The Bond Fund of America

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THE BOND FUND OF AMERICA, INC.

Part B
Statement of Additional Information

March 1, 2006
(as supplemented April 1, 2006)

This document is not a prospectus but should be read in conjunction with the
current prospectus or retirement plan prospectus of The Bond Fund of America
(the "fund" or "BFA") dated March 1, 2006. You may obtain a prospectus from your
financial adviser or by writing to the fund at the following address:

The Bond Fund of America, Inc.
Attention: Secretary
333 South Hope Street
Los Angeles, California 90071
213/486-9200

Shareholders who purchase shares at net asset value through eligible retirement
plans should note that not all of the services or features described below may
be available to them. They should contact their employers for details.

TABLE OF CONTENTS

Item Page no.
---- --------

Certain investment limitations and guidelines . . . . . . . . . . . 2
Description of certain securities and investment techniques . . . . 3
Fundamental policies and investment restrictions. . . . . . . . . . 10
Management of the fund . . . . . . . . . . . . . . . . . . . . . . 12
Execution of portfolio transactions . . . . . . . . . . . . . . . . 30
Disclosure of portfolio holdings. . . . . . . . . . . . . . . . . . 31
Price of shares . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Taxes and distributions . . . . . . . . . . . . . . . . . . . . . . 34
Purchase and exchange of shares . . . . . . . . . . . . . . . . . . 39
Sales charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Sales charge reductions and waivers . . . . . . . . . . . . . . . . 44
Selling shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Shareholder account services and privileges . . . . . . . . . . . . 49
General information . . . . . . . . . . . . . . . . . . . . . . . . 51
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Financial statements

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CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES

The following limitations and guidelines are considered at the time of purchase,
under normal circumstances, and are based on a percentage of the fund's net
assets unless otherwise noted. This summary is not intended to reflect all of
the fund's investment limitations.

. The fund will invest at least 80% of its assets in bonds (for purposes of
this limit, bonds include any debt instrument and cash equivalents, and may
include certain preferred securities).

. The fund will invest at least 60% of its assets in debt securities rated A
or better by Moody's Investors Service (Moody's) or Standard & Poor's
Corporation (S&P) or in unrated securities that are determined to be of
equivalent quality at time of purchase, including U.S. government
securities, money market instruments or cash.

. The fund may invest up to 40% of its assets in debt securities rated below
A by Moody's and S&P or in unrated securities that are determined to be of
equivalent quality.

. The fund may invest up to 35% of its assets in debt securities rated Ba or
below by Moody's and BB or below by S&P or in unrated securities determined
to be of equivalent quality. However, the fund's current practice is not to
invest more than 15% of its assets in debt securities rated Ba and BB or
below or unrated but determined to be of equivalent quality.

. The fund may invest up to 10% of its assets in preferred stocks.

. The fund may invest up to 25% of its assets in securities of issuers
domiciled outside the United States.

. While the fund may not make direct purchases of common stocks or warrants
or rights to acquire common stocks, the fund may invest in debt securities
that are issued together with common stock or other equity interests or in
securities that have equity conversion, exchange or purchase rights. The
fund may hold up to 5% of its assets in common stock, warrants and rights
acquired after sales of the corresponding debt securities or received in
exchange for debt securities.

. The fund may invest up to 5% of its assets in IOs and POs (as defined in
the following section).

* * * * * *

The fund may experience difficulty liquidating certain portfolio securities
during significant market declines or periods of heavy redemptions.

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DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES

The descriptions below are intended to supplement the material in the prospectus
under "Investment objective, strategies and risks."

DEBT SECURITIES -- Debt securities are used by issuers to borrow money.
Generally, issuers pay investors periodic interest and repay the amount borrowed
either periodically during the life of the security and/or at maturity. Some
debt securities, such as zero coupon bonds, do not pay current interest, but are
purchased at a discount from their face values and accrue interest at the
applicable coupon rate over a specified time period. The market prices of debt
securities fluctuate depending on such factors as interest rates, credit quality
and maturity. In general, market prices of debt securities decline when interest
rates rise and increase when interest rates fall.

Lower rated debt securities, rated Ba or below by Moody's and/or BB or below by
S&P or unrated but determined to be of equivalent quality, are described by the
rating agencies as speculative and involve greater risk of default or price
changes due to changes in the issuer's creditworthiness than higher rated debt
securities, or they may already be in default. The market prices of these
securities may fluctuate more than higher quality securities and may decline
significantly in periods of general economic difficulty. It may be more
difficult to dispose of, and to determine the value of, lower rated debt
securities.

Certain additional risk factors relating to debt securities are discussed below:

SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES -- Debt securities may be
sensitive to economic changes, political and corporate developments, and
interest rate changes. In addition, during an economic downturn or
substantial period of rising interest rates, issuers that are highly
leveraged may experience increased financial stress that would adversely
affect their ability to meet projected business goals, to obtain additional
financing and to service their principal and interest payment obligations.
Periods of economic change and uncertainty also can be expected to result
in increased volatility of market prices and yields of certain debt
securities.

PAYMENT EXPECTATIONS -- Debt securities may contain redemption or call
provisions. If an issuer exercises these provisions in a lower interest
rate market, the fund would have to replace the security with a lower
yielding security, resulting in decreased income to investors. If the
issuer of a debt security defaults on its obligations to pay interest or
principal or is the subject of bankruptcy proceedings, the fund may incur
losses or expenses in seeking recovery of amounts owed to it.

LIQUIDITY AND VALUATION -- There may be little trading in the secondary
market for particular debt securities, which may affect adversely the
fund's ability to value accurately or dispose of such debt securities.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the value and/or liquidity of debt
securities.

The investment adviser attempts to reduce the risks described above through
diversification of the fund's portfolio and by credit analysis of each issuer,
as well as by monitoring broad economic trends and corporate and legislative
developments, but there can be no assurance that it will be successful in doing
so.

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INFLATION-INDEXED BONDS -- The fund may invest in inflation-indexed bonds issued
by governments, their agencies or instrumentalities and corporations. The
principal value of this type of bond is adjusted in response to changes in the
level of the consumer price index. The interest rate is fixed at issuance as a
percentage of this adjustable principal. The actual interest income may
therefore both rise and fall as the level of the consumer price index rises and
falls. In particular, in a period of deflation the interest income would fall.
While the interest income may adjust upward or downward without limit in
response to changes in the consumer price index, the principal has a floor at
par, meaning that the investor receives at least the par value at redemption.

Repayment of the original bond principal upon maturity (as adjusted for
inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds,
even during a period of deflation. However, the current market value of the
bonds is not guaranteed and will fluctuate.

SECURITIES WITH EQUITY AND DEBT CHARACTERISTICS -- The fund may invest in
securities that have a combination of equity and debt characteristics. These
securities may at times behave more like equity than debt and vice versa. Some
types of convertible bonds or preferred stocks automatically convert into common
stocks. The prices and yields of nonconvertible preferred stocks generally move
with changes in interest rates and the issuer's credit quality, similar to the
factors affecting debt securities. Certain of these securities will be treated
as debt for fund investment limit purposes.

Convertible bonds, convertible preferred stocks and other securities may
sometimes be converted, or may automatically convert, into common stocks or
other securities at a stated conversion ratio. These securities, prior to
conversion, may pay a fixed rate of interest or a dividend. Because convertible
securities have both debt and equity characteristics, their value varies in
response to many factors, including the value of the underlying assets, general
market and economic conditions, and convertible market valuations, as well as
changes in interest rates, credit spreads and the credit quality of the issuer.

U.S. GOVERNMENT OBLIGATIONS -- U.S. government obligations are securities backed
by the full faith and credit of the U.S. government. U.S. government obligations
include the following types of securities:

U.S. TREASURY SECURITIES -- U.S. Treasury securities include direct
obligations of the U.S. Treasury, such as Treasury bills, notes and bonds.
For these securities, the payment of principal and interest is
unconditionally guaranteed by the U.S. government, and thus they are of the
highest possible credit quality. Such securities are subject to variations
in market value due to fluctuations in interest rates, but, if held to
maturity, will be paid in full.

FEDERAL AGENCY SECURITIES BACKED BY "FULL FAITH AND CREDIT" -- The
securities of certain U.S. government agencies and government-sponsored
entities are guaranteed as to the timely payment of principal and interest
by the full faith and credit of the U.S. government. Such agencies and
entities include the Government National Mortgage Association (Ginnie Mae),
the Veterans Administration (VA), the Federal Housing Administration (FHA),
the Export-Import Bank (Exim Bank), the Overseas Private Investment
Corporation (OPIC), the Commodity Credit Corporation (CCC) and the Small
Business Administration (SBA).

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OTHER FEDERAL AGENCY OBLIGATIONS -- Additional federal agency securities are
neither direct obligations of, nor guaranteed by, the U.S. government. These
obligations include securities issued by certain U.S. government agencies and
government-sponsored entities. However, they generally involve some form of
federal sponsorship: some operate under a government charter; some are backed by
specific types of collateral; some are supported by the issuer's right to borrow
from the Treasury; and others are supported only by the credit of the issuing
government agency or entity. These agencies and entities include, but are not
limited to: Federal Home Loan Bank, Federal Home Loan Mortgage Corporation
(Freddie Mac), Federal National Mortgage Association (Fannie Mae), Tennessee
Valley Authority and Federal Farm Credit Bank System.

PASS-THROUGH SECURITIES -- The fund may invest in various debt obligations
backed by pools of mortgages or other assets including, but not limited to,
loans on single family residences, home equity loans, mortgages on commercial
buildings, credit card receivables and leases on airplanes or other equipment.
Principal and interest payments made on the underlying asset pools backing these
obligations are typically passed through to investors. Pass-through securities
may have either fixed or adjustable coupons. These securities include:

"MORTGAGE-BACKED SECURITIES" -- These securities may be issued by U.S.
government agencies and government-sponsored entities, such as Ginnie Mae,
Fannie Mae and Freddie Mac, and by private entities. The payment of
interest and principal on mortgage-backed obligations issued by U.S.
government agencies may be guaranteed by the full faith and credit of the
U.S. government (in the case of Ginnie Mae), or may be guaranteed by the
issuer (in the case of Fannie Mae and Freddie Mac). However, these
guarantees do not apply to the market prices and yields of these
securities, which vary with changes in interest rates.

Mortgage-backed securities issued by private entities are structured
similarly to those issued by U.S. government agencies. However, these
securities and the underlying mortgages are not guaranteed by any
government agencies. These securities generally are structured with one or
more types of credit enhancement. Mortgage-backed securities generally
permit borrowers to prepay their underlying mortgages. Prepayments can
alter the effective maturity of these instruments.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS) -- CMOs are also backed by a
pool of mortgages or mortgage loans, which are divided into two or more
separate bond issues. CMOs issued by U.S. government agencies are backed by
agency mortgages. Payments of principal and interest are passed through to
each bond issue at varying schedules resulting in bonds with different
coupons, effective maturities and sensitivities to interest rates. Some
CMOs may be structured in a way that when interest rates change, the impact
of changing prepayment rates on the effective maturities of certain issues
of these securities is magnified.

COMMERCIAL MORTGAGE-BACKED SECURITIES -- These securities are backed by
mortgages on commercial property, such as hotels, office buildings, retail
stores, hospitals and other commercial buildings. These securities may have
a lower prepayment uncertainty than other mortgage-related securities
because commercial mortgage loans generally prohibit or impose penalties on
prepayments of principal. In addition, commercial mortgage-related
securities often are structured with some form of credit enhancement to
protect against potential losses on the underlying mortgage loans. Many of
the risks of investing in commercial mortgage-backed securities reflect the
risks of

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investing in the real estate securing the underlying mortgage loans,
including the effects of local and other economic conditions on real estate
markets, the ability of tenants to make loan payments and the ability of a
property to attract and retain tenants.

ASSET-BACKED SECURITIES -- These securities are backed by other assets such
as credit card, automobile or consumer loan receivables, retail installment
loans, or participations in pools of leases. Credit support for these
securities may be based on the underlying assets and/or provided through
credit enhancements by a third party. The values of these securities are
sensitive to changes in the credit quality of the underlying collateral,
the credit strength of the credit enhancement, changes in interest rates
and at times the financial condition of the issuer. Some asset-backed
securities also may receive prepayments that can change their effective
maturities.

"IOs" and "POs" are issued in portions or tranches with varying maturities and
characteristics. Some tranches may only receive the interest paid on the
underlying mortgages (IOs) and others may only receive the principal payments
(POs). The values of IOs and POs are extremely sensitive to interest rate
fluctuations and prepayment rates, and IOs are also subject to the risk of early
repayment of the underlying mortgages that will substantially reduce or
eliminate interest payments.

INVESTING IN VARIOUS COUNTRIES -- Investing outside the United States may
involve additional risks caused by, among other things, currency controls and
fluctuating currency values; different accounting, auditing, financial reporting
and legal standards and practices in some countries; changing local, regional
and global economic, political and social conditions; expropriation; changes in
tax policy; greater market volatility; differing securities market structures;
higher transaction costs; and various administrative difficulties, such as
delays in clearing and settling portfolio transactions or in receiving payment
of dividends.

The risks described above may be heightened in connection with investments in
developing countries. Although there is no universally accepted definition, the
investment adviser generally considers a developing country as a country that is
in the earlier stages of its industrialization cycle with a low per capita gross
domestic product ("GDP") and a low market capitalization to GDP ratio relative
to those in the United States and the European Union. Historically, the markets
of developing countries have been more volatile than the markets of developed
countries. The fund may invest in securities of issuers in developing countries
only to a limited extent.

Additional costs could be incurred in connection with the fund's investment
activities outside the United States. Brokerage commissions may be higher
outside the United States, and the fund will bear certain expenses in connection
with its currency transactions. Furthermore, increased custodian costs may be
associated with maintaining assets in certain jurisdictions.

CURRENCY TRANSACTIONS -- The fund may purchase and sell currencies to facilitate
securities transactions and enter into forward currency contracts to protect
against changes in currency exchange rates. A forward currency contract is an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. Forward currency contracts
entered into by the fund will involve the purchase or sale of one currency
against the U.S. dollar. While entering into forward currency transactions could
minimize the risk of loss due to a decline in the value of the hedged currency,
it could also limit any potential gain that may result from an increase in the
value of the currency. The fund will not generally attempt to protect against
all

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potential changes in exchange rates. The fund will segregate liquid assets that
will be marked to market daily to meet its forward contract commitments to the
extent required by the Securities and Exchange Commission.

Certain provisions of the Internal Revenue Code may affect the extent to which
the fund may enter into forward contracts. Such transactions also may affect the
character and timing of income, gain or loss recognized by the fund for U.S.
federal income tax purposes.

REAL ESTATE INVESTMENT TRUSTS -- The fund may invest in debt securities issued
by real estate investment trusts (REITs), which primarily invest in real estate
or real estate-related loans. Equity REITs own real estate properties, while
mortgage REITs hold construction, development and/or long-term mortgage loans.
The values of REITs may be affected by changes in the value of the underlying
property of the trusts, the creditworthiness of the issuer, property taxes,
interest rates and tax and regulatory requirements, such as those relating to
the environment. Both types of REITs are dependent upon management skill and the
cash flows generated by their holdings, the real estate market in general and
the possibility of failing to qualify for any applicable pass-through tax
treatment or failing to maintain any applicable exemptive status afforded under
relevant laws.

FORWARD COMMITMENTS -- The fund may enter into commitments to purchase or sell
securities at a future date. When the fund agrees to purchase such securities,
it assumes the risk of any decline in value of the security from the date of the
agreement. When the fund agrees to sell such securities, it does not participate
in further gains or losses with respect to the securities beginning on the date
of the agreement. If the other party to such a transaction fails to deliver or
pay for the securities, the fund could miss a favorable price or yield
opportunity, or could experience a loss.

The fund will not use these transactions for the purpose of leveraging and will
segregate liquid assets that will be marked to market daily in an amount
sufficient to meet its payment obligations in these transactions. Although these
transactions will not be entered into for leveraging purposes, to the extent the
fund's aggregate commitments in connection with these transactions exceed its
segregated assets, the fund temporarily could be in a leveraged position
(because it may have an amount greater than its net assets subject to market
risk). Should market values of the fund's portfolio securities decline while the
fund is in a leveraged position, greater depreciation of its net assets would
likely occur than if it were not in such a position. The fund will not borrow
money to settle these transactions and, therefore, will liquidate other
portfolio securities in advance of settlement if necessary to generate
additional cash to meet its obligations.

The fund may also enter into "roll" transactions which involve the sale of
mortgage-backed or other securities together with a commitment to purchase
similar, but not identical, securities at a later date. The fund assumes the
risk of price and yield fluctuations during the time of the commitment. The fund
will segregate liquid assets which will be marked to market daily in an amount
sufficient to meet its payment obligations in these transactions.

REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements under
which the fund buys a security and obtains a simultaneous commitment from the
seller to repurchase the security at a specified time and price. Repurchase
agreements permit the fund to maintain liquidity and earn income over periods of
time as short as overnight. The seller must maintain with the fund's custodian
collateral equal to at least 100% of the repurchase price, including

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accrued interest, as monitored daily by the investment adviser. The fund will
only enter into repurchase agreements involving securities in which it could
otherwise invest and with selected banks and securities dealers whose financial
condition is monitored by the investment adviser. If the seller under the
repurchase agreement defaults, the fund may incur a loss if the value of the
collateral securing the repurchase agreement has declined and may incur
disposition costs in connection with liquidating the collateral. If bankruptcy
proceedings are commenced with respect to the seller, realization of the
collateral by the fund may be delayed or limited.

CASH AND CASH EQUIVALENTS -- These include (a) commercial paper (for example,
short-term notes with maturities typically up to 12 months in length issued by
corporations, governmental bodies or bank/corporation sponsored conduits
(asset-backed commercial paper)) (b) short-term bank obligations (for example,
certificates of deposit, bankers' acceptances (time drafts on a commercial bank
where the bank accepts an irrevocable obligation to pay at maturity)) or bank
notes, (c) savings association and savings bank obligations (for example, bank
notes and certificates of deposit issued by savings banks or savings
associations), (d) securities of the U.S. government, its agencies or
instrumentalities that mature, or may be redeemed, in one year or less, and (e)
corporate bonds and notes that mature, or that may be redeemed, in one year or
less.

LOAN PARTICIPATIONS AND ASSIGNMENTS -- The fund may invest, subject to an
overall 10% limit on loans, in loan participations or assignments. Loan
participations are loans or other direct debt instruments that are interests in
amounts owed by a corporate, governmental or other borrower to another party.
They may represent amounts owed to lenders or lending syndicates to suppliers of
goods or services, or to other parties. The fund will have the right to receive
payments of principal, interest and any fees to which it is entitled only from
the lender selling the participation and only upon receipt by the lender of the
payments from the borrower. In connection with purchasing participations, the
fund generally will have no right to enforce compliance by the borrower with the
terms of the loan agreement relating to the loan, nor any rights of set-off
against the borrower, and the fund may not directly benefit from any collateral
supporting the loan in which it has purchased the participation. As a result,
the fund will be subject to the credit risk of both the borrower and the lender
that is selling the participation. In the event of the insolvency of the lender
selling a participation, a fund may be treated as a general creditor of the
lender and may not benefit from any set-off between the lender and the borrower.

When the fund purchases assignments from lenders, it acquires direct rights
against the borrower on the loan. However, because assignments are arranged
through private negotiations between potential assignees and potential
assignors, the rights and obligations acquired by a fund as the purchaser of an
assignment may differ from, and be more limited than, those held by the
assigning lender. Investments in loan participations and assignments present the
possibility that the fund could be held liable as a co-lender under emerging
legal theories of lender liability. In addition, if the loan is foreclosed, the
fund could be part owner of any collateral and could bear the costs and
liabilities of owning and disposing of the collateral. The fund anticipates that
loan participations could be sold only to a limited number of institutional
investors. In addition, some loan participations and assignments may not be
rated by major rating agencies and may not be protected by the securities laws.

INVERSE FLOATING RATE NOTES -- The fund may invest to a very limited extent (no
more than 1% of its assets) in inverse floating rate notes (a type of derivative
instrument). These notes have rates that move in the opposite direction of
prevailing interest rates. A change in prevailing interest

The Bond Fund of America -- Page 8
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rates will often result in a greater change in the instruments' interest rates.
As a result, these instruments may have a greater degree of volatility than
other types of interest-bearing securities.

RESTRICTED OR ILLIQUID SECURITIES -- The fund may purchase securities subject to
restrictions on resale. Restricted securities generally can be sold in privately
negotiated transactions, pursuant to an exemption from registration under the
Securities Act of 1933 (the "1933 Act"), or in a registered public offering.
Restricted securities held by the fund are often eligible for resale under Rule
144A, an exemption under the 1933 Act allowing for resales to "Qualified
Institutional Buyers". Where registration is required, the holder of a
registered security may be obligated to pay all or part of the registration
expense and a considerable period may elapse between the time it decides to seek
registration and the time it may be permitted to sell a security under an
effective registration statement. Difficulty in selling such securities may
result in a loss or be costly to the fund.

Securities (including restricted securities) not actively traded will be
considered illiquid unless they have been specifically determined to be liquid
under procedures adopted by the fund's board of directors, taking into account
factors such as the frequency and volume of trading, the commitment of dealers
to make markets and the availability of qualified investors, all of which can
change from time to time. The fund may incur certain additional costs in
disposing of illiquid securities.

MATURITY -- There are no restrictions on the maturity composition of the
portfolio, although it is anticipated that the fund normally will be invested
substantially in securities with maturities in excess of three years. Under
normal market conditions, longer term securities yield more than shorter term
securities, but are subject to greater price fluctuations.

LOANS OF PORTFOLIO SECURITIES -- The fund is authorized to lend portfolio
securities to selected securities dealers or other institutional investors whose
financial condition is monitored by the investment adviser. The borrower must
maintain with the fund's custodian collateral consisting of cash, cash
equivalents or U.S. government securities equal to at least 100% of the value of
the borrowed securities, plus any accrued interest. The investment adviser will
monitor the adequacy of the collateral on a daily basis. The fund may at any
time call a loan of its portfolio securities and obtain the return of the loaned
securities. The fund will receive any interest paid on the loaned securities and
a fee or a portion of the interest earned on the collateral. The fund will limit
its loans of portfolio securities to an aggregate of 33-1/3% of the value of its
total assets, measured at the time any such loan is made. The fund does not
currently intend to engage in this investment practice over the next 12 months.

* * * * * *

PORTFOLIO TURNOVER -- Portfolio changes will be made without regard to the
length of time particular investments may have been held. Short-term trading
profits are not the fund's objective, and changes in its investments are
generally accomplished gradually, though short-term transactions may
occasionally be made. High portfolio turnover involves correspondingly greater
transaction costs in the form of dealer spreads or brokerage commissions, and
may result in the realization of net capital gains, which are taxable when
distributed to shareholders.

Fixed-income securities are generally traded on a net basis and usually neither
brokerage commissions nor transfer taxes are involved. Transaction costs are
usually reflected in the spread between the bid and asked price.

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A fund's portfolio turnover rate would equal 100% if each security in the fund's
portfolio were replaced once per year. The fund's portfolio turnover rates for
the fiscal years ended December 31, 2005 and 2004 were 50% and 45%,
respectively. See "Financial highlights" in the prospectus for the fund's annual
portfolio turnover rate for each of the last five fiscal years.

FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS

FUNDAMENTAL POLICIES -- The fund has adopted the following fundamental policies
and investment restrictions, which may not be changed without approval by
holders of a majority of its outstanding shares. Such majority is defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), as the vote of the
lesser of (a) 67% or more of the outstanding voting securities present at a
shareholder meeting, if the holders of more than 50% of the outstanding voting
securities are present in person or by proxy, or (b) more than 50% of the
outstanding voting securities. All percentage limitations are considered at the
time securities are purchased and are based on the fund's net assets unless
otherwise indicated. None of the following investment restrictions involving a
maximum percentage of assets will be considered violated unless the excess
occurs immediately after, and is caused by, an acquisition by the fund.

These restrictions provide that the fund may not:

1. With respect to 75% of the fund's total assets, purchase the security of
any issuer (other than securities issued or guaranteed by the U.S. government or
its agencies or instrumentalities), if as a result, (a) more than 5% of the
fund's total assets would be invested in securities of that issuer, or (b) the
fund would hold more than 10% of the outstanding voting securities of that
issuer.

Concentrate its investments in a particular industry, as that term is used
in the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time.

2. Invest in companies for the purpose of exercising control or management;

3. Buy or sell real estate in the ordinary course of its business; however,
the fund may invest in debt securities secured by real estate or interests
therein or issued by companies, including real estate investment trusts, which
invest in real estate or interests therein;

4. Buy or sell commodities or commodity contracts in the ordinary course of
its business, provided, however, that this shall not prohibit the fund from
purchasing or selling currencies including forward currency contracts;

5. Invest more than 15% of the value of its net assets in securities that are
illiquid;

6. Engage in the business of underwriting of securities of other issuers,
except to the extent that the disposal of an investment position may technically
constitute the fund an underwriter as that term is defined under the Securities
Act of 1933;

7. Make loans in an aggregate amount in excess of 10% of the value of the
fund's total assets, taken at the time any loan is made, provided, (i) that the
purchase of debt securities pursuant to the fund's investment objectives and
entering into repurchase agreements maturing in seven days or less shall not be
deemed loans for the purposes of this restriction, and (ii) that

The Bond Fund of America -- Page 10
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loans of portfolio securities as described under "Loans of Portfolio
Securities," shall be made only in accordance with the terms and conditions
therein set forth;

8. Sell securities short, except to the extent that the fund contemporaneously
owns or has the right to acquire at no additional cost securities identical to
those sold short;

9. Purchase securities at margin;

10. Borrow money except from banks for temporary or emergency purposes, not in
excess of 5% of the value of the fund's total assets.

Notwithstanding Investment Restriction #8, the fund has no current intention (at
least during the next 12 months) to sell securities short to the extent the fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short.

NONFUNDAMENTAL POLICIES -- The fund has adopted the following nonfundamental
investment policies, which may be changed by action of the Board of Directors
without shareholder approval:

1. The fund may not invest in securities of other investment companies, except
as permitted by the 1940 Act.

2. The fund may not issue senior securities, except as permitted by the 1940
Act.

The Bond Fund of America -- Page 11
<PAGE>

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS AND OFFICERS

"NON-INTERESTED" DIRECTORS/1/

NUMBER OF
NAME, AGE AND PORTFOLIOS/3/
POSITION WITH FUND PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS/4/
(YEAR FIRST ELECTED/2/) DURING PAST FIVE YEARS BY DIRECTOR HELD BY DIRECTOR
--------------------------------------------------------------------------------------------------------

Richard G. Capen, Jr., 71 Corporate director and author; 14 Carnival Corporation
Director (1999) former U.S. Ambassador to
Spain; former Vice Chairman,
Knight-Ridder, Inc.
(communications company);
former Chairman and Publisher,
The Miami Herald
----------------
--------------------------------------------------------------------------------------------------------
H. Frederick Christie, 72 Private investor; former 19 Ducommun Incorporated;
Director (1974) President and CEO, The Mission IHOP Corporation;
Group (non-utility holding Southwest Water Company
company, subsidiary of
Southern California Edison
Company)
--------------------------------------------------------------------------------------------------------
Diane C. Creel, 57 Chairman of the Board, 12 Allegheny Technologies;
Director (1994) President and CEO, Ecovation, BF Goodrich;
Inc. (organic waste Foster Wheeler Ltd.
management); former President
and CEO, The Earth Technology
Corporation (international
consulting engineering)

--------------------------------------------------------------------------------------------------------
Martin Fenton, 70 Chairman of the Board, Senior 16 None
Chairman of the Board Resource Group LLC
(Independent and (development and management of
Non-Executive) (1989) senior living communities)
--------------------------------------------------------------------------------------------------------
Leonard R. Fuller, 59 President and CEO, Fuller 14 None
Director (1994) Consulting (financial
management consulting firm)
--------------------------------------------------------------------------------------------------------
R. Clark Hooper, 59 President, Dumbarton Group LLC 15 None
Director (2005) (consulting); former Executive
Vice President - Policy and
Oversight, NASD
--------------------------------------------------------------------------------------------------------
Richard G. Newman, 71 Chairman of the Board, AECOM 13 Sempra Energy;
Director (1991) Technology Corporation Southwest Water Company
(engineering, consulting and
professional technical
services)
--------------------------------------------------------------------------------------------------------
Frank M. Sanchez, 62 Principal, The Sanchez Family 12 None
Director (1999) Corporation dba McDonald's
Restaurants (McDonald's
licensee)
--------------------------------------------------------------------------------------------------------

The Bond Fund of America -- Page 12
<PAGE>

"INTERESTED" DIRECTORS/5,6/

PRINCIPAL OCCUPATION(S)
DURING PAST FIVE YEARS
AND POSITIONS NUMBER OF
NAME, AGE AND HELD WITH AFFILIATED ENTITIES PORTFOLIOS/3/
POSITION WITH FUND OR THE PRINCIPAL UNDERWRITER OVERSEEN OTHER DIRECTORSHIPS/4/
(YEAR FIRST ELECTED/2/) OF THE FUND BY DIRECTOR HELD BY DIRECTOR
--------------------------------------------------------------------------------------------------------

Paul G. Haaga, Jr., 57 Executive Vice President and 16 None
Vice Chairman and Director, Capital Research and
Director (1985) Management Company; Director,
The Capital Group Companies,
Inc.*
--------------------------------------------------------------------------------------------------------
Abner D. Goldstine, 76 Senior Vice President and 12 None
President and Director Director, Capital Research and
(1974) Management Company
--------------------------------------------------------------------------------------------------------
Don R. Conlan, 70 President (retired), The Capital 5 None
Director (1996) Group Companies, Inc.*
--------------------------------------------------------------------------------------------------------

OTHER OFFICERS

NAME, AGE AND PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
POSITION WITH FUND AND POSITIONS HELD WITH AFFILIATED ENTITIES
(YEAR FIRST OR THE PRINCIPAL UNDERWRITER OF THE FUND
ELECTED/2/)
-------------------------------------------------------------------------------

David C. Barclay, 49 Senior Vice President, Capital Research and
Senior Vice Management Company; Director, The Capital Group
President (1997) Companies, Inc.*
-------------------------------------------------------------------------------
Mark R. Macdonald, Senior Vice President and Director, Capital Research
46 and Management Company
Senior Vice
President (2001)
-------------------------------------------------------------------------------
John H. Smet, 49 Senior Vice President, Capital Research and
Senior Vice Management Company; Director, American Funds
President (1994) Distributors, Inc.*
-------------------------------------------------------------------------------
Kristine M. Vice President and Counsel - Fund Business Management
Nishiyama, 35 Group, Capital Research and Management Company; Vice
Vice President President and Counsel, Capital Bank and Trust
(2003) Company*
-------------------------------------------------------------------------------
Kimberly S. Verdick, Assistant Vice President - Fund Business Management
41 Group, Capital Research and Management Company
Secretary (1994)
-------------------------------------------------------------------------------
Susi M. Silverman, Vice President - Fund Business Management Group,
35 Capital Research and Management Company
Treasurer (2001)
-------------------------------------------------------------------------------
Sharon G. Moseley, Vice President - Fund Business Management Group,
38 Capital Research and Management Company
Assistant Treasurer
(2003)
-------------------------------------------------------------------------------

The Bond Fund of America -- Page 13
<PAGE>

* Company affiliated with Capital Research and Management Company.
1 A "non-interested" director refers to a director who is not an "interested
person" within the meaning of the 1940 Act.
2 Directors and officers of the fund serve until their resignation, removal or
retirement.
3 Fund managed by Capital Research and Management Company, including the
American Funds, American Funds Insurance Series,(R) which serves as the
underlying investment vehicle for certain variable insurance contracts, and
Endowments, whose shareholders are limited to certain nonprofit organizations.
4 This includes all directorships (other than those of the American Funds) that
are held by each director as a director of a public company or a registered
investment company.
5 "Interested persons," within the meaning of the 1940 Act, on the basis of
their affiliation with the fund's investment adviser, Capital Research and
Management Company, or affiliated entities (including the fund's principal
underwriter).
6 All of the officers listed are officers and/or directors/trustees of one or
more of the other funds for which Capital Research and Management Company
serves as investment adviser.

THE ADDRESS FOR ALL DIRECTORS AND OFFICERS OF THE FUND IS 333 SOUTH HOPE STREET,
55TH FLOOR, LOS ANGELES, CALIFORNIA 90071, ATTENTION: FUND SECRETARY.

The Bond Fund of America -- Page 14
<PAGE>

FUND SHARES OWNED BY DIRECTORS AS OF DECEMBER 31, 2005

AGGREGATE DOLLAR RANGE/1/
OF SHARES
OWNED IN ALL FUNDS
IN THE AMERICAN FUNDS
DOLLAR RANGE/1/ OF FUND FAMILY OVERSEEN
NAME SHARES OWNED BY DIRECTOR
-------------------------------------------------------------------------------

"NON-INTERESTED" DIRECTORS
-------------------------------------------------------------------------------
Richard G. Capen, Jr. None Over $100,000
-------------------------------------------------------------------------------
H. Frederick Christie None Over $100,000
-------------------------------------------------------------------------------
Diane C. Creel $10,001 - $50,000 $10,001 - $50,000
-------------------------------------------------------------------------------
Martin Fenton $10,001 - $50,000 Over $100,000
-------------------------------------------------------------------------------
Leonard R. Fuller $10,001 - $50,000 $50,001 - $100,000
-------------------------------------------------------------------------------
R. Clark Hooper None $50,001 - $100,000
-------------------------------------------------------------------------------
Richard G. Newman $50,001 - $100,000 Over $100,000
-------------------------------------------------------------------------------
Frank M. Sanchez $1 - $10,000 $10,001 - $50,000
-------------------------------------------------------------------------------
"INTERESTED" DIRECTORS
-------------------------------------------------------------------------------
Don R. Conlan None Over $100,000
-------------------------------------------------------------------------------
Abner D. Goldstine Over $100,000 Over $100,000
-------------------------------------------------------------------------------
Paul G. Haaga, Jr. Over $100,000 Over $100,000
-------------------------------------------------------------------------------

1 Ownership disclosure is made using the following ranges: None; $1 - $10,000;
$10,001 - $50,000; $50,001 - $100,000; and Over $100,000. The amounts listed
for "interested" directors include shares owned through The Capital Group
Companies, Inc. retirement plan and 401(k) plan.
DIRECTOR COMPENSATION -- No compensation is paid by the fund to any officer or
director who is a director, officer or employee of the investment adviser or its
affiliates. The fund typically pays each non-interested director an annual fee
of $11,000. If the aggregate annual fees paid to a non-interested director by
all funds advised by the investment adviser is less than $50,000, that
non-interested director would be eligible for a $50,000 alternative fee. This
alternative fee is paid by those funds for which the non-interested director
serves as a director on a pro-rata basis according to each fund's relative share
of the annual fees that it would typically pay. The alternative fee reflects the
significant time and labor commitment required for a director to oversee even
one fund. A non-interested director who is chairman of the board (an
"independent chair") also receives an additional annual fee of $25,000, paid in
equal portions by the fund and the funds whose boards and committees typically
meet jointly with those of the fund. The fund pays to its independent chair
attendance fees (as described below) for each meeting of a committee of the
board of directors attended as a non-voting ex-officio member.

In addition, the fund generally pays to non-interested directors a pro-rata
portion of fees of: (a) $3,600 for each board of directors meeting attended; (b)
$1,500 for each meeting attended as a member of the nominating and governance
committee; (c) $3,000 for each meeting attended

The Bond Fund of America -- Page 15
<PAGE>

as a member of the contracts committee; and (d) an annual fee of $6,160 for
attending all audit committee meetings.

Non-interested directors also receive attendance fees of (a) $2,500 for each
director seminar or information session organized by the investment adviser, (b)
$1,500 for each joint audit committee meeting with all other audit committees of
funds advised by the investment adviser and (c) $500 for each meeting of the
board or committee chairs of other funds advised by the investment adviser. The
fund and the other funds served by each non-interested director each pay an
equal portion of these attendance fees.

No pension or retirement benefits are accrued as part of fund expenses.
Non-interested directors may elect, on a voluntary basis, to defer all or a
portion of their fees through a deferred compensation plan in effect for the
fund. The fund also reimburses certain expenses of the non-interested directors.

DIRECTOR COMPENSATION PAID DURING THE FISCAL YEAR ENDED DECEMBER 31, 2005

TOTAL COMPENSATION (INCLUDING
AGGREGATE COMPENSATION VOLUNTARILY DEFERRED COMPENSATION/1/)
(INCLUDING VOLUNTARILY FROM ALL FUNDS MANAGED BY
DEFERRED COMPENSATION/1/) CAPITAL RESEARCH AND MANAGEMENT
NAME FROM THE FUND COMPANY OR ITS AFFILIATES/2/
------------------------------------------------------------------------------------------

Richard G. Capen, $14,503 $130,920
Jr./3/
------------------------------------------------------------------------------------------
H. Frederick 14,821 319,920
Christie/3/
------------------------------------------------------------------------------------------
Diane C. Creel/3/ 15,660 77,650
------------------------------------------------------------------------------------------
Martin Fenton/3/ 13,051 262,670
------------------------------------------------------------------------------------------
Leonard R. Fuller/3/ 14,968 187,420
------------------------------------------------------------------------------------------
R. Clark Hooper 8,602 43,964
------------------------------------------------------------------------------------------
Richard G. Newman 12,906 151,150
------------------------------------------------------------------------------------------
Frank M. Sanchez 15,936 79,060
------------------------------------------------------------------------------------------

1 Amounts may be deferred by eligible directors under a nonqualified deferred
compensation plan adopted by the fund in 1993. Deferred amounts accumulate at
an earnings rate determined by the total return of one or more American Funds
as designated by the directors. Compensation shown in this table for the fiscal
year ended December 31, 2005 does not include earnings on amounts deferred in
previous fiscal years. See footnote 3 to this table for more information.
2 Fund managed by Capital Research and Management Company, including the
American Funds, American Funds Insurance Series,(R) which serves as the
underlying investment vehicle for certain variable insurance contracts, and
Endowments, whose shareholders are limited to certain nonprofit organizations.
3 Since the deferred compensation plan's adoption, the total amount of deferred
compensation accrued by the fund (plus earnings thereon) through the 2005
fiscal year for participating directors is as follows: Richard G. Capen, Jr.
($88,825), H. Frederick Christie ($25,203), Diane C. Creel ($85,987), Martin
Fenton ($69,342) and Leonard R. Fuller ($119,783). Amounts deferred and
accumulated earnings thereon are not funded and are general unsecured
liabilities of the fund until paid to the directors.

As of February 1, 2006, the officers and directors of the fund and their
families, as a group, owned beneficially or of record less than 1% of the
outstanding shares of the fund.

The Bond Fund of America -- Page 16
<PAGE>

FUND ORGANIZATION AND THE BOARD OF DIRECTORS -- The fund, an open-end,
diversified management investment company, was organized as a Maryland
corporation on December 3, 1973. Although the board of directors has delegated
day-to-day oversight to the investment adviser, all fund operations are
supervised by the fund's board, which meets periodically and performs duties
required by applicable state and federal laws.

Under Maryland law, the business affairs of a fund are managed under the
direction of the board of directors, and all powers of the fund are exercised by
or under the authority of the board except as reserved to the shareholders by
law or the fund's charter or by-laws. Maryland law requires each director to
perform his/her duties as a director, including his/her duties as a member of
any board committee on which he/she serves, in good faith, in a manner he/she
reasonably believes to be in the best interest of the fund, and with the care
that an ordinarily prudent person in a like position would use under similar
circumstances.

Members of the board who are not employed by the investment adviser or its
affiliates are paid certain fees for services rendered to the fund as described
above. They may elect to defer all or a portion of these fees through a deferred
compensation plan in effect for the fund.

The fund has several different classes of shares, including Class A, B, C, F,
529-A, 529-B, 529-C, 529-E, 529-F, R-1, R-2, R-3, R-4 and R-5 shares. Shares of
each class represent an interest in the same investment portfolio. Each class
has pro rata rights as to voting, redemption, dividends and liquidation, except
that each class bears different distribution expenses and may bear different
transfer agent fees and other expenses properly attributable to the particular
class as approved by the board of directors and set forth in the fund's rule
18f-3 Plan. Each class' shareholders have exclusive voting rights with respect
to the respective class' rule 12b-1 plans adopted in connection with the
distribution of shares and on other matters in which the interests of one class
are different from interests in another class. Shares of all classes of the fund
vote together on matters that affect all classes in substantially the same
manner. Each class votes as a class on matters that affect that class alone.
Note that CollegeAmerica/(R)// /account owners invested in Class 529 shares are
not shareholders of the fund and, accordingly, do not have the rights of a
shareholder, such as the right to vote proxies relating to fund shares. As the
legal owner of the fund's Class 529 shares, the Virginia College Savings
Plan/SM/ will vote any proxies relating to such fund shares.

The fund does not hold annual meetings of shareholders. However, significant
matters that require shareholder approval, such as certain elections of board
members or a change in a fundamental investment policy, will be presented to
shareholders at a meeting called for such purpose. Shareholders have one vote
per share owned. At the request of the holders of at least 10% of the shares,
the fund will hold a meeting at which any member of the board could be removed
by a majority vote.

