 2008 1,000 1,010 0.01 Hutchison Whampoa Finance (CI) Ltd. 6.95% 2007(3) 250 219 0.00 237,572 2.62 Insurance Jefferson Pilot Corp. 8.14% 2046(3) 6,000 6,425 0.07 Lindsey Morden Group Inc. 7.00% 2008 C$16000 10,825 0.12 Terra Nova Insurance (UK) Holdings PLC 7.20% 2007 $10,000 10,109 0.11 27,359 0.30 COLLATERALIZED MORTGAGE/ASSET - BACKED OBLIGATIONS (Excluding Those Issued by Federal Agencies)(8) Green Tree Financial Corp., pass-through certificates: Series 1994-A, Class NIM, 6.90% 2004 4,710 4,709 0.84 Series 1995-A, Class NIM, 7.25% 2005 9,159 9,147 Series 1993-2, Class B, 8.00% 2018 2,250 2,257 Series 1997-A, Class HI-M1, 7.47% 2023 1,000 1,028 Series 1995-8, Class B2, 7.65% 2026 4,000 3,810 Series 1995-6, Class B2, 8.00% 2026 2,450 2,419 Series 1995-9, Class A-5, 6.80% 2027 8,000 8,110 Series 1996-7, Class A6, 7.65% 2027 2,100 2,235 Series 1996-6, Class B2, 8.35% 2027 10,625 10,978 Series 1997-1, Class A-5, 6.86% 2028 1,500 1,536 Series 1996-10, Class A-6, 7.30% 2028 8,500 8,869 Series 1998-4, Class B2, 8.11%2028 13,350 13,488 Series 1997-6, Class A6, 6.90% 2029 7,500 7,673 DLJ Mortgage Acceptance Corp.: Series 1997-CF1, Class A1A, 7.40% 2006(3) 6,553 6,877 Series 1996-CF2, Class A2, 7.28% 2021(3) 6,000 6,320 Series 1996-CF2, Class A1B, 7.29% 2021(3) 11,200 11,872 Series 1996-CF2, Class B1, 7.53% 2021(3) 2,100 2,174 Series 1995-CF2, Class A1B, 6.85% 2027(3) 30,000 30,882 0.81 Series 1995-CF2, Class B1, 7.50% 2027(3) 4,900 5,044 Series 1996-CF1, Class A1A, 7.28% 2028 9,866 10,220 Morgan Stanley Capital I Inc.: Series 1995-GA1, Class A-1, 7.00% 2002(3) 6,808 6,837 0.71 Series 1998-HF1, Class A-1, 6.19% 2007(2) 34,436 34,460 Series 1996-WF1, Class A-1, 6.594% 2028(2,3) 10,522 10,592 Series 1996-WF1, Class D, 6.594% 2028(2,3) 2,000 1,975 Series 1998-WF2, Class A-1, 6.34% 2030(2) 10,000 10,075 Asset-Backed Securities Investment Trust, Series 1997-D, 6.79% 2003(3) 51,000 51,143 0.57 Chase Commercial Mortgage Securities Corp.: Series 1996-1, Class A1, 7.60% 2005 4,742 5,015 0.52 Series 1997-1, Class A1, 7.27% 2029 9,370 9,703 Series 1998-1, Class A1, 6.34% 2030 31,842 32,116 The Money Store Trust: Series 1996-D, Class A-12, 6.37% 2011 20,000 20,050 Series 1997-1, Class A-2, 6.81% 2011 17,000 17,117 Series 1996-D, Class A-14, 6.985% 2016 4,000 4,064 Series 1996-C, Class A-3, 7.07% 2016 2,962 2,983 0.49 Asset Securitization Corp.: Series 1996-D3, Class A-1B, 7.21% 2026 3,000 3,144 0.48 Series 1997-D4, Class A-1A, 7.35% 2029 10,237 10,467 Series 1997-D5, Class A-PS1, Interest Only, 1.005% 2043(2) 279,025 29,660 DLJ Commercial Mortgage Corp.: Series 1998-CF1, Class A-1A, 6.14% 2006(2) 22,140 22,127 0.36 Series 1998-CF1, Class B-1, 7.06% 2009(2) 10,000 10,106 Merrill Lynch Mortgage Investors, Inc.: Series 1995-C2, Class A-1, 7.325% 2021(2) 1,750 1,779 Series 1995-C2, Class D, 8.095% 2021(2) 673 690 Series 1995-C3, Class A-1, 6.787% 2025(2) 2,471 2,504 Series 1995-C3, Clas A-3, 7.087% 2025 9,855 10,208 Series 1996-C2, Class A-1, 6.69% 2028(2) 13,872 14,073 0.32 GMAC Commercial Mortgage Securities, Inc: Series 1997-C1, Class A1, 6.83% 2003 26,338 26,701 Series 1996-C1, Class A2A, 6.79% 2028 943 956 0.31 Deutsche Mortgage & Asset Receiving Corporation: Series 1998-C1, Class A-1, 6.22% 2031 20,150 20,200 0.28 Series 1998-C1, Class D, 7.231% 2031 5,000 5,081 Aames Mortgage Trust, Series 1996-D, Class A-1B, 6.34% 2012 22,000 21,982 0.24 EquiCredit Funding Asset Backed Certificates, Series 1996-A, Class A2, 6.95% 2012 21,000 21,126 0.23 Bear Asset Trust Securities, Series 1997-1, Class A, 6.686% 2006(3) 20,000 20,026 0.22 G E Capital Mortgage Services: Series 