N-CSR 1 bfa_ncsr.htm N-CSR bfa_ncsr.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM N-CSR
Certified Shareholder Report of
Registered Management Investment Companies

Investment Company Act File Number: 811-02444



The Bond Fund of America, Inc.
(Exact Name of Registrant as Specified in Charter)

333 South Hope Street
Los Angeles, California 90071
(Address of Principal Executive Offices)




Registrant's telephone number, including area code: (213) 486-9200

Date of fiscal year end: December 31

Date of reporting period: December 31, 2009





Kimberly S. Verdick
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071
(Name and Address of Agent for Service)


Copies to:
Michael Glazer
Bingham McCutchen LLP
355 South Grand Avenue, Suite 4400
Los Angeles, California 90071
(Counsel for the Registrant)


 
 
 

ITEM 1 – Reports to Stockholders
 
[logo - American Funds®]

The right choice for the long term®

The Bond Fund of America

Bonds for the long run

[photo of a highway over a body of water]
 
Annual report for the year ended December 31, 2009

The Bond Fund of AmericaSM 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.
 
This fund is one of the 30 American Funds. American Funds is one of the nation’s largest mutual fund families. For nearly 80 years, Capital Research and Management Company,SM the American Funds adviser, has invested with a long-term focus based on thorough research and attention to risk.

Fund results shown in this report, unless otherwise indicated, are for Class A shares at net asset value. If a sales charge (maximum 3.75%) had been deducted, the results would have been lower. Results are for past periods and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value. For current information and month-end results, visit americanfunds.com.

Here are the average annual total returns on a $1,000 investment with all distributions reinvested for periods ended December 31, 2009:

Class A shares
  
1 year
    
5 years
    
10 years
  
                   
Reflecting 3.75% maximum sales charge
     10.59 %     1.61 %     4.50 %

The total annual fund operating expense ratio was 0.65% for Class A shares as of December 31, 2009.

Investment results assume all distributions are reinvested and reflect applicable fees and expenses. The fund’s investment adviser waived a portion of its management fees from September 1, 2004, through December 31, 2008. Fund results shown reflect the waiver, without which they would have been lower. See the Financial Highlights table on pages 25 and 26 for details.

The fund’s 30-day yield for Class A shares as of January 31, 2010, calculated in accordance with the Securities and Exchange Commission formula, was 3.79%. The fund’s distribution rate for Class A shares as of that date was 4.25%. Both reflect the 3.75% maximum sales charge. The SEC yield reflects the rate at which the fund is earning income on its current portfolio of securities while the distribution rate reflects the fund’s past dividends paid to shareholders. Accordingly, the fund’s SEC yield and distribution rate may differ.

Results for other share classes can be found on page 32.

The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. Bond ratings, which typically range from AAA (highest) to D (lowest), are generally issued by independent rating agencies and are designed to provide an indication of an issuer’s creditworthiness. See the fund’s most recent statement of additional information for details. High-yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in bonds of issuers outside the U.S. may be subject to additional risks. They include currency fluctuations; political and social instability; differing securities regulations and accounting standards; higher transaction costs; possible changes in taxation; and illiquidity. See the prospectus and the Risk Factors section of this report for more information on these and other risks associated with investing in the fund.
 

 
Fellow shareholders:

2009 saw a reversal of the trends that darkened the bond market in 2008. As a result, most nongovernment sectors of the market rallied steadily, with some of the best returns being recorded by lower rated, higher risk bonds.

The Bond Fund of America, boosted by the rally, produced a total return of 14.9% for the year ended December 31, 2009. Fund results far exceeded those of its primary benchmark, the unmanaged Barclays Capital U.S. Aggregate Index, which returned 5.9%. However, the fund’s results fell short of its peer-group measure, the Lipper Corporate Debt A-Rated Bond Funds Average, which returned 15.2%.

Income remains a vital component of the fund’s total return. For 2009, the fund paid monthly dividends totaling 52.2 cents a share. This represents an income return of nearly 5.0% for those who reinvested dividends. Those who took dividends in cash recorded an income return of about 4.9%. Importantly for our shareholders, the fund’s income return continued to surpass that of its Lipper peer-group average for the 25th consecutive year.

Bond market overview
To put 2009 in perspective, we should first refresh our memories of 2008. The bond market nearly froze up in late 2008, as problem mortgages encumbered financial institutions and pushed some to extinction. Investors increasingly shunned most debt obligations except government bonds, which rallied sharply from a flight to safety and a decline in the federal funds rate to historic lows. As the financial crisis grew and the economy plunged deeper into recession, the division in the market widened: Government debt soared, while most other sectors of the market sagged.

[Begin Sidebar]
Results at a glance
                        
For periods ended December 31, 2009, with all distributions reinvested
                        
   
Total returns
    
Average annual total returns
  
                         
                     
Lifetime
  
   
1 year
    
5 years
    
10 years
    
(since 5/28/74)
  
                         
The Bond Fund of America
                        
(Class A shares)
     14.91 %     2.38 %     4.90 %     8.45 %
                                 
Barclays Capital U.S. Aggregate Index1
     5.93       4.97       6.33       8.43  
                                 
Lipper Corporate Debt A-Rated Bond Funds Average2
     15.18       3.52       5.48       8.24  
                                 
1 The unmanaged Barclays Capital U.S. Aggregate Index began on January 1, 1976. From May 28, 1974, through December 31, 1975, the Barclays Capital U.S. Government/Credit Index was used.
  
2 Source: Lipper. Lipper averages do not include the effect of sales charges.
                                
[End Sidebar]
 
 
[photo of a suspension bridge at night with lights on]
[Begin Sidebar]
In this report
  
   
 
Special feature
   
6
Bonds for the long run
 
In this article, we’ll take a closer look at the concept of bonds’ relative stability by taking a longer view of the bond market, its basic components and its fluctuations. In the process, we’ll discuss how and why bond funds should be a part of every investor’s long-term investment strategy.
   
 
Contents
   
1
Letter to shareholders
   
4
The value of a long-term perspective
   
11
Summary investment portfolio
   
15
Financial statements
   
33
Board of directors and other officers
[End Sidebar]

[Begin Sidebar]
Treasury yield curves

As shown, rising yields pushed most Treasury prices lower in 2009.
 
[begin line chart]
   
December 31, 2009
    
December 31, 2008
  
   
 
    
 
  
3 Mo
     0.06       0.09  
6 Mo
     0.20       0.27  
1 Yr
     0.45       0.35  
2 Yr
     1.14       0.77  
3 Yr
     1.68       0.97  
5 Yr
     2.68       1.55  
10 Yr
     3.84       2.22  
30 Yr
     4.64       2.68  
[end line chart]

Source: Bloomberg
[End Sidebar]

In response, the government and the Federal Reserve enacted extraordinary measures to stimulate the economy and foster liquidity in the financial markets. With implicit government support, the weaker sectors of the market began to stabilize during the first quarter of 2009. Though trading remained sketchy at first, buyers began to return to the market in search of higher yields than those offered by Treasuries.

By the second quarter of 2009, some of the most battered sectors of 2008 were rallying, producing large gains. These mainly included credit-sensitive areas of the market such as corporate bonds, high-yield debt, commercial mortgage-backed securities and mortgage-related debt in the asset-backed sector.

By the second half of 2009, the economy was showing signs of stabilizing, albeit at lower levels. Despite rising unemployment, there were glimpses of hope in corporate earnings and signs of strength in international economies with key ties to the United States. With prospects of a sustainable recovery emerging, the rally in credit-sensitive bonds continued throughout the second half, though at a more measured pace.

If 2008 and 2009 were studies in contrasts and extremes, so were the returns of those two years. High-yield bonds (those rated below investment grade) recorded some of the worst results in 2008 yet produced returns in excess of 50% in 2009. In contrast, Treasuries, which rallied 13.7% in 2008, fell 3.6% in 2009 as measured by Barclays Capital. Overall, bonds with the greatest measure of credit risk generally posted the highest returns last year. As for high-quality bonds, not all fell from favor. Government mortgage-backed securities, for example, delivered positive results in both years, providing a striking exception to the reversal in market momentum.

A look at the portfolio
During the past year, the portfolio counselors of The Bond Fund of America took advantage of the bond market rally to bolster the credit quality of the portfolio and to lower the fund’s exposure to higher risk securities as prices increased. These adjustments were primarily intended to lessen the overall volatility of the portfolio, should the market encounter hurdles in the months ahead in the face of developing uncertainties. These include the likely withdrawal of government initiatives to support the market, ongoing difficulties in the commercial real estate market and potential setbacks to the fledgling recovery taking place in the economy.

Adjustments to the portfolio include an increased weighting in U.S. government bonds (mainly Treasuries and federal agencies), which grew to 28.9% by year-end from 14.1% at the start of the year. Additionally, portfolio counselors took advantage of rising prices to reduce exposure to asset-backed securities, commercial mortgage-backed obligations and privately originated mortgage-backed bonds. On the other hand, they modestly increased holdings of federally supported mortgage-backed securities. This left the fund’s total mortgage exposure down only slightly for the year.

Corporate bonds have long been a core component of the fund’s portfolio and remained its largest sector exposure. As these bonds rallied during the first half of the year, portfolio counselors trimmed its exposure, primarily by reducing bank and financial obligations. During the second half of the year, counselors increased the fund’s weightings in consumer discretionary debt and energy bonds. Overall, corporate bonds ended the year with a 34.5% weighting in the portfolio, down marginally from the start of the year. Over the past two years, however, the reduction has been more significant; corporates totaled about 44.3% of portfolio holdings in mid-2008.

Despite these adjustments, The Bond Fund of America has maintained a broad exposure to the market, as can be seen in the charts atop the summary portfolio on page 11. Overall, the fund ended the year with more than 2,100 individual holdings, a 23% increase in net assets and more than 2.3 million shareholders.

Looking ahead
The recovery in the bond market over the past year has been truly impressive. In most respects, the market has returned to normal: It readily accommodates the daily fluctuations that move bond prices, and trading activity has increased significantly. This is the good news for 2010, and we do not expect a return to the troubles of 2008.

The year ahead, however, holds new uncertainties, as we mentioned earlier in the letter. While we have confidence that the market will contend with these issues in an orderly fashion as they unfold, we have also tempered our expectations for returns in the coming year. Though we continue to find longer term opportunities for our shareholders, we do not expect 2010 to deliver the outsized gains of last year.

In this environment, we believe that caution is the better part of prudency, and we have positioned the fund’s portfolio accordingly. We continue to rely heavily on the efforts of our analysts, traders, economists and market professionals to drive our investment decisions, and we are ever mindful of the importance this fund has for so many of our shareholders who view it as a pillar of stability and reliability in their overall portfolio. Accordingly, we invite you to read our feature article, “Bonds for the long run,” which begins on page 6 and takes a closer look at the relative stability bonds offer.

We thank you for this opportunity to help you achieve your financial goals, and we look forward to reporting to you again in six months.

Cordially,

/s/ Paul G. Haaga, Jr.

Paul G. Haaga, Jr.
Vice Chairman of the Board


/s/ John H. Smet

John H. Smet
President

February 5, 2010

For current information about the fund, visit americanfunds.com.

[Begin Sidebar]
We take this opportunity to thank Abner Goldstine for his many years of leadership and service as president of The Bond Fund of America. Beginning this year, John Smet has assumed the responsibilities of president. Abner has been with the fund since its inception in 1974. John has been with the fund for 20 years.
[End Sidebar]

 
The value of a long-term perspective
 
How a $10,000 investment has grown over the fund’s lifetime

Fund results shown are for Class A shares and reflect deduction of the maximum sales charge of 3.75% on the $10,000 ­investment.1 Thus, the net amount invested was $9,625.2 Results are for past periods and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For current information and month-end results, visit americanfunds.com.

There have always been reasons not to invest. You will find, however, that despite occasional stumbles, financial markets have tended to reward investors over the long term.

Dividends, particularly when reinvested, have accounted for virtually all of the fund’s overall results. The table beneath the chart details the fund’s annual dividends and the cumulative value of the original investment.

Average annual total returns based on a $1,000 investment
                 
(for periods ended December 31, 2009)*
                  
   
1 year
    
5 years
    
10 years
  
Class A shares
     10.59 %     1.61 %     4.50 %
                         
*Assumes reinvestment of all distributions and payment of the maximum 3.75% sales charge.
                        

The total annual fund operating expense ratio was 0.65% for Class A shares as of the most recent fiscal year-end.

Investment results assume all distributions are reinvested and reflect applicable fees and expenses. The fund’s investment adviser waived a portion of its management fees from September 1, 2004, through December 31, 2008. Fund results shown reflect the waiver, without which they would have been lower. See the Financial Highlights table on pages 25 and 26 for details.

[begin mountain chart]
Year ended Dec 31
  
BFA with
 dividends
 reinvested4
    
Barclays Capital U.S. Aggregate Index3
    
Consumer Price Index
(inflation)5
  
                   
5/28/74
   $ 9,625     $ 10,000     $ 10,000  
1974
     9,988       10,318       10,679  
1975
     11,254       11,587       11,420  
1976
     13,293       13,395       11,975  
1977
     13,977       13,802       12,778  
1978
     14,261       13,994       13,930  
1979
     14,710       14,264       15,782  
1980
     15,230       14,650       17,757  
1981
     16,242       15,565       19,342  
1982
     21,586       20,643       20,082  
1983
     23,628       22,368       20,844  
1984
     26,450       25,756       21,667  
1985
     33,488       31,449       22,490  
1986
     38,568       36,250       22,737  
1987
     39,324       37,248       23,745  
1988
     43,533       40,186       24,794  
1989
     47,942       46,025       25,947  
1990
     49,509       50,149       27,531  
1991
     59,927       58,174       28,374  
1992
     66,722       62,480       29,198  
1993
     76,155       68,571       30,000  
1994
     72,335       66,572       30,802  
1995
     85,536       78,870       31,584  
1996
     91,274       81,733       32,634  
1997
     99,709       89,624       33,189  
1998
     104,863       97,409       33,724  
1999
     107,265       96,609       34,630  
2000
     113,906       107,841       35,802  
2001
     122,051       116,946       36,358  
2002
     129,514       128,939       37,222  
2003
     145,335       134,231       37,922  
2004
     153,837       140,055       39,156  
2005
     156,815       143,457       40,494  
2006
     166,032       149,674       41,523  
2007
     171,635       160,101       43,217  
2008
     150,619       168,491       43,257  
2009
     173,071       178,483       44,434  
[end mountain chart]


Year ended
                                                
December 31
     1974 6     1975       1976       1977       1978       1979       1980       1981  
                                                                 
Total value
                                                                
Dividends reinvested
   $ 418       907       1,020       1,126       1,211       1,401       1,724       2,118  
Value at year-end
   $ 9,988       11,254       13,293       13,977       14,261       14,710       15,230       16,242  
BFA’s total return
     (0.1 )%     12.7       18.1       5.1       2.0       3.1       3.5       6.6  
                                                                 
                                                                 
Year ended
                                                                
December 31
     1982       1983       1984       1985       1986       1987       1988       1989  
                                                                 
Total value
                                                                
Dividends reinvested
     2,434       2,556       2,869       3,227       3,604       3,787       3,953       4,471  
Value at year-end
     21,586       23,628       26,450       33,488       38,568       39,324       43,533       47,942  
BFA’s total return
     32.9       9.5       11.9       26.6       15.2       2.0       10.7       10.1  
                                                                 
                                                                 
Year ended
                                                                
December 31
     1990       1991       1992       1993       1994       1995       1996       1997  
                                                                 
Total value
                                                                
Dividends reinvested
     4,699       4,909       5,275       5,325       5,733       6,178       6,473       6,704  
Value at year-end
     49,509       59,927       66,722       76,155       72,335       85,536       91,274       99,709  
BFA’s total return
     3.3       21.0       11.3       14.1       (5.0 )     18.2       6.7       9.2  
                                                                 
                                                                 
Year ended
                                                                
December 31
     1998       1999       2000       2001       2002       2003       2004       2005  
                                                                 
Total value
                                                                
Dividends reinvested
     7,007       7,398       8,190       8,228       8,189       7,370       6,913       7,924  
Value at year-end
     104,863       107,265       113,906       122,051       129,514       145,335       153,837       156,815  
BFA’s total return
     5.2       2.3       6.2       7.2       6.1       12.2       5.8       1.9  
                                                                 
                                                                 
Year ended
                                                                
December 31
     2006       2007       2008       2009              
Average
                  
                                              annual                  
Total value
                                            
total return
                 
Dividends reinvested
     7,949       8,950       10,094       7,469              
for fund’s
                  
Value at year-end
     166,032       171,635       150,619       173,071              
lifetime:
                  
BFA’s total return
     5.9       3.4       (12.2 )     14.9               8.34 %4                

 
1As outlined in the prospectus, the sales charge is reduced for accounts (and aggregated investments) of $100,000 or more and is eliminated for purchases of $1 million or more. There is no sales charge on dividends or capital gain distributions that are reinvested in additional shares.
 
2The maximum initial sales charge was 8.5% prior to December 15, 1986, when it became 4.75% until January 9, 2000.
 
3From May 28, 1974, through December 31, 1975, the Barclays Capital U.S. Government/Credit Index was used because the Barclays Capital U.S. Aggregate Index did not yet exist. Since January 1, 1976, the Barclays Capital U.S. Aggregate Index has been used. These indexes are unmanaged and their results do not reflect the effect of sales charges, commissions or expenses.
 
4Includes reinvested dividends of $177,805 and reinvested capital gain distributions of $4,573.
 
5Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.
 
6For the period ended May 28, 1974 (when fund operations began), through December 31, 1974.

The results shown are before taxes on fund distribution and sale of fund shares.
 
 
[photo of a suspension bridge over water - view from water level]
Bonds for the long run

In our 2007 annual report, we addressed some of the lessons learned from difficult markets. One lesson was that sharp downturns in the bond market have often been followed by robust rebounds. We’ve seen ample evidence of this last year.

In late 2008, most bond sectors (except Treasuries) declined significantly during the darkest days of the financial crisis. In 2009, many of those same bonds retraced lost ground.

The 2009 bond rally also coincided with renewed investor interest in fixed-income securities. For much of the year, investors put far more money into bond funds than into stock funds, as measured by the Investment Company Institute, the trade organization for the mutual fund industry. This rotation into bonds occurred even as stock prices also rebounded strongly from multi-year lows.

Why the preference for bonds? No doubt some investors were chasing after expected short-term gains. More likely, in our view, many more were seeking the relative stability that bonds tend to provide, particularly in light of the extreme volatility that occurred in the stock market over the past two years.

In this article, we’ll take a closer look at the concept of bonds’ relative stability by taking a longer view of the bond market, its basic components and its fluctuations. In the process, we’ll discuss how and why bond funds should be a part of every investor’s long-term investment strategy.
 
[photo of the top portion of a suspension bridge]
The perspective of a decade

The past decade has been an extraordinary period for U.S. stocks and bonds alike. Two major declines bookended the decade for stocks, with the most recent selloff being the most severe since the 1930s. Large portions of the bond market also withstood a major downturn in 2008, while Treasuries rallied and interest rates tumbled to historic lows. Nonetheless, the interim losses recorded by most of the nongovernment portions of the bond market were smaller than those of the stock market. Moreover, bond market returns for the decade just ended bested those of the stock market, as measured by their primary indexes: The Barclays Capital U.S. Aggregate Index (a benchmark for this fund) posted a cumulative return of 84.7% for the 10 years ended December 31, 2009, while Standard & Poor’s 500 Composite Index declined 9.1%.

Was this an anomaly? Yes and no. Over much longer periods of time, stocks have generally provided higher returns than bonds; but there are exceptions — other 10-year periods when bonds produced better results. During the 1970s, for example, there were several 10-year rolling periods when bond returns outpaced those of stocks. The quandary for investors is that no one can predict with certainty which asset class will produce the best results for the next 10 years. History offers insights, but its guidance is murky because markets and the forces that drive markets are constantly evolving.

To address this uncertainty, prudent investors must understand the differences between stocks and bonds, then carefully evaluate their tolerance for investment risk. With that knowledge, a financial adviser can help investors devise a strategy to achieve their long-term investment goals — a strategy that combines both stocks and bonds that are appropriate to the investor’s risk tolerance and time horizon.
 
[photo of the upper portion of the Brooklyn Bridge]
[Begin Sidebar]
Stocks + bonds = balance

Historically, bonds have helped buoy investment portfolios during stock market declines. We had ample evidence of this twice during the past decade. It is not unusual for stocks and bonds to move in different directions, but the main reason for incorporating bonds into an overall investment plan is that bonds tend to be less volatile than stocks. As this chart suggests, an investor who put equal amounts of money into stocks and bonds at the start of the decade would have done far better by the end of the decade than one who invested only in stocks.

[begin line chart]
   
Stocks
    
Bonds
    
Stocks + Bonds
  
                   
12/31/1999
     10,000       10,000       10,000  
3/31/2000
     10,229       10,221       10,225  
6/30/2000
     9,957       10,399       10,178  
9/30/2000
     9,861       10,712       10,286  
12/31/2000
     9,090       11,163       10,126  
3/31/2001
     8,013       11,501       9,757  
6/30/2001
     8,481       11,566       10,024  
9/30/2001
     7,237       12,100       9,668  
12/31/2001
     8,010       12,105       10,058  
3/31/2002
     8,032       12,116       10,074  
6/30/2002
     6,957       12,564       9,760  
9/30/2002
     5,756       13,140       9,448  
12/31/2002
     6,241       13,347       9,794  
3/31/2003
     6,044       13,532       9,788  
6/30/2003
     6,974       13,871       10,422  
9/30/2003
     7,159       13,851       10,505  
12/31/2003
     8,030       13,894       10,962  
3/31/2004
     8,166       14,264       11,215  
6/30/2004
     8,306       13,915       11,111  
9/30/2004
     8,151       14,360       11,255  
12/31/2004
     8,903       14,497       11,700  
3/31/2005
     8,712       14,428       11,570  
6/30/2005
     8,831       14,862       11,846  
9/30/2005
     9,149       14,761       11,955  
12/31/2005
     9,340       14,849       12,094  
3/31/2006
     9,733       14,753       12,243  
6/30/2006
     9,592       14,742       12,167  
9/30/2006
     10,135       15,303       12,719  
12/31/2006
     10,814       15,493       13,153  
3/31/2007
     10,883       15,726       13,304  
6/30/2007
     11,566       15,644       13,605  
9/30/2007
     11,800       16,089       13,945  
12/31/2007
     11,407       16,572       13,990  
3/31/2008
     10,330       16,931       13,631  
6/30/2008
     10,049       16,759       13,404  
9/30/2008
     9,209       16,677       12,943  
12/31/2008
     7,188       17,440       12,314  
3/31/2009
     6,398       17,461       11,930  
6/30/2009
     7,417       17,772       12,594  
9/30/2009
     8,573       18,437       13,505  
12/31/2009
     9,090       18,475       13,783  
[end line chart]
Assumes a hypothetical $10,000 investment on January 1, 2000, with all distributions reinvested. Stocks are represented by Standard & Poor’s 500 Composite Index. Bonds are represented by Barclays Capital U.S. Aggregate Index. The stocks & bonds portfolio consists of $5,000 invested in stocks and $5,000 invested in bonds at the beginning of the period. The indexes are unmanaged, and the portfolio was not rebalanced after the initial investment.
[End Sidebar]

Distinct securities

The fundamental distinction between stocks and bonds is that the former involves an ownership stake in a company, while the latter is a loan to a company or entity. As such, stocks represent an investment in the ability of a company to thrive over time, while bonds are an investment in the ability of a company or entity to make good on its debt. Thus, stockholders primarily seek capital appreciation (growth of principal), and bondholders primarily seek timely interest payments and the return of their principal (the loan) at maturity. The steady stream of interest payments exerts a moderating influence on bond returns during difficult markets.

Another important distinction is how these securities are treated in the capital structure, the building blocks of a company’s funding. Stocks and bonds are both integral parts of the funding structure, but bonds have seniority. In a worst-case scenario, for example, stockholders are typically wiped out if a company files for bankruptcy, while bondholders may have access to the company’s assets or may assume ownership of the company itself. In other words, bondholders often have a greater downside protection than do stockholders.

These basic distinctions point to underlying differences between the two asset classes, which influence their behavior under changing market conditions. Stocks, by virtue of their greater upside and downside potential, are historically more volatile than bonds. To be sure, both securities involve degrees of investment risk, but bonds are generally perceived to be less volatile over time than stocks. As a result, bond returns — particularly those with investment-grade ratings — are typically more moderate than stocks; but moderation can serve a vital function in a broader investment portfolio, as many have recently learned.

A question of allocation

The question for most investors is really not one of stocks or bonds. Rather, it is a question of determining the right mix of the two asset classes to best serve their investment goals. A financial adviser is the preferred resource for determining the optimum mix, based on the investor’s goals, ability to accept risk and the need for current income. Once an allocation to bonds has been determined, the question becomes which bonds?

Diversification among types of bonds can help smooth out returns and provide a steadier stream of income. Recent history provides an example. For decades, U.S. Treasuries have been the gold standard for investors, the universal safe haven during periods of market distress. During the worst days of the financial crisis, Treasuries rallied while most other sectors of the bond market sank. Indeed, for 2008, Treasuries returned 13.7%. In 2009, however, Treasuries gave up some of those gains, declining 3.6%. In contrast, corporate bonds fell 4.9% in 2008 but gained 18.7% in 2009. These variations point to the need for diversification within the bond portfolio because each sector of the market can respond differently to changing market conditions.
 
[photo of a large group of people on a suspension bridge]
[Begin Sidebar]
Bond market sector returns

This table shows the total return for major sectors of the bond market for 2008 and 2009. It also shows the average annual total return for each of these sectors for the past decade. While returns often fluctuate from year to year, as we have recently seen, they have tended to smooth out over time, as shown in the 10-year average annual total returns.

Sector
  
2008
    
2009
    
10-year average*
  
                   
U.S. Treasuries
     13.74 %     –3.57 %     6.15 %
U.S. Agencies
     9.26       1.53       6.22  
U.S. Corporates
     –4.94       18.68       6.58  
U.S. Mortgage-backed securities
     8.34       5.89       6.46  
U.S. Commercial mortgage-backed securities
     –20.52       28.45       6.01  
U.S. Asset-backed securities
     –12.72       24.72       5.35  
Global bonds
     4.79       6.93       6.49  
U.S. High Yield
     –26.16       58.21       6.72  
                         
*Average annual total returns through 12/31/09
                        
Source: Barclays Capital
[End Sidebar]

The relative stability of bonds becomes more apparent when investors take a longer view of the market and returns, as shown in the chart above. Since it is rare that all sectors of the market do equally well or poorly, financial advisers frequently recommend that investors diversify holdings, just as they would in a stock portfolio.

The Bond Fund of America aims to do just that by offering a broad selection of bonds culled from the various sectors of the market. The fund also strives to provide layers of diversity by investing in bonds of varying credit quality and across the spectrum of maturities available. This mix, however, is neither arbitrary nor fully inclusive. The fund is purposefully weighted in investment-grade bonds (those rated BBB or higher), and each holding is carefully selected for its potential to contribute to results based on the terms of the issue, prospects of the issuer and the outlook for market conditions. Yet with this approach, investors gain access to a wide variety of bonds that are actively managed to help shareholders meet their investment needs.

Management matters

A professionally managed bond portfolio like The Bond Fund of America offers advantages rarely available to the average investor. These include access to areas of the bond market that are restricted to institutions or high net worth individuals and a more broadly diversified portfolio.

The latter is especially important for investors seeking an element of stability from their bond holdings. Not only does the broader array of securities help to smooth out returns over time, but it affords professional managers the means necessary to make adjustments in response to changing market conditions without having to substantially alter the portfolio. These adjustments may entail increasing or reducing exposure to a sector or industry, altering the mix of credit quality in the fund, and/or extending or shortening the maturity structure of the portfolio.

As important as these modifications may be to preserving stability, it is even more important to know when and to what degree changes should be made. In this regard, the seasoned professional typically has an edge over amateur investors. The more expansive the pool of holdings, the greater the number of “tools” that becomes available to the manager seeking to steady a portfolio. To this end, The Bond Fund of America, with more than 2,100 individual holdings as of December 2009, affords greater flexibility to address changing markets than most individual investors could amass on their own.
 
[close-up photo of a suspension bridges' cables]
Income paces returns

Finally, bond managers and investors need to pay close attention to income. The interest payments a bond makes — or the dividends, in the case of bond funds — are a vital component of the total return. This income can boost total returns when bond prices are rising and can soften the effects of declining prices. For bond fund investors, income reinvested can contribute meaningfully to growth of principal over time; when the time comes, that same income can become a key source of funds for living in retirement.

The portfolio counselors of The Bond Fund of America recognize the importance of income and seek to provide a high level of current income for our shareholders. This is no small feat, given that interest rates reached multi-decade lows in the past year. In fact, rates have declined by more than half over the life of this fund, as measured by the 10-year Treasury. Nonetheless, The Bond Fund of America has consistently provided its shareholders with a competitive income return, exceeding its Lipper peer-group average in 33 of its 36 fiscal years.

The chart on pages 4 and 5 maps the importance of income for fund results and for our shareholders. It shows that the growth of a $10,000 investment over the life of the fund with dividends reinvested totaled about $173,000 at the end of 2009. Despite several difficult market periods along the way, the overall trend has been higher, reflecting the power of compounding through reinvestment. What may not be readily apparent is that all of the growth came from income reinvested.

An ancient fable tells us that slow and steady wins the race. In many respects, bonds resemble the fabled tortoise. They seldom provide the highest or lowest results in a given year. Yet over time, patient investors may enjoy the benefits of the regular income and steady results they have historically provided. n
 
 
 
Summary investment portfolio, December 31, 2009
 
The following summary investment portfolio is designed to streamline the report and help investors better focus on a fund’s principal holdings.  See the inside back cover for details on how to obtain a complete schedule of portfolio holdings.
 
[begin pie chart]
Portfolio by type of security (percent of net assets)
      
Corporate bonds & notes
     34.47  
Bonds & notes of U.S. government & government agencies
     28.92  
Mortgage-backed obligations
     23.78  
Bonds & notes of governments & government agencies outside the U.S.
     5.91  
Asset-backed obligations
     2.73  
Preferred securities
     1.49  
Municipals
     0.38  
Convertible securities
     0.05  
Common stocks & warrants
     0.04  
Short-term securities & other assets less liabilities
     2.23  
[end pie chart]
 
 
Portfolio quality summary (percent of net assets)*
  
U.S. government obligations†
       27.5 %
Federal agencies
       19.2  
AAA
       8.2  
AA
       4.9  
A       12.5  
BBB
       17.0  
BB or below
       8.5  
Short-term securities & other assets less liabilities
 2.2  
             
* Bond ratings reflect those of a credit rating agency; if ratings are not available, they are assigned by the fund's investment analysts. The ratings are not covered by the Report of Independent Registered Public Accounting Firm.
† These securities are guaranteed by the full faith and credit of the United States government.
 