The fund's Articles of Incorporation and by-laws as well as separate
indemnification agreements that the fund has entered into with non-interested
directors provide in effect that, subject to certain conditions, the fund will
indemnify its officers and directors against liabilities or expenses actually
and reasonably incurred by them relating to their service to the fund. However,
directors are not protected from liability by reason of their willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of their office.

COMMITTEES OF THE BOARD OF DIRECTORS -- The fund has an audit committee
comprised of Richard G. Capen, Jr.; H. Frederick Christie; Leonard R. Fuller;
and R. Clark Hooper, none of

The Bond Fund of America -- Page 17
<PAGE>

whom is an "interested person" of the fund within the meaning of the 1940 Act.
The committee provides oversight regarding the fund's accounting and financial
reporting policies and practices, its internal controls and the internal
controls of the fund's principal service providers. The committee acts as a
liaison between the fund's independent registered public accounting firm and the
full board of directors. Six audit committee meetings were held during the 2005
fiscal year.

The fund has a contracts committee comprised of Richard G. Capen, Jr.; H.
Frederick Christie; Diane C. Creel; Martin Fenton; Leonard R. Fuller; R. Clark
Hooper; Richard G. Newman; and Frank M. Sanchez, none of whom is an "interested
person" of the fund within the meaning of the 1940 Act. The committee's
principal function is to request, review and consider the information deemed
necessary to evaluate the terms of certain agreements between the fund and its
investment adviser or the investment adviser's affiliates, such as the
Investment Advisory and Service Agreement, Principal Underwriting Agreement,
Administrative Services Agreement and Plans of Distribution adopted pursuant to
rule 12b-1 under the 1940 Act, that the fund may enter into, renew or continue,
and to make its recommendations to the full board of directors on these matters.
Two contracts committee meetings were held during the 2005 fiscal year.

The fund has a nominating and governance committee comprised of Richard G.
Capen, Jr.; H. Frederick Christie; Diane C. Creel; Martin Fenton; Leonard R.
Fuller; R. Clark Hooper; Richard G. Newman; and Frank M. Sanchez, none of whom
is an "interested person" of the fund within the meaning of the 1940 Act. The
committee periodically reviews such issues as the board's composition,
responsibilities, committees, compensation and other relevant issues, and
recommends any appropriate changes to the full board of directors. The committee
also evaluates, selects and nominates non-interested director candidates to the
full board of directors. While the committee normally is able to identify from
its own and other resources an ample number of qualified candidates, it will
consider shareholder suggestions of persons to be considered as nominees to fill
future vacancies on the board. Such suggestions must be sent in writing to the
nominating and governance committee of the fund, addressed to the fund's
secretary, and must be accompanied by complete biographical and occupational
data on the prospective nominee, along with a written consent of the prospective
nominee for consideration of his or her name by the committee. Three nominating
and governance committee meetings were held during the 2005 fiscal year.

PROXY VOTING PROCEDURES AND GUIDELINES -- The fund and its investment adviser
have adopted Proxy Voting Guidelines (the "Guidelines") with respect to voting
proxies of securities held by the fund, other American Funds, Endowments and
American Funds Insurance Series. Certain American Funds have established
separate proxy committees that vote proxies or delegate to a voting officer the
authority to vote on behalf of those funds. Proxies for all other funds are
voted by a committee of the investment adviser under authority delegated by
those funds' boards. Therefore, if more than one fund invests in the same
company, they may vote differently on the same proposal.

All U.S. proxies are voted. Non-U.S. proxies also are voted, provided there is
sufficient time and information available. After a proxy is received, the
investment adviser prepares a summary of the proposals in the proxy. A
discussion of any potential conflicts of interest is also included in the
summary. After reviewing the summary, one or more research analysts familiar
with the company and industry make a voting recommendation on the proxy
proposals. A second recommendation is made by a proxy coordinator (a senior
investment professional) based on the individual's knowledge of the Guidelines
and familiarity with proxy-related issues. The proxy summary and

The Bond Fund of America -- Page 18
<PAGE>

voting recommendations are then sent to the appropriate proxy voting committee
for the final voting decision.

The analyst and proxy coordinator making voting recommendations are responsible
for noting any potential material conflicts of interest. One example might be
where a director of one or more American Funds is also a director of a company
whose proxy is being voted. In such instances, proxy committee members are
alerted to the potential conflict. The proxy committee may then elect to vote
the proxy or seek a third-party recommendation or vote of an ad hoc group of
committee members.

The Guidelines, which have been in effect in substantially their current form
for many years, provide an important framework for analysis and decision-making
by all funds. However, they are not exhaustive and do not address all potential
issues. The Guidelines provide a certain amount of flexibility so that all
relevant facts and circumstances can be considered in connection with every
vote. As a result, each proxy received is voted on a case-by-case basis
considering the specific circumstances of each proposal. The voting process
reflects the funds' understanding of the company's business, its management and
its relationship with shareholders over time.

Information regarding how the fund voted proxies relating to portfolio
securities during the 12-month period ended June 30 of each year will be
available on or about September 1 of each year (a) without charge, upon request
by calling American Funds Service Company at 800/421-0180, (b) on the American
Funds website at www.americanfunds.com and (c) on the SEC's website at sec.gov.

The following summary sets forth the general positions of the American Funds,
Endowments, American Funds Insurance Series and the investment adviser on
various proposals. A copy of the full Guidelines is available upon request, free
of charge, by calling American Funds Service Company at 800/421-0180 or visiting
the American Funds website.

DIRECTOR MATTERS -- The election of a company's slate of nominees for
director is generally supported. Votes may be withheld for some or all of
the nominees if this is determined to be in the best interest of
shareholders. Separation of the chairman and CEO positions may also be
supported. Typically, proposals to declassify the board (elect all
directors annually) are supported based on the belief that this increases
the directors' sense of accountability to shareholders.

SHAREHOLDER RIGHTS -- Proposals to repeal an existing poison pill, to
provide for confidential voting and to provide for cumulative voting are
usually supported. Proposals to eliminate the right of shareholders to act
by written consent or to take away a shareholder's right to call a special
meeting are not typically supported.

COMPENSATION AND BENEFIT PLANS -- Option plans are complicated, and many
factors are considered in evaluating a plan. Each plan is evaluated based
on protecting shareholder interests and a knowledge of the company and its
management. Considerations include the pricing (or repricing) of options
awarded under the plan and the impact of dilution on existing shareholders
from past and future equity awards. Compensation packages should be
structured to attract, motivate and retain existing employees and qualified
directors; however, they should not be excessive.

The Bond Fund of America -- Page 19
<PAGE>

ROUTINE MATTERS -- The ratification of auditors, procedural matters
relating to the annual meeting and changes to company name are examples of
items considered routine. Such items are generally voted in favor of
management's recommendations unless circumstances indicate otherwise.

PRINCIPAL FUND SHAREHOLDERS -- The following table identifies those investors
who own of record or are known by the fund to own beneficially 5% or more of any
class of its shares as of the opening of business on February 1, 2006. Unless
otherwise indicated, the ownership percentages below represent ownership of
record rather than beneficial ownership.

NAME AND ADDRESS OWNERSHIP PERCENTAGE
----------------------------------------------------------------------------

Edward D. Jones & Co. Class A 16.41%
201 Progress Parkway Class B 8.80
Maryland Heights, MO 63043-3009
----------------------------------------------------------------------------
MLPF&S Class B 5.94
4800 Deer Lake Drive, East, Floor 2 Class C 16.10
Jacksonville, FL 32246-6484 Class R-5 18.86
----------------------------------------------------------------------------
Citigroup Global Markets, Inc. Class C 10.32
333 W. 34th Street
New York, NY 10001-2402
----------------------------------------------------------------------------
Hartford Life Insurance Co. Class R-3 6.36
P.O. Box 2999
Hartford, CT 06104-2999
----------------------------------------------------------------------------
Nationwide Trust Co. Class R-3 6.22
P.O. Box 182029
Columbus, OH 43218-2029
----------------------------------------------------------------------------
Charles Schwab & Co., Inc. Class R-4 7.79
101 Montgomery Street
San Francisco, CA 94104-4122
----------------------------------------------------------------------------
Marshall & Ilsley Trust Co. Class R-4 5.29
11270 W. Park Place, Suite 400
Milwaukee, Wi 53224-3638
----------------------------------------------------------------------------
CGTC Class R-5 7.84
333 S. Hope Street, Floor 49
Los Angeles, CA 90071
----------------------------------------------------------------------------
UBS Financial Services Class R-5 6.80
P. O. Box 92994
Chicago, IL 60675-2994
----------------------------------------------------------------------------

INVESTMENT ADVISER -- Capital Research and Management Company, the investment
adviser, founded in 1931, maintains research facilities in the United States and
abroad (Los Angeles, San Francisco, New York, Washington, DC, London, Geneva,
Hong Kong, Singapore and Tokyo). These facilities are staffed with experienced
investment professionals. The investment adviser is located at 333 South Hope
Street, Los Angeles, CA 90071 and 135 South State College Boulevard, Brea, CA
92821. It is a wholly owned subsidiary of The Capital Group Companies,

The Bond Fund of America -- Page 20
<PAGE>

Inc., a holding company for several investment management subsidiaries. The
investment adviser manages equity assets for the American Funds through two
divisions. These divisions generally function separately from each other with
respect to investment research activities and they make investment decisions for
the funds on a separate basis.

POTENTIAL CONFLICTS OF INTEREST -- The investment adviser has adopted policies
and procedures that address conflicts of interest that may arise between a
portfolio counselor's management of the fund and his or her management of other
funds and accounts. Potential areas of conflict could involve allocation of
investment opportunities and trades among funds and accounts, use of information
regarding the timing of fund trades, personal investing activities, portfolio
counselor compensation and proxy voting of portfolio securities. The investment
adviser has adopted policies and procedures that it believes are reasonably
designed to address these conflicts. However, there is no guarantee that such
policies and procedures will be effective or that the investment adviser will
anticipate all potential conflicts of interest.

COMPENSATION OF INVESTMENT PROFESSIONALS -- As described in the prospectus, the
investment adviser uses a system of multiple portfolio counselors in managing
fund assets. In addition, Capital Research and Management Company's investment
analysts may make investment decisions with respect to a portion of a fund's
portfolio within their research coverage. Portfolio counselors and investment
analysts may also manage assets in other mutual funds advised by Capital
Research and Management Company.

Portfolio counselors and investment analysts are paid competitive salaries by
Capital Research and Management Company. In addition, they may receive bonuses
based on their individual portfolio results. Investment professionals also may
participate in profit-sharing plans. The relative mix of compensation
represented by bonuses, salary and profit-sharing will vary depending on the
individual's portfolio results, contributions to the organization and other
factors. In order to encourage a long-term focus, bonuses based on investment
results are calculated by comparing pretax total returns to relevant benchmarks
over both the most recent year and a four-year rolling average, with the greater
weight placed on the four-year rolling average. For portfolio counselors,
benchmarks may include measures of the marketplaces in which the relevant fund
invests and measures of the results of comparable mutual funds. For investment
analysts, benchmarks may include relevant market measures and appropriate
industry or sector indexes reflecting their areas of expertise. Capital Research
and Management Company also separately compensates analysts for the quality of
their research efforts. The benchmarks against which The Bond Fund of America
portfolio counselors are measured include: Lehman Brothers Aggregate Bond Index;
Credit Suisse First Boston High Yield Bond Index; Lipper High Current Yield Bond
Funds Average; and Citigroup World Government Bond Index.

PORTFOLIO COUNSELOR FUND HOLDINGS AND OTHER MANAGED ACCOUNTS -- As described
below, portfolio counselors may personally own shares of the fund. In addition,
portfolio counselors may manage a portion of other mutual funds or accounts
advised by Capital Research and Management Company or its affiliates.

The Bond Fund of America -- Page 21
<PAGE>

THE FOLLOWING TABLE REFLECTS INFORMATION AS OF DECEMBER 31, 2005:

NUMBER NUMBER
OF OTHER OF OTHER NUMBER
REGISTERED POOLED OF OTHER
INVESTMENT INVESTMENT ACCOUNTS
COMPANIES (RICS) VEHICLES (PIVS) THAT
THAT THAT PORTFOLIO
PORTFOLIO PORTFOLIO COUNSELOR
DOLLAR RANGE COUNSELOR COUNSELOR MANAGES AND
OF FUND MANAGES AND MANAGES AND ASSETS OF
PORTFOLIO SHARES ASSETS OF RICS ASSETS OF PIVS OTHER ACCOUNTS
COUNSELOR OWNED/1/ IN BILLIONS/2/ IN BILLIONS/3/ IN BILLIONS/4/
------------------------------------------------------------------------------------------

Abner D. Over 4 $143.1 None None
Goldstine $1,000,000
------------------------------------------------------------------------------------------
David C. Barclay $100,001 - 4 $149.2 5 $1.06 13 $2.98
$500,000
------------------------------------------------------------------------------------------
Mark R. Macdonald $100,001 - 3 $191.3 None None
$500,000
------------------------------------------------------------------------------------------
John H. Smet $100,001 - 6 $192.5 None 3 $2.23
$500,000
------------------------------------------------------------------------------------------
Mark H. Dalzell $50,001 - 2 $ 73.3 3 $0.43 19 $4.27
$100,000
------------------------------------------------------------------------------------------
Susan M. Tolson $100,001- 3 $ 83.4 3 $0.84 2 $0.60
$500,000
------------------------------------------------------------------------------------------

1 Ownership disclosure is made using the following ranges: None; $1 - $10,000;
$10,001 - $50,000; $50,001 - $100,000; $100,001 - $500,000; $500,001 -
$1,000,000; and Over $1,000,000. The amounts listed include shares owned
through The Capital Group Companies, Inc. retirement plan and 401(k) plan.
2 Indicates fund(s) where the portfolio counselor also has significant
responsibilities for the day to day management of the fund(s). Assets noted are
the total net assets of the registered investment companies and are not
indicative of the total assets managed by the individual, which is a
substantially lower amount.
3 Represents funds advised or sub-advised by Capital Research and Management
Company and sold outside the United States and/ or fixed-income assets in
institutional accounts managed by investment adviser subsidiaries of Capital
Group International, Inc., an affiliate of Capital Research and Management
Company. Assets noted are the total net assets of the fund or account and are
not indicative of the total assets managed by the individual, which is a
substantially lower amount.
4 Reflects other professionally managed accounts held at companies affiliated
with Capital Research and Management Company. Personal brokerage accounts of
portfolio counselors and their families are not reflected.

INVESTMENT ADVISORY AND SERVICE AGREEMENT -- The Investment Advisory and Service
Agreement (the "Agreement") between the fund and the investment adviser will
continue in effect until October 31, 2006, unless sooner terminated, and may be
renewed from year to year thereafter, provided that any such renewal has been
specifically approved at least annually by (a) the board of directors, or by the
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the fund, and (b) the vote of a majority of directors who are not
parties to the Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The Agreement provides that the investment adviser has no
liability to the fund for its acts or omissions in the performance of its
obligations to the fund not involving willful misconduct, bad faith, gross
negligence or reckless disregard of its obligations under the Agreement. The
Agreement also

The Bond Fund of America -- Page 22
<PAGE>

provides that either party has the right to terminate it, without penalty, upon
60 days' written notice to the other party, and that the Agreement automatically
terminates in the event of its assignment (as defined in the 1940 Act).

In addition to providing investment advisory services, the investment adviser
furnishes the services and pays the compensation and travel expenses of persons
to perform the fund's executive, administrative, clerical and bookkeeping
functions, and provides suitable office space, necessary small office equipment
and utilities, general purpose accounting forms, supplies and postage used at
the fund's offices. The fund pays all expenses not assumed by the investment
adviser, including, but not limited to, custodian, stock transfer and dividend
disbursing fees and expenses; shareholder recordkeeping and administrative
expenses; costs of the designing, printing and mailing of reports, prospectuses,
proxy statements and notices to its shareholders; taxes; expenses of the
issuance and redemption of fund shares (including stock certificates,
registration and qualification fees and expenses); expenses pursuant to the
fund's plans of distribution (described below); legal and auditing expenses;
compensation, fees and expenses paid to non-interested directors; association
dues; costs of stationery and forms prepared exclusively for the fund; and costs
of assembling and storing shareholder account data.

The management fee is based upon the net assets of the fund and monthly gross
investment income. Gross investment income is determined in accordance with
generally accepted accounting principles and does not include gains or losses
from sales of capital assets.

The management fee is based on the following annualized rates and average daily
net asset levels:

Net asset level

RATE IN EXCESS OF UP TO
------------------------------------------------------------------------------

0.30% $ 0 $ 60,000,000
------------------------------------------------------------------------------
0.21 60,000,000 1,000,000,000
------------------------------------------------------------------------------
0.18 1,000,000,000 3,000,000,000
------------------------------------------------------------------------------
0.16 3,000,000,000 6,000,000,000
------------------------------------------------------------------------------
0.15 6,000,000,000 10,000,000,000
------------------------------------------------------------------------------
0.14 10,000,000,000 16,000,000,000
------------------------------------------------------------------------------
0.13 16,000,000,000 20,000,000,000
------------------------------------------------------------------------------
0.12 20,000,000,000
------------------------------------------------------------------------------

The agreement also provides for fees based on monthly gross investment income at
the following annualized rates:

The Bond Fund of America -- Page 23
<PAGE>

Monthly gross investment income

RATE IN EXCESS OF UP TO
-----------------------------------------------------------------------------------

2.25% $ 0 $ 8,333,333
-----------------------------------------------------------------------------------
2.00 8,333,333 41,666,667
-----------------------------------------------------------------------------------
1.75 41,666,667
-----------------------------------------------------------------------------------

Assuming average daily net assets of $23.0 billion and gross investment income
levels of 3%, 4%, 5%, 6% and 7%, management fees would be .21%, .22%, .24%, .26%
and .28%, respectively.

The investment adviser has agreed to reduce the fee payable to it under the
agreement by (a) the amount by which the ordinary operating expenses of the fund
for any fiscal year of the fund, excluding interest, taxes and extraordinary
expenses such as litigation, exceed the greater of (i) 1% of the average
month-end net assets of the fund for such fiscal year or (ii) 10% of the fund's
gross investment income, and (b) any additional amount necessary to assure that
such ordinary operating expenses of the fund in any year after such reduction do
not exceed the lesser of (i) 1-1/2% of the first $30 million of average
month-end net assets of the fund, plus 1% of the average month-end net assets in
excess thereof, or (ii) 25% of the fund's gross investment income. To the extent
the fund's management fee must be waived due to Class A share expense ratios
exceeding these limits, management fees will be reduced similarly for all
classes of shares of the fund or other Class A fees will be waived in lieu of
management fees.

For the fiscal years ended December 31, 2005 and 2004, the investment adviser
was entitled to receive from the fund management fees of $53,137,000 and
$45,595,000, respectively. After giving effect to the management fee waivers
described below, the fund paid the investment adviser management fees of
$48,434,000 (a reduction of $4,703,000) and $44,807,000 (a reduction of
$788,000) for the fiscal years ended December 31, 2005 and 2004, respectively.
For the fiscal year ended December 31, 2003, the fund paid the investment
adviser management fees of $43,501,000.

For the period from September 1, 2004 through March 31, 2005, the investment
adviser agreed to waive 5% of the management fees that it was otherwise entitled
to receive under the Agreement. Beginning April 1, 2005, this waiver increased
to 10% of the management fees that the investment adviser is otherwise entitled
to receive and is expected to continue at this level until further review. As a
result of this waiver, management fees will be reduced similarly for all classes
of shares of the fund.

ADMINISTRATIVE SERVICES AGREEMENT -- The Administrative Services Agreement (the
"Administrative Agreement") between the fund and the investment adviser relating
to the fund's Class C, F, R and 529 shares will continue in effect until October
31, 2006, unless sooner terminated, and may be renewed from year to year
thereafter, provided that any such renewal has been specifically approved at
least annually by the vote of a majority of directors who are not parties to the
Administrative Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The fund may terminate the Administrative Agreement at any time
by vote of a majority of non-interested directors. The investment adviser has
the right to terminate the Administrative

The Bond Fund of America -- Page 24
<PAGE>

Agreement upon 60 days' written notice to the fund. The Administrative Agreement
automatically terminates in the event of its assignment (as defined in the 1940
Act).

Under the Administrative Agreement, the investment adviser provides certain
transfer agent and administrative services for shareholders of the fund's Class
C and F shares, and all Class R and 529 shares. The investment adviser contracts
with third parties, including American Funds Service Company, the fund's
Transfer Agent, to provide these services. Services include, but are not limited
to, shareholder account maintenance, transaction processing, tax information
reporting and shareholder and fund communications. In addition, the investment
adviser monitors, coordinates and oversees the activities performed by third
parties providing such services. For Class R-1, R-2 and R-3 shares, the
investment adviser has agreed to pay a portion of the fees payable under the
Administrative Agreement that would otherwise have been paid by the fund. For
the year ended December 31, 2005, the total fees paid by the investment adviser
were $932,000.

As compensation for its services, the investment adviser receives transfer agent
fees for transfer agent services provided to the fund's Class C, F, R and 529
shares. Transfer agent fees are paid monthly according to a fee schedule
contained in a Shareholder Services Agreement between the fund and American
Funds Service Company. The investment adviser also receives an administrative
services fee at the annual rate of up to 0.15% of the average daily net assets
for each applicable share class (excluding Class R-5 shares) for administrative
services provided to these share classes. Administrative services fees are paid
monthly and accrued daily. The investment adviser uses a portion of this fee to
compensate third parties for administrative services provided to the fund. Of
the remainder, the investment adviser will not retain more than 0.05% of the
average daily net assets for each applicable share class. For Class R-5 shares,
the administrative services fee is calculated at the annual rate of up to 0.10%
of the average daily net assets. This fee is subject to the same uses and
limitations described above.

During the 2005 fiscal year, administrative services fees, gross of any payments
made by the investment adviser, were:

ADMINISTRATIVE SERVICES FEE
------------------------------------------------------------------------------

CLASS C $2,217,000
------------------------------------------------------------------------------
CLASS F 882,000
------------------------------------------------------------------------------
CLASS 529-A 316,000
------------------------------------------------------------------------------
CLASS 529-B 93,000
------------------------------------------------------------------------------
CLASS 529-C 166,000
------------------------------------------------------------------------------
CLASS 529-E 18,000
------------------------------------------------------------------------------
CLASS 529-F 7,000
------------------------------------------------------------------------------
CLASS R-1 35,000
------------------------------------------------------------------------------
CLASS R-2 2,166,000
------------------------------------------------------------------------------
CLASS R-3 829,000
------------------------------------------------------------------------------
CLASS R-4 215,000
------------------------------------------------------------------------------
CLASS R-5 158,000
------------------------------------------------------------------------------

The Bond Fund of America -- Page 25
<PAGE>

PRINCIPAL UNDERWRITER AND PLANS OF DISTRIBUTION -- American Funds Distributors,
Inc. (the "Principal Underwriter") is the principal underwriter of the fund's
shares. The Principal Underwriter is located at 333 South Hope Street, Los
Angeles, CA 90071; 135 South State College Boulevard, Brea, CA 92821; 3500
Wiseman Boulevard, San Antonio, TX 78251; 8332 Woodfield Crossing Boulevard,
Indianapolis, IN 46240; and 5300 Robin Hood Road, Norfolk, VA 23513.

The Principal Underwriter receives revenues from sales of the fund's shares. For
Class A and 529-A shares, the Principal Underwriter receives commission revenue
consisting of that portion of the Class A and 529-A sales charge remaining after
the allowances by the Principal Underwriter to investment dealers. For Class B
and 529-B shares, the Principal Underwriter sells the rights to the 12b-1 fees
paid by the fund for distribution expenses to a third party and receives the
revenue remaining after compensating investment dealers for sales of Class B and
529-B shares. The fund also pays the Principal Underwriter for advancing the
immediate service fees paid to qualified dealers of Class B and 529-B shares.
For Class C and 529-C shares, the Principal Underwriter receives any contingent
deferred sales charges that apply during the first year after purchase. The fund
pays the Principal Underwriter for advancing the immediate service fees and
commissions paid to qualified dealers of Class C and 529-C shares. For Class
529-E shares, the fund pays the Principal Underwriter for advancing the
immediate service fees and commissions paid to qualified dealers. For Class F
and 529-F shares, the fund pays the Principal Underwriter for advancing the
immediate service fees paid to qualified dealers and advisers who sell Class F
and 529-F shares. For Class R-1, R-2, R-3 and R-4 shares, the fund pays the
Principal Underwriter for advancing the immediate service fees paid to qualified
dealers and advisers who sell Class R-1, R-2, R-3 and R-4 shares.

Commissions, revenue or service fees retained by the Principal Underwriter after
allowances or compensation to dealers were:

COMMISSIONS, ALLOWANCE OR
REVENUE COMPENSATION
FISCAL YEAR/PERIOD OR FEES RETAINED TO DEALERS
-----------------------------------------------------------------------------------------------------

CLASS A 2005 $17,184,000 $66,352,000
2004 15,056,000 58,069,000
2003 11,590,000 44,559,000
-----------------------------------------------------------------------------------------------------
CLASS B 2005 901,000 6,196,000
2004 1,412,000 9,915,000
2003 2,416,000 15,396,000
-----------------------------------------------------------------------------------------------------
CLASS C 2005 0 4,874,000
2004 0 4,210,000
2003 65,000 3,732,000
-----------------------------------------------------------------------------------------------------
CLASS 529-A 2005 567,000 2,178,000
2004 492,000 1,881,000
2003 361,000 1,376,000
-----------------------------------------------------------------------------------------------------
CLASS 529-B 2005 58,000 358,000
2004 103,000 570,000
2003 121,000 671,000
-----------------------------------------------------------------------------------------------------
CLASS 529-C 2005 0 380,000
2004 0 320,000
2003 13,000 279,000
-----------------------------------------------------------------------------------------------------

The Bond Fund of America -- Page 26
<PAGE>

The fund has adopted plans of distribution (the "Plans") pursuant to rule 12b-1
under the 1940 Act. The Principal Underwriter receives amounts payable pursuant
to the Plans (see below). As required by rule 12b-1 and the 1940 Act, the Plans
(together with the Principal Underwriting Agreement) have been approved by the
full board of directors and separately by a majority of the non-interested
directors of the fund and who have no direct or indirect financial interest in
the operation of the Plans or the Principal Underwriting Agreement. Potential
benefits of the Plans to the fund include quality shareholder services; savings
to the fund in transfer agency costs; and benefits to the investment process
from growth or stability of assets. The selection and nomination of
non-interested directors are committed to the discretion of the non-interested
directors during the existence of the Plans. The Plans may not be amended to
increase materially the amount spent for distribution without shareholder
approval. Plan expenses are reviewed quarterly and the Plans must be renewed
annually by the board of directors.

Under the Plans, the fund may annually expend the following amounts to finance
any activity primarily intended to result in the sale of fund shares, provided
the fund's board of directors has approved the category of expenses for which
payment is being made: (a) for Class A shares, up to 0.25% of the average daily
net assets attributable to Class A shares; (b) for Class 529-A shares, up to
0.50% of the average daily net assets attributable to Class 529-A shares; (c)
for Class B and 529-B shares, up to 1.00% of the average daily net assets
attributable to Class B and 529-B shares, respectively; (d) for Class C and
529-C shares, up to 1.00% of the average daily net assets attributable to Class
C and 529-C shares, respectively; (e) for Class 529-E shares, up to 0.75% of the
average daily net assets attributable to Class 529-E shares; (f) for Class F and
529-F shares, up to 0.50% of the average daily net assets attributable to Class
F and 529-F shares, respectively; (g) for Class R-1 shares, up to 1.00% of the
average daily net assets

The Bond Fund of America -- Page 27
<PAGE>

attributable to Class R-1 shares; (h) for Class R-2 shares, up to 1.00% of the
average daily net assets attributable to Class R-2 shares; (i) for Class R-3
shares, up to 0.75% of the average daily net assets attributable to Class R-3
shares; and (j) for Class R-4 shares, up to 0.50% of the average daily net
assets attributable to Class R-4 shares. The fund has not adopted a Plan for
Class R-5 shares; accordingly, no 12b-1 fees are paid from Class R-5 share
assets.

For Class A and 529-A shares: (a) up to 0.25% is reimbursed to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to the amount allowable under the fund's Class
A and 529-A 12b-1 limit is reimbursed to the Principal Underwriter for paying
distribution-related expenses, including for Class A and 529-A shares dealer
commissions and wholesaler compensation paid on sales of shares of $1 million or
more purchased without a sales charge (including purchases by employer-sponsored
defined contribution-type retirement plans investing $1 million or more or with
100 or more eligible employees, and retirement plans, endowments and foundations
with $50 million or more in assets -- "no load purchases"). Commissions on no
load purchases of Class A and 529-A shares in excess of the Class A and 529-A
plan limitations not reimbursed to the Principal Underwriter during the most
recent fiscal quarter are recoverable for five quarters, provided that such
commissions do not exceed the annual expense limit. After five quarters, these
commissions are not recoverable. As of December 31, 2005, unreimbursed expenses
which remain subject to reimbursement under the Plan for Class A shares totaled
$7,865,000 or 0.04% of Class A net assets.

For Class B and 529-B shares: (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) 0.75% is paid to the Principal Underwriter for
distribution-related expenses, including the financing of commissions paid to
qualified dealers.

For Class C and 529-C shares: (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to 0.75% is paid to the Principal Underwriter
for paying distribution-related expenses, including commissions paid to
qualified dealers.

For Class 529-E shares: currently (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to 0.25% is paid to the Principal Underwriter
for paying distribution-related expenses, including commissions paid to
qualified dealers.

For Class F and 529-F shares: currently up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers or advisers.

For Class R-1 shares: (a) up to 0.25% is paid to the Principal Underwriter for
paying service-related expenses, including paying service fees to qualified
dealers, and (b) up to 0.75% is paid to the Principal Underwriter for
distribution-related expenses, including commissions paid to qualified dealers.

For Class R-2 shares: currently (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to 0.50% is paid to the Principal Underwriter
for paying distribution-related expenses, including commissions paid to
qualified dealers.

The Bond Fund of America -- Page 28
<PAGE>

For Class R-3 shares: currently (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to 0.25% is paid to the Principal Underwriter
for paying distribution-related expenses, including commissions paid to
qualified dealers.

For Class R-4 shares: currently up to 0.25% is paid to the Principal Underwriter
for paying service-related expenses, including paying service fees to qualified
dealers or advisers.

As of the end of the 2005 fiscal year, total 12b-1 expenses, and the portion of
the expenses that remained unpaid, were:

12B-1 UNPAID LIABILITY
12B-1 EXPENSES OUTSTANDING
--------------------------------------------------------------------------------------------

CLASS A $42,166,000 $3,070,000
--------------------------------------------------------------------------------------------
CLASS B 13,994,000 1,142,000
--------------------------------------------------------------------------------------------
CLASS C 12,684,000 1,146,000
--------------------------------------------------------------------------------------------
CLASS F 1,586,000 160,000
--------------------------------------------------------------------------------------------
CLASS 529-A 411,000 34,000
--------------------------------------------------------------------------------------------
CLASS 529-B 533,000 46,000
--------------------------------------------------------------------------------------------
CLASS 529-C 1,021,000 95,000
--------------------------------------------------------------------------------------------
CLASS 529-E 64,000 6,000
--------------------------------------------------------------------------------------------
CLASS 529-F 4,000 0
--------------------------------------------------------------------------------------------
CLASS R-1 142,000 14,000
--------------------------------------------------------------------------------------------
CLASS R-2 2,227,000 210,000
--------------------------------------------------------------------------------------------
CLASS R-3 1,454,000 144,000
--------------------------------------------------------------------------------------------
CLASS R-4 330,000 36,000
--------------------------------------------------------------------------------------------

OTHER COMPENSATION TO DEALERS -- As of January 2006, the top dealers that
American Funds Distributors anticipates will receive additional compensation (as
described in the prospectus) include:

A. G. Edwards & Sons, Inc.
AIG Advisors Group
American General Securities Inc.
Ameritas Investment Corp.
AXA Advisors, LLC
Cadaret, Grant & Co., Inc.
Cambridge Investment Research, Inc.
Capital Analysts, Inc.
Commonwealth Financial Network
Cuna Brokerage Services, Inc.
Deutsche Bank Securities Inc.

The Bond Fund of America -- Page 29
<PAGE>

Edward Jones
Ferris, Baker Watts, Inc.
Genworth Financial Securities Corp.
Hefren-Tillotson, Inc.
Hornor, Townsend & Kent, Inc.
ING Advisors Network Inc.
InterSecurities, Inc./Transamerica Financial Advisors, Inc.
Investacorp, Inc.
Janney Montgomery Scott LLC
Jefferson Pilot Securities Corporation
JJB Hilliard, WL Lyons, Inc./PNC Bank
Legg Mason Wood Walker, Inc.
Lincoln Financial Advisors Corporation
McDonald Investments Inc./Society National Bank
Merrill Lynch, Pierce, Fenner & Smith Inc.
Metlife Enterprises
MML Investors Services, Inc.
Morgan Keegan & Company, Inc.
Morgan Stanley DW
NatCity Investment, Inc.
National Planning Holdings Inc.
NFP Securities, Inc.
Northwestern Mutual Investment Services, LLC.
Pacific Select Distributors Inc.
Park Avenue Securities LLC
Piper Jaffray & Co.
Princor Financial Services
ProEquities, Inc.
Raymond James Financial Services/Raymond James & Associates
RBC Dain Rauscher Inc.
Robert W. Baird & Co. Inc.
Securian Financial Services/C.R.I. Securities Inc.
Securities Service Network Inc.
Signator Investors, Inc.
Smith Barney
Stifel, Nicolaus & Company, Inc.
The O.N. Equity Sales Company
UBS Financial Services Inc.
US Bancorp Investments, Inc.
Wachovia Securities

EXECUTION OF PORTFOLIO TRANSACTIONS

As described in the prospectus, the investment adviser places orders with
broker-dealers for the fund's portfolio transactions. Portfolio transactions for
the fund may be executed as part of concurrent authorizations to purchase or
sell the same security for other funds served by the investment adviser, or for
trusts or other accounts served by affiliated companies of the investment
adviser. When such concurrent authorizations occur, the objective is to allocate
the executions in an equitable manner.

The Bond Fund of America -- Page 30
<PAGE>

Brokerage commissions paid on portfolio transactions, including investment
dealer concessions on underwritings, if applicable, for the fiscal years ended
December 31, 2005, 2004 and 2003 amounted to $18,003,000, $12,899,000 and
$11,276,000. With respect to fixed-income securities, brokerage commissions
include explicit investment dealer concessions and may exclude other transaction
costs which may be reflected in the spread between the bid and asked price. The
volume of underwriting activity increased during the year, resulting in an
increase in brokerage commissions/concessions paid on portfolio transactions.

The fund is required to disclose information regarding investments in the
securities of its "regular" broker-dealers (or parent companies of its regular
broker-dealers) that derive more than 15% of their revenue from broker-dealer,
underwriter or investment adviser activities. A regular broker-dealer is (a) one
of the 10 broker-dealers that received from the fund the largest amount of
brokerage commissions by participating, directly or indirectly, in the fund's
portfolio transactions during the fund's most recent fiscal year; (b) one of the
10 broker-dealers that engaged as principal in the largest dollar amount of
portfolio transactions of the fund during the fund's most recent fiscal year; or
(c) one of the 10 broker-dealers that sold the largest amount of securities of
the fund during the fund's most recent fiscal year.

At the end of the fund's most recent fiscal year, the fund's regular
broker-dealers included Bank of America Securities, LLC., Credit Suisse First
Boston (USA), Inc., Deutsche Bank Financial LLC, First Clearing LLC, J.P. Morgan
Securities Inc., Smith Barney and Citigroup Global Markets Inc. As of the fund's
most recent fiscal year-end, the fund held debt securities of Bank of America,
Corp. in the amount of $69,433,000; Credit Suisse First Boston (USA), Inc. in
the amount of $16,067,000; Deutsche Bank A.G. in the amount of $2,033,000;
Wachovia Corp. in the amount of $4,896,000; J.P. Morgan Chase & Co. in the
amount of $149,096,000; and Citigroup, Inc. in the amount of $65,307,000. .

DISCLOSURE OF PORTFOLIO HOLDINGS

The fund's investment adviser, on behalf of the fund, has adopted policies and
procedures with respect to the disclosure of information about fund portfolio
securities. These policies and procedures have been reviewed by the fund's board
of directors and compliance will be periodically assessed by the board in
connection with reporting from the fund's Chief Compliance Officer.

Under these policies and procedures, the fund's complete list of portfolio
holdings available for public disclosure, dated as of the end of each calendar
quarter, is permitted to be posted on the American Funds website no earlier than
the tenth day after such calendar quarter. In practice, the public portfolio
typically is posted on the website approximately 45 days after the end of the
calendar quarter. Such portfolio holdings information may then be disclosed to
any person pursuant to an ongoing arrangement to disclose portfolio holdings
information to such person no earlier than one day after the day on which the
information is posted on the American Funds website. Affiliates of the fund
(including the fund's board members and officers, and certain personnel of the
fund's investment adviser and its affiliates) and certain service providers
(such as the fund's custodian and outside counsel) who require portfolio
holdings information for legitimate business and fund oversight purposes may
receive the information earlier.

Affiliated persons of the fund as described above who receive portfolio holdings
information are subject to restrictions and limitations on the use and handling
of such information pursuant to applicable codes of ethics, including
requirements to maintain the confidentiality of such

The Bond Fund of America -- Page 31
<PAGE>

information, preclear securities trades and report securities transactions
activity, as applicable. Third party service providers of the fund receiving
such information are subject to confidentiality obligations. When portfolio
holdings information is disclosed other than through the American Funds website
to persons not affiliated with the fund (which, as described above, would
typically occur no earlier than one day after the day on which the information
is posted on the American Funds website), such persons may be bound by
agreements (including confidentiality agreements) that restrict and limit their
use of the information to legitimate business uses only. Neither the fund nor
its investment adviser or any affiliate thereof receives compensation or other
consideration in connection with the disclosure of information about portfolio
securities.

Subject to board policies, the authority to disclose a fund's portfolio
holdings, and to establish policies with respect to such disclosure, resides
with the investment committee of the fund's investment adviser. In exercising
its authority, the investment committee determines whether disclosure of
information about the fund's portfolio securities is appropriate and in the best
interest of fund shareholders. The investment adviser has implemented policies
and procedures to address conflicts of interest that may arise from the
disclosure of fund holdings. For example, the investment adviser's code of
ethics specifically requires, among other things, the safeguarding of
information about fund holdings and contains prohibitions designed to prevent
the personal use of confidential, proprietary investment information in a way
that would conflict with fund transactions. In addition, the investment adviser
believes that its current policy of not selling portfolio holdings information
and not disclosing such information to unaffiliated third parties until such
holdings have been made public on the American Funds website (other than to
certain fund service providers for legitimate business and fund oversight
purposes) helps reduce potential conflicts of interest between fund shareholders
and the investment adviser and its affiliates.

PRICE OF SHARES

Shares are purchased at the offering price or sold at the net asset value price
next determined after the purchase or sell order is received and accepted by the
fund or the Transfer Agent; the offering or net asset value price is effective
for orders received prior to the time of determination of the net asset value
and, in the case of orders placed with dealers or their authorized designees,
accepted by the Principal Underwriter, the Transfer Agent, a dealer or any of
their designees. In the case of orders sent directly to the fund or the Transfer
Agent, an investment dealer MUST be indicated. The dealer is responsible for
promptly transmitting purchase and sell orders to the Principal Underwriter.

Orders received by the investment dealer or authorized designee, the Transfer
Agent or the fund after the time of the determination of the net asset value
will be entered at the next calculated offering price. Note that investment
dealers or other intermediaries may have their own rules about share
transactions and may have earlier cut-off times than those of the fund. For more
information about how to purchase through your intermediary, contact your
intermediary directly.

Prices that appear in the newspaper do not always indicate prices at which you
will be purchasing and redeeming shares of the fund, since such prices generally
reflect the previous day's closing price, while purchases and redemptions are
made at the next calculated price. The price you pay for shares, the offering
price, is based on the net asset value per share, which is calculated once daily
as of approximately 4:00 p.m. New York time, which is the normal close of
trading on the New York Stock Exchange, each day the Exchange is open. If, for
example, the Exchange closes at 1:00 p.m., the fund's share price would still be
determined as of 4:00 p.m.

The Bond Fund of America -- Page 32
<PAGE>

New York time. The New York Stock Exchange is currently closed on weekends and
on the following holidays: New Year's Day; Martin Luther King, Jr. Day;
Presidents' Day; Good Friday; Memorial Day; Independence Day; Labor Day;
Thanksgiving; and Christmas Day. Each share class of the fund has a separately
calculated net asset value (and share price).

All portfolio securities of funds managed by Capital Research and Management
Company (other than money market funds) are valued, and the net asset values per
share for each share class are determined, as follows:

1. Equity securities, including depositary receipts, are valued at the official
closing price of, or the last reported sale price on, the exchange or market on
which such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last available bid
price. Prices for each security are taken from the principal exchange or market
in which the security trades. Fixed-income securities are valued at prices
obtained from an independent pricing service, when such prices are available;
however, 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 bid prices, if asked prices are not available) or at prices for securities
of comparable maturity, quality and type. The pricing services base bond prices
on, among other things, an evaluation of the yield curve as of approximately
3:00 p.m. New York time. The fund's investment adviser performs certain checks
on these prices prior to the fund's net asset value being calculated.