1994-15, Class A10, 6.00% 2009 16,376 15,706 0.22 Series 1994-9, Class A9, 6.50% 2024 4,482 4,316 IMC Home Equity Loan Trust: Series 1996-2, Class A2, 6.78% 2011 997 994 0.21 Series 1996-4, Class A3, 6.81% 2011 17,972 18,008 Resolution Trust Corp.: Series 1991-M5, Class B, 9.00% 2017 1,808 1,808 0.19 Series 1993-C1, Class D, 9.45% 2024 9,352 9,352 Series 1993-C1, Class E, 9.50% 2024 235 235 Series 1993-C2, Class C, 8.00% 2025 3,000 2,999 Series 1993-C2, Class D, 8.50% 2025 2,661 2,661 Ocwen Residential MBS Corp., Series 1998-R1, Class AWAC 3.453% 2040(2,3) 16,687 16,687 0.19 Nomura Asset Securities Corp., Series 1998-D6, Class A-A1, 6.28% 2030(2) 16,489 16,597 0.18 FIRSTPLUS Home Loan Owner Trust: Series 1996-4, Class A-3, 6.28% 2009 1,000 1,001 0.18 Series 1997-1, Class A-7, 7.16% 2018 10,000 10,241 Series 1997-3, Class B-1, 7.79% 2023 5,000 4,973 Chase Manhattan Credit Card Master Trust, Series 1996-4, Class A, 6.73% 2003 15,000 15,136 0.17 Prudential Home Mortgage Securities Co., Inc.: Series 1993-48, Class A-6, 6.25% 2008 4,466 4,397 Series 1993-34, Class A-1, 7.00% 2023 9,278 9,301 0.15 Structured Asset Notes Transaction, Ltd., Series 1996-A, Class A1, 7.156% 2003(3) 12,851 13,019 0.14 CS First Boston Mortgage Securities Corp., mortgage pass-through certificates: Series 1998-FL1, Class E, 6.506% 2013(3) 10,000 9,998 Series 1995-MBL1, 6.425% 2030 2,898 2,893 0.14 Structured Asset Securities Corp., pass-through certificates: Series 1998-RF1, 8.70% 2021(2,3) 4,413 4,740 Series 1996-CFL, Class A1C, 5.944% 2028(2) 3,981 3,961 0.14 Series 1996-CFL, Class D, 7.034% 2028 2,950 2,963 Series 1996-CFL, Class A2A, 7.75% 2028(2) 1,045 1,050 Grupo Financiero Banamex Accival SA de CV 0% 2002(3) 13,436 11,548 0.13 Carco Auto Loan Master Trust, Series 1997-1, Class A 6.689% 2004(2) 10,895 10,982 0.12 Ditech Home Loan Owner Trust, Series 1998-1, Class B1 9.50% 2029 10,500 10,235 0.11 Chase Manhattan Bank, N.A., Series 1993-I, Class 2A5, 7.25% 2024 9,852 10,003 0.11 LB Commercial Conduit Mortgage Trust, Series 1998-C1, Class A1 6.33% 2004 9,770 9,837 0.11 Capstead Securities Corp. IV, collateralized mortgage obligations, Series 1992-4, Class J, 18.918% 2022(9) 8,237 8,841 0.10 Mortgage Capital Funding, Inc., Series 1998-MC1 Class A-1 6.417% 2030 8,416 8,512 0.10 Green Tree Recreational, Equipment and Consumer Trust, Series 1997-D, Class CTFS, 7.25% 2029 8,500 8,309 0.09 Collateralized Mortgage Obligation Trust, Series 63, Class Z, 9.00% 2020 7,072 7,444 0.08 Travelers Mortgage Securities Corp., Series 1, Class Z2, 12.00% 2014 6,586 7,376 0.08 Ryland Acceptance Corp. Four, Series 88, Class E 7.95% 2019 6,251 6,486 0.07 Bombardier Capital Mortgage Securitization Corp.: Series 1998-A, Class A-3 6.23% 2008 2,000 1,992 0.07 Series 1998 -A, Class A-4, 6.65% 2008 4,000 4,025 Residential Funding Mortgage Securities I, Inc., Series 1992-S6, Class A-10, 12.489% 2022(9) 5,507 5,755 0.06 Standard Credit Card Master Trust I, credit card participation certificates, Series 1994-2A, 7.25% 2008 5,000 5,342 0.06 Bear Stearns Structured Securities Inc., Series 1997-2, Class AWAC, 3.88% 2036(2,3) 4,327 4,295 0.05 J.P. Morgan Commercial Mortgage Finance Corp., pass-through certificates: Series 1995-C1, Class A-2, 7.403% 2010 1,000 1,034 0.04 Series 1997-C4, Class A-1, 6.939% 2028 1,241 1,264 Series 1996-C3, Class A-1, 7.330% 2028(2) 1,580 1,644 UCFC Acceptance Corp., home-equity loan pass-through certificates, Series 1996-D1, Class A-4, 6.776% 2016 2,400 2,423 0.03 Blackrock Capital Finance LP:(2,3) Series 1996-C2, Class A, 7.702% 2026 597 597 0.02 Series 1996-C2, Class C, 7.962% 2026 