 
     
Principal
          
Percent
  
     
amount
    
Value
    
of net
  
Bonds & notes - 96.19%
       (000 )     (000 )  
assets
  
                         
Corporate bonds & notes - 34.47%
                        
Financials - 9.65%
                        
Other securities
             $ 3,821,574       9.65 %
                           
                           
Consumer discretionary - 4.55%
                          
Other securities
               1,803,090       4.55  
                           
                           
Energy - 3.65%
                          
Other securities
               1,443,937       3.65  
                           
                           
Industrials - 3.46%
                          
Other securities
               1,370,021       3.46  
                           
                           
Telecommunication services - 3.34%
                          
Verizon Communications Inc. 3.75% 2011
     $ 111,950       115,478       .29  
Other securities
               1,205,086       3.05  
                1,320,564       3.34  
                           
Utilities - 3.08%
                          
Other securities
               1,220,331       3.08  
                           
                           
Health care - 2.73%
                          
Other securities
               1,079,145       2.73  
                           
                           
Other corporate bonds & notes - 4.01%
                          
Other securities
               1,588,568       4.01  
                           
                           
Total corporate bonds & notes
               13,647,230       34.47  
                           
                           
                           
Bonds & notes of U.S. government & government agencies - 28.92%
                          
U.S. Treasury:
                          
 1.00% 2011     129,450       129,660          
 1.125% 2011     262,675       262,793          
 1.125% 2011     146,100       146,705          
 1.75% 2011     177,959       180,221          
 4.625% 2011     133,500       142,657          
 1.50% 2012     125,815       126,026          
 4.25% 2012     100,000       107,328          
 2.00% 2013     220,540       219,402          
 2.75% 2013     132,160       135,377          
 3.375% 2013     175,260       183,995          
 3.625% 2013     105,400       111,621          
 4.25% 2013     654,036       705,953          
 1.75% 2014     461,170       452,505          
 1.875% 2014     158,400       155,813          
 1.875% 2014     100,000       97,961          
 2.25% 2014     111,500       110,760          
 2.00% 2014  (1)  (2)     144,514       153,177          
 2.625% 2014     204,800       205,871          
 4.00% 2015     241,630       256,874          
 4.125% 2015     155,380       165,716          
 4.25% 2015     154,000       164,876          
 11.25% 2015     133,500       188,423          
 2.375% 2016     237,400       227,180          
 2.625% 2016     389,250       377,269          
 3.00% 2016     232,585       228,787          
 3.25% 2016     130,915       131,478          
 3.25% 2016     100,750       100,946          
 4.50% 2017     153,250       163,893          
 4.625% 2017     92,375       99,786          
 3.50% 2018     749,735       743,730          
 3.75% 2018     610,825       610,898          
 3.875% 2018     107,500       109,179          
 3.125% 2019     797,090       754,964          
 3.375% 2019     105,600       101,590          
 3.625% 2019     148,220       145,748          
 6.875% 2025     93,610       118,877          
 4.50% 2036     286,367       282,249          
 4.375% 2038     129,610       124,506          
 0%-8.875% 2010-2039 (1)  (2)     1,568,394       1,656,040       26.22  
Freddie Mac 1.75%-5.50% 2010-2016
       240,990       246,197       .62  
Fannie Mae 1.00%-6.125% 2011-2017
       124,750       128,743       .32  
Federal Home Loan Bank 3.625% 2013
       93,000       97,288       .25  
Other securities
               598,391       1.51  
                  11,451,453       28.92  
                             
Mortgage-backed obligations - 23.78%
                          
Federal agency mortgage-backed obligations (3) - 17.76%
                          
Fannie Mae:
                          
 4.00% 2024     129,874       130,894          
 4.50% 2024     130,431       134,405          
 5.00% 2036     107,693       110,726          
 6.00% 2037     108,684       115,307          
 5.50% 2038     293,956       308,088          
 6.50% 2038     160,956       172,575          
 0%-11.829% 2012-2047 (4)     4,262,562       4,450,586       13.70  
Freddie Mac:
                          
 6.00% 2027     125,933       134,418          
 6.00% 2038     106,249       112,778          
 0%-10.00% 2019-2047 (4)     1,139,450       1,192,123       3.63  
Other securities
               169,265       .43  
                  7,031,165       17.76  
                             
Commercial mortgage-backed securities (3) - 3.88%
                          
Fannie Mae 4.491%-7.30% 2010-2012
       151,325       156,904       .40  
Other securities
               1,378,962       3.48  
                  1,535,866       3.88  
                             
Other mortgage-backed securities - 2.14%
                          
Other securities
               845,671       2.14  
                             
                             
Total mortgage-backed obligations
               9,412,702       23.78  
                             
                             
Bonds & notes of governments & government agencies outside the U.S. - 5.91%
                  
Other securities
               2,341,492       5.91  
                             
                             
Asset-backed obligations - 2.73%
                          
Other securities
               1,080,143       2.73  
                             
                             
Municipals - 0.38%
                          
Other securities
               151,283       .38  
                             
                             
Total bonds & notes (cost: $37,738,120,000)
               38,084,303       96.19  
                             
                             
                             
                       
Percent
  
               
Value
    
of net
  
Convertible securities - 0.05%
               (000 )  
assets
  
                             
Other - 0.05%
                          
Other securities
               19,319       .05  
                             
                             
Total convertible securities (cost: $15,432,000)
               19,319       .05  
                             
                             
                             
                       
Percent
  
               
Value
    
of net
  
Preferred securities - 1.49%
               (000 )  
assets
  
                             
Other - 1.49%
                          
Other securities
               588,636       1.49  
                             
                             
Total preferred securities (cost: $596,665,000)
               588,636       1.49  
                             
                             
                             
                       
Percent
  
               
Value
    
of net
  
Common stocks - 0.04%
               (000 )  
assets
  
                             
Other - 0.04%
                          
Other securities
               15,574       .04  
                             
                             
Total common stocks (cost: $32,598,000)
               15,574       .04  
                             
                             
                             
                       
Percent
  
               
Value
    
of net
  
Warrants - 0.00%
               (000 )  
assets
  
                             
Other - 0.00%
                          
Other securities
               -       .00  
                             
                             
Total warrants (cost: $143,000)
               -       .00  
                             
                             
                             
       
Principal
            
Percent
  
       
amount
    
Value
    
of net
  
Short-term securities - 1.30%
       (000 )     (000 )  
assets
  
                             
U.S. Treasury Bills 0.18%-0.325% due 6/17-10/21/2010
     $ 152,200       151,874       .38  
Straight-A Funding LLC 0.14%-0.18% due 1/26-3/18/2010 (5)
       119,300       119,277       .30  
Fannie Mae 0.43% due 12/3/2010
       33,700       33,564       .09  
Freddie Mac 0.215% due 1/27/2010
       8,600       8,599       .02  
Other securities
               203,455       .51  
                             
                             
Total short-term securities (cost: $516,834,000)
               516,769       1.30  
                             
                             
Total investment securities (cost: $38,899,792,000)
               39,224,601       99.07  
Other assets less liabilities
               369,553       .93  
                             
Net assets
             $ 39,594,154       100.00 %
 
 
"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio. One of these securities (with a value of $7,045,000, which represented .02% of the net assets of the fund) may be subject to legal or contractual restrictions on resale.
 
 
Investments in affiliates
 
A company is considered to be an affiliate of the fund under the Investment Company Act of 1940 if the fund's holdings in that company represent 5% or more of the outstanding voting shares of that company. The value of the fund's holdings in affiliated companies is included in "Other securities" under their respective industry sectors in the summary investment portfolio. Further details on these holdings and related transactions during the year ended December 31, 2009, appear below.
 
   
Beginning shares
    
Additions
    
Reductions
    
Ending shares
      
Dividend income
(000
 )    
Value of affiliate at 12/31/09
(000
 )
Clarent Hospital Corp. Liquidating Trust (1) (6)
 331,291       -       -       331,291       -     $ 17  
ZiLOG, Inc. (6) (7)
     879,000       -       404,000       475,000       -       -  
                                                 
                                      -     $ 17  
 
The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item.
 
(1) Valued under fair value procedures adopted by authority of the board of directors. The total value of all such securities, including those in "Other securities," was $579,205,000, which represented 1.46% of the net assets of the fund.
(2) Index-linked bond whose principal amount moves with a government retail price index.
(3) Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.
(4) Coupon rate may change periodically.
(5) Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the U.S. in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities, including those in "Other securities," was $5,187,968,000, which represented 13.10% of the net assets of the fund.
(6) Security did not produce income during the last 12 months.
(7) Unaffiliated issuer at 12/31/2009.
 
See Notes to Financial Statements
 
 
Financial statements
 
Statement of assets and liabilities
            
at December 31, 2009
     (dollars in thousands)  
             
Assets:
            
 Investment securities, at value:
            
  Unaffiliated issuers (cost: $38,897,691)
   $ 39,224,584        
  Affiliated issuer (cost: $2,101)
     17     $ 39,224,601  
 Cash
             2,144  
 Unrealized appreciation on open forward currency contracts
             20,729  
 Receivables for:
                
  Sales of investments
     21,154          
  Sales of fund's shares
     68,618          
  Closed forward currency contracts
     6,027          
  Interest
     404,172       499,971  
              39,747,445  
Liabilities:
                
 Unrealized depreciation on open forward currency contracts
             378  
 Payables for:
                
  Purchases of investments
     9,942          
  Repurchases of fund's shares
     109,726          
  Closed forward currency contracts
     5,252          
  Investment advisory services
     7,485          
  Services provided by affiliates
     16,620          
  Directors' deferred compensation
     413          
  Other
     3,475       152,913  
Net assets at December 31, 2009
           $ 39,594,154  
                 
Net assets consist of:
                
 Capital paid in on shares of capital stock
           $ 43,657,543  
 Undistributed net investment income
             9,590  
 Accumulated net realized loss
             (4,417,802 )
 Net unrealized appreciation
             344,823  
Net assets at December 31, 2009
           $ 39,594,154  
 
 
   
(dollars and shares in thousands, except per-share amounts)
  
Total authorized capital stock - 5,000,000 shares, $.001 par value (3,354,571 total shares outstanding)
              
   
Net assets
    
Shares
outstanding
    
Net asset value
per share*
  
Class A
   $ 27,348,991       2,317,113     $ 11.80  
Class B
     1,211,612       102,653       11.80  
Class C
     3,188,886       270,175       11.80  
Class F-1
     2,328,872       197,311       11.80  
Class F-2
     737,081       62,448       11.80  
Class 529-A
     758,472       64,261       11.80  
Class 529-B
     86,587       7,336       11.80  
Class 529-C
     369,647       31,318       11.80  
Class 529-E
     40,317       3,416       11.80  
Class 529-F-1
     44,576       3,777       11.80  
Class R-1
     102,752       8,706       11.80  
Class R-2
     794,717       67,331       11.80  
Class R-3
     1,090,827       92,419       11.80  
Class R-4
     787,941       66,757       11.80  
Class R-5
     451,114       38,220       11.80  
Class R-6
     251,762       21,330       11.80  
   
(*) Maximum offering price and redemption price per share were equal to the net asset value per share for all share classes, except for Classes A and 529-A, for which the maximum offering prices per share were $12.26 each.
  
                         
See Notes to Financial Statements
                        
 
 
Statement of operations
        
 
  
for the year ended December 31, 2009
        
(dollars in thousands)
             
Investment income:
            
 Income:
            
  Interest (net of non-U.S. taxes of $6)
   $ 1,980,096        
  Dividends
     10,190     $ 1,990,286  
                 
 Fees and expenses*:
                
  Investment advisory services
     86,265          
  Distribution services
     129,634          
  Transfer agent services
     35,226          
  Administrative services
     19,313          
  Reports to shareholders
     2,209          
  Registration statement and prospectus
     6,881          
  Directors' compensation
     558          
  Auditing and legal
     212          
  Custodian
     645          
  State and local taxes
     264          
  Other
     1,742       282,949  
 Net investment income
             1,707,337  
                 
Net realized loss and unrealized appreciation
                
 on investments, forward currency contracts and currency:
                
 Net realized loss on:
                
  Investments (net of non-U.S. taxes of $55; also includes $5,965 net loss from affiliate)
     (2,533,486 )        
  Forward currency contracts
     (96,337 )        
  Currency transactions
     (9,097 )     (2,638,920 )
 Net unrealized appreciation on:
                
  Investments
     6,078,820          
  Forward currency contracts
     58,195          
  Currency translations
     1,087       6,138,102  
   Net realized loss and unrealized appreciation
                
    on investments, forward currency contracts and currency
             3,499,182  
Net increase in net assets resulting from operations
           $ 5,206,519  
                 
(*) Additional information related to class-specific fees and expenses is included in the Notes to Financial Statements.
          
                 
See Notes to Financial Statements
                
                 
                 
                 
Statements of changes in net assets
          
(dollars in thousands)
                 
   
Year ended December 31
  
      2009       2008  
Operations:
                
 Net investment income
   $ 1,707,337     $ 2,017,552  
 Net realized loss on investments, forward currency contracts and currency transactions
     (2,638,920 )     (1,215,405 )
 Net unrealized appreciation (depreciation) on investments, forward currency contracts and currency translations
     6,138,102       (5,526,626 )
  Net increase (decrease) in net assets resulting from operations
     5,206,519       (4,724,479 )
                 
Dividends paid to shareholders from net investment income
     (1,665,583 )     (2,153,748 )
                 
Net capital share transactions
     3,865,207       3,247,995  
                 
Total increase (decrease) in net assets
     7,406,143       (3,630,232 )
                 
Net assets:
                
 Beginning of year
     32,188,011       35,818,243  
 End of year (including undistributed and distributions in excess of
                
  net investment income: $9,590 and $(42,588), respectively)
   $ 39,594,154     $ 32,188,011  
                 
                 
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.

On November 24, 2009, shareholders approved a proposal to reorganize the fund from a Maryland corporation to a Delaware statutory trust. The reorganization may be completed in 2010 or early 2011; however, the fund reserves the right to delay the implementation. Shareholders also approved amendments to the fund’s Investment Advisory and Service Agreement and amendments to and elimination of certain fundamental investment policies of the fund.

The fund has 16 share classes consisting of five retail share classes, five 529 college savings plan share classes and six retirement plan share classes. The 529 college savings plan share classes (529-A, 529-B, 529-C, 529-E and 529-F-1) can be used to save for college education. The six retirement plan share classes (R-1, R-2, R-3, R-4, R-5 and R-6) are generally offered only through eligible employer-sponsored retirement plans. The fund’s share classes are described below:
 
 
Share class
Initial sales charge
Contingent deferred sales charge upon redemption
Conversion feature
Classes 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
Classes B and 529-B*
None
Declines from 5% to 0% for redemptions within six years of purchase
Classes B and 529-B convert to Classes 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-1 after 10 years
Class 529-C
None
1% for redemptions within one year of purchase
None
Class 529-E
None
None
None
Classes F-1, F-2 and 529-F-1
None
None
None
Classes R-1, R-2, R-3, R-4, R-5 and R-6
None
None
None
 
*Effective April 21, 2009, Class B and 529-B shares of the fund are not available for purchase.

On May 1, 2009, the fund made an additional retirement plan share class (Class R-6) available for sale pursuant to an amendment to its registration statement filed with the Securities and Exchange Commission (“SEC”). Refer to the fund’s retirement plan prospectus for more details.

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:

Net asset value – The fund generally determines its net asset value as of approximately 4:00 p.m. New York time each day the New York Stock Exchange is open.

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 one or more independent pricing vendors when such prices are available. However, where the investment adviser deems it appropriate to do so, such securities will be valued in good faith at the mean quoted bid and asked prices that are reasonably and timely available (or bid prices, if asked prices are not available) or at prices for securities of comparable maturity, quality and type. Vendors base bond prices on, among other things, valuation matrices that incorporate dealer-supplied valuations, proprietary pricing models and evaluations of the yield curve as of approximately 3:00 p.m. New York time. Securities with both fixed-income and equity characteristics, or equity securities traded principally among fixed-income dealers, are valued in the manner described on the previous page 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. 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 or are considered unreliable by the investment adviser are fair valued as determined in good faith under guidelines 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. Fair valuations and valuations of investments that are not actively trading involve judgment and may differ materially from valuations that would have been used had greater market activity occurred.

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.

Currency translation – Assets and liabilities, including investment securities, denominated in currencies other than U.S. dollars 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. On the accompanying financial statements, the effects of changes in exchange rates on investment securities are included with the net realized gain or loss and net unrealized appreciation or depreciation on investments. The realized gain or loss and unrealized appreciation or depreciation resulting from all other transactions denominated in currencies other than U.S. dollars are disclosed separately.

Loan transactions – The fund may enter into loan transactions in which the fund acquires a loan either through an agent, by assignment from another holder, or as a participation interest in another holder's portion of a loan. The loan is often administered by a financial institution that acts as agent for the holders of the loan, and the fund may be required to receive approval from the agent and/or borrower prior to the sale of the investment. The loan's interest rate and maturity date may change based on the terms of the loan, including potential early payments of principal.
 
2. Risk factors
 
Investing in the fund may involve certain risks including, but not limited to, those described below.

The fund is subject to risks, including the possibility that the fund's income and the value of its portfolio holdings may fluctuate in response to economic, political or social events in the U.S. or abroad.

The prices of, and the income generated by, most debt securities held by the fund may be affected by changing interest rates, by changes in the effective maturities and credit ratings of these securities, as well as by events specifically involving the issuers of those securities. For example, the prices of debt securities in the fund's portfolio generally will decline when interest rates rise and increase when interest rates fall. In addition, falling interest rates may cause an issuer to redeem, "call" or refinance a security before its stated maturity, which may result in the fund having to reinvest the proceeds in lower yielding securities. Debt securities are also subject to credit risk, which is the possibility that the credit strength of an issuer will weaken and/or an issuer of a debt security will fail to make timely payments of principal or interest and the security will go into default. Lower quality or longer maturity debt securities may be subject to greater price fluctuations than higher quality or shorter maturity debt securities.

Many types of debt securities, including mortgage-related securities, are subject to prepayment risk. For example, when interest rates fall, homeowners are more likely to refinance their home mortgages and "prepay" their principal earlier than expected. The fund must then reinvest the prepaid principal in new securities when interest rates on new mortgage investments are falling, thus reducing the fund’s income.

A security backed by the U.S. Treasury or the full faith and credit of the U.S. government is guaranteed only as to the timely payment of interest and principal when held to maturity. Accordingly, the current market values for these securities will fluctuate with changes in interest rates.

The fund may also invest in debt securities and mortgage-backed securities issued by federal agencies and instrumentalities that are not backed by the full faith and credit of the U.S. government. These securities are neither issued nor guaranteed by the U.S. Treasury.

Although all securities in the fund's portfolio may be adversely affected by currency fluctuations or global economic, political or social instability, securities issued by entities based outside the U.S. may be affected to a greater extent.

3. Taxation and distributions                                                      

Federal income taxation – 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. Therefore, no federal income tax provision is required. 

As of and during the period ended December 31, 2009, the fund did not have a liability for any unrecognized tax benefits. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statement of operations. During the period, the fund did not incur any interest or penalties.

The fund is not subject to examination by U.S. federal tax authorities for tax years before 2006, by state tax authorities for tax years before 2005 and by tax authorities outside the U.S. for tax years before 2004.

Non-U.S. taxation – Dividend and interest income is recorded net of non-U.S. 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.

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 different treatment for items such as currency gains and losses; short-term capital gains and losses; capital losses related to sales of certain securities within 30 days of purchase; cost of investments sold; net capital losses; amortization of premiums and income on certain investments. 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.

During the year ended December 31, 2009, the fund reclassified $156,000 from undistributed net investment income to capital paid in on shares of capital stock and $10,580,000 from accumulated net realized loss to undistributed net investment income to align financial reporting with tax reporting.

As of December 31, 2009, the tax basis components of distributable earnings, unrealized appreciation (depreciation) and cost of investment securities were as follows:

    (dollars in thousands)  
Undistributed ordinary income
         $ 49,754  
Capital loss carryforwards*:
              
     Expiring 2010
   $ (125,233 )        
     Expiring 2011
     (243,982 )        
     Expiring 2014
     (69,196 )        
     Expiring 2016
     (959,389 )        
     Expiring 2017
     (2,930,992 )     (4,328,792 )
Gross unrealized appreciation on investment securities
             1,209,369  
Gross unrealized depreciation on investment securities
             (991,071 )
Net unrealized appreciation on investment securities
             218,298  
Cost of investment securities
             39,006,303  
                 
*The 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.
  

Ordinary income distributions paid to shareholders from net investment income and currency gains were as follows (dollars in thousands):
 
   
Year ended December 31
  
Share class
  
2009
    
2008
  
Class A
   $ 1,171,526     $ 1,505,354  
Class B
     49,620       77,235  
Class C
     108,139       136,921  
Class F-1
     126,279       183,086  
Class F-2*
     20,625       1,971  
Class 529-A
     29,648       34,549  
Class 529-B
     3,028       4,096  
Class 529-C
     11,797       14,236  
Class 529-E
     1,491       1,715  
Class 529-F-1
     1,600       1,624  
Class R-1
     3,811       4,662  
Class R-2
     26,641       35,404  
Class R-3
     44,173       59,775  
Class R-4
     34,735       47,010  
Class R-5
     27,537       46,110  
Class R-6†
     4,933       -  
Total
   $ 1,665,583     $ 2,153,748  
                 
*Class F-2 was offered beginning August 1, 2008.
  
†Class R-6 was offered beginning May 1, 2009.
  

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 Distributors,® Inc. ("AFD"), the principal underwriter of the fund’s shares, and American Funds Service Company® ("AFS"), the fund’s transfer agent.

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 0.11% on such assets in excess of $36 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. For the year ended December 31, 2009, the investment advisory services fee was $86,265,000, which was equivalent to an annualized rate of 0.234% 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 Classes F-2, R-5 and R-6. 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 on the following page. 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 with a plan 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 to provide 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 Classes 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, 2009, unreimbursed expenses subject to reimbursement totaled $2,443,000 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
Classes B and 529-B
1.00
1.00
Classes C, 529-C and R-1
1.00
1.00
Class R-2
0.75
1.00
Classes 529-E and R-3
0.50
0.75
Classes F-1, 529-F-1 and R-4
0.25
0.50

Transfer agent services – The fund has a transfer agent agreement with AFS for Classes 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 as 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 Classes A and B.  Each relevant share class pays CRMC annual fees up to 0.15% (0.10% for Class R-5 and 0.05% for Class R-6) 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. Each 529 share class is subject to an additional administrative services fee payable to the Commonwealth of Virginia for the maintenance of the 529 college savings plan. The quarterly fee is based on a declining series of annual rates beginning with 0.10% on the first $30 billion of the net assets invested in Class 529 shares of the American Funds and decreasing to 0.06% on such assets between $120 billion and $150 billion. The fee for any given calendar quarter is accrued and calculated on the basis of the average net assets of Class 529 shares of the American Funds for the last month of the prior calendar quarter. 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 above for the year ended December 31, 2009, were as follows (dollars in thousands):

Share class
Distribution services
Transfer agent services
Administrative services
CRMC administrative services
Transfer agent services
Commonwealth of Virginia administrative services
Class A
$63,349
$33,634
Not applicable
Not applicable
Not applicable
Class B
12,578
1,592
Not applicable
Not applicable
Not applicable
Class C
28,416
 
 
 
 
 
 
Included
in
administrative services
$4,265
$720
Not applicable
Class F-1
6,588
3,457
325
Not applicable
Class F-2
 Not applicable
582
40
Not applicable
Class 529-A
1,364
650
127
$651
Class 529-B
798
80
29
80
Class 529-C
3,139
314
91
315
Class 529-E
175
35
7
35
Class 529-F-1
-
34
7
34
Class R-1
980
128
53
Not applicable
Class R-2
5,292
1,052
2,313
Not applicable
Class R-3
5,080
1,472
710
Not applicable
Class R-4
1,875
1,081
32
Not applicable
Class R-5
Not applicable
523
14
Not applicable
Class R-6*
Not applicable
57
- †
Not applicable
Total
$129,634
$35,226
$13,730
$4,468
$1,115
* Class R-6 was offered beginning May 1, 2009.
† Amount less than one thousand.
Directors’ deferred 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 $558,000, shown on the accompanying financial statements, includes $468,000 in current fees (either paid in cash or deferred) and a net increase of $90,000 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. Disclosure of fair value measurements

The fund classifies its assets and liabilities into three levels based on the method used to value the assets or liabilities. Level 1 values are based on quoted prices in active markets for identical securities. Level 2 values are based on significant observable market inputs, such as quoted prices for similar securities and quoted prices in inactive markets. Level 3 values are based on significant unobservable inputs that reflect the fund’s determination of assumptions that market participants might reasonably use in valuing the securities. The valuation levels are not necessarily an indication of the risk or liquidity associated with the underlying investment. For example, U.S. government securities are generally high-quality and liquid; however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. The following table presents the fund’s valuation levels as of December 31, 2009 (dollars in thousands):
 
Investment securities:
  
Level 1
    
Level 2
    
Level 3
    
Total
  
Bonds & notes:
                        
 Corporate bonds & notes
   $ -     $ 13,646,270     $ 960     $ 13,647,230  
 Bonds & notes of U.S. government & government agencies
     -       11,451,453       -       11,451,453  
 Mortgage-backed obligations
     -       9,401,879       10,823       9,412,702  
 Bonds & notes of governments & government agencies outside the U.S.
     -       2,341,492       -       2,341,492  
 Asset-backed obligations
     -       1,064,750       15,393       1,080,143  
 Municipals
     -       151,283       -       151,283  
Convertible securities
     -       19,319       -       19,319  
Preferred securities
     16,144       572,492       -       588,636  
Common stocks
     15,529       -       45       15,574  
Short-term securities
     -       516,769       -       516,769  
Total
   $ 31,673     $ 39,165,707     $ 27,221     $ 39,224,601  
                                 
   
Level 1
    
Level 2
    
Level 3
    
Total
  
Forward currency contracts (*)
     -     $ 20,351       -     $ 20,351  
 
 
The following table reconciles the valuation of the fund's Level 3 investment securities and related transactions for the year ended December 31, 2009 (dollars in thousands):
  
                                     
   
Beginning value at 1/1/2009
    
Net purchases and sales
    
Net realized gain (†)
    
Net unrealized appreciation (†)
    
Net transfers out of Level 3
    
Ending value at 12/31/2009
  
Investment securities
   $ 523,921     $ (145,353 )   $ 2,109     $ 6,750     $ (360,206 )   $ 27,221  
                                                 
Net unrealized appreciation during the period on Level 3 investment securities held at December 31, 2009 (dollars in thousands) (†):
     $ 1,024  
                                                 
(*) Forward currency contracts are not included in the investment portfolio.
                          
(†) Net realized gain and unrealized appreciation are included in the related amounts on investments in the statement of operations.
  

6. Capital share transactions

Capital share transactions in the fund were as follows (dollars and shares in thousands):
 
Share class
  
Sales(1)
    
Reinvestments of dividends and distributions
    
Repurchases(1)
    
Net increase
(decrease)
  
   
Amount
    
Shares
    
Amount
    
Shares
    
Amount
    
Shares
    
Amount
    
Shares
  
Year ended December 31, 2009
                                      
Class A
   $ 8,658,161       782,590     $ 1,064,353       95,240     $ (6,787,523 )     (604,967 )   $ 2,934,991       272,863  
Class B
     258,257       23,640       44,500       3,996       (437,963 )     (39,085 )     (135,206 )     (11,449 )
Class C
     1,306,870       118,167       94,973       8,498       (762,734 )     (67,922 )     639,109       58,743  
Class F-1
     1,658,840       150,099       109,818       9,879       (2,355,758 )     (209,330 )     (587,100 )     (49,352 )
Class F-2
     723,216       65,057       15,631       1,368       (149,439 )     (13,148 )     589,408       53,277  
Class 529-A
     219,770       19,609       29,524       2,638       (99,735 )     (8,863 )     149,559       13,384  
Class 529-B
     15,490       1,398       3,016       270       (10,965 )     (975 )     7,541       693  
Class 529-C
     130,705       11,657       11,741       1,050       (60,952 )     (5,395 )     81,494       7,312  
Class 529-E
     13,309       1,189       1,484       133       (6,541 )     (574 )     8,252       748  
Class 529-F-1
     21,956       1,931       1,590       141       (7,963 )     (702 )     15,583       1,370  
Class R-1
     49,412       4,420       3,722       334       (47,225 )     (4,184 )     5,909       570  
Class R-2
     315,716       28,235       26,421       2,366       (229,867 )     (20,531 )     112,270       10,070  
Class R-3
     411,155       36,770       43,747       3,920       (399,873 )     (35,607 )     55,029       5,083  
Class R-4
     289,937       25,938       34,544       3,095       (313,682 )     (27,975 )     10,799       1,058  
Class R-5
     281,846       25,451       25,360       2,289       (568,691 )     (51,568 )     (261,485 )     (23,828 )
Class R-6(2)
     237,322       21,177       4,926       425       (3,194 )     (272 )     239,054       21,330  
Total net increase
                                                          
   (decrease)
   $ 14,591,962       1,317,328     $ 1,515,350       135,642     $ (12,242,105 )     (1,091,098 )   $ 3,865,207       361,872  
                                                                 
Year ended December 31, 2008
                                                  
Class A
   $ 6,852,721       563,129     $ 1,370,285       116,136     $ (6,431,432 )     (541,018 )   $ 1,791,574       138,247  
Class B
     304,429       24,965       68,497       5,813       (397,075 )     (33,311 )     (24,149 )     (2,533 )
Class C
     922,097       75,445       120,888       10,276       (809,514 )     (68,089 )     233,471       17,632  
Class F-1
     1,692,529       139,793       157,443       13,367       (1,572,023 )     (133,348 )     277,949       19,812  
Class F-2(3)
     125,467       11,218       1,582       147       (23,803 )     (2,194 )     103,246       9,171  
Class 529-A
     160,968       13,215       34,433       2,929       (70,702 )     (5,954 )     124,699       10,190  
Class 529-B
     13,620       1,118       4,082       348       (8,590 )     (725 )     9,112       741  
Class 529-C
     92,811       7,615       14,184       1,211       (44,239 )     (3,731 )     62,756       5,095  
Class 529-E
     8,810       727       1,709       146       (3,943 )     (331 )     6,576       542  
Class 529-F-1
     11,194       927       1,615       138       (4,241 )     (366 )     8,568       699  
Class R-1
     54,856       4,492       4,534       388       (26,516 )     (2,206 )     32,874       2,674  
Class R-2
     295,996       24,167       35,134       2,992       (235,150 )     (19,523 )     95,980       7,636  
Class R-3
     512,079       41,561       59,475       5,056       (382,379 )     (31,909 )     189,175       14,708  
Class R-4
     382,804       31,033       46,848       3,980       (265,125 )     (22,311 )     164,527       12,702  
Class R-5
     371,353       30,448       42,060       3,567       (241,776 )     (20,583 )     171,637       13,432  
Total net increase
                                                          
   (decrease)
   $ 11,801,734       969,853     $ 1,962,769       166,494     $ (10,516,508 )     (885,599 )   $ 3,247,995       250,748  
                                                                 
                                                                 
(1) Includes exchanges between share classes of the fund.
                                  
(2)Class R-6 was offered beginning May 1, 2009.
                                          
(3)Class F-2 was offered beginning August 1, 2008.
                                  

7. Investment transactions

The fund made purchases and sales of investment securities, excluding short-term securities and U.S. government obligations, if any, of $20,116,691,000 and $22,144,502,000, respectively, during the year ended December 31, 2009.

8. Forward currency contracts

The fund may enter into forward currency contracts, which represent agreements to exchange currencies on specific future dates at predetermined rates. The fund enters into these contracts to manage its exposure to changes in exchange rates. 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 exchange rates.

On a daily basis, the fund values forward currency contracts based on the applicable exchange rate and records unrealized appreciation or depreciation for open forward currency contracts in the statement of assets and liabilities. 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. Closed forward currency contracts that have not reached their expiration date are included in the respective receivables or payables for closed forward currency contracts in the statement of assets and liabilities. Net realized gains or losses from closed forward currency contracts and net unrealized appreciation or depreciation from open forward currency contracts are recorded in the statement of operations. As of December 31, 2009, the fund had open forward currency contracts to sell currencies as follows (amounts in thousands):
 
    Settlement  
Contract amount
    
Unrealized 
(depreciation) appreciation at
December 31, 2009
  
 
 date
  
Receive
    
Deliver
        
                     
Sales:
                    
Australian dollars
2/5/2010
   $ 41,831     $ A47,100     $ (332 )
Australian dollars
2/8/2010
   $ 70,789     $ A78,610       440  
British pounds
1/7/2010
   $ 13,944     £ 8,335       463  
Danish kroner
1/29/2010
   $ 17,456    
DKr87,715
       573  
Danish kroner
2/4/2010
   $ 57,581    
DKr291,110
       1,553  
Euros
1/6/2010
   $ 20,141     € 13,500       801  
Euros
1/7/2010
   $ 375     € 250       17  
Euros
1/22/2010
   $ 109,451     € 71,350       4,236  
Euros
1/26/2010
   $ 2,258     € 1,500       106  
Euros
1/26/2010
   $ 57,355     € 38,085       2,593  
Euros
1/27/2010
   $ 46,344     € 30,875       2,112  
Euros
1/27/2010
   $ 41,946     € 28,370       1,302  
Euros
1/28/2010
   $ 17,323     € 11,740       504  
Euros
1/28/2010
   $ 34,962     € 23,535       1,246  
Euros
1/28/2010
   $ 17,274     € 11,695       519  
Euros
1/29/2010
   $ 52,573     € 35,570       1,615  
Euros
2/8/2010
   $ 28,450     € 18,860       1,432  
Euros
2/8/2010
   $ 35,514     € 23,940       1,217  
Israeli shekels
1/6/2010
   $ 6,552    
ILS25,000
       (46 )
                           
Forward currency contracts - net
                   $ 20,351  
 
9. Subsequent events

As of February 5, 2010, the date the financial statements were available to be issued, no subsequent events or transactions had occurred that would have materially impacted the financial statements as presented.
 