Securities with both fixed-income and equity characteristics (e.g., convertible
bonds, preferred stocks, units comprised of more than one type of security,
etc.), or equity securities traded principally among fixed-income dealers, are
valued in the manner described above for either equity or fixed-income
securities, depending on which method is deemed most appropriate by the
investment adviser.

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
representative quoted bid and asked prices.

Assets or liabilities initially expressed in terms of non-U.S. currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.

Securities and assets for which market quotations are not readily available or
are considered unreliable are valued at fair value as determined in good faith
under policies approved by the fund's board. Subject to board oversight, the
fund's board has delegated the obligation to make fair valuation determinations
to a valuation committee established by the fund's investment adviser. The board
receives regular reports describing fair-valued securities and the valuation
methods used.

The valuation committee has adopted guidelines and procedures (consistent with
SEC rules and guidance) to ensure that certain basic principles and factors are
considered when making all fair value determinations. As a general principle,
securities lacking readily available market quotations, or that have quotations
that are considered unreliable, are valued in good faith by the valuation
committee based upon what the fund might reasonably expect to receive upon their
current sale. The valuation committee considers all indications of value
available to it in

The Bond Fund of America -- Page 33
<PAGE>

determining the fair value to be assigned to a particular security, including,
without limitation, the type and cost of the security, contractual or legal
restrictions on resale of the security, relevant financial or business
developments of the issuer, actively traded similar or related securities,
conversion or exchange rights on the security, related corporate actions,
significant events occurring after the close of trading in the security and
changes in overall market conditions.

2. Each class of shares represents interests in the same portfolio of
investments and is identical in all respects to each other class, except for
differences relating to distribution, service and other charges and expenses,
certain voting rights, differences relating to eligible investors, the
designation of each class of shares, conversion features and exchange
privileges. Expenses attributable to the fund, but not to a particular class of
shares, are borne by each class pro rata based on relative aggregate net assets
of the classes. Expenses directly attributable to a class of shares are borne by
that class of shares. Liabilities, including accruals of taxes and other expense
items attributable to particular share classes, are deducted from total assets
attributable to such share classes.

3. Net assets so obtained for each share class are then divided by the total
number of shares outstanding of that share class, and the result, rounded to the
nearer cent, is the net asset value per share for that share class.

TAXES AND DISTRIBUTIONS

FUND TAXATION -- The fund has elected to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code (the "Code"). A
regulated investment company qualifying under Subchapter M of the Code is
required to distribute to its shareholders at least 90% of its investment
company taxable income (including the excess of net short-term capital gain over
net long-term capital losses) and generally is not subject to federal income tax
to the extent that it distributes annually 100% of its investment company
taxable income and net realized capital gains in the manner required under the
Code. The fund intends to distribute annually all of its investment company
taxable income and net realized capital gains and therefore does not expect to
pay federal income tax, although in certain circumstances, the fund may
determine that it is in the interest of shareholders to distribute less than
that amount.

To be treated as a regulated investment company under Subchapter M of the Code,
the fund must also (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, net income from certain
publicly traded partnerships and gains from the sale or other disposition of
securities or foreign currencies, or other income (including, but not limited
to, gains from options, futures or forward contracts) derived with respect to
the business of investing in such securities or currencies, and (b) diversify
its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the
market value of the fund's assets is represented by cash, U.S. government
securities and securities of other regulated investment companies, and other
securities (for purposes of this calculation, generally limited in respect of
any one issuer, to an amount not greater than 5% of the market value of the
fund's assets and 10% of the outstanding voting securities of such issuer) and
(ii) not more than 25% of the value of its assets is invested in the securities
of (other than U.S. government securities or the securities of other regulated
investment companies) any one issuer; two or more issuers which the fund
controls and which are determined to be engaged in the same or similar trades or
businesses; or the securities of certain publicly traded partnerships.

The Bond Fund of America -- Page 34
<PAGE>

Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (a) 98% of ordinary income (generally net investment income)
for the calendar year, (b) 98% of capital gain (both long-term and short-term)
for the one-year period ending on October 31 (as though the one-year period
ending on October 31 were the regulated investment company's taxable year) and
(c) the sum of any untaxed, undistributed net investment income and net capital
gains of the regulated investment company for prior periods. The term
"distributed amount" generally means the sum of (a) amounts actually distributed
by the fund from its current year's ordinary income and capital gain net income
and (b) any amount on which the fund pays income tax during the periods
described above. Although the fund intends to distribute its net investment
income and net capital gains so as to avoid excise tax liability, the fund may
determine that it is in the interest of shareholders to distribute a lesser
amount.

The following information may not apply to you if you hold fund shares in a
tax-deferred account, such as a retirement plan or education savings account.
Please see your tax adviser for more information.

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS -- Dividends and capital gain
distributions on fund shares will be reinvested in shares of the fund of the
same class, unless shareholders indicate in writing that they wish to receive
them in cash or in shares of the same class of other American Funds, as provided
in the prospectus. Dividends and capital gain distributions by 529 share classes
will be automatically reinvested.

Distributions of investment company taxable income and net realized capital
gains to individual shareholders will be taxable whether received in shares or
in cash, unless such shareholders are exempt from taxation. Shareholders
electing to receive distributions in the form of additional shares will have a
cost basis for federal income tax purposes in each share so received equal to
the net asset value of that share on the reinvestment date. Dividends and
capital gain distributions by the fund to a tax-deferred retirement plan account
are not taxable currently.

DIVIDENDS -- The fund intends to follow the practice of distributing
substantially all of its investment company taxable income, which includes
any excess of net realized short-term gains over net realized long-term
capital losses. Investment company taxable income generally includes
dividends, interest, net short-term capital gains in excess of net
long-term capital losses, and certain foreign currency gains, if any, less
expenses and certain foreign currency losses.

Under the Code, gains or losses attributable to fluctuations in exchange
rates that occur between the time the fund accrues receivables or
liabilities denominated in a foreign currency and the time the fund
actually collects such receivables, or pays such liabilities, generally are
treated as ordinary income or ordinary loss. Similarly, on disposition of
debt securities denominated in a foreign currency and on disposition of
certain futures contracts, forward contracts and options, gains or losses
attributable to fluctuations in the value of foreign currency between the
date of acquisition of the security or contract and the date of disposition
are also treated as ordinary gain or loss. These gains or losses, referred
to under the Code as Section 988 gains or losses, may increase or decrease
the amount of the fund's investment company taxable income to be
distributed to its shareholders as ordinary income.

The Bond Fund of America -- Page 35
<PAGE>

If the fund invests in stock of certain passive foreign investment
companies, the fund may be subject to U.S. federal income taxation on a
portion of any "excess distribution" with respect to, or gain from the
disposition of, such stock. The tax would be determined by allocating such
distribution or gain ratably to each day of the fund's holding period for
the stock. The distribution or gain so allocated to any taxable year of the
fund, other than the taxable year of the excess distribution or
disposition, would be taxed to the fund at the highest ordinary income rate
in effect for such year, and the tax would be further increased by an
interest charge to reflect the value of the tax deferral deemed to have
resulted from the ownership of the foreign company's stock. Any amount of
distribution or gain allocated to the taxable year of the distribution or
disposition would be included in the fund's investment company taxable
income and, accordingly, would not be taxable to the fund to the extent
distributed by the fund as a dividend to its shareholders.

To avoid such tax and interest, the fund intends to elect to treat these
securities as sold on the last day of its fiscal year and recognize any
gains for tax purposes at that time. Under this election, deductions for
losses are allowable only to the extent of any prior recognized gains, and
both gains and losses will be treated as ordinary income or loss. The fund
will be required to distribute any resulting income, even though it has not
sold the security and received cash to pay such distributions. Upon
disposition of these securities, any gain recognized is treated as ordinary
income and loss is treated as ordinary loss to the extent of any prior
recognized gain.

Dividends from domestic corporations are expected to comprise some portion
of the fund's gross income. To the extent that such dividends constitute
any of the fund's gross income, a portion of the income distributions of
the fund may be eligible for the deduction for dividends received by
corporations. Corporate shareholders will be informed of the portion of
dividends that so qualifies. The dividends-received deduction is reduced to
the extent that either the fund shares, or the underlying shares of stock
held by the fund, with respect to which dividends are received, are treated
as debt-financed under federal income tax law, and is eliminated if the
shares are deemed to have been held by the shareholder or the fund, as the
case may be, for less than 46 days during the 90-day period beginning on
the date that is 45 days before the date on which the shares become
ex-dividend. Capital gain distributions are not eligible for the
dividends-received deduction.

A portion of the difference between the issue price of zero coupon
securities and their face value (original issue discount) is considered to
be income to the fund each year, even though the fund will not receive cash
interest payments from these securities. This original issue discount
(imputed income) will comprise a part of the investment company taxable
income of the fund that must be distributed to shareholders in order to
maintain the qualification of the fund as a regulated investment company
and to avoid federal income taxation at the level of the fund.

In addition, some of the bonds may be purchased by the fund at a discount
that exceeds the original issue discount on such bonds, if any. This
additional discount represents market discount for federal income tax
purposes. The gain realized on the disposition of any bond having a market
discount may be treated as taxable ordinary income to the extent it does
not exceed the accrued market discount on such bond or a fund may elect to
include the market discount in income in tax years to which it is
attributable. Generally, accrued market discount may be figured under
either the ratable accrual method or

The Bond Fund of America -- Page 36
<PAGE>

constant interest method. If the fund has paid a premium over the face
amount of a bond, the fund has the option of either amortizing the premium
until bond maturity and reducing the fund's basis in the bond by the
amortized amount, or not amortizing and treating the premium as part of the
bond's basis. In the case of any debt security having a fixed maturity date
of not more than one year from its date of issue, the gain realized on
disposition generally will be treated as a short-term capital gain. In
general, any gain realized on disposition of a security held less than one
year is treated as a short-term capital gain.

Dividend and interest income received by the fund from sources outside the
United States may be subject to withholding and other taxes imposed by such
foreign jurisdictions. Tax conventions between certain countries and the
United States, however, may reduce or eliminate these foreign taxes. Most
foreign countries do not impose taxes on capital gains with respect to
investments by foreign investors.

CAPITAL GAIN DISTRIBUTIONS -- The fund also intends to follow the practice
of distributing the entire excess of net realized long-term capital gains
over net realized short-term capital losses. Net capital gains for a fiscal
year are computed by taking into account any capital loss carry forward of
the fund.

If any net long-term capital gains in excess of net short-term capital
losses are retained by the fund for reinvestment, requiring federal income
taxes to be paid thereon by the fund, the fund intends to elect to treat
such capital gains as having been distributed to shareholders. As a result,
each shareholder will report such capital gains as long-term capital gains
taxable to individual shareholders at a maximum 15% capital gains rate,
will be able to claim a pro rata share of federal income taxes paid by the
fund on such gains as a credit against personal federal income tax
liability, and will be entitled to increase the adjusted tax basis on fund
shares by the difference between a pro rata share of the retained gains and
such shareholder's related tax credit.

SHAREHOLDER TAXATION -- In January of each year, individual shareholders holding
fund shares in taxable accounts will receive a statement of the federal income
tax status of all distributions. Shareholders of the fund also may be subject to
state and local taxes on distributions received from the fund.

DIVIDENDS -- Fund dividends are taxable to shareholders as ordinary income.
Under the 2003 Tax Act, all or a portion of a fund's dividend distribution
may be a "qualified dividend." If the fund meets the applicable holding
period requirement, it will distribute dividends derived from qualified
corporation dividends to shareholders as qualified dividends. Interest
income from bonds and money market instruments and nonqualified foreign
dividends will be distributed to shareholders as nonqualified fund
dividends. The fund will report on Form 1099-DIV the amount of each
shareholder's dividend that may be treated as a qualified dividend. If a
shareholder meets the requisite holding period requirement, qualified
dividends are taxable at a maximum rate of 15%.

CAPITAL GAINS -- Distributions of the excess of net long-term capital gains
over net short-term capital losses that the fund properly designates as
"capital gain dividends" generally will be taxable as long-term capital
gain. Regardless of the length of time the shares of the fund have been
held by a shareholder, a capital gain distribution by the fund is subject
to a maximum tax rate of 15%. Any loss realized upon the redemption of
shares held at

The Bond Fund of America -- Page 37
<PAGE>

the time of redemption for six months or less from the date of their
purchase will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gains during such
six-month period.

Distributions by the fund result in a reduction in the net asset value of the
fund's shares. Investors should consider the tax implications of buying shares
just prior to a distribution. The price of shares purchased at that time
includes the amount of the forthcoming distribution. Those purchasing just prior
to a distribution will subsequently receive a partial return of their investment
capital upon payment of the distribution, which will be taxable to them.

Redemptions of shares, including exchanges for shares of other American Funds,
may result in federal, state and local tax consequences (gain or loss) to the
shareholder. However, conversion from one class to another class in the same
fund should not be a taxable event.

If a shareholder exchanges or otherwise disposes of shares of the fund within 90
days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously incurred
in acquiring the fund's shares will not be taken into account (to the extent
such previous sales charges do not exceed the reduction in sales charges) for
the purposes of determining the amount of gain or loss on the exchange, but will
be treated as having been incurred in the acquisition of such other fund(s).

Any loss realized on a redemption or exchange of shares of the fund will be
disallowed to the extent substantially identical shares are reacquired within
the 61-day period beginning 30 days before and ending 30 days after the shares
are disposed of. Any loss disallowed under this rule will be added to the
shareholder's tax basis in the new shares purchased.

The fund will be required to report to the IRS all distributions of investment
company taxable income and capital gains as well as gross proceeds from the
redemption or exchange of fund shares, except in the case of certain exempt
shareholders. Under the backup withholding provisions of Section 3406 of the
Code, distributions of investment company taxable income and capital gains and
proceeds from the redemption or exchange of a regulated investment company may
be subject to backup withholding of federal income tax in the case of non-exempt
U.S. shareholders who fail to furnish the investment company with their taxpayer
identification numbers and with required certifications regarding their status
under the federal income tax law. Withholding may also be required if the fund
is notified by the IRS or a broker that the taxpayer identification number
furnished by the shareholder is incorrect or that the shareholder has previously
failed to report interest or dividend income. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in additional shares, will be reduced by the amounts required to be
withheld.

The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. persons (i.e., U.S. citizens and residents and
U.S. corporations, partnerships, trusts and estates). Each shareholder who is
not a U.S. person should consider the U.S. and foreign tax consequences of
ownership of shares of the fund, including the possibility that such a
shareholder may be subject to a U.S. withholding tax at a rate of 30% (or a
lower rate under an applicable income tax treaty) on dividend income received by
the shareholder.

Shareholders should consult their tax advisers about the application of federal,
state and local tax law in light of their particular situation.

The Bond Fund of America -- Page 38
<PAGE>

UNLESS OTHERWISE NOTED, ALL REFERENCES IN THE FOLLOWING PAGES TO CLASS A, B, C
OR F SHARES ALSO REFER TO THE CORRESPONDING CLASS 529-A, 529-B, 529-C OR 529-F
SHARES. CLASS 529 SHAREHOLDERS SHOULD ALSO REFER TO THE COLLEGEAMERICA PROGRAM
DESCRIPTION FOR INFORMATION ON POLICIES AND SERVICES SPECIFICALLY RELATING TO
COLLEGEAMERICA ACCOUNTS. SHAREHOLDERS HOLDING SHARES THROUGH AN ELIGIBLE
RETIREMENT PLAN SHOULD CONTACT THEIR PLAN'S ADMINISTRATOR OR RECORDKEEPER FOR
INFORMATION REGARDING PURCHASES, SALES AND EXCHANGES.

PURCHASE AND EXCHANGE OF SHARES

PURCHASES BY INDIVIDUALS -- As described in the prospectus, you may generally
open an account and purchase fund shares by contacting a financial adviser or
investment dealer authorized to sell the fund's shares. You may make investments
by any of the following means:

CONTACTING YOUR FINANCIAL ADVISER -- Deliver or mail a check to your
financial adviser.

BY MAIL -- for initial investments, you may mail a check, made payable to
the fund, directly to the address indicated on the account application.
Please indicate an investment dealer on the account application. You may
make additional investments by filling out the "Account Additions" form at
the bottom of a recent account statement and mailing the form, along with a
check made payable to the fund, using the envelope provided with your
account statement.

BY TELEPHONE -- using the American FundsLine. Please see the "Shareholder
account services and privileges" section of this document for more
information regarding this service.

BY INTERNET -- using americanfunds.com. Please see the "Shareholder account
services and privileges" section of this document for more information
regarding this service.

BY WIRE -- If you are making a wire transfer, instruct your bank to wire
funds to:

Wells Fargo Bank
ABA Routing No. 121000248
Account No. 4600-076178

Your bank should include the following information when wiring funds:

For credit to the account of:
American Funds Service Company
(fund's name)

For further credit to:
(shareholder's fund account number)
(shareholder's name)

You may contact American Funds Service Company at 800/421-0180 if you have
questions about making wire transfers.

The Principal Underwriter will not knowingly sell shares of the fund directly or
indirectly to any person or entity, where, after the sale, such person or entity
would own beneficially directly or

The Bond Fund of America -- Page 39
<PAGE>

indirectly more than 3% of the outstanding shares of the fund without the
consent of a majority of the fund's board.

Class 529 shares may be purchased only through CollegeAmerica by investors
establishing qualified higher education savings accounts. Class 529-E shares may
be purchased only by investors participating in CollegeAmerica through an
eligible employer plan. The R share classes are generally available only to
employer-sponsored retirement plans. Class R-5 shares are also available to
clients of the Personal Investment Management group of Capital Guardian Trust
Company who do not have an intermediary associated with their accounts and
without regard to the $1 million purchase minimum. In addition, the American
Funds state tax-exempt funds are qualified for sale only in certain
jurisdictions, and tax-exempt funds in general should not serve as retirement
plan investments. The fund and the Principal Underwriter reserve the right to
reject any purchase order.

PURCHASE MINIMUMS AND MAXIMUMS -- All investments are subject to the purchase
minimums and maximums described in the prospectus. As noted in the prospectus,
purchase minimums may be waived or reduced in certain cases. The initial
purchase minimum of $25 may be waived for the following account types:

. Payroll deduction retirement plan accounts (such as, but not limited
to, 403(b), 401(k), SIMPLE IRA, SARSEP and deferred compensation plan
accounts); and

. Employer-sponsored CollegeAmerica accounts.

The following account types may be established without meeting the initial
purchase minimum:

. Retirement accounts that are funded with employer contributions; and

. Accounts that are funded with monies set by court decree.

The following account types may be established without meeting the initial
purchase minimum, but shareholders wishing to invest in two or more funds must
meet the normal initial purchase minimum of each fund:

. Accounts that are funded with (a) transfers of assets, (b) rollovers
from retirement plans, (c) rollovers from 529 college savings plans or
(d) required minimum distribution automatic exchanges; and

. American Funds money market fund accounts registered in the name of
clients of Capital Guardian Trust Company's Personal Investment
Management group.

EXCHANGES -- You may only exchange shares into other American Funds within the
same share class. However, exchanges from Class A shares of The Cash Management
Trust of America may be made to Class B or C shares of other American Funds for
dollar cost averaging purposes. Exchange purchases are subject to the minimum
investment requirements of the fund purchased and no sales charge generally
applies. However, exchanges of shares from American Funds money market funds are
subject to applicable sales charges on the fund being purchased, unless the
money market fund shares were acquired by an exchange from a fund having a sales
charge, or by reinvestment or cross-reinvestment of dividends or capital gain
distributions. Exchanges of Class F shares generally may only be made through
fee-based programs of investment firms that have special agreements with the
fund's distributor and certain registered investment advisers.

The Bond Fund of America -- Page 40
<PAGE>

You may exchange shares of other classes by contacting the Transfer Agent, by
contacting your investment dealer or financial adviser, by using American
FundsLine or americanfunds.com, or by telephoning 800/421-0180 toll-free, or
faxing (see "American Funds Service Company service areas" in the prospectus for
the appropriate fax numbers) the Transfer Agent. For more information, see
"Shareholder account services and privileges" below. THESE TRANSACTIONS HAVE THE
SAME TAX CONSEQUENCES AS ORDINARY SALES AND PURCHASES.

Shares held in employer-sponsored retirement plans may be exchanged into other
American Funds by contacting your plan administrator or recordkeeper. Exchange
redemptions and purchases are processed simultaneously at the share prices next
determined after the exchange order is received (see "Price of shares" above).

FREQUENT TRADING OF FUND SHARES -- As noted in the prospectus, certain
redemptions may trigger a purchase block lasting 30 calendar days under the
fund's "purchase blocking policy." Under this policy, systematic redemptions
will not trigger a purchase block and systematic purchases will not be
prevented. For purposes of this policy, systematic redemptions include, for
example, regular periodic automatic redemptions and statement of intention
escrow share redemptions. Systematic purchases include, for example, regular
periodic automatic purchases and automatic reinvestments of dividends and
capital gain distributions.

OTHER POTENTIALLY ABUSIVE ACTIVITY -- In addition to implementing purchase
blocks, American Funds Service Company will monitor for other types of activity
that could potentially be harmful to the American Funds - for example,
short-term trading activity in multiple funds. When identified, American Funds
Service Company will request that the shareholder discontinue the activity. If
the activity continues, American Funds Service Company will freeze the
shareholder account to prevent all activity other than redemptions of fund
shares.

MOVING BETWEEN SHARE CLASSES

AUTOMATIC CONVERSIONS -- As described more fully in the prospectus, Class
B, 529-B and C shares automatically convert to Class A, 529-A and F shares,
respectively, after a certain period from the purchase date.

MOVING FROM CLASS B TO CLASS A SHARES -- Under the right of reinvestment
policy as described in the prospectus, if you redeem Class B shares during
the contingent deferred sales charge period, you may reinvest the proceeds
in Class A shares without paying a Class A sales charge if you notify
American Funds Service Company and the reinvestment occurs within 90 days
after the date of redemption. If you redeem your Class B shares after the
contingent deferred sales charge period and with the redemption proceeds
you purchase Class A shares, you are still responsible for paying any
applicable Class A sales charges.

MOVING FROM CLASS C TO CLASS A SHARES -- If you redeem Class C shares and
with the redemption proceeds purchase Class A shares, you are still
responsible for paying any Class C contingent deferred sales charges and
applicable Class A sales charges.

MOVING FROM CLASS F TO CLASS A SHARES -- You can redeem Class F shares held
in a qualified fee-based program and with the redemption proceeds purchase
Class A shares without paying an initial Class A sales charge if all of the
following are met: (a) you are leaving or have left the fee-based program,
(b) you have held the Class F shares in the

The Bond Fund of America -- Page 41
<PAGE>

program for at least one year, and (c) you notify American Funds Service
Company and purchase the Class A shares within 90 days after redeeming the
Class F shares.

MOVING FROM CLASS A TO CLASS F SHARES -- If you are part of a qualified
fee-based program and you wish to redeem your Class A shares and with the
redemption proceeds purchase Class F shares for the program, any Class A
sales charges (including contingent deferred sales charges) that you paid
or are payable will not be credited back to your account.

SALES CHARGES

CLASS A PURCHASES

PURCHASES BY CERTAIN 403(B) PLANS

Individual 403(b) plans may be treated similarly to employer-sponsored
plans for Class A sales charge purposes (i.e., individual participant
accounts are eligible to be aggregated together) if: (a) the American Funds
are principal investment options; (b) the employer facilitates the
enrollment process by, for example, allowing for onsite group enrollment
meetings held during working hours; and (c) there is only one dealer firm
assigned to the plans.

OTHER PURCHASES

Pursuant to a determination of eligibility by a vice president or more
senior officer of the Capital Research and Management Company Fund
Administration Unit, or by his or her designee, Class A shares of the
American Funds stock, stock/bond and bond funds may be sold at net asset
value to:

(1) current or retired directors, trustees, officers and advisory board
members of, and certain lawyers who provide services to, the funds
managed by Capital Research and Management Company, current or retired
employees of Washington Management Corporation, current or retired
employees and partners of The Capital Group Companies, Inc. and its
affiliated companies, certain family members and employees of the
above persons, and trusts or plans primarily for such persons;

(2) currently registered representatives and assistants directly employed
by such representatives, retired registered representatives with
respect to accounts established while active, or full-time employees
(collectively, "Eligible Persons") (and their (a) spouses or
equivalents if recognized under local law, (b) parents and children,
including parents and children in step and adoptive relationships,
sons-in-law and daughters-in-law, and (c) parents-in-law, if the
Eligible Persons or the spouses, children or parents of the Eligible
Persons are listed in the account registration with the
parents-in-law) of dealers who have sales agreements with the
Principal Underwriter (or who clear transactions through such
dealers), plans for the dealers, and plans that include as
participants only the Eligible Persons, their spouses, parents and/or
children;

(3) currently registered investment advisers ("RIAs") and assistants
directly employed by such RIAs, retired RIAs with respect to accounts
established while active, or

The Bond Fund of America -- Page 42
<PAGE>

full-time employees (collectively, "Eligible Persons") (and their (a)
spouses or equivalents if recognized under local law, (b) parents and
children, including parents and children in step and adoptive
relationships, sons-in-law and daughters-in-law and (c)
parents-in-law, if the Eligible Persons or the spouses, children or
parents of the Eligible Persons are listed in the account registration
with the parents-in-law) of RIA firms that are authorized to sell
shares of the funds, plans for the RIA firms, and plans that include
as participants only the Eligible Persons, their spouses, parents
and/or children;

(4) companies exchanging securities with the fund through a merger,
acquisition or exchange offer;

(5) insurance company separate accounts;

(6) accounts managed by subsidiaries of The Capital Group Companies, Inc.;

(7) The Capital Group Companies, Inc., its affiliated companies and
Washington Management Corporation;

(8) an individual or entity with a substantial business relationship with
The Capital Group Companies, Inc. or its affiliates, or an individual
or entity related or relating to such individual or entity;

(9) wholesalers and full-time employees directly supporting wholesalers
involved in the distribution of insurance company separate accounts
whose underlying investments are managed by any affiliate of The
Capital Group Companies, Inc.; and

(10) full-time employees of banks that have sales agreements with the
Principal Underwriter, who are solely dedicated to directly supporting
the sale of mutual funds.

Shares are offered at net asset value to these persons and organizations
due to anticipated economies in sales effort and expense. Once an account
is established under this net asset value privilege, additional investments
can be made at net asset value for the life of the account.

DEALER COMMISSIONS AND COMPENSATION -- Commissions (up to 1.00%) are paid to
dealers who initiate and are responsible for certain Class A share purchases not
subject to sales charges. These purchases consist of purchases of $1 million or
more, purchases by employer-sponsored defined contribution-type retirement plans
investing $1 million or more or with 100 or more eligible employees, and
purchases made at net asset value by certain retirement plans, endowments and
foundations with assets of $50 million or more. Commissions on such investments
(other than IRA rollover assets that roll over at no sales charge under the
fund's IRA rollover policy as described in the prospectus) are paid to dealers
at the following rates: 1.00% on amounts to $4 million, 0.50% on amounts over $4
million to $10 million and 0.25% on amounts over $10 million. Commissions are
based on cumulative investments and are not annually reset.

A dealer concession of up to 1% may be paid by the fund under its Class A plan
of distribution to reimburse the Principal Underwriter in connection with dealer
and wholesaler compensation paid by it with respect to investments made with no
initial sales charge.

The Bond Fund of America -- Page 43
<PAGE>

SALES CHARGE REDUCTIONS AND WAIVERS

REDUCING YOUR CLASS A SALES CHARGE -- As described in the prospectus, there are
various ways to reduce your sales charge when purchasing Class A shares.
Additional information about Class A sales charge reductions is provided below.

STATEMENT OF INTENTION -- By establishing a statement of intention (the
"Statement"), you enter into a nonbinding commitment to purchase shares of
American Funds non-money market funds over a 13-month period and receive
the same sales charge as if all shares had been purchased at once.

When a shareholder elects to use a Statement, shares equal to 5% of the
dollar amount specified in the Statement will be held in escrow in the
shareholder's account out of the initial purchase (or subsequent purchases,
if necessary) by the Transfer Agent. All dividends and any capital gain
distributions on shares held in escrow will be credited to the
shareholder's account in shares (or paid in cash, if requested). If the
intended investment is not completed within the specified Statement period,
the purchaser will remit to the Principal Underwriter the difference
between the sales charge actually paid and the sales charge which would
have been paid if the total of such purchases had been made at a single
time. The dealer assigned to an account at the time of each purchase made
during the Statement period will receive an appropriate commission
adjustment. If the difference is not paid by the close of the Statement
period, the appropriate number of shares held in escrow will be redeemed to
pay such difference. If the proceeds from this redemption are inadequate,
the purchaser will be liable to the Principal Underwriter for the balance
still outstanding.

The Statement may be revised upward at any time during the Statement
period, and such a revision will be treated as a new Statement, except that
the Statement period during which the purchase must be made will remain
unchanged. Accordingly, upon your request, the sales charge paid on
investments made 90 days prior to the Statement revision will be adjusted
to reflect the revised Statement.

The market value of your existing holdings eligible to be aggregated (see
below) as of the day immediately before the start of the Statement period
may be credited toward satisfying the Statement.

The Statement will be considered completed if the shareholder dies within
the Statement period. Commissions to dealers will not be adjusted or paid
on the difference between the Statement amount and the amount actually
invested before the shareholder's death.

When the trustees of certain retirement plans purchase shares by payroll
deduction, the sales charge for the investments made during the Statement
period will be handled as follows: the total monthly investment will be
multiplied by 13 and then multiplied by 1.5. The market value of existing
American Funds investments (other than shares representing direct purchases
of money market funds) as of the day immediately before the start of the
Statement period, and any rollovers or transfers reasonably anticipated to
be invested in non-money market American Funds during the Statement period,
are added to the figure determined above. The sum is the Statement amount
and applicable breakpoint level. On the first investment and all other
investments made pursuant to the Statement, a sales charge will be assessed
according to the sales charge breakpoint thus

The Bond Fund of America -- Page 44
<PAGE>

determined. There will be no retroactive adjustments in sales charges on
investments made during the Statement period.

Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms and those in the prospectus with
their first purchase.

AGGREGATION -- Qualifying investments for aggregation include those made by
you and your "immediate family" as defined in the prospectus, if all
parties are purchasing shares for their own accounts and/or:

. individual-type employee benefit plans, such as an IRA, individual
403(b) plan (see exception in "Purchases by certain 403(b) plans"
under "Sales charges") or single-participant Keogh-type plan;

. business accounts solely controlled by you or your immediate family
(for example, you own the entire business);

. trust accounts established by you or your immediate family (For trusts
with only one primary beneficiary, upon the trustor's death the trust
account may be aggregated with such beneficiary's own accounts; for
trusts with multiple primary beneficiaries, upon the trustor's death
the trustees of the trust may instruct American Funds Service Company
to establish separate trust accounts for each primary beneficiary;
each primary beneficiary's separate trust account may then be
aggregated with such beneficiary's own accounts);

. endowments or foundations established and controlled by you or your
immediate family; or

. CollegeAmerica accounts, which will be aggregated at the account owner
level (Class 529-E accounts may only be aggregated with an eligible
employer plan).

Individual purchases by a trustee(s) or other fiduciary(ies) may also be
aggregated if the investments are:

. for a single trust estate or fiduciary account, including employee
benefit plans other than the individual-type employee benefit plans
described above;

. made for two or more employee benefit plans of a single employer or of
affiliated employers as defined in the 1940 Act, excluding the
individual-type employee benefit plans described above;

. for a diversified common trust fund or other diversified pooled
account not specifically formed for the purpose of accumulating fund
shares;

. for nonprofit, charitable or educational organizations, or any
endowments or foundations established and controlled by such
organizations, or any employer-sponsored retirement plans established
for the benefit of the employees of such organizations, their
endowments, or their foundations; or

. for individually established participant accounts of a 403(b) plan
that is treated similarly to an employer-sponsored plan for sales
charge purposes (see "Purchases by certain 403(b) plans" under "Sales
charges" above), or made for two or more such 403(b) plans that are
treated similarly to employer-sponsored plans for sales charge
purposes, in each case of a single employer or affiliated employers as
defined in the 1940 Act.

The Bond Fund of America -- Page 45
<PAGE>

Purchases made for nominee or street name accounts (securities held in the
name of an investment dealer or another nominee such as a bank trust
department instead of the customer) may not be aggregated with those made
for other accounts and may not be aggregated with other nominee or street
name accounts unless otherwise qualified as described above.

CONCURRENT PURCHASES -- As described in the prospectus, you may reduce your
Class A sales charge by combining purchases of all classes of shares in the
American Funds, as well as individual holdings in Endowments, American
Legacy variable annuity contracts and variable life insurance policies.
Shares of money market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge also qualify. However,
direct purchases of American Funds money market funds are excluded.

RIGHTS OF ACCUMULATION -- Subject to the limitations described in the
aggregation policy, you may take into account your accumulated holdings in
all share classes of the American Funds, as well as your holdings in
Endowments, to determine your sales charge on investments in accounts
eligible to be aggregated. Subject to your investment dealer's or
recordkeeper's capabilities, your accumulated holdings will be calculated
as the higher of (a) the current value of your existing holdings (the
"market value") or (b) the amount you invested (including reinvested
dividends and capital gains, but excluding capital appreciation) less any
withdrawals (the "cost value"). Depending on the entity on whose books your
account is held, the value of your holdings in that account may not be
eligible for calculation at cost value. For example, the value of accounts
held in nominee or street name are not eligible for calculation at cost
value and instead will be calculated at market value for purposes of rights
of accumulation.

The value of all of your holdings in accounts established in calendar year
2005 or earlier will be assigned an initial cost value equal to the market
value of those holdings as of the last business day of 2005. Thereafter,
the cost value of such accounts will increase or decrease according to
actual investments or withdrawals. You must contact your financial adviser
or American Funds Service Company if you have additional information that
is relevant to the calculation of the value of your holdings.

When determining your American Funds Class A sales charge, if you are not
an employer-sponsored retirement plan, you may also take into account the
market value (as of the end of the week prior to your American Funds
investment) of your individual holdings in various American Legacy variable
annuity contracts and variable life insurance policies. An
employer-sponsored retirement plan may also take into account the market
value of its investments in American Legacy Retirement Investment Plans.
Direct purchases of American Funds money market funds are excluded. If you
make a gift of American Funds Class A shares, upon your request, you may
purchase the shares at the sales charge discount allowed under rights of
accumulation of all of your American Funds and American Legacy accounts.

CDSC WAIVERS FOR CLASS A, B AND C SHARES -- As noted in the prospectus, a
contingent deferred sales charge ("CDSC") may be waived for redemptions due to
death or postpurchase disability of a shareholder (this generally excludes
accounts registered in the names of trusts and other entities). In the case of
joint tenant accounts, if one joint tenant dies, a surviving joint tenant, at
the time he or she notifies the Transfer Agent of the other joint tenant's death
and removes the decedent's name from the account, may redeem shares from the
account without

The Bond Fund of America -- Page 46
<PAGE>

incurring a CDSC. Redemptions made after the Transfer Agent is notified of the
death of a joint tenant will be subject to a CDSC.

In addition, a CDSC may be waived for the following types of transactions, if
together they do not exceed 12% of the value of an "account" (defined below)
annually (the "12% limit"):

. Required minimum distributions taken from retirement accounts upon the
shareholder's attainment of age 70-1/2 (required minimum distributions
that continue to be taken by the beneficiary(ies) after the account
owner is deceased also qualify for a waiver).

. Redemptions through a systematic withdrawal plan (SWP) (see "Automatic
withdrawals" under "Shareholder account services and privileges"
below). For each SWP payment, assets that are not subject to a CDSC,
such as appreciation on shares and shares acquired through
reinvestment of dividends and/or capital gain distributions, will be
redeemed first and will count toward the 12% limit. If there is an
insufficient amount of assets not subject to a CDSC to cover a
particular SWP payment, shares subject to the lowest CDSC will be
redeemed next until the 12% limit is reached. Any dividends and/or
capital gain distributions taken in cash by a shareholder who receives
payments through a SWP will also count toward the 12% limit. In the
case of a SWP, the 12% limit is calculated at the time a systematic
redemption is first made, and is recalculated at the time each
additional systematic redemption is made. Shareholders who establish a
SWP should be aware that the amount of a payment not subject to a CDSC
may vary over time depending on fluctuations in the value of their
accounts. This privilege may be revised or terminated at any time.

For purposes of this paragraph, "account" means:

. in the case of Class A shares, your investment in Class A shares of
all American Funds (investments representing direct purchases of
American Funds money market funds are excluded);

. in the case of Class B shares, your investment in Class B shares of
the particular fund from which you are making the redemption; and

. in the case of Class C shares, your investment in Class C shares of
the particular fund from which you are making the redemption.

CDSC waivers are allowed only in the cases listed here and in the prospectus.
For example, CDSC waivers will not be allowed on redemptions of Class 529-B and
529-C shares due to termination of CollegeAmerica; a determination by the
Internal Revenue Service that CollegeAmerica does not qualify as a qualified
tuition program under the Code; proposal or enactment of law that eliminates or
limits the tax-favored status of CollegeAmerica; or elimination of the fund by
the Virginia College Savings Plan as an option for additional investment within
CollegeAmerica.

The Bond Fund of America -- Page 47
<PAGE>

SELLING SHARES

The methods for selling (redeeming) shares are described more fully in the
prospectus. If you wish to sell your shares by contacting American Funds Service
Company directly, any such request must be signed by the registered
shareholders.

A signature guarantee may be required for certain redemptions. In such an event,
your signature may be guaranteed by a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association or credit
union that is an eligible guarantor institution. The Transfer Agent reserves the
right to require a signature guarantee on any redemptions.

Additional documentation may be required for sales of shares held in corporate,
partnership or fiduciary accounts. You must include with your written request
any shares you wish to sell that are in certificate form.

If you sell Class A, B or C shares and request a specific dollar amount to be
sold, we will sell sufficient shares so that the sale proceeds, after deducting
any applicable CDSC, equals the dollar amount requested.

Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the 1940 Act), sale proceeds will be paid on or before the
seventh day following receipt and acceptance of an order. Interest will not
accrue or be paid on amounts that represent uncashed distribution or redemption
checks.

You may request that redemption proceeds of $1,000 or more from money market
funds be wired to your bank by writing American Funds Service Company. A
signature guarantee is required on all requests to wire funds.

The Bond Fund of America -- Page 48
<PAGE>

SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

The following services and privileges are generally available to all
shareholders. However, certain services and privileges may not be available for
Class 529 shareholders or if your account is held with an investment dealer or
through an employer-sponsored retirement plan.

AUTOMATIC INVESTMENT PLAN -- An automatic investment plan enables you to make
monthly or quarterly investments in the American Funds through automatic debits
from your bank account. To set up a plan, you must fill out an account
application and specify the amount that you would like to invest ($50 minimum)
and the date on which you would like your investments to occur. The plan will
begin within 30 days after your account application is received. Your bank
account will be debited on the day or a few days before your investment is made,
depending on the bank's capabilities. The Transfer Agent will then invest your
money into the fund you specified on or around the date you specified. If the
date you specified falls on a weekend or holiday, your money will be invested on
the following business day. However, if the following business day falls in the
next month, your money will be invested on the business day immediately
preceding the weekend or holiday. If your bank account cannot be debited due to
insufficient funds, a stop-payment or the closing of the account, the plan may
be terminated and the related investment reversed. You may change the amount of
the investment or discontinue the plan at any time by contacting the Transfer
Agent.

AUTOMATIC REINVESTMENT -- Dividends and capital gain distributions are
reinvested in additional shares of the same class and fund at net asset value
unless you indicate otherwise on the account application. You also may elect to
have dividends and/or capital gain distributions paid in cash by informing the
fund, the Transfer Agent or your investment dealer. Dividends and capital gain
distributions paid to retirement plan shareholders or shareholders of the 529
share classes will be automatically reinvested.

If you have elected to receive dividends and/or capital gain distributions in
cash, and the postal or other delivery service is unable to deliver checks to
your address of record, or you do not respond to mailings from American Funds
Service Company with regard to uncashed distribution checks, your distribution
option will automatically be converted to having all dividends and other
distributions reinvested in additional shares.

CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS -- For all share classes,
except the 529 classes of shares, you may cross-reinvest dividends and capital
gains (distributions) into other American Funds in the same share class at net
asset value, subject to the following conditions:

(1) the aggregate value of your account(s) in the fund(s) paying distributions
equals or exceeds $5,000 (this is waived if the value of the account in the fund
receiving the distributions equals or exceeds that fund's minimum initial
investment requirement);

(2) if the value of the account of the fund receiving distributions is below
the minimum initial investment requirement, distributions must be automatically
reinvested; and

(3) if you discontinue the cross-reinvestment of distributions, the value of
the account of the fund receiving distributions must equal or exceed the minimum
initial investment requirement. If you do not meet this requirement within 90
days of notification, the fund has the right to automatically redeem the
account.

The Bond Fund of America -- Page 49
<PAGE>

AUTOMATIC EXCHANGES -- For all share classes, you may automatically exchange
shares of the same class in amounts of $50 or more among any of the American
Funds on any day (or preceding business day if the day falls on a nonbusiness
day) of each month you designate.

AUTOMATIC WITHDRAWALS -- For all share classes, except the R and 529 classes of
shares, you may automatically withdraw shares from any of the American Funds.
You can make automatic withdrawals of $50 or more as often as you wish if your
account is worth at least $10,000, or up to four times a year for an account
worth at least $5,000. You can designate the day of each period for withdrawals
and request that checks be sent to you or someone else. Withdrawals may also be
electronically deposited to your bank account. The Transfer Agent will withdraw
your money from the fund you specify on or around the date you specify. If the
date you specified falls on a weekend or holiday, the redemption will take place
on the previous business day. However, if the previous business day falls in the
preceding month, the redemption will take place on the following business day
after the weekend or holiday.