1,000 1,005 GCC Home Equity Trust, asset-backed certificates, Series 1990-1, Class A, 10.00% 2005 1,222 1,225 0.01 GS Mortgage Securities Corp., Mortgage Participation Securities, Series 1998-2, Class M, 7.75% 2027(3) 1,200 1,224 0.01 Prudential-Bache CMO Trust, Series 3, Class F, 9.44% 2018 1,000 1,018 0.01 882,060 9.75 GOVERNMENTAL U.S. Treasury Obligations 9.25% August 1998 43,700 43,898 0.49 9.125% May 1999 7,750 7,985 0.09 6.875% July 1999 6,750 6,844 0.08 6.00% August 2000 11,000 11,105 0.12 7.75% February 2001 55,500 58,474 0.65 8.00% May 2001 7,000 7,453 0.08 13.125% May 2001 21,500 25,770 0.28 14.25% February 2002 7,000 8,975 0.10 3.625% July 2002(10) 55,802 55,218 0.61 11.625% November 2002 92,000 113,390 1.25 6.25% February 2003 6,000 6,174 0.07 10.75% May 2003 12,500 15,232 0.17 11.875% November 2003 10,000 12,888 0.14 5.875% February 2004 33,000 33,609 0.37 7.25% May 2004 376,000 407,960 4.51 7.875% November 2004 3,000 3,369 0.04 11.625% November 2004 108,800 143,871 1.59 7.50% February 2005 20,000 22,137 0.24 6.50% May 2005 18,500 19,526 0.22 6.50% October 2006 28,500 30,263 0.33 3.375% January 2007(10) 41,024 39,793 0.44 6.625% May 2007 11,450 12,298 0.14 9.125% May 2009 18,000 21,083 0.23 10.375% November 2009 12,500 15,619 0.17 10.00% May 2010 7,500 9,343 0.10 10.375% November 2012 15,000 20,086 0.22 12.00% August 2013 10,000 14,827 0.16 7.50% November 2016 32,000 38,415 0.43 8.875% August 2017 199,875 272,486 3.01 8.125% May 2021 98,000 127,599 1.41 6.375% August 2027 30,250 33,218 0.37 1,638,908 18.11 Federal Agency Obligations - Mortgage Pass-Throughs(8) Government National Mortgage Assn.: 5.50% 2023(2) 1,647 1,678 6.00% 2028 1,980 1,934 6.50% 2008-2028(2) 140,215 142,124 7.00% 2008-2028 50,057 50,904 7.00% 2022-2024(2) 48,562 49,703 7.50% 2007-2028 72,029 74,136 8.00% 2017-2026 16,918 17,624 8.50% 2020-2028 29,115 30,768 9.00% 2016-2022 14,340 15,414 9.50% 2017-2021 14,553 15,774 4.54 10.00% 2017-2019 7,739 8,516 10.50% 2015-2019 1,891 450 11.00% 2013-2016 898 1,016 11.50% 2015 38 43 12.00% 2014 111 126 12.50% 2010-2015 623 727 13.25% 2014 79 90 Fannie Mae: 6.00% 2013 34,658 34,279 6.089% 2033(2) 31,184 31,379 6.50% 2013 6,723 6,761 6.50% 2013-2028 25,462 25,597 7.00% 2009-2028 14,627 14,863 7.50% 2009-2028 11,077 11,371 7.952% 2026(2) 11,530 11,770 8.00% 2023-2028 6,791 7,038 8.307% 2002(2) 7,231 7,500 8.50% 2009-2027 9,661 10,123 9.00% 2018-2025 3,947 4,193 9.50% 2009-2025 3,305 3,504 10.00% 2018-2025 11,588 12,714 2.11 10.50% 2012 3,327 3,710 11.00% 2015-2020 2,152 2,415 11.25% 2014 34 39 11.50% 2010-2014 200 229 12.00% 2015-2019 68 78 12.50% 2015 1,643 1,930 13.00% 2014-2015 1,174 1,392 15.00% 2013 60 73 Freddie Mac: 6.00% 2013 20,000 19,808 6.50% 2013 7,425 7,476 8.00% 2003-2010 3,431 3,512 8.25% 2007 1,959 2,034 8.50% 2002-2020 22,535 23,469 8.75% 2008 2,597 2,725 9.00% 2021 715 763 0.76 10.00% 2011-2019 230 248 10.50% 2020 2,237 2,500 10.75% 2010 85 94 11.50% 2000 24 25 12.00% 2016-2017 2,627 3,026 12.50% 2015-2019 2,356 2,747 12.75% 2019 436 508 13.00% 2014 36 43 13.50% 2018 11 13 13.75% 2014 17 20 670,996 7.41 Governments (Excluding U.S. Government) Canadian Government: 9.00% 2004 C$36000 29,313 1.34 4.25% 2021(10) 22,982 16,543 4.25% 2026(10) 104,066 75,429 United Kingdom: 8.50% 2005 L23500 44,881 0.91 7.25% 2007 10,000 18,351 8.00% 2009 10,000 19,620 Hellenic Republic: 8.90% 2004 GRD4900000 16,345 0.82 2.90% 2007 Y1270000 9,778 8.80% 2007 GRD6500000 22,569 6.95% 2008 $5,000 5,158 8.60% 2008 GRD5870000 20,343 Poland (Republic of) Treasury Bill 1998 PLZ11000 3,031 0.73 Polish Government: 12.00% 2001 20,000 4,968 13.00% 