 
 
Financial highlights(1)
 
         
Income (loss) from investment operations(2)
    
 
                                      
   
Net asset value, beginning of period
    
Net investment income
    
Net gains (losses) on securities (both realized and unrealized)
    
Total from investment operations
    
Dividends (from net investment income)
    
Net asset value, end of period
    
Total return(3) (4)
    
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(4)
  
Class A:
                                                                  
Year ended 12/31/2009
   $ 10.76     $ .53     $ 1.03     $ 1.56     $ (.52 )   $ 11.80       14.91 %   $ 27,349       .65 %     .65 %     4.74 %
Year ended 12/31/2008
     13.06       .70       (2.25 )     (1.55 )     (.75 )     10.76       (12.24 )     21,987       .65       .63       5.76  
Year ended 12/31/2007
     13.32       .69       (.25 )     .44       (.70 )     13.06       3.37       24,898       .63       .61       5.22  
Year ended 12/31/2006
     13.22       .67       .09       .76       (.66 )     13.32       5.88       20,670       .65       .62       5.07  
Year ended 12/31/2005
     13.65       .62       (.36 )     .26       (.69 )     13.22       1.94       17,738       .65       .62       4.60  
Class B:
                                                                                        
Year ended 12/31/2009
     10.76       .45       1.03       1.48       (.44 )     11.80       14.06       1,212       1.40       1.40       4.05  
Year ended 12/31/2008
     13.06       .61       (2.25 )     (1.64 )     (.66 )     10.76       (12.88 )     1,227       1.40       1.37       5.02  
Year ended 12/31/2007
     13.32       .59       (.25 )     .34       (.60 )     13.06       2.61       1,524       1.38       1.35       4.48  
Year ended 12/31/2006
     13.22       .57       .09       .66       (.56 )     13.32       5.09       1,458       1.40       1.37       4.33  
Year ended 12/31/2005
     13.65       .52       (.36 )     .16       (.59 )     13.22       1.19       1,415       1.38       1.36       3.87  
Class C:
                                                                                        
Year ended 12/31/2009
     10.76       .44       1.03       1.47       (.43 )     11.80       14.00       3,189       1.44       1.44       3.91  
Year ended 12/31/2008
     13.06       .60       (2.25 )     (1.65 )     (.65 )     10.76       (12.92 )     2,274       1.44       1.41       4.98  
Year ended 12/31/2007
     13.32       .59       (.25 )     .34       (.60 )     13.06       2.56       2,532       1.42       1.40       4.43  
Year ended 12/31/2006
     13.22       .56       .09       .65       (.55 )     13.32       5.04       1,847       1.45       1.42       4.27  
Year ended 12/31/2005
     13.65       .51       (.36 )     .15       (.58 )     13.22       1.12       1,429       1.44       1.42       3.81  
Class F-1:
                                                                                        
Year ended 12/31/2009
     10.76       .53       1.03       1.56       (.52 )     11.80       14.91       2,329       .65       .65       4.80  
Year ended 12/31/2008
     13.06       .70       (2.25 )     (1.55 )     (.75 )     10.76       (12.23 )     2,653       .64       .62       5.78  
Year ended 12/31/2007
     13.32       .69       (.25 )     .44       (.70 )     13.06       3.38       2,963       .62       .60       5.22  
Year ended 12/31/2006
     13.22       .67       .09       .76       (.66 )     13.32       5.90       1,611       .63       .60       5.07  
Year ended 12/31/2005
     13.65       .62       (.36 )     .26       (.69 )     13.22       1.92       803       .65       .63       4.60  
Class F-2:
                                                                                        
Year ended 12/31/2009
     10.76       .56       1.03       1.59       (.55 )     11.80       15.19       737       .39       .39       4.66  
Period from 8/4/2008 to 12/31/2008
     12.31       .29       (1.47 )     (1.18 )     (.37 )     10.76       (9.62 )     99       .18       .17       2.69  
Class 529-A:
                                                                                        
Year ended 12/31/2009
     10.76       .53       1.03       1.56       (.52 )     11.80       14.86       758       .70       .70       4.67  
Year ended 12/31/2008
     13.06       .69       (2.25 )     (1.56 )     (.74 )     10.76       (12.28 )     547       .69       .67       5.74  
Year ended 12/31/2007
     13.32       .68       (.25 )     .43       (.69 )     13.06       3.31       532       .69       .67       5.17  
Year ended 12/31/2006
     13.22       .66       .09       .75       (.65 )     13.32       5.85       388       .68       .66       5.05  
Year ended 12/31/2005
     13.65       .61       (.36 )     .25       (.68 )     13.22       1.88       273       .69       .67       4.57  
Class 529-B:
                                                                                        
Year ended 12/31/2009
     10.76       .44       1.03       1.47       (.43 )     11.80       13.94       86       1.50       1.50       3.89  
Year ended 12/31/2008
     13.06       .60       (2.25 )     (1.65 )     (.65 )     10.76       (12.98 )     71       1.51       1.48       4.92  
Year ended 12/31/2007
     13.32       .58       (.25 )     .33       (.59 )     13.06       2.49       77       1.50       1.47       4.36  
Year ended 12/31/2006
     13.22       .55       .09       .64       (.54 )     13.32       4.97       69       1.53       1.50       4.20  
Year ended 12/31/2005
     13.65       .50       (.36 )     .14       (.57 )     13.22       1.02       58       1.54       1.52       3.71  
Class 529-C:
                                                                                        
Year ended 12/31/2009
     10.76       .44       1.03       1.47       (.43 )     11.80       13.95       370       1.49       1.49       3.87  
Year ended 12/31/2008
     13.06       .60       (2.25 )     (1.65 )     (.65 )     10.76       (12.97 )     258       1.50       1.47       4.94  
Year ended 12/31/2007
     13.32       .58       (.25 )     .33       (.59 )     13.06       2.50       247       1.49       1.46       4.37  
Year ended 12/31/2006
     13.22       .55       .09       .64       (.54 )     13.32       4.99       170       1.51       1.49       4.22  
Year ended 12/31/2005
     13.65       .50       (.36 )     .14       (.57 )     13.22       1.03       121       1.53       1.51       3.74  
Class 529-E:
                                                                                        
Year ended 12/31/2009
     10.76       .49       1.03       1.52       (.48 )     11.80       14.52       40       .99       .99       4.38  
Year ended 12/31/2008
     13.06       .66       (2.25 )     (1.59 )     (.71 )     10.76       (12.53 )     29       .99       .96       5.45  
Year ended 12/31/2007
     13.32       .65       (.25 )     .40       (.66 )     13.06       3.02       28       .98       .96       4.88  
Year ended 12/31/2006
     13.22       .62       .09       .71       (.61 )     13.32       5.53       21       .99       .97       4.74  
Year ended 12/31/2005
     13.65       .57       (.36 )     .21       (.64 )     13.22       1.56       15       1.01       .99       4.25  
                                                                                         
Class 529-F-1:
                                                                                        
Year ended 12/31/2009
   $ 10.76     $ .55     $ 1.03     $ 1.58     $ (.54 )   $ 11.80       15.09 %   $ 44       .49 %     .49 %     4.84 %
Year ended 12/31/2008
     13.06       .72       (2.25 )     (1.53 )     (.77 )     10.76       (12.10 )     26       .49       .46       5.96  
Year ended 12/31/2007
     13.32       .71       (.25 )     .46       (.72 )     13.06       3.53       22       .48       .46       5.38  
Year ended 12/31/2006
     13.22       .69       .09       .78       (.68 )     13.32       6.05       14       .49       .46       5.25  
Year ended 12/31/2005
     13.65       .62       (.36 )     .26       (.69 )     13.22       1.98       7       .58       .56       4.69  
Class R-1:
                                                                                        
Year ended 12/31/2009
     10.76       .44       1.03       1.47       (.43 )     11.80       14.02       103       1.43       1.43       3.96  
Year ended 12/31/2008
     13.06       .60       (2.25 )     (1.65 )     (.65 )     10.76       (12.92 )     88       1.44       1.42       5.01  
Year ended 12/31/2007
     13.32       .58       (.25 )     .33       (.59 )     13.06       2.54       71       1.44       1.42       4.44  
Year ended 12/31/2006
     13.22       .56       .09       .65       (.55 )     13.32       5.05       29       1.49       1.42       4.28  
Year ended 12/31/2005
     13.65       .51       (.36 )     .15       (.58 )     13.22       1.11       18       1.51       1.43       3.82  
Class R-2:
                                                                                        
Year ended 12/31/2009
     10.76       .44       1.03       1.47       (.43 )     11.80       13.95       795       1.49       1.49       3.89  
Year ended 12/31/2008
     13.06       .59       (2.25 )     (1.66 )     (.64 )     10.76       (12.99 )     616       1.53       1.50       4.90  
Year ended 12/31/2007
     13.32       .59       (.25 )     .34       (.60 )     13.06       2.56       648       1.51       1.40       4.44  
Year ended 12/31/2006
     13.22       .56       .09       .65       (.55 )     13.32       5.06       500       1.67       1.41       4.30  
Year ended 12/31/2005
     13.65       .51       (.36 )     .15       (.58 )     13.22       1.14       352       1.74       1.41       3.84  
Class R-3:
                                                                                        
Year ended 12/31/2009
     10.76       .50       1.03       1.53       (.49 )     11.80       14.54       1,091       .97       .97       4.43  
Year ended 12/31/2008
     13.06       .66       (2.25 )     (1.59 )     (.71 )     10.76       (12.52 )     939       .98       .95       5.45  
Year ended 12/31/2007
     13.32       .65       (.25 )     .40       (.66 )     13.06       3.02       949       .98       .95       4.89  
Year ended 12/31/2006
     13.22       .62       .09       .71       (.61 )     13.32       5.49       570       1.02       .99       4.71  
Year ended 12/31/2005
     13.65       .56       (.36 )     .20       (.63 )     13.22       1.53       361       1.05       1.02       4.23  
Class R-4:
                                                                                        
Year ended 12/31/2009
     10.76       .53       1.03       1.56       (.52 )     11.80       14.90       788       .66       .66       4.75  
Year ended 12/31/2008
     13.06       .70       (2.25 )     (1.55 )     (.75 )     10.76       (12.25 )     707       .67       .64       5.77  
Year ended 12/31/2007
     13.32       .69       (.25 )     .44       (.70 )     13.06       3.35       692       .66       .64       5.22  
Year ended 12/31/2006
     13.22       .66       .09       .75       (.65 )     13.32       5.86       325       .67       .65       5.06  
Year ended 12/31/2005
     13.65       .61       (.36 )     .25       (.68 )     13.22       1.91       182       .67       .65       4.61  
Class R-5:
                                                                                        
Year ended 12/31/2009
     10.76       .56       1.03       1.59       (.55 )     11.80       15.24       451       .37       .37       5.20  
Year ended 12/31/2008
     13.06       .73       (2.25 )     (1.52 )     (.78 )     10.76       (12.00 )     667       .37       .34       6.06  
Year ended 12/31/2007
     13.32       .73       (.25 )     .48       (.74 )     13.06       3.65       635       .36       .34       5.50  
Year ended 12/31/2006
     13.22       .70       .09       .79       (.69 )     13.32       6.17       336       .37       .35       5.36  
Year ended 12/31/2005
     13.65       .66       (.36 )     .30       (.73 )     13.22       2.21       204       .37       .35       4.91  
Class R-6:
                                                                                        
Period from 5/1/2009 to 12/31/2009
     10.78       .35       1.01       1.36       (.34 )     11.80       12.75       252       .31 (5)     .31 (5)     4.59 (5)
 
 
   
Year ended December 31
  
   
2009
    
2008
    
2007
    
2006
    
2005
  
Portfolio turnover rate for all classes of shares
     84 %     57 %     58 %     53 %     50 %
 
(1)Based on operations for the periods shown (unless otherwise noted) and, accordingly, may not be representative of a full year.
      
(2)Based on average shares outstanding.
                    
(3)Total returns exclude any applicable sales charges, including contingent deferred sales charges.
            
(4)This column reflects the impact, if any, of certain reimbursements/waivers from CRMC. During some of the periods shown, CRMC reduced fees for investment advisory services. In addition, during some of the periods shown, CRMC paid a portion of the fund's transfer agent fees for certain retirement plan share classes.
(5)Annualized.
                      
                       
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, including the summary investment portfolio, of The Bond Fund of America, Inc. (the “Fund”), as of December 31, 2009, 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, 2009, 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, 2009, 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.


Deloitte & Touche LLP

Costa Mesa, California
February 5, 2010



 
Expense example        
                                                                                                                                             unaudited
 
As a shareholder of the fund, you incur two types of costs: (1) transaction costs, such as initial sales charges on purchase payments and contingent deferred sales charges on redemptions (loads), and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, and other expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2009, through December 31, 2009).
 
Actual expenses:
The first line of each share class in the table on the next page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period.
 
Hypothetical example for comparison purposes:
The second line of each share class in the table on the next page provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio for the share class and an assumed rate of return of 5.00% per year before expenses, which is not the actual return of the share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5.00% hypothetical example with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.
 
Notes:
There are some account fees that are charged to certain types of accounts, such as individual retirement accounts and 529 college savings plan accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually), that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F-1, F-2 and 529-F-1 shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would be lower by the amount of these fees.
 
Note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
 
   
Beginning account value 7/1/2009
    
Ending account value 12/31/2009
    
Expenses paid during period*
    
Annualized
expense ratio
  
                         
Class A -- actual return
   $ 1,000.00     $ 1,073.29     $ 3.29       .63 %
Class A -- assumed 5% return
     1,000.00       1,022.03       3.21       .63  
Class B -- actual return
     1,000.00       1,069.47       7.15       1.37  
Class B -- assumed 5% return
     1,000.00       1,018.30       6.97       1.37  
Class C -- actual return
     1,000.00       1,069.16       7.46       1.43  
Class C -- assumed 5% return
     1,000.00       1,018.00       7.27       1.43  
Class F-1 -- actual return
     1,000.00       1,073.29       3.29       .63  
Class F-1 -- assumed 5% return
     1,000.00       1,022.03       3.21       .63  
Class F-2 -- actual return
     1,000.00       1,074.57       1.99       .38  
Class F-2 -- assumed 5% return
     1,000.00       1,023.29       1.94       .38  
Class 529-A -- actual return
     1,000.00       1,073.07       3.55       .68  
Class 529-A -- assumed 5% return
     1,000.00       1,021.78       3.47       .68  
Class 529-B -- actual return
     1,000.00       1,068.88       7.77       1.49  
Class 529-B -- assumed 5% return
     1,000.00       1,017.69       7.58       1.49  
Class 529-C -- actual return
     1,000.00       1,068.91       7.72       1.48  
Class 529-C -- assumed 5% return
     1,000.00       1,017.74       7.53       1.48  
Class 529-E -- actual return
     1,000.00       1,071.53       5.06       .97  
Class 529-E -- assumed 5% return
     1,000.00       1,020.32       4.94       .97  
Class 529-F-1 -- actual return
     1,000.00       1,074.12       2.46       .47  
Class 529-F-1 -- assumed 5% return
     1,000.00       1,022.84       2.40       .47  
Class R-1 -- actual return
     1,000.00       1,069.20       7.41       1.42  
Class R-1 -- assumed 5% return
     1,000.00       1,018.05       7.22       1.42  
Class R-2 -- actual return
     1,000.00       1,069.02       7.61       1.46  
Class R-2 -- assumed 5% return
     1,000.00       1,017.85       7.43       1.46  
Class R-3 -- actual return
     1,000.00       1,017.61       5.01       .96  
Class R-3 -- assumed 5% return
     1,000.00       1,020.37       4.89       .96  
Class R-4 -- actual return
     1,000.00       1,073.19       3.40       .65  
Class R-4 -- assumed 5% return
     1,000.00       1,021.93       3.31       .65  
Class R-5 -- actual return
     1,000.00       1,074.72       1.83       .35  
Class R-5 -- assumed 5% return
     1,000.00       1,023.44       1.79       .35  
Class R-6 -- actual return
     1,000.00       1,074.98       1.57       .30  
Class R-6 -- assumed 5% return
     1,000.00       1,023.69       1.53       .30  
 
*The “expenses paid during period” are equal to the “annualized expense ratio,” multiplied by the average account value over the period, multiplied by the number of days in the period, and divided by 365 (to reflect the one-half year period).
 
 
 
 
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 fund hereby designates the following amounts for the fund’s fiscal year ended December 31, 2009:

Qualified dividend income
$68,623,000
Corporate dividends received deduction
$15,160,000
U.S. government income that may be exempt from state taxation
$207,203,000

Individual shareholders should refer to their Form 1099 or other tax information, which was mailed in January 2010, to determine the calendar year amounts to be included on their 2009 tax returns. Shareholders should consult their tax advisers.
 
 
 
 
Approval of Investment Advisory and Service Agreement

The fund’s board has approved the fund’s Investment Advisory and Service Agreement (the “agreement”) with Capital Research and Management Company (“CRMC”) for an additional one-year term through October 31, 2010. The board approved the agreement following the recommendation of the fund’s Contracts Committee (the “committee”), which is composed of all of the fund’s independent board members. The board and the committee determined that the fund’s advisory fee structure was fair and reasonable in relation to the services provided and that approving the agreement was in the best interests of the fund and its shareholders.

In reaching this decision, the board and the committee took into account information furnished to them throughout the year, as well as information prepared specifically in connection with their review of the agreement and were advised by their independent counsel. They considered the factors discussed below, among others, but did not identify any single issue or particular piece of information that, in isolation, was the controlling factor.

1. Nature, extent and quality of services

The board and the committee considered the depth and quality of CRMC’s investment management process, including its global research capabilities; the experience, capability and integrity of its senior management and other personnel; the low turnover rates of its key personnel; the overall financial strength and stability of its organization; and the ongoing evolution of CRMC’s organizational structure designed to maintain and strengthen these qualities. The board and the committee considered, among other things, the impact of current market conditions on the fund and CRMC. The board and the committee also considered the nature, extent and quality of administrative, compliance and shareholder services provided by CRMC to the fund under the agreement and other agreements as well as the benefits to fund shareholders from investing in a fund that is part of a large family of funds. The board and the committee concluded that the nature, extent and quality of the services provided by CRMC have benefited and should continue to benefit the fund and its shareholders.  

2. Investment results

The board and the committee considered the investment results of the fund in light of its objective of providing as high a level of current income as is consistent with the preservation of capital. They compared the fund’s total returns with those of other relevant funds (including the other funds that are the basis of the Lipper index for the category in which the fund is included) and market data such as relevant market indices, in each case as available at the time of the related meetings. In addition to the information reviewed by the board and the committee, this report, including the letter to shareholders and related disclosures, contains certain information about the fund’s investment results. The board and the committee concluded that although the fund’s net asset value per share had declined during the one-year period ended December 31, 2008, its long-term results have been satisfactory and that CRMC’s record in managing the fund indicated that its continued management should benefit the fund and its shareholders.

3. Advisory fees and total expenses

The board and the committee compared the advisory fees and total expense levels of the fund to those of other relevant funds. They observed that the fund’s advisory fees and expenses remain significantly below those of most other relevant funds. The board and the committee also noted the breakpoint discounts in the fund’s advisory fee structure that reduce the level of fees charged by CRMC to the fund as fund assets increase. In addition, they reviewed information regarding the advisory fees paid by institutional clients of an affiliate of CRMC with investment mandates similar to those of the fund. They noted that, although the fees paid by those clients generally were lower than those paid by the fund, the differences appropriately reflected the significant investment, operational and regulatory differences between advising mutual funds and institutional clients. The board and the committee concluded that the fund’s cost structure was fair and reasonable in relation to the services provided and that the shareholders receive reasonable value in return for the advisory fees and other amounts paid to CRMC by the fund.

4. Ancillary benefits

The board and the committee considered a variety of other benefits received by CRMC and its affiliates as a result of CRMC’s relationship with the fund and the other American Funds, including fees for administrative services provided to certain share classes; fees paid to CRMC’s affiliated transfer agent; sales charges and distribution fees received and retained by the fund’s principal underwriter, an affiliate of CRMC; and possible ancillary benefits to CRMC’s institutional management affiliates. The board and the committee reviewed CRMC’s portfolio trading practices, noting that while CRMC receives the benefit of research provided by broker-dealers executing portfolio transactions on behalf of the fund, it does not obtain third-party research or other services in return for allocating brokerage to such broker-dealers. The board and the committee took these ancillary benefits into account in evaluating the reasonableness of the advisory fees and other amounts paid to CRMC by the fund.

5. Adviser financial information

The board and the committee reviewed information regarding CRMC’s costs of providing services to the American Funds, including personnel, systems and resources of investment, compliance, trading, accounting and other administrative operations. They considered CRMC’s costs and willingness to invest in technology, infrastructure and staff to maintain and expand services and capabilities, respond to industry and regulatory developments and attract and retain qualified personnel. They noted information previously received regarding the compensation structure for CRMC’s investment professionals. The board and the committee also compared CRMC’s profitability to the reported results of several large, publicly held investment management companies. The board and the committee noted the competitiveness and cyclicality of both the mutual fund industry and the capital markets, and the importance in that environment of CRMC’s long-term profitability for maintaining its independence, company culture and management continuity. They further considered the breakpoint discounts in the fund’s advisory fee structure and the termination of CRMC’s 10% advisory fee waiver effective December 31, 2008. The board and the committee concluded that the fund’s advisory fee structure reflected a reasonable sharing of benefits between CRMC and the fund’s shareholders.

 
 
Other share class results
unaudited

Classes B, C, F and 529

Fund results shown are for past periods and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For current information and month-end results, visit americanfunds.com.

Average annual total returns for periods ended December 31, 2009:
                  
                   
   
1 year
    
5 years
    
Life of class
  
                   
Class B shares1 — first sold 3/15/00
                  
Reflecting applicable contingent deferred sales charge
                 
(CDSC), maximum of 5%, payable only if shares
                 
are sold within six years of purchase
     9.06 %     1.31 %     4.24 %
Not reflecting CDSC
     14.06       1.63       4.24  
                         
Class C shares — first sold 3/15/01
                        
Reflecting CDSC, maximum of 1%, payable only
                       
if shares are sold within one year of purchase
    13.00       1.58       3.62  
Not reflecting CDSC
     14.00       1.58       3.62  
                         
Class F-1 shares2 first sold 3/15/01
                        
Not reflecting annual asset-based fee charged
                       
by sponsoring firm
     14.91       2.39       4.42  
                         
Class F-2 shares2 — first sold 8/4/08
                        
Not reflecting annual asset-based fee charged
                       
by sponsoring firm
     15.19       —       2.90  
                         
Class 529-A shares3 — first sold 2/15/02
                        
Reflecting 3.75% maximum sales charge
     10.54       1.56       3.89  
Not reflecting maximum sales charge
     14.86       2.34       4.40  
                         
Class 529-B shares1,3 — first sold 2/15/02
                        
Reflecting applicable CDSC, maximum of 5%, payable
                       
only if shares are sold within six years of purchase
     8.94       1.18       3.52  
Not reflecting CDSC
     13.94       1.51       3.52  
                         
Class 529-C shares3 — first sold 2/19/02
                        
Reflecting CDSC, maximum of 1%, payable only
                       
if shares are sold within one year of purchase
     12.95       1.52       3.56  
Not reflecting CDSC
     13.95       1.52       3.56  
                         
Class 529-E shares2,3 — first sold 3/7/02
     14.52       2.03       4.11  
                         
Class 529-F-1 shares2,3 — first sold 9/26/02
                        
Not reflecting annual asset-based fee charged
                       
by sponsoring firm
     15.09       2.52       4.79  
                         
1 These shares are not available for purchase.
                        
2 These shares are sold without any initial or contingent deferred sales charge.
                        
3 Results shown do not reflect the $10 account setup fee and an annual $10 account maintenance fee.
          

Investment results assume all distributions are reinvested and reflect applicable fees and expenses. The fund’s investment adviser waived a portion of its management fees from September 1, 2004, through December 31, 2008. Fund results shown reflect the waiver, without which they would have been lower. See the Financial Highlights table on pages 25 and 26 for details that include expense ratios for all share classes.

For information regarding the differences among the various share classes, refer to the fund’s prospectus.

 
 
Board of directors and other officers
 
 
“Independent” directors
    
     
 
Year first
  
 
elected a
  
 
director of
  
Name and age
the fund1
Principal occupation(s) during past five years
     
Lee A. Ault III,4 73
2010
Private investor and corporate director; former
   
Chairman of the Board, In-Q-Tel, Inc. (technology
   
venture company funded principally by the Central
   
Intelligence Agency); former Chairman of the Board,
   
President and CEO, Telecredit, Inc. (payment
   
services)
     
William H. Baribault,4 64
2010
Chairman of the Board and CEO, Oakwood
   
Enterprises (private investment and consulting);
   
former Chairman of the Board, President and CEO,
   
Professional Business Bank (financial services for
   
small businesses); former President and CEO, Henry
   
Company (building products)
     
Ambassador
1999
Corporate director and author; former U.S.
Richard G. Capen, Jr., 75
  
Ambassador to Spain; former Vice Chairman, Knight-
   
Ridder, Inc. (communications company); former
   
Chairman and Publisher, The Miami Herald
     
James G. Ellis, 63
2006
Dean and Professor of Marketing, Marshall School of
   
Business, University of Southern California
     
Martin Fenton, 74
1989
Chairman of the Board, Senior Resource Group LLC
Chairman of the Board
  
(development and management of senior living
(Independent and Non-Executive)
  
communities)
     
Leonard R. Fuller, 63
1994
President and CEO, Fuller Consulting (financial
   
management consulting firm)
     
W. Scott Hedrick,4 64
2010
Founding General Partner, InterWest Partners
   
(a venture capital firm); Visiting Lecturer, Stanford
   
Graduate School of Business
     
R. Clark Hooper, 63
2005
Private investor; former President, Dumbarton Group
   
LLC (securities industry consulting); former Executive
   
Vice President — Policy and Oversight, NASD
     
Merit E. Janow,4 51
2010
Professor, Columbia University, School of
   
International and Public Affairs; former Member,
   
World Trade Organization Appellate Body
     
Laurel B. Mitchell, Ph.D., 54
2009
Director, Accounting Program, University of Redlands
     
Richard G. Newman, 75
1991
Chairman of the Board, AECOM Technology
   
Corporation (engineering, consulting and professional
   
technical services)
     
Frank M. Sanchez, 66
1999
Principal, The Sanchez Family Corporation dba
   
McDonald’s Restaurants (McDonald’s licensee)
     
Margaret Spellings,4 52
2010
President and CEO, Margaret Spellings & Company;
   
former United States Secretary of Education, United
   
States Department of Education — Federal
   
Government Agency; former Assistant to the
   
President for Domestic Policy, The White House —
   
Federal Government, Executive Branch — Domestic
   
Policy
     
Steadman Upham, Ph.D., 60
2007
President and Professor of Anthropology, The
   
University of Tulsa; former President and Professor of
   
Archaeology, Claremont Graduate University
     
     
“Independent” directors
    
     
 
Number of
  
 
portfolios
  
 
in fund
  
 
complex2
  
 
overseen by
  
Name and age
director
Other directorships3 held by director
     
Lee A. Ault III,4 73
38
Anworth Mortgage Asset Corporation;
   
Office Depot, Inc.
     
William H. Baribault,4 64
38
None
     
Ambassador
12
Carnival Corporation
Richard G. Capen, Jr., 75
    
     
James G. Ellis, 63
41
Quiksilver, Inc.
     
Martin Fenton, 74
41
None
Chairman of the Board
    
(Independent and Non-Executive)
    
     
Leonard R. Fuller, 63
41
None
     
W. Scott Hedrick,4 64
38
Office Depot, Inc.; Hot Topic, Inc.
     
R. Clark Hooper, 63
44
JPMorgan Value Opportunities Fund, Inc.;
   
The Swiss Helvetia Fund, Inc.
     
Merit E. Janow,4 51
41
The NASDAQ Stock Market LLC;
   
Trimble Navigation Limited
     
Laurel B. Mitchell, Ph.D., 54
38
None
     
Richard G. Newman, 75
13
Sempra Energy; SouthWest Water Company
     
Frank M. Sanchez, 66
38
None
     
Margaret Spellings,4 52
38
None
     
Steadman Upham, Ph.D., 60
41
None

H. Frederick Christie, a director of the fund since 1974, retired from the board in December 2009. The directors thank Mr. Christie for his dedication and service to the fund.
 
See page 34 for footnotes


“Interested” directors5
    
     
 
Year first
  
 
elected a
  
 
director or
Principal occupation(s) during past five years and
Name, age and
officer of
positions held with affiliated entities or the
position with fund
the fund1
principal underwriter of the fund
     
Paul G. Haaga, Jr., 61
1985
Vice Chairman of the Board, Capital Research and
Vice Chairman of the Board
  
Management Company; Senior Vice President — Fixed Income, Capital Research and Management Company
     
Abner D. Goldstine, 80
1974
Senior Vice President — Fixed Income, Capital Research and Management Company; Director, Capital Research and Management Company
     
     
“Interested” directors5
    
     
 
Number of
  
 
portfolios
  
 
in fund
  
 
complex2
  
Name, age and
overseen by
  
position with fund
director
Other directorships3 held by director
     
Paul G. Haaga, Jr., 61
12
None
Vice Chairman of the Board
    
     
Abner D. Goldstine, 80
2
None

The fund’s statement of additional information includes additional information about fund directors and is available without charge upon request by calling American Funds Service Company at 800/421-0180. The address for all directors and officers of the fund is 333 South Hope Street, Los Angeles, CA 90071, Attention: Secretary.


Other officers5
    
     
 
Year first
  
 
elected
Principal occupation(s) during past five years
Name, age and
an officer
and positions held with affiliated entities or the
position with fund
of the fund1
principal underwriter of the fund
     
John H. Smet, 53
1994
Senior Vice President — Fixed Income, Capital
President
  
Research and Management Company; Director, The Capital Group Companies, Inc.6
     
David C. Barclay, 53
1997
Senior Vice President — Fixed Income, Capital
Senior Vice President
  
Research and Management Company
     
Mark R. Macdonald, 50
2001
Senior Vice President — Fixed Income, Capital
Senior Vice President
  
Research and Management Company; Director, Capital Research and Management Company
     
Mark H. Dalzell, 55
2009
Senior Vice President — Fixed Income, Capital
Vice President
  
Research and Management Company
     
Kristine M. Nishiyama, 39
2003
Vice President and Senior Counsel — Fund Business
Vice President
  
Management Group, Capital Research and Management Company; Vice President and Counsel, Capital Bank and Trust Company6
     
Kimberly S. Verdick, 45
1994
Vice President — Fund Business Management
Secretary
  
Group, Capital Research and Management Company
     
Ari M. Vinocor, 35
2007
Vice President — Fund Business Management
Treasurer
  
Group, Capital Research and Management Company
     
Courtney R. Taylor, 35
2006
Assistant Vice President — Fund Business
Assistant Secretary
  
Management Group, Capital Research and Management Company
     
M. Susan Gupton, 36
2008
Vice President — Fund Business Management
Assistant Treasurer
  
Group, Capital Research and Management Company

 
1Directors and officers of the fund serve until their resignation, removal or retirement.
 
2Capital Research and Management Company manages the American Funds, consisting of 30 funds. Capital Research and Management Company also manages American Funds Insurance Series,® which is composed of 16 funds and serves as the underlying investment vehicle for certain variable insurance contracts; American Funds Target Date Retirement Series,® Inc., which is composed of 10 funds and is available through tax-deferred retirement plans and IRAs; and Endowments, which is available to certain nonprofit organizations.
 
3This includes all directorships (other than those in the American Funds or other funds managed by Capital Research and Management Company) that are held by each director as a director of a public company or a registered investment company.
 
4Lee A. Ault III, William H. Baribault, W. Scott Hedrick, Merit E. Janow and Margaret Spellings were newly elected to the board by the fund’s shareholders effective January 1, 2010.
 
5“Interested persons” within the meaning of the 1940 Act, as amended, 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).
 
6Company affiliated with Capital Research and Management Company.

 
 
Results of meeting of shareholders held November 24, 2009

Shares outstanding (all classes) on record date (August 28, 2009):
     3,352,817,701    
Total shares voting on November 24, 2009:
     2,277,316,281  
(67.9% of shares outstanding)


Election of board members
                        
Director*
  
Votes for
    
Percent
of shares voting for
    
Votes withheld
    
Percent
of shares withheld
  
                         
Lee A. Ault III
     2,223,203,351       97.6 %     54,112,930       2.4 %
William H. Baribault
     2,223,657,466       97.6       53,658,815       2.4  
James G. Ellis
     2,223,456,594       97.6       53,859,687       2.4  
Martin Fenton
     2,223,572,135       97.6       53,744,146       2.4  
Leonard R. Fuller
     2,223,656,562       97.6       53,659,719       2.4  
Abner D. Goldstine
     2,223,497,119       97.6       53,819,162       2.4  
Paul G. Haaga, Jr.
     2,223,719,967       97.6       53,596,314       2.4  
W. Scott Hedrick
     2,223,520,619       97.6       53,795,662       2.4  
R. Clark Hooper
     2,223,516,285       97.6       53,799,996       2.4  
Merit E. Janow
     2,223,538,024       97.6       53,778,257       2.4  
Laurel B. Mitchell
     2,223,770,323       97.6       53,545,958       2.4  
Frank M. Sanchez
     2,223,617,942       97.6       53,698,339       2.4  
Margaret Spellings
     2,223,539,072       97.6       53,777,209       2.4  
Steadman Upham
     2,223,399,953       97.6       53,916,328       2.4  


 
   
Votes for
    
Percent of outstanding
 shares
 voting for
    
Votes
against
    
Percent of outstanding
 shares
 voting
 against
    
Votes
 abstaining
    
Percent of outstanding
 shares
 abstaining
  
 
                                    
To approve an Agreement and Plan of Reorganization
     1,743,127,805       52.0 %     40,389,406       1.2 %     493,799,070 †     14.7 %
To update the fund’s fundamental investment policies regarding:
                                                
Borrowing
     1,739,465,968       76.3 %     44,525,011       2.0 %     493,325,302 †     21.7 %
Issuance of senior securities
     1,739,226,048       76.4       43,896,892       1.9       494,193,341 †     21.7  
Underwriting
     1,740,522,056       76.4       41,608,264       1.9       495,185,961 †     21.7  
Investments in real estate or commodities
     1,736,320,724       76.2       46,957,703       2.1       494,037,854 †     21.7  
Lending
     1,735,476,734       76.2       47,449,382       2.1       494,390,165 †     21.7  
Industry concentration
     1,740,948,461       76.5       41,063,213       1.8       495,304,607 †     21.7  
Elimination of certain policies
     1,733,752,487       76.1       45,947,360       2.0       497,616,434 †     21.9  
                                                 
To approve a policy allowing CRMC to appoint subsidiary advisers for the fund’s day-to-day investment management without additional shareholder approval
     1,725,354,587       75.8       55,431,138       2.4       496,530,556 †     21.8  
                                                 
To approve amendments to the fund’s Investment Advisory and Service Agreement with CRMC
     1,731,229,554       76.0       47,161,016       2.1       498,925,711 †     21.9  
 
                                                
To approve a form of Subsidiary Agreement and appointment of one or more subsidiary advisers for the fund
     1,727,630,453       75.8       51,845,704       2.3       497,840,124 †     21.9  
                                                 
To consider a shareholder proposal regarding genocide-free investing
     189,693,538       10.4       1,554,347,742       84.9       86,653,151       4.7  
(broker non-votes = 446,621,850)

 
*Richard G. Capen, Jr. and Richard G. Newman did not stand for election at the Meeting of Shareholders because they plan to retire in December 2010.
 