Withdrawal payments are not to be considered as dividends, yield or income.
Automatic investments may not be made into a shareholder account from which
there are automatic withdrawals. Withdrawals of amounts exceeding reinvested
dividends and distributions and increases in share value would reduce the
aggregate value of the shareholder's account. The Transfer Agent arranges for
the redemption by the fund of sufficient shares, deposited by the shareholder
with the Transfer Agent, to provide the withdrawal payment specified.

ACCOUNT STATEMENTS -- Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments, will be reflected on regular confirmation statements from the
Transfer Agent. Dividend and capital gain reinvestments, purchases through
automatic investment plans and certain retirement plans, as well as automatic
exchanges and withdrawals will be confirmed at least quarterly.

AMERICAN FUNDSLINE AND AMERICANFUNDS.COM -- You may check your share balance,
the price of your shares or your most recent account transaction; redeem shares
(up to $75,000 per American Funds shareholder each day) from nonretirement plan
accounts; or exchange shares around the clock with American FundsLine or using
americanfunds.com. To use American FundsLine, call 800/325-3590 from a
TouchTone(TM) telephone. Redemptions and exchanges through American FundsLine
and americanfunds.com are subject to the conditions noted above and in
"Telephone and Internet purchases, redemptions and exchanges" below. You will
need your fund number (see the list of the American Funds under "General
information -- fund numbers"), personal identification number (generally the
last four digits of your Social Security number or other tax identification
number associated with your account) and account number.

Generally, all shareholders are automatically eligible to use these services.
However, if you are not currently authorized to do so, you may complete an
American FundsLink Authorization Form. Once you establish this privilege, you,
your financial adviser or any person with your account information may use these
services.

TELEPHONE AND INTERNET PURCHASES, REDEMPTIONS AND EXCHANGES -- By using the
telephone (including American FundsLine) or the Internet (including
americanfunds.com), or fax purchase, redemption and/or exchange options, you
agree to hold the fund, the Transfer Agent, any of its affiliates or mutual
funds managed by such affiliates, and each of their respective directors,
trustees, officers, employees and agents harmless from any losses, expenses,
costs or liability (including attorney fees) that may be incurred in connection
with the exercise of these privileges.

The Bond Fund of America -- Page 50
<PAGE>

Generally, all shareholders are automatically eligible to use these services.
However, you may elect to opt out of these services by writing the Transfer
Agent (you may also reinstate them at any time by writing the Transfer Agent).
If the Transfer Agent does not employ reasonable procedures to confirm that the
instructions received from any person with appropriate account information are
genuine, it and/or the fund may be liable for losses due to unauthorized or
fraudulent instructions. In the event that shareholders are unable to reach the
fund by telephone because of technical difficulties, market conditions or a
natural disaster, redemption and exchange requests may be made in writing only.

CHECKWRITING -- You may establish check writing privileges for Class A shares
(but not Class 529-A shares) of American Funds money market funds. This can be
done by using an account application. If you request check writing privileges,
you will be provided with checks that you may use to draw against your account.
These checks may be made payable to anyone you designate and must be signed by
the authorized number of registered shareholders exactly as indicated on your
account application.

REDEMPTION OF SHARES -- The fund's Articles of Incorporation permit the fund to
direct the Transfer Agent to redeem the shares of any shareholder for their then
current net asset value per share if at such time the shareholder of record owns
shares having an aggregate net asset value of less than the minimum initial
investment amount required of new shareholders as set forth in the fund's
current registration statement under the 1940 Act, and subject to such further
terms and conditions as the board of directors of the fund may from time to time
adopt.

While payment of redemptions normally will be in cash, the fund's Articles of
Incorporation permit payment of the redemption price wholly or partly in
securities or other property included in the assets belonging to the fund when
in the opinion of the fund's board of directors, which shall be conclusive,
conditions exist which make payment wholly in cash unwise or undesirable.

SHARE CERTIFICATES -- Shares are credited to your account and certificates are
not issued unless you request them by contacting the Transfer Agent.
Certificates are not available for the 529 or R share classes.

GENERAL INFORMATION

CUSTODIAN OF ASSETS -- Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by JPMorgan Chase Bank, 270 Park Avenue, New York, NY 10017-2070, as
Custodian. If the fund holds non-U.S. securities, the Custodian may hold these
securities pursuant to subcustodial arrangements in non-U.S. banks or non-U.S.
branches of U.S. banks.

TRANSFER AGENT -- American Funds Service Company, a wholly owned subsidiary of
the investment adviser, maintains the records of shareholder accounts, processes
purchases and redemptions of the fund's shares, acts as dividend and capital
gain distribution disbursing agent, and performs other related shareholder
service functions. The principal office of American Funds Service Company is
located at 135 South State College Boulevard, Brea, CA 92821-5823. American
Funds Service Company was paid a fee of $20,246,000 for Class A shares and
$1,562,000 for Class B shares for the 2005 fiscal year.

In the case of certain shareholder accounts, third parties who may be
unaffiliated with the investment adviser provide transfer agency and shareholder
services in place of American Funds

The Bond Fund of America -- Page 51
<PAGE>

Service Company. These services are rendered under agreements with American
Funds Service Company or its affiliates and the third parties receive
compensation according to such agreements. Compensation for transfer agency and
shareholder services, whether paid to American Funds Service Company or such
third parties, is ultimately paid from fund assets and is reflected in the
expenses of the fund as disclosed in the prospectus.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -- Deloitte & Touche LLP, 695 Town
Center Drive, Costa Mesa, California 92626, serves as the fund's independent
registered public accounting firm, providing audit services, preparation of tax
returns and review of certain documents to be filed with the Securities and
Exchange Commission. The financial statements included in this statement of
additional information from the annual report have been so included in reliance
on the report of Deloitte & Touche LLP, independent registered public accounting
firm, given on the authority of said firm as experts in accounting and auditing.
The selection of the fund's independent registered public accounting firm is
reviewed and determined annually by the board of directors.

INDEPENDENT LEGAL COUNSEL -- Paul, Hastings, Janofsky & Walker LLP, 515 South
Flower Street, Los Angeles, CA 90071, serves as counsel for the fund and for
non-interested directors in their capacities as such. Certain legal matters in
connection with the capital shares offered by the prospectus have been passed
upon for the fund by Paul, Hastings, Janofsky & Walker LLP. Counsel does not
provide legal services to the fund's investment adviser or any of its affiliated
companies. A determination with respect to the independence of the fund's
"independent legal counsel" will be made at least annually by the non-interested
directors of the fund, as prescribed by the 1940 Act and related rules.

PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS -- The fund's fiscal
year ends on December 31. Shareholders are provided updated prospectuses
annually and at least semiannually with reports showing the fund's investment
portfolio or summary investment portfolio, financial statements and other
information. The fund's annual financial statements are audited by the fund's
independent registered public accounting firm, Deloitte & Touche LLP. In
addition, shareholders may also receive proxy statements for the fund. In an
effort to reduce the volume of mail shareholders receive from the fund when a
household owns more than one account, the Transfer Agent has taken steps to
eliminate duplicate mailings of prospectuses, shareholder reports and proxy
statements. To receive additional copies of a prospectus, report or proxy
statement, shareholders should contact the Transfer Agent.

CODES OF ETHICS -- The fund and Capital Research and Management Company and its
affiliated companies, including the fund's Principal Underwriter, have adopted
codes of ethics that allow for personal investments, including securities in
which the fund may invest from time to time. These codes include a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; preclearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; blackout periods on personal
investing for certain investment personnel; ban on short-term trading profits
for investment personnel; limitations on service as a director of publicly
traded companies; and disclosure of personal securities transactions.

LEGAL PROCEEDINGS -- On February 16, 2005, the NASD filed an administrative
complaint against the Principal Underwriter. The complaint alleges violations of
certain NASD rules by the Principal Underwriter with respect to the selection of
broker-dealer firms that buy and sell

The Bond Fund of America -- Page 52
<PAGE>

securities for mutual fund investment portfolios. The complaint seeks sanctions,
restitution and disgorgement.

On March 24, 2005, the investment adviser and Principal Underwriter filed a
complaint against the Attorney General of the State of California in Los Angeles
County Superior Court. The complaint alleged that the Attorney General
threatened to take enforcement actions against the investment adviser and
Principal Underwriter that are without merit and preempted by federal law. On
the same day, following the filing of the investment adviser's and Principal
Underwriter's complaint, the Attorney General of the State of California filed a
complaint against the Principal Underwriter and investment adviser. Filed in Los
Angeles County Superior Court, the Attorney General's complaint alleged
violations of certain sections of the California Corporations Code with respect
to so-called "revenue sharing" disclosures in mutual fund prospectuses and
statements of additional information. On November 22, 2005, the Los Angeles
Superior Court dismissed the Attorney General's complaint. On February 7, 2006,
the Attorney General filed a notice that he intends to appeal the Superior
Court's decision to California's Court of Appeal for the Second Appellate
District.

The investment adviser and Principal Underwriter believe that the likelihood
that these matters could have a material adverse effect on the fund or on the
ability of the investment adviser or Principal Underwriter to perform their
contracts with the fund is remote. The SEC is conducting a related investigation
as of the date of this statement of additional information. The investment
adviser and Principal Underwriter are cooperating fully. In addition, a class
action lawsuit has been filed in the U.S. District Court, Central District of
California, relating to these matters. Although the suit was dismissed in its
entirety, an amended complaint relating to management fees has been filed. The
investment adviser believes that this suit is without merit and will defend
itself vigorously. Further updates on these issues will be available on the
American Funds website (americanfunds.com) under "American Funds regulatory
matters."

OTHER INFORMATION -- The financial statements including the investment portfolio
and the report of the fund's independent registered public accounting firm
contained in the annual report are included in this statement of additional
information. The following information is not included in the annual report:

DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND MAXIMUM OFFERING PRICE
PER SHARE FOR CLASS A SHARES -- DECEMBER 31, 2005

Net asset value and redemption price per share
(Net assets divided by shares outstanding). . $13.22
Maximum offering price per share
(100/96.25 of net asset value per share,
which takes into account the fund's current maximum
sales charge). . . . . . . . . . . . . . . . $13.74

The Bond Fund of America -- Page 53
<PAGE>

FUND NUMBERS -- Here are the fund numbers for use with our automated telephone
line, American FundsLine/(R)/, or when making share transactions:

FUND NUMBERS
------------------------------------
FUND CLASS A CLASS B CLASS C CLASS F
-----------------------------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . . 002 202 302 402
American Balanced Fund/(R)/ . . . . . . . . . . . . . . . . . 011 211 311 411
American Mutual Fund/(R)/ . . . . . . . . . . . . . . . . . . 003 203 303 403
Capital Income Builder/(R)/ . . . . . . . . . . . . . . . . . 012 212 312 412
Capital World Growth and Income Fund/SM/ . . . . . . . . . . . 033 233 333 433
EuroPacific Growth Fund/(R)/ . . . . . . . . . . . . . . . . . 016 216 316 416
Fundamental Investors/SM/ . . . . . . . . . . . . . . . . . . 010 210 310 410
The Growth Fund of America/(R)/ . . . . . . . . . . . . . . . 005 205 305 405
The Income Fund of America/(R)/ . . . . . . . . . . . . . . . 006 206 306 406
The Investment Company of America/(R)/ . . . . . . . . . . . . 004 204 304 404
The New Economy Fund/(R)/ . . . . . . . . . . . . . . . . . . 014 214 314 414
New Perspective Fund/(R)/ . . . . . . . . . . . . . . . . . . 007 207 307 407
New World Fund/SM/ . . . . . . . . . . . . . . . . . . . . . . 036 236 336 436
SMALLCAP World Fund/(R)/ . . . . . . . . . . . . . . . . . . . 035 235 335 435
Washington Mutual Investors Fund/SM/ . . . . . . . . . . . . . 001 201 301 401
BOND FUNDS
American High-Income Municipal Bond Fund/(R)/ . . . . . . . . 040 240 340 440
American High-Income Trust/SM/ . . . . . . . . . . . . . . . . 021 221 321 421
The Bond Fund of America/SM/ . . . . . . . . . . . . . . . . . 008 208 308 408
Capital World Bond Fund/(R)/ . . . . . . . . . . . . . . . . . 031 231 331 431
Intermediate Bond Fund of America/SM/ . . . . . . . . . . . . 023 223 323 423
Limited Term Tax-Exempt Bond Fund of America/SM/ . . . . . . . 043 243 343 443
The Tax-Exempt Bond Fund of America/(R)/ . . . . . . . . . . . 019 219 319 419
The Tax-Exempt Fund of California/(R)/* . . . . . . . . . . . 020 220 320 420
The Tax-Exempt Fund of Maryland/(R)/* . . . . . . . . . . . . 024 224 324 424
The Tax-Exempt Fund of Virginia/(R)/* . . . . . . . . . . . . 025 225 325 425
U.S. Government Securities Fund/SM/ . . . . . . . . . . . . . 022 222 322 422
MONEY MARKET FUNDS
The Cash Management Trust of America/(R)/ . . . . . . . . . . 009 209 309 409
The Tax-Exempt Money Fund of America/SM/ . . . . . . . . . . . 039 N/A N/A N/A
The U.S. Treasury Money Fund of America/SM/ . . . . . . . . . 049 N/A N/A N/A
___________
*Qualified for sale only in certain jurisdictions.

The Bond Fund of America -- Page 54
<PAGE>

FUND NUMBERS
---------------------------------------------
CLASS CLASS CLASS CLASS CLASS
FUND 529-A 529-B 529-C 529-E 529-F
-------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund . . . . . . . . . . 1002 1202 1302 1502 1402
American Balanced Fund . . . . 1011 1211 1311 1511 1411
American Mutual Fund . . . . . 1003 1203 1303 1503 1403
Capital Income Builder . . . . 1012 1212 1312 1512 1412
Capital World Growth and Income
Fund . . . . . . . . . . . . . 1033 1233 1333 1533 1433
EuroPacific Growth Fund . . . . 1016 1216 1316 1516 1416
Fundamental Investors . . . . . 1010 1210 1310 1510 1410
The Growth Fund of America . . 1005 1205 1305 1505 1405
The Income Fund of America . . 1006 1206 1306 1506 1406
The Investment Company of
America . . . . . . . . . . . . 1004 1204 1304 1504 1404
The New Economy Fund . . . . . 1014 1214 1314 1514 1414
New Perspective Fund . . . . . 1007 1207 1307 1507 1407
New World Fund . . . . . . . . 1036 1236 1336 1536 1436
SMALLCAP World Fund . . . . . . 1035 1235 1335 1535 1435
Washington Mutual Investors Fund
. . . . . . . . . . . . . . . 1001 1201 1301 1501 1401
BOND FUNDS
American High-Income Trust . . 1021 1221 1321 1521 1421
The Bond Fund of America . . . 1008 1208 1308 1508 1408
Capital World Bond Fund . . . . 1031 1231 1331 1531 1431
Intermediate Bond Fund of
America . . . . . . . . . . . . 1023 1223 1323 1523 1423
U.S. Government Securities Fund 1022 1222 1322 1522 1422
MONEY MARKET FUND
The Cash Management Trust of
America . . . . . . . . . . . . 1009 1209 1309 1509 1409

The Bond Fund of America -- Page 55
<PAGE>

FUND NUMBERS
----------------------------------------
CLASS CLASS CLASS CLASS CLASS
FUND R-1 R-2 R-3 R-4 R-5
-------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund . . . . . . . . . . . . . 2102 2202 2302 2402 2502
American Balanced Fund . . . . . . . 2111 2211 2311 2411 2511
American Mutual Fund . . . . . . . . 2103 2203 2303 2403 2503
Capital Income Builder . . . . . . . 2112 2212 2312 2412 2512
Capital World Growth and Income Fund 2133 2233 2333 2433 2533
EuroPacific Growth Fund . . . . . . 2116 2216 2316 2416 2516
Fundamental Investors . . . . . . . 2110 2210 2310 2410 2510
The Growth Fund of America . . . . . 2105 2205 2305 2405 2505
The Income Fund of America . . . . . 2106 2206 2306 2406 2506
The Investment Company of America . 2104 2204 2304 2404 2504
The New Economy Fund . . . . . . . . 2114 2214 2314 2414 2514
New Perspective Fund . . . . . . . . 2107 2207 2307 2407 2507
New World Fund . . . . . . . . . . . 2136 2236 2336 2436 2536
SMALLCAP World Fund . . . . . . . . 2135 2235 2335 2435 2535
Washington Mutual Investors Fund . . 2101 2201 2301 2401 2501
BOND FUNDS
American High-Income Municipal Bond
Fund . . . . . . . . . . . . . . . . N/A N/A N/A N/A 2540
American High-Income Trust . . . . . 2121 2221 2321 2421 2521
The Bond Fund of America . . . . . . 2108 2208 2308 2408 2508
Capital World Bond Fund . . . . . . 2131 2231 2331 2431 2531
Intermediate Bond Fund of America . 2123 2223 2323 2423 2523
Limited Term Tax-Exempt Bond Fund of
America. . . . . . . . . . . . . . . N/A N/A N/A N/A 2543
The Tax-Exempt Bond Fund of America N/A N/A N/A N/A 2519
The Tax-Exempt Fund of California* . N/A N/A N/A N/A 2520
The Tax-Exempt Fund of Maryland* . . N/A N/A N/A N/A 2524
The Tax-Exempt Fund of Virginia* . . N/A N/A N/A N/A 2525
U.S. Government Securities Fund . . 2122 2222 2322 2422 2522
MONEY MARKET FUNDS
The Cash Management Trust of America 2109 2209 2309 2409 2509
The Tax-Exempt Money Fund of America N/A N/A N/A N/A 2539
The U.S. Treasury Money Fund of
America . . . . . . . . . . . . . . 2149 2249 2349 2449 2549
___________
*Qualified for sale only in certain
jurisdictions.

The Bond Fund of America -- Page 56
<PAGE>

APPENDIX

The following descriptions of debt security ratings are based on information
provided by Moody's Investors Service and Standard & Poor's Corporation.

DESCRIPTION OF BOND RATINGS

MOODY'S
LONG-TERM RATING DEFINITIONS

Aaa
Obligations rated Aaa are judged to be of the highest quality, with minimal
credit risk.

Aa
Obligations rated Aa are judged to be of high quality and are subject to very
low credit risk.

A
Obligations rated A are considered upper-medium grade and are subject to low
credit risk.

Baa
Obligations rated Baa are subject to moderate credit risk. They are considered
medium-grade and as such may possess certain speculative characteristics.

Ba
Obligations rated Ba are judged to have speculative elements and are subject to
substantial credit risk.

B
Obligations rated B are considered speculative and are subject to high credit
risk.

Caa
Obligations rated Caa are judged to be of poor standing and are subject to very
high credit risk.

Ca
Obligations rated Ca are highly speculative and are likely in, or very near,
default, with some prospect of recovery of principal and interest.

C
Obligations rated C are the lowest rated class of bonds and are typically in
default, with little prospect for recovery of principal or interest.

NOTE: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating
classification from Aa through Caa. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.

The Bond Fund of America -- Page 57
<PAGE>

STANDARD & POOR'S
LONG-TERM ISSUE CREDIT RATINGS

AAA
An obligation rated AAA has the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.

AA
An obligation rated AA differs from the highest-rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.

A
An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.

BBB
An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.

BB, B, CCC, CC, AND C
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.

BB
An obligation rated BB is less vulnerable to nonpayment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.

B
An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.

CCC
An obligation rated CCC is currently vulnerable to nonpayment and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial, or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.

CC
An obligation rated CC is currently highly vulnerable to nonpayment.

The Bond Fund of America -- Page 58
<PAGE>

C
The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.

D
An obligation rated D is in payment default. The D rating category is used when
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless Standard & Poor's believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.

PLUS (+) OR MINUS (-)
The ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.

The Bond Fund of America -- Page 59
<page>
[Logo - American Funds ®]

Bond Fund of America^SM

Investment portfolio

December 31, 2005

Bonds & notes — 90.27%	Principal amount (000)			Market value (000)

CORPORATE BONDS & NOTES — 46.19%
FINANCIALS — 16.48%
International Lease Finance Corp., Series P, 3.125% 2007	$	2,000		$	1,952
International Lease Finance Corp. 3.75% 2007		5,800			5,697
ASIF Global Financing XVIII 3.85% 2007¹		5,785			5,676
ASIF Global Financing XXVIII 4.301% 2007^1,2		2,000			2,001
International Lease Finance Corp. 4.35% 2008		21,000			20,628
International Lease Finance Corp. 4.50% 2008		25,500			25,221
AIG SunAmerica Global Financing VII 5.85% 2008¹		24,250			24,775
International Lease Finance Corp. 3.50% 2009		16,000			15,241
International Lease Finance Corp., Series O, 4.55% 2009		21,955			21,697
International Lease Finance Corp. 4.75% 2009		25,000			24,595
International Lease Finance Corp. 5.00% 2010		23,700			23,596
International Lease Finance Corp. 5.125% 2010		25,000			24,920
International Lease Finance Corp. 5.00% 2012		13,500			13,301
American International Group, Inc. 4.25% 2013		5,555			5,292
ASIF Global Financing XIX 4.90% 2013¹		2,000			1,993
International Lease Finance Corp. 5.875% 2013		5,000			5,182
American International Group 5.05% 2015¹		16,435			16,160
American General Finance Corp., Series I, 5.40% 2015		20,000			19,974
ILFC E-Capital Trust I 5.90% 2065^1,2		18,000			18,090
ILFC E-Capital Trust II 6.25% 2065^1,2		2,325			2,364
Household Finance Corp. 5.75% 2007		10,000			10,085
Household Finance Corp. 7.875% 2007		32,000			33,041
Household Finance Corp. 4.125% 2008		1,000			977
Household Finance Corp. 6.40% 2008		10,000			10,322
Household Finance Corp. 4.125% 2009		25,000			24,158
HSBC Finance Corp. 4.625% 2010		11,500			11,275
Household Finance Corp. 6.375% 2011		7,250			7,673
Household Finance Corp. 6.75% 2011		23,750			25,517
HSBC Finance Corp. 4.518% 2012²		15,000			15,029
HSBC Finance Corp. 4.841% 2012²		20,000			20,034
HSBC Holdings PLC 5.25% 2012		10,000			10,049
HSBC Bank USA 4.625% 2014¹		4,000			3,847
HSBC Finance Corp. 5.00% 2015		31,730			30,912
HSBC Finance Capital Trust IX 5.911% 2035²		18,000			18,187
Midland Bank 5.00% Eurodollar note (undated)²		15,000			12,750
CIT Group Inc. 4.125% 2006		25,000			24,990
CIT Group Inc. 3.65% 2007		25,720			25,154
CIT Group Inc. 5.75% 2007		20,500			20,794
CIT Group Inc. 7.375% 2007		12,500			12,868
CIT Group Inc. 4.00% 2008		14,000			13,703
CIT Group Inc. 3.375% 2009		5,000			4,761
CIT Group Inc. 6.875% 2009		31,000			32,910
CIT Group Inc. 4.25% 2010		30,000			29,216
CIT Group Inc. 7.75% 2012		26,875			30,518
J.P. Morgan Chase & Co. 5.35% 2007		3,285			3,299
J.P. Morgan Chase & Co. 4.00% 2008		12,500			12,297
BANK ONE, Texas, NA 6.25% 2008		7,250			7,440
J.P. Morgan Chase & Co. 6.75% 2011		15,000			16,083
J.P. Morgan Chase & Co. 6.625% 2012		14,165			15,284
J.P. Morgan Chase & Co. 5.75% 2013		16,000			16,524
J.P. Morgan Chase & Co. 4.75% 2015		7,500			7,263
J.P. Morgan Chase & Co. 4.891% 2015		55,000			54,454
Bank One Corp. 4.90% 2015		9,000			8,758
J.P. Morgan Chase & Co. 5.15% 2015		24,190			23,892
Chase Capital II, Global Floating Rate Capital Securities, Series B, 4.75% 2027²		20,000			18,947
USA Education, Inc. 5.625% 2007		45,150			45,434
SLM Corp., Series A, 3.95% 2008		17,500			17,084
SLM Corp., Series A, 4.00% 2010		5,500			5,294
SLM Corp., Series A, 4.50% 2010		65,000			63,701
SLM Corp., Series A, 5.125% 2012		5,000			5,014
SLM Corp., Series A, 5.375% 2013		5,450			5,534
SLM Corp., Series A, 5.375% 2014		10,000			10,117
HBOS Treasury Services PLC 3.75% 2008¹		2,000			1,948
HBOS PLC, Series B, 5.92% (undated)^1,2		105,200			106,370
HBOS PLC 6.413% (undated)¹		10,000			10,150
Bank of Scotland 7.00% (undated)^1,2		25,000			25,800
Washington Mutual, Inc. 7.50% 2006		12,000			12,184
Washington Mutual, Inc. 5.625% 2007		11,000			11,063
Washington Mutual, Inc. 4.375% 2008		16,735			16,543
Washington Mutual, Inc. 4.20% 2010		12,500			12,114
Washington Mutual, Inc. 4.45% 2010²		31,000			31,064
Washington Mutual Bank, FA 6.875% 2011		10,000			10,815
Washington Mutual, Inc. 5.00% 2012		14,000			13,852
Washington Mutual, Inc. 5.25% 2017		15,000			14,597
Providian Financial Corp., Series A, 9.525% 2027¹		16,750			18,158
Prudential Financial, Inc. 4.104% 2006		10,000			9,936
Prudential Insurance Co. of America 6.375% 2006¹		4,000			4,033
PRICOA Global Funding I, Series 2003-2, 3.90% 2008¹		7,500			7,293
PRICOA Global Funding I, Series 2004-4, 4.35% 2008¹		2,500			2,466
PRICOA Global Funding I 4.20% 2010¹		17,000			16,518
Prudential Financial, Inc., Series B, 4.75% 2014		4,000			3,915
Prudential Financial, Inc., Series B, 5.10% 2014		1,000			997
Prudential Holdings, LLC, Series C, 8.695% 2023^1,3		57,035			72,468
Resona Bank, Ltd. 3.75% 2015²		€9,740			11,555
Resona Bank, Ltd. 5.85% (undated)^1,2	$	44,375			44,272
Sumitomo Mitsui Banking Corp. 4.375% 2014²		€6,670			8,134
Sumitomo Mitsui Banking Corp. 5.625% (undated)^1,2	$	90,625			90,454
SocGen Real Estate Co. LLC, Series A, 7.64% (undated)^1,2		74,250			77,284
Société Générale 7.85% (undated)^1,2		17,705			18,285
Westfield Capital Corp. Ltd. and WT Finance (Australia) Pty Ltd. and WEA Finance LLC 4.375% 2010¹		57,950			56,153
Westfield Capital Corp. Ltd. and WT Finance (Australia) Pty Ltd. and WEA Finance LLC 5.125% 2014¹		26,600			26,326
WT Finance (Australia) Pty Ltd., Westfield Europe Finance PLC, and WEA Finance LLC 5.50% 2017		£3,470			6,155
Citigroup Inc. 3.50% 2008	$	20,000			19,481
Citigroup Inc. 4.25% 2009		15,000			14,686
Citigroup Inc. 4.125% 2010		26,000			25,283
Citigroup Inc. 5.625% 2012		5,675			5,857
Lazard Group LLC 7.125% 2015		58,990			62,051
XL Capital Finance (Europe) PLC 6.50% 2012		12,455			13,174
XL Capital Ltd. 5.25% 2014		7,315			7,152
Mangrove Bay Pass Through Trust 6.102% 2033^1,2		31,505			31,368
Twin Reefs Asset Trust (XLFA), Series B, 5.36% (undated)^1,2		9,200			9,210
Banco Santander Central Hispano, SA 7.625% 2010		4,000			4,434
Abbey National PLC 6.70% (undated)²		18,380			19,022
Abbey National PLC 7.35% (undated)²		30,500			31,051
Abbey National PLC 7.50% (undated)²		£2,975			6,086
BNP Paribas 4.80% 2015¹	$	10,100			9,874
BNP Paribas 5.186% noncumulative (undated)^1,2		49,160			47,780
Allstate Life Global Funding Trust, Series 2004-2, 4.45% 2007²		3,000			3,000
Allstate Financial Global Funding LLC 5.25% 2007¹		26,500			26,568
Allstate Financial Global Funding LLC 4.25% 2008¹		7,500			7,376
Allstate Life Global Funding Trust, Series 2004-1, 4.50% 2009		18,000			17,760
Allstate Life Global Funding 4.25% 2010		2,000			1,948
ReliaStar Financial Corp. 8.00% 2006		23,160			23,676
ING Security Life Institutional Funding 2.70% 2007¹		4,730			4,598
ReliaStar Financial Corp. 6.50% 2008		6,016			6,255
ING Bank NV 5.50% 2012		€3,750			4,930
ING Groep NV 5.775% (undated)²	$	16,000			16,246
Price REIT, Inc. 7.50% 2006		2,760			2,818
Kimco Realty Corp., Series C, 3.95% 2008		9,200			9,007
Kimco Realty Corp., Series C, 4.82% 2011		10,000			9,855
Kimco Realty Corp. 6.00% 2012		18,500			19,339
Kimco Realty Corp., Series C, 4.82% 2014		12,000			11,588
Kimco Realty Corp., Series C, 4.904% 2015		3,000			2,894
EOP Operating LP 7.75% 2007		2,000			2,096
EOP Operating LP 6.75% 2008		24,500			25,343
EOP Operating LP 4.65% 2010		17,010			16,498
EOP Operating LP 6.75% 2012		8,250			8,766
EOP Operating LP 7.50% 2029		1,710			1,933
Kazkommerts International BV 7.00% 2009¹		11,000			11,341
Kazkommerts International BV 7.00% 2009		2,850			2,938
Kazkommerts International BV 8.50% 2013		8,500			9,302
Kazkommerts International BV (CGMD) 7.375% 2014^1,2		2,250			2,320
Kazkommerts International BV 7.875% 2014¹		9,200			9,706
Kazkommerts International BV 8.00% 2015¹		15,500			16,478
Monumental Global Funding Trust II, Series 2001-B, 6.05% 2006¹		11,025			11,031
Monumental Global Funding Trust II, Series 2002-A, 5.20% 2007¹		17,500			17,531
AEGON NV 4.625% 2008		€7,750			9,476
Transamerica Corp. 9.375% 2008	$	7,500			8,119
Monumental Global Funding II, Series 2004-F, 4.375% 2009¹		2,000			1,959
AEGON NV 6.125% 2031		£1,600			3,287
MBNA Corp., Series F, 7.50% 2012	$	6,200			6,992
MBNA Capital A, Series A, 8.278% 2026		7,500			7,987
MBNA Global Capital Funding, Series B, 5.05% 2027²		32,800			32,261
TuranAlem Finance BV 8.00% 2014		9,710			10,123
TuranAlem Finance BV 8.50% 2015¹		24,100			26,011
TuranAlem Finance BV 8.50% 2015		6,890			7,436
HVB Funding Trust I 8.741% 2031¹		18,339			24,353
HVB Funding Trust III 9.00% 2031¹		12,425			16,810
Liberty Mutual Group Inc. 6.50% 2035¹		42,015			41,123
Royal Bank of Scotland Group PLC 8.375% 2007		£6,500			11,607
Royal Bank of Scotland Group PLC 5.00% 2014	$	6,500			6,448
National Westminster Bank PLC 7.75% (undated)²	$	17,000		$	17,765
CNA Financial Corp. 6.75% 2006		3,000			3,041
CNA Financial Corp. 6.60% 2008		3,458			3,580
CNA Financial Corp. 5.85% 2014		13,500			13,620
CNA Financial Corp. 7.25% 2023		18,088			19,977
Developers Diversified Realty Corp. 3.875% 2009		19,500			18,744
Developers Diversified Realty Corp. 5.00% 2010		2,500			2,466
Developers Diversified Realty Corp. 5.50% 2015		17,500			17,333
Countrywide Home Loans, Inc., Series M, 4.125% 2009		20,000			19,281
Countrywide Home Loans, Inc., Series L, 4.00% 2011		20,000			18,840
ACE Ltd. 6.00% 2007		1,000			1,011
ACE INA Holdings Inc. 5.875% 2014		14,500			15,024
ACE INA Holdings Inc. 8.875% 2029		2,450			3,270
ACE Capital Trust II 9.70% 2030		12,423			17,335
Nationwide Life Insurance Co. 5.35% 2007¹		4,250			4,261
North Front Pass Through Trust 5.81% 2024^1,2		18,500			18,549
Nationwide Mutual Insurance Co. 7.875% 2033¹		8,000			9,720
Nationwide Mutual Insurance Co. 6.60% 2034¹		2,000			2,019
Berkshire Hathaway Finance Corp. 4.125% 2010		25,000			24,316
Berkshire Hathaway Finance Corp. 4.75% 2012		10,000			9,899
World Savings Bank, FSB, Bank Notes, Series 2008-FXR, 4.125% 2008		34,250			33,681
Bank of America Corp. 3.875% 2008		2,000			1,964
Bank of America Corp. 4.375% 2010		13,000			12,697
Bank of America Corp. 4.50% 2010		9,000			8,853
BankAmerica Corp. 7.125% 2011		1,750			1,934
Bank of America Corp. 4.875% 2012		2,000			1,989
Bank of America Corp. 5.25% 2015		5,000			5,020
Skandinaviska Enskilda Banken AB 4.958% (undated)^1,2		7,050			6,782
Skandinaviska Enskilda Banken AB 5.471% (undated)^1,2		12,000			11,898
Skandinaviska Enskilda Banken AB 7.50% (undated)²		12,500			13,521
PLD International Finance LLC 4.375% 2011		€4,150			5,056
ProLogis Trust 5.625% 2015¹	$	25,000			25,197
Principal Life Global Funding I 2.80% 2008¹		11,625			11,087
Principal Life Global Funding I 4.40% 2010¹		16,600			16,159
Principal Life Income Fundings Trust, Series 2005-34, 5.20% 2010		2,000			2,018
Hospitality Properties Trust 7.00% 2008		1,000			1,037
Hospitality Properties Trust 6.75% 2013		17,845			19,039
Hospitality Properties Trust 5.125% 2015		7,100			6,806
iStar Financial, Inc. 5.375% 2010		10,675			10,590
iStar Financial, Inc., Series B, 5.125% 2011		1,500			1,463
iStar Financial, Inc. 6.05% 2015		14,285			14,430
Wells Fargo & Co. 3.50% 2008		3,310			3,218
Wells Fargo & Co. 4.125% 2008		23,000			22,666
Bayerische Landesbank, Series F, 2.50% 2006		26,000			25,873
Development Bank of Singapore Ltd. 7.875% 2009¹		20,000			21,804
Development Bank of Singapore Ltd. 7.125% 2011¹		3,500			3,822
Simon Property Group, LP 4.875% 2010		12,000			11,856
Simon Property Group, Inc. 5.375% 2011¹		12,500			12,544
Assurant, Inc. 5.625% 2014		23,500			23,840
Rouse Co. 3.625% 2009		5,200			4,860
Rouse Co. 7.20% 2012		17,700			18,597
Jackson National Life Global Funding, Series 2002-1, 5.25% 2007¹		23,125			23,146
Hartford Financial Services Group, Inc. 2.375% 2006		2,000			1,981
Hartford Financial Services Group, Inc. 4.70% 2007		16,250			16,161
Hartford Financial Services Group, Inc. 4.625% 2013		5,000			4,802
Metropolitan Life Global Funding I, Series 2004-2, 4.561% 2007^1,2		1,500			1,502
Met Life Global Funding I 2.60% 2008¹		20,000			18,870
MetLife, Inc. 5.00% 2015		2,000			1,965
John Hancock Global Funding II, Series 2002-G, 5.00% 2007¹		5,000			5,001
John Hancock Global Funding II, Series 2004-A, 3.50% 2009¹		18,000			17,291
United Overseas Bank Ltd. 5.375% 2019^1,2		22,250			22,201
Zions Bancorporation 5.50% 2015		21,625			21,826
Canadian Imperial Bank of Commerce 4.25% Eurodollar note 2085²		25,000			20,875
Irvine Co., Class A, 7.46% 2006^1,4		15,000			15,000
Irvine Apartment Communities, LP 7.00% 2007		5,000			5,107
New York Life Global Funding 4.625% 2010¹		20,000			19,811
United Dominion Realty Trust, Inc., Series E, 4.50% 2008		17,000			16,736
Credit Suisse First Boston (USA), Inc. 6.50% 2012		15,000			16,067
Standard Chartered Bank 4.775% (undated)²		5,000			4,025
Standard Chartered Bank 4.813% Eurodollar note (undated)²		15,000			12,037
Genworth Financial, Inc. 4.641% 2007²		2,500			2,506
Genworth Financial, Inc. 4.75% 2009		10,345			10,260
Genworth Financial, Inc. 5.75% 2014		3,000			3,136
Weingarten Realty Investors, Series A, 5.263% 2012		5,000			5,066
Weingarten Realty Investors, Series A, 4.857% 2014		11,080			10,652
Barclays Bank PLC 8.55% (undated)^1,2		13,080			15,107
Protective Life Insurance Co., Series 2005-C, 4.85% 2010		15,000			14,991
Downey Financial Corp. 6.50% 2014		14,380			14,449
Plum Creek Timberlands, LP 5.875% 2015		13,000			13,193
Advanta Capital Trust I, Series B, 8.99% 2026		12,500			12,688
E*TRADE Financial Corp. 7.375% 2013¹		925			941
E*TRADE Financial Corp. 7.875% 2015		10,570			10,966
Independence Community Bank Corp. 4.90% 2010		12,000			11,800
MassMutual Global Funding II, Series 2002-1, 3.50% 2010¹		12,000			11,328
Comerica, Inc., Imperial Capital Trust I, Imperial Bancorp, Series B, 9.98% 2026		10,200			11,325
Banco Santander-Chile 5.375% 2014¹		11,200			11,207
PNC Funding Corp. 4.20% 2008		6,750			6,653
PNC Funding Corp. 5.125% 2010		4,000			4,017
AB Spintab 6.00% 2009		SKr73,000			9,979
United Energy Distribution Pty Ltd., AMBAC insured, 4.70% 2011¹	$	10,000			9,878
Post Apartment Homes, LP 7.70% 2010		1,400			1,548
Post Apartment Homes, LP 5.125% 2011		7,720			7,686
American Express Credit Corp. 3.00% 2008		9,060			8,688
Bank of Nova Scotia 4.25% Eurodollar note 2085²		10,000			8,464
Host Marriott, LP, Series G, 9.25% 2007		625			663
Host Marriott, LP, Series M, 7.00% 2012		6,595			6,793
Host Marriott, LP, Series O, 6.375% 2015		710			712
Chohung Bank 4.50% 2014^1,2		8,000			7,719
Travelers Property Casualty Corp. 3.75% 2008		5,500			5,367
St. Paul Travelers Companies, Inc. 5.50% 2015		2,000			2,018
Capital One Financial Corp. 6.25% 2013		7,000			7,313
Lloyds Bank, Series 2, 4.59% (undated)²		8,000			6,990
BCI U.S. Funding Trust I 8.01% noncumulative preferred (undated)^1,2		6,500			6,910
Allied Irish Banks Ltd. 4.75% (undated)²		7,000			6,265
National Australia Bank Ltd. 5.486% (undated)^1,2		5,925			5,932
Swedish Export Credit Corp. 4.00% 2010		5,950			5,807
Munich Re Finance BV 6.75% 2023²		€3,670			5,078
Wachovia Corp., Series G, 4.375% 2010	$	5,000			4,896
Industrial Bank of Korea 4.00% 2014^1,2		5,000			4,797
Westpac Capital Trust IV 5.256% (undated)^1,2		4,500			4,416
Bergen Bank 4.188% (undated)²		5,000			4,213
National Bank of Canada 4.188% 2087²		5,000			4,075
Christiana Bank Og Kreditkasse 4.75% (undated)²		4,000			3,529
Federal Realty Investment Trust 4.50% 2011		3,500			3,339
UnumProvident Finance Co. PLC 6.85% 2015¹		3,025			3,157
Willis North America Inc. 5.625% 2015		2,500			2,504
FelCor Lodging LP 9.00% 2011²		2,270			2,497
Fairfax Financial Holdings Ltd. 7.75% 2012		2,500			2,345
ERP Operating LP 4.75% 2009		2,225			2,201
Deutsche Bank Financial LLC 5.375% 2015		2,000			2,033
UnionBanCal Corp. 5.25% 2013		2,000			1,997
Principal Life Insurance Co. 3.20% 2009		2,000			1,908
Crescent Real Estate LP 7.50% 2007		1,190			1,214
LaBranche & Co Inc. 9.50% 2009		740			784
					3,786,844