2001 25,000 6,350 12.00% 2002 50,375 12,390 12.00% 2003(2) $145,000 35,579 Poland (Republic of) Past Due Interest Registered Bond 3.75% 2014 4,000 3,608 Deutschland Republic: 8.00% 2002 DM34050 21,406 0.40 5.25% 2008 26,000 14,923 Treuhandanstalt: 7.125% 2003 22,250 13,698 0.38 7.50% 2004 32,000 20,479 Bundesrepublik: 7.125% 2002 24,000 14,758 0.36 6.00% 2007 29,000 17,495 Argentina (Republic of): 8.75% 2002(3) ARP5000 4,338 0.33 Eurobonds: 6.312% 2005(2) 238 210 11.00% 2006 2,500 2,637 11.75% 2007(3) ARP9650 9,181 11.375% 2017 $6,500 6,922 9.75% 2027 7,350 6,817 International Bank of Reconstruction and Development 2.00% 2008 Y3970000 29,807 0.33 New Zealand Government: 7.00% 2009 NZ$18000 9,805 0.32 4.50% 2016(10) 40,180 19,462 Norwegian Government 6.75% 2007 NOK155000 21,857 0.24 Queensland Treasury Corp. Global 6.00% 2009 A$30000 18,788 0.21 Swedish Government: 10.250% 2003 SKr58000 9,036 0.19 6.50% 2008 60,000 8,390 United Mexican States Government Eurobonds: Global, 11.375% 2016 $9,015 10,074 0.15 Series A, 6.25% 2019 1,000 828 Series A, Units, 6.693% 2019(2) 1,250 1,123 Series B, Units, 6.617% 2019(2) 500 449 Global, 11.50% 2026 825 937 Quebec (Province of): 8.625% 2005 2,250 2,544 0.10 13.25% 2014 5,500 6,179 Panama (Republic of): Interest Reduction Bond 3.75% 2014(2,3) 6,500 4,875 0.07 Past Due Interest Bond, 6.688% 2016(2,3) 1,562 1,207 Past Due Interest Bond, 6.688% 2016(2) 260 201 Ontario (Province of), 7.75% 2002 3,500 3,717 Ontario Hydro (Province of Ontario) 4.61% 1999(2) C$3000 2,044 0.06 British Columbia Hydro & Power Authority 12.50% 2013 $4,000 4,199 0.05 Mendoza (Province of) 10.00% 2007(3) 3,974 0.04 Hydro-Quebec, Series HKF, 9.375% 2030 2,000 2,698 0.03 Philippines (Republic of): 8.75% 2016 2,000 1,885 0.03 8.875% 2008 750 717 Venezuela (Republic of): Front Loaded Interest Reduction Bond, Series B, 6.50% 2007(2) 214 178 0.03 6.625% 2007(2) 1,131 942 Front Loaded Interest Reduction Bond, Series A, 7.00% 2007(2) 857 712 Global 9.25% 2027 750 582 Manitoba (Province of) 9.625% 1999 2,000 2,051 0.02 Brazil (Federal Republic of): Debt Conversion Bond, Series L, 6.562% 2012(2) 500 348 0.01 Bearer, 8.00% 2014 290 213 Ecuador (Republic of):(2) Past Due Interest Registered Bond 6.062% 2015 278 160 0.01 Past Due Interest Bearer Bond 7.25% 2015 417 239 Past Due Interest Discount Bond 7.25% 2025 250 174 Peru (Republic of) Past Due Interest Bond, 4.00% 2017 750 467 647,982 7.16 Federal Agency Oblications - Other Freddie Mac: 5.74% 2003 6,500 6,389 0.72 5.78% 2003 14,520 14,288 6.19% 2004 11,000 10,873 6.24% 2003 2,900 2,880 6.27% 2004 3,500 3,477 6.28% 2003 3,000 2,984 6.30% 2003 2,000 1,991 6.375% 2003 5,820 5,801 6.39% 2003 5,830 5,807 6.50% 2003 6,200 6,186 7.25% 2007 5,000 5,005 Fannie Mae: Medium-Term Note, 6.14% 2004 13,000 12,868 0.32 6.50% 2002 A$5000 3,191 7.70% 2004 $12,500 12,750 Federal Home Loan Bank Bonds: 6.27% 2004 5,000 4,965 0.20 6.38% 2003 3,000 2,986 7.013% 2007 10,000 10,066 FNSM Callable Principal STRIPS 0%/8.25% 2022(1) 4,500 4,418 0.05 116,925 1.29 Collateralized Mortgage Obligations - Federal Agencies(8) Freddie Mac: Series 1673, Class SA, 4.4499% 2024(9) 7,879 5,690 0.45 Series 1657, Class SA, 5.9935% 2023(9) 7,520 6,119 Series 1849, Class Z, 6.00% 2008 5,664 5,467 Series 2030, Class F6 6.188% 2028(2) 2,674 2,684 Series 1983, Class FB, 6.625% 2026(2) 9,392 9,433 Series 1716, Class A, 6.50% 2009 4,750 4,631 Series 1948, Class PJ, 6.65% 2027 3,000 2,995 Series 178, Class Z, 9.25% 2021 3,284 3,519 Fannie Mae: Series 90-93, Class G, 5.50% 2020 1,079 1,056 0.35 Series 91-2, Class Z, 6.50% 2021 16,173 16,138 Series 