†Includes broker non-votes.

 
Offices of the fund and of the investment adviser
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1406

6455 Irvine Center Drive
Irvine, CA 92618

Custodian of assets
JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017-2070

Transfer agent for shareholder accounts
American Funds Service Company
(Please write to the address near you.)

P.O. Box 6007
Indianapolis, IN 46206-6007

P.O. Box 2280
Norfolk, VA 23501-2280

Counsel
Bingham McCutchen LLP
355 South Grand Avenue, Suite 4400
Los Angeles, CA 90071-3106

Independent registered public accounting firm
Deloitte & Touche LLP
695 Town Center Drive
Suite 1200
Costa Mesa, CA 92626-7188

Principal underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406

Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in the fund’s summary prospectus and prospectus, which can be obtained from your financial professional and should be read carefully before investing. You may also call American Funds Service Company (AFS) at 800/421-0180 or visit the American Funds website at americanfunds.com.

“American Funds Proxy Voting Procedures and Principles” — which describes how we vote proxies relating to portfolio securities — is available on the American Funds website or upon request by calling AFS. The fund files its proxy voting record with the U.S. Securities and Exchange Commission (SEC) for the 12 months ended June 30 by August 31. The proxy voting record is available free of charge on the SEC website at sec.gov and on the American Funds website.

A complete December 31, 2009, portfolio of The Bond Fund of America’s investments is available free of charge by calling AFS or visiting the SEC website (where it is part of Form N-CSR).

The Bond Fund of America files a complete list of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. This filing is available free of charge on the SEC website. You may also review or, for a fee, copy this filing at the SEC’s Public Reference Room in Washington, D.C. Additional information regarding the operation of the Public Reference Room may be obtained by calling the SEC’s Office of Investor Education and Advocacy at 800/SEC-0330. Additionally, the list of portfolio holdings is available by calling AFS.

This report is for the information of shareholders of The Bond Fund of America, but it also may be used as sales literature when preceded or accompanied by the current summary prospectus or prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. If used as sales material after March 31, 2010, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter.
 

 
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The right choice for the long term®

What makes American Funds different?

For nearly 80 years, we have followed a consistent philosophy to benefit our investors. Our 30 carefully conceived, broadly diversified funds, in addition to the target date retirement series, offer opportunities that have attracted over 50 million shareholder accounts.

Our unique combination of strengths includes these five factors:

 
•A long-term, value-oriented approach
 
We seek to buy securities at reasonable prices relative to their prospects and hold them for the long term.

 
•An extensive global research effort
 
Our investment professionals travel the world to find the best investment opportunities and gain a comprehensive understanding of companies and markets.

 
•The multiple portfolio counselor system
 
Our unique approach to portfolio management, developed 50 years ago, blends teamwork with individual accountability and has provided American Funds with a sustainable method of achieving fund objectives.

 
•Experienced investment professionals
 
American Funds portfolio counselors have an average of 25 years of investment experience, providing a depth of knowledge and broad perspective that few organizations have.

 
•A commitment to low management fees
 
The American Funds provide exceptional value for shareholders, with management fees that are among the lowest in the mutual fund industry.

 
American Funds span a range of investment objectives

 
•Growth funds
 
Emphasis on long-term growth through stocks
 
AMCAP Fund®
 
EuroPacific Growth Fund®
 
The Growth Fund of America®
 
The New Economy Fund®
 
New Perspective Fund®
 
New World Fund®
 
SMALLCAP World Fund®

 
•Growth-and-income funds
 
Emphasis on long-term growth and dividends through stocks
 
American Mutual Fund®
 
Capital World Growth and Income FundSM
 
Fundamental InvestorsSM
 
International Growth and Income FundSM
 
The Investment Company of America®
 
Washington Mutual Investors FundSM

 
•Equity-income funds
 
Emphasis on above-average income and growth through stocks and/or bonds
 
Capital Income Builder®
 
The Income Fund of America®

 
•Balanced fund
 
Emphasis on long-term growth and current income through stocks and bonds
 
American Balanced Fund®

 
•Bond funds
 
Emphasis on current income through bonds
 
American High-Income TrustSM
 
>The Bond Fund of AmericaSM
 
Capital World Bond Fund®
 
Intermediate Bond Fund of America®
 
Short-Term Bond Fund of AmericaSM
 
U.S. Government Securities FundSM

 
•Tax-exempt bond funds
 
Emphasis on tax-exempt current income through municipal bonds
 
American Funds Short-Term Tax-Exempt Bond FundSM
 
American High-Income Municipal Bond Fund®
 
Limited Term Tax-Exempt Bond Fund of AmericaSM
 
The Tax-Exempt Bond Fund of America®
 
State-specific tax-exempt funds
 
The Tax-Exempt Fund of California®
 
The Tax-Exempt Fund of Maryland®
 
The Tax-Exempt Fund of Virginia®

 
•Money market fund
 
American Funds Money Market FundSM

 
•American Funds Target Date Retirement Series®


The Capital Group Companies
 
American Funds   Capital Research and Management   Capital International   Capital Guardian   Capital Bank and Trust
 
 
 

 
Lit. No. MFGEAR-908-0210P
 
Litho in USA BG/N/8053-S20664
 
Printed on paper containing 10% post-consumer waste
 
Printed with inks containing soy and/or vegetable oil
 
 
ITEM 2 – Code of Ethics

The Registrant has adopted a Code of Ethics that applies to its Principal Executive Officer and Principal Financial Officer.  The Registrant undertakes to provide to any person without charge, upon request, a copy of the Code of Ethics.  Such request can be made to American Funds Service Company at 800/421-0180 or to the Secretary of the Registrant, 333 South Hope Street, Los Angeles, California 90071.


ITEM 3 – Audit Committee Financial Expert

The Registrant’s board has determined that Leonard R. Fuller, a member of the Registrant’s audit committee, is an “audit committee financial expert” and "independent," as such terms are defined in this Item. This designation will not increase the designee’s duties, obligations or liability as compared to his or her duties, obligations and liability as a member of the audit committee and of the board, nor will it reduce the responsibility of the other audit committee members.  There may be other individuals who, through education or experience, would qualify as "audit committee financial experts" if the board had designated them as such.  Most importantly, the board believes each member of the audit committee contributes significantly to the effective oversight of the Registrant’s financial statements and condition.


ITEM 4 – Principal Accountant Fees and Services

 
Registrant:
   
a)  Audit Fees:
     
2008
$120,000
     
2009
$157,000
     
 
   
b)  Audit-Related Fees:
     
2008
$12,000
     
2009
$9,000
     
The audit-related fees consist of assurance and related services relating to the examination of the Registrant’s investment adviser conducted in accordance with Statement on Auditing Standards Number 70 issued by the American Institute of Certified Public Accountants.
     
   
c)  Tax Fees:
     
2008
$7,000
     
2009
$7,000
     
The tax fees consist of professional services relating to the preparation of the Registrant’s tax returns.
     
   
d)  All Other Fees:
     
2008
None
     
2009
None
       
 
Adviser and affiliates (includes only fees for non-audit services billed to the adviser and affiliates for engagements that relate directly to the operations and financial reporting of the Registrant and were subject to the pre-approval policies described below):
   
a)  Audit Fees:
     
Not Applicable
     
   
b)  Audit-Related Fees:
     
2008
$1,070,000
     
2009
$1,029,000
     
The audit-related fees consist of assurance and related services relating to the examination of the Registrant’s transfer agent, principal underwriter and investment adviser conducted in accordance with Statement on Auditing Standards Number 70 issued by the American Institute of Certified Public Accountants.
     
   
c)  Tax Fees:
     
2008
$8,000
     
2009
None
     
The tax fees consist of consulting services relating to the Registrant’s investments.
     
   
d)  All Other Fees:
     
2008
None
     
2009
$2,000
     
The other fees consist of subscription services related to an accounting research tool.

All audit and permissible non-audit services that the Registrant’s audit committee considers compatible with maintaining the independent registered public accounting firm’s independence are required to be pre-approved by the committee.  The pre-approval requirement will extend to all non-audit services provided to the Registrant, the investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant, if the engagement relates directly to the operations and financial reporting of the Registrant. The committee will not delegate its responsibility to pre-approve these services to the investment adviser. The committee may delegate to one or more committee members the authority to review and pre-approve audit and permissible non-audit services.  Actions taken under any such delegation will be reported to the full committee at its next meeting. The pre-approval requirement is waived with respect to non-audit services if certain conditions are met. The pre-approval requirement was not waived for any of the non-audit services listed above provided to the Registrant, adviser and affiliates.

Aggregate non-audit fees paid to the Registrant’s auditors, including fees for all services billed to the Registrant, adviser and affiliates that provide ongoing services to the Registrant, were $1,389,000 for fiscal year 2008 and $1,477,000 for fiscal year 2009. The non-audit services represented by these amounts were brought to the attention of the committee and considered to be compatible with maintaining the auditors’ independence.
 
 
ITEM 5 – Audit Committee of Listed Registrants

Not applicable to this Registrant, insofar as the Registrant is not a listed issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934.


ITEM 6 – Schedule of Investments
 
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Bond Fund of AmericaSM 
Investment portfolio
 
December 31, 2009


Bonds & notes — 96.19%
  
Principal amount (000)
    
Value
(000)
  
             
CORPORATE BONDS & NOTES — 34.47%
            
FINANCIALS — 9.65%
            
Banks — 3.18%
            
Sovereign Bancorp, Inc. 1.991% 20131
   $ 8,270     $ 8,097  
Abbey National Treasury Services PLC 3.875% 20142
     39,880       40,066  
Santander Issuances, SA Unipersonal 5.805% 20161,2  
     73,600       72,959  
Santander Issuances, SA Unipersonal 5.911% 20162
     10,000       10,233  
Sovereign Bancorp, Inc. 8.75% 2018  
     70,605       81,556  
Santander Issuances, SA Unipersonal 6.50% 20191,2
     29,500       30,630  
Bayerische Hypo- und Vereinsbank AG 6.00% 2014
   € 2,155       3,306  
UniCredito Italiano SpA 5.584% 20171,2
   $ 60,690       57,851  
UniCredito Italiano SpA 6.00% 20172
     70,025       69,510  
HVB Funding Trust I 8.741% 20312
    10,634       9,358  
HVB Funding Trust III 9.00% 20312
    16,038       14,113  
Scotland International Finance No. 2 BV 4.25% 20132
     7,744       7,196  
HBOS PLC 6.75% 20182
     95,927       89,149  
HBOS PLC 4.375% 20191
   € 2,850       3,441  
HBOS PLC 6.00% 20332
   $ 5,875       4,449  
Standard Chartered PLC 5.50% 20142
    6,000       6,417  
Standard Chartered Bank 6.40% 20172
     75,380       78,070  
Barclays Bank PLC 2.50% 2013
     27,970       27,958  
Barclays Bank PLC 5.20% 2014
     32,215       34,182  
Barclays Bank PLC 6.05% 20172
     17,202       17,534  
Royal Bank of Scotland Group PLC 4.875% 20142
     38,240       38,803  
Royal Bank of Scotland Group PLC 5.00% 2014
     6,665       5,896  
Royal Bank of Scotland Group PLC 5.05% 2015
     10,370       9,005  
Royal Bank of Scotland Group PLC 4.70% 2018  
     3,485       2,717  
Royal Bank of Scotland PLC 6.934% 2018
   € 12,590       16,782  
Société Générale 5.75% 20162
   $ 60,535       61,427  
Fifth Third Bancorp 8.25% 2038
     30,250       28,837  
Fifth Third Capital Trust IV 6.50% 20671
     43,660       32,090  
PNC Funding Corp. 5.40% 2014  
     10,000       10,705  
PNC Bank NA 6.875% 2018  
     5,200       5,528  
PNC Funding Corp. 6.70% 2019  
     15,000       16,815  
PNC Funding Corp., Series II, 6.113% (undated)1,2
     18,300       12,904  
HSBC Finance Corp. 5.70% 2011
     10,000       10,451  
HSBC Finance Corp. 0.604% 20121
     20,000       19,257  
HSBC Finance Corp. 0.634% 20121
     15,000       14,474  
Paribas, New York Branch 6.95% 2013
     11,550       12,809  
BNP Paribas 4.80% 20152
     19,546       20,414  
BNP Paribas 5.125% 20152
     5,677       6,028  
Wells Fargo Bank, National Assn. 4.75% 2015
     28,785       29,385  
Wells Fargo & Co. 5.625% 2017
     8,500       8,855  
Korea Development Bank 5.30% 2013
     13,635       14,262  
Korea Development Bank 8.00% 2014
     15,365       17,525  
Union Bank of California, NA 5.95% 2016
     28,831       28,674  
Allied Irish Banks, PLC 12.50% 2019
   € 16,139       24,030  
Allied Irish Banks, PLC 5.625% 20301
  £ 250       245  
Allied Irish Banks Ltd. 0.813% (undated)1
   $ 7,000       2,560  
Resona Bank, Ltd. 5.85% (undated)1,2  
     30,603       26,743  
United Overseas Bank Ltd. 5.375% 20191,2
     22,250       22,971  
SunTrust Banks, Inc. 5.25% 2012
     1,885       1,957  
SunTrust Banks, Inc. 5.45% 2017  
     8,484       8,081  
SunTrust Banks, Inc. 6.00% 2017
     11,516       11,433  
Nordea Bank 3.70% 20142
     21,250       21,232  
Silicon Valley Bank 5.70% 2012
     18,000       18,250  
Westpac Banking Corp. 4.875% 2019
     10,500       10,384  
Banco Santander-Chile 5.375% 20142
     9,035       9,505  
Zions Bancorporation 6.00% 2015
     8,442       5,978  
Bergen Bank 0.938% (undated)1
     5,000       2,715  
Northern Rock PLC 5.60% (undated)1,2
    6,815       895  
Northern Rock PLC 6.594% (undated)1,2
    11,800       1,549  
HSBK (Europe) BV 7.75% 20132
    305       302  
HSBK (Europe) BV 7.25% 20172
     460       423  
Development Bank of Singapore Ltd. 7.125% 20112
    400       425  
Norinchukin Finance (Cayman) Ltd. 5.625% 20161
  £ 205       332  
Commerzbank AG 6.625% 2019
     70       109  
              1,259,837  
                 
Diversified financials — 2.22%
                
Countrywide Financial Corp., Series A, 4.50% 2010
   $ 15,540       15,801  
Countrywide Financial Corp. 6.25% 2010
   $ A7,700       6,888  
Countrywide Financial Corp., Series B, 0.715% 20121
   $ 24,250       23,714  
Countrywide Financial Corp., Series B, 5.80% 2012
     71,863       76,327  
Bank of America Corp., Series L, 7.375% 2014
     2,000       2,272  
Bank of America Corp. 0.534% 20161
     13,575       12,106  
Bank of America Corp. 5.75% 2017
     34,705       35,595  
BankAmerica Capital II, Series 2, 8.00% 2026
     395       390  
Goldman Sachs Group, Inc. 3.625% 2012  
     15,825       16,315  
Goldman Sachs Group, Inc. 6.25% 2017
     4,805       5,161  
Goldman Sachs Group, Inc. 5.95% 2018
     16,192       17,126  
Goldman Sachs Group, Inc. 6.15% 2018
     46,788       50,168  
Goldman Sachs Group, Inc. 7.50% 2019  
     8,295       9,720  
Citigroup Inc. 6.01% 2015
     27,700       28,315  
Citigroup Inc. 6.125% 2017
     30,325       30,614  
Citigroup Inc. 6.125% 2018
     19,125       19,260  
Citigroup Inc. 8.125% 2039
     9,750       11,037  
JPMorgan Chase & Co. 4.891% 20151
    44,025       44,123  
JPMorgan Chase Bank NA 5.875% 2016
     25,730       27,035  
JPMorgan Chase & Co. 6.30% 2019
     13,400       14,767  
Morgan Stanley 6.00% 2014  
     10,225       11,004  
Morgan Stanley, Series F, 6.00% 2015
     28,425       30,313  
Morgan Stanley, Series F, 5.625% 2019
     41,400       41,780  
Capital One Financial Corp. 6.25% 2013
     1,600       1,734  
Capital One Financial Corp. 7.375% 2014  
     5,900       6,686  
Capital One Financial Corp. 5.50% 2015
     12,223       12,817  
Capital One Financial Corp. 6.15% 2016
     10,000       10,059  
Capital One Financial Corp. 5.25% 2017
     1,009       993  
Capital One Capital III 7.686% 20361
     42,565       38,947  
CIT Group Inc., Term Loan 2A, 9.50% 20121,3,4
     12,000       12,330  
CIT Group Inc., Term Loan, 13.00% 20121,3,4
     17,000       17,633  
CIT Group Inc., Series A, 7.00% 2013  
     4,969       4,670  
CIT Group Inc., Series A, 7.00% 2014  
     7,143       6,652  
CIT Group Inc., Series A, 7.00% 2015  
     11,663       10,497  
CIT Group Inc., Series A, 7.00% 2016  
     10,421       9,223  
CIT Group Inc., Series A, 7.00% 2017  
     6,190       5,401  
SLM Corp., Series A, 4.50% 2010
     38,000       37,869  
SLM Corp., Series A, 0.512% 20111
     8,700       8,148  
SLM Corp., Series A, 5.40% 2011
     5,000       4,998  
SLM Corp., Series A, 5.375% 2013
     3,000       2,832  
SLM Corp., Series A, 0.582% 20141
     1,900       1,467  
American Express Co. 6.15% 2017
     19,185       20,081  
American Express Co. 8.15% 2038
     4,600       5,773  
American Express Co. 6.80% 20661
     6,321       5,720  
Lazard Group LLC 7.125% 2015
     20,177       20,970  
Lazard Group LLC 6.85% 2017
     3,000       3,023  
General Motors Acceptance Corp. 6.625% 20122
     1,899       1,880  
General Motors Acceptance Corp. 6.875% 20122
    7,218       7,146  
General Motors Acceptance Corp. 2.456% 20141,2
     3,070       2,475  
General Motors Acceptance Corp. 6.75% 20142
    1,535       1,474  
General Motors Acceptance Corp. 8.00% 20182
     9,577       8,523  
International Lease Finance Corp. 5.00% 2012
     13,500       11,327  
International Lease Finance Corp., Series R, 5.40% 2012
     10,000       8,700  
Northern Trust Corp. 5.50% 2013
     5,450       5,967  
Northern Trust Corp. 4.625% 2014  
     8,475       9,040  
Northern Trust Corp. 5.85% 20172
     3,750       3,963  
Lehman Brothers Holdings Inc., Series I, 3.018% 20121,5
     3,300       660  
Lehman Brothers Holdings Inc., Series G, 4.80% 20145
     10,395       2,079  
Lehman Brothers Holdings Inc., Series I, 6.20% 20145
     9,965       1,993  
Lehman Brothers Holdings Inc., Series H, 5.50% 20165
    765       153  
Lehman Brothers Holdings Inc., Series I, 6.875% 20185
     41,753       8,872  
Charles Schwab Corp., Series A, 6.375% 2017
     4,000       4,338  
Schwab Capital Trust I 7.50% 20371
     3,755       3,650  
ING Bank NV 5.50% 2012
   € 3,750       5,560  
Credit Suisse Group AG 5.50% 2014  
   $ 5,000       5,431  
Export-Import Bank of Korea 5.875% 2015
     4,400       4,732  
Bank of New York Mellon Corp., Series G, 4.95% 2012
     3,500       3,772  
              880,089  
                 
Real estate — 2.22%
                
PLD International Finance LLC 4.375% 2011
   € 7,700       11,201  
ProLogis 5.50% 2012
   $ 4,640       4,700  
ProLogis 7.625% 2014  
     45,425       47,548  
ProLogis 5.625% 2015
     13,035       12,410  
ProLogis 5.625% 2016
     15,130       13,962  
ProLogis 5.75% 2016
     27,620       25,975  
ProLogis 6.625% 2018
     55,205       52,437  
ProLogis 7.375% 2019  
     32,550       32,163  
Westfield Capital Corp. Ltd., WT Finance (Australia) Pty Ltd. and WEA Finance LLC 4.375% 20102
    44,950       46,196  
Westfield Group 5.40% 20122
     28,400       30,146  
Westfield Capital Corp. Ltd., WT Finance (Australia) Pty Ltd. and WEA Finance LLC 5.125% 20142
     35,860       37,035  
Westfield Group 7.50% 20142
    12,500       14,080  
Westfield Group 5.75% 20152
    32,000       33,783  
Westfield Group 5.70% 20162
     19,240       19,814  
Westfield Group 7.125% 20182
    9,060       9,921  
Kimco Realty Corp., Series C, 4.82% 2011
     7,500       7,534  
Kimco Realty Corp. 6.00% 2012
     20,570       21,710  
Pan Pacific Retail Properties, Inc. 6.125% 2013
     1,605       1,681  
Kimco Realty Corp., Series C, 4.82% 2014
     19,000       18,635  
Kimco Realty Corp., Series C, 4.904% 2015
     10,765       10,563  
Kimco Realty Corp., Series C, 5.783% 2016
     19,500       19,277  
Kimco Realty Corp. 5.70% 2017
     28,450       27,446  
Kimco Realty Corp. 6.875% 2019
     4,000       4,075  
Simon Property Group, LP 5.60% 2011
     8,810       9,198  
Simon Property Group, LP 5.00% 2012
     10,000       10,341  
Simon Property Group, LP 5.75% 2012
     9,000       9,460  
Simon Property Group, LP 6.75% 2014
     11,195       11,942  
Simon Property Group, LP 5.75% 2015
     3,250       3,318  
Simon Property Group, LP 5.25% 2016
     3,610       3,516  
Simon Property Group, LP 6.10% 2016
     4,750       4,854  
Simon Property Group, LP 5.875% 2017
     17,000       17,048  
Simon Property Group, LP 6.125% 2018
     23,950       24,373  
Simon Property Group, LP 10.35% 2019
     11,495       14,461  
Hospitality Properties Trust 6.75% 2013
     14,745       14,964  
Hospitality Properties Trust 7.875% 2014
     3,895       4,025  
Hospitality Properties Trust 5.125% 2015
     6,665       6,022  
Hospitality Properties Trust 6.30% 2016
     26,718       24,743  
Hospitality Properties Trust 5.625% 2017
     5,695       4,938  
Hospitality Properties Trust 6.70% 2018
     36,650       33,588  
Rouse Co. 3.625% 20095
    5,200       5,089  
Rouse Co. 7.20% 20125
    17,475       18,065  
Rouse Co. 5.375% 20135
    7,250       7,005  
Rouse Co. 6.75% 20132,5
     3,750       3,755  
Brandywine Operating Partnership, LP 5.75% 2012
     27,110       27,648  
Brandywine Operating Partnership, LP 5.40% 2014
     3,000       2,806  
Developers Diversified Realty Corp. 5.375% 2012
     5,782       5,438  
Developers Diversified Realty Corp. 5.50% 2015
     13,773       12,146  
Developers Diversified Realty Corp. 9.625% 2016
     11,850       12,385  
Boston Properties, Inc. 5.875% 2019  
     29,250       29,396  
ERP Operating LP 5.25% 2014
     2,000       2,036  
ERP Operating LP 6.584% 2015
     13,040       13,873  
ERP Operating LP 5.75% 2017
     1,530       1,532  
ERP Operating LP 7.125% 2017
     5,000       5,371  
Realogy Corp., Letter of Credit, 3.271% 20131,3,4
    1,876       1,673  
Realogy Corp., Term Loan B, 3.287% 20131,3,4
     6,933       6,184  
Realogy Corp., Term Loan DD, 3.287% 20131,3,4
     2,715       2,421  
Realogy Corp., Second Lien Term Loan A, 13.50% 20173,4
     2,500       2,656  
Host Marriott, LP, Series M, 7.00% 2012
     2,675       2,732  
Host Marriott, LP, Series K, 7.125% 2013
     925       945  
Host Hotels & Resorts, LP, Series S, 6.875% 2014
     300       303  
Host Hotels & Resorts, LP, Series Q, 6.75% 2016
     4,075       4,075  
Host Hotels & Resorts LP 9.00% 20172
    1,800       1,955  
Weingarten Realty Investors, Series A, 4.857% 2014
     6,080       5,610  
Federal Realty Investment Trust 4.50% 2011
     3,500       3,523  
              877,705  
                 
Insurance — 1.91%
                
Liberty Mutual Group Inc. 5.75% 20142
    10,435       10,295  
Liberty Mutual Group Inc. 6.70% 20162
     11,250       11,084  
Liberty Mutual Group Inc. 6.50% 20352
    45,810       36,885  
Liberty Mutual Group Inc. 7.50% 20362
     39,485       36,249  
Liberty Mutual Group Inc., Series C, 10.75% 20881,2  
     18,000       19,260  
Prudential Holdings, LLC, Series C, 8.695% 20232,3
    57,035       61,181  
Prudential Financial, Inc. 8.875% 20681
     12,500       13,245  
CNA Financial Corp. 5.85% 2014
     11,500       11,347  
CNA Financial Corp. 6.50% 2016
     24,625       24,238  
CNA Financial Corp. 7.35% 2019  
     5,770       5,787  
CNA Financial Corp. 7.25% 2023
     24,145       22,769  
ACE INA Holdings Inc. 5.875% 2014
     20,445       22,196  
ACE INA Holdings Inc. 5.70% 2017
     4,000       4,251  
ACE INA Holdings Inc. 5.80% 2018
     7,000       7,461  
ACE Capital Trust II 9.70% 2030
     12,423       13,984  
ACE INA Holdings Inc. 6.70% 2036
     5,980       6,777  
Metropolitan Life Global Funding I, 5.125% 20132
    18,310       19,412  
MetLife Capital Trust IV 7.875% 20671,2
    450       452  
MetLife Capital Trust X 9.25% 20681,2
    23,050       26,277  
Allstate Life Global Funding Trust, Series 2008-4, 5.375% 2013
     17,500       18,695  
Allstate Corp., Series B, 6.125% 20671
    28,300       24,763  
ZFS Finance (USA) Trust II 6.45% 20651,2
    29,500       26,550  
ZFS Finance (USA) Trust V 6.50% 20671,2  
     17,571       15,199  
Monumental Global Funding 5.50% 20132
    16,270       16,753  
Monumental Global Funding III 5.25% 20142
     21,500       21,955  
AEGON NV 6.125% 2031
   £ 1,730       2,578  
Nationwide Financial Services, Inc. 6.75% 20671
   $ 37,620       29,409  
Lincoln National Corp. 5.65% 2012
     11,250       11,650  
Lincoln National Corp. 7.00% 20661
     18,000       15,120  
Catlin Insurance Ltd. 7.249% (undated)1,2
    35,375       26,177  
New York Life Global Funding 5.25% 20122
    15,300       16,419  
New York Life Global Funding 4.65% 20132
     9,170       9,639  
AXA SA 8.60% 2030
     2,315       2,697  
AXA SA 6.463% (undated)1,2
     25,000       19,625  
Principal Life Insurance Co. 5.30% 2013
     18,000       19,021  
Principal Life Global Funding I 4.40% 20102
     16,600       16,940  
Assurant, Inc. 5.625% 2014
     16,000       16,420  
Nationwide Mutual Insurance Co. 5.81% 20241,2
     18,835       14,895  
RSA Insurance Group PLC 9.375% 20391
  £ 3,765       7,170  
RSA Insurance Group PLC 8.50% (undated)1
     2,429       4,125  
Chubb Corp. 6.50% 2038
   $ 3,350       3,702  
Chubb Corp. 6.375% 20671
     7,150       6,721  
United Energy Distribution Pty Ltd., AMBAC insured, 4.70% 20112
     10,000       10,246  
Jackson National Life Global 5.375% 20132
     10,000       10,163  
Genworth Global Funding Trust, Series 2007-C, 5.25% 2012
     10,000       10,101  
MassMutual Global Funding II, Series 2002-1, 3.50% 20102
     10,000       10,033  
Loews Corp. 6.00% 2035
     8,000       7,684  
UnumProvident Finance Co. PLC 6.85% 20152
     2,839       2,893  
Unum Group 7.125% 2016
     1,845       1,914  
TIAA Global Markets 4.95% 20132
    3,275       3,504  
              755,911  
                 
Automobiles & components — 0.12%
                
Ford Motor Credit Co. 7.875% 2010
     7,000       7,107  
Ford Motor Credit Co. 9.75% 20101
    5,000       5,160  
Ford Motor Credit Co. 5.504% 20111
    10,275       10,185  
Ford Motor Credit Co. 7.375% 2011
     2,200       2,245  
Ford Motor Credit Co. 3.034% 20121
     825       768  
American Honda Finance Corp. 5.125% 20102
     21,850       22,567  
              48,032  
                 
CONSUMER DISCRETIONARY — 4.55%
                
Media — 2.90%
                
Comcast Corp. 5.50% 2011
     10,301       10,783  
Comcast Cable Communications, Inc. 6.75% 2011
     520       549  
Tele-Communications, Inc. 9.80% 2012
     17,500       19,816  
Comcast Corp. 5.30% 2014
     4,000       4,273  
Comcast Corp. 5.85% 2015
     34,275       37,709  
Comcast Corp. 6.50% 2015
     4,000       4,486  
Comcast Corp. 6.30% 2017
     20,500       22,467  
Comcast Corp. 5.875% 2018
     66,125       70,311  
Comcast Corp. 5.65% 2035
     4,745       4,450  
Comcast Corp. 6.45% 2037
     8,500       8,793  
Comcast Corp. 6.95% 2037
     15,520       16,969  
Comcast Corp. 6.40% 2038
     11,800       12,183  
Time Warner Inc. 5.50% 2011
     5,185       5,507  
AOL Time Warner Inc. 6.75% 2011
     3,815       4,043  
AOL Time Warner Inc. 6.875% 2012
     25,000       27,383  
Time Warner Inc. 5.875% 2016
     40,670       43,966  
Time Warner Companies, Inc. 7.25% 2017
     1,600       1,795  
Time Warner Companies, Inc. 7.57% 2024
     12,340       13,430  
AOL Time Warner Inc. 7.625% 2031
     31,935       37,201  
Time Warner Inc. 6.50% 2036
     30,660       32,117  
Time Warner Cable Inc. 5.40% 2012
     8,000       8,552  
Time Warner Cable Inc. 6.20% 2013
     17,460       19,194  
Time Warner Cable Inc. 7.50% 2014
     21,675       24,996  
Time Warner Cable Inc. 8.25% 2014
     25,000       29,245  
Time Warner Cable Inc. 3.50% 2015
     5,000       4,945  
Time Warner Cable Inc. 6.75% 2018
     47,990       52,806  
Time Warner Cable Inc. 8.25% 2019
     7,185       8,572  
Time Warner Cable Inc. 8.75% 2019
     150       183  
Time Warner Cable Inc. 5.00% 2020
     10,000       9,716  
News America Holdings Inc. 8.00% 2016
     1,000       1,179  
News America Holdings Inc. 8.25% 2018
     2,000       2,364  
News America Inc. 6.90% 2019
     41,125       46,418  
News America Inc. 6.65% 2037
     38,900       41,224  
News America Inc. 6.90% 20392
    1,050       1,149  
News America Inc. 7.85% 2039
     1,500       1,760  
NTL Cable PLC 8.75% 2014
     2,213       2,296  
NTL Cable PLC 8.75% 2014
   € 210       315  
NTL Cable PLC 9.125% 2016
   $ 18,795       19,899  
NTL Cable PLC 9.50% 2016  
     25,750       27,778  
Virgin Media Finance 8.375% 20192
     15,475       15,997  
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 8.00% 20122
     10,150       10,480  
CCO Holdings, LLC and CCO Holdings Capital Corp. 8.75% 2013
     14,075       14,515  
Charter Communications Operating, LLC, Term Loan B, 4.24% 20141,3,4
    11,956       11,230  
Charter Communications Operating, LLC, Term Loan B, 7.25% 20141,3,4
     1,965       2,009  
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 8.375% 20142
    1,575       1,626  
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 10.875% 20142
    15,375       17,297  
Charter Communications, Inc. 13.50% 20162
     7,334       8,599  
Thomson Reuters Corp. 6.50% 2018
     57,865       65,511  
Univision Communications, Inc., First Lien Term Loan B, 2.501% 20141,3,4
     24,205       21,089  
Univision Communications Inc. 12.00% 20142
     4,555       5,039  
Univision Communications Inc. 10.50% 20151,2,6
    37,595       33,131  
Cox Communications, Inc. 4.625% 2010
     900       901  
Cox Communications, Inc. 7.125% 2012
     7,000       7,781  
Cox Communications, Inc. 5.45% 2014
     17,045       18,281  
Cox Communications, Inc. 9.375% 20192
     7,225       9,157  
CSC Holdings, Inc. 8.50% 20142
     5,950       6,366  
CSC Holdings, Inc. 8.50% 20152
    12,900       13,803  
CSC Holdings, Inc. 8.625% 20192
     3,700       4,001  
Mediacom Broadband LLC and Mediacom Broadband Corp. 8.50% 2015
     13,520       13,723  
Mediacom LLC and Mediacom Capital Corp. 9.125% 20192
     8,325       8,533  
Warner Music Group 7.375% 2014
     4,725       4,589  
Warner Music Group 9.50% 20162
     13,175       14,180  
AMC Entertainment Inc. 8.00% 2014
     8,125       7,800  
AMC Entertainment Inc., Series B, 11.00% 2016
     2,500       2,625  
AMC Entertainment Inc. 8.75% 2019  
     7,775       7,969  
TL Acquisitions, Inc., Term Loan B, 2.75% 20141,3,4
     8,094       7,382  
Thomson Learning 10.50% 20152
     11,450       11,006  
Quebecor Media Inc. 7.75% 2016
     8,950       8,972  
Quebecor Media Inc. 7.75% 2016
     5,670       5,684  
Clear Channel Worldwide, Series B, 9.25% 20172
    11,525       11,928  
American Media Operation 9.00% 20132,6
    1,200       774  
American Media Operation 14.00% 20131,2,6
    17,265       11,136  
Grupo Televisa, SAB de CV 6.625% 20402
    10,200       10,138  
UPC Holding BV 9.875% 20182
     8,500       9,010  
Regal Cinemas Corp., Series B, 9.375% 2012
     6,125       6,163  
Regal Cinemas Corp. 8.625% 2019  
     2,000       2,090  
UPC Germany GmbH 8.125% 20172
     1,100       1,118  
UPC Germany GmbH 9.625% 2019  
   € 2,250       3,267  
Liberty Media Corp. 8.25% 2030
   $ 3,550       3,270  
Kabel Deutschland GmbH 10.625% 2014
     7,150       7,508  
Discovery Communications Inc. 5.625% 2019  
     6,500       6,724  
LBI Media, Inc. 8.50% 20172
     8,015       6,693  
Fox Acquisition LLC, Term Loan B, 7.50% 20151,3,4
     843       787  
Fox Acquisition LLC 13.375% 20162
     6,165       4,809  
Radio One, Inc. 6.375% 2013
     7,380       5,452  
Cinemark USA, Inc., Term Loan B, 2.04% 20131,3,4
     3,314       3,164  
Cinemark USA, Inc. 8.625% 20192
     2,000       2,090  
Atlantic Broadband Finance, LLC and Atlantic Broadband Finance, Inc. 9.375% 2014
     4,300       4,311  
Local T.V. Finance LLC, Term Loan B, 2.26% 20131,3,4
     989       834  
Local T.V. Finance LLC 10.00% 20151,2,6
     5,562       2,420  
Walt Disney Co. 5.625% 2016
     2,000       2,163  
Vidéotron Ltée 6.875% 2014
     1,000       1,010  
Vidéotron Ltée 6.375% 2015
     1,000       983  
Carmike Cinemas, Inc., Delayed Draw, Term Loan DD, 4.24% 20121,3,4
     410       400  
Young Broadcasting Inc. 10.00% 20115
     13,317       47  
              1,148,387  
                 