CONSUMER DISCRETIONARY — 8.82%
General Motors Acceptance Corp. 4.50% 2006		4,600			4,461
General Motors Acceptance Corp. 6.125% 2006		3,880			3,769
General Motors Acceptance Corp. 5.05% 2007²		27,000			25,660
General Motors Acceptance Corp. 5.22% 2007²		15,000			14,173
General Motors Acceptance Corp. 6.15% 2007		2,750			2,598
General Motors Acceptance Corp. 5.125% 2008		9,855			8,778
Residential Capital Corp. 5.67% 2008²		17,500			17,537
General Motors Acceptance Corp. 5.85% 2009		25,790			23,088
Residential Capital Corp. 6.375% 2010		40,000			40,684
General Motors Acceptance Corp. 7.75% 2010		9,060			8,468
General Motors Acceptance Corp. 6.875% 2011		48,055			43,873
General Motors Corp. 7.20% 2011		13,700			9,693
General Motors Acceptance Corp. 7.25% 2011		26,795			24,654
General Motors Acceptance Corp. 7.00% 2012		37,750			34,277
General Motors Corp. 7.125% 2013		6,865			4,565
General Motors Corp. 7.25% 2013		€9,920			7,860
General Motors Acceptance Corp. 6.61% 2014²	$	75,000			67,639
Residential Capital Corp. 6.875% 2015		2,780			2,959
General Motors Corp. 7.70% 2016		1,000			652
General Motors Corp. 8.375% 2033		1,200			798
Ford Motor Credit Co. 5.50% 2006		€2,750			3,239
Ford Motor Credit Co. 6.50% 2007	$	1,000			968
Ford Motor Credit Co. 7.20% 2007		3,000			2,857
Ford Motor Credit Co. 5.80% 2009		3,500			3,055
Ford Motor Credit Co. 7.375% 2009		53,725			47,686
Ford Motor Credit Co. 5.72% 2010²		35,275			30,751
Ford Motor Credit Co. 7.875% 2010		141,000			126,999
Hertz Corp. 8.875% 2014¹		1,250			1,280
Hertz Corp. 10.50% 2016¹		2,650			2,743
DaimlerChrysler North America Holding Corp. 6.40% 2006		13,885			13,955
DaimlerChrysler North America Holding Corp. 4.05% 2008		4,750			4,627
DaimlerChrysler North America Holding Corp. 4.75% 2008		4,800			4,758
DaimlerChrysler North America Holding Corp. 7.20% 2009		22,500			23,814
DaimlerChrysler North America Holding Corp. 4.875% 2010		37,750			36,895
DaimlerChrysler North America Holding Corp. 8.00% 2010		56,500			61,849
DaimlerChrysler North America Holding Corp. 7.75% 2011		23,600			25,848
DaimlerChrysler North America Holding Corp. 6.50% 2013		11,610			12,175
DaimlerChrysler North America Holding Corp. 8.50% 2031		1,610			1,954
Comcast Cable Communications, Inc. 8.375% 2007		7,000			7,302
Comcast Cable Communications, Inc. 6.20% 2008		7,150			7,345
Lenfest Communications, Inc. 7.625% 2008		6,750			7,071
Comcast Cable Communications, Inc. 6.875% 2009		15,194			15,971
Comcast Corp. 5.45% 2010		6,250			6,294
Comcast Cable Communications, Inc. 6.75% 2011		4,355			4,616
Tele-Communications, Inc. 9.80% 2012		17,500			21,137
Comcast Cable Communications, Inc. 7.125% 2013		1,650			1,796
Tele-Communications, Inc. 7.875% 2013		7,500			8,489
Comcast Corp. 5.85% 2015		30,730			31,185
Comcast Corp. 6.50% 2015		23,000			24,349
Comcast Corp. 5.65% 2035		6,670			6,158
Clear Channel Communications, Inc. 6.625% 2008		5,375			5,510
Chancellor Media Corp. of Los Angeles 8.00% 2008		12,500			13,298
Clear Channel Communications, Inc. 7.65% 2010		14,826			15,886
Clear Channel Communications, Inc. 5.75% 2013		12,200			11,978
Clear Channel Communications, Inc. 5.50% 2014		3,000			2,876
Clear Channel Communications, Inc. 6.875% 2018		13,000			13,123
Harrah’s Operating Co., Inc. 5.50% 2010		30,260			30,278
Harrah’s Operating Co., Inc. 5.625% 2015		14,650			14,418
Harrah’s Operating Co., Inc. 5.75% 2017		12,000			11,704
Time Warner Inc. 8.18% 2007		2,225			2,328
AOL Time Warner Inc. 6.875% 2012		40,000			42,634
AOL Time Warner Inc. 7.625% 2031		9,825			10,974
Viacom Inc. 6.40% 2006		5,000			5,006
Viacom Inc. 5.625% 2007		6,600			6,637
Viacom Inc. 7.70% 2010		13,000			14,046
Viacom Inc. 6.625% 2011		13,000			13,555
Viacom Inc. 5.625% 2012		8,500			8,451
Toll Brothers, Inc. 6.875% 2012		9,875			10,387
Toll Brothers, Inc. 4.95% 2014		23,720			22,015
Toll Brothers Finance Corp. 5.15% 2015¹		14,000			13,000
Pulte Homes, Inc. 4.875% 2009		25,300			24,803
Pulte Homes, Inc. 5.20% 2015		6,795			6,404
Pulte Homes, Inc. 7.625% 2017		7,500			8,328
Liberty Media Corp. 7.875% 2009		2,500			2,647
Liberty Media Corp. 5.70% 2013		1,000			937
Liberty Media Corp. 8.50% 2029		8,675			8,634
Liberty Media Corp. 8.25% 2030		25,745			25,355
Cox Communications, Inc. 7.75% 2006		2,325			2,359
Cox Communications, Inc. 5.039% 2007²		5,000			5,041
Cox Communications, Inc. 7.875% 2009		1,000			1,075
Cox Communications, Inc. 4.625% 2010		5,000			4,845
Cox Communications, Inc. 7.75% 2010		10,000			10,842
Cox Communications, Inc. 5.45% 2014		12,750			12,463
American Honda Finance Corp. 5.125% 2010¹		34,350			34,491
J.C. Penney Co., Inc. 9.00% 2012		995			1,176
J.C. Penney Co., Inc. 7.65% 2016		9,970			11,384
J.C. Penney Co., Inc. 7.95% 2017		16,680			19,458
J.C. Penney Co., Inc. 7.125% 2023		425			475
J.C. Penney Co., Inc. 7.625% 2097		500			519
Target Corp. 3.375% 2008		8,330			8,097
Target Corp. 5.375% 2009		24,500			24,880
Ryland Group, Inc. 5.375% 2008		2,000			2,000
Ryland Group, Inc. 5.375% 2012		30,900			29,729
News America Holdings Inc. 6.625% 2008		12,900			13,310
News America Inc. 5.30% 2014		16,000			15,908
Carnival Corp. 3.75% 2007		8,500			8,313
Carnival Corp. 6.15% 2008		18,623			19,081
Tribune Co. 4.875% 2010		22,500			21,964
American Media Operations, Inc., Series B, 10.25% 2009		13,625			12,501
American Media Operations, Inc. 8.875% 2011		7,060			6,036
Kohl's Corp. 6.30% 2011		16,000			16,864
Kohl’s Corp. 7.375% 2011		1,500			1,656
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 8.00% 2012¹		9,650			9,650
CCO Holdings, LLC and CCO Holdings Capital Corp. 8.75% 2013		5,500			5,266
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 8.375% 2014¹		2,500			2,500
Centex Corp. 4.75% 2008		8,000			7,920
Centex Corp. 5.80% 2009		2,500			2,534
Centex Corp. 5.25% 2015		6,725			6,400
May Department Stores Co. 4.80% 2009		16,500			16,283
Mohegan Tribal Gaming Authority 6.375% 2009		14,410			14,572
Mohegan Tribal Gaming Authority 7.125% 2014		1,500			1,543
AMC Entertainment Inc., Series B, 8.625% 2012		3,000			3,150
AMC Entertainment Inc. 8.00% 2014		14,175			12,899
Visteon Corp. 8.25% 2010		17,690			15,125
Visteon Corp. 7.00% 2014		525			408
Cinemark USA, Inc. 9.00% 2013		8,325			8,845
Cinemark, Inc. 0%/9.75% 2014⁵		8,750			6,519
Seminole Tribe of Florida 5.798% 2013¹		14,750			14,698
Univision Communications Inc. 7.85% 2011		13,250			14,598
Six Flags, Inc. 8.875% 2010		5,000			4,900
Six Flags, Inc. 9.75% 2013		8,375			8,260
Six Flags, Inc. 9.625% 2014		850			831
Wynn Las Vegas, LLC and Wynn Las Vegas Capital Corp. 6.625% 2014		14,015			13,700
Circus and Eldorado Joint Venture and Silver Legacy Resort Casino 10.125% 2012		12,025			12,777
CanWest Media Inc., Series B, 8.00% 2012		12,426			12,752
Grupo Posadas, SA de CV 8.75% 2011¹		10,585			10,850
Grupo Posadas, SA de CV 8.75% 2011		1,050			1,076
Young Broadcasting Inc. 10.00% 2011		12,317			11,593
MGM MIRAGE 6.00% 2009		1,975			1,973
MGM MIRAGE 8.50% 2010		6,850			7,458
MGM MIRAGE 6.75% 2012		1,050			1,070
MGM MIRAGE 5.875% 2014		500			480
MGM MIRAGE 6.625% 2015		525			526
Telenet Group Holding NV 0%/11.50% 2014^1,5		12,709			10,485
Toys “R” Us, Inc. 7.875% 2013		12,005			9,604
Toys “R” Us, Inc. 7.375% 2018		1,000			725
Lowe’s Companies, Inc. 8.25% 2010		8,450			9,571
Iesy Repository GmbH 10.375% 2015¹		8,550			8,935
Kabel Deutschland GmbH 10.625% 2014¹		8,375			8,857
William Lyon Homes, Inc. 7.625% 2012		5,750			5,103
William Lyon Homes, Inc. 10.75% 2013		2,000			2,075
William Lyon Homes, Inc. 7.50% 2014		1,500			1,305
Royal Caribbean Cruises Ltd. 7.00% 2007		1,400			1,441
Royal Caribbean Cruises Ltd. 8.75% 2011		4,325			4,909
Royal Caribbean Cruises Ltd. 6.875% 2013		1,150			1,224
Delphi Automotive Systems Corp. 6.55% 2006⁶		500			255
Delphi Automotive Systems Corp. 6.50% 2009⁶		6,000			3,060
Delphi Corp. 6.50% 2013⁶		7,020			3,563
Delphi Automotive Systems Corp. 7.125% 2029⁶		1,350			692
NTL Cable PLC 8.75% 2014		5,825			6,116
NTL Cable PLC 8.75% 2014		€1,000			1,257
Payless ShoeSource, Inc. 8.25% 2013	$	7,000			7,350
Emmis Operating Co. 6.875% 2012		4,250			4,245
Emmis Communications Corp. 10.366% 2012²		3,075			3,102
Technical Olympic USA, Inc. 9.00% 2010		2,600			2,642
Technical Olympic USA, Inc. 9.00% 2010		950			965
Technical Olympic USA, Inc. 7.50% 2011		3,750			3,361
Thomson Corp. 5.50% 2035		7,000			6,780
Regal Cinemas Corp., Series B, 9.375% 2012⁴		6,375			6,657
MDC Holdings, Inc. 5.50% 2013		6,555			6,359
PETCO Animal Supplies, Inc. 10.75% 2011		5,750			6,253
Century Communications Corp. 0% 2003⁷		5,000			4,250
Adelphia Communications Corp. 10.25% 2006⁶		3,500			1,960
Tenneco Automotive Inc., Series B, 10.25% 2013		750			823
Tenneco Automotive Inc. 8.625% 2014		5,510			5,234
Neiman Marcus Group, Inc. 9.00% 2015^1,8		5,870			6,031
Marriott International, Inc., Series F, 4.625% 2012		1,500			1,446
Marriott International, Inc. 5.81% 2015¹		4,500			4,569
Blockbuster Inc. 9.75% 2012¹		6,545			5,792
RBS-Zero Editora Jornalística SA 11.00% 2010¹		5,492			5,753
Dollarama Group LP 8.875% 2012¹		5,550			5,467
Stoneridge, Inc. 11.50% 2012		5,158			5,274
D.R. Horton, Inc. 9.75% 2010		1,150			1,306
D.R. Horton, Inc. 7.875% 2011		800			875
D.R. Horton, Inc. 6.125% 2014		1,500			1,503
D.R. Horton, Inc. 5.25% 2015		1,500			1,412
Fisher Communications, Inc. 8.625% 2014		4,550			4,823
WCI Communities, Inc. 9.125% 2012		3,115			3,115
WCI Communities, Inc. 7.875% 2013		1,750			1,658
Cooper-Standard Automotive Inc. 7.00% 2012		3,250			3,006
Cooper-Standard Automotive Inc. 8.375% 2014		1,700			1,300
Radio One, Inc., Series B, 8.875% 2011		4,000			4,240
Carmike Cinemas, Inc. 7.50% 2014		4,200			3,953
Atlantic Broadband Finance, LLC and Atlantic Broadband Finance, Inc. 9.375% 2014		4,300			3,859
Gannett Co., Inc. 6.375% 2012		3,665			3,807
Sealy Mattress Co. 8.25% 2014		3,500			3,622
Vidéotron Ltée 6.875% 2014		2,525			2,569
Vidéotron Ltée 6.375% 2015¹		1,000			999
Buffets, Inc. 11.25% 2010		3,275			3,357
Hyatt Equities, LLC 6.875% 2007¹		3,250			3,317
Warner Music Group 7.375% 2014		3,300			3,292
Starwood Hotels & Resorts Worldwide, Inc. 7.375% 2007		250			256
Starwood Hotels & Resorts Worldwide, Inc. 7.875% 2012		2,550			2,824
Cablevision Systems Corp., Series B, 8.00% 2012		3,260			3,064
Kingfisher PLC 5.625% 2014		£1,740			3,011
YUM! Brands, Inc. 7.70% 2012	$	2,500			2,766
WDAC Subsidiary Corp. 8.375% 2014¹		2,600			2,532
Reader's Digest Association, Inc. 6.50% 2011		2,500			2,456
Bombardier Recreational Products Inc. 8.375% 2013		2,425			2,440
Gaylord Entertainment Co. 8.00% 2013		2,300			2,421
LBI Media, Inc. 10.125% 2012		2,250			2,399
Aztar Corp. 7.875% 2014		2,250			2,368
Lighthouse International Co. SA 8.00% 2014		€1,750			2,202
GSC Holdings Corp. and GameStop, Inc. 7.875% 2011^1,2	$	2,000			1,990
KB Home 6.25% 2015		2,000			1,945
Dana Corp. 5.85% 2015		2,500			1,787
Jostens IH Corp. 7.625% 2012		1,615			1,631
DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. 8.375% 2013		1,493			1,612
Hilton Hotels Corp. 8.25% 2011		1,325			1,454
Loews Cineplex Entertainment Corp. 9.00% 2014		1,250			1,269
TRW Automotive Acquisition Corp. 9.375% 2013		1,075			1,169
Riddell Bell Holdings Inc. 8.375% 2012		1,230			1,147
Warnaco, Inc. 8.875% 2013		925			1,001
Standard Pacific Corp. 5.125% 2009		1,000			944
Dillard’s, Inc. 6.625% 2018		1,000			929
Boyd Gaming Corp. 6.75% 2014		750			748
Dex Media, Inc., Series B, 8.00% 2013		525			538
Boyds Collection, Ltd., Series B, 9.00% 2008^4,6		1,501			390
					2,026,983


TELECOMMUNICATION SERVICES — 5.74%
Sprint Capital Corp. 4.78% 2006		2,425			2,423
Sprint Capital Corp. 7.625% 2011		10,000			11,039
Nextel Communications, Inc. 6.875% 2013		100,980			105,432
Nextel Communications, Inc. 7.375% 2015		85,025			89,798
Sprint Capital Corp. 6.875% 2028		15,000			16,439
France Télécom 7.00% 2008²		€3,500			4,447
France Télécom 7.75% 2011²	$	111,350			124,505
SBC Communications Inc. 5.75% 2006		3,575			3,584
SBC Communications Inc. 4.542% 2008²		9,460			9,481
SBC Communications Inc. 4.125% 2009		31,345			30,293
SBC Communications Inc. 6.25% 2011		1,150			1,204
AT&T Corp. 9.05% 2011²		5,917			6,557
SBC Communications Inc. 5.10% 2014		22,745			22,258
SBC Communications Inc. 6.15% 2034		27,460			27,675
SBC Communications Inc. 6.45% 2034		13,750			14,355
Cingular Wireless LLC 5.625% 2006		5,000			5,037
AT&T Wireless Services, Inc. 7.35% 2006		2,750			2,762
AT&T Wireless Services, Inc. 7.875% 2011		15,355			17,248
AT&T Wireless Services, Inc. 8.125% 2012		62,630			72,456
Telecom Italia Capital SA, Series A, 4.00% 2008		1,270			1,232
Sogerim SA 7.25% 2011		€ 2,650			3,642
Telecom Italia SpA 6.25% 2012		18,500			24,754
Telecom Italia Capital SA, Series B, 5.25% 2013	$	9,050			8,895
Telecom Italia Capital SA 4.95% 2014		20,000			19,135
Telecom Italia Capital SA 5.25% 2015		37,000			36,005
Verizon Wireless Capital LLC and Cellco Partnership 5.375% 2006		91,330			91,652
BellSouth Corp. 4.20% 2009		37,530			36,487
BellSouth Corp. 4.75% 2012		22,725			22,177
BellSouth Corp. 5.20% 2016		22,000			21,637
Verizon Global Funding Corp. 6.125% 2007		3,625			3,688
Verizon Global Funding Corp. 7.25% 2010		7,690			8,353
Verizon New York Inc., Series A, 6.875% 2012		5,250			5,480
Verizon Global Funding Corp. 7.375% 2012		7,360			8,219
Verizon Global Funding Corp. 7.75% 2030		29,700			35,410
Vodafone Group PLC 7.75% 2010		35,285			38,681
Koninklijke KPN NV 4.75% 2008		€6,000			7,328
Koninklijke KPN NV 8.00% 2010	$	27,575			30,314
Deutsche Telekom International Finance BV 8.50% 2010²		1,300			1,475
Deutsche Telekom International Finance BV 6.625% 2011		€1,200			1,633
Deutsche Telekom International Finance BV 8.75% 2030²	$	20,000			25,513
British Telecommunications PLC 8.375% 2010²		15,000			17,093
British Telecommunications PLC 7.125% 2011²		€5,500			7,607
British Telecommunications PLC 5.75% 2028		£1,800			3,188
ALLTEL Corp. 4.656% 2007	$	26,675			26,563
CenturyTel, Inc., Series M, 5.00% 2015		24,000			22,427
Dobson Communications Corp. 8.40% 2012^1,2		1,650			1,650
Dobson Cellular Systems, Inc. 9.875% 2012		13,300			14,730
Dobson Communications Corp. 8.875% 2013		5,000			5,013
Triton PCS, Inc. 8.75% 2011		2,975			2,179
Triton PCS, Inc. 9.375% 2011		8,875			6,523
Triton PCS, Inc. 8.50% 2013		13,550			12,669
Singapore Telecommunications Ltd. 6.375% 2011¹		16,250			17,339
Singapore Telecommunications Ltd. 6.375% 2011		3,475			3,708
PCCW-HKT Capital Ltd. 8.00% 2011^1,2		15,000			16,609
PCCW-HKT Capital No. 3 Ltd. 5.25% 2015¹		3,600			3,457
American Tower Corp. 7.125% 2012		17,275			17,880
Qwest Capital Funding, Inc. 7.75% 2006		3,595			3,649
U S WEST Capital Funding, Inc. 6.375% 2008		1,400			1,396
Qwest Capital Funding, Inc. 7.90% 2010		950			988
Qwest Capital Funding, Inc. 7.25% 2011		4,150			4,223
U S WEST Capital Funding, Inc. 6.875% 2028		4,725			4,335
Qwest Capital Funding, Inc. 7.75% 2031		2,605			2,514
Centennial Cellular Corp. 10.75% 2008		379			388
Centennial Communications Corp. 10.25% 2013^1,2		6,000			6,045
Centennial Communications Corp. and Centennial Cellular Operating Co. LLC and
Centennial Puerto Rico Operations Corp. 8.125% 2014²		8,250			8,415
Intelsat, Ltd. 8.695% 2012^1,2		4,950			5,055
Intelsat, Ltd. 8.25% 2013¹		4,675			4,745
Intelsat, Ltd. 8.625% 2015¹		4,000			4,060
Telekom Austria AG 3.375% 2010		€4,200			4,899
Telekom Finanzmanagement GmbH 4.25% 2017		5,415			6,265
NTELOS Inc. 9.39% 2012²	$	9,500			9,595
NTELOS Holding Corp. 12.90% 2013^1,2,8		1,000			1,002
Hawaiian Telcom Communications, Inc. 9.75% 2013¹		5,895			5,792
Hawaiian Telcom Communications, Inc. 9.948% 2013^1,2		1,730			1,678
Hawaiian Telcom Communications, Inc. 9.948% 2013^1,2		95			92
Hawaiian Telcom Communications, Inc. 12.50% 2015¹		3,050			2,867
Rogers Wireless Inc. 7.25% 2012		1,275			1,347
Rogers Wireless Inc. 7.50% 2015		6,925			7,514
Rogers Cantel Inc. 9.75% 2016		1,250			1,516
Cincinnati Bell Inc. 7.25% 2013		6,800			7,106
MetroPCS, Inc. 10.75% 2007²		3,860			4,053
MetroPCS, Inc. 8.25% 2011²		2,250			2,315
TELUS Corp. 8.00% 2011		5,250			5,892
Valor Telecommunications Enterprises, LLC and Valor Telecommunications Enterprises Finance Corp. 7.75% 2015		5,520			5,796
SK Telecom Co., Ltd. 4.25% 2011¹		6,000			5,732
SBA Communications Corp. 8.50% 2012		5,108			5,695
Millicom International Cellular SA 10.00% 2013		3,930			4,077
AirGate PCS, Inc. 9.375% 2009¹		3,200			3,360
Nextel Partners, Inc. 8.125% 2011		3,000			3,221
Rural Cellular Corp. 10.046% 2012^1,2		3,010			3,048
Cell C Ltd. 8.625% 2012		€2,195			2,785
					1,318,798


INDUSTRIALS — 4.73%
Continental Airlines, Inc., Series 2001-1, Class A-2, 6.503% 2011³	$	14,050		$	13,822
Continental Airlines, Inc., Series 1999-2, Class A-2, 7.056% 2011³		10,000			10,274
Continental Airlines, Inc., Series 2000-2, Class A-1, 7.487% 2012³		12,000			12,115
Continental Airlines, Inc., Series 1997-1, Class A, 7.461% 2016³		10,493			9,765
Continental Airlines, Inc., Series 1996-2, Class D, 11.50% 2016³		1,785			1,294
Continental Airlines, Inc., Series 2001-1, Class B, 7.373% 2017³		4,145			3,612
Continental Airlines, Inc., Series 1997-4B, Class B, 6.90% 2018³		432			375
Continental Airlines, Inc., Series 1998-1, Class A, 6.648% 2019³		22,173			21,682
Continental Airlines, Inc., Series 1997-4, Class A, 6.90% 2019³		31,529			31,422
Continental Airlines, Inc., Series 1999-1, Class A, 6.545% 2020³		10,700			10,690
Continental Airlines, Inc., Series 1999-1, Class B, 6.795% 2020³		6,025			5,362
Continental Airlines, Inc., Series 2001-1, Class A-1, 6.703% 2022³		11,903			11,610
Continental Airlines, Inc., Series 2000-1, Class A-1, 8.048% 2022³		4,817			4,927
Continental Airlines, Inc., Series 2000-1, Class B, 8.388% 2022³		1,626			1,440
BAE Systems Holding Inc. 4.75% 2010¹		10,350			10,175
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class B, 7.156% 2011^1,3		42,414			44,468
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class G, MBIA insured, 6.664% 2013^1,3		43,110			45,902
Hutchison Whampoa International Ltd. 7.00% 2011¹		33,125			35,698
Hutchison Whampoa International Ltd. 6.50% 2013¹		57,200			60,675
AMR Corp. 10.15% 2006		3,250			3,217
American Airlines, Inc., Series 1999-1, Class A-1, 6.855% 2010³		10,030			10,211
American Airlines, Inc., Series 2001-2, Class A-1, 6.978% 2012³		27,266			28,127
American Airlines, Inc., Series 2001-2, Class B, 8.608% 2012		10,100			10,042
AMR Corp. 9.00% 2012		4,000			3,490
American Airlines, Inc., Series 2001-2, Class A-2, 7.858% 2013³		25,460			26,860
American Airlines, Inc., Series 1991-C2, 9.73% 2014³		6,410			4,775
American Airlines, Inc., Series 2001-1, Class B, 7.377% 2019³		6,859			5,622
General Electric Capital Corp., Series A, 5.00% 2007		21,500			21,548
General Electric Capital Corp., Series A, 5.375% 2007		13,250			13,337
General Electric Capital Corp., Series A, 7.25% 2007		£1,030			1,849
General Electric Capital Corp., Series A, 3.50% 2008	$	20,000			19,438
General Electric Capital Corp., Series A, 6.00% 2012		15,000			15,819
General Electric Co. 5.00% 2013		12,750			12,762
Cendant Corp. 6.875% 2006		2,000			2,021
Cendant Corp. 6.25% 2008		29,000			29,537
Cendant Corp. 7.375% 2013		32,500			36,360
Cendant Corp. 7.125% 2015		5,710			6,414
Bombardier Capital Inc., Series A, 6.125% 2006¹		1,000			1,005
Bombardier Inc. 6.75% 2012¹		10,290			9,570
Bombardier Inc. 6.30% 2014¹		39,000			34,320
Delta Air Lines, Inc. 8.00% 2007^1,6		4,000			900
Delta Air Lines, Inc., Series 2001-1, Class A-1, 6.619% 2011³		9,122			8,983
Delta Air Lines, Inc., Series 2000-1, Class A-2, 7.57% 2012³		3,500			3,451
Delta Air Lines, Inc., Series 2001-1, Class A-2, 7.111% 2013³		15,000			14,748
Delta Air Lines, Inc., Series 2002-1, Class C, 7.779% 2013³		10,802			8,756
Delta Air Lines, Inc., Series 1992-A2, 9.20% 2014^3,6		7,500			4,103
Delta Air Lines, Inc., 1991 Equipment Certificates Trust, Series J, 10.00% 2014^1,3,6		5,000			2,200
Delta Air Lines, Inc. 10.375% 2022⁶		2,577			586
Burlington Northern and Santa Fe Railway Co. Pass Through Trust, Series 1996-B, 6.96% 2009³		1,824			1,888
Burlington Northern and Santa Fe Railway Co. Pass Through Trust, Series 2002-2, 5.14% 2021³		12,458			12,528
Burlington Northern and Santa Fe Railway Co. Pass Through Trust, Series 2002-1, 5.943% 2022³		6,535			6,889
BNSF Funding Trust I 6.613% 2055²		13,600			14,211
Tyco International Group SA 6.125% 2008		13,000			13,279
Tyco International Group SA 6.125% 2009		500			511
Tyco International Group SA 6.375% 2011		15,000			15,598
Northwest Airlines, Inc. 9.875% 2007⁶		6,000			2,370
Northwest Airlines, Inc. 10.00% 2009⁶		4,000			1,530
Northwest Airlines, Inc., Series 2001-1, Class A-2, 6.841% 2012³		9,955			9,651
Northwest Airlines, Inc., Series 1999-2, Class A, 7.575% 2020³		5,898			5,942
Northwest Airlines, Inc., Series 2002-1, Class G-2, MBIA insured, 6.264% 2023³		7,362			7,498
Northwest Airlines, Inc., Series 2001-1, Class A-1, 7.041% 2023³		2,090			2,021
Southwest Airlines Co., Series 2001-1, Class A-2, 5.496% 2006³		5,000			5,024
Southwest Airlines Co., Series 2001-1, Class B, 6.126% 2006³		7,500			7,544
Southwest Airlines Co. 5.25% 2014		12,500			12,143
Caterpillar Financial Services Corp., Series F, 2.35% 2006		5,000			4,915
Caterpillar Financial Services Corp. 2.70% 2008		4,845			4,606
Caterpillar Financial Services Corp., Series F, 4.30% 2008²		1,000			1,001
Caterpillar Inc. 4.50% 2009		2,833			2,796
Caterpillar Financial Services Corp. 4.30% 2010		9,400			9,159
Caterpillar Inc. 5.30% 2035		1,750			1,725
Union Pacific Railroad Co. Pass Through Trust, Series 2001-1, 6.63% 2022³		7,816			8,560
Union Pacific Railroad Co. Pass Through Trust, Series 2002-1, 6.061% 2023³		11,347			12,175
Union Pacific Railroad Co. Pass Through Trust, Series 2003-1, 4.698% 2024³		2,968			2,857
Allied Waste North America, Inc. 8.50% 2008		7,500			7,912
Allied Waste North America, Inc., Series B, 8.875% 2008		5,250			5,565
Allied Waste North America, Inc., Series B, 6.50% 2010		500			497
Allied Waste North America, Inc., Series B, 5.75% 2011		2,500			2,381
Allied Waste North America, Inc., Series B, 6.125% 2014		3,000			2,842
Allied Waste North America, Inc., Series B, 7.375% 2014		3,750			3,666
John Deere Capital Corp., Series D, 4.375% 2008		15,000			14,842
Deere & Co. 8.95% 2019		6,000			6,673
NTK Holdings Inc. 0%/10.75% 2014⁵		15,118			9,524
THL Buildco, Inc. 8.50% 2014		10,650			10,330
United Air Lines, Inc. 9.00% 2003⁷		2,000			455
United Air Lines, Inc., Series 2001-1, Class A-2, 6.201% 2010³		2,848			2,794
United Air Lines, Inc., Series 2000-2, Class B, 7.811% 2011³		2,455			2,138
United Air Lines, Inc., Series 2000-2, Class A-2, 7.186% 2012³		233			233
United Air Lines, Inc., Series 2000-1, Class A-2, 7.73% 2012^3,6		8,993			8,956
United Air Lines, Inc., Series 2001-1, Class A-1, 6.071% 2014³		852			835
United Air Lines, Inc., Series 2001-1, Class A-3, 6.602% 2015³		3,342			3,302
Holcim Finance (Luxembourg) SA 4.375% 2014		€8,860			10,874
Northrop Grumman Corp. 4.079% 2006	$	2,000			1,985
Northrop Grumman Systems Corp. 7.125% 2011		8,000			8,727
Raytheon Co. 6.55% 2010		6,000			6,328
Raytheon Co. 8.30% 2010		3,000			3,363
TFM, SA de CV 9.375% 2012¹		6,450			7,095
TFM, SA de CV 12.50% 2012		2,145			2,456
DynCorp International and DIV Capital Corp. 9.50% 2013		7,975			8,334
Lockheed Martin Corp. 8.50% 2029		6,000			8,202
United Rentals (North America), Inc., Series B, 6.50% 2012		7,150			6,998
United Rentals (North America), Inc. 7.75% 2013		900			882
Jacuzzi Brands, Inc. 9.625% 2010		7,240			7,729
Horizon Lines, LLC and Horizon Lines Holding Corp. 9.00% 2012		7,071			7,478
Terex Corp. 9.25% 2011		4,215			4,521
Terex Corp., Class B, 10.375% 2011		2,725			2,902
American Standard Inc. 7.625% 2010		5,000			5,379
American Standard Inc. 5.50% 2015		2,000			1,978
AIR 2 US, Series A, 8.027% 2020^1,3		7,476			7,294
Southern Capital Corp. Pass Through Trust, Series 2002-1, Class G, MBIA insured, 5.70% 2023^1,3		7,011			7,054
Waste Management, Inc. 6.50% 2008		5,220			5,416
Waste Management, Inc. 5.00% 2014		765			751
Goodman Global Holdings 7.875% 2012¹		6,470			6,049
Accuride Corp. 8.50% 2015		5,700			5,643
General Dynamics Corp. 4.50% 2010		5,000			4,925
K&F Industries, Inc. 7.75% 2014		4,010			4,070
Standard Aero Holdings, Inc. 8.25% 2014		4,760			3,927
Ashtead Group PLC 8.625% 2015¹		3,525			3,728
Builders FirstSource, Inc. 8.59% 2012²		3,475			3,553
Williams Scotsman, Inc. 8.50% 2015		3,300			3,432
ACIH, Inc. 0%/11.50% 2012^1,5		3,390			2,407
FTI Consulting, Inc. 7.625% 2013¹		2,300			2,380
Argo-Tech Corp. 9.25% 2011		1,795			1,849
Kansas City Southern Railway Co. 9.50% 2008		1,500			1,631
UCAR Finance Inc. 10.25% 2012		1,385			1,470
Ahern Rentals, Inc. 9.25% 2013¹		950			1,005
AGCO Corp. 6.875% 2014		€700			857
DRS Technologies, Inc. 6.875% 2013	$	625			601
Jet Equipment Trust, Series 1994-A, 11.79% 2013^1,6		4,000			—
Jet Equipment Trust, Series 1995-B, 10.91% 2014^1,6		5,000			—
Jet Equipment Trust, Series 1995-D, 11.44% 2014^1,6		2,500			—
					1,087,998


UTILITIES — 2.91%
Edison Mission Energy 10.00% 2008		3,000			3,300
Edison Mission Energy 7.73% 2009		10,125			10,505
Edison Mission Energy 9.875% 2011		16,250			19,033
Southern California Edison, First and Refunding Mortgage Bonds, Series 2005-A, 5.00% 2016		4,000			3,962
Midwest Generation, LLC, Series B, 8.56% 2016³		7,569			8,236
Homer City Funding LLC 8.734% 2026³		11,080			12,964
Midwest Generation, LLC and Midwest Finance Corp. 8.75% 2034		7,600			8,407
PECO Energy Co., First and Refunding Mortgage Bonds, 3.50% 2008		5,000			4,840
Commonwealth Edison Co., Series 99, 3.70% 2008		7,125			6,917
Commonwealth Edison Co., First Mortgage Bonds, Series 102, 4.74% 2010		12,500			12,230
Exelon Corp. 6.75% 2011		2,200			2,345
Exelon Generation Co., LLC 6.95% 2011		22,975			24,801
PECO Energy Co., First and Refunding Mortgage Bonds, 4.75% 2012		3,900			3,835
Duke Capital Corp. 4.37% 2009		7,500			7,326
Duke Capital Corp. 7.50% 2009		16,575			17,813
Duke Energy Corp., First and Refunding Mortgage Bonds, 4.50% 2010		4,500			4,416
Duke Capital Corp. 6.25% 2013		9,000			9,386
Duke Capital Corp. 5.50% 2014		10,000			9,977
Duke Capital LLC 5.668% 2014		2,000			2,020
Dominion Resources, Inc., Series A, 3.66% 2006		3,000			2,965
Virginia Electric and Power Co., Series 2002-A, 5.375% 2007		14,140			14,196
Dominion Resources, Inc., Series 2002-C, 5.70% 2012²		1,000			1,018
Dominion Resources, Inc., Series 2002-B, 6.25% 2012		10,000			10,476
Virginia Electric and Power Co., Series 2003-A, 4.75% 2013		22,000			21,399
PSEG Power LLC 3.75% 2009		6,825			6,537
PSEG Power LLC 7.75% 2011		18,700			20,727
PSEG Power LLC 5.00% 2014		11,690			11,298
Ameren Corp. 4.263% 2007		2,500			2,465
Cilcorp Inc. 8.70% 2009		1,000			1,112
Union Electric Co. 5.25% 2012		1,490			1,501
Union Electric Co. 4.65% 2013		11,000			10,672
Union Electric Co. 5.40% 2016		5,750			5,807
Cilcorp Inc. 9.375% 2029		12,265			16,371
Israel Electric Corp. Ltd. 7.95% 2011¹		10,000			11,245
Israel Electric Corp. Ltd. 7.70% 2018¹		8,500			9,622
Israel Electric Corp. Ltd. 8.10% 2096¹		12,000			13,939
PacifiCorp, First Mortgage Bonds, 4.30% 2008		3,060			3,015
PacifiCorp, First Mortgage Bonds, 5.45% 2013		2,875			2,943
Scottish Power PLC 5.375% 2015		21,415			21,466
Alabama Power Co., Series U, 2.65% 2006		20,500			20,457
Alabama Power Co., Series R, 4.70% 2010		2,250			2,223
Southern Power Co., Series B, 6.25% 2012		2,500			2,634
Niagara Mohawk Power Corp., Series G, 7.75% 2008		17,460			18,653
SP PowerAssets Ltd. 3.80% 2008¹		10,000			9,715
SP PowerAssets Ltd. 5.00% 2013¹		8,000			8,007
AES Corp. 9.50% 2009		4,677			5,075
AES Corp. 9.375% 2010		4,803			5,271
AES Corp. 8.75% 2013¹		1,000			1,094
AES Gener SA 7.50% 2014		5,000			5,086
Southern California Gas Co., First Mortgage Bonds, Series II, 4.375% 2011		5,000			4,871
San Diego Gas & Electric Co., Series CCC, 5.30% 2015		10,000			10,137
Empresa Nacional de Electricidad SA, Series B, 8.50% 2009		4,455			4,863
Empresa Nacional de Electricidad SA 8.35% 2013		5,000			5,704
Empresa Nacional de Electricidad SA 8.625% 2015		3,000			3,520
Constellation Energy Group, Inc. 6.125% 2009		10,500			10,843
Baltimore Gas and Electric Co. 5.20% 2033		3,000			2,785
Old Dominion Electric Cooperative, Series 2003-A, 5.676% 2028³		12,938			13,279
Consolidated Edison Co. of New York, Inc., Series 2003-A, 3.625% 2008		6,000			5,818
Consolidated Edison Co. of New York, Inc., Series B, 3.85% 2013		5,000			4,646
Consolidated Edison Co. of New York, Inc., Series 2003-C, 5.10% 2033		2,000			1,882
MidAmerican Energy Co. 5.125% 2013		7,500			7,524
MidAmerican Energy Co. 4.65% 2014		5,000			4,818
Progress Energy Florida, Inc., First Mortgage Bonds, 4.80% 2013		7,000			6,866
Carolina Power & Light Co. d/b/a Progress Energy Carolinas, Inc., First Mortgage Bonds, 5.125% 2013		5,000			4,995
Oncor Electric Delivery Co. 6.375% 2012		10,700			11,298
Pacific Gas and Electric Co., First Mortgage Bonds, 4.20% 2011		7,000			6,720
Pacific Gas and Electric Co., First Mortgage Bonds, 6.05% 2034		4,000			4,154
Anglian Water Services Financing PLC 4.625% 2013		€8,250			10,408
Reliant Energy Resources Corp. 7.75% 2011	$	7,000			7,748
Centerpoint Energy Resources Corp., Series B, 7.875% 2013		2,000			2,290
Kern River Funding Corp. 4.893% 2018^1,3		9,764			9,592
Ohio Power Co., Series J, 5.30% 2010		8,000			8,056
Appalachian Power Co., Series I, 4.95% 2015		1,000			967
Dynegy Holdings Inc. 10.125% 2013¹		7,475			8,484
Energy East Corp. 6.75% 2012		7,155			7,747
Nevada Power Co., General and Refunding Mortgage Notes, Series I, 6.50% 2012		700			721
Nevada Power Co., General and Refunding Mortgage Notes, Series G, 9.00% 2013		2,336			2,584
Sierra Pacific Resources 8.625% 2014		900			978
Nevada Power Co., General and Refunding Mortgage Notes, Series L, 5.875% 2015		2,550			2,543
Edison SpA 5.125% 2010		€4,730			6,007
NiSource Finance Corp. 6.15% 2013	$	5,600			5,873
Essent NV 4.50% 2013		€4,160			5,151
Florida Power & Light Co. 4.85% 2013	$	5,000			4,964
Korea East-West Power Co., Ltd. 4.875% 2011¹		5,000			4,928
FPL Energy National Wind, LLC 5.608% 2024^1,3		4,887			4,883
NGG Finance PLC 6.125% 2011		€3,480			4,668
Texas Genco LLC and Texas Genco Financing Corp. 6.875% 2014¹	$	3,500			3,806
Tri-State Generation and Transmission Association Inc., Pass Through Trust, Series 2003-A, 6.04% 2018^1,3		3,500			3,606
Enersis SA 7.375% 2014		3,000			3,233
Equitable Resources, Inc. 5.15% 2018		2,500			2,484
Wisconsin Gas Co. 5.20% 2015		2,025			2,013
					667,759