94-4, Class ZA, 6.50% 2024 3,662 3,496 Series 93-247, Class Z, 7.00% 2023 4,085 4,127 Series 97-41, Class B, 7.25% 2027 1,000 1,003 Series 91-146, Class Z, 8.00% 2006 5,845 6,062 72,420 0.80 FLOATING RATE EURODOLLAR NOTES (UNDATED)(2) Skandinaviska Enskilda Banken 7.50% 24,000 24,800 0.27 Canadian Imperial Bank of Commerce 5.813% 25,000 21,750 0.24 Standard Chartered Bank: !5.775% 5,000 3,200 0.14 !5.813% 15,000 9,638 Bank of Scotland 7.00% (3) 10,000 10,157 0.11 Bank of Nova Scotia 5.875% 10,000 8,700 0.10 Fuji International Finance (Bermuda) Trust, Fuji Bank, Ltd. 7.30% 10,000 8,600 0.09 Hongkong and Shanghai Banking Corp. 6.25% 2049 10,000 7,377 0.08 Lloyds Bank (#2) 6.062% 8,000 7,085 0.08 Allied Irish Banks Ltd. 6.438% 7,000 6,352 0.07 Midland Bank 5.813% 5,000 4,249 0.05 Bergen Bank 6.00% 5,000 4,130 0.05 National Bank of Canada 3.031% 5,000 4,013 0.04 Christiana Bank Og Kreditkasse 6.606% 4,000 3,390 0.04 123,441 1.36 OTHER SECURITIES & MISCELLANEOUS Shares Stocks and Warrants CellNet Data Systems, Inc. (USA)(6) NEXTEL Communications Inc., Class A (USA) 398,000 3,084 0.03 NEXTEL Communications, Inc., warrants, expire 1999 (USA)(6,11) 122,000 3,044 0.03 Cellular Communications International, Inc., warrants, expire 2003 (USA)(11) 39,000 64 Protection One Alarm Monitoring, Inc. warrants, expire 2005 (USA)(3,11) 15,000 527 0.01 IntelCom Group Inc., warrants, expire 2005 (USA)(3,11) 54,000 517 0.01 Discovery Zone, Inc. (USA)(6,7) 20,000 376 0.00 14,000 71 0.00 7,683 0.08 Miscellaneous Investment securities in initial period of acquisition 380,000 9,334 0.10 TOTAL BONDS, NOTES AND EQUITY SECURITIES (cost: $8,209,628,000) 8,331,338 92.05 Principal SHORT-TERM SECURITIES Amount (000) Commercial Paper Ford Motor Credit Co.: 6.05% due 7/1/98 5.51% due 7/10/98 34,700 34,694 0.66 E.I du Pont de Nemours & Co.: 25,000 24,962 5.48% due 7/7/98 5.49% due 8/4/98 24,600 24,574 0.64 National Rural Utilities Cooperatibe Finance Corp.: 33,800 33,619 5.48% due 7/24/98 5.47% due 7/28/98 13,500 13,451 0.63 5.50% due 8/5/98 12,200 12,148 5.50% due 8/6/98 13,423 13,349 A.I. Credit Corp.: 17,900 17,799 5.48% due 7/16/98 5.48% due 7/20/98 10,000 9,976 0.60 5.47% due 8/17/98 15,000 14,954 5.48% due 9/11/98 20,000 19,853 General Motors Acceptance Corp.: 10,000 9,887 5.50% due 7/14/98 5.50% due 7/15/98 25,000 24,947 0.55 International Lease Finance Corp.: 25,000 24,943 5.49% due 8/21/98 5.48% due 8/24/98 25,000 24,801 0.55 Bellsouth Telecommunications Inc.: 25,000 24,790 5.48% due 7/6/98 5.48% due 7/7/98 15,900 15,885 0.55 5.47% due 8/18/98 15,000 14,984 SBC Communications:(3) 18,800 18,659 5.50% due 7/13/98 5.47% due 7/21/98 11,900 11,876 0.52 American Express Credit Corp.: 35,000 34,888 5.53% due 7/22/98 5.49% due 7/27/98 15,000 14,949 0.54 H.J. Heinz Co.: 33,850 33,710 5.51% due 7/8/98 5.50% due 7/15/98 19,000 18,977 0.50 Lucent Technologies Inc.: 26,000 25,940 5.50% due 7/9/98 5.50% due 7/29/98 25,000 24,966 0.49 Coca-Cola Co. 5.48% due 7/13/98 20,000 19,911 Commercial Credit Co. 5.52% due 7/23/98 43,100 43,014 0.48 26,500 26,406 0.29 TOTAL SHORT-TERM SECURITIES (COST $632,920,000) TOTAL INVESTMENT SECURITIES (COST $8,842,548,000) 632,912 6.99 Excess of cash and receivables over payables 8,964,250 99.04 NET ASSETS 87,033 0.96 9,051,283 100.00 /1/Step bond; coupon rate will increase at a later date. /2/Coupon rate may change periodically. /3/Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. /4/Payment in kind. The issuer has the option of paying additional securities in lieu of cash. /5/Purchased as a unit; issue was separated but reattached for reporting purposes. /6/Valued under procedures established by the Board of Directors. /7/Company is not making interest or dividend payments; bankruptcy proceedings pending. /8/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. /9/Inverse floater, which is a floating rate note whose interest rate moves in the opposite direction of prevailing interest rates. /10/Index-linked bond whose principal amount moves with a government retail price index. /11/A13Non-income-producing security. See Notes to Financial Statements