Retailing — 0.89%
                
Macy’s Retail Holdings, Inc. 8.875% 20151
     20,770       23,003  
Federated Retail Holdings, Inc. 5.90% 2016
     40,875       40,057  
Staples, Inc. 7.75% 2011
     16,265       17,484  
Staples, Inc. 9.75% 2014  
     28,470       34,719  
Nordstrom, Inc. 6.75% 2014
     35,860       40,087  
Nordstrom, Inc. 6.25% 2018
     3,000       3,253  
Nordstrom, Inc. 6.95% 2028
     1,000       1,091  
Toys "R" Us, Inc. 7.625% 2011
     13,115       13,394  
Toys "R" Us-Delaware, Inc., Term Loan B, 4.481% 20121,3,4
     7,970       7,809  
Toys "R" Us, Inc. 8.50% 20172
     5,225       5,343  
Michaels Stores, Inc., Term Loan B1, 2.563% 20131,3,4
    6,136       5,589  
Michaels Stores, Inc. 10.00% 2014
     16,125       16,770  
Michaels Stores, Inc. 0%/13.00% 20167
     1,110       921  
Michaels Stores, Inc., Term Loan B2, 4.813% 20161,3,4
    2,079       1,969  
Lowe’s Companies, Inc. 8.25% 2010
     8,450       8,722  
Lowe’s Companies, Inc. 6.875% 2028
     4,800       5,410  
Lowe’s Companies, Inc. 5.50% 2035
     140       138  
Lowe’s Companies, Inc. 5.80% 2036
     5,500       5,624  
Lowe’s Companies, Inc. 6.65% 2037
     390       446  
J.C. Penney Co., Inc. 9.00% 2012
     3,495       3,958  
J.C. Penney Corp., Inc. 5.75% 2018
     11,500       11,399  
Dollar General Corp., Term Loan B2, 2.981% 20141,3,4
     995       957  
Dollar General Corp. 10.625% 2015
     5,459       6,073  
Dollar General Corp. 11.875% 20171,6
    6,179       7,168  
Neiman Marcus Group, Inc. 9.00% 20151,6
     13,297       13,064  
Neiman Marcus Group, Inc. 10.375% 2015
     425       419  
Home Depot, Inc. 5.875% 2036
     11,000       10,653  
Sally Holdings LLC and Sally Capital Inc. 9.25% 2014
     8,550       8,913  
Sally Holdings LLC and Sally Capital Inc. 10.50% 2016
     1,050       1,134  
Kohl’s Corp. 6.25% 2017
     2,000       2,217  
Kohl’s Corp. 6.00% 2033
     3,878       3,944  
Kohl’s Corp. 6.875% 2037
     3,287       3,740  
Marks and Spencer Group PLC 6.25% 20172
     8,500       8,743  
Marks and Spencer Group PLC 7.125% 20372
     850       866  
Target Corp. 7.00% 2038
     7,500       8,780  
Burlington Coat Factory Warehouse Corp. 11.125% 2014
     6,500       6,744  
Edcon (Proprietary) Ltd. 3.964% 20141
   € 6,500       6,034  
Edcon (Proprietary) Ltd. 3.964% 20141
     500       464  
Bon-Ton Department Stores, Inc. 10.25% 2014
   $ 7,000       6,492  
TJX Companies, Inc. 6.95% 2019
     5,000       5,789  
Vitamin Shoppe Industries Inc. 7.773% 20121
     4,797       4,833  
              354,213  
                 
Consumer services — 0.39%
                
MGM MIRAGE 8.50% 2010
     6,850       6,850  
MGM MIRAGE 6.75% 2012
     1,050       942  
MGM MIRAGE 6.75% 2013
     3,350       2,906  
MGM MIRAGE 13.00% 2013  
     5,150       5,935  
MGM MIRAGE 5.875% 2014
     6,575       5,301  
MGM MIRAGE 10.375% 20142
     3,025       3,297  
MGM MIRAGE 6.625% 2015
     3,600       2,817  
MGM MIRAGE 11.125% 20172
     4,375       4,867  
Boyd Gaming Corp. 7.75% 2012
     2,550       2,591  
Boyd Gaming Corp. 6.75% 2014
     8,925       8,088  
Boyd Gaming Corp. 7.125% 2016
     9,000       7,875  
Seminole Tribe of Florida 5.798% 20132,3
     8,210       7,905  
Seminole Tribe of Florida 7.804% 20202,3
    8,870       7,758  
Wynn Las Vegas, LLC and Wynn Las Vegas Capital Corp. 6.625% 2014
     15,415       14,972  
Marriott International, Inc., Series I, 6.375% 2017
     13,750       14,125  
Mohegan Tribal Gaming Authority 8.00% 2012
     6,375       5,459  
Mohegan Tribal Gaming Authority 7.125% 2014
     6,750       4,632  
Mohegan Tribal Gaming Authority 6.875% 2015
     1,800       1,179  
Royal Caribbean Cruises Ltd. 8.75% 2011
     2,465       2,591  
Royal Caribbean Cruises Ltd. 11.875% 2015  
     7,075       8,216  
Circus and Eldorado Joint Venture and Silver Legacy Resort Casino 10.125% 2012
     12,025       10,702  
ERAC USA Finance Co. 7.00% 20372
    10,000       9,818  
Norwegian Cruise Lines 11.75% 20162
     6,150       6,104  
Education Management LLC and Education Management Finance Corp. 8.75% 2014
     4,800       4,980  
Seneca Gaming Corp. 7.25% 2012
     3,025       2,965  
Seneca Gaming Corp., Series B, 7.25% 2012
     1,175       1,152  
Wendy’s/Arby’s Restaurants, LLC 10.00% 2016
     1,100       1,204  
              155,231  
                 
Automobiles & components — 0.26%
                
DaimlerChrysler North America Holding Corp., Series E, 5.75% 2011
     14,925       15,684  
DaimlerChrysler North America Holding Corp. 5.875% 2011
     9,400       9,831  
DaimlerChrysler North America Holding Corp. 7.75% 2011
     14,930       15,877  
DaimlerChrysler North America Holding Corp. 7.30% 2012
     7,455       8,108  
DaimlerChrysler North America Holding Corp. 6.50% 2013
     18,775       20,599  
Allison Transmission Holdings, Inc., Term Loan B, 3.00% 20141,3,4
     5,741       5,300  
Allison Transmission Holdings, Inc. 11.00% 20152
     3,300       3,482  
Allison Transmission Holdings, Inc. 11.25% 20151,2,6
     12,402       13,022  
Ford Motor Co. 9.50% 2011
     2,000       2,060  
FCE Bank PLC 7.125% 2013
   € 2,000       2,793  
Tenneco Automotive Inc. 8.625% 2014
   $ 3,025       3,067  
Tenneco Inc. 8.125% 2015
     750       762  
TRW Automotive Inc. 7.00% 20142
     1,500       1,478  
Cooper-Standard Automotive Inc. 7.00% 20125
    425       405  
Cooper-Standard Automotive Inc. 8.375% 20145
     2,200       572  
              103,040  
                 
Consumer durables & apparel — 0.11%
                
Fortune Brands, Inc. 6.375% 2014
     20,000       21,440  
Hanesbrands Inc., Series B, 3.831% 20141
     11,105       10,564  
Hanesbrands Inc. 8.00% 2016
     3,100       3,174  
KB Home 6.25% 2015
     3,170       2,972  
Jarden Corp. 8.00% 2016  
     2,375       2,464  
Standard Pacific Corp. 7.00% 2015
     1,005       879  
Sealy Mattress Co. 10.875% 20162
     650       726  
              42,219  
                 
ENERGY — 3.65%
                
Enbridge Energy Partners, LP 5.875% 2016
     7,000       7,285  
Enbridge Energy Partners, LP, Series B, 6.50% 2018
     45,455       48,695  
Enbridge Energy Partners, LP 9.875% 2019
     28,255       35,835  
Enbridge Energy Partners, LP, Series B, 7.50% 2038
     33,700       38,483  
Enbridge Energy Partners, LP 8.05% 20771
     64,600       60,140  
Kinder Morgan Energy Partners LP 6.75% 2011
     5,500       5,818  
Kinder Morgan Energy Partners LP 5.85% 2012
     6,500       7,000  
Kinder Morgan Energy Partners LP 5.00% 2013
     14,279       15,004  
Kinder Morgan Energy Partners LP 5.125% 2014
     34,052       35,780  
Kinder Morgan Energy Partners LP 5.625% 2015  
     14,100       15,180  
Kinder Morgan Energy Partners LP 6.00% 2017
     22,375       23,526  
Kinder Morgan Energy Partners LP 9.00% 2019
     9,865       12,159  
Kinder Morgan Energy Partners LP 6.85% 2020  
     55,935       62,162  
Williams Companies, Inc. 6.375% 20102
     1,500       1,527  
Williams Companies, Inc. 7.125% 2011
     500       535  
Transcontinental Gas Pipe Line Corp. 6.40% 2016
     10,000       10,923  
Williams Companies, Inc. 7.625% 2019
     17,995       20,207  
Williams Companies, Inc. 8.75% 2020
     16,060       19,192  
Williams Companies, Inc. 7.875% 2021
     46,605       53,562  
Williams Companies, Inc. 8.75% 2032
     18,916       22,697  
Gaz Capital SA, Series 13, 6.605% 2018
   € 8,200       12,011  
Gaz Capital SA 6.51% 20222
  $ 72,475       66,677  
Gaz Capital SA 7.288% 20372
     15,250       14,144  
TransCanada PipeLines Ltd. 6.50% 2018
     7,500       8,380  
TransCanada PipeLines Ltd. 7.125% 2019
     10,790       12,637  
TransCanada PipeLines Ltd. 6.35% 20671
     70,555       66,294  
StatoilHydro ASA 2.90% 2014  
     15,360       15,313  
StatoilHydro ASA 3.875% 2014  
     7,000       7,282  
StatoilHydro ASA 5.125% 20142
     14,570       15,834  
StatoilHydro ASA 5.25% 2019
     20,230       21,482  
Rockies Express Pipeline LLC 6.25% 20132
    14,500       15,855  
Rockies Express Pipeline LLC 6.85% 20182
    39,650       43,893  
Enbridge Inc. 5.80% 2014
     9,200       9,977  
Enbridge Inc. 4.90% 2015
     3,250       3,367  
Enbridge Inc. 5.60% 2017
     42,080       43,806  
Shell International Finance 1.30% 2011  
     17,000       17,051  
Shell International Finance B.V. 4.00% 2014
     22,000       22,980  
Shell International Finance 4.30% 2019  
     13,275       13,141  
BP Capital Markets PLC 3.625% 20142
     16,000       16,384  
BP Capital Markets PLC 3.875% 2015
     34,965       35,966  
Devon Energy Corp. 5.625% 2014
     18,000       19,463  
Devon Energy Corp. 6.30% 2019
     24,385       27,199  
Devon Financing Corp. ULC 7.875% 2031
     3,000       3,770  
Petrobras International 5.75% 2020  
     25,890       26,467  
Petrobras International 6.875% 2040  
     22,780       23,523  
Ras Laffan Liquefied Natural Gas III 5.50% 20142
     330       347  
Ras Laffan Liquefied Natural Gas Co. Ltd. 8.294% 20143
     900       979  
Ras Laffan Liquefied Natural Gas III 5.832% 20163
    2,000       2,120  
Ras Laffan Liquefied Natural Gas III 6.75% 20192
    3,500       3,804  
Ras Laffan Liquefied Natural Gas II 5.298% 20202,3
    24,470       24,710  
Ras Laffan Liquefied Natural Gas III 5.838% 20272,3
     10,000       10,003  
Ras Laffan Liquefied Natural Gas III 6.332% 20273
     2,000       2,034  
Husky Energy Inc. 6.25% 2012
     2,510       2,713  
Husky Energy Inc. 5.90% 2014  
     2,490       2,717  
Husky Energy Inc. 6.20% 2017
     16,415       17,704  
Husky Energy Inc. 7.25% 2019  
     15,830       18,326  
Husky Energy Inc. 6.80% 2037
     2,000       2,126  
Chevron Corp. 3.95% 2014  
     4,400       4,598  
Chevron Corp. 4.95% 2019  
     33,330       35,174  
Enterprise Products Operating LP 4.95% 2010
     8,750       8,870  
Enterprise Products Operating LP 7.50% 2011
     5,000       5,299  
Enterprise Products Operating LLC 5.65% 2013
     17,850       19,033  
Enterprise Products Operating LLC 7.00% 20671
    1,770       1,571  
Tengizchevroil Finance Co. S.àr.l., Series A, 6.124% 20142,3
     25,613       25,741  
Tengizchevroil Finance Co. S.àr.l., Series A, 6.124% 20143
     4,234       4,255  
Phillips Petroleum Co. 8.75% 2010
     4,000       4,134  
Polar Tankers, Inc. 5.951% 20372,3
     24,355       23,727  
Pemex Finance Ltd. 8.875% 20103
     6,400       6,621  
Pemex Finance Ltd., Series 1999-2, Class A-3, 10.61% 20173,8
     11,700       14,099  
Pemex Project Funding Master Trust 5.75% 2018  
     3,150       3,201  
Pemex Project Funding Master Trust 6.625% 2035
     3,500       3,337  
Petroplus Finance Ltd. 6.75% 20142
    6,500       6,143  
Petroplus Finance Ltd. 7.00% 20172
    17,675       15,996  
Petroplus Finance Ltd. 9.375% 20192
     3,650       3,650  
Sunoco, Inc. 4.875% 2014
     9,730       9,816  
Sunoco, Inc. 9.625% 2015
     8,750       10,424  
Apache Corp. 6.00% 2013
     2,420       2,680  
Apache Corp. 5.625% 2017
     7,200       7,686  
Apache Corp. 6.90% 2018
     7,145       8,386  
Williams Partners L.P. and Williams Partners Finance Corp. 7.50% 2011
     5,725       5,856  
Williams Partners L.P. and Williams Partners Finance Corp. 7.25% 2017
     10,975       11,102  
Gulfstream Natural Gas 5.56% 20152
    3,500       3,666  
Gulfstream Natural Gas 6.19% 20252
    7,235       7,038  
Canadian Natural Resources Ltd. 5.70% 2017
     10,000       10,700  
Total Capital 3.125% 2015
     10,800       10,670  
Qatar Petroleum 5.579% 20112,3
     10,302       10,592  
Petroleum Export Ltd., Class A-1, MBIA insured, 4.623% 20102,3
     3,833       3,776  
Petroleum Export Ltd., Class A-2, XLCA insured, 4.633% 20102,3
     722       711  
General Maritime Corp. 12.00% 20172
    3,400       3,557  
Continental Resources 8.25% 20192
    3,000       3,165  
PETRONAS Capital Ltd. 7.00% 20122
     2,250       2,474  
              1,443,937  
                 
INDUSTRIALS — 3.46%
                
Transportation — 1.90%
                
Continental Airlines, Inc., Series 2001-1, Class A-2, 6.503% 20113
    14,050       13,953  
Continental Airlines, Inc. 8.75% 2011
     300       292  
Continental Airlines, Inc., Series 2000-2, Class A-2, 7.487% 20123
     12,500       12,578  
Continental Airlines, Inc., Series 2006-1, Class G, FGIC insured, 0.607% 20151,3
    1,100       878  
Continental Airlines, Inc., Series 1997-1, Class A, 7.461% 20163
    27,421       26,247  
Continental Airlines, Inc., Series 2001-1, Class B, 7.373% 20173
    155       137  
Continental Airlines, Inc., Series 1998-1, Class B, 6.748% 20183
    1,473       1,348  
Continental Airlines, Inc., Series 1997-4B, Class B, 6.90% 20183
    249       237  
Continental Airlines, Inc., Series 1998-1, Class A, 6.648% 20193
     16,629       15,943  
Continental Airlines, Inc., Series 1997-4, Class A, 6.90% 20193
    35,863       35,437  
Continental Airlines, Inc., Series 2000-2, Class B, 8.307% 20193
     792       725  
Continental Airlines, Inc., Series 1999-1, Class A, 6.545% 20203
    17,718       17,519  
Continental Airlines, Inc., Series 1999-1, Class B, 6.795% 20203
    11,850       10,843  
Continental Airlines, Inc., Series 1999-2, Class A-1, 7.256% 20213
    278       264  
Continental Airlines, Inc., Series 1999-2, Class B, 7.566% 20213
    3,568       3,408  
Continental Airlines, Inc., Series 2001-1, Class A-1, 6.703% 20223
    12,906       12,092  
Continental Airlines, Inc., Series 2007-1, Class B, 6.903% 20223
    10,130       9,218  
Continental Airlines, Inc., Series 2000-2, Class A-1, 7.707% 20223
    12,951       12,619  
Continental Airlines, Inc., Series 2000-1, Class A-1, 8.048% 20223
    12,917       12,780  
Continental Airlines, Inc., Series 2000-1, Class B, 8.388% 20223
    1,390       1,286  
Delta Air Lines, Inc., Series 2000-1, Class A-2, 7.57% 20123
    400       405  
Northwest Airlines, Inc., Term Loan B, 3.76% 20131,3,4
     2,526       2,053  
Delta Air Lines, Inc., Series 2001-1, Class A-2, 7.111% 20133
    1,000       1,012  
Delta Air Lines, Inc., Second Lien Term Loan B, 3.534% 20141,3,4
     2,885       2,424  
Delta Air Lines, Inc., Series 2002-1, Class G-2, MBIA insured, 6.417% 20143
     42,180       40,387  
Delta Air Lines, Inc., Series 1992-A2, 9.20% 20143,5
    4,611       1,522  
Northwest Airlines, Inc., Term Loan A, 2.01% 20181,3,4
     64,235       50,745  
Delta Air Lines, Inc., Series 2002-1, Class G-1, MBIA insured, 6.718% 20243
     23,914       21,284  
Burlington Northern Santa Fe Corp. 4.30% 2013
     2,640       2,777  
Burlington Northern Santa Fe Corp. 7.00% 2014
     5,000       5,680  
Burlington Northern Santa Fe Corp. 5.75% 2018
     10,035       10,677  
Burlington Northern Santa Fe Corp. 4.70% 2019
     39,300       39,009  
Burlington Northern Santa Fe Corp. 6.15% 2037
     10,890       11,493  
BNSF Funding Trust I 6.613% 20551
     15,000       14,436  
CSX Corp. 5.50% 2013
     2,900       3,118  
CSX Corp. 5.75% 2013
     8,335       9,023  
CSX Corp. 6.25% 2015
     10,000       11,027  
CSX Corp. 6.25% 2018
     10,000       10,786  
CSX Corp. 7.375% 2019
     16,500       18,882  
CSX Corp. 6.15% 2037
     26,585       27,025  
Norfolk Southern Corp. 6.75% 2011
     991       1,047  
Norfolk Southern Corp. 5.75% 2016
     6,740       7,180  
Norfolk Southern Corp. 5.75% 2018
     21,050       22,304  
Norfolk Southern Corp. 5.90% 2019  
     14,000       14,976  
Norfolk Southern Corp. 7.05% 2037
     23,225       27,480  
AMR Corp., Series B, 10.45% 2011
     150       134  
American Airlines, Inc., Series 2001-1, Class A-2, 6.817% 20123
    3,750       3,619  
American Airlines, Inc., Series 2001-2, Class A-1, 6.978% 20123
     7,434       7,425  
American Airlines, Inc., Series 2001-2, Class B, 8.608% 20123
    18,165       17,302  
AMR Corp. 9.00% 2012
     1,300       1,079  
American Airlines, Inc., Series 2001-2, Class A-2, 7.858% 20133
    38,010       38,162  
American Airlines, Inc., Series 2001-1, Class B, 7.377% 20193
     1,827       1,434  
Union Pacific Corp. 3.625% 2010
     4,820       4,879  
Union Pacific Corp. 5.125% 2014
     8,430       8,987  
Union Pacific Corp. 5.75% 2017
     22,965       24,269  
Union Pacific Corp. 5.70% 2018
     4,000       4,197  
Union Pacific Railroad Co. Pass Through Trust, Series 2001-1, 6.63% 20223
    6,703       7,548  
Union Pacific Corp. 6.15% 2037
     10,930       11,320  
United Air Lines, Inc., Series 2000-2, Class B, 7.811% 20113,5
     7,335       9,957  
United Air Lines, Inc., Series 2000-2, Class A-2, 7.186% 20123
     40       40  
United Air Lines, Inc., Term Loan B, 2.313% 20141,3,4
    8,358       6,620  
United Air Lines, Inc., Series 2007-1, Class B, 7.336% 20212,3
    879       622  
United Air Lines, Inc., Series 2007-1, Class A, 6.636% 20243
     26,557       22,839  
Canadian National Railway Co. 5.55% 2018
     16,500       17,614  
Canadian National Railway Co. 6.375% 2037
     3,100       3,462  
Kansas City Southern Railway Co. 13.00% 2013  
     3,375       3,932  
Kansas City Southern Railway Co. 8.00% 2015
     4,250       4,425  
RailAmerica, Inc. 9.25% 2017
     3,600       3,848  
Navios Maritime Holdings Inc. 8.875% 20172
    2,225       2,322  
CEVA Group PLC 10.00% 20142
     500       477  
CEVA Group PLC, Bridge Loan, 7.984% 20151,3,4,8
     1,500       960  
CEVA Group PLC 11.625% 20162
     300       309  
              752,338  
                 
Capital goods — 1.27%
                
BAE Systems Holdings Inc. 4.75% 20102,3
     10,350       10,509  
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class B, 7.156% 20112,3
     24,853       25,857  
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class G, MBIA insured, 6.664% 20132,3
     27,715       28,282  
BAE Systems Holdings Inc. 4.95% 20142
    16,125       16,807  
Northrop Grumman Systems Corp. 7.125% 2011
     8,000       8,471  
Northrop Grumman Corp. 3.70% 2014
     9,500       9,546  
Northrop Grumman Corp. 7.75% 2016
     13,420       15,884  
Northrop Grumman Corp. 5.05% 2019
     18,600       19,029  
Northrop Grumman Systems Corp. 7.75% 2031
     3,000       3,717  
Volvo Treasury AB 5.95% 20152
     48,905       50,522  
Lockheed Martin Corp. 4.121% 2013
     6,000       6,273  
Lockheed Martin Corp. 4.25% 2019
     34,810       33,668  
Lockheed Martin Corp., Series B, 6.15% 2036
     6,000       6,371  
Hutchison Whampoa International Ltd. 7.00% 20112
    24,300       25,662  
Hutchison Whampoa International Ltd. 6.50% 20132
    7,200       7,831  
Raytheon Co. 6.40% 2018
     9,500       10,817  
Raytheon Co. 6.75% 2018
     4,030       4,620  
Raytheon Co. 4.40% 2020
     10,970       10,827  
General Electric Capital Corp., Series A, 6.00% 2019
     10,000       10,399  
General Electric Capital Corp., Series A, 0.658% 20261
     15,200       12,878  
Koninklijke Philips Electronics NV 5.75% 2018
     20,000       21,316  
DAE Aviation Holdings, Inc. and Standard Aero Ltd., Term Loan B2, 4.03% 20141,3,4
    2,401       2,204  
DAE Aviation Holdings, Inc. and Standard Aero Ltd., Term Loan B1, 4.04% 20141,3,4
     2,460       2,259  
DAE Aviation Holdings, Inc. 11.25% 20152
     17,285       14,692  
Ashtead Group PLC 8.625% 20152
    4,675       4,722  
Ashtead Capital, Inc. 9.00% 20162
     14,125       14,213  
US Investigations Services, Inc., Term Loan B, 3.253% 20151,3,4
     5,380       4,835  
US Investigations Services, Inc. 10.50% 20152
     7,255       6,511  
US Investigations Services, Inc. 11.75% 20162
    5,630       4,877  
DynCorp International and DIV Capital Corp., Series B, 9.50% 2013
     15,493       15,764  
John Deere Capital Corp. 5.40% 2011
     3,500       3,742  
John Deere Capital Corp., Series D, 4.50% 2013
     3,000       3,152  
John Deere Capital Corp. 5.10% 2013
     1,100       1,170  
John Deere Capital Corp., Series D, 5.50% 2017
     3,650       3,875  
John Deere Capital Corp., Series D, 5.75% 2018
     2,000       2,172  
TransDigm Inc. 7.75% 20142
    10,970       11,162  
TransDigm Inc. 7.75% 2014
     1,325       1,348  
Hawker Beechcraft Acquisition Co., LLC, Term Loan B, 2.231% 20141,3,4
     3,413       2,580  
Hawker Beechcraft Acquisition Co., LLC, Letter of Credit, 2.231% 20141,3,4
     198       150  
Hawker Beechcraft Acquisition Co., LLC, Term Loan B, 10.50% 20141,3,4
     479       458  
Hawker Beechcraft Acquisition Co., LLC 8.50% 2015
     1,325       941  
Hawker Beechcraft Acquisition Co., LLC 9.625% 20151,6
     11,328       6,967  
Hawker Beechcraft Acquisition Co., LLC 9.75% 2017
     170       106  
Caterpillar Financial Services Corp. 4.30% 2010
     2,400       2,432  
Caterpillar Financial Services Corp., Series F, 5.125% 2011
     500       531  
Caterpillar Financial Services Corp., Series F, 4.85% 2012
     210       226  
Caterpillar Financial Services Corp., Series F, 5.50% 2016
     4,050       4,283  
Caterpillar Financial Services Corp., Series F, 7.15% 2019  
     1,850       2,143  
Honeywell International Inc. 5.00% 2019
     8,725       9,092  
Navistar International Corp. 8.25% 2021  
     7,650       7,880  
B/E Aerospace 8.50% 2018
     6,920       7,352  
RBS Global, Inc. and Rexnord LLC 9.50% 2014
     4,525       4,559  
RBS Global, Inc. and Rexnord LLC 8.875% 2016
     850       744  
Atlas Copco AB 5.60% 20172
     4,525       4,569  
United Rentals (North America), Inc., Series B, 6.50% 2012
     3,000       3,008  
Atrium Companies, Inc., Term Loan B, 11.75% 20121,3,4,6
    4,868       2,808  
Atrium Companies, Inc. 15.00% 20122,6
    4,343       87  
Esterline Technologies Corp. 6.625% 2017
     1,955       1,916  
H&E Equipment Services, Inc. 8.375% 2016
     1,750       1,761  
Esco Corp. 4.129% 20131,2  
     325       298  
Esco Corp. 8.625% 20132
     1,100       1,100  
Sequa Corp., Term Loan B, 3.89% 20141,3,4
     874       783  
RSC Equipment Rental, Inc. and RSC Holdings III, LLC 9.50% 2014
     400       402  
Alion Science and Technology Corp. 10.25% 2015
     230       177  
              503,337  
                 
Commercial & professional services — 0.29%
                
Nielsen Finance LLC, Term Loan A, 2.235% 20131,3,4
     3,400       3,201  
Nielsen Finance LLC and Nielsen Finance Co. 10.00% 2014
     25,325       26,528  
Nielsen Finance LLC and Nielsen Finance Co. 11.625% 2014
     1,650       1,863  
Nielsen Finance LLC and Nielsen Finance Co. 0%/12.50% 20167
     35,125       32,227  
Nielsen Finance LLC and Nielsen Finance Co. 11.50% 2016
     19,480       21,866  
ARAMARK Corp., Term Loan B, 2.126% 20141,3,4
     4,017       3,810  
ARAMARK Corp., Letter of Credit, 4.721% 20141,3,4
     264       251  
ARAMARK Corp. 3.781% 20151
     3,450       3,174  
ARAMARK Corp. 8.50% 2015
     9,450       9,781  
Allied Waste North America, Inc., Series B, 6.125% 2014
     3,500       3,564  
Allied Waste North America, Inc. 6.875% 2017
     3,095       3,289  
Iron Mountain Inc. 7.75% 2015
     2,425       2,449  
FTI Consulting, Inc. 7.625% 2013
     2,300       2,343  
              114,346  
                 