ENERGY — 2.12%
Ras Laffan Liquefied Natural Gas Co. Ltd. 3.437% 2009^1,3	$	40,498		$	39,124
Ras Laffan Liquefied Natural Gas Co. Ltd. 3.437% 2009³		2,235			2,159
Ras Laffan Liquefied Natural Gas Co. Ltd. 8.294% 2014^1,3		15,570			18,032
Ras Laffan Liquefied Natural Gas Co. Ltd. 8.294% 2014³		1,000			1,158
Ras Laffan Liquefied Natural Gas II 5.298% 2020^1,3		45,970			45,706
Ras Laffan Liquefied Natural Gas III 5.838% 2027^1,3		15,000			15,094
Tengizchevroil Finance Co. S.àr.l., Series A, 6.124% 2014^1,3		59,400			60,707
Tengizchevroil Finance Co. S.àr.l., Series A, 6.124% 2014³		6,000			6,132
Pemex Finance Ltd. 8.875% 2010³		24,000			26,656
Pemex Finance Ltd., Series 1999-2, Class A-3, 10.61% 2017³		11,700			15,715
Pemex Project Funding Master Trust 8.625% 2022		750			926
Petroleum Export Ltd., Class A-1, MBIA insured, 4.623% 2010^1,3		34,500			34,194
Petroleum Export Ltd., Class A-2, XLCA insured, 4.633% 2010^1,3		6,500			6,442
Devon Financing Corp., ULC 6.875% 2011		8,500			9,309
Devon Energy Corp. 7.95% 2032		18,000			23,288
Conoco Funding Co. 6.35% 2011		26,750			28,697
Delek & Avner-Yam Tethys Ltd. 5.326% 2013^1,3		18,730			18,326
Premcor Refining Group Inc. 9.25% 2010		3,250			3,523
Premcor Refining Group Inc. 6.125% 2011		5,000			5,174
Premcor Refining Group Inc. 6.75% 2011		1,000			1,060
Premcor Refining Group Inc. 9.50% 2013		2,750			3,067
Premcor Refining Group Inc. 6.75% 2014		3,000			3,155
Sunoco, Inc. 4.875% 2014		14,830			14,498
Reliance Industries Ltd. 10.25% 2097¹		8,750			10,655
Williams Companies, Inc. 6.375% 2010¹		1,500			1,506
Williams Companies, Inc. 7.125% 2011		500			522
Williams Companies, Inc. 7.875% 2021		2,000			2,175
Williams Companies, Inc. 8.75% 2032		5,080			5,918
Coastal Corp. 6.375% 2009		200			197
El Paso Energy Corp. 7.375% 2012		1,815			1,833
El Paso Natural Gas Co. 7.50% 2026		250			259
Southern Natural Gas Co. 7.35% 2031		1,450			1,495
El Paso Corp. 7.75% 2032		4,000			4,030
Southern Natural Gas Co. 8.00% 2032		830			914
Open Joint Stock Co. Gazprom 9.125% 2007		2,000			2,094
Gaz Capital SA 5.875% 2015		€5,125			6,536
Newfield Exploration Co. 7.625% 2011	$	3,000			3,225
Newfield Exploration Co. 8.375% 2012		2,775			2,983
Newfield Exploration Co. 6.625% 2014		2,000			2,045
Enterprise Products Operating LP 6.375% 2013		5,000			5,242
Enterprise Products Operating LP 5.00% 2015		3,000			2,863
Gulfstream Natural Gas System LLC 6.19% 2025¹		7,235			7,425
OXYMAR 7.50% 2016^1,3		5,500			5,959
Pogo Producing Co. 6.875% 2017¹		5,850			5,733
Ultrapetrol (Bahamas) Ltd., First Preferred Ship Mortgage Notes, 9.00% 2014		5,225			4,885
Teekay Shipping Corp. 8.875% 2011		4,250			4,824
Petrozuata Finance, Inc., Series B, 8.22% 2017^1,3		4,550			4,300
American Commercial Lines LLC and ACL Finance Corp. 9.50% 2015		3,928			4,262
Encore Acquisition Co. 6.00% 2015		4,450			4,116
Overseas Shipholding Group, Inc. 8.25% 2013		2,500			2,656
Massey Energy Co. 6.875% 2013¹		2,500			2,534
PETRONAS Capital Ltd. 7.00% 2012¹		2,250			2,481
Peabody Energy Corp., Series B, 6.875% 2013		1,200			1,254
Apache Corp. 6.25% 2012		1,000			1,076
					488,139


MATERIALS — 2.12%
Norske Skogindustrier ASA 7.625% 2011¹	$	47,135		$	50,530
Norske Skogindustrier ASA 6.125% 2015¹		4,870			4,715
Norske Skogindustrier ASA 7.125% 2033¹		4,100			3,958
Weyerhaeuser Co. 5.95% 2008		11,063			11,294
Weyerhaeuser Co. 6.75% 2012		20,580			21,871
Weyerhaeuser Co. 7.375% 2032		12,500			13,939
International Paper Co. 5.375% 2006		€4,500			5,399
International Paper Co. 4.00% 2010	$	6,545			6,186
International Paper Co. 6.75% 2011		2,500			2,663
International Paper Co. 5.85% 2012		27,670			28,115
Millennium America Inc. 9.25% 2008		4,540			4,920
Equistar Chemicals, LP 10.125% 2008		6,100			6,649
Equistar Chemicals, LP and Equistar Funding Corp. 8.75% 2009		12,800			13,536
Millennium America Inc. 7.625% 2026		2,600			2,496
BHP Finance (USA) Ltd. 6.69% 2006		10,000			10,034
BHP Finance (USA) Ltd. 8.50% 2012		10,000			11,963
Stone Container Corp. 9.25% 2008		1,000			1,030
Stone Container Corp. 9.75% 2011		3,250			3,299
Jefferson Smurfit Corp. (U.S.) 8.25% 2012		12,150			11,725
Stone Container Corp. 8.375% 2012		1,675			1,629
Jefferson Smurfit Corp. (U.S.) 7.50% 2013		250			231
Abitibi-Consolidated Inc. 8.55% 2010		3,737			3,802
Abitibi-Consolidated Co. of Canada 8.375% 2015		13,750			13,234
Teck Cominco Ltd. 5.375% 2015		5,000			4,945
Teck Cominco Ltd. 6.125% 2035		12,000			11,908
ICI Wilmington, Inc. 4.375% 2008		200			195
ICI Wilmington, Inc. 5.625% 2013		16,465			16,415
Scotia Pacific Co. LLC, Series B, Class A-2, 7.11% 2028³		21,160			16,518
Temple-Inland Inc. 6.375% 2016		14,500			14,816
JSG Funding PLC 7.75% 2015		€2,000			2,117
JSG Funding PLC 7.75% 2015	$	1,200			1,002
JSG Holdings PLC 11.50% 2015⁸		€10,175			10,844
Dow Chemical Co. 5.75% 2008	$	11,100			11,395
Dow Chemical Co. 7.375% 2029		1,750			2,115
Owens-Illinois, Inc. 8.10% 2007		3,130			3,216
Owens-Illinois, Inc. 7.35% 2008		5,250			5,342
Owens-Brockway Glass Container Inc. 8.875% 2009		1,500			1,573
Owens-Illinois, Inc. 7.50% 2010		2,250			2,295
Rhodia SA 8.00% 2010		€3,000			3,743
Rhodia 10.25% 2010	$	150			165
Rhodia 8.875% 2011		3,740			3,852
Rhodia SA 9.25% 2011		€3,200			4,050
UPM-Kymmene Corp. 5.625% 2014¹	$	11,320			11,283
Associated Materials Inc. 9.75% 2012		10,065			9,763
AMH Holdings, Inc. 0%/11.25% 2014⁵		3,000			1,485
Graphic Packaging International, Inc. 8.50% 2011		2,825			2,846
Graphic Packaging International, Inc. 9.50% 2013		6,495			6,235
Building Materials Corp. of America, Series B, 8.00% 2007		1,000			1,016
Building Materials Corp. of America 8.00% 2008		500			508
Building Materials Corp. of America 7.75% 2014		7,250			7,033
Alcan Inc. 5.20% 2014		8,000			7,925
Plastipak Holdings, Inc. 8.50% 2015¹		6,690			6,790
Domtar Inc. 7.875% 2011		1,225			1,133
Domtar Inc. 7.125% 2015		6,500			5,574
Boise Cascade, LLC and Boise Cascade Finance Corp. 7.125% 2014		6,800			6,375
Corporación Nacional del Cobre de Chile 5.625% 2035¹		5,650			5,649
Stora Enso Oyj 5.125% 2014		€4,250		$	5,353
Praxair, Inc. 2.75% 2008	$	5,000			4,761
Nalco Co. 7.75% 2011		775			800
Nalco Co. 8.875% 2013		2,500			2,631
Nalco Finance Holdings LLC and Nalco Finance Holdings Inc. 0%/9.00% 2014⁵		1,254			947
Yara International ASA 5.25% 2014¹		4,000			3,924
Earle M. Jorgensen Co. 9.75% 2012		3,600			3,870
NOVA Chemicals Corp. 7.561% 2013^1,2		3,750			3,849
Ainsworth Lumber Co. Ltd. 7.25% 2012		700			634
Ainsworth Lumber Co. Ltd. 6.75% 2014		1,750			1,509
Ainsworth Lumber Co. Ltd. 6.75% 2014		1,750			1,496
Crompton Corp. 10.198% 2010²		2,400			2,652
Crompton Corp. 9.875% 2012		500			573
SCA Coordination Center NV 4.50% 2015¹		3,250			2,939
Longview Fibre Co. 10.00% 2009		2,730			2,880
Neenah Paper, Inc. 7.375% 2014		2,640			2,396
Gerdau Ameristeel Corp. and GUSAP Partners 10.375% 2011		2,100			2,326
Sino-Forest Corp. 9.125% 2011¹		2,065			2,225
Inco Ltd. 7.20% 2032		2,000			2,207
Crystal US Holdings 3 LLC and Crystal US Sub 3 Corp., Series B, 0%/10.50% 2014⁵		1,928			1,412
BCP Caylux Holdings Luxembourg SCA 9.625% 2014		535			598
Rockwood Specialties Group, Inc. 10.625% 2011		218			240
Rockwood Specialties Group, Inc. 7.50% 2014		1,675			1,677
Foundation PA Coal Co. 7.25% 2014		1,800			1,870
Freeport-McMoRan Copper & Gold Inc. 6.875% 2014		1,500			1,523
Packaging Corp. of America 4.375% 2008		1,500			1,468
E.I. du Pont de Nemours and Co. 4.125% 2010		1,500			1,450
AEP Industries Inc. 7.875% 2013		1,200			1,179
Huntsman LLC 11.40% 2011²		275			293
Huntsman LLC 11.50% 2012		712			810
AK Steel Corp. 7.75% 2012		1,000			908
Koppers Inc. 9.875% 2013		725			790
PQ Corp. 7.50% 2013¹		625			584
Airgas, Inc. 6.25% 2014		550			543
Ispat Inland ULC 9.75% 2014		206			234
					486,890

HEALTH CARE — 1.28%
Allegiance Corp. 7.30% 2006		2,000			2,033
Cardinal Health, Inc. 6.25% 2008		3,000			3,074
Cardinal Health, Inc. 6.75% 2011		17,625			18,809
Cardinal Health, Inc. 4.00% 2015		3,000			2,697
Cardinal Health, Inc. 5.85% 2017		26,060			26,564
Allegiance Corp. 7.00% 2026		9,260			10,274
Wyeth 4.375% 2008²		5,375			5,316
Wyeth 5.50% 2016¹		40,165			40,710
UnitedHealth Group Inc. 5.20% 2007		8,000			7,997
UnitedHealth Group Inc. 3.30% 2008		4,000			3,879
UnitedHealth Group Inc. 3.75% 2009		12,500			12,105
UnitedHealth Group Inc. 4.125% 2009		8,000			7,808
Amgen Inc. 4.00% 2009		24,000			23,294
Tenet Healthcare Corp. 7.375% 2013		3,050			2,829
Tenet Healthcare Corp. 9.875% 2014		8,450			8,598
Tenet Healthcare Corp. 9.25% 2015¹		6,475			6,459
Humana Inc. 7.25% 2006		5,000			5,048
Humana Inc. 6.30% 2018		12,000			12,667
Columbia/HCA Healthcare Corp. 8.85% 2007		2,000			2,072
HCA Inc. 5.50% 2009		2,600			2,581
Columbia/HCA Healthcare Corp. 8.70% 2010		1,750			1,915
HCA Inc. 6.25% 2013		2,500			2,514
Columbia/HCA Healthcare Corp. 7.69% 2025		5,750			6,000
Schering-Plough Corp. 5.55% 2013²		11,750			11,989
Bristol-Myers Squibb Co. 4.00% 2008		10,000			9,802
Warner Chilcott Corp. 8.75% 2015¹		10,440			9,657
Accellent Inc. 10.50% 2013¹		9,100			9,373
Quintiles Transnational Corp. 10.00% 2013		6,000			6,720
Pharma Services Intermediate Holding Corp. 0%/11.50% 2014⁵		1,750			1,304
Hospira, Inc. 4.95% 2009		7,391			7,349
Concentra Operating Corp. 9.50% 2010		3,000			3,120
Concentra Operating Corp. 9.125% 2012		3,200			3,312
HealthSouth Corp. 8.375% 2011		1,275			1,304
HealthSouth Corp. 7.625% 2012		3,975			4,054
Omnicare, Inc. 6.875% 2015		2,500			2,550
American Medical Response, Inc. and EmCare Holdings, Inc. 10.00% 2015¹		2,000			2,145
Mylan Laboratories Inc. 5.75% 2010¹		2,025			2,038
Team Finance LLC and Health Finance Corp. 11.25% 2013¹		1,500			1,537
Health Net, Inc. 9.875% 2011²		1,035			1,209
MedCath Holdings Corp. 9.875% 2012		1,000			1,060
					293,766

CONSUMER STAPLES — 1.10%
CVS Corp. 6.117% 2013^1,3		26,600			27,641
CVS Corp. 5.789% 2026^1,3		10,008			10,186
CVS Corp. 5.298% 2027^1,3		12,761			12,489
H.J. Heinz Co. 6.428% 2020¹		18,820			19,346
Ahold Finance U.S.A., Inc. 6.25% 2009		2,325			2,360
Ahold Finance U.S.A., Inc. 8.25% 2010		4,610			5,008
Ahold Lease Pass Through Trust, Series 2001-A-1, 7.82% 2020³		932			998
Ahold Lease Pass Through Trust, Series 2001-A-2, 8.62% 2025³		7,095			7,915
Rite Aid Corp. 6.125% 2008¹		2,750			2,599
Rite Aid Corp. 9.50% 2011		4,500			4,770
Rite Aid Corp. 6.875% 2013		5,485			4,607
Rite Aid Corp. 9.25% 2013		2,575			2,427
Rite Aid Corp. 7.50% 2015		1,000			950
Nabisco, Inc. 7.05% 2007		6,500			6,698
Nabisco, Inc. 7.55% 2015		5,105			5,960
Kraft Foods Inc. 6.50% 2031		2,000			2,208
Diageo Capital PLC 3.50% 2007		5,000			4,872
Diageo Capital PLC 4.375% 2010		2,395			2,338
Diageo Finance BV 5.30% 2015		6,000			6,060
Cadbury Schweppes Investments PLC, Series 41, 4.25% 2009		€4,250			5,168
Cadbury Schweppes US Finance LLC 5.125% 2013¹	$	6,750			6,723
Wal-Mart Stores, Inc. 5.45% 2006		10,000			10,045
Pepsi Bottling Group, Inc. 5.625% 2009¹		9,000			9,216
Anheuser-Busch Companies, Inc. 9.00% 2009		7,750			8,896
Jean Coutu Group (PJC) Inc. 7.625% 2012		800			792
Jean Coutu Group (PJC) Inc. 8.50% 2014		7,400			6,808
Gold Kist Inc. 10.25% 2014		6,783			7,597
Vitamin Shoppe Industries, Inc. 11.84% 2012^1,2		7,000			7,140
Kellogg Co. 6.60% 2011		4,000			4,287
Kellogg Co. 7.45% 2031		2,000			2,479
Petro Stopping Centers, LP and Petro Financial Corp. 9.00% 2012		5,530			5,585
Petro Stopping Centers, LP 9.00% 2012¹		1,030			1,040
J Sainsbury PLC 6.125% 2017		£3,450			6,231
Stater Bros. Holdings Inc. 7.991% 2010²	$	475			477
Stater Bros. Holdings Inc. 8.125% 2012		5,360			5,333
Pathmark Stores, Inc. 8.75% 2012		5,565			5,224
Molson Coors Capital Finance ULC 4.85% 2010		5,000			4,937
Spectrum Brands, Inc. 7.375% 2015		5,330			4,477
PepsiAmericas, Inc. 4.875% 2015		4,000			3,951
Delhaize America, Inc. 8.125% 2011		3,500			3,833
Winn-Dixie Stores, Inc. 8.875% 2008⁶		2,300			1,829
Winn-Dixie Pass Through Trust, Series 1999-1, Class A-1, 4.40% 2017^1,3,9		2,071			1,575
SUPERVALU INC. 7.50% 2012		2,390			2,559
Playtex Products, Inc. 9.375% 2011		2,375			2,500
Elizabeth Arden, Inc. 7.75% 2014		1,780			1,807
WH Holdings (Cayman Islands) Ltd. and WH Capital Corp. 9.50% 2011		1,500			1,627
					251,568

INFORMATION TECHNOLOGY — 0.89%
Electronic Data Systems Corp. 6.334% 2006		18,000			18,149
Electronic Data Systems Corp. 7.125% 2009		32,000			34,031
Electronic Data Systems Corp., Series B, 6.50% 2013²		58,375			60,082
Electronic Data Systems Corp. 7.45% 2029		11,475			12,241
Motorola, Inc. 8.00% 2011		10,995			12,623
Motorola, Inc. 5.22% 2097		6,250			5,189
Amkor Technology, Inc. 9.25% 2008		2,895			2,823
Amkor Technology, Inc. 10.50% 2009		1,855			1,716
Amkor Technology, Inc. 7.125% 2011		5,780			5,115
Amkor Technology, Inc. 7.75% 2013		1,025			897
SunGard Data Systems Inc. 9.125% 2013¹		8,175			8,502
SunGard Data Systems Inc. 10.25% 2015¹		2,000			2,010
Hyundai Semiconductor America, Inc. 8.625% 2007¹		10,150			10,453
Celestica Inc. 7.875% 2011		5,880			5,953
Celestica Inc. 7.625% 2013		4,170			4,133
Sanmina-SCI Corp. 10.375% 2010		1,000			1,110
Sanmina-SCI Corp. 6.75% 2013		7,500			7,172
Jabil Circuit, Inc. 5.875% 2010		4,750			4,829
MagnaChip Semiconductor SA and MagnaChip Semiconductor Finance Co. 6.875% 2011		4,350			4,296
Iron Mountain Inc. 7.75% 2015		2,010			2,035
Flextronics International Ltd. 6.50% 2013		925			945
Freescale Semiconductor, Inc. 6.875% 2011		750			791
Exodus Communications, Inc. 11.625% 2010^4,6		1,132			0
					205,095

MORTGAGE-BACKED OBLIGATIONS³— 20.35%
Fannie Mae 7.00% 2009		98			99
Fannie Mae 7.50% 2009		158			163
Fannie Mae 7.50% 2009		127			131
Fannie Mae 7.50% 2009		34			35
Fannie Mae 7.50% 2009		32			33
Fannie Mae 7.50% 2009		30			30
Fannie Mae 7.50% 2009		24			24
Fannie Mae 8.50% 2009		105			108
Fannie Mae 9.50% 2009		31			33
Fannie Mae 7.00% 2010		78			80
Fannie Mae, Series 2000-T5B, 7.30% 2010		57,100			62,532
Fannie Mae, Series 2001-T6B, 6.088% 2011		48,000			50,671
Fannie Mae, Series 2003-T1, Class B, 4.491% 2012		46,225			45,263
Fannie Mae 4.89% 2012		25,000			24,758
Fannie Mae 4.00% 2015		35,180			33,913
Fannie Mae 6.00% 2016		4,862			4,969
Fannie Mae 6.00% 2016		2,457			2,511
Fannie Mae 6.00% 2016		2,347			2,398
Fannie Mae 6.00% 2016		1,335			1,364
Fannie Mae 7.00% 2016		337			347
Fannie Mae 11.50% 2016		693			788
Fannie Mae 5.00% 2017		4,349			4,316
Fannie Mae 6.00% 2017		1,707			1,744
Fannie Mae 5.00% 2018		27,113			26,905
Fannie Mae 5.00% 2018		19,256			19,108
Fannie Mae 5.00% 2018		10,521			10,440
Fannie Mae 5.50% 2018		3,499			3,523
Fannie Mae 9.00% 2018		53			58
Fannie Mae 10.00% 2018		519			584
Fannie Mae 4.50% 2019		7,676			7,483
Fannie Mae 5.50% 2019		36,663			36,917
Fannie Mae 5.50% 2019		13,735			13,826
Fannie Mae 12.00% 2019		639			740
Fannie Mae, Series 90-93, Class G, 5.50% 2020		53			53
Fannie Mae 11.00% 2020		218			247
Fannie Mae 11.271% 2020²		609			701
Fannie Mae 9.00% 2022		231			248
Fannie Mae 7.50% 2023		183			193
Fannie Mae, Series 2001-4, Class GA, 10.248% 2025²		1,064			1,193
Fannie Mae, Series 2001-4, Class NA, 11.87% 2025²		5,517			6,224
Fannie Mae 5.269% 2026²		1,184			1,208
Fannie Mae 7.00% 2026		1,817			1,911
Fannie Mae 8.50% 2027		18			19
Fannie Mae, Series 1998-W5, Class B3, 6.50% 2028		3,035			2,965
Fannie Mae 7.00% 2028		978			1,023
Fannie Mae, Series 2002-W3, Class A-5, 7.50% 2028		7,644			8,000
Fannie Mae 6.50% 2029		361			368
Fannie Mae, Series 2002-W7, Class A-5, 7.50% 2029		1,157			1,214
Fannie Mae 7.50% 2029		93			98
Fannie Mae 7.50% 2029		84			88
Fannie Mae 7.00% 2030		262			273
Fannie Mae 7.50% 2030		304			319
Fannie Mae 6.50% 2031		1,504			1,547
Fannie Mae 6.50% 2031		859			883
Fannie Mae 6.50% 2031		552			568
Fannie Mae 6.50% 2031		176			181
Fannie Mae 7.00% 2031		485			507
Fannie Mae 7.50% 2031		753			791
Fannie Mae 7.50% 2031		85			89
Fannie Mae, Series 2001-20, Class E, 9.607% 2031²		190			210
Fannie Mae, Series 2001-20, Class C, 12.044% 2031²		236			265
Fannie Mae 6.00% 2032		1,218			1,231
Fannie Mae 6.50% 2032		10,569			10,865
Fannie Mae 6.50% 2032		6,044			6,213
Fannie Mae 7.00% 2032		335			350
Fannie Mae 3.755% 2033²		4,118			4,039
Fannie Mae 5.50% 2033		84,252			83,660
Fannie Mae 5.50% 2034		14,818			14,695
Fannie Mae 6.00% 2034		3,316			3,347
Fannie Mae 6.00% 2034		2,657			2,682
Fannie Mae 6.00% 2034		2,524			2,548
Fannie Mae 6.00% 2034		2,193			2,214
Fannie Mae 6.00% 2034		665			671
Fannie Mae 6.00% 2034		512			517
Fannie Mae 4.487% 2035²		4,684			4,618
Fannie Mae 4.588% 2035²		22,153			21,872
Fannie Mae 5.00% 2035		45,000			43,596
Fannie Mae 5.00% 2035		9,883			9,575
Fannie Mae 5.00% 2035		5,771			5,591
Fannie Mae 5.50% 2035		131,107			130,021
Fannie Mae 5.50% 2035		25,000			24,762
Fannie Mae 5.50% 2035		12,690			12,569
Fannie Mae 5.50% 2035		6,859			6,853
Fannie Mae 5.50% 2035		6,916			6,850
Fannie Mae 6.00% 2035		17,648			17,817
Fannie Mae 6.00% 2035		2,717			2,742
Fannie Mae 6.00% 2035		2,416			2,439
Fannie Mae 6.00% 2035		873			882
Fannie Mae 6.00% 2035		838			847
Fannie Mae 5.50% 2036		48,796			48,316
Fannie Mae 6.00% 2036		19,670			19,847
Fannie Mae, Series 2003-W10, Class 1A-2B, 3.112% 2037		5,417			5,394
Fannie Mae, Series 2001-T10, Class A-1, 7.00% 2041		11,507			11,906
Fannie Mae, Series 2001-50, Class BA, 7.00% 2041		3,623			3,770
Fannie Mae, Series 2002-W1, Class 2A, 7.50% 2042		8,482			8,853
Freddie Mac 8.25% 2007		61			62
Freddie Mac 8.25% 2007		16			16
Freddie Mac 8.50% 2007		10			10
Freddie Mac, Series H009, Class A-2, 1.876% 2008²		397			395
Freddie Mac 8.00% 2008		10			10
Freddie Mac 8.50% 2008		30			31
Freddie Mac 8.50% 2008		28			28
Freddie Mac 8.50% 2008		10			10
Freddie Mac 8.50% 2008		4			4
Freddie Mac 8.75% 2008		83			85
Freddie Mac 8.75% 2008		27			27
Freddie Mac 8.75% 2008		12			12
Freddie Mac 8.75% 2008		11			11
Freddie Mac 8.00% 2009		7			7
Freddie Mac 8.50% 2009		141			146
Freddie Mac 8.50% 2010		137			142
Freddie Mac 8.50% 2010		92			94
Freddie Mac 4.00% 2015		48,184			46,093
Freddie Mac 6.00% 2017		813			830
Freddie Mac 6.00% 2017		812			828
Freddie Mac, Series 2310, Class A, 10.582% 2017²		1,232			1,336
Freddie Mac 5.00% 2018		25,958			25,775
Freddie Mac 11.00% 2018		156			175
Freddie Mac 8.50% 2020		264			285
Freddie Mac 8.50% 2020		93			100
Freddie Mac, Series 41, Class F, 10.00% 2020		205			205
Freddie Mac, Series 178, Class Z, 9.25% 2021		145			154
Freddie Mac 8.00% 2026		161			173
Freddie Mac 8.50% 2027		35			38
Freddie Mac 4.648% 2035²		27,018			26,639
Freddie Mac 4.79% 2035²		14,380			14,224
Freddie Mac 5.00% 2035		48,159			46,619
Freddie Mac 5.00% 2035		11,685			11,311
Freddie Mac, Series 3061, Class PN, 5.50% 2035		64,198			64,679
Freddie Mac 5.50% 2035		24,100			23,882
Freddie Mac 5.50% 2035		24,066			23,848
Freddie Mac, Series 2977, Class NX, 5.50% 2035		10,880			10,653
Freddie Mac 6.50% 2035		1,276			1,308
Freddie Mac 6.50% 2035		1,188			1,217
Freddie Mac 6.50% 2035		1,092			1,120
Freddie Mac 6.00% 2036		408,600			412,527
Freddie Mac 6.50% 2036		800			820
Countrywide Alternative Loan Trust, Series 2004-5CB, Class 2-A-1, 5.00% 2019		12,164			12,004
Countrywide Alternative Loan Trust, Series 2004-28CB, Class 7-A-1, 5.00% 2020		5,034			4,907
Countrywide Alternative Loan Trust, Series 2005-9CB, Class 2-A-1, 6.00% 2020		9,703			9,764
Countrywide Alternative Loan Trust, Series 2005-62, Class 2-A-1, 4.326% 2035²		33,190			33,065
Countrywide Alternative Loan Trust, Series 2005-46CB, Class A-8, 5.50% 2035		107,348			107,357
Countrywide Alternative Loan Trust, Series 2005-54CB, Class 1-A-7, 5.50% 2035		59,304			59,394
Countrywide Alternative Loan Trust, Series 2005-40CB, Class A-1, 5.50% 2035		40,955			40,609
Countrywide Alternative Loan Trust, Series 2005-49CB, Class A-1, 5.50% 2035		39,530			39,530
Countrywide Alternative Loan Trust, Series 2005-21CB, Class A-9, 5.50% 2035		17,543			17,559
Countrywide Alternative Loan Trust, Series 2005-13CB, Class A-3, 5.50% 2035		6,706			6,665
Countrywide Alternative Loan Trust, Series 2004-28CB, Class 5-A-1, 5.75% 2035		3,354			3,320
Countrywide Alternative Loan Trust, Series 2005-21CB, Class A-17, 6.00% 2035		38,990			39,109
Countrywide Alternative Loan Trust, Series 2004-36CB, Class 1-A-1, 6.00% 2035		22,220			22,223
Countrywide Alternative Loan Trust, Series 2004-28CB, Class 6-A-1, 6.00% 2035		1,464			1,462
Countrywide Alternative Loan Trust, Series 2005-73CB, Class 1-A-11, 5.50% 2036		9,573			9,324
Countrywide Alternative Loan Trust, Series 2005-73CB, Class 2-A-1, 5.75% 2036		7,692			7,710
CS First Boston Mortgage Securities Corp., Series 2002-30, Class I-A-1, 7.50% 2032		2,229			2,242
CS First Boston Mortgage Securities Corp., Series 2002-34, Class I-A-1, 7.50% 2032		221			223
CS First Boston Mortgage Securities Corp., Series 2003-AR12, Class II-A-2, 4.321% 2033²		1,278			1,281
CS First Boston Mortgage Securities Corp., Series 2003-21, Class V-A-1, 6.50% 2033		11,822			12,004
CS First Boston Mortgage Securities Corp., Series 2003-29, Class V-A-1, 7.00% 2033		2,928			2,994
CS First Boston Mortgage Securities Corp., Series 2004-AR5, Class VII-A-2, 4.603% 2034²		22,187			21,846
CS First Boston Mortgage Securities Corp., Series 2004-5, Class IV-A-1, 6.00% 2034		14,140			14,128
CS First Boston Mortgage Securities Corp., Series 2001-CF2, Class A-3, 6.238% 2034		7,770			7,929
CS First Boston Mortgage Securities Corp., Series 2001-CF2, Class A-4, 6.505% 2034		460			487
CS First Boston Mortgage Securities Corp., Series 2002-CP5, Class A-1, 4.106% 2035		1,731			1,689
CS First Boston Mortgage Securities Corp., Series 2005-6, Class VI-A-1, 6.00% 2035		24,662			24,735
CS First Boston Mortgage Securities Corp., Series 2005-5, Class IV-A-1, 6.25% 2035		12,557			12,674
CS First Boston Mortgage Securities Corp., Series 2001-CK1, Class A-3, 6.38% 2035		67,122			70,506
CS First Boston Mortgage Securities Corp., Series 2002-CKP1, Class F, 7.067% 2035¹		1,500			1,638
CS First Boston Mortgage Securities Corp., Series 2001-CK6, Class A-3, 6.387% 2036		26,650			28,248
CS First Boston Mortgage Securities Corp., Series 2004-C5, Class A-1A, 3.883% 2037		10,681			10,452
CS First Boston Mortgage Securities Corp., Series 2005-C3, Class A-AB, 4.614% 2037		20,000			19,373
CS First Boston Mortgage Securities Corp., Series 2002-CKN2, Class A-1, 4.637% 2037		1,394			1,391
CS First Boston Mortgage Securities Corp., Series 2004-C4, Class A-4, 4.283% 2039		20,600			19,746
CS First Boston Mortgage Securities Corp., Series 2005-C6, Class A-3, 5.23% 2040		42,000			42,157
CS First Boston Mortgage Securities Corp., Series 1999-C1, Class D, 7.801% 2041²		5,725			6,231
Bear Stearns Commercial Mortgage Securities Inc., Series 1998-C1, Class A-1, 6.34% 2030		2,405			2,440
Bear Stearns Commercial Mortgage Securities Inc., Series 1999-WF2, Class X, interest only, 0.234% 2031²		233,877			3,167
Bear Stearns Commercial Mortgage Securities Inc., Series 1999-C1, Class X, interest only, 1.01% 2031^1,2		149,262			5,105
Bear Stearns Commercial Mortgage Securities Inc., Series 2000-WF2, Class A-2, 7.32% 2032		16,480			17,873
Bear Stearns Commercial Mortgage Securities Inc., Series 2002-PBW1, Class A-1, 3.97% 2035		22,583			22,022
Bear Stearns Commercial Mortgage Securities Inc., Series 2004-PWR6, Class A-1, 3.688% 2041		3,944			3,870
Bear Stearns Commercial Mortgage Securities Inc., Series 2004-PWR6, Class A-4, 4.521% 2041		10,000			9,670
Bear Stearns Commercial Mortgage Securities Inc., Series 2005-PWR9, Class A-2, 4.735% 2042		64,000			63,093
Bear Stearns Commercial Mortgage Securities Inc., Series 2005-PWR9, Class A-3, 4.868% 2042		38,825			38,157
Residential Accredit Loans, Inc., Series 2004-QS6, Class A-1, 5.00% 2019		2,902			2,848
Residential Accredit Loans, Inc., Series 2004-QS16, Class 1-A-1, 5.50% 2034		16,214			16,158
Residential Accredit Loans, Inc., Series 2005-QR1, Class A, 6.00% 2034		50,705			50,657
Residential Accredit Loans, Inc., Series 2004-QS12, Class M-1, 6.00% 2034		2,459			2,454
Residential Accredit Loans, Inc., Series 2005-QS4, Class A-3, 5.50% 2035		43,990			43,402
Residential Accredit Loans, Inc., Series 2005-QS9, Class A-6, 5.50% 2035		5,000			4,868
Residential Accredit Loans, Inc., Series 2005-QS5, Class A-5, 5.75% 2035		5,000			4,967
Residential Accredit Loans, Inc., Series 2005-QS15, Class 2-A, 6.00% 2035		8,005			8,000
Residential Accredit Loans, Inc., Series 2005-QS14, Class 2-A-1, 6.00% 2035		6,179			6,176
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CIBC12, Class A-3B, 5.334% 2037²		45,000			45,519
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2003-ML1, Class A-1, 3.972% 2039		16,194			15,677
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP4, Class A-2, 4.79% 2042		10,508			10,374
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP4, Class A-3A1, 4.871% 2042		25,000			24,633
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP1, Class A-2, 4.625% 2046		31,455			30,991
WaMu Mortgage Pass-Through Certificates Trust, Series 2004-CB2, Class VII-A, 5.50% 2019		2,004			2,007
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR7, Class A-7, 3.842% 2033²		33,235			32,544
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR8, Class A, 4.03% 2033²		7,168			7,148
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR5, Class A-7, 4.208% 2033²		6,579			6,558
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR6, Class A-1, 4.456% 2033²		16,450			16,165
WaMu Mortgage Pass-Through Certificates Trust, Series 2004-AR11, Class A, 4.597% 2034²		37,250			36,595
WaMu Mortgage Pass-Through Certificates Trust, Series 2005-AR15, Class A-1-A, 4.639% 2045²		23,517			23,517
Government National Mortgage Assn. 7.50% 2007		29			30
Government National Mortgage Assn. 6.50% 2008		179			185
Government National Mortgage Assn. 6.50% 2008		47			48
Government National Mortgage Assn. 7.50% 2008		47			48
Government National Mortgage Assn. 7.50% 2008		35			35
Government National Mortgage Assn. 7.50% 2008		34			34
Government National Mortgage Assn. 7.50% 2008		28			28
Government National Mortgage Assn. 7.50% 2008		14			14
Government National Mortgage Assn. 6.50% 2009		64			66
Government National Mortgage Assn. 7.50% 2009		61			64
Government National Mortgage Assn. 7.50% 2009		52			55
Government National Mortgage Assn. 7.50% 2009		46			49
Government National Mortgage Assn. 7.50% 2009		47			48
Government National Mortgage Assn. 7.50% 2009		41			42
Government National Mortgage Assn. 7.50% 2009		38			40
Government National Mortgage Assn. 7.50% 2009		28			29
Government National Mortgage Assn. 9.00% 2009		578			597
Government National Mortgage Assn. 9.50% 2009		607			635
Government National Mortgage Assn. 9.50% 2009		45			47
Government National Mortgage Assn. 9.00% 2016		119			130
Government National Mortgage Assn. 9.00% 2017		40			43
Government National Mortgage Assn. 9.50% 2019		289			316
Government National Mortgage Assn. 8.50% 2020		67			72
Government National Mortgage Assn. 8.50% 2020		47			50
Government National Mortgage Assn. 9.50% 2020		125			136
Government National Mortgage Assn. 10.00% 2020		908			1,040
Government National Mortgage Assn. 8.50% 2021		298			320
Government National Mortgage Assn. 8.50% 2021		181			195
Government National Mortgage Assn. 8.50% 2021		117			126
Government National Mortgage Assn. 8.50% 2021		47			50
Government National Mortgage Assn. 10.00% 2021		1,996			2,257
Government National Mortgage Assn. 9.00% 2022		44			48
Government National Mortgage Assn. 8.50% 2023		38			41
Government National Mortgage Assn. 8.50% 2024		36			38
Government National Mortgage Assn. 8.50% 2024		27			29
Government National Mortgage Assn. 8.50% 2027		31			33
Government National Mortgage Assn. 8.50% 2028		25			27
Government National Mortgage Assn. 8.50% 2029		29			31
Government National Mortgage Assn. 4.00% 2035²		16,741			16,391
Government National Mortgage Assn. 4.00% 2035²		7,338			7,167
Government National Mortgage Assn. 4.00% 2035²		3,485			3,404
Government National Mortgage Assn. 6.00% 2035		46,025			47,025
Government National Mortgage Assn. 6.00% 2035		37,525			38,340
CHL Mortgage Pass-Through Trust, Series 2003-HYB3, Class 4-A-1, 3.471% 2033²		4,642			4,562
CHL Mortgage Pass-Through Trust, Series 2003-27, Class A-1, 3.727% 2033²		10,497			10,339
CHL Mortgage Pass-Through Trust, Series 2004-22, Class A-2, 4.676% 2034²		12,581			12,391
CHL Mortgage Pass-Through Trust, Series 2004-HYB6, Class A-3, 5.184% 2034²		5,707			5,695
CHL Mortgage Pass-Through Trust, Series 2005-HYB8, Class 4-A-1, 5.778% 2035²		85,300			85,368
Bear Stearns ARM Trust, Series 2003-6, Class I-A-2, 3.992% 2033²		30,223			29,570
Bear Stearns ARM Trust, Series 2003-3, Class II-A-2, 4.079% 2033²		6,856			6,727
Bear Stearns ARM Trust, Series 2003-3, Class III-A-1, 5.131% 2033²		6,584			6,524
Bear Stearns ARM Trust, Series 2004-3, Class II-A, 4.264% 2034²		16,820			16,381
Bear Stearns ARM Trust, Series 2003-9, Class III-A-2, 4.982% 2034²		2,714			2,685
Bear Stearns ARM Trust, Series 2005-10, Class A-3, 4.65% 2035²		51,800			50,564
Chase Commercial Mortgage Securities Corp., Series 1998-2, Class A-2, 6.39% 2030		42,744			44,222
Chase Commercial Mortgage Securities Corp., Series 1998-1, Class A-2, 6.56% 2030		12,078			12,414
Chase Commercial Mortgage Securities Corp., Series 2000-2, Class A-1, 7.543% 2032		11,042			11,571
Chase Commercial Mortgage Securities Corp., Series 2000-1, Class A-2, 7.757% 2032		17,183			18,479
Crown Castle Towers LLC, Series 2005-1, Class A-FX, 4.643% 2035¹		36,000			35,256
Crown Castle Towers LLC, Series 2005-1, Class C, 5.074% 2035¹		43,000			41,990
Banc of America Commercial Mortgage Inc., Series 2001-1, Class A-2, 6.503% 2036		56,200			59,331
Banc of America Commercial Mortgage Inc., Series 2004-5, Class A-3, 4.561% 2041		9,655			9,379
GMAC Commercial Mortgage Securities, Inc., Series 1997-C1, Class A-3, 6.869% 2029		11,964			12,237
GMAC Commercial Mortgage Securities, Inc., Series 1997-C1, Class D, 6.997% 2029		8,300			8,560
GMAC Commercial Mortgage Securities, Inc., Series 2001-C1, Class A-2, 6.465% 2034		30,250			31,973
GMAC Commercial Mortgage Securities, Inc., Series 1998-C2, Class C, 6.50% 2035		9,000			9,339
Residential Asset Mortgage Products Trust, Series 2004-RS3, Class A-I-2, 3.052% 2029		858			853
Residential Asset Mortgage Products Trust, Series 2004-RS9, Class A-I-4, AMBAC insured, 4.767% 2032		10,000			9,896
Residential Asset Mortgage Products Trust, Series 2004-RZ3, Class A-I-4, 4.572% 2033		6,038			5,891
Residential Asset Mortgage Products Trust, Series 2003-RZ4, Class A-7, 4.79% 2033²		10,000			9,845
Residential Asset Mortgage Products Trust, Series 2003-RS11, Class A-I-7, 4.828% 2033		9,000			8,833
Residential Asset Mortgage Products Trust, Series 2004-RS10, Class A-I-6, 4.55% 2034		26,100			25,346
Banc of America Funding Corp., Series 2005-H, Class 9-A-1, 5.992% 2035²		53,524			54,009
HarborView Mortgage Loan Trust, Series 2005-15, Class 2-A1A2, 5.17% 2045²		51,897			52,424
Nykredit 4.00% 2035		DKr335,041			51,566
Salomon Brothers Commercial Mortgage Trust, Series 2000-C3, Class A-1, 6.341% 2033¹	$	3,242			3,280
Salomon Brothers Commercial Mortgage Trust, Series 2000-C3, Class A-2, 6.592% 2033		17,250			18,214
Salomon Brothers Commercial Mortgage Trust, Series 2001-C1, Class A-2, 6.226% 2035		12,580			12,725
Salomon Brothers Commercial Mortgage Trust, Series 2001-C1, Class A-3, 6.428% 2035		16,420			17,313
L.A. Arena Funding, LLC, Series 1, Class A, 7.656% 2026¹		41,310			44,714
Merrill Lynch Mortgage Investors, Inc., Series 2003-A4, Class II-A, 4.61% 2033²		16,825			16,718
Merrill Lynch Mortgage Investors, Inc., Series 2004-A1, Class II-A-1, 4.605% 2034²		28,382			27,738
SBA CMBS Trust, Series 2005-1A, 5.369% 2035¹		33,000			32,984
SBA CMBS Trust, Series 2005-1B, 5.565% 2035¹		3,300			3,298
SBA CMBS Trust, Series 2005-1E, 6.706% 2035¹		7,460			7,453
Banc of America Mortgage Securities Trust, Series 2003-F, Class 2-A-1, 3.734% 2033²		25,209			24,549
Banc of America Mortgage Securities Trust, Series 2003-G, Class 2-A-1, 4.088% 2033²		7,454			7,390
Banc of America Mortgage Securities Trust, Series 2003-I, Class 3-A-1, 4.533% 2033²		10,360			10,192
Residential Asset Securitization Trust, Series 2005-A8CB, Class A-11, 6.00% 2035		23,606			23,586
Residential Asset Securitization Trust, Series 2005-A6CB, Class A-7, 6.00% 2035		15,604			15,727
Deutsche Genossenschafts-Hypothekenbank AG 5.25% 2009		€29,447			37,350
GS Mortgage Securities Corp. II, Series 1998-C1, Class E, 7.215% 2030²	$	31,076			31,986
GS Mortgage Securities Corp. II, Series 1998-C1, Class D, 7.215% 2030²		3,750			3,929
Morgan Stanley Capital I, Inc., Series 1998-HF2, Class A-2, 6.48% 2030		14,794			15,237
Morgan Stanley Capital I, Inc., Series 1999-FNV1, Class A-1, 6.12% 2031		1,276			1,278
Morgan Stanley Capital I, Inc., Series 1999-FNV1, Class A-2, 6.53% 2031		10,000			10,379
Morgan Stanley Capital I Trust, Series 2005-HQ7, Class A-2, 5.205% 2042		7,875			7,924
Bear Stearns ALT-A Trust, Series 2005-9, Class II-6A-1, 5.88% 2035²		33,997			34,189
Structured Adjustable Rate Mortgage Loan Trust, Series 2005-22, Class 5-A-1, 6.058% 2035²		32,659			32,904
Morgan Stanley Mortgage Loan Trust, Series 2004-3, Class 4-A, 5.70% 2034²		29,270			29,009
Morgan Stanley Mortgage Loan Trust, Series 2004-3, Class 3-A, 6.00% 2034		3,605			3,602
Mastr Alternative Loan Trust, Series 2003-2, Class 6-A-1, 6.00% 2033		896			897
Mastr Alternative Loan Trust, Series 2004-2, Class 2-A-1, 6.00% 2034		1,716			1,715
Mastr Alternative Loan Trust, Series 2005-1, Class 1-A-1, 5.50% 2035		18,321			18,287
Mastr Alternative Loan Trust, Series 2005-3, Class 1-A-1, 5.50% 2035		4,461			4,425
Mastr Alternative Loan Trust, Series 2005-3, Class 2-A-1, 6.00% 2035		5,983			6,016
Mastr Alternative Loan Trust, Series 2005-3, Class 3-A-1, 6.50% 2035		745			759
Wachovia Bank Commercial Mortgage Trust, Series 2003-C9, Class A-2, 3.958% 2035		4,200			4,076
Wachovia Bank Commercial Mortgage Trust, Series 2003-C9, Class A-3, 4.608% 2035		1,979			1,933
Wachovia Bank Commercial Mortgage Trust, Series 2005-C17, Class A-2, 4.782% 2042		24,000			23,735
Chase Manhattan Bank - First Union National Bank, Commercial Mortgage Trust, Series 1999-1, Class A-2, 7.439% 2031		5,000			5,369
Chase Manhattan Bank - First Union National Bank, Commercial Mortgage Trust, Series 1999-1, Class B, 7.619% 2031		17,125			18,560
Chase Manhattan Bank - First Union National Bank, Commercial Mortgage Trust, Series 1999-1, Class C, 7.625% 2031		5,000			5,425
Morgan Stanley Dean Witter Capital I Trust, Series 2001-TOP5, Class A-3, 6.16% 2035		17,468			18,070
Morgan Stanley Dean Witter Capital I Trust, Series 2003-TOP9, Class A-1, 3.98% 2036		8,744			8,455
Morgan Stanley Dean Witter Capital I Trust, Series 2002-IQ3, Class A-1, 3.48% 2037		2,085			2,047
GE Capital Commercial Mortgage Corp., Series 2001-1, Class A-1, 6.079% 2033		337			344
GE Capital Commercial Mortgage Corp., Series 2001-1, Class A-2, 6.531% 2033		17,590			18,706
GE Capital Commercial Mortgage Corp., Series 2001-3, Class A-1, 5.56% 2038		3,289			3,323
GE Capital Commercial Mortgage Corp., Series 2001-3, Class A-2, 6.07% 2038		2,500			2,618
Structured Asset Securities Corp., Series 1998-RF2, Class A, 8.582% 2027^1,2		7,995			8,102
Structured Asset Securities Corp., Series 1998-RF1, Class A, 8.737% 2027^1,2		2,926			2,980
Structured Asset Securities Corp., Series 1999-RF1, Class A, 7.86% 2028^1,2		1,946			2,006
Structured Asset Securities Corp., Series 2003-17A, Class 3-A1, 4.01% 2033²		2,352			2,330
Structured Asset Securities Corp., Series 2005-6, Class 5-A-4, 5.00% 2035		6,927			6,593
Structured Asset Securities Corp., Series 2005-6, Class 5-A-9, 5.00% 2035		2,874			2,819
LB-UBS Commercial Mortgage Trust, Series 2000-C3, Class A-2, 7.95% 2025		14,500			15,959
LB-UBS Commercial Mortgage Trust, Series 2002-C1, Class A-3, 6.226% 2026		8,300			8,612
Prudential Securities Secured Financing Corp., Series 1999-NRF1, Class C, 6.746% 2031		18,000			18,887
Commercial Mortgage Trust, Series 2003-LNB1, Class A-2, 4.084% 2038		20,000			18,765
Tower Ventures, LLC, Series 2004-1, Class A, 3.711% 2034¹		19,255			18,542
Banc of America Alternative Loan Trust, Series 2005-6, Class 2-CB-2, 6.00% 2035		18,070			18,190
First Horizon Alternative Mortgage Securities Trust, Series 2005-FA8, Class I-A-14, 5.50% 2035		15,501			15,500
GGP Mall Properties Trust, Series 2001-GGP1, Class A-2, 5.007% 2011¹		15,134			15,155
GSR Mortgage Loan Trust, Series 2005-AR1, Class 2-A-1, 4.952% 2035²		15,058			14,899
Bank of America, NA and First Union National Bank Commercial Mortgage Trust, Series 2001-3, Class A-1, 4.89% 2037		13,668			13,645
Dexia Municipal Agency 3.50% 2009		€10,076			12,083
Washington Mutual Securities Corp., WMALT Series 2005-1, Class 6-A-1, 6.50% 2020	$	2,016			2,055
Washington Mutual Securities Corp., Series 2005-AR1, Class A-1-A, 4.639% 2035²		9,456			9,453
Residential Funding Mortgage Securities I, Inc., Series 2004-SA1, Class A-II, 4.334% 2034²		11,649			11,401
DLJ Commercial Mortgage Corp., Series 1999-CG1, Class A-1B, 6.46% 2032		10,000			10,413
DLJ Mortgage Acceptance Corp., Series 1998-CF1, Class A-1B, 6.41% 2031		9,351			9,563
First Union National Bank Commercial Mortgage Trust, Series 2000-C1, Class A-1, 7.739% 2032		5,612			5,771
First Union National Bank Commercial Mortgage Trust, Series 2001-C4, Class A-1, 5.673% 2033		3,158			3,207
Hypothekenbank in Essen AG 5.25% 2008		€6,000		$	7,413
Citigroup Mortgage Loan Trust Inc., Series 2004-HYB1, Class A-3-1, 4.55% 2034²	$	6,439			6,371
Rheinische Hypothekenbank Eurobond 4.25% 2008		€5,000			6,100
SACO I Trust, Series 2005-2, Class A, interest only, 6.00% 2007¹	$	24,546			1,974
SACO I Trust, Series 2005-1, Class A, interest only, 6.00% 2007¹		16,489			1,175
SACO I Trust, Series 2005-3, Class A, interest only, 6.00% 2035¹		29,359			2,495
Hilton Hotel Pool Trust, Series 2000-HLTA, Class F, 7.75% 2015¹		5,000			5,201
RAAC Mortgage Loan Asset-backed Trust, Series 2004-SP3, Class A-I-5, 4.89% 2032		5,000			4,836
Specialty Underwriting and Residential Finance Trust, Series 2004-AA1, Class I-A-1, 5.00% 2034		3,836			3,770
Ocwen Residential MBS Corp., Series 1998-R1, Class AWAC, 5.208% 2040^1,2		2,719			2,628
Nomura Asset Securities Corp., Series 1998-D6, Class A-1A, 6.28% 2030		2,021			2,036
Ball Corp., Series 2005-BOCA, Class E, 4.789% 2016^1,2		1,750			1,753
GS Mortgage Securities Corp., Series 1998-2, Class M, 7.75% 2027¹		707			737
Financial Asset Securitization, Inc., Series 1997-NAM1, Class B-1, 7.75% 2027		501			500
First Boston Mortgage Securities Corp., Series D, interest only, 10.965% 2017		139			34
First Boston Mortgage Securities Corp., Series D, principal only, 0% 2017		139			112
					4,674,108