The Bond Fund of America (Unaudited) FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES June 30, 1998 (dollars in thousands) Assets: Investment securities at market (cost: $8,842,548) $8,964,250 Cash 23,598 Receivables for-- Sales of investments $103,167 Forward currency contracts 760 Sales of Fund's shares 19,093 Dividends and accrued interest 129,364 252,384 -------- -------- 9,240,232 Liabilities: Payables for-- 1 Purchases of investments 165,623 Repurchases of fund's shares 10,660 Dividends on Fund's shares 8,675 Management services 2,342 Accrued expenses 1,649 188,949 8,714 $197,663 -------- -------- Net Assets at June 30, 1998-- Equivalent to $13.96 per share on 648,194,350 shares of $1 par value capital stock outstanding (authorized capital stock - 1,000,000,000 shares) $9,051,283 ======== STATEMENT OF OPERATIONS (Unaudited) for the six months ended June 30, 1998 (dollars in thousands) Investment Income: Income: Interest $319,917 Dividends from investment in stocks 5,633 $325,550 Expenses: Management services fee $13,871 Distribution expenses 10,730 Transfer agent fee 2,583 Reports to shareholders 145 Registration statement and prospectus 337 Postage, stationery and supplies 428 Directors' fees 29 Auditing and legal fees 56 Custodian fee 228 Taxes other than federal income tax 63 Other expenses 39 28,509 -------- -------- Net investment income 297,041 ======= Realized Gain and Unrealized Appreciation on Investments: Net realized gain 57,714 Net unrealized depreciation on: Investments (25,249) Open forward currency contracts (7,551) -------- Net unrealized depreciation (32,800) -------- Net realized loss and unrealized depreciation on investments 24,914 -------- Net Increase in Net Assets Resulting $321,955 from Operations ======= STATEMENT OF CHANGES IN NET ASSETS (dollars in thousands) Six months Year ended ended December 31, June 30, 1998* 1997 Operations: Net investment income $297,041 $520,154 Net realized gain on investments 57,714 99,025 Net unrealized appreciation (depreciation) on investments (32,800) 44,044 -------- -------- Net increase in net assets resulting from operations 321,955 663,223 -------- -------- Dividends and Distributions Paid to Shareholders: Dividends from net investment income (307,119) (526,643) Distributions from net realized gain on investments (42,997) - -------- -------- Total dividends and distributions (350,116) (526,643) -------- -------- Capital Share Transactions: Proceeds from shares sold: 106,205,192 and 159,869,358 shares, respectively 1,490,607 2,214,949 Proceeds from shares issued in reinvestment of net investment income dividends and distributions of net realized gain on investments: 19,166,316 and 28,414,675 shares, respectively 268,389 393,612 Cost of shares repurchased: 61,005,561 and 113,580,749 shares, respectively (855,683) (1,571,399) -------- -------- Net increase in net assets resulting from capital share transactions 903,313 1,037,162 -------- -------- Total Increase in Net Assets 875,152 1,173,742 Net Assets: Beginning of period 8,176,131 7,002,389 -------- -------- End of period (including