TELECOMMUNICATION SERVICES — 3.34%
                
Verizon Communications Inc. 3.75% 2011
     111,950       115,478  
ALLTEL Corp. 7.00% 2012
     18,299       20,197  
Verizon Global Funding Corp. 7.375% 2012
     11,835       13,349  
Verizon Communications Inc. 5.25% 2013
     14,500       15,642  
Verizon Communications Inc. 5.55% 2014
     14,710       15,979  
Verizon Communications Inc. 5.50% 2018
     8,540       8,927  
Verizon Communications Inc. 6.10% 2018
     24,000       26,129  
Verizon Communications Inc. 8.50% 2018
     16,000       19,878  
Verizon Communications Inc. 8.75% 2018
     34,000       42,535  
Verizon Communications Inc. 6.35% 2019
     3,500       3,868  
Telecom Italia Capital SA 4.875% 2010
     1,260       1,290  
Olivetti Finance NV 7.25% 2012
   € 8,830       13,870  
Telecom Italia Capital SA, Series B, 5.25% 2013
   $ 5,480       5,769  
Telecom Italia Capital SA 4.95% 2014
     9,867       10,238  
Telecom Italia Capital SA 5.25% 2015
     77,500       81,130  
Telecom Italia Capital SA 6.999% 2018
     8,400       9,257  
Telecom Italia Capital SA 7.175% 2019  
     41,500       46,348  
Telecom Italia SpA 7.75% 2033
   € 8,270       14,033  
Telecom Italia Capital SA 7.20% 2036
   $ 2,000       2,182  
Telecom Italia Capital SA 7.721% 2038
     24,000       27,718  
AT&T Wireless Services, Inc. 7.875% 2011
     15,355       16,502  
SBC Communications Inc. 5.875% 2012
     20,337       22,216  
AT&T Wireless Services, Inc. 8.125% 2012
     12,630       14,279  
AT&T Inc. 4.95% 2013
     20,750       22,153  
Centennial Communications Corp. 6.04% 20131
     6,500       6,500  
Centennial Communications Corp. 10.00% 2013
     2,750       2,888  
SBC Communications Inc. 5.10% 2014
     4,745       5,109  
SBC Communications Inc. 5.625% 2016
     45,200       48,621  
AT&T Inc. 5.50% 2018
     7,910       8,267  
AT&T Inc. 5.60% 2018
     6,620       6,949  
AT&T Inc. 5.80% 2019  
     11,550       12,334  
SBC Communications Inc. 6.45% 2034
     11,175       11,430  
AT&T Inc. 6.55% 2039  
     12,000       12,686  
Vodafone Group PLC 7.75% 2010
     20,000       20,153  
Vodafone Group PLC 5.625% 2017
     26,580       28,274  
Vodafone Group PLC 5.45% 2019
     25,000       25,935  
Vodafone Group PLC 6.15% 2037
     6,000       6,271  
France Télécom 7.75% 20111
     32,000       34,306  
France Télécom 7.25% 2013
   € 4,800       7,781  
France Télécom 4.375% 2014  
     19,010       19,885  
France Télécom 5.375% 2019  
     12,690       13,402  
Sprint Nextel Corp. 0.651% 20101
     1,865       1,836  
Sprint Capital Corp. 7.625% 2011
     500       514  
Sprint Capital Corp. 8.375% 2012
     900       936  
Nextel Communications, Inc., Series E, 6.875% 2013
     25,330       24,697  
Nextel Communications, Inc., Series F, 5.95% 2014
     39,045       36,654  
Nextel Communications, Inc., Series D, 7.375% 2015
     9,200       8,993  
Cricket Communications, Inc. 9.375% 2014
     30,110       30,411  
Cricket Communications, Inc. 10.00% 2015
     1,000       1,019  
Cricket Communications, Inc. 7.75% 2016
     20,225       20,276  
Qwest Capital Funding, Inc. 7.90% 2010
     1,400       1,435  
Qwest Capital Funding, Inc. 7.25% 2011
     36,450       37,179  
Qwest Communications International Inc. 7.25% 2011
     6,000       6,060  
Qwest Corp. 7.875% 2011
     1,000       1,053  
Deutsche Telekom International Finance BV 5.875% 2013
     4,000       4,332  
Deutsche Telekom International Finance BV 4.875% 2014
     16,250       17,058  
Deutsche Telekom International Finance BV 6.75% 2018
     10,000       11,214  
MetroPCS Wireless, Inc. 9.25% 2014
     14,475       14,728  
MetroPCS Wireless, Inc. 9.25% 2014
     13,950       14,194  
Crown Castle International Corp. 9.00% 2015
     15,275       16,306  
Crown Castle International Corp. 7.75% 20172
    9,675       10,352  
American Tower Corp. 4.625% 20152
     14,875       15,063  
American Tower Corp. 7.00% 2017  
     5,950       6,619  
American Tower Corp. 7.25% 20192
     3,750       4,200  
Windstream Corp. 8.125% 2013
     18,150       18,921  
Valor Telecommunications Enterprises, LLC and Valor Telecommunications Enterprises Finance Corp. 7.75% 2015
 2,850       2,938  
Windstream Corp. 8.625% 2016
     3,300       3,374  
Clearwire Communications LLC/Finance 12.00% 20152
    16,900       17,238  
Clearwire Communications LLC/Finance 12.00% 20152
     4,500       4,590  
Digicel Group Ltd. 12.00% 20142
     12,025       13,543  
Digicel Group Ltd. 8.875% 20152
    7,150       6,971  
Digicel Group Ltd. 8.875% 2015  
     400       390  
Telefónica Emisiones, SAU 4.949% 2015  
     13,150       14,072  
Telefónica Emisiones, SAU 6.421% 2016
     5,750       6,391  
Wind Acquisition SA 11.75% 20172
    17,275       18,959  
British Telecommunications PLC 5.95% 2018
     17,472       17,786  
PCCW-HKT Capital Ltd. 8.00% 20111,2
     15,000       16,183  
Intelsat, Ltd. 8.50% 2013  
     4,000       4,100  
Intelsat, Ltd. 8.875% 2015  
     4,275       4,446  
Intelsat Jackson Holding Co., Series B, 8.875% 20152
    1,950       2,028  
Intelsat Jackson Holding Co. 9.50% 2016  
     2,100       2,258  
Intelsat Jackson Holding Co. 8.50% 20192
     1,175       1,216  
Koninklijke KPN NV 4.75% 2017
   € 3,500       5,177  
Koninklijke KPN NV 8.375% 2030
   $ 5,200       6,533  
Singapore Telecommunications Ltd. 6.375% 2011
     3,475       3,768  
Singapore Telecommunications Ltd. 6.375% 20112
    2,050       2,223  
Singapore Telecommunications Ltd. 7.375% 20312
    3,800       4,722  
SK Telecom Co., Ltd. 4.25% 20112
     6,000       6,104  
SBA Telecommunications, Inc. 8.00% 20162
     3,750       3,938  
Orascom Telecom 7.875% 20142
     3,275       2,980  
Hawaiian Telcom Communications, Inc. 8.765% 20131,5
     3,605       81  
Hawaiian Telcom Communications, Inc. 9.75% 20135
     7,715       174  
Hawaiian Telcom Communications, Inc., Term Loan C, 4.75% 20141,3,4,6
     2,155       1,579  
Hawaiian Telcom Communications, Inc., Series B, 12.50% 20155
     3,050       —  
América Móvil, SAB de CV 8.46% 2036
  
MXN27,000
       1,691  
Nordic Telephone Co. Holding ApS 8.875% 20162
   $ 1,000       1,063  
Trilogy International Partners LLC, Term Loan B, 3.751% 20121,3,4
     275       240  
              1,320,564  
                 
UTILITIES — 3.08%
                
National Rural Utilities Cooperative Finance Corp. 5.50% 2013
     46,600       50,480  
National Rural Utilities Cooperative Finance Corp. 5.45% 2017
     2,880       3,008  
National Rural Utilities Cooperative Finance Corp. 5.45% 2018
     3,500       3,658  
National Rural Utilities Cooperative Finance Corp. 10.375% 2018
     41,425       54,977  
MidAmerican Energy Holdings Co. 5.875% 2012
     15,000       16,347  
MidAmerican Energy Co. 5.125% 2013
     7,500       7,987  
PacifiCorp, First Mortgage Bonds, 5.45% 2013
     2,875       3,133  
MidAmerican Energy Co. 4.65% 2014
     5,000       5,278  
MidAmerican Energy Co. 5.95% 2017
     3,000       3,232  
MidAmerican Energy Co. 5.30% 2018
     5,000       5,161  
PacifiCorp., First Mortgage Bonds, 5.65% 2018
     3,800       4,088  
MidAmerican Energy Holdings Co. 5.75% 2018
     47,700       50,357  
MidAmerican Energy Holdings Co. 6.125% 2036
     5,000       5,138  
FirstEnergy Solutions Corp. 4.80% 2015
     10,000       10,218  
Ohio Edison Co. 6.40% 2016
     13,750       14,796  
Jersey Central Power & Light Co. 5.65% 2017
     3,000       3,097  
Pennsylvania Electric Co. 6.05% 2017
     5,165       5,383  
Cleveland Electric Illuminating Co. 8.875% 2018  
     24,600       30,420  
Jersey Central Power & Light Co. 7.35% 2019
     1,700       1,933  
Toledo Edison Co. 7.25% 2020
     10,000       11,433  
Ohio Edison Co. 6.875% 2036
     2,315       2,481  
E.ON International Finance BV 5.80% 20182
     70,425       75,762  
Edison Mission Energy 7.50% 2013
     5,000       4,725  
Southern California Edison Co., First and Refunding Mortgage Bonds, Series 2009-B, 4.15% 2014
     3,500       3,664  
Southern California Edison Co., First and Refunding Mortgage Bonds, Series 2005-A, 5.00% 2016
     4,000       4,176  
Edison Mission Energy 7.75% 2016
     6,025       5,151  
Midwest Generation, LLC, Series B, 8.56% 20163
     17,347       17,521  
Edison Mission Energy 7.00% 2017
     6,825       5,426  
Southern California Edison Co., First and Refunding Mortgage Bonds, Series 2008-B, 5.50% 2018
     1,000       1,069  
Edison Mission Energy 7.20% 2019
     15,450       11,781  
Homer City Funding LLC 8.734% 20263
     13,550       13,143  
Edison Mission Energy 7.625% 2027
     6,900       4,709  
Southern California Edison Co., First and Refunding Mortgage Bonds, Series 2006-E, 5.55% 2037
     3,500       3,492  
Energy East Corp. 6.75% 2012
     7,155       7,825  
Iberdrola Finance Ireland 3.80% 20142
     26,475       26,623  
Scottish Power PLC 5.375% 2015
     31,415       33,393  
Consumers Energy Co., First Mortgage Bonds, Series P, 5.50% 2016
     2,500       2,629  
Consumers Energy Co., First Mortgage Bonds, 5.15% 2017
     5,000       5,190  
Consumers Energy Co. 5.65% 2018
     18,325       19,197  
Consumers Energy Co., First Mortgage Bonds, 6.125% 2019
     30,575       33,157  
Consumers Energy Co., First Mortgage Bonds, 6.70% 2019
     2,380       2,688  
Niagara Mohawk Power 3.553% 20142
    15,565       15,534  
National Grid PLC 6.30% 2016
     37,605       40,953  
National Grid Co. PLC 5.875% 2024
   £ 170       278  
Carolina Power & Light Co. d/b/a Progress Energy Carolinas, Inc., First Mortgage Bonds, 5.125% 2013
   $ 5,000       5,356  
Progress Energy, Inc. 6.05% 2014
     2,100       2,301  
Carolina Power & Light Co. d/b/a Progress Energy Carolinas, Inc. 5.25% 2015
     6,000       6,570  
Progress Energy Florida, Inc., First Mortgage Bonds, 5.65% 2018
     3,150       3,386  
Progress Energy, Inc. 7.05% 2019
     32,900       36,870  
Veolia Environnement 5.25% 2013
     18,235       19,300  
Veolia Environnement 6.00% 2018
     11,445       12,105  
Veolia Environnement 6.125% 2033
   € 13,640       21,267  
Israel Electric Corp. Ltd. 7.25% 20192
  $ 29,800       32,327  
Israel Electric Corp. 7.25% 2019  
     4,375       4,746  
Israel Electric Corp. Ltd. 8.10% 20962
     6,250       6,476  
Enel Finance International 3.875% 20142
     32,890       33,326  
ENEL SpA 5.625% 2027
   € 5,760       8,786  
Texas Competitive Electric Holdings Co. LLC, Term Loan B2, 3.735% 20141,3,4
   $ 14,432       11,758  
Texas Competitive Electric Holdings Co. LLC, Series A, 10.25% 2015
     12,215       9,955  
Texas Competitive Electric Holdings Co. LLC, Series B, 10.25% 2015
     9,505       7,747  
Nevada Power Co., General and Refunding Mortgage Notes, Series I, 6.50% 2012
     700       751  
Sierra Pacific Power Co., General and Refunding Mortgage Notes, Series Q, 5.45% 2013
     4,275       4,563  
Sierra Pacific Resources 8.625% 2014
     900       937  
Nevada Power Co., General and Refunding Mortgage Notes, Series L, 5.875% 2015
     2,550       2,740  
Nevada Power Co., General and Refunding Mortgage Notes, Series M, 5.95% 2016
     5,975       6,339  
Nevada Power Co., General and Refunding Mortgage Notes, Series S, 6.50% 2018
     10,025       10,781  
Nevada Power Co., General and Refunding Mortgage Notes, Series V, 7.125% 2019  
     2,500       2,796  
Abu Dhabi National Energy Co. PJSC (TAQA) 5.62% 20122
    3,060       3,120  
Abu Dhabi National Energy Co. PJSC (TAQA) 5.875% 20162
    1,475       1,425  
Abu Dhabi National Energy Co. PJSC (TAQA) 6.165% 20172
    12,000       11,450  
Abu Dhabi National Energy Co. PJSC (TAQA) 6.165% 2017
     2,700       2,576  
Abu Dhabi National Energy Co. PJSC (TAQA) 6.50% 20362
     11,110       10,153  
AES Corp. 9.375% 2010
     129       134  
AES Corp. 8.75% 20132
     624       643  
AES Corp. 7.75% 2015
     11,575       11,807  
AES Corp. 8.00% 2017
     10,000       10,313  
AES Corp. 8.00% 2020  
     3,350       3,425  
PSEG Power LLC 7.75% 2011
     16,410       17,565  
Public Service Electric and Gas Co., Series E, 5.30% 2018
     4,990       5,247  
PSEG Power LLC 8.625% 2031
     2,360       3,059  
Intergen Power 9.00% 20172
     23,450       24,564  
Ohio Power Co., Series H, 4.85% 2014
     5,965       6,238  
Ohio Power Co., Series K, 6.00% 2016
     15,000       15,924  
Southern California Gas Co., First Mortgage Bonds, Series II, 4.375% 2011
     5,000       5,147  
San Diego Gas & Electric Co., Series CCC, 5.30% 2015
     10,000       10,963  
San Diego Gas & Electric Co., Series DDD, 6.00% 2026
     5,000       5,287  
Virginia Electric and Power Co., Series 2003-A, 4.75% 2013
     6,000       6,282  
Virginia Electric and Power Co., Series B, 5.95% 2017
     10,000       10,853  
Virginia Electric and Power Co., Series A, 6.00% 2037
     1,250       1,299  
AmerenEnergy Generating Co., Series D, 8.35% 2010
     1,500       1,554  
Union Electric Co. 4.65% 2013
     3,000       3,081  
Ameren Corp. 8.875% 2014
     7,000       7,870  
Union Electric Co. 5.40% 2016
     5,750       5,924  
Northern States Power Co., First Mortgage Bonds, 5.25% 2018
     6,500       6,821  
Public Service Co. of Colorado 5.80% 2018  
     6,300       6,845  
Public Service Co. of Colorado 5.125% 2019  
     4,350       4,533  
Electricité de France SA 5.50% 20142
    1,300       1,415  
Electricité de France SA 6.50% 20192
     14,250       16,025  
Pacific Gas and Electric Co., First Mortgage Bonds, 4.20% 2011
     2,000       2,064  
Pacific Gas and Electric Co. 6.25% 2013
     1,550       1,727  
PG&E Corp. 5.75% 2014
     2,000       2,158  
Pacific Gas and Electric Co. 8.25% 2018
     4,000       4,892  
Pacific Gas and Electric Co., First Mortgage Bonds, 6.05% 2034
     4,000       4,190  
CenterPoint Energy Houston Electric, LLC, General Mortgage Bonds, Series U, 7.00% 2014
     9,900       11,282  
Old Dominion Electric Cooperative, Series 2003-A, 5.676% 20283
     10,687       10,555  
NRG Energy, Inc. 7.25% 2014
     4,200       4,263  
NRG Energy, Inc. 7.375% 2016
     5,500       5,521  
NRG Energy, Inc. 7.375% 2017
     700       704  
Duke Energy Corp., First and Refunding Mortgage Bonds, 4.50% 2010
     4,500       4,543  
Duke Energy Corp., First and Refunding Mortgage Bonds, 5.30% 2015
     5,000       5,459  
Commonwealth Edison Co., First Mortgage Bonds, Series 105, 5.40% 2011
     9,000       9,620  
Empresa Nacional de Electricidad SA 8.35% 2013
     5,000       5,797  
Empresa Nacional de Electricidad SA 8.625% 2015
     3,000       3,564  
SP PowerAssets Ltd. 5.00% 20132
     8,000       8,468  
Alabama Power Co., Series R, 4.70% 2010
     2,250       2,326  
Alabama Power Co., Series 2007-D, 4.85% 2012
     1,550       1,661  
Alabama Power Co., Series 2008-B, 5.80% 2013
     4,000       4,387  
Kern River Funding Corp. 4.893% 20182,3
     7,365       7,359  
Florida Power & Light Co. 4.85% 2013
     5,000       5,297  
Korea East-West Power Co., Ltd. 4.875% 20112
     5,000       5,052  
Enersis SA 7.375% 2014
     3,000       3,350  
Tri-State Generation and Transmission Assn. Inc., Pass Through Trust, Series 2003-A, 6.04% 20182,3
     2,667       2,676  
              1,220,331  
                 
HEALTH CARE — 2.73%
                
Pharmaceuticals, biotechnology & life sciences — 1.53%
                
Roche Holdings Inc. 5.00% 20142
    45,250       48,597  
Roche Holdings Inc. 6.00% 20192
     87,750       96,939  
Roche Holdings Inc. 7.00% 20392
    11,060       13,445  
Schering-Plough Corp. 5.30% 20131
     14,559       16,015  
Schering-Plough Corp. 5.375% 2014
   € 13,155       20,623  
Merck & Co., Inc. 4.00% 2015
   $ 5,000       5,221  
Schering-Plough Corp. 6.00% 2017
     49,240       54,778  
Merck & Co., Inc. 5.00% 2019
     27,380       28,514  
Pfizer Inc. 4.45% 2012
     11,040       11,683  
Pfizer Inc. 5.35% 2015
     5,000       5,471  
Wyeth 5.50% 2016
     15,000       16,144  
Pfizer Inc. 6.20% 2019
     55,870       62,217  
Biogen Idec Inc. 6.00% 2013
     36,525       38,821  
Biogen Idec Inc. 6.875% 2018
     27,000       29,107  
GlaxoSmithKline Capital Inc. 4.85% 2013
     20,000       21,486  
GlaxoSmithKline Capital Inc. 5.65% 2018
     15,000       16,206  
GlaxoSmithKline Capital Inc. 6.375% 2038
     15,000       16,675  
Abbott Laboratories 5.125% 2019  
     29,150       30,546  
Abbott Laboratories 6.00% 2039  
     6,040       6,389  
Novartis Capital Corp. 4.125% 2014
     13,375       14,073  
Novartis Securities Investment Ltd. 5.125% 2019
     12,530       13,187  
Elan Finance PLC and Elan Finance Corp. 4.273% 20111
    1,015       959  
Elan Finance PLC and Elan Finance Corp. 4.381% 20131
     5,135       4,403  
Elan Finance PLC and Elan Finance Corp. 8.875% 2013
     11,010       11,010  
Elan Finance PLC and Elan Finance Corp. 8.75% 20162
     5,850       5,616  
AstraZeneca PLC 5.40% 2012
     12,000       13,117  
Quintiles Transnational 9.50% 20141,2,6
     1,980       1,995  
              603,237  
                 
Health care equipment & services — 1.20%
                
Cardinal Health, Inc. 5.50% 2013
     14,535       15,461  
Cardinal Health, Inc. 4.00% 2015
     5,500       5,403  
Cardinal Health, Inc. 5.80% 2016
     12,509       12,600  
Cardinal Health, Inc. 5.85% 2017
     23,365       23,633  
Allegiance Corp. 7.00% 2026
     9,635       9,761  
Express Scripts Inc. 5.25% 2012  
     17,105       18,186  
Express Scripts Inc. 6.25% 2014  
     28,133       30,727  
HCA Inc., Term Loan B1, 2.501% 20131,3,4
     4,262       4,088  
HCA Inc. 9.125% 2014
     695       735  
HCA Inc. 9.25% 2016
     775       834  
HCA Inc. 9.625% 20161,6
     957       1,038  
HCA Inc. 8.50% 20192
    25,785       27,912  
HCA Inc. 7.875% 20202
     9,190       9,592  
Coventry Health Care, Inc. 5.875% 2012
     1,000       1,015  
Coventry Health Care, Inc. 6.30% 2014
     32,960       32,270  
Coventry Health Care, Inc. 5.95% 2017
     11,440       10,388  
Hospira, Inc. 5.90% 2014
     4,510       4,891  
Hospira, Inc. 6.40% 2015
     2,800       3,103  
Hospira, Inc. 6.05% 2017
     32,765       34,342  
Tenet Healthcare Corp. 7.375% 2013
     7,945       8,005  
Tenet Healthcare Corp. 9.25% 2015
     7,170       7,672  
Tenet Healthcare Corp. 8.875% 20192
    24,385       26,458  
Boston Scientific Corp. 5.45% 2014
     1,565       1,651  
Boston Scientific Corp. 4.50% 2015  
     22,780       22,852  
Boston Scientific Corp. 5.125% 2017
     1,190       1,193  
Boston Scientific Corp. 6.00% 2020  
     13,360       13,676  
Boston Scientific Corp. 7.00% 2035
     845       833  
Boston Scientific Corp. 7.375% 2040  
     75       81  
UnitedHealth Group Inc. 5.25% 2011
     2,463       2,553  
UnitedHealth Group Inc. 6.00% 2017
     24,920       26,119  
PTS Acquisition Corp. 10.25% 20151,6
    23,511       21,336  
Aetna Inc. 5.75% 2011
     17,500       18,359  
VWR Funding, Inc. 11.25% 20151,6
     16,179       16,907  
Bausch & Lomb Inc. 9.875% 2015  
     13,625       14,442  
HealthSouth Corp. 10.75% 2016
     10,980       11,996  
Surgical Care Affiliates, Inc. 9.625% 20151,2,6
     3,747       3,466  
Surgical Care Affiliates, Inc. 10.00% 20172
    7,845       7,257  
WellPoint, Inc. 5.00% 2011
     1,000       1,034  
WellPoint, Inc. 5.00% 2014
     810       844  
WellPoint, Inc. 5.25% 2016
     6,455       6,524  
Humana Inc. 6.45% 2016
     7,187       7,274  
Team Finance LLC and Health Finance Corp. 11.25% 2013
     3,525       3,701  
Viant Holdings Inc. 10.125% 20172
    2,929       2,929  
Symbion Inc. 11.75% 20151,6
     2,474       1,880  
United Surgical Partners International Inc. 9.25% 20171,6
     820       840  
CHS/Community Health Systems, Inc. 8.875% 2015
     45       47  
              475,908  
                 
CONSUMER STAPLES — 1.63%
                
Food & staples retailing — 1.05%
                
CVS Caremark Corp. 0.556% 20101
     5,000       5,003  
CVS Corp. 6.117% 20132,3
     715       756  
CVS Caremark Corp. 6.60% 2019  
     28,973       31,760  
CVS Caremark Corp. 5.789% 20262,3
     14,077       13,153  
CVS Caremark Corp. 6.036% 20283
    22,165       21,034  
CVS Caremark Corp. 6.943% 20303
     23,741       23,930  
CVS Caremark Corp. 6.125% 2039
     3,700       3,679  
Kroger Co. 5.00% 2013
     18,000       19,050  
Kroger Co. 7.50% 2014
     9,035       10,321  
Kroger Co. 6.40% 2017
     56,110       61,389  
Kroger Co. 6.15% 2020
     3,650       3,914  
Delhaize Group 5.875% 2014  
     6,850       7,364  
Delhaize Group 6.50% 2017
     26,205       28,502  
Delhaize America, Inc. 9.00% 2031
     6,850       8,794  
Safeway Inc. 6.25% 2014
     3,725       4,095  
Safeway Inc. 6.35% 2017
     20,000       21,922  
Safeway Inc. 5.00% 2019  
     15,000       14,903  
Safeway Inc. 7.45% 2027
     2,170       2,468  
SUPERVALU INC. 7.50% 2012
     365       378  
Albertson’s, Inc. 7.25% 2013
     3,950       4,019  
SUPERVALU INC. 7.50% 2014
     830       844  
SUPERVALU INC. 8.00% 2016  
     20,525       20,935  
Albertson’s, Inc. 8.00% 2031
     3,700       3,376  
Tesco PLC 5.50% 20172
     25,325       26,696  
Wal-Mart Stores, Inc. 5.375% 2017
     4,500       4,849  
Wal-Mart Stores, Inc. 5.80% 2018
     12,800       14,228  
Wal-Mart Stores, Inc. 5.25% 2035
     3,800       3,750  
Stater Bros. Holdings Inc. 8.125% 2012
     9,160       9,297  
Stater Bros. Holdings Inc. 7.75% 2015
     12,025       12,265  
Duane Reade Inc. 11.75% 2015
     12,687       13,829  
Tops Markets 10.125% 20152
     9,075       9,393  
Walgreen Co. 4.875% 2013
     5,000       5,374  
Costco Wholesale Corp. 5.30% 2012
     3,000       3,238  
Ingles Markets, Inc. 8.875% 2017
     2,550       2,665  
              417,173  
                 
Food, beverage & tobacco — 0.58%
                
Anheuser-Busch InBev NV 7.20% 20142
    25,000       28,379  
Anheuser-Busch InBev NV 4.125% 20152
    37,250       37,865  
Anheuser-Busch InBev NV 8.625% 2017
   € 2,500       4,530  
Anheuser-Busch InBev NV 6.875% 20192
  $ 7,740       8,657  
Anheuser-Busch InBev NV 7.75% 20192
     18,367       21,540  
Anheuser-Busch InBev NV 5.375% 20202
     17,600       17,991  
Altria Group, Inc. 9.70% 2018
     7,925       9,812  
Altria Group, Inc. 9.25% 2019
     27,800       33,934  
British American Tobacco International Finance PLC 9.50% 20182
     13,000       16,535  
Smithfield Foods, Inc., Series B, 7.75% 2013
     150       146  
Smithfield Foods, Inc. 10.00% 20142
    8,150       8,883  
Smithfield Foods, Inc. 7.75% 2017
     3,825       3,548  
Constellation Brands, Inc. 8.375% 2014
     2,075       2,220  
Constellation Brands, Inc. 7.25% 2017
     9,945       10,131  
Coca-Cola Co. 4.875% 2019
     7,500       7,827  
Tyson Foods, Inc. 10.50% 2014
     4,750       5,451  
Tyson Foods, Inc. 7.85% 20161
     1,000       1,030  
CEDC Finance Corp. 9.125% 20162
     3,500       3,623  
H.J Heinz Co. 7.125% 20392
    2,600       2,949  
Diageo Capital PLC 5.75% 2017
     1,437       1,549  
Cott Beverages Inc. 8.375% 20172
     1,000       1,035  
Dole Food Co., Inc. 8.875% 2011
     104       105  
              227,740  
                 
Household & personal products — 0.00%
                
Elizabeth Arden, Inc. 7.75% 2014
     1,625       1,609  
                 
                 
MATERIALS — 1.30%
                
Rio Tinto Finance (USA) Ltd. 5.875% 2013
     50,500       54,535  
Rio Tinto Finance (USA) Ltd. 8.95% 2014
     7,465       8,954  
Rio Tinto Finance (USA) Ltd. 9.00% 2019
     24,420       30,957  
Rio Tinto Finance (USA) Ltd. 7.125% 2028
     2,000       2,270  
Dow Chemical Co. 7.60% 2014
     26,400       30,069  
Dow Chemical Co. 5.70% 2018
     1,700       1,730  
Dow Chemical Co. 8.55% 2019
     30,170       36,057  
Dow Chemical Co. 9.40% 2039
     1,350       1,790  
International Paper Co. 7.40% 2014
     32,610       36,357  
International Paper Co. 7.95% 2018
     7,400       8,549  
International Paper Co. 9.375% 2019
     2,470       3,041  
International Paper Co. 7.50% 2021
     4,330       4,861  
International Paper Co. 7.30% 2039
     5,465       5,816  
Freeport-McMoRan Copper & Gold Inc. 3.881% 20151
     10,011       9,967  
Freeport-McMoRan Copper & Gold Inc. 8.25% 2015
     6,350       6,929  
Freeport-McMoRan Copper & Gold Inc. 8.375% 2017
     30,070       32,972  
BHP Billiton Finance (USA) Ltd. 5.50% 2014
     18,295       20,086  
BHP Billiton Finance (USA) Ltd. 6.50% 2019
     7,500       8,618  
Nalco Co. 8.875% 2013
     5,650       5,848  
Nalco Finance Holdings LLC and Nalco Finance Holdings Inc. 9.00% 2014
    2,254       2,310  
Nalco Co., Term Loan B, 5.75% 20161,3,4
     736       745  
Nalco Co. 8.25% 20172
     15,000       16,013  
CRH America Inc. 6.95% 2012  
     1,590       1,723  
CRH Finance BV 7.375% 20141
   € 4,394       7,161  
CRH America, Inc. 6.00% 2016
   $ 980       1,025  
CRH America, Inc. 8.125% 2018
     12,275       14,339  
Owens-Brockway Glass Container Inc. 8.25% 2013
     2,900       2,994  
Owens-Brockway Glass Container Inc. 7.375% 2016
     10,545       10,940  
Georgia Gulf Corp. 9.00% 20172
     12,975       13,170  
Smurfit Kappa Acquisition 7.25% 2017  
   € 2,200       3,108  
Smurfit Kappa Acquisition 7.75% 2019  
     6,570       9,310  
Smurfit Capital Funding PLC 7.50% 2025
   $ 800       686  
Reynolds Group 7.75% 20162
     10,985       11,287  
CEMEX Finance LLC 9.50% 20162
     9,450       9,946  
C5 Capital (SPV) Ltd. 6.196% (undated)1,2  
     100       69  
C8 Capital (SPV) Ltd. 6.64% (undated)1
    350       243  
C10 Capital (SPV) Ltd. 6.722% (undated)1,2
    950       671  
C10 Capital (SPV) Ltd. 6.722% (undated)1
     100       71  
Georgia-Pacific Corp. 8.125% 2011
     2,065       2,179  
Georgia-Pacific LLC 8.25% 20162
    7,800       8,307  
Teck Resources Ltd. 9.75% 2014  
     8,000       9,270  
Ball Corp. 7.125% 2016  
     4,990       5,140  
Ball Corp. 7.375% 2019  
     3,480       3,593  
Gerdau Holdings Inc. 7.00% 20202
    7,500       7,744  
Plastipak Holdings, Inc. 8.50% 20152
    7,165       7,389  
Holcim Ltd. 6.00% 20192
    3,525       3,676  
Holcim Ltd. 6.875% 20392
     3,500       3,688  
Lafarge 6.15% 2011
     5,690       5,932  
Newpage Corp. 11.375% 20142
    5,195       5,273  
Praxair, Inc. 4.375% 2014
     1,850       1,953  
Praxair, Inc. 4.625% 2015
     2,500       2,662  
Rockwood Specialties Group, Inc. 7.50% 2014
     3,345       3,395  
Rockwood Specialties Group, Inc. 7.625% 2014
   € 500       718  
Arbermarle Corp. 5.10% 2015
   $ 3,656       3,649  
Graphic Packaging International, Inc. 9.50% 2017
     3,415       3,637  
Airgas, Inc. 7.125% 20182
     3,250       3,400  
Yara International ASA 7.875% 20192
    2,675       3,059  
Associated Materials Inc. 9.875% 20162
    2,250       2,385  
E.I. du Pont de Nemours and Co. 5.25% 2016
     2,000       2,117  
ICI Wilmington, Inc. 5.625% 2013
     2,000       2,089  
Stora Enso Oyj 6.404% 20162
    2,000       1,798  
Potash Corp. of Saskatchewan Inc. 5.875% 2036
     1,600       1,580  
Lubrizol Corp. 8.875% 2019
     1,000       1,245  
Solutia Inc. 8.75% 2017  
     610       638  
Rock-Tenn Co. 9.25% 20162
     515       562  
Neenah Paper, Inc. 7.375% 2014
     560       514  
              512,809  
                 
INFORMATION TECHNOLOGY — 1.08%
                
Semiconductors & semiconductor equipment — 0.57%
                
NXP BV and NXP Funding LLC 3.034% 20131
    17,595       14,670  
NXP BV and NXP Funding LLC 3.492% 20131
  € 6,075       6,875  
NXP BV and NXP Funding LLC 10.00% 20139
   $ 6,882       7,045  
NXP BV and NXP Funding LLC 7.875% 2014
     25,085       22,890  
NXP BV and NXP Funding LLC 8.625% 2015
   € 11,375       12,139  
NXP BV and NXP Funding LLC 9.50% 2015
   $ 20,170       17,296  
Freescale Semiconductor, Inc., Term Loan B, 1.985% 20131,3,4
     5,280       4,634  
Freescale Semiconductor, Inc. 8.875% 2014
     21,150       19,511  
Freescale Semiconductor, Inc. 9.875% 20141,6
     19,440       17,277  
Freescale Semiconductor, Inc., Term Loan B, 12.50% 20143,4
    18,575       19,156  
Freescale Semiconductor, Inc. 10.125% 2016
     10,792       8,741  
KLA-Tencor Corp. 6.90% 2018
     43,175       45,498  
National Semiconductor Corp. 6.15% 2012
     3,700       3,878  
National Semiconductor Corp. 6.60% 2017
     23,000       23,595  
Advanced Micro Devices, Inc. 8.125% 20172
     3,075       3,079  
              226,284  
                 
Technology hardware & equipment — 0.30%
                
Sanmina-SCI Corp. 6.75% 2013
     15,675       15,538  
Sanmina-SCI Corp. 3.004% 20141,2
     16,346       15,079  
Sanmina-SCI Corp. 8.125% 2016
     12,490       12,521  
Electronic Data Systems Corp., Series B, 6.00% 20131
     28,625       31,668  
Electronic Data Systems Corp. 7.45% 2029
     4,520       5,363  
Jabil Circuit, Inc. 8.25% 2018
     16,975       18,248  
Cisco Systems, Inc. 2.90% 2014
     10,000       9,993  
Cisco Systems, Inc. 5.50% 2016
     2,000       2,199  
Cisco Systems, Inc. 4.95% 2019
     3,500       3,594  
Cisco Systems, Inc. 4.45% 2020
     2,500       2,458  
Sensata Technologies BV 8.00% 20141
     2,475       2,438  
              119,099  
                 
Software & services — 0.21%
                
First Data Corp., Term Loan B2, 2.999% 20141,3,4
     17,402       15,507  
First Data Corp. 9.875% 2015  
     10,975       10,289  
First Data Corp. 9.875% 2015
     2,975       2,789  
SunGard Data Systems Inc. 9.125% 2013
     19,613       20,201  
Oracle Corp. 3.75% 2014  
     16,500       17,043  
Serena Software, Inc. 10.375% 2016
     11,262       10,882  
Ceridian Corp. 11.25% 2015
     7,450       7,143  
              83,854  
                 