U.S. GOVERNMENT & GOVERNMENT AGENCY BONDS & NOTES — 9.78%
U.S. Treasury 5.625% 2006¹⁰		12,350			12,372
U.S. Treasury 6.875% 2006¹⁰		105,320			106,274
U.S. Treasury 7.00% 2006¹⁰		100,000			101,328
U.S. Treasury 3.125% 2007¹⁰		10,300			10,123
U.S. Treasury 3.375% 2007^10,11		62,857			63,355
U.S. Treasury 2.625% 2008¹⁰		20,000			19,213
U.S. Treasury 3.375% 2008¹⁰		20,500			19,951
U.S. Treasury 3.625% 2008^10,11		74,570			76,610
U.S. Treasury 3.625% 2009¹⁰		401,750			392,020
U.S. Treasury 6.00% 2009¹⁰		925			975
U.S. Treasury Principal Strip 0% 2009¹⁰		1,250			1,070
U.S. Treasury 0.875% 2010^10,11		10,514			9,997
U.S. Treasury 3.50% 2011^10,11		57,219			61,175
U.S. Treasury 5.00% 2011¹⁰		25,925			26,699
U.S. Treasury 3.00% 2012^10,11		493			522
U.S. Treasury 10.375% 2012¹⁰		24,500			27,057
U.S. Treasury 4.25% 2013¹⁰		10,000			9,913
U.S. Treasury 12.00% 2013¹⁰		10,000			11,845
U.S. Treasury 2.00% 2014^10,11		45,839			45,612
U.S. Treasury 4.00% 2014		3,175			3,090
U.S. Treasury 11.25% 2015		70,000			105,416
U.S. Treasury Principal Strip 0% 2015		11,020			7,178
U.S. Treasury 9.25% 2016		33,650			46,647
U.S. Treasury 8.875% 2017		60,000			83,428
U.S. Treasury Principal Strip 0% 2018		31,220			17,759
U.S. Treasury 6.875% 2025		226,450			291,801
U.S. Treasury 5.25% 2028		32,820			35,799
U.S. Treasury 3.875% 2029¹¹		363			492
U.S. Treasury Principal Strip 0% 2029		4,150			1,447
U.S. Treasury 6.25% 2030		12,375			15,370
U.S. Treasury 5.375% 2031		9,600			10,785
U.S. Treasury 3.375% 2032¹¹		421			550
Freddie Mac 4.125% 2009		25,000			24,494
Freddie Mac 4.125% 2010		262,250			255,662
Freddie Mac 6.25% 2012		15,000			15,192
Federal Home Loan Bank 2.375% 2006		69,550			69,166
Federal Home Loan Bank 2.50% 2006		41,145			40,916
Federal Home Loan Bank 2.875% 2006		39,500			39,241
Federal Home Loan Bank 2.875% 2006		37,500			37,020
Federal Home Loan Bank 3.70% 2007		20,000			19,662
Federal Home Loan Bank 5.823% 2009		46,690			48,122
Fannie Mae 5.25% 2012		50,000			50,454
Federal Agricultural Mortgage Corp. 4.25% 2008		17,000			16,771
United States Government-Guaranteed Certificates of Participation, Overseas Private Investment Corp., Series 2000-044-A, 3.74% 2015³		11,110			10,630
Republic of Egypt; United States Agency for International Development 4.45% 2015		5,000			4,909
					2,248,112

NON-U.S. GOVERNMENT & GOVERNMENT AGENCY BONDS & NOTES — 6.73%
Japanese Government 0.50% 2007		¥3,834,550			32,648
Japanese Government 0.90% 2008		7,187,550			61,707
Japanese Government 1.80% 2010		487,350			4,317
Japanese Government 1.30% 2011		7,036,050			60,799
Japanese Government 0.50% 2013		3,840,500			30,850
Japanese Government 1.50% 2014		3,312,850			28,386
German Government 4.50% 2006		€57,580			68,867
German Government 4.50% 2009		55,000			68,295
German Government 6.25% 2030		30,500			51,497
United Mexican States Government Global 4.625% 2008	$	11,000			10,876
United Mexican States Government Global 10.375% 2009		14,500			16,726
United Mexican States Government, Series MI10, 9.50% 2014		MXP394,000			40,003
United Mexican States Government Eurobonds 4.25% 2015		€9,980			11,874
United Mexican States Government Global 11.375% 2016	$	18,658			27,474
United Mexican States Government, Series M20, 8.00% 2023		MXP153,800			13,661
United Mexican States Government, Series M20, 10.00% 2024		228,500			24,386
United Mexican States Government Global 8.30% 2031	$	8,220			10,583
United Mexican States Government Global 7.50% 2033		6,705			7,955
United Kingdom 5.00% 2008		£ 1,380			2,413
United Kingdom 4.75% 2010		27,275			47,982
United Kingdom 4.75% 2015		32,636			58,982
United Kingdom 6.00% 2028		1,800			4,006
United Kingdom 4.25% 2032		23,645			42,344
Korean Government 4.50% 2008		KRW71,938,000			70,379
Korean Government 4.50% 2009		18,516,000			18,023
Korean Government 4.00% 2010		8,515,000			8,061
Korean Government 4.25% 2014		26,585,000			23,971
Polish Government 5.75% 2010		PLZ122,110			38,734
Polish Government 6.00% 2010		157,250			50,457
Canadian Government 4.25% 2026¹¹		C$67,939			83,136
Israeli Government 7.50% 2014		ILS347,282			81,757
Russian Federation 8.25% 2010	$	4,000			4,268
Russian Federation 5.00%/7.50% 2030⁵		51,610			58,319
Russian Federation 5.00%/7.50% 2030^1,5		145			164
Swedish Government 5.00% 2009		SKr105,000			13,993
Swedish Government 5.25% 2011		311,885			43,153
French Government O.A.T. Eurobond 5.00% 2011		€ 1,750			2,275
French Government O.A.T. Eurobond Strip Principal 0% 2019		14,000			10,310
French Government O.A.T. Eurobond 5.50% 2029		7,610			11,719
French Government O.A.T. Eurobond 4.75% 2035		21,075			30,033
Queensland Treasury Corp. 6.00% 2015		A$57,080			43,917
Thai Government 4.125% 2009		THB905,000			21,259
Thai Government 5.00% 2014		735,810			17,460
Aries Vermögensverwaltungs GmbH, Series C, 9.60% 2014	$	19,750			25,576
Italian Government BTPS Eurobond 6.00% 2007		€16,204		$	20,216
Export-Import Bank of China 4.875% 2015¹	$	20,000			19,477
State of Qatar 9.75% 2030		12,220			18,697
Spanish Government 4.25% 2007		€13,765			16,664
Argentina (Republic of) 3.504% 2012²	$	8,850			6,827
Argentina (Republic of) 6.84% 2033^8,11		ARS15,664			5,664
Argentina (Republic of) GDP-Linked 2035		53,811			881
Argentina (Republic of) 0.72% 2038¹¹		10,050			1,609
Bulgaria (Republic of) 8.25% 2015	$	9,000			10,891
Banque Centrale de Tunisie 4.75% 2011		€3,000			3,734
Banque Centrale de Tunisie 7.375% 2012	$	6,250			6,984
Corporación Andina de Fomento 6.875% 2012		5,895			6,423
Corporación Andina de Fomento 5.125% 2015		2,000			1,973
El Salvador (Republic of) 7.65% 2035¹		4,850			5,020
El Salvador (Republic of) 7.65% 2035		3,170			3,281
Brazil (Federal Republic of) Global 7.875% 2015		1,250			1,334
Brazil (Federal Republic of) Global 8.00% 2018		644			696
Brazil (Federal Republic of) Global 8.875% 2024		1,375			1,537
Brazil (Federal Republic of) Global 12.25% 2030		425			614
Brazil (Federal Republic of) Global 11.00% 2040		3,110			4,013
Panama (Republic of) Global 9.375% 2023		4,062			5,108
Panama (Republic of) Global 7.125% 2026		690			702
Panama (Republic of) Global 8.875% 2027		250			299
Panama (Republic of) Global 9.375% 2029		675			852
Columbia (Republic of) Global 8.25% 2014		2,500			2,787
Colombia (Republic of) Global 12.00% 2015		COP2,330,000			1,209
Peru (Republic of) 9.125% 2012	$	432			496
Peru (Republic of) 8.375% 2016		2,500			2,756
Peru (Republic of) Past Due Interest Eurobond 5.00% 2017²		357			338
Turkey (Republic of) 12.375% 2009		500			606
Turkey (Republic of) 15.00% 2010		TRY3,250			2,636
New Zealand Government 4.50% 2016¹¹	$	NZ3,664			2,760
Dominican Republic 9.50% 2011^1,8	$	2,236			2,371
Venezuela (Republic of) Global 8.50% 2014		245			270
Venezuela (Republic of) 9.25% 2027		780			926
Guatemala (Republic of) 10.25% 2011¹		1,000			1,195
					1,545,441

ASSET-BACKED OBLIGATIONS³— 6.14%
ARG Funding Corp., Series 2005-1, Class A-1, MBIA insured, 4.02% 2009¹		21,000			20,584
ARG Funding Corp., Series 2005-2, Class A-1, AMBAC insured, 4.54% 2009¹		51,820			51,466
ARG Funding Corp., Series 2005-1, Class A-3, MBIA insured, 4.29% 2011¹		32,000			31,053
ARG Funding Corp., Series 2005-2, Class A-4, AMBAC insured, 4.84% 2011¹		30,000			29,880
Drive Auto Receivables Trust, Series 2005-2, Class A-2, MBIA insured, 4.12% 2010¹		8,600			8,521
Drive Auto Receivables Trust, Series 2005-1, Class A-4, MBIA insured, 4.01% 2012		28,125			27,557
Drive Auto Receivables Trust, Series 2005-2, Class A-3, MBIA insured, 4.26% 2012¹		60,520			59,191
Drive Auto Receivables Trust, Series 2005-3, Class A-4, FSA insured, 5.09% 2013¹		17,500			17,527
CWABS, Inc., Series 2004-15, Class AF-2, 3.775% 2024		10,000			9,900
CWABS, Inc., Series 2004-12, Class 2-AV-2, 4.659% 2033²		20,212			20,248
CWABS, Inc., Series 2004-10, Class AF-6, 4.485% 2034		16,000			15,384
CWABS, Inc., Series 2004-15, Class 2-AV-2, 4.649% 2034²		27,906			27,970
CWABS, Inc., Series 2005-11, Class AF-2, 4.657% 2036		22,666			22,450
MBNA Credit Card Master Note Trust, Series 2002-1, Class B, 5.15% 2009		17,000			17,059
MBNA Master Credit Card Trust II, Series 1999-B, Class A, 5.90% 2011		3,000			3,101
MBNA Master Credit Card Trust II, Series 1999-B, Class B, 6.20% 2011		3,750			3,901
MBNA Credit Card Master Note Trust, Series 2005-6, Class A, 4.50% 2013		46,850			46,293
WFS Financial Owner Trust, Series 2002-3, Class A-4, 3.50% 2010		9,247			9,185
WFS Financial Owner Trust, Series 2004-1, Class C, 2.49% 2011		2,696			2,637
WFS Financial Owner Trust, Series 2004-1, Class A-4, 2.81% 2011		14,600			14,226
WFS Financial Owner Trust, Series 2005-1, Class A-4, 3.87% 2012		35,250			34,562
CPS Auto Receivables Trust, Series 2003-A, Class A-2, XLCA insured, 2.89% 2009¹		3,895			3,805
CPS Auto Receivables Trust, Series 2002-B, Class A-2, XLCA insured, 3.50% 2009¹		953			947
CPS Auto Receivables Trust, Series 2002-C, Class A-2, XLCA insured, 3.52% 2009¹		553			551
CPS Auto Receivables Trust, Series 2004-A, Class A-2, FSA insured, 3.87% 2010¹		7,141			7,048
CPS Auto Receivables Trust, Series 2004-D, Class A-2, XLCA insured, 3.86% 2011¹		22,810			22,560
CPS Auto Receivables Trust, Series 2005-B, Class A-2, FSA insured, 4.36% 2012¹		12,000			11,849
CPS Auto Receivables Trust, Series 2005-D, Class A-2, FSA insured, 5.06% 2015¹		7,600			7,600
Vanderbilt Mortgage and Finance, Inc., Series 2002-B, Class A-3, 4.70% 2018		5,100			5,034
Vanderbilt Mortgage and Finance, Inc., Series 2002-C, Class A-4, 6.57% 2024		7,660			8,019
Vanderbilt Mortgage and Finance, Inc., Series 1999-B, Class I-A-6, 6.925% 2024		10,250			10,691
Vanderbilt Mortgage and Finance, Inc., Series 2000-C, Class A-4, 7.905% 2026		4,135			4,346
Vanderbilt Mortgage and Finance, Inc., Series 1997-C, Class II-A-1, 4.541% 2027²		1,235			1,234
Vanderbilt Mortgage and Finance, Inc., Series 2000-D, Class A-4, 7.715% 2027		4,866			5,100
Vanderbilt Mortgage and Finance, Inc., Series 2000-C, Class A-5, 8.195% 2030		6,889			7,465
Vanderbilt Mortgage and Finance, Inc., Series 2001-C, Class M-1, 6.76% 2032		1,500			1,532
Residential Asset Securities Corp. Trust, Series 1999-KS3, Class A-I-7, AMBAC insured, 7.505% 2030		2,165			2,160
Residential Asset Securities Corp. Trust, Series 2001-KS3, Class A-I-6, 5.96% 2031		20,042			20,158
Residential Asset Securities Corp. Trust, Series 2004-KS12, Class A-1-2, 4.609% 2035²		20,000			20,022
Residential Funding Mortgage Securities II, Inc., Series 2005-HS1, Class A-1-2, FGIC insured, 4.66% 2020		12,500			12,379
Residential Funding Mortgage Securities II, Inc., Series 2005-HI1, Class A-3, FGIC insured, 4.16% 2034		3,000			2,948
Residential Funding Mortgage Securities II, Inc., Series 2005-HI1, Class A-4, FGIC insured, 4.70% 2034		19,594			19,416
Residential Funding Mortgage Securities II, Inc., Series 2005-HS1, Class A-1-5, FGIC insured, 4.91% 2035		6,000			5,850
Wells Fargo Home Equity Trust, Series 2004-2, Class AI-5, 4.89% 2028		39,935			38,947
UPFC Auto Receivables Trust, Series 2005-A, Class A-3, AMBAC insured, 4.34% 2010		14,000			13,900
UPFC Auto Receivables Trust, Series 2005-B, Class A-3, XLCA insured, 4.98% 2011		20,000			20,097
Bear Stearns Asset-backed Securities I Trust, Series 2004-HE11, Class I-A-2, 4.679% 2033²		4,750			4,760
Bear Stearns Asset-backed Securities I Trust, Series 2005-CL1, Class A-1, 4.879% 2035²		27,944			28,014
Spirit Master Funding LLC, Net-Lease Mortgage Notes, Series 2005-1, Class A-1, AMBAC insured, 5.05% 2023¹		29,472			29,163
Hertz Vehicle Financing LLC, Rental Car Asset-backed Notes, Series 2005-2, Class A-6, AMBAC insured, 5.08% 2011¹		14,500			14,497
Hertz Vehicle Financing LLC, Rental Car Asset-backed Notes, Series 2005-1, Class A-5, MBIA insured, 5.08% 2011¹		13,000			12,997
Cendant Timeshare Receivables Funding, LLC, Series 2005-1, Class A-1, FGIC insured, 4.67% 2017¹		25,626			25,407
Green Tree Financial Corp., Series 1995-3, Class B-2, 8.10% 2025⁶		3,991			1,046
Green Tree Financial Corp., Series 1996-10, Class A-6, 7.30% 2028		4,287			4,440
Green Tree Financial Corp., Series 1997-6, Class A-7, 7.14% 2029		9,115			9,497
Green Tree Recreational, Equipment & Consumer Trust, Series 1997-D, 7.25% 2029		5,880			5,310
Green Tree Financial Corp., Series 1997-6, Class B-2, 7.75% 2029⁶		3,051			—
Green Tree Financial Corp., Series 1998-4, Class B-2, 8.11% 2030⁶		8,028			1
Conseco Finance Home Equity Loan Trust, Series 2002-B, Class M-1, 6.119% 2033²		4,500			4,540
Vanderbilt Acquisition Loan Trust, Series 2002-1, Class B-1, 7.30% 2021		10,148			10,305
Vanderbilt Acquisition Loan Trust, Series 2002-1, Class A-4, 6.57% 2027		8,290			8,576
Vanderbilt Acquisition Loan Trust, Series 2002-1, Class A-5, 7.12% 2032		3,000			3,198
Capital Auto Receivables Asset Trust, Series 2004-2, Class A-4, 3.75% 2009		21,750			21,257
First Investors Auto Owners Trust, Series 2003-A, Class A, MBIA insured, 2.58% 2011¹		11,364			11,120
First Investors Auto Owners Trust, Series 2005-A, Class A-2, MBIA insured, 4.23% 2012¹		10,000			9,928
AmeriCredit Automobile Receivables Trust, Series 2003-A-M, Class A-4-A, MBIA insured, 3.10% 2009		1,645			1,621
AmeriCredit Automobile Receivables Trust, Series 2002-C, Class A-4, FSA insured, 3.55% 2009		3,324			3,299
AmeriCredit Automobile Receivables Trust, Series 2003-C-F, Class A-4, FSA insured, 3.48% 2010		15,500			15,332
Morgan Stanley ABS Capital I, Inc., Series 2004-NC3, Class M-1, 4.909% 2034²		20,000			20,065
Triad Automobile Receivables Trust, Series 2005-A, Class A-4, AMBAC insured, 4.22% 2012		20,000			19,676
New Century Home Equity Loan Trust, Series 2001-NC2, Class M-1, 5.19% 2031²		5,000			5,006
New Century Home Equity Loan Trust, Series 2004-A, Class A-II-5, FGIC insured, 5.25% 2034		11,000			11,000
New Century Home Equity Loan Trust, Series 2004-A, Class M-II, FGIC insured, 5.65% 2034		3,000			3,038
Providian Gateway Master Trust, Series 2004-DA, Class A, 3.35% 2011¹	$	15,000		$	14,646
Providian Gateway Master Trust, Series 2004-AA, Class C, 5.269% 2011^1,2		4,000			4,039
Consumer Credit Reference Index Securities Program Trust, Series 2002-1A, Class A, 6.501% 2007^1,2		10,158			10,209
Consumer Credit Reference Index Securities Program Trust, Series 2002-2A, Class FX, 10.421% 2007¹		8,250			7,960
Chase Issuance Trust, Series 2005-7, Class A, 4.55% 2013		17,500			17,303
Long Beach Acceptance Auto Receivables Trust, Series 2005-B, Class A-4, FSA insured, 4.522% 2012		17,000			16,799
CNL Funding, Series 2000-AA, Class A-2, MBIA Insured, 8.044% 2017¹		13,800			14,813
PP&L Transition Bond Co. LLC, Series 1999-1, Class A-7, 7.05% 2009		14,450			14,733
PECO Energy Transition Trust, Series 1999-A, Class A-7, 6.13% 2009		14,250			14,613
Prestige Auto Receivables Trust, Series 2003-1, Class A-2, FSA insured, 2.41% 2010¹		4,274			4,217
Prestige Auto Receivables Trust, Series 2005-1A, Class A-2, FSA insured, 4.37% 2012¹		10,000			9,902
Ameriquest Mortgage Securities Inc., Series 2004-R4, Class A-4, 4.859% 2034²		13,808			13,835
Park Place Securities, Inc., Series 2005-WHQ3, Class A-2-A, 4.459% 2035²		13,056			13,054
Providian Master Note Trust, Series 2005-A1A, Class A, 4.429% 2012^1,2		10,000			10,008
Providian Master Note Trust, Series 2005-B1A, Class B, 4.669% 2012^1,2		3,000			3,010
SLM Private Credit Student Loan Trust, Series 2002-A, Class A-2, 5.041% 2030²		10,000			10,234
SLM Student Loan Trust, Series 2003-10, Class A-4, 5.15% 2039¹		£1,160			2,090
AESOP Funding II LLC, Series 2003-2, Class A-1, MBIA insured, 2.74% 2007¹	$	12,000			11,944
MMCA Auto Owner Trust, Series 2001-3, Class B, 5.319% 2008²		1,255			1,256
MMCA Auto Owner Trust, Series 2002-4, Class B, 3.82% 2009		1,543			1,531
MMCA Auto Owner Trust, Series 2002-2, Class A-4, 4.30% 2010		8,087			8,068
Capital One Multi-asset Execution Trust, Series 2005-7, Class A, 4.70% 2015		10,750			10,649
Capital One Auto Finance Trust, Series 2004-B, Class A-3, MBIA insured, 2.96% 2009		10,000			9,892
PF Export Receivables Master Trust, Series 2001-B, MBIA insured, 6.60% 2011¹		8,831			9,225
Citibank Credit Card Issuance Trust, Class 2005-B1, 4.40% 2010		9,000			8,886
PG&E Energy Recovery Funding LLC, Series 2005-1, Class A-2, 3.87% 2011		8,825			8,669
Home Equity Asset Trust, Series 2004-2, Class M-1, 4.909% 2034²		1,000			1,004
Home Equity Asset Trust, Series 2004-7, Class M-1, 4.999% 2035²		7,500			7,559
GreenPoint Credit Manufactured Housing Contract Trust, Series 2000-7, Class A-1, MBIA insured, 4.66% 2022²		8,153			8,193
Nordstrom Credit Card Master Note Trust, Series 2002-1, Class B, 5.069% 2010^1,2		8,000			8,056
Household Automotive Trust, Series 2001-3, Class A-4, 4.37% 2008		7,921			7,908
Specialty Underwriting and Residential Finance Trust, Series 2004-BC4, Class A-2B, 4.689% 2035²		7,450			7,463
Discover Card Master Trust I, Series 1996-4, Class B, 4.919% 2013²		7,000			7,129
American Express Credit Account Master Trust, Series 2005-3, Class B, 4.509% 2011²		7,000			7,001
ACLC Business Loan Receivables Trust, Series 2002-1, Class A-2, 7.462% 2022¹		6,836			6,938
Origen Manufactured Housing Contract Trust, Series 2004-B, Class A-1, 2.87% 2013		2,427			2,402
Origen Manufactured Housing Contract Trust, Series 2004-B, Class M-1, 5.73% 2035		2,500			2,461
Origen Manufactured Housing Contract Trust, Series 2004-B, Class M-2, 6.51% 2035		2,000			2,007
First USA Credit Card Master Trust, Series 1997-4, Class C, 5.37% 2010^1,2		6,630			6,657
PCR Auto Receivables Trust, Series 2004-1, Class A-2, XLCA insured, 3.995% 2010¹		6,357			6,298
Impac CMB Grantor Trust, Series 2004-6, Class M-4, 5.529% 2034²		5,955			5,989
Lehman ABS Manufactured Housing Contract Trust, Series 2001-B, Class A-3, 4.35% 2014		3,977			3,831
Lehman ABS Manufactured Housing Contract Trust, Series 2001-B, Class A-4, 5.27% 2018		2,039			2,021
Drivetime Auto Owner Trust, Series 2004-C, Class A-3, XLCA insured, 3.493% 2010¹		5,584			5,524
Chase Credit Card Owner Trust, Series 2003-6, Class B, 4.719% 2011²		5,000			5,029
West Penn Funding LLC, Series 1999-A, Class A-4, 6.98% 2008		4,500			4,660
Advanta Business Card Master Trust, Series 2005-C1, Class C, 4.88% 2011²		2,000			2,003
Advanta Business Card Master Trust, Series 2005-A2, Class A-1, 4.50% 2013²		2,000			1,996
Centex Home Equity Loan Trust, Series 2005-A, Class AF-4, 4.72% 2031		1,750			1,732
Centex Home Equity Loan Trust, Series 2005-A, Class AF-6, 4.69% 2035		2,000			1,967
Credit-Based Asset Servicing and Securitization LLC, Series 2005-CB4, Class AF-4, 5.028% 2035²		3,490			3,425
Countryplace Manufactured Housing Contract, Series 2005-1, Class A-2, AMBAC insured, 4.42% 2035¹		3,400			3,342
IndyMac Home Equity Mortgage Loan Asset-backed Trust, Series SPMD 2001-A, Class AF-6, 6.537% 2030		3,031			3,042
Harley-Davidson Motorcycle Trust, Series 2001-3, Class B, 3.72% 2009		298			295
Harley-Davidson Motorcycle Trust, Series 2001-3, Class A-2, 4.04% 2009		1,604			1,596
Harley-Davidson Motorcycle Trust, Series 2002-2, Class B, 2.84% 2010		1,099			1,090
Triad Automobile Receivables Trust, Series 2002-1, Class A-3, AMBAC insured, 3.00% 2009¹		2,867			2,843
California Infrastructure and Economic Development Bank, Special Purpose Trust, PG&E-1,
Series 1997-1, Class A-7, 6.42% 2008		2,601			2,622
Chase Manhattan Auto Owner Trust, Series 2002-B, 4.24% 2009		2,132			2,132
Advanta Mortgage Loan Trust, Series 1999-2, Class A-6, AMBAC insured, 6.82% 2029		1,983			1,992
Hyundai Auto Receivables Trust, Series 2002-A, Class C, 3.91% 2009¹		2,000			1,986
New South Motor Vehicle Trust, Series 2002-A, Class A-3, AMBAC insured, 3.03% 2010		1,649			1,648
Financial Pacific Funding II, LLC, Series 2003-A, Class A, FSA insured, 2.29% 2009¹		1,562			1,545
Continental Auto Receivables Owner Trust, Series 2000-B, Class CTFS, MBIA insured, 7.11% 2007¹		1,117			1,119
Capital One Master Trust, Series 2002-1A, Class B, 4.969% 2011²		1,000			1,013
California Infrastructure and Economic Development Bank, Special Purpose Trust, SCE-1,
Series 1997-1, Class A-6, 6.38% 2008		960			969
NPF XII, Inc., Series 1999-3, Class B, 2.389% 2003^1,2,7		3,000			0
NPF XII, Inc., Series 2001-1A, Class A, 1.989% 2004^1,2,7		7,000			280
NPF XII, Inc., Series 2001-3, Class A, 5.52% 2007^1,6		16,000			640
SeaWest Securitization, LLC, Series 2002-A, Class A-3, XLCA insured, 3.58% 2008¹		401			399
SeaWest Securitization, LLC, Series 2003-A, Class A-2, XLCA insured, 2.84% 2009¹		255			252
Option One Mortgage Loan Trust, Series 2002-1, Class M-1, 5.129% 2032²		581			582
Chevy Chase Auto Receivables Trust, Series 2001-2, Class A-4, 4.44% 2007		428			429
					1,410,100

MUNICIPALS — 1.08%
State of California, Golden State Tobacco Securitization Corp., Tobacco Settlement Asset-backed Bonds, Series 2003-A-1, 6.25% 2033		64,975			70,816
State of Wisconsin, Badger Tobacco Asset Securitization Corp., Tobacco Settlement Asset-backed Bonds, 6.125% 2027		38,330			40,488
State of South Dakota, Educational Enhancement Funding Corp., Tobacco Settlement Asset-backed Bonds, Series 2002-A, Class A, 6.72% 2025		28,051			27,958
State of New Jersey, Tobacco Settlement Financing Corp., Tobacco Settlement Asset-backed Bonds, Series 2003, 6.125% 2024		15,500			16,935
State of New Jersey, Tobacco Settlement Financing Corp., Tobacco Settlement Asset-backed Bonds, Series 2002, 5.75% 2032		4,855			5,046
State of Louisiana, Tobacco Settlement Financing Corp., Tobacco Settlement Asset-backed Bonds, Series 2001-A, Class A, 6.36% 2025		20,639			20,582
State of California, Department of Water Resources, Power Supply Revenue Bonds, Series 2002-E, 4.33% 2006		13,320			13,301
State of Louisiana, Tobacco Settlement Authority, Asset-backed Bonds, Series 2001-B, 5.50% 2030		10,000			10,239
State of California, Los Angeles County Metropolitan Transportation Authority, General Revenue Refunding Bonds (Workers’ Compensation Funding Program), Series 2003, AMBAC insured, 3.83% 2008		5,000			4,889
State of California, Los Angeles County Metropolitan Transportation Authority, General Revenue Refunding Bonds (Workers’ Compensation Funding Program), Series 2003, AMBAC insured, 4.56% 2010		5,000			4,937
California Maritime Infrastructure Authority, Taxable Lease Revenue Bonds (San Diego Unified Port District-South Bay Plant Acquisition), Series 1999, 6.63% 2009¹		8,861			9,073
State of Washington, Tobacco Settlement Authority, Asset-backed Bonds, Series 2002, 6.50% 2026		6,715			7,253
State of South Carolina, Tobacco Settlement Revenue Management Authority, Tobacco Settlement Asset-backed Bonds, Series 2001-B, 6.00% 2022		6,410			6,772
State of South Carolina, Piedmont Municipal Power Agency, Electric Revenue Bonds, Refunding Series 2004-A-1, 3.60% 2006		5,000			5,000
State of New York, Housing Finance Agency, State Personal Income Tax Revenue Bonds (Economic Development and Housing), Series B, 2.88% 2007		2,000			1,956
State of New York, Housing Finance Agency, State Personal Income Tax Revenue Bonds (Economic Development and Housing), Series B, 3.09% 2007		2,200			2,138
					247,383


Total bonds & notes (cost: $20,648,010,000)					20,738,984


		Shares or			Market value
Convertible securities — 0.53%		principal amount			(000	)

CONSUMER DISCRETIONARY — 0.17%
Amazon.com, Inc. 6.875% PEACS convertible subordinated notes 2010		€18,421,000		$	22,113
General Motors Corp., Series B, 5.25% convertible senior debentures 2032	$	17,375,000			10,355
Ford Motor Co. Capital Trust II 6.50% cumulative convertible trust preferred 2032		128,100			3,536
					36,004

INFORMATION TECHNOLOGY — 0.11%
Conexant Systems, Inc. 4.00% convertible subordinated notes 2007	$	14,700,000			14,204
SCI Systems, Inc. 3.00% convertible subordinated debentures 2007	$	12,000,000			11,550
					25,754

TELECOMMUNICATION SERVICES — 0.09%
American Tower Corp. 5.00% convertible debentures 2010	$	21,000,000			20,921


INDUSTRIALS — 0.07%
Cummins Capital Trust I 7.00% QUIPS convertible preferred 2031¹		180,000			17,055


UTILITIES — 0.07%
AES Trust VII 6.00% convertible preferred 2008		351,450			16,817


FINANCIALS — 0.02%
Equity Office Properties Trust, Series B, 5.25% convertible preferred 2008		70,400			3,545


MISCELLANEOUS — 0.00%
Other convertible securities in initial period of acquisition					924


Total convertible securities (cost: $99,629,000)					121,020



Preferred securities — 3.49%		Shares

FINANCIALS — 3.49%
Fuji JGB Investment LLC, Series A, 9.87% noncumulative preferred^1,2		121,238,000			134,157
IBJ Preferred Capital Co. LLC, Series A, 8.79% noncumulative preferred^1,2		57,500,000			62,197
HSBC Capital Funding LP, Series 1, 9.547% noncumulative step-up perpetual preferred^1,2		87,750,000			102,792
HSBC Capital Funding LP, Series 2, 10.176% noncumulative step-up perpetual preferred^1,2		25,000,000			38,303
HSBC Capital Funding LP 8.03% noncumulative preferred²		20,000,000			29,312
Fannie Mae, Series O, 7.00% preferred¹		1,369,000			74,953
Swire Pacific Capital Ltd. 8.84% cumulative guaranteed perpetual capital securities¹		1,670,000			45,508
Swire Pacific Offshore Financing Ltd. 9.33% cumulative guaranteed perpetual preferred capital securities¹		230,000			5,894
Resona Preferred Global Securities (Cayman) Ltd. 7.191%^1,2		47,710,000			50,706
BNP U.S. Funding LLC, Series A, 7.738% noncumulative preferred^1,2		21,750,000			22,783
BNP Paribas Capital Trust 9.003% noncumulative trust preferred^1,2		19,000,000			22,014
ING Capital Funding Trust III 8.439% noncumulative preferred²		31,000,000			35,284
NB Capital Corp., Series A, 8.35% exchangeable preferred depositary shares		1,200,000			31,812
Chuo Mitsui Trust and Banking Co., Ltd. 5.506%^1,2		24,970,000			24,239
RBS Capital Trust I 4.709% noncumulative trust preferred²		18,550,000			17,658
Royal Bank of Scotland Group PLC 6.625%²		4,700,000			6,184
RBS Capital Trust IV 5.327% noncumulative trust preferred²		5,000,000			5,053
SB Treasury Co. LLC, Series A, 9.40% noncumulative preferred^1,2		17,638,000			19,327
Standard Chartered Capital Trust I 8.16%²		10,000,000		$	13,893
Tokai Preferred Capital Co. LLC, Series A, 9.98% noncumulative preferred^1,2		12,000,000			13,271
DBS Capital Funding Corp., Series A, 7.657% noncumulative guaranteed preference shares^1,2		11,250,000			12,461
Weingarten Realty Investors, Series D, 6.75% preferred 2008		400,000			10,304
HBOS Capital Funding LP, Series A, 6.461% noncumulative preferred²		3,000,000			5,839
New Plan Excel Realty Trust, Inc., Series D, 7.80% preferred cumulative step-up premium rate		112,500			5,780
ACE Ltd., Series C, 7.80% preferred depositary shares		217,355			5,673
Nationwide Health Properties, Inc., Series A, 7.677% preferred cumulative step-up premium rate		50,000			5,117
					800,514