undistributed net investment income: ($5,363) and $11,969 respectively) $9,051,283 $8,176,131 ======== ======= *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: 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. Securities with original maturities of one year or less having 60 days or less to maturity are amortized to maturity based on their cost if acquired within 60 days of maturity or, if already held on the 60th day, based on the value determined on the 61st day. Forward currency contracts are valued at the mean of their representative quoted bid and asked prices. Assets or liabilities initially expressed in terms of foreign 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 foreign currency exchange rates on investment securities are included with the net realized and unrealized gain or loss on investment securities. Securities and assets for which representative market quotations are not readily available are valued at fair value as determined in good faith by a committee appointed by the Board of Directors. 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 and dividend income is reported on the accrual basis. Discounts and premiums on securities purchased are amortized. 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. 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 reduce 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. 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, 1998, net unrealized appreciation on investments, excluding forward currency contracts, for book and federal income tax purposes aggregated $121,702,000, of which $277,002,000 related to appreciated securities and $155,300,000 related to depreciated securities. During the six months ended June 30, 1998, the fund realized, on a tax basis, a net capital gain of $59,787,000 on securities transactions. Net losses related to non-U.S. currency transactions of $2,074,000 are treated as an adjustment to ordinary income for federal income tax purposes. The cost of portfolio securities, excluding forward currency contracts, for book and federal income tax purposes was $8,842,548,000 at June 30, 1998. 3. The fee of $13,871,000 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 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; and 0.15% of such 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, 1998, distribution expenses under the Plan were limited to $10,730,000. Had no limitation been in effect, the fund would have paid $11,766,000 in distribution expenses under the Plan. As of June 30, 1998, accrued and unpaid distribution expenses were $1,396,000. American Funds Service Company (AFS), the transfer agent for the fund, was paid a fee of $2,583,000. American Funds Distributors, Inc. (AFD), the principal underwriter of the fund's shares, received $3,602,000 (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, 1998, aggregate amounts deferred and earnings thereon were $109,000. 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, 1998, accumulated undistributed net realized gain on investments was $78,176,000 and additional paid-in capital was $8,230,534,000. The fund made purchases and sales of investment securities, excluding short-term securities, of $3,868,114,000 and $3,014,684,000, respectively, during the six months ended June 30, 1998. Pursuant to the custodian agreement, the fund receives credits against its custodian fee for imputed interest on certain balances with the custodian bank. The custodian fee of $228,000 includes $156,000 that was paid by these credits rather than in cash. Net realized currency losses on interest