Total corporate bonds & notes
            13,647,230  
                 
                 
BONDS & NOTES OF U.S. GOVERNMENT & GOVERNMENT AGENCIES — 28.92%
                
U.S. Treasury 0.875% 20108,10  
     26,701       26,795  
U.S. Treasury 2.00% 2010
     30,000       30,359  
U.S. Treasury 0.875% 2011
     30,000       30,039  
U.S. Treasury 1.00% 2011
     129,450       129,660  
U.S. Treasury 1.125% 2011
     262,675       262,793  
U.S. Treasury 1.125% 2011
     146,100       146,705  
U.S. Treasury 1.75% 2011
     177,959       180,221  
U.S. Treasury 2.375% 20118,10  
     25,975       26,779  
U.S. Treasury 4.50% 2011
     27,475       28,682  
U.S. Treasury 4.625% 2011
     133,500       142,657  
U.S. Treasury 4.875% 2011
     20,000       21,068  
U.S. Treasury 4.875% 2011
     10,000       10,621  
U.S. Treasury 5.125% 2011
     20,000       21,255  
U.S. Treasury 1.375% 2012
     70,525       70,026  
U.S. Treasury 1.50% 2012
     125,815       126,026  
U.S. Treasury 1.75% 2012
     50,000       50,330  
U.S. Treasury 3.00% 20128,10
     17,132       18,463  
U.S. Treasury 4.25% 2012
     100,000       107,328  
U.S. Treasury 4.875% 2012
     54,825       59,001  
U.S. Treasury 2.00% 2013
     220,540       219,402  
U.S. Treasury 1.875% 20138,10
    58,849       62,108  
U.S. Treasury 2.75% 2013
     132,160       135,377  
U.S. Treasury 2.75% 2013
     50,000       51,524  
U.S. Treasury 3.125% 2013
     50,000       51,969  
U.S. Treasury 3.375% 2013
     175,260       183,995  
U.S. Treasury 3.50% 2013
     50,805       53,547  
U.S. Treasury 3.625% 2013
     105,400       111,621  
U.S. Treasury 3.875% 2013
     75,000       79,895  
U.S. Treasury 4.25% 2013
     654,036       705,953  
U.S. Treasury 1.75% 2014
     461,170       452,505  
U.S. Treasury 1.75% 2014
     89,355       87,253  
U.S. Treasury 1.875% 2014
     158,400       155,813  
U.S. Treasury 1.875% 2014
     100,000       97,961  
U.S. Treasury 2.25% 2014
     111,500       110,760  
U.S. Treasury 2.00% 20148,10
    11,468       12,176  
U.S. Treasury 2.00% 20148,10
     144,514       153,177  
U.S. Treasury 2.625% 2014
     204,800       205,871  
U.S. Treasury 4.00% 2014
     12,800       13,690  
U.S. Treasury 4.25% 2014
     14,150       15,246  
U.S. Treasury 1.625% 20158,10
     77,776       81,041  
U.S. Treasury 4.00% 2015
     241,630       256,874  
U.S. Treasury 4.125% 2015
     155,380       165,716  
U.S. Treasury 4.25% 2015
     154,000       164,876  
U.S. Treasury 11.25% 2015
     133,500       188,423  
U.S. Treasury 2.375% 2016
     237,400       227,180  
U.S. Treasury 2.625% 2016
     389,250       377,269  
U.S. Treasury 2.625% 2016
     50,000       48,656  
U.S. Treasury 2.75% 2016
     15,000       14,443  
U.S. Treasury 3.00% 2016
     232,585       228,787  
U.S. Treasury 3.125% 2016
     86,750       85,673  
U.S. Treasury 3.25% 2016
     130,915       131,478  
U.S. Treasury 3.25% 2016
     100,750       100,946  
U.S. Treasury 3.25% 2016
     21,300       21,365  
U.S. Treasury 5.125% 2016
     56,500       63,024  
U.S. Treasury 7.50% 2016
     15,250       19,228  
U.S. Treasury 2.375% 20178,10
     10,719       11,599  
U.S. Treasury 4.50% 2017
     153,250       163,893  
U.S. Treasury 4.625% 2017
     92,375       99,786  
U.S. Treasury 8.75% 2017
     25,000       33,811  
U.S. Treasury 8.875% 2017
     67,320       91,808  
U.S. Treasury 3.50% 2018
     749,735       743,730  
U.S. Treasury 3.75% 2018
     610,825       610,898  
U.S. Treasury 3.875% 2018
     107,500       109,179  
U.S. Treasury 4.00% 2018
     50,000       51,080  
U.S. Treasury 2.75% 2019
     22,474       20,696  
U.S. Treasury 3.125% 2019
     797,090       754,964  
U.S. Treasury 3.375% 2019
     105,600       101,590  
U.S. Treasury 3.625% 2019
     148,220       145,748  
U.S. Treasury 8.125% 2019
     20,000       26,929  
U.S. Treasury 8.50% 2020
     31,900       44,226  
U.S. Treasury 7.125% 2023
     25,000       32,082  
U.S. Treasury 7.50% 2024
     18,575       24,846  
U.S. Treasury 6.875% 2025
     93,610       118,877  
U.S. Treasury 6.00% 2026
     39,000       45,648  
U.S. Treasury 6.125% 2027
     18,475       22,020  
U.S. Treasury 6.25% 2030
     8,250       10,084  
U.S. Treasury 4.50% 2036
     286,367       282,249  
U.S. Treasury 4.375% 2038
     129,610       124,506  
U.S. Treasury 3.50% 2039
     17,265       14,152  
U.S. Treasury 4.25% 2039
     14,280       13,403  
U.S. Treasury 4.375% 2039
     5,000       4,787  
U.S. Treasury 4.50% 2039
     48,500       47,424  
U.S. Treasury Principal Strip 0% 2039
     29,000       7,189  
Federal Home Loan Bank 1.75% 2012
     69,000       68,997  
Federal Home Loan Bank 4.50% 2012
     50,000       53,706  
Federal Home Loan Bank 3.625% 2013
     93,000       97,288  
Federal Home Loan Bank 5.375% 2016
     25,000       27,604  
Freddie Mac 3.125% 2010
     73,990       74,197  
Freddie Mac 5.25% 2011
     20,000       21,275  
Freddie Mac 1.75% 2012
     60,000       60,269  
Freddie Mac 2.125% 2012
     20,000       20,176  
Freddie Mac 2.50% 2014
     37,000       36,822  
Freddie Mac 5.50% 2016
     30,000       33,458  
United States Government Agency-Guaranteed (FDIC insured), Citigroup Inc. 1.25% 2011  
     10,000       10,008  
United States Government Agency-Guaranteed (FDIC insured), Citigroup Inc. 0.253% 20121
    11,020       11,034  
United States Government Agency-Guaranteed (FDIC insured), Citigroup Inc. 0.414% 20121
    50,000       49,996  
United States Government Agency-Guaranteed (FDIC insured), Citigroup Inc. 1.875% 2012  
     20,000       20,115  
United States Government Agency-Guaranteed (FDIC insured), Citigroup Inc. 1.875% 2012  
     20,000       19,979  
United States Government Agency-Guaranteed (FDIC insured), Citigroup Inc. 1.875% 2012  
     10,000       10,047  
United States Government Agency-Guaranteed (FDIC insured), Citigroup Inc. 2.125% 2012  
     11,000       11,107  
United States Government Agency-Guaranteed (FDIC insured), Citigroup Inc. 2.25% 2012  
     12,550       12,668  
Fannie Mae 1.00% 2011
     15,000       14,928  
Fannie Mae 1.75% 2011
     30,000       30,312  
Fannie Mae 6.125% 2012
     20,000       22,026  
Fannie Mae 2.50% 2014
     17,250       17,170  
Fannie Mae 2.625% 2014
     12,000       11,886  
Fannie Mae 3.00% 2014
     13,500       13,626  
Fannie Mae 5.375% 2017
     17,000       18,795  
United States Government Agency-Guaranteed (FDIC insured), General Electric Capital Corp., Series G, 1.625% 2011
     8,250       8,325  
United States Government Agency-Guaranteed (FDIC insured), General Electric Capital Corp., Series G, 1.80% 2011
     9,665       9,754  
United States Government Agency-Guaranteed (FDIC insured), General Electric Capital Corp., Series G, 2.125% 2012
     40,000       40,162  
United States Government Agency-Guaranteed (FDIC insured), General Electric Capital Corp., Series G, 2.25% 2012
     29,250       29,674  
CoBank ACB 7.875% 20182
     22,115       23,999  
CoBank ACB 0.854% 20221,2  
     46,470       34,611  
United States Government Agency-Guaranteed (FDIC insured), GMAC LLC 1.75% 2012  
     15,000       14,921  
United States Government Agency-Guaranteed (FDIC insured), GMAC LLC 2.20% 2012
     20,000       20,118  
United States Government Agency-Guaranteed (FDIC insured), Goldman Sachs Group, Inc. 3.25% 2012
     25,000       25,952  
United States Government Agency-Guaranteed (FDIC insured), State Street Corp. 2.15% 2012
     20,000       20,200  
United States Government Agency-Guaranteed (FDIC insured), Bank of America Corp. 2.375% 2012
     17,500       17,808  
Federal Agricultural Mortgage Corp. 4.875% 20112
    10,000       10,460  
Federal Agricultural Mortgage Corp. 5.125% 20172
     5,000       5,226  
Federal Farm Credit Banks, Consolidated Systemwide Designated Bonds, 2.625% 2014
     5,000       4,961  
Federal Farm Credit Banks, Consolidated Systemwide Designated Bonds, 3.00% 2014
     10,000       10,063  
United States Government Agency-Guaranteed (FDIC insured), John Deere Capital Corp. 2.875% 2012  
     10,000       10,295  
United States Government Agency-Guaranteed (FDIC insured), Sovereign Bancorp, Inc. 2.75% 2012  
     7,500       7,693  
United States Agency for International Development, Republic of Egypt 4.45% 2015
     5,000       5,286  
Private Export Funding Corp., Series W, 5.00% 2016
     3,400       3,622  
              11,451,453  
                 
MORTGAGE-BACKED OBLIGATIONS — 23.78%
                
FEDERAL AGENCY MORTGAGE-BACKED OBLIGATIONS3 — 17.76%
                
Fannie Mae 4.89% 2012   
     25,000       26,262  
Fannie Mae, Series 2002-15, Class PG, 6.00% 2017   
     5,570       5,971  
Fannie Mae 4.00% 2019   
     25,995       26,605  
Fannie Mae 4.50% 2019   
     16,651       17,320  
Fannie Mae 4.50% 2019   
     15,861       16,513  
Fannie Mae 5.50% 2019   
     153       164  
Fannie Mae 5.50% 2020   
     12,891       13,763  
Fannie Mae 5.50% 2020   
     1,459       1,557  
Fannie Mae 11.236% 20201
     209       238  
Fannie Mae 4.50% 2021   
     65,874       68,334  
Fannie Mae, Series 2003-48, Class TJ, 4.50% 2022   
     18,005       18,650  
Fannie Mae 5.50% 2022   
     1,746       1,850  
Fannie Mae 5.50% 2022   
     830       879  
Fannie Mae 4.50% 2023   
     21,690       22,363  
Fannie Mae 4.50% 2023   
     15,678       16,161  
Fannie Mae 5.00% 2023   
     15,426       16,141  
Fannie Mae 5.00% 2023   
     15,137       15,838  
Fannie Mae 5.00% 2023   
     12,920       13,518  
Fannie Mae 5.00% 2023   
     10,967       11,475  
Fannie Mae 5.00% 2023   
     10,412       10,894  
Fannie Mae 5.00% 2023   
     9,461       9,899  
Fannie Mae 5.00% 2023   
     7,733       8,091  
Fannie Mae 5.00% 2023   
     6,924       7,260  
Fannie Mae 5.50% 2023   
     39,455       41,853  
Fannie Mae 5.50% 2023   
     34,295       36,444  
Fannie Mae 5.50% 2023   
     3,962       4,195  
Fannie Mae 5.50% 2023   
     2,567       2,720  
Fannie Mae 5.50% 2023   
     1,993       2,111  
Fannie Mae 6.00% 2023   
     3,841       4,115  
Fannie Mae 4.00% 2024   
     129,874       130,894  
Fannie Mae 4.00% 2024   
     48,418       48,787  
Fannie Mae 4.00% 2024   
     48,216       48,583  
Fannie Mae 4.00% 2024   
     46,495       46,849  
Fannie Mae 4.00% 2024   
     45,706       46,054  
Fannie Mae 4.00% 2024   
     35,836       36,109  
Fannie Mae 4.00% 2024   
     23,693       23,874  
Fannie Mae 4.00% 2024   
     23,666       23,846  
Fannie Mae 4.00% 2024   
     23,486       23,671  
Fannie Mae 4.00% 2024   
     11,436       11,523  
Fannie Mae 4.50% 2024   
     130,431       134,405  
Fannie Mae 4.50% 2024   
     52,153       53,724  
Fannie Mae 4.50% 2024   
     50,580       52,121  
Fannie Mae 4.50% 2024   
     47,569       49,018  
Fannie Mae 4.50% 2024   
     45,962       47,347  
Fannie Mae 4.50% 2024   
     45,772       47,167  
Fannie Mae 4.50% 2024   
     39,446       40,648  
Fannie Mae 4.50% 2024   
     37,899       39,040  
Fannie Mae 4.50% 2024   
     30,567       31,488  
Fannie Mae 4.50% 2024   
     27,750       28,586  
Fannie Mae 4.50% 2024   
     23,675       24,410  
Fannie Mae 4.50% 2024   
     20,130       20,736  
Fannie Mae 4.50% 2024   
     17,570       18,100  
Fannie Mae 4.50% 2024   
     16,469       16,965  
Fannie Mae 4.50% 2024   
     16,071       16,555  
Fannie Mae 4.50% 2024   
     13,537       13,945  
Fannie Mae 4.50% 2024   
     8,624       8,884  
Fannie Mae 4.50% 2024   
     8,349       8,601  
Fannie Mae 4.50% 2024   
     8,217       8,465  
Fannie Mae 4.50% 2024   
     7,868       8,105  
Fannie Mae 4.50% 2024   
     7,353       7,575  
Fannie Mae 4.50% 2024   
     7,328       7,549  
Fannie Mae 4.50% 2024   
     5,854       6,031  
Fannie Mae 4.50% 2024   
     4,909       5,057  
Fannie Mae 4.50% 2024   
     4,399       4,531  
Fannie Mae 5.00% 2024   
     45,206       47,300  
Fannie Mae 5.50% 2024   
     36,155       38,353  
Fannie Mae 5.50% 2024   
     25,371       26,905  
Fannie Mae 6.00% 2024   
     10,400       11,086  
Fannie Mae, Series 2001-4, Class GA, 10.037% 20251   
     394       450  
Fannie Mae, Series 2001-4, Class NA, 11.829% 20251   
     1,530       1,725  
Fannie Mae 5.123% 20261
     484       504  
Fannie Mae 6.00% 2026   
     24,792       26,428  
Fannie Mae 5.50% 2027   
     18,182       19,177  
Fannie Mae 6.00% 2028   
     7,254       7,705  
Fannie Mae 6.00% 2028   
     6,889       7,343  
Fannie Mae, Series 1998-W5, Class B3, 6.50% 2028   
     1,809       1,377  
Fannie Mae, Series 2002-W7, Class A-5, 7.50% 2029   
     590       666  
Fannie Mae, Series 2001-25, Class ZA, 6.50% 2031   
     4,904       5,266  
Fannie Mae, Series 2001-20, Class E, 9.622% 20311
    69       78  
Fannie Mae 6.50% 2032   
     581       623  
Fannie Mae 5.50% 2033   
     26,138       27,486  
Fannie Mae 6.50% 2034   
     869       931  
Fannie Mae 4.603% 20351    
     9,383       9,735  
Fannie Mae 5.50% 2035   
     33,850       35,595  
Fannie Mae, Series 2005-68, Class PG, 5.50% 2035   
     5,572       5,935  
Fannie Mae 6.50% 2035   
     8,722       9,422  
Fannie Mae, Series 2006-51, Class PO, principal only, 0% 2036   
     7,971       6,100  
Fannie Mae, Series 2006-32, Class OA, principal only, 0% 2036   
     7,354       6,024  
Fannie Mae, Series 2006-96, Class OP, principal only, 0% 2036   
     1,674       1,359  
Fannie Mae 5.00% 2036   
     107,693       110,726  
Fannie Mae, Series 2006-101, Class PC, 5.50% 2036   
     6,833       7,201  
Fannie Mae 6.00% 2036   
     56,074       59,570  
Fannie Mae 6.00% 2036   
     20,804       22,147  
Fannie Mae, Series 2006-106, Class HG, 6.00% 2036   
     18,596       19,865  
Fannie Mae, Series 2006-43, Class PX, 6.00% 2036   
     16,603       17,685  
Fannie Mae 6.00% 2036   
     9,954       10,589  
Fannie Mae 6.00% 2036   
     6,713       7,145  
Fannie Mae 6.50% 2036   
     22,212       23,842  
Fannie Mae 6.50% 2036   
     21,485       23,081  
Fannie Mae 6.50% 2036   
     12,833       13,773  
Fannie Mae 6.50% 2036   
     7,437       8,039  
Fannie Mae 6.50% 2036   
     4,725       5,076  
Fannie Mae 7.00% 2036   
     1,721       1,886  
Fannie Mae 7.00% 2036   
     1,374       1,508  
Fannie Mae 7.50% 2036   
     1,307       1,423  
Fannie Mae 7.50% 2036   
     532       579  
Fannie Mae 8.00% 2036   
     2,294       2,517  
Fannie Mae 5.259% 20371    
     1,530       1,623  
Fannie Mae, Series 2007-40, Class PT, 5.50% 2037   
     27,360       28,958  
Fannie Mae 5.506% 20371   
     21,831       22,998  
Fannie Mae 5.61% 20371    
     34,976       36,878  
Fannie Mae 5.616% 20371    
     10,667       11,243  
Fannie Mae 5.684% 20371    
     16,677       17,582  
Fannie Mae 5.785% 20371    
     18,115       19,166  
Fannie Mae 5.967% 20371    
     26,879       28,432  
Fannie Mae 6.00% 2037   
     108,684       115,307  
Fannie Mae 6.00% 2037   
     72,294       76,725  
Fannie Mae 6.00% 2037   
     44,206       46,915  
Fannie Mae 6.00% 2037   
     41,387       43,949  
Fannie Mae 6.00% 2037   
     34,684       36,809  
Fannie Mae 6.00% 2037   
     29,194       30,973  
Fannie Mae 6.00% 2037   
     19,884       21,103  
Fannie Mae 6.00% 2037   
     11,478       12,189  
Fannie Mae 6.00% 2037   
     10,773       11,379  
Fannie Mae 6.00% 2037   
     7,568       7,994  
Fannie Mae, Series 2007-24, Class P, 6.00% 2037   
     3,786       4,046  
Fannie Mae 6.00% 2037   
     3,310       3,531  
Fannie Mae 6.083% 20371    
     17,032       17,948  
Fannie Mae 6.428% 20371    
     8,956       9,467  
Fannie Mae 6.50% 2037   
     31,179       33,447  
Fannie Mae 6.50% 2037   
     27,707       29,722  
Fannie Mae 6.50% 2037   
     23,224       24,913  
Fannie Mae 6.50% 2037   
     23,143       24,703  
Fannie Mae 6.50% 2037   
     20,318       21,709  
Fannie Mae 6.50% 2037   
     20,079       21,529  
Fannie Mae 6.50% 2037   
     15,085       16,174  
Fannie Mae 6.50% 2037   
     1,455       1,560  
Fannie Mae 6.646% 20371    
     10,670       11,250  
Fannie Mae 7.00% 2037   
     37,601       41,260  
Fannie Mae 7.00% 2037   
     29,699       32,366  
Fannie Mae 7.00% 2037   
     11,547       12,584  
Fannie Mae 7.00% 2037   
     11,536       12,572  
Fannie Mae 7.00% 2037   
     1,585       1,739  
Fannie Mae 7.00% 2037   
     1,516       1,664  
Fannie Mae 7.00% 2037   
     822       902  
Fannie Mae 7.00% 2037   
     655       719  
Fannie Mae 7.50% 2037   
     5,706       6,258  
Fannie Mae 7.50% 2037   
     3,342       3,638  
Fannie Mae 7.50% 2037   
     3,094       3,368  
Fannie Mae 7.50% 2037   
     2,818       3,068  
Fannie Mae 7.50% 2037   
     1,806       1,965  
Fannie Mae 7.50% 2037   
     1,701       1,852  
Fannie Mae 7.50% 2037   
     1,689       1,839  
Fannie Mae 7.50% 2037   
     1,511       1,644  
Fannie Mae 7.50% 2037   
     1,243       1,353  
Fannie Mae 7.50% 2037   
     1,197       1,303  
Fannie Mae 7.50% 2037   
     1,118       1,217  
Fannie Mae 7.50% 2037   
     1,069       1,164  
Fannie Mae 7.50% 2037   
     1,003       1,092  
Fannie Mae 7.50% 2037   
     913       994  
Fannie Mae 7.50% 2037   
     723       787  
Fannie Mae 7.50% 2037   
     571       621  
Fannie Mae 7.50% 2037   
     554       599  
Fannie Mae 7.50% 2037   
     493       540  
Fannie Mae 7.50% 2037   
     494       538  
Fannie Mae 7.50% 2037   
     399       435  
Fannie Mae 8.00% 2037   
     2,648       2,908  
Fannie Mae 8.00% 2037   
     2,140       2,302  
Fannie Mae 8.00% 2037   
     1,669       1,795  
Fannie Mae 8.00% 2037   
     1,488       1,650  
Fannie Mae 8.00% 2037   
     1,147       1,258  
Fannie Mae 5.00% 2038   
     16,665       17,124  
Fannie Mae 5.00% 2038   
     8,200       8,425  
Fannie Mae 5.013% 20381    
     15,274       16,041  
Fannie Mae 5.314% 20381    
     12,344       12,950  
Fannie Mae 5.50% 2038   
     293,956       308,088  
Fannie Mae 5.50% 2038   
     50,607       53,122  
Fannie Mae 5.50% 2038   
     40,472       42,433  
Fannie Mae 5.50% 2038   
     38,756       40,634  
Fannie Mae 5.50% 2038   
     38,148       39,981  
Fannie Mae 5.50% 2038   
     33,936       35,568  
Fannie Mae 5.50% 2038   
     33,687       35,360  
Fannie Mae 5.50% 2038   
     29,492       30,910  
Fannie Mae 5.50% 2038   
     20,490       21,585  
Fannie Mae 5.50% 2038   
     17,459       18,392  
Fannie Mae 5.50% 2038   
     13,911       14,580  
Fannie Mae 5.50% 2038   
     11,752       12,336  
Fannie Mae 5.50% 2038   
     9,178       9,619  
Fannie Mae 5.50% 2038   
     3,096       3,262  
Fannie Mae 5.551% 20381    
     2,255       2,358  
Fannie Mae 5.678% 20381    
     17,581       18,565  
Fannie Mae 5.737% 20381   
     24,939       26,283  
Fannie Mae 6.00% 2038   
     62,896       66,728  
Fannie Mae 6.00% 2038   
     34,783       36,915  
Fannie Mae 6.00% 2038   
     33,256       35,262  
Fannie Mae 6.00% 2038   
     27,177       28,833  
Fannie Mae 6.00% 2038   
     23,912       25,362  
Fannie Mae 6.00% 2038   
     23,769       25,211  
Fannie Mae 6.00% 2038   
     19,724       21,013  
Fannie Mae 6.00% 2038   
     16,944       17,977  
Fannie Mae 6.00% 2038   
     16,160       17,140  
Fannie Mae 6.00% 2038   
     10,651       11,300  
Fannie Mae 6.00% 2038   
     9,961       10,562  
Fannie Mae 6.00% 2038   
     9,092       9,640  
Fannie Mae 6.00% 2038   
     8,339       8,847  
Fannie Mae 6.00% 2038   
     7,124       7,558  
Fannie Mae 6.50% 2038   
     160,956       172,575  
Fannie Mae 6.50% 2038   
     39,561       42,415  
Fannie Mae 6.50% 2038   
     33,643       36,072  
Fannie Mae 6.50% 2038   
     17,958       19,254  
Fannie Mae 3.62% 20391    
     46,125       46,905  
Fannie Mae 3.625% 20391    
     43,499       44,235  
Fannie Mae 3.626% 20391    
     20,179       20,536  
Fannie Mae 3.65% 20391    
     34,572       35,151  
Fannie Mae 3.658% 20391   
     23,744       24,184  
Fannie Mae 3.695% 20391    
     37,121       37,828  
Fannie Mae 3.761% 20391    
     24,914       25,435  
Fannie Mae 3.762% 20391   
     9,557       9,760  
Fannie Mae 3.79% 20391    
     45,231       46,214  
Fannie Mae 3.809% 20391    
     13,042       13,321  
Fannie Mae 3.83% 20391    
     11,428       11,682  
Fannie Mae 3.85% 20391    
     10,256       10,493  
Fannie Mae 3.91% 20391    
     18,008       18,431  
Fannie Mae 3.912% 20391    
     8,319       8,523  
Fannie Mae 3.914% 20391
    9,591       9,878  
Fannie Mae 3.95% 20391    
     22,424       22,978  
Fannie Mae 3.951% 20391    
     9,457       9,699  
Fannie Mae 4.50% 2039   
     93,048       93,000  
Fannie Mae 4.50% 2039   
     23,764       23,754  
Fannie Mae 5.00% 2039   
     91,571       94,079  
Fannie Mae 5.00% 2039   
     48,146       49,465  
Fannie Mae 5.124% 20391    
     24,213       25,357  
Fannie Mae 5.50% 2039   
     29,757       31,183  
Fannie Mae 6.00% 2039   
     59,339       62,976  
Fannie Mae 6.00% 2039   
     44,658       47,367  
Fannie Mae 6.00% 2039   
     9,074       9,622  
Fannie Mae 6.00% 2039   
     8,728       9,258  
Fannie Mae 6.50% 2039   
     21,613       23,173  
Fannie Mae 3.619% 20401    
     34,426       34,991  
Fannie Mae, Series 2001-T10, Class A-1, 7.00% 2041   
     5,508       6,121  
Fannie Mae, Series 2001-50, Class BA, 7.00% 2041   
     1,754       1,903  
Fannie Mae, Series 2002-W3, Class A-5, 7.50% 2041   
     3,251       3,667  
Fannie Mae, Series 2002-W1, Class 2A, 7.50% 2042   
     3,757       4,240  
Fannie Mae 6.00% 2047   
     1,096       1,156  
Fannie Mae 6.50% 2047   
     1,350       1,426  
Fannie Mae 6.50% 2047   
     1,200       1,267  
Fannie Mae 6.50% 2047   
     665       708  
Fannie Mae 7.00% 2047   
     6,069       6,615  
Fannie Mae 7.00% 2047   
     472       514  
Fannie Mae 7.50% 2047   
     1,448       1,573  
Fannie Mae 7.50% 2047   
     704       765  
Freddie Mac, Series 2890, Class KT, 4.50% 2019   
     2,500       2,565  
Freddie Mac 5.50% 2019   
     7,028       7,500  
Freddie Mac, Series 41, Class F, 10.00% 2020   
     78       79  
Freddie Mac, Series 178, Class Z, 9.25% 2021   
     62       68  
Freddie Mac, Series 2626, Class NG, 3.50% 2023   
     1,507       1,529  
Freddie Mac, Series 2922, Class EL, 4.50% 2023   
     29,269       30,195  
Freddie Mac 5.00% 2023   
     31,642       33,152  
Freddie Mac 5.00% 2023   
     11,278       11,816  
Freddie Mac 5.00% 2023   
     3,187       3,339  
Freddie Mac 5.00% 2023   
     195       204  
Freddie Mac, Series 1617, Class PM, 6.50% 2023   
     1,624       1,794  
Freddie Mac 4.50% 2024   
     32,344       33,288  
Freddie Mac 4.50% 2024   
     32,017       32,951  
Freddie Mac 4.50% 2024   
     6,684       6,879  
Freddie Mac 5.00% 2024   
     33,318       34,889  
Freddie Mac 6.00% 2026   
     21,808       23,277  
Freddie Mac 6.00% 2026   
     16,942       18,084  
Freddie Mac 5.50% 2027   
     11,519       12,158  
Freddie Mac 6.00% 2027   
     125,933       134,418  
Freddie Mac, Series 2153, Class GG, 6.00% 2029   
     2,808       3,020  
Freddie Mac, Series 2122, Class QM, 6.25% 2029   
     4,873       5,214  
Freddie Mac 4.632% 20351   
     11,509       11,981  
Freddie Mac, Series 3061, Class PN, 5.50% 2035   
     40,526       42,783  
Freddie Mac, Series 3136, Class OP, principal only, 0% 2036   
     7,102       5,547  
Freddie Mac, Series 3149, Class MO, principal only, 0% 2036   
     4,938       4,181  
Freddie Mac, Series 3147, Class OD, principal only, 0% 2036   
     4,868       4,158  
Freddie Mac, Series 3149, Class AO, principal only, 0% 2036   
     4,327       3,654  
Freddie Mac, Series 3257, Class PA, 5.50% 2036   
     45,422       48,256  
Freddie Mac, Series 3233, Class PA, 6.00% 2036   
     36,035       38,642  
Freddie Mac, Series 3156, Class NG, 6.00% 2036   
     11,431       12,274  
Freddie Mac, Series 3286, Class JN, 5.50% 2037   
     58,157       61,296  
Freddie Mac, Series 3318, Class JT, 5.50% 2037   
     32,502       34,226  
Freddie Mac 5.50% 2037   
     25,282       26,527  
Freddie Mac, Series 3312, Class PA, 5.50% 2037   
     24,626       25,950  
Freddie Mac 5.50% 2037   
     22,183       23,275  
Freddie Mac 5.517% 20371    
     29,058       30,731  
Freddie Mac 5.875% 20371    
     4,972       5,284  
Freddie Mac 5.885% 20371    
     8,927       9,367  
Freddie Mac 5.927% 20371   
     29,608       31,541  
Freddie Mac 5.965% 20371   
     24,785       26,062  
Freddie Mac, Series 3271, Class OA, 6.00% 2037   
     14,991       16,128  
Freddie Mac 6.00% 2037   
     2,321       2,465  
Freddie Mac 6.242% 20371    
     3,160       3,347  
Freddie Mac 6.50% 2037   
     31,719       34,001  
Freddie Mac 6.50% 2037   
     888       952  
Freddie Mac 7.00% 2037   
     897       966  
Freddie Mac 7.00% 2037   
     759       817  
Freddie Mac 7.00% 2037   
     365       394  
Freddie Mac 7.50% 2037   
     17,036       18,438  
Freddie Mac 4.802% 20381    
     12,412       12,856  
Freddie Mac 4.929% 20381    
     17,513       18,337  
Freddie Mac 5.00% 2038   
     8,031       8,246  
Freddie Mac 5.033% 20381  
     13,435       14,220  
Freddie Mac 5.055% 20381   
     8,896       9,242  
Freddie Mac 5.324% 20381   
     14,980       15,697  
Freddie Mac 5.50% 2038   
     21,517       22,567  
Freddie Mac 5.50% 2038   
     20,830       21,855  
Freddie Mac 5.50% 2038   
     17,078       17,911  
Freddie Mac 5.50% 2038   
     16,776       17,595  
Freddie Mac 5.50% 2038   
     15,031       15,764  
Freddie Mac 5.50% 2038   
     12,017       12,603  
Freddie Mac 5.593% 20381    
     29,375       30,826  
Freddie Mac 6.00% 2038   
     106,249       112,778  
Freddie Mac 6.50% 2038   
     16,090       17,248  
Freddie Mac 3.608% 20391    
     8,594       8,735  
Freddie Mac 3.758% 20391    
     17,324       17,639  
Freddie Mac 3.837% 20391    
     7,749       7,907  
Freddie Mac 3.894% 20391   
     7,829       8,065  
Freddie Mac 3.915% 20391   
     4,545       4,693  
Freddie Mac 3.959% 20391
     5,272       5,394  
Freddie Mac 5.00% 2039   
     59,254       60,831  
Freddie Mac 5.50% 2039   
     45,001       47,192  
Freddie Mac 5.50% 2039   
     6,143       6,442  
Freddie Mac 6.50% 2047   
     2,043       2,174  
Freddie Mac 6.50% 2047   
     1,091       1,161  
Freddie Mac 7.00% 2047   
     845       917  
Freddie Mac 7.00% 2047   
     702       762  
Government National Mortgage Assn. 10.00% 2021   
     744       849  
Government National Mortgage Assn., Series 2005-58, Class NO, principal only, 0% 2035   
     4,380       3,404  
Government National Mortgage Assn. 6.00% 2038   
     75,251       79,948  
Government National Mortgage Assn. 5.00% 2039   
     71,835       74,021  
Government National Mortgage Assn., Series 2003, Class A, 5.612% 2058   
     10,336       11,043  
              7,031,165  
                 