CONSUMER STAPLES — 0.00%
Great Atlantic & Pacific Tea Co., Inc. 9.375% QUIBS preferred 2039		18,500			470


CONSUMER DISCRETIONARY — 0.00%
Adelphia Communications Corp., Series B, 13.00% preferred 2009¹²		50,565			25


INFORMATION TECHNOLOGY — 0.00%
ZiLOG, Inc. - MOD III Inc., units^4,12,13		1,447			0


TELECOMMUNICATION SERVICES — 0.00%
XO Communications, Inc. 14.00% preferred 2009^4,8,12		24			0


Total preferred securities (cost: $720,185,000)					801,009



Common stocks — 0.27%

UTILITIES — 0.16%
Drax Group PLC¹²		4,430,290			37,689


FINANCIALS — 0.04%
Beverly Hills Bancorp Inc.		883,800			9,165


TELECOMMUNICATION SERVICES — 0.04%
Dobson Communications Corp., Class A^1,12		1,051,359			7,885
XO Communications, Inc.¹²		5,685			10
					7,895

INDUSTRIALS — 0.02%
DigitalGlobe Inc.^1,4,12		3,984,039			3,984
Delta Air Lines, Inc.^1,12		312,961			235
					4,219

INFORMATION TECHNOLOGY — 0.01%
ZiLOG, Inc.^12,13		879,000			2,145


HEALTH CARE — 0.00%
Clarent Hospital Corp.^4,12,13		331,291		$	165


Total common stocks (cost: $55,856,000)					61,278


Warrants — 0.00%

TELECOMMUNICATION SERVICES — 0.00%
XO Communications, Inc., Series A, warrants, expire 2010¹²		11,373			3
XO Communications, Inc., Series B, warrants, expire 2010¹²		8,529			1
XO Communications, Inc., Series C, warrants, expire 2010¹²		8,529			1
GT Group Telecom Inc., warrants, expire 2010^1,4,12		2,750			0


Total warrants (cost: $143,000)					5


Short-term securities — 6.97%		Principal amount (000	)

CAFCO, LLC 4.33%-4.37% due 2/14-3/9/2006^1,10	$	104,400			103,642
CAFCO, LLC 4.09% due 1/5/2006¹		50,000			49,973
Ciesco LLC 4.37% due 3/1/2006^1,10		41,400			41,111
Clipper Receivables Co., LLC 4.28%-4.30% due 1/17-1/26/2006¹		173,600			173,185
Pfizer Investment Capital PLC 4.175%-4.25% due 1/19-1/24/2006¹		170,500			170,090
Procter & Gamble Co. 4.18%-4.24% due 1/4-1/20/2006¹		140,000			139,765
Freddie Mac 4.23%-4.255% due 2/16-2/27/2006¹⁰		78,400			77,949
Freddie Mac 4.18% due 2/1/2006		45,300			45,133
Federal Home Loan Bank 4.10%-4.15% due 1/20-1/27/2006		88,500			88,268
Park Avenue Receivables Co., LLC 4.25%-4.29% due 1/10-1/27/2006¹		61,500			61,370
Preferred Receivables Funding Corp. 4.32% due 1/30/2006¹		20,400			20,327
Triple-A One Funding Corp. 4.30% due 1/12-1/13/2006¹		75,560			75,445
Federal Farm Credit Banks 4.10%-4.15% due 1/4-1/12/2006		69,300			69,250
Concentrate Manufacturing Co. of Ireland 4.20%-4.25% due 1/6-1/27/2006¹		63,600			63,427
NetJets Inc. 4.29% due 2/7-2/10/2006^1,10		53,900			53,647
Atlantic Industries 4.28%-4.30% due 2/10-2/17/2006^1,10		53,200			52,929
Variable Funding Capital Corp. 4.31% due 2/9-2/10/2006^1,10		49,700			49,459
Gannett Co. 4.25% due 1/18/2006¹		37,500			37,420
Bank of America Corp. 4.10% due 1/6/2006		37,000			36,976
American General Finance Corp. 4.25% due 1/30/2006		35,000			34,876
Wal-Mart Stores Inc. 4.08% due 1/10/2006¹		25,400			25,371
Cloverleaf International Holdings SA 4.25% due 1/9/2006¹		25,000			24,973
Verizon Network Funding Corp. 4.27% due 1/17/2006		25,000			24,950
Anheuser-Busch Companies, Inc. 4.30% due 2/27/2006^1,10		25,000			24,827
Hershey Co. 4.24% due 1/10/2006¹		24,000			23,972
Tennessee Valley Authority 4.03% due 1/12/2006		15,800			15,778
General Electric Capital Corp. 4.20% due 1/3/2006		13,200			13,194
Fannie Mae 4.25% due 3/3/2006¹⁰		6,000			5,956


Total short-term securities (cost: $1,603,204,000)					1,603,263


					Market value (000	)

Total investment securities (cost: $23,127,027,000)				$	23,325,559
Other assets less liabilities					(349,936	)

Net assets				$	22,975,623

“Miscellaneous” securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.

¹ Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require

registration. The total value of all such restricted securities was $5,137,294,000, which represented 22.36% of the net assets of the fund.

²Coupon rate may change periodically.

³ Pass-through securities backed by a pool of mortgages or other loans on which principal payments are periodically made.

Therefore, the effective maturities are shorter than the stated maturities.

⁴ Valued under fair value procedures adopted by authority of the board of directors.

⁵ Step bond; coupon rate will increase at a later date.

⁶ Company not making scheduled interest payments; bankruptcy proceedings pending.

⁷ Company did not make principal payment upon scheduled maturity date; reorganization pending.

⁸ Payment in kind; the issuer has the option of paying additional securities in lieu of cash.

⁹ Scheduled interest payments not made; reorganization pending.

¹⁰This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future.

¹¹Index-linked bond whose principal amount moves with a government retail price index.

¹²Security did not produce income during the last 12 months.

¹³Represents an affiliated company as defined under the Investment Company Act of 1940.

See Notes to Financial Statements

Financial statements

Statement of assets and liabilities
at December 31, 2005	(dollars and shares in thousands, except per-share amounts)

Assets:
Investment securities at market:
Unaffiliated issuers (cost: $23,109,565)	$	23,323,248
Affiliated issuers (cost: $17,462)		2,311	$	23,325,559
Cash				48,893
Receivables for:
Sales of investments		4,840
Sales of fund's shares		67,108
Open forward currency contracts		4,878
Closed forward currency contracts		2,740
Dividends and interest		266,071		345,637
				23,720,089
Liabilities:
Payables for:
Purchases of investments		511,105
Repurchases of fund's shares		215,627
Open forward currency contracts		1,877
Closed forward currency contracts		1,463
Investment advisory services		4,407
Services provided by affiliates		8,809
Deferred directors' compensation		383
Other fees and expenses		795		744,466
Net assets at December 31, 2005			$	22,975,623

Net assets consist of:
Capital paid in on shares of capital stock			$	23,238,530
Undistributed net investment income				13,350
Accumulated net realized loss				(477,091	)
Net unrealized appreciation				200,834
Net assets at December 31, 2005			$	22,975,623

Total authorized capital stock - 2,500,000 shares, $.001 par value (1,737,335 total shares outstanding)
		Net assets	Shares outstanding		Net asset value per share(1	)

Class A	$	17,737,821	1,341,270	$	13.22
Class B		1,415,200	107,013		13.22
Class C		1,428,965	108,054		13.22
Class F		802,612	60,691		13.22
Class 529-A		273,364	20,671		13.22
Class 529-B		57,877	4,376		13.22
Class 529-C		120,777	9,133		13.22
Class 529-E		15,347	1,160		13.22
Class 529-F		7,310	553		13.22
Class R-1		17,635	1,333		13.22
Class R-2		351,636	26,590		13.22
Class R-3		361,447	27,331		13.22
Class R-4		181,490	13,724		13.22
Class R-5		204,142	15,436		13.22
(1) Maximum offering price and redemption price per share were equal to the net asset value per share for all share classes, except for Class A and 529-A, for which the maximum offering prices per share were $13.74 each.

See Notes to Financial Statements

Statement of operations
for the year ended December 31, 2005		(dollars in thousands				)

Investment income:
Income:
Interest (net of non-U.S. withholding
tax of $814; also includes $704 from affiliates)	$	1,106,786
Dividends (includes
$523 from affiliates)		17,734		$	1,124,520

Fees and expenses:(1)
Investment advisory services		53,137
Distribution services		76,616
Transfer agent services		21,808
Administrative services		7,504
Reports to shareholders		1,028
Registration statement and prospectus		1,159
Postage, stationery and supplies		2,396
Directors' compensation		149
Auditing and legal		132
Custodian		890
State and local taxes		172
Other		13
Total fees and expenses before reimbursements/waivers		165,004
Less reimbursement/waiver of fees and expenses:
Investment advisory services		4,703
Administrative services		932
Total fees and expenses after reimbursements/waivers					159,369
Net investment income					965,151

Net realized gain and change in unrealized appreciation
on investments and non-U.S. currency:
Net realized gain on:
Investments (including $24,025 net gain from affiliates)		158,285
Non-U.S. currency transactions		35,200			193,485
Net change in unrealized appreciation on:
Investments		(759,742	)
Non-U.S. currency translations		5,769			(753,973	)
Net realized gain and change in unrealized appreciation on investments and non-U.S. currency					(560,488	)
Net increase in net assets resulting from operations				$	404,663

(1) Additional information related to class-specific fees and expenses is included in the Notes to Financial Statements.


Statements of changes in net assets		(dollars in thousands				)

		Year ended December 31
		2005			2004
Operations:
Net investment income	$	965,151		$	800,046
Net realized gain on investments and non-U.S. currency transactions		193,485			191,769
Net change in unrealized (depreciation) appreciation
on investments and non-U.S. currency translations		(753,973	)		32,889
Net increase in net assets resulting from operations		404,663			1,024,704

Dividends paid to shareholders from net investment income		(1,081,144	)		(822,839	)

Capital share transactions		3,822,696			2,677,089

Total increase in net assets		3,146,215			2,878,954

Net assets:
Beginning of year		19,829,408			16,950,454
End of year (including undistributed
net investment income: $13,350 and $24,684, respectively)	$	22,975,623		$	19,829,408

See Notes to Financial Statements

Notes to financial statements

1.	Organization and significant accounting policies

Organization - The Bond Fund of America, Inc. (the "fund") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. The fund seeks as high a level of current income as is consistent with preservation of capital through a diversified portfolio of bonds and other fixed-income obligations.

The fund offers 14 share classes consisting of four retail share classes, five CollegeAmerica® savings plan share classes and five retirement plan share classes. The CollegeAmerica savings plan share classes (529-A, 529-B, 529-C, 529-E and 529-F) can be utilized to save for college education. The five retirement plan share classes (R-1, R-2, R-3, R-4 and R-5) are sold without any sales charges and do not carry any conversion rights. The fund’s share classes are described below:

Share class	Initial sales charge	Contingent deferred sales charge upon redemption	Conversion feature
Class A and 529-A	Up to 3.75%	None (except 1% for certain redemptions within one year of purchase without an initial sales charge)	None
Class B and 529-B	None	Declines from 5% to 0% for redemptions within six years of purchase	Class B and 529-B convert to Class A and 529-A, respectively, after eight years
Class C	None	1% for redemptions within one year of purchase	Class C converts to Class F after 10 years
Class 529-C	None	1% for redemptions within one year of purchase	None
Class 529-E	None	None	None
Class F and 529-F	None	None	None
Class R-1, R-2, R-3, R-4 and R-5	None	None	None

Holders of all share classes have equal pro rata rights to assets, dividends and liquidation proceeds. Each share class has identical voting rights, except for the exclusive right to vote on matters affecting only its class. Share classes have different fees and expenses ("class-specific fees and expenses"), primarily due to different arrangements for distribution, administrative and shareholder services. Differences in class-specific fees and expenses will result in differences in net investment income and, therefore, the payment of different per-share dividends by each class.

Significant accounting policies - The financial statements have been prepared to comply with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the fund:

Security valuation - Equity securities are valued at the official closing price of, or the last reported sale price on, the exchange or market on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. Prices for each security are taken from the principal exchange or market in which the security trades. Fixed-income securities, including short-term securities purchased with more than 60 days left to maturity, are valued at prices obtained from an independent pricing service when such prices are available. However, where the investment adviser deems it appropriate, such securities will be valued at the mean quoted bid and asked prices (or bid prices, if asked prices are not available) or at prices for securities of comparable maturity, quality and type. Securities with both fixed-income and equity characteristics, or equity securities traded principally among fixed-income dealers, are valued in the manner described above for either equity or fixed-income securities, depending on which method is deemed most appropriate by the investment adviser. Short-term securities purchased within 60 days to maturity are valued at amortized cost, which approximates market value. The value of short-term securities originally purchased with maturities greater than 60 days is determined based on an amortized value to par when they reach 60 days or less remaining to maturity. The ability of the issuers of the debt securities held by the fund to meet their obligations may be affected by economic developments in a specific industry, state or region. Forward currency contracts are valued at the mean of representative quoted bid and asked prices. Securities and other assets for which representative market quotations are not readily available are fair valued as determined in good faith under procedures adopted by authority of the fund's board of directors. Various factors may be reviewed in order to make a good faith determination of a security’s fair value. These factors include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; significant events occurring after the close of trading in the security; and changes in overall market conditions.

Security transactions and related investment income - Security transactions are recorded by the fund as of the date the trades are executed with brokers. Realized gains and losses from security transactions are determined based on the specific identified cost of the securities. In the event a security is purchased with a delayed payment date, the fund will segregate liquid assets sufficient to meet its payment obligations. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Market discounts, premiums and original issue discounts on fixed-income securities are amortized daily over the expected life of the security.

Class allocations - Income, fees and expenses (other than class-specific fees and expenses) are allocated daily among the various share classes based on the relative value of their settled shares. Realized and unrealized gains and losses are allocated daily among the various share classes based on their relative net assets. Class-specific fees and expenses, such as distribution, administrative and shareholder services, are charged directly to the respective share class.

Dividends and distributions to shareholders - Dividends paid to shareholders are declared daily from net investment income and are paid to shareholders monthly. Distributions paid to shareholders are recorded on the ex-dividend date.

Non-U.S. currency translation - Assets and liabilities, including investment securities, denominated in non-U.S. currencies are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investment securities and income and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. In the accompanying financial statements, the effects of changes in non-U.S. exchange rates on investment securities are included with the net realized gain or loss and net change in unrealized appreciation or depreciation on investments. The realized gain or loss and change in unrealized appreciation or depreciation resulting from all other transactions denominated in non-U.S. currencies are disclosed separately.

Forward currency contracts - The fund may enter into forward currency contracts, which represent agreements to exchange non-U.S. currencies on specific future dates at predetermined rates. The fund enters into these contracts to manage its exposure to changes in non-U.S. exchange rates arising from investments denominated in non-U.S. currencies. Upon entering into these contracts, risks may arise from the potential inability of counterparties to meet the terms of their contracts and from possible movements in non-U.S. exchange rates. Due to these risks, the fund could incur losses up to the entire contract amount, which may exceed the net unrealized value shown on the accompanying financial statements. On a daily basis, the fund values forward currency contracts based on the applicable exchange rates and records unrealized gains or losses. The fund records realized gains or losses at the time the forward contract is closed or offset by another contract with the same broker for the same settlement date and currency.

Mortgage dollar rolls - The fund may enter into mortgage dollar roll transactions in which the fund sells a mortgage-backed security to a counterparty and simultaneously enters into an agreement with the same counterparty to buy back a similar security on a specific future date at a predetermined price. Each mortgage dollar roll is treated as a financing transaction, therefore, any gain or loss is considered unrealized until the roll reaches completion. Risks may arise due to the delayed payment date and the potential inability of counterparties to complete the transaction. Income is generated as consideration for entering into these transactions and is included in interest income on the accompanying financial statements.

2.	Non-U.S. investments

Investment risk - The risks of investing in securities of non-U.S. issuers may include, but are not limited to, investment and repatriation restrictions; revaluation of currencies; adverse political, social and economic developments; government involvement in the private sector; limited and less reliable investor information; lack of liquidity; certain local tax law considerations; and limited regulation of the securities markets.

Taxation - Dividend and interest income is recorded net of non-U.S. withholding taxes paid. Realized and unrealized gains on securities in certain countries are subject to non-U.S. taxes. The fund records a liability based on realized and unrealized gains to provide for potential non-U.S. taxes payable on these securities. For the year ended December 31, 2005, there were no non-U.S. taxes recorded based on realized and unrealized gains.

3. Federal income taxation and distributions

The fund complies with the requirements under Subchapter M of the Internal Revenue Code applicable to mutual funds and intends to distribute substantially all of its net taxable income and net capital gains each year. The fund is not subject to income taxes to the extent such distributions are made.

Distributions - Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences are due primarily to differing treatment for items such as non-U.S. currency gains and losses; short-term capital gains and losses; capital losses related to sales of certain securities within 30 days of purchase; unrealized appreciation of certain investments in non-U.S. securities; deferred expenses; cost of investments sold; paydowns on fixed-income securities; and net capital losses. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund for financial reporting purposes. As of December 31, 2005, the cost of investment securities, excluding forward currency contracts, for federal income tax purposes was $23,181,297,000.

During the year ended December 31, 2005, the fund reclassified $104,674,000 from undistributed net realized gains to undistributed net investment income and reclassified $15,000 from undistributed net investment income to capital paid in on shares of capital stock to align financial reporting with tax reporting.

As of December 31, 2005, the components of distributable earnings on a tax basis were as follows (dollars in thousands):

Undistributed net investment income and non-U.S. currency gains	$28,638
Short-term and long-term capital loss deferrals	(432,969)
Gross unrealized appreciation on investment securities	519,237
Gross unrealized depreciation on investment securities	(374,975)
Net unrealized appreciation on investment securities	144,262

Short-term capital loss deferrals above include capital loss carryforwards of $183,032,000 and $243,982,000 expiring in 2010 and 2011, respectively. These numbers reflect the utilization of a capital loss carryforward of $87,767,000. The remaining capital loss carryforwards will be used to offset any capital gains realized by the fund in future years through the expiration dates. The fund will not make distributions from capital gains while capital loss carryforwards remain. Short-term and long-term capital loss deferrals above include capital losses of $5,955,000 that were realized during the period November 1, 2005, through December 31, 2005. During the year ended December 31, 2005, the fund realized, on a tax basis, a net capital gain of $81,812,000 before the deferral of capital losses of $5,955,000.

Ordinary income distributions paid to shareholders from net investment income and non-U.S. currency gains were as follows (dollars in thousands):

	Year ended December 31
Share class		2005		2004
Class A	$	867,764	$	683,482
Class B		61,634		51,745
Class C		55,743		37,239
Class F		33,288		17,193
Class 529-A		11,711		6,705
Class 529-B		2,278		1,568
Class 529-C		4,413		2,641
Class 529-E		618		375
Class 529-F		295		135
Class R-1		629		297
Class R-2		13,142		6,883
Class R-3		14,060		6,674
Class R-4		7,048		2,053
Class R-5		8,521		5,849
Total	$	1,081,144	$	822,839

4. Fees and transactions with related parties

Capital Research and Management Company ("CRMC"), the fund’s investment adviser, is the parent company of American Funds Service Company ("AFS"), the fund’s transfer agent, and American Funds Distributors, Inc. ("AFD"), the principal underwriter of the fund’s shares.

Investment advisory services - The Investment Advisory and Service Agreement with CRMC provides for monthly fees accrued daily. These fees are based on a declining series of annual rates beginning with 0.30% on the first $60 million of daily net assets and decreasing to 0.12% on such assets in excess of $20 billion. The agreement also provides for monthly fees, accrued daily, based on a declining series of rates beginning with 2.25% on the first $8,333,333 of the fund's monthly gross income and decreasing to 1.75% on such income in excess of $41,666,667. CRMC is currently waiving a portion of investment advisory services fees. At the beginning of the period, CRMC waived 5% of these fees and increased the waiver to 10% on April 1, 2005. During the year ended December 31, 2005, total investment advisory services fees waived by CRMC were $4,703,000. As a result, the fee shown on the accompanying financial statements of $53,137,000, which was equivalent to an annualized rate of 0.247%, was reduced to $48,434,000, or 0.225% of average daily net assets.

Class-specific fees and expenses - Expenses that are specific to individual share classes are accrued directly to the respective share class. The principal class-specific fees and expenses are described below:

Distribution services - The fund has adopted plans of distribution for all share classes, except Class R-5. Under the plans, the board of directors approves certain categories of expenses that are used to finance activities primarily intended to sell fund shares and service existing accounts. The plans provide for payments, based on an annualized percentage of average daily net assets, ranging from 0.25% to 1.00% as noted below. In some cases, the board of directors has limited the amounts that may be paid to less than the maximum allowed by the plans. All share classes may use up to 0.25% of average daily net assets to pay service fees, or to compensate AFD for paying service fees, to firms that have entered into agreements with AFD for providing certain shareholder services. The remaining amounts available to be paid under each plan are paid to dealers to compensate them for their sales activities.

For Class A and 529-A, the board of directors has also approved the reimbursement of dealer and wholesaler commissions paid by AFD for certain shares sold without a sales charge. These classes reimburse AFD for amounts billed within the prior 15 months but only to the extent that the overall annual expense limit of 0.25% is not exceeded. As of December 31, 2005, unreimbursed expenses subject to reimbursement totaled $7,865,000 for Class A. There were no unreimbursed expenses subject to reimbursement for Class 529-A.

Share class	Currently approved limits	Plan limits
Class A	0.25%	0.25%
Class 529-A	0.25	0.50
Class B and 529-B	1.00	1.00
Class C, 529-C and R-1	1.00	1.00
Class R-2	0.75	1.00
Class 529-E and R-3	0.50	0.75
Class F, 529-F and R-4	0.25	0.50

Transfer agent services - The fund has a transfer agent agreement with AFS for Class A and B. Under this agreement, these share classes compensate AFS for transfer agent services including shareholder recordkeeping, communications and transaction processing. AFS is also compensated for certain transfer agent services provided to all other share classes from the administrative services fees paid to CRMC described below.

Administrative services - The fund has an administrative services agreement with CRMC to provide transfer agent and other related shareholder services for all share classes other than Class A and B. Each relevant share class pays CRMC annual fees up to 0.15% (0.10% for Class R-5) based on its respective average daily net assets. Each relevant share class also pays AFS additional amounts for certain transfer agent services. CRMC and AFS may use these fees to compensate third parties for performing these services. CRMC has agreed to pay AFS on the fund's behalf for a portion of the transfer agent services fees for some of the retirement plan share classes. For the year ended December 31, 2005, the total administrative services fees paid by CRMC were $8,000, $923,000 and $1,000 for Class R-1, R-2 and R-3, respectively. Administrative services fees are presented gross of any payments made by CRMC. Each 529 share class is subject to an additional annual administrative services fee of 0.10% of its respective average daily net assets; this fee is payable to the Commonwealth of Virginia for the maintenance of the CollegeAmerica plan. Although these amounts are included with administrative services fees on the accompanying financial statements, the Commonwealth of Virginia is not considered a related party.

Expenses under the agreements described on the previous page for the year ended December 31, 2005, were as follows (dollars in thousands):

Share class	Distribution services	Transfer agent services	Administrative services
Share class	Distribution services	Transfer agent services	CRMC administrative services	Transfer agent services	Commonwealth of Virginia administrative services
Class A	$42,166	$20,246	Not applicable	Not applicable	Not applicable
Class B	13,994	1,562	Not applicable	Not applicable	Not applicable
Class C	12,684	Included in administrative services	$1,823	$394	Not applicable
Class F	1,586		708	174	Not applicable
Class 529-A	411		264	52	$227
Class 529-B	533		63	30	54
Class 529-C	1,021		120	46	103
Class 529-E	64		15	3	13
Class 529-F	4		6	1	5
Class R-1	142		20	15	Not applicable
Class R-2	2,227		446	1,720	Not applicable
Class R-3	1,454		436	393	Not applicable
Class R-4	330		201	14	Not applicable
Class R-5	Not applicable		153	5	Not applicable
Total	$76,616	$21,808	$4,255	$2,847	$402

Deferred directors’ compensation - Since the adoption of the deferred compensation plan in 1993, directors who are unaffiliated with CRMC may elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Directors’ compensation of $149,000, shown on the accompanying financial statements, includes $109,000 in current fees (either paid in cash or deferred) and a net increase of $40,000 in the value of the deferred amounts.

Affiliated officers and directors - Officers and certain directors of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated officers or directors received any compensation directly from the fund.

5. Capital share transactions

Capital share transactions in the fund were as follows (dollars and shares in thousands):

Share class		Sales(1)			Reinvestments of dividends			Repurchases(1)					Net increase
		Amount	Shares		Amount	Shares		Amount		Shares			Amount	Shares
Year ended December 31, 2005
Class A	$	4,739,784	353,095	$	753,982	56,328	$	(3,046,419	)	(227,453	)	$	2,447,347	181,970
Class B		210,741	15,691		51,049	3,814		(196,388	)	(14,642	)		65,402	4,863
Class C		539,360	40,179		46,353	3,465		(239,621	)	(17,876	)		346,092	25,768
Class F		439,809	32,789		26,293	1,966		(129,966	)	(9,713	)		336,136	25,042
Class 529-A		99,048	7,386		11,692	874		(17,655	)	(1,317	)		93,085	6,943
Class 529-B		11,021	821		2,274	170		(3,178	)	(237	)		10,117	754
Class 529-C		43,687	3,257		4,404	330		(10,279	)	(767	)		37,812	2,820
Class 529-E		5,516	411		616	46		(1,102	)	(82	)		5,030	375
Class 529-F		3,351	250		295	22		(383	)	(28	)		3,263	244
Class R-1		10,761	802		627	46		(3,762	)	(281	)		7,626	567
Class R-2		185,712	13,833		13,048	976		(75,678	)	(5,646	)		123,082	9,163
Class R-3		211,778	15,775		14,002	1,047		(68,049	)	(5,080	)		157,731	11,742
Class R-4		130,864	9,741		7,037	526		(29,203	)	(2,180	)		108,698	8,087
Class R-5		121,222	9,076		5,937	444		(45,884	)	(3,422	)		81,275	6,098
Total net increase
(decrease)	$	6,752,654	503,106	$	937,609	70,054	$	(3,867,567	)	(288,724	)	$	3,822,696	284,436

Year ended December 31, 2004
Class A	$	4,113,288	304,709	$	585,100	43,375	$	(3,028,423	)	(224,803	)	$	1,669,965	123,281
Class B		290,080	21,493		42,293	3,135		(226,378	)	(16,819	)		105,995	7,809
Class C		452,065	33,472		30,241	2,242		(218,016	)	(16,201	)		264,290	19,513
Class F		276,299	20,471		13,677	1,014		(100,016	)	(7,438	)		189,960	14,047
Class 529-A		81,558	6,041		6,689	496		(12,466	)	(925	)		75,781	5,612
Class 529-B		15,159	1,123		1,564	116		(3,056	)	(228	)		13,667	1,011
Class 529-C		34,537	2,558		2,635	195		(8,033	)	(597	)		29,139	2,156
Class 529-E		3,881	287		374	28		(721	)	(54	)		3,534	261
Class 529-F		2,019	150		135	10		(119	)	(9	)		2,035	151
Class R-1		7,762	575		295	22		(2,382	)	(176	)		5,675	421
Class R-2		163,885	12,152		6,838	507		(46,485	)	(3,445	)		124,238	9,214
Class R-3		149,741	11,099		6,643	493		(41,099	)	(3,048	)		115,285	8,544
Class R-4		70,820	5,252		2,044	151		(15,251	)	(1,131	)		57,613	4,272
Class R-5		39,652	2,956		3,979	295		(23,719	)	(1,764	)		19,912	1,487
Total net increase
(decrease)	$	5,700,746	422,338	$	702,507	52,079	$	(3,726,164	)	(276,638	)	$	2,677,089	197,779

6. Forward currency contracts

As of December 31, 2005, the fund had outstanding forward currency contracts to sell non-U.S. currencies as follows (dollars in thousands):

	Contract amount				U.S. valuations at December 31, 2005
								Unrealized
Non-U.S. currency contracts		Non-U.S.		U.S.		Amount		appreciation

Sales:
Euros
expiring 1/5 to 5/10/2006		€294,054	$	349,902	$	348,483	$	1,419
Japanese yen
expiring 1/23 to 3/27/2006		¥20,931,712		179,834		178,626		1,208
Swedish kronor
expiring 1/23/2006		SKr403,644		51,564		50,857		707
British pounds
expiring 2/23/2006		£29,507		50,642		50,712		(70	)
Danish kroner
expiring 3/9/2006		DKr249,912		39,511		39,774		(263	)

Forward currency contracts - net			$	671,453	$	668,452	$	3,001

7. Investment transactions

The fund made purchases and sales of investment securities, excluding short-term securities, of $13,512,747,000 and $10,120,696,000, respectively, during the year ended December 31, 2005.

Financial highlights	(1)

				Income from investment operations(2)

			Net asset value, beginning of period		Net investment income		Net (losses) gains on securities (both realized and unrealized	)		Total from investment operations		Dividends (from net investment income	)		Net asset value, end of period	Total return(3	)		Net assets, end of period (in millions	)			Ratio of expenses to average net assets before reimbursements / waivers				Ratio of expenses to average net assets after reimbursements / waivers		(4	)	Ratio of net income to average net assets
Class A:
Year ended 12/31/2005		$	13.65	$	.62	$	(.36	)	$	.26	$	(.69	)	$	13.22	1.94	%	$	17,738				.65	%			.62	%			4.60	%
Year ended 12/31/2004			13.51		.61		.16			.77		(.63	)		13.65	5.85			15,822				.65				.65				4.54
Year ended 12/31/2003			12.70		.68		.84			1.52		(.71	)		13.51	12.22			13,991				.67				.67				5.15
Year ended 12/31/2002			12.79		.82		(.08	)		.74		(.83	)		12.70	6.11			12,600				.71				.71				6.59
Year ended 12/31/2001			12.79		.93		(.03	)		.90		(.90	)		12.79	7.15			11,223				.71				.71				7.17
Class B:
Year ended 12/31/2005			13.65		.52		(.36	)		.16		(.59	)		13.22	1.19			1,415				1.38				1.36				3.87
Year ended 12/31/2004			13.51		.51		.16			.67		(.53	)		13.65	5.07			1,394				1.39				1.38				3.80
Year ended 12/31/2003			12.70		.58		.84			1.42		(.61	)		13.51	11.38			1,274				1.41				1.41				4.37
Year ended 12/31/2002			12.79		.72		(.08	)		.64		(.73	)		12.70	5.28			939				1.47				1.47				5.77
Year ended 12/31/2001			12.79		.83		(.03	)		.80		(.80	)		12.79	6.37			471				1.45				1.45				6.30
Class C:
Year ended 12/31/2005			13.65		.51		(.36	)		.15		(.58	)		13.22	1.12			1,429				1.44				1.42				3.81
Year ended 12/31/2004			13.51		.50		.16			.66		(.52	)		13.65	4.99			1,123				1.46				1.45				3.71
Year ended 12/31/2003			12.70		.57		.84			1.41		(.60	)		13.51	11.29			848				1.49				1.49				4.26
Year ended 12/31/2002			12.79		.71		(.08	)		.63		(.72	)		12.70	5.20			554				1.55				1.55				5.66
Period from 3/15/2001 to 12/31/2001			13.05		.63		(.27	)		.36		(.62	)		12.79	2.83			188				1.57		(5	)	1.57		(5	)	6.25		(5	)
Class F:
Year ended 12/31/2005			13.65		.62		(.36	)		.26		(.69	)		13.22	1.92			803				.65				.63				4.60
Year ended 12/31/2004			13.51		.60		.16			.76		(.62	)		13.65	5.80			487				.70				.69				4.46
Year ended 12/31/2003			12.70		.67		.84			1.51		(.70	)		13.51	12.15			292				.72				.72				5.02
Year ended 12/31/2002			12.79		.81		(.08	)		.73		(.82	)		12.70	6.04			180				.77				.77				6.44
Period from 3/15/2001 to 12/31/2001			13.05		.70		(.27	)		.43		(.69	)		12.79	3.35			76				.79		(5	)	.79		(5	)	7.03		(5	)
Class 529-A:
Year ended 12/31/2005			13.65		.61		(.36	)		.25		(.68	)		13.22	1.88			273				.69				.67				4.57
Year ended 12/31/2004			13.51		.60		.16			.76		(.62	)		13.65	5.80			187				.70				.70				4.48
Year ended 12/31/2003			12.70		.67		.84			1.51		(.70	)		13.51	12.21			110				.68				.68				5.05
Period from 2/15/2002 to 12/31/2002			12.76		.69		(.04	)		.65		(.71	)		12.70	5.33			50				.75		(5	)	.75		(5	)	6.46		(5	)
Class 529-B:
Year ended 12/31/2005			13.65		.50		(.36	)		.14		(.57	)		13.22	1.02			58				1.54				1.52				3.71
Year ended 12/31/2004			13.51		.48		.16			.64		(.50	)		13.65	4.86			49				1.59				1.58				3.60
Year ended 12/31/2003			12.70		.55		.84			1.39		(.58	)		13.51	11.18			35				1.61				1.61				4.13
Period from 2/15/2002 to 12/31/2002			12.76		.60		(.04	)		.56		(.62	)		12.70	4.55			17				1.64		(5	)	1.64		(5	)	5.57		(5	)
Class 529-C:
Year ended 12/31/2005			13.65		.50		(.36	)		.14		(.57	)		13.22	1.03			121				1.53				1.51				3.74
Year ended 12/31/2004			13.51		.48		.16			.64		(.50	)		13.65	4.88			86				1.57				1.57				3.61
Year ended 12/31/2003			12.70		.55		.84			1.39		(.58	)		13.51	11.19			56				1.59				1.59				4.15
Period from 2/19/2002 to 12/31/2002			12.73		.60		(.02	)		.58		(.61	)		12.70	4.75			28				1.63		(5	)	1.63		(5	)	5.58		(5	)
Class 529-E:
Year ended 12/31/2005			13.65		.57		(.36	)		.21		(.64	)		13.22	1.56			15				1.01				.99				4.25
Year ended 12/31/2004			13.51		.55		.16			.71		(.57	)		13.65	5.43			11				1.05				1.05				4.13
Year ended 12/31/2003			12.70		.62		.84			1.46		(.65	)		13.51	11.77			7				1.06				1.06				4.68
Period from 3/7/2002 to 12/31/2002			12.70		.61		.02			.63		(.63	)		12.70	5.14			3				1.13		(5	)	1.13		(5	)	6.06		(5	)
Class 529-F:
Year ended 12/31/2005			13.65		.62		(.36	)		.26		(.69	)		13.22	1.98			7				.58				.56				4.69
Year ended 12/31/2004			13.51		.59		.16			.75		(.61	)		13.65	5.69			4				.80				.80				4.36
Year ended 12/31/2003			12.70		.64		.84			1.48		(.67	)		13.51	11.96			2				.82				.82				4.72
Period from 9/26/2002 to 12/31/2002			12.31		.19		.40			.59		(.20	)		12.70	4.81			-		(6	)	.30				.30				1.51
Class R-1:
Year ended 12/31/2005		$	13.65	$	.51	$	(.36	)	$	.15	$	(.58	)	$	13.22	1.11	%	$	18				1.51	%			1.43	%			3.82	%
Year ended 12/31/2004			13.51		.50		.16			.66		(.52	)		13.65	4.98			11				1.55				1.47				3.70
Year ended 12/31/2003			12.70		.57		.84			1.41		(.60	)		13.51	11.29			5				1.65				1.49				4.13
Period from 6/11/2002 to 12/31/2002			12.65		.38		.06			.44		(.39	)		12.70	3.59			1				2.53		(5	)	1.52		(5	)	5.55		(5	)
Class R-2:
Year ended 12/31/2005			13.65		.51		(.36	)		.15		(.58	)		13.22	1.14			352				1.74				1.41				3.84
Year ended 12/31/2004			13.51		.50		.16			.66		(.52	)		13.65	5.02			238				1.85				1.43				3.73
Year ended 12/31/2003			12.70		.57		.84			1.41		(.60	)		13.51	11.33			111				1.94				1.46				4.20
Period from 5/31/2002 to 12/31/2002			12.72		.40		(.01	)		.39		(.41	)		12.70	3.23			21				1.67		(5	)	1.48		(5	)	5.56		(5	)
Class R-3:
Year ended 12/31/2005			13.65		.56		(.36	)		.20		(.63	)		13.22	1.53			361				1.05				1.02				4.23
Year ended 12/31/2004			13.51		.55		.16			.71		(.57	)		13.65	5.42			213				1.06				1.05				4.12
Year ended 12/31/2003			12.70		.62		.84			1.46		(.65	)		13.51	11.76			95				1.12				1.07				4.59
Period from 6/4/2002 to 12/31/2002			12.73		.42		(.02	)		.40		(.43	)		12.70	3.31			18				1.20		(5	)	1.10		(5	)	5.95		(5	)
Class R-4:
Year ended 12/31/2005			13.65		.61		(.36	)		.25		(.68	)		13.22	1.91			182				.67				.65				4.61
Year ended 12/31/2004			13.51		.60		.16			.76		(.62	)		13.65	5.81			77				.68				.68				4.48
Year ended 12/31/2003			12.70		.67		.84			1.51		(.70	)		13.51	12.15			18				.72				.72				5.05
Period from 5/20/2002 to 12/31/2002			12.67		.47		.04			.51		(.48	)		12.70	4.21			11				.77		(5	)	.74		(5	)	6.20		(5	)
Class R-5:
Year ended 12/31/2005			13.65		.66		(.36	)		.30		(.73	)		13.22	2.21			204				.37				.35				4.91
Year ended 12/31/2004			13.51		.65		.16			.81		(.67	)		13.65	6.14			127				.37				.37				4.81
Year ended 12/31/2003			12.70		.71		.84			1.55		(.74	)		13.51	12.52			106				.40				.40				5.39
Period from 5/15/2002 to 12/31/2002			12.66		.52		.05			.57		(.53	)		12.70	4.66			78				.42		(5	)	.42		(5	)	6.75		(5	)

	Year ended December 31
	2005		2004		2003		2002		2001

Portfolio turnover rate for all classes of shares	50	%	45	%	60	%	50	%	64	%

(1) Based on operations for the period shown (unless otherwise noted) and, accordingly, may not be representative of a full year.

(2) Based on average shares outstanding.

(3) Total returns exclude all sales charges, including contingent deferred sales charges.

(4) The ratios in this column reflect the impact, if any, of certain reimbursements/waivers from CRMC. During some of the periods shown,

CRMC reduced fees for investment advisory services for all share classes. In addition, during the start-up period for the

retirement plan share classes (except Class R-5), CRMC agreed to pay a portion of the fees related to transfer agent services.

(5) Annualized.

(6) Amount less than $1 million.

See Notes to Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of The Bond Fund of America, Inc.:

We have audited the accompanying statement of assets and liabilities of The Bond Fund of America, Inc. (the “Fund”), including the investment portfolio, as of December 31, 2005, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Bond Fund of America, Inc. as of December 31, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE LLP

February 14, 2006

Costa Mesa, California

Tax information unaudited

We are required to advise you within 60 days of the fund’s fiscal year-end regarding the federal tax status of certain distributions received by shareholders during such fiscal year. The information below is provided for the fund’s fiscal year ended December 31, 2005.

Individual shareholders are eligible for reduced tax rates on qualified dividend income. The fund designates $9,381,000 of the dividends paid by the fund as qualified dividend income.

Corporate shareholders may exclude up to 70% of qualifying dividends. The fund designates $8,870,000 of dividends received as qualified dividend income.

For state tax purposes, certain states may exempt from income taxation that portion of the income dividends paid by the fund that were derived from direct U.S. government obligations. The fund designates $90,381,000 as interest derived on direct U.S. government obligations.

Individual shareholders should refer to their Form 1099-DIV or other tax information, which was mailed in January 2006, to determine the calendar year amounts to be included on their 2005 tax returns. Shareholders should consult their tax advisers.