and sales of non-U.S. bonds and notes, on a book basis, were $22,683,000 for the six months ended June 30, 1998. At June 30, 1998, the fund had outstanding forward currency contracts to sell non-U.S. currency as follows: Contract Amount U.S. Valuations at 06/30/98 ----------- ----------- ----------- ----------- Unrealized Appreciation Non-U.S. Currency Sales Contracts Non-U.S. U.S. Amount (Depreciation) Australian Dollars expiring 7/06/98 to 9/14/98 A$ 37,455,000 $22,712,000 $23,253,000 ($541,000) British Pounds expiring 8/17/98 to 10/02/98 Pound 42,775,000 70,600,000 71,208,000 (608,000) German Deutsche Marks expiring 7/07/98 to 10/02/98 DM 126,471,000 70,717,000 70,309,000 408,000 Japanese Yen expiring 8/24/98 to 10/20/98 Yen 5,362,754,000 41,029,000 39,459,000 1,570,000 New Zealand Dollars expiring 7/15/98 to 8/26/98 NZ$ 28,332,000 14,463,000 14,708,000 (245,000) Swedish Krona expiring 7/06/98 to 8/03/98 SKr 71,800,000 9,262,000 8,999,000 263,000 ----------- ----------- ----------- $228,783,000 $227,936,000 $847,000 ========== ========== ==========
Per-Share Data and Ratios Six months ended Year ended December 31 6/30/98 (1) 1997 1996 1995 1994 1993 Net Asset Value, Beginning of Period $14.00 $13.75 $13.88 $12.69 $14.45 $13.99 -------- -------- -------- -------- -------- -------- Income from Investment Operations: Net investment income 0.48 0.98 1.02 1.05 1.05 1.09 Net realized and unrealized gain(loss) on investments 0.05 0.25 (0.13) 1.18 (1.76) 0.84 -------- -------- -------- -------- -------- -------- Total income (loss) from investment operations 0.53 1.23 0.89 2.23 (0.71) 1.93 -------- -------- -------- -------- -------- -------- Less Distributions: Dividends from net investment income (0.50) (0.98) (1.02) (1.04) (1.05) (1.08) Distributions from net realized gains (0.07) -- -- -- -- (0.39) -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Total distributions (0.57) (0.98) (1.02) (1.04) (1.05) (1.47) -------- -------- -------- -------- -------- -------- Net Asset Value, End of Period $13.96 $14.00 $13.75 $13.88 $12.69 $14.45 ======= ======= ======= ======= ======= ======= Total Return (2) 3.73 /3/ 9.24% 6.71% 18.25% (5.02%) 14.14% Ratios/Supplemental Data: Net assets, end of period (in millions) $9,051 $8,176 $7,002 $6,290 $4,941 $5,285 Ratio of expenses to average net assets 0.33 /3/ 0.68 .71% .74% .69% 0.71% Ratio of net income to average net assets 3.43% /3/ 6.95% 7.47% 7.87% 7.77% 7.53% Portfolio turnover rate 37.96% /3/ 51.96% 43.43% 43.80% 56.98% 44.68% /1/ Unaudited /2/ Excludes maximum sales charge of 4.75% /3/ Based on operations for the period shown and, accordingly, not representative of a full year.
[The American Funds Group(R)] 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 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 The Bond Fund of America is one of the 28 mutual funds in The American Funds Group,(R) managed by Capital Research and Management Company. Since 1931, Capital has invested with a long-term focus based on thorough research and attention to risk. FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, PLEASE CONTACT YOUR FINANCIAL ADVISER. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE COMPANY, TOLL-FREE, AT 800/421-0180 OR VISIT WWW.AMERICANFUNDS.COM ON THE WORLD WIDE WEB. 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, 1998, this report must be accompanied by an American Funds Group Quarterly Statistical Update for the most recently completed calendar quarter. Printed on recycled paper Litho in USA CD/GRS/3908 Lit. No. BFA-013-0898 45005/15005 -----END PRIVACY-ENHANCED MESSAGE-----