COMMERCIAL MORTGAGE-BACKED SECURITIES3 — 3.88%
                
CS First Boston Mortgage Securities Corp., Series 2001-CKN5, Class A-4, 5.435% 2034   
     1,184       1,214  
CS First Boston Mortgage Securities Corp., Series 2001-CF2, Class A-4, 6.505% 2034   
     371       382  
CS First Boston Mortgage Securities Corp., Series 2001-CK3, Class A-4, 6.53% 2034   
     2,435       2,531  
CS First Boston Mortgage Securities Corp., Series 2002-CP5, Class A-1, 4.106% 2035   
     448       455  
CS First Boston Mortgage Securities Corp., Series 2001-CK1, Class A-3, 6.38% 2035   
     40,500       41,554  
CS First Boston Mortgage Securities Corp., Series 2002-CKP1, Class F, 7.067% 20351,2     
     1,500       1,311  
CS First Boston Mortgage Securities Corp., Series 2002-CKS4, Class G, 6.006% 20361,2    
     500       386  
CS First Boston Mortgage Securities Corp., Series 2001-CK6, Class A-3, 6.387% 2036   
     29,056       30,268  
CS First Boston Mortgage Securities Corp., Series 2004-C5, Class A-2, 4.183% 2037   
     8,342       8,425  
CS First Boston Mortgage Securities Corp., Series 2004-C5, Class A-3, 4.499% 2037   
     12,900       12,642  
CS First Boston Mortgage Securities Corp., Series 2005-C3, Class A-AB, 4.614% 2037   
     20,000       20,076  
CS First Boston Mortgage Securities Corp., Series 2005-C2, Class A-MFX, 4.877% 2037   
     10,000       7,606  
CS First Boston Mortgage Securities Corp., Series 2004-C1, Class E, 5.015% 20372   
     8,240       4,254  
CS First Boston Mortgage Securities Corp., Series 2002-CKN2, Class A-3, 6.133% 2037   
     2,500       2,632  
CS First Boston Mortgage Securities Corp., Series 2003-C3, Class F, 4.518% 20382    
     2,000       951  
CS First Boston Mortgage Securities Corp., Series 2005-C4, Class A-2, 5.017% 2038   
     12,200       12,233  
CS First Boston Mortgage Securities Corp., Series 2005-C5, Class A-AB, 5.10% 20381   
     12,000       12,094  
CS First Boston Mortgage Securities Corp., Series 2004-C4, Class A-4, 4.283% 2039   
     20,600       20,667  
CS First Boston Mortgage Securities Corp., Series 2006-C1, Class A-3, 5.548% 20391    
     10,000       10,092  
CS First Boston Mortgage Securities Corp., Series 2006-C2, Class A-3, 5.658% 20391    
     7,305       6,326  
CS First Boston Mortgage Securities Corp., Series 2005-C6, Class A-3, 5.23% 20401
     42,000       41,446  
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2001-CIBC1, Class A-3, 6.26% 2033   
     3,568       3,654  
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2002-C2, Class F, 5.957% 20341,2   
     2,500       1,942  
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2002-C3, Class A-1, 4.20% 2035   
     313       318  
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2004-CBX, Class A-5, 4.654% 2037     
     2,500       2,524  
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CIBC12, Class A-3B, 5.316% 20371    
     61,300       61,730  
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2002-C1, Class E, 6.135% 20372
     400       353  
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2003-ML1, Class A-1, 3.972% 2039   
     5,343       5,417  
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2004-C3, Class A-3, 4.545% 2042   
     21,050       20,962  
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP2, Class A-2, 4.575% 2042   
     17,032       17,055  
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP4, Class A-3A1, 4.871% 2042   
     25,000       25,090  
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP3, Class A-4A, 4.936% 20421   
     1,655       1,572  
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP5, Class A-2, 5.198% 2044   
     10,080       10,158  
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2006-CIBC14, Class A-4, 5.481% 20441   
     15,130       14,359  
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2006-LDP7, Class A-4, 5.875% 20451   
     34,000       32,449  
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP1, Class A-2, 4.625% 2046   
     17,059       17,045  
Fannie Mae, Series 2000-T5, Class B, 7.30% 2010   
     57,100       58,314  
Fannie Mae, Series 2001-T6B, 6.088% 2011   
     48,000       50,552  
Fannie Mae, Series 2003-T1, Class B, 4.491% 2012   
     46,225       48,038  
American Tower Trust I, Series 2007-1A, Class A-FX, 5.42% 20372   
     18,500       18,686  
American Tower Trust I, Series 2007-1A, Class B, 5.537% 20372    
     10,000       10,283  
American Tower Trust I, Series 2007-1A, Class C, 5.615% 20372   
     10,000       10,283  
American Tower Trust I, Series 2007-1A, Class D, 5.957% 20372    
     36,415       37,446  
American Tower Trust I, Series 2007-1A, Class E, 6.249% 20372   
     11,375       11,697  
American Tower Trust I, Series 2007-1A, Class F, 6.639% 20372   
     13,470       13,852  
SBA CMBS Trust, Series 2006-1A, Class A, 5.314% 20362   
     48,500       48,966  
SBA CMBS Trust, Series 2006-1A, Class B, 5.451% 20362    
     14,180       14,317  
SBA CMBS Trust, Series 2006-1A, Class D, 5.852% 20362   
     12,329       12,466  
SBA CMBS Trust, Series 2006-1A, Class E, 6.174% 20362   
     4,025       4,070  
SBA CMBS Trust, Series 2006-1A, Class F, 6.709% 20362    
     375       379  
SBA CMBS Trust, Series 2006-1A, Class G, 6.904% 20362   
     1,375       1,415  
SBA CMBS Trust, Series 2006-1A, Class H, 7.389% 20362   
     4,040       4,159  
SBA CMBS Trust, Series 2006-1A, Class J, 7.825% 20362
     2,375       2,445  
Crown Castle Towers LLC, Series 2005-1, Class C, 5.074% 20352    
     43,000       43,406  
Crown Castle Towers LLC, Series 2006-1, Class E, 6.065% 20362   
     31,000       31,634  
Crown Castle Towers LLC, Series 2006-1, Class F, 6.65% 20362    
     10,350       10,551  
Crown Castle Towers LLC, Series 2006-1, Class G, 6.795% 20362
     1,400       1,426  
Banc of America Commercial Mortgage Inc., Series 2001-1, Class A-2, 6.503% 2036   
     42,146       43,548  
Banc of America Commercial Mortgage Inc., Series 2004-5, Class A-3, 4.561% 2041   
     9,975       9,815  
Banc of America Commercial Mortgage Inc., Series 2004-5, Class A-AB, 4.673% 2041   
     1,918       1,937  
Banc of America Commercial Mortgage Inc., Series 2004-4, Class B, 4.985% 2042   
     1,000       544  
Banc of America Commercial Mortgage Inc., Series 2005-3, Class A-2, 4.501% 2043   
     1,079       1,080  
Banc of America Commercial Mortgage Inc., Series 2005-5, Class A-4, 5.115% 20451   
     2,500       2,390  
Banc of America Commercial Mortgage Inc., Series 2006-4, Class A-4, 5.634% 2046   
     5,000       4,694  
Wachovia Bank Commercial Mortgage Trust, Series 2003-C9, Class A-3, 4.608% 2035   
     2,205       2,236  
Wachovia Bank Commercial Mortgage Trust, Series 2005-C18, Class A-PB, 4.807% 2042   
     3,000       2,944  
Wachovia Bank Commercial Mortgage Trust, Series 2005-C20, Class A-7, 5.118% 20421   
     4,650       4,500  
Wachovia Bank Commercial Mortgage Trust, Series 2005-C22, Class A-2, 5.242% 2044   
     10,274       10,334  
Wachovia Bank Commercial Mortgage Trust, Series 2005-C22, Class A-4, 5.265% 20441   
     15,350       15,010  
Wachovia Bank Commercial Mortgage Trust, Series 2005-C22, Class A-PB, 5.27% 20441
     8,038       7,916  
Wachovia Bank Commercial Mortgage Trust, Series 2006-C23, Class A-PB, 5.446% 2045   
     16,750       16,382  
J.P. Morgan Chase Commercial Mortgage Securities Trust, Series 2006-LDP6, Class A-4, 5.475% 20431    
     51,820       49,956  
J.P. Morgan Chase Commercial Mortgage Securities Trust, Series 2006-LDP7, Class A-M, 5.875% 20451    
     7,645       6,134  
Bear Stearns Commercial Mortgage Securities Inc., Series 1999-WF2, Class X, interest only, 0.612% 20311    
     42,257       1,493  
Bear Stearns Commercial Mortgage Securities Inc., Series 1999-C1, Class X, interest only, 0.656% 20311,2     
     35,032       858  
Bear Stearns Commercial Mortgage Securities Inc., Series 2000-WF2, Class A-2, 7.32% 2032   
     12,986       13,243  
Bear Stearns Commercial Mortgage Securities Inc., Series 2002-PBW1, Class A-1, 3.97% 2035   
     2,791       2,829  
Bear Stearns Commercial Mortgage Securities Inc., Series 2001-TOP2, Class D, 6.94% 20352  
     3,000       2,773  
Bear Stearns Commercial Mortgage Securities Inc., Series 2004-PWR6, Class A-4, 4.521% 2041   
     10,000       10,061  
Bear Stearns Commercial Mortgage Securities Inc., Series 2005-PWR9, Class A-3, 4.868% 2042   
     20,825       20,152  
GE Commercial Mortgage Corp., Series 2004-C3, Class B, 5.179% 20391    
     8,000       4,473  
GE Commercial Mortgage Corp., Series 2004-C2, Class B, 4.983% 2040   
     19,193       12,651  
GE Commercial Mortgage Corp., Series 2006-C1, Class A-4, 5.336% 20441    
     33,700       32,207  
Merrill Lynch Mortgage Trust, Series 2005-CKI1, Class AM, 5.233% 20371    
     4,620       3,882  
Merrill Lynch Mortgage Trust, Series 2005-CIP1, Class A-3-A, 4.949% 20381   
     8,500       8,361  
Merrill Lynch Mortgage Trust, Series 2006-C1, Class A-3, 5.656% 20391    
     3,050       3,057  
Merrill Lynch Mortgage Trust, Series 2004-BPC1, Class A-5, 4.855% 20411    
     6,805       6,684  
Merrill Lynch Mortgage Trust, Series 2005-MCP1, Class A-4, 4.747% 20431    
     5,065       4,894  
Merrill Lynch Mortgage Trust, Series 2005-MCP1, Class AM, 4.805% 20431   
     6,300       4,920  
Merrill Lynch Mortgage Trust, Series 2006-C2, Class A-4, 5.742% 20431
     10,250       9,537  
Commercial Mortgage Trust, Series 2000-C1, Class A-2, 7.416% 2033   
     1,134       1,141  
Commercial Mortgage Trust, Series 2004-LB3A, Class A-4, 5.234% 2037   
     10,956       11,166  
Commercial Mortgage Trust, Series 2003-LNB1, Class A-2, 4.084% 2038   
     20,000       19,618  
Commercial Mortgage Trust, Series 2004-LNB2, Class A-3, 4.221% 2039   
     8,298       8,275  
Greenwich Capital Commercial Funding Corp., Series 2003-C1, Class A-2, 3.285% 2035   
     1,567       1,565  
Greenwich Capital Commercial Funding Corp., Series 2005-GG5, Class A-2, 5.117% 2037   
     13,045       13,116  
Greenwich Capital Commercial Funding Corp., Series 2005-GG5, Class A-5, 5.224% 20371    
     11,000       9,978  
Greenwich Capital Commercial Funding Corp., Series 2005-GG5, Class A-4-1, 5.243% 20371   
     15,000       15,177  
ML-CFC Commercial Mortgage Trust, Series 2006-4, Class A-3, 5.172% (undated)1
     41,210       36,516  
L.A. Arena Funding, LLC, Series 1, Class A, 7.656% 20262
     37,992       36,067  
GMAC Commercial Mortgage Securities, Inc., Series 1997-C1, Class F, 7.222% 2029   
     931       948  
GMAC Commercial Mortgage Securities, Inc., Series 2001-C1, Class A-2, 6.465% 2034   
     28,234       29,072  
GMAC Commercial Mortgage Securities, Inc., Series 2003-C1, Class F, 4.718% 20361,2     
     1,000       513  
GMAC Commercial Mortgage Securities, Inc., Series 2003-C1, Class G, 4.817% 20361,2     
     1,000       484  
Salomon Brothers Commercial Mortgage Trust, Series 2000-C3, Class A-2, 6.592% 2033   
     16,084       16,368  
Salomon Brothers Commercial Mortgage Trust, Series 2001-C1, Class A-3, 6.428% 2035   
     6,779       7,004  
Salomon Brothers Commercial Mortgage Trust, Series 2001-C2, Class A-3, 6.499% 2036   
     2,254       2,346  
GE Capital Commercial Mortgage Corp., Series 2001-1, Class A-1, 6.079% 2033   
     17       17  
GE Capital Commercial Mortgage Corp., Series 2001-1, Class A-2, 6.531% 2033   
     18,090       18,791  
GE Capital Commercial Mortgage Corp., Series 2002-3, Class A-2, 4.996% 2037   
     2,500       2,557  
GE Capital Commercial Mortgage Corp., Series 2001-3, Class A-1, 5.56% 2038   
     723       739  
GE Capital Commercial Mortgage Corp., Series 2001-3, Class A-2, 6.07% 2038   
     2,500       2,620  
LB-UBS Commercial Mortgage Trust, Series 2000-C3, Class A-2, 7.95% 2025   
     1,944       1,947  
LB-UBS Commercial Mortgage Trust, Series 2002-C1, Class A-3, 6.226% 2026   
     561       562  
LB-UBS Commercial Mortgage Trust, Series 2005-C7, Class A-2, 5.103% 2030   
     3,468       3,490  
LB-UBS Commercial Mortgage Trust, Series 2005-C7, Class A-4, 5.197% 20301    
     5,000       4,922  
LB-UBS Commercial Mortgage Trust, Series 2005-C5, Class A-M, 5.017% 20401  
     10,000       8,288  
Citigroup Commercial Mortgage Trust, Series 2006-C4, Class A-3, 5.725% (undated)1
     15,800       15,163  
Citigroup-Deutsche Bank Commercial Mortgage Trust, Series 2006-CD3, Class A-5, 5.617% 2048   
     15,000       13,803  
COBALT CMBS Commerical Mortgage Trust, Series 2006-C1, Class A-2, 5.174% 2048   
     13,563       13,674  
Structured Products Asset Return Certificates Trust, Series 2001-CF1, Class A, 6.36% 20338  
     10,410       10,458  
Morgan Stanley Capital I Trust, Series 2005-HQ7, Class A-2, 5.207% 20421
     7,875       8,075  
Morgan Stanley Dean Witter Capital I Trust, Series 2000-LIFE2, Class A-2, 7.20% 2033   
     3,814       3,882  
Morgan Stanley Dean Witter Capital I Trust, Series 2003-TOP9, Class A-1, 3.98% 2036   
     2,269       2,286  
Chase Manhattan Bank - First Union National Bank, Commercial Mortgage Trust, Series 1999-1, Class B, 7.619% 2031   
     797       796  
Chase Manhattan Bank - First Union National Bank, Commercial Mortgage Trust, Series 1999-1, Class C, 7.625% 2031   
     5,000       5,025  
Chase Commercial Mortgage Securities Corp., Series 2000-1, Class A-2, 7.757% 2032   
     1,208       1,207  
First Union National Bank Commercial Mortgage Trust, Series 2001-C4, Class A-1, 5.673% 2033   
     156       157  
              1,535,866  
                 
COLLATERALIZED MORTGAGE-BACKED OBLIGATIONS (PRIVATELY ORIGINATED)3 — 1.59%
                
Structured Adjustable Rate Mortgage Loan Trust, Series 2005-22, Class 5-A-1, 5.997% 20351    
     3,073       2,276  
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-8, Class 3-AF, 0.611% 20361    
     13,261       8,245  
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-4, Class 6-A, 5.905% 20361    
     25,869       18,399  
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-2, Class 5-A-1, 6.00% 20361   
     5,875       3,866  
Structured Adjustable Rate Mortgage Loan Trust, Series 2007-6, Class 3-A-1, 5.792% 20371    
     18,765       11,790  
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-12, Class 2-A1, 5.817% 20371   
     18,970       12,214  
Structured Adjustable Rate Mortgage Loan Trust, Series 2007-8, Class 2-A3, 5.877% 20371
     28,911       17,809  
Bear Stearns ARM Trust, Series 2004-3, Class II-A, 3.899% 20341    
     7,594       6,240  
Bear Stearns ARM Trust, Series 2005-6, Class I-A-1, 3.789% 20351   
     27,422       19,159  
Bear Stearns ARM Trust, Series 2005-10, Class A-3, 4.462% 20351    
     51,800       39,679  
Bear Stearns ARM Trust, Series 2007-2, Class I-A-1, 5.00% 20461
     748       502  
Countrywide Alternative Loan Trust, Series 2004-14T2, Class A-2, 5.50% 2034   
     12,021       10,362  
Countrywide Alternative Loan Trust, Series 2005-49CB, Class A-1, 5.50% 2035   
     14,396       12,912  
Countrywide Alternative Loan Trust, Series 2005-J11, Class 1-A-16, 5.50% 2035   
     4,618       1,940  
Countrywide Alternative Loan Trust, Series 2004-28CB, Class 5-A-1, 5.75% 2035   
     2,177       1,815  
Countrywide Alternative Loan Trust, Series 2004-36CB, Class 1-A-1, 6.00% 2035   
     7,652       6,674  
Countrywide Alternative Loan Trust, Series 2005-9CB, Class 2-A-1, 6.00% 2035   
     5,434       4,025  
Countrywide Alternative Loan Trust, Series 2004-28CB, Class 6-A-1, 6.00% 2035   
     886       756  
Countrywide Alternative Loan Trust, Series 2007-14T2, Class A-4, 0.581% 20371   
     21,976       9,934  
Residential Accredit Loans, Inc., Series 2004-QS16, Class 1-A-1, 5.50% 2034   
     5,566       5,168  
Residential Accredit Loans, Inc., Series 2005-QR1, Class A, 6.00% 2034   
     25,546       21,970  
Residential Accredit Loans, Inc., Series 2005-QA12, Class CB-I, 4.262% 20351   
     3,880       2,416  
Residential Accredit Loans, Inc., Series 2006-QA1, Class A-II-1, 5.919% 20361
     12,453       6,720  
Residential Accredit Loans, Inc., Series 2007-QS11, Class A-1, 7.00% 2037   
     6,308       3,941  
WaMu Mortgage Pass-Through Certificates Trust, Series 2004-AR11, Class A, 2.896% 20341   
     18,627       16,367  
WaMu Mortgage Pass-Through Certificates Trust, Series 2006-AR12, Class 1-A4, 6.038% 20361   
     2,178       1,590  
WaMu Mortgage Pass-Through Certificates Trust, Series 2007-HY7, Class 2-A1, 5.792% 20371
     29,887       20,537  
Wells Fargo Alternative Loan Trust, Series 2007-PA4, Class III-A-1, 6.054% 20371  
     23,925       14,184  
Wells Fargo Alternative Loan Trust, Series 2007-PA3, Class III-A-1, 6.25% 2037   
     27,209       19,937  
CS First Boston Mortgage Securities Corp., Series 2002-30, Class I-A-1, 7.50% 2032   
     328       325  
CS First Boston Mortgage Securities Corp., Series 2002-34, Class I-A-1, 7.50% 2032   
     40       37  
CS First Boston Mortgage Securities Corp., Series 2003-21, Class V-A-1, 6.50% 2033   
     2,387       2,251  
CS First Boston Mortgage Securities Corp., Series 2003-29, Class V-A-1, 7.00% 2033   
     45       45  
CS First Boston Mortgage Securities Corp., Series 2004-5, Class IV-A-1, 6.00% 2034   
     6,296       5,736  
CS First Boston Mortgage Securities Corp., Series 2005-5, Class IV-A-1, 6.25% 2035   
     4,797       4,370  
CS First Boston Mortgage Securities Corp., Series 2006-7, Class 8-A-6, 0.861% 20361   
     12,567       5,354  
CS First Boston Mortgage Securities Corp., Series 2006-7, Class 6-A-3, 5.50% 2036   
     23,566       14,122  
CHL Mortgage Pass-Through Trust, Series 2004-HYB6, Class A-3, 3.619% 20341    
     2,491       1,946  
CHL Mortgage Pass-Through Trust, Series 2005-HYB8, Class 4-A-1, 5.492% 20351   
     22,251       16,881  
CHL Mortgage Pass-Through Trust, Series 2007-HY5, Class 1-A-1, 5.905% 20471   
     7,414       5,358  
CHL Mortgage Pass-Through Trust, Series 2007-HY4, Class 1-A-1, 6.048% 20471   
     2,247       1,520  
IndyMac IMSC Mortgage Loan Trust, Series 2007-F2, Class 2-A-1, 6.50% 2037   
     36,844       22,922  
Thornburg Mortgage Securities Trust, Series 2006-5, Class A-1, 0.351% 20461  
     18,699       18,345  
Residential Asset Securitization Trust, Series 2005-A7, Class A-5, 5.50% 2035   
     5,338       2,939  
Residential Asset Securitization Trust, Series 2005-A8CB, Class A-11, 6.00% 2035   
     13,218       8,662  
Residential Asset Securitization Trust, Series 2006-A8, Class 1-A-2, 0.531% 20361    
     8,898       4,552  
Residential Asset Securitization Trust, Series 2006-A8, Class 3-A-11, 6.00% 2036   
     3,853       2,123  
J.P. Morgan Alternative Loan Trust, Series 2006-A1, Class 2-A-1, 5.80% 20361    
     16,034       9,807  
J.P. Morgan Alternative Loan Trust, Series 2006-A2, Class 5-A-1, 6.197% 20361   
     11,676       7,446  
J.P. Morgan Mortgage Trust, Series 2006-A3, Class 3-A-3, 5.731% 20361   
     4,000       2,890  
J.P. Morgan Mortgage Trust, Series 2006-A7, Class 2-A-4, 5.762% 20371
     21,750       14,266  
MASTR Alternative Loan Trust, Series 2003-2, Class 6-A-1, 6.00% 2033   
     511       481  
MASTR Alternative Loan Trust, Series 2004-2, Class 2-A-1, 6.00% 2034   
     972       856  
MASTR Alternative Loan Trust, Series 2005-1, Class 1-A-1, 5.50% 2035   
     11,825       9,877  
MASTR Alternative Loan Trust, Series 2005-3, Class 1-A-1, 5.50% 2035   
     3,152       2,638  
MASTR Alternative Loan Trust, Series 2005-3, Class 2-A-1, 6.00% 2035   
     3,651       3,031  
MASTR Alternative Loan Trust, Series 2005-3, Class 3-A-1, 6.50% 2035   
     372       269  
American Home Mortgage Assets Trust, Series 2007-3, Class II-2A-1, 6.25% 20371   
     29,633       17,058  
GSR Mortgage Loan Trust, Series 2005-AR1, Class 2-A-1, 3.377% 20351    
     7,939       6,609  
GSR Mortgage Loan Trust, Series 2006-2F, Class 3A-4, 6.00% 2036   
     11,543       9,362  
Banc of America Funding Trust, Series 2005-H, Class 9-A-1, 5.867% 20351   
     22,014       14,622  
Bear Stearns ALT-A Trust, Series 2006-2, Class II-4-A-1, 5.774% 20361
     21,394       13,128  
IndyMac INDX Mortgage Loan Trust, Series 2006-AR25, Class 3-A-1, 5.914% 20361  
     18,463       11,105  
Banc of America Alternative Loan Trust, Series 2005-6, Class 2-CB-2, 6.00% 2035   
     11,959       9,288  
BCAP LLC Trust, Series 2006-AA2, Class A-1, 0.401% 20371
     19,012       9,084  
Morgan Stanley Mortgage Loan Trust, Series 2004-3, Class 4-A, 5.669% 20341
    4,988       4,955  
Morgan Stanley Mortgage Loan Trust, Series 2005-6AR, Class 3-A-1, 5.194% 20351
    4,771       3,190  
TBW Mortgage-backed Trust, Series 2007-2, Class A-4-B, 0.651% 20371
     22,000       8,034  
Washington Mutual Mortgage, WMALT Series 2005-1, Class 6-A-1, 6.50% 2035   
     1,082       860  
Washington Mutual Mortgage, WMALT Series 2006-2, Class 1-A-3, 6.00% 2036   
     12,000       6,561  
Wells Fargo Mortgage-backed Securities Trust, Series 2006-AR19, Class A-6, 5.622% 20361    
     10,000       6,964  
GMAC Mortgage Loan Trust, Series 2006-AR1, Class 2-A-1, 5.618% 20361
     8,530       6,959  
American General Mortgage Loan Trust, Series 2006-1, Class A-5, 5.75% 20351,2    
     7,737       6,690  
Structured Asset Securities Corp., Series 1998-RF2, Class A, 8.245% 20271,2     
     3,962       3,571  
Structured Asset Securities Corp., Series 1998-RF1, Class A, 8.399% 20271,2     
     1,531       1,381  
Structured Asset Securities Corp., Series 1999-RF1, Class A, 7.70% 20281,2
     950       902  
CitiMortgage Alternative Loan Trust, Series 2006-A1, Class IA-3, 5.75% 2036   
     10,000       4,429  
Banc of America Mortgage Securities Trust, Series 2003-I, Class 3-A-1, 4.521% 20331
    4,253       4,091  
Sequoia Mortgage Trust, Series 2007-1, Class 4-A1, 5.719% 20461
     4,771       3,997  
Citigroup Mortgage Loan Trust, Inc., Series 2007-AR5, Class 1-A2A, 5.595% 20371  
     6,218       3,662  
Harborview Mortgage Loan Trust, Series 2006-6, Class 1A, 3.76% 20361   
     2,897       1,786  
Ocwen Residential MBS Corp., Series 1998-R1, Class AWAC, 5.42% 20401,2,8
     1,459       365  
GS Mortgage Securities Corp., Series 1998-2, Class M, 7.75% 20272   
     347       249  
Financial Asset Securitization, Inc., Series 1997-NAM1, Class B-1, 7.75% 2027   
     228       209  
              629,587  
                 
OTHER MORTGAGE-BACKED SECURITIES3 — 0.55%
                
Nykredit 4.00% 2035   
  
DKr286,711
       52,477  
Nykredit 5.00% 2038   
     168,134       32,552  
Nationwide Building Society, Series 2007-2, 5.50% 20122
  $ 34,750       37,284  
Bank of America 5.50% 20122    
     34,750       37,095  
Barclays Bank PLC 4.00% 2019     
   € 14,100       19,984  
Northern Rock PLC 5.625% 20172
   $ 20,000       18,816  
HBOS Treasury Services PLC 5.25% 20172
     11,000       10,924  
HBOS Treasury Services PLC 5.25% 2017   
     7,000       6,952  
              216,084  
                 
Total mortgage-backed obligations
             9,412,702  
                 
                 
BONDS & NOTES OF GOVERNMENTS & GOVERNMENT AGENCIES OUTSIDE THE U.S. — 5.91%
                
United Mexican States Government Global 6.375% 2013
     5,150       5,717  
United Mexican States Government Global 5.875% 2014
     3,000       3,268  
United Mexican States Government, Series MI10, 9.50% 2014
  
MXN690,300
       57,323  
United Mexican States Government, Series M10, 8.00% 2015
     505,000       39,311  
United Mexican States Government, Series M10, 7.25% 2016
     435,000       32,787  
United Mexican States Government 3.50% 20178,10
     225,418       17,717  
United Mexican States Government Global 5.95% 2019
   $ 31,080       33,023  
United Mexican States Government, Series M20, 10.00% 2024
  
MXN394,800
       34,674  
United Mexican States Government Global 6.75% 2034
   $ 2,495       2,645  
United Mexican States Government, Series M30, 10.00% 2036
  
MXN138,000
       12,037  
Polish Government 5.75% 2014
  
PLN180,696
       63,390  
Polish Government 5.25% 2017
     255,245       84,496  
Polish Government 6.375% 2019
   $ 59,095       64,572  
South Korean Government 4.25% 2014
  
KRW29,650,000
       24,854  
South Korean Government 4.75% 2014
     45,350,000       39,024  
South Korean Government 5.00% 2014
     7,890,000       6,824  
South Korean Government 5.75% 2014
   $ 21,000       22,998  
South Korean Government 5.25% 2015
  
KRW24,200,000
       21,065  
South Korean Government 5.50% 2017
     10,100,000       8,857  
South Korean Government 5.75% 2018
     19,625,000       17,425  
Irish Government 4.00% 2014
   € 44,665       65,659  
Irish Government 4.40% 2019
     14,855       20,624  
Irish Government 5.90% 2019
     21,030       32,571  
Australia Government Agency-Guaranteed, National Australia Bank 5.75% 2013  
   $ A11,250       10,080  
Australia Government Agency-Guaranteed, National Australia Bank 0.784% 20141,2  
   $ 25,000       25,047  
Australia Government Agency-Guaranteed, National Australia Bank 3.375% 20142
     50,550       50,878  
Australia Government Agency-Guaranteed, Commonwealth Bank of Australia 2.50% 20122
    7,250       7,315  
Australia Government Agency-Guaranteed, Commonwealth Bank of Australia 2.90% 20142
    22,900       22,665  
Australia Government Agency-Guaranteed, Commonwealth Bank of Australia 3.625% 20142
     45,000       45,872  
European Investment Bank 3.125% 2014  
     11,500       11,645  
European Investment Bank 4.25% 2014
   € 35,020       53,864  
European Investment Bank 4.875% 2017
   $ 9,000       9,659  
Brazilian Treasury Bill 6.00% 20108,10  
  
BRL 1,566
       908  
Brazilian Treasury Bill 6.00% 20158,10  
     7,418       4,131  
Brazil (Federal Republic of) Global 12.50% 2016
     23,400       15,242  
Brazil (Federal Republic of) 10.00% 20178  
     48,000       23,666  
Brazilian Treasury Bill 6.00% 20178,10
     41,613       23,030  
Brazil (Federal Republic of) Global 8.00% 20183
   $ 608       697  
Brazil (Federal Republic of) Global 12.25% 2030
     425       746  
Brazil (Federal Republic of) Global 7.125% 2037
     750       864  
Brazil (Federal Republic of) Global 11.00% 2040
     2,110       2,822  
France Government Agency-Guaranteed, Société Finance 2.25% 20122
     21,815       22,003  
France Government Agency-Guaranteed, Société Finance 2.875% 20142
     33,000       32,734  
France Government Agency-Guaranteed, Société Finance 3.375% 20142
     16,450       16,790  
Turkey (Republic of) 15.00% 2010
  
TRY 5,250
       3,553  
Turkey (Republic of) 10.00% 20128,10
     26,867       20,621  
Turkey (Republic of) 16.00% 2012
     9,555       7,149  
Turkey (Republic of) 16.00% 2013
     21,045       16,606  
Turkey (Republic of) 7.50% 2017
   $ 5,725       6,526  
Turkey (Republic of) 6.75% 2018
     8,550       9,287  
Turkey (Republic of) 8.00% 2034
     1,250       1,450  
Netherlands Government Eurobond 4.00% 2018
   € 41,200       61,514  
New South Wales Treasury Corp., Series 12, 6.00% 2012
   $ A32,750       30,028  
New South Wales Treasury Corp., Series 19, 6.00% 2019
     33,350       29,474  
German Government 4.25% 2014
   € 18,615       28,729  
German Government 3.75% 2019
     7,240       10,725  
German Government 6.25% 2030
     8,190       14,983  
German Government 4.75% 2034
     3,065       4,764  
Aries Vermögensverwaltungs GmbH, Series C, 9.60% 2014
   $ 44,750       56,497  
KfW 6.25% 2012
   $ A13,000       11,904  
KfW 5.50% 2014  
     35,400       31,224  
KfW 5.00% 2015
  
NKr50,000
       8,979  
Greek Government 5.50% 2014
   € 11,125       16,154  
Greek Government 6.00% 2019
     24,710       35,776  
Malaysian Government 5.094% 2014
  
MYR90,920
       28,121  
Malaysian Government 3.741% 2015
     63,870       18,601  
Queensland Treasury Corp., Series 12, 6.50% 2012
   $ A32,250       29,900  
Queensland Treasury Corp., Series 15, 6.00% 2015
     18,380       16,621  
French Government O.A.T. Eurobond 4.00% 2014
   € 30,340       46,190  
Sweden Government Agency-Guaranteed, Swedbank AB 2.80% 20122
  $ 9,000       9,160  
Sweden Government Agency-Guaranteed, Swedbank AB 2.90% 20132
     35,000       35,559  
Indonesia (Republic of) 11.00% 2012
  
IDR 4,090,000
       464  
Indonesia (Republic of) 12.50% 2013
     8,710,000       1,028  
Indonesia (Republic of) 14.275% 2013
     2,110,000       265  
Indonesia (Republic of) 11.25% 2014
     1,260,000       146  
Indonesia (Republic of) 9.50% 2015
     28,000,000       3,045  
Indonesia (Republic of) 10.75% 2016
     136,020,000       15,553  
Indonesia (Republic of) 6.875% 2018
   $ 2,000       2,210  
Indonesia (Republic of) 6.875% 20182
     1,700       1,878  
Indonesia (Republic of) 11.625% 2019
     10,254       14,766  
Indonesia (Republic of) 7.75% 2038
     4,500       5,107  
Denmark Government Agency-Guaranteed, Danish Finance Co. 2.45% 20122
     42,120       42,580  
Japanese Government 1.30% 2011
   ¥ 50       1  
Japanese Government 1.50% 2018
     2,468,700       27,433  
Japanese Government 2.40% 2038
     1,342,250       14,845  
New Zealand Government Agency-Guaranteed, Westpac Securities Co. 2.50% 20122
  $ 8,250       8,301  
New Zealand Government Agency-Guaranteed, Westpac Securities Co. 3.45% 20142
     33,220       33,146  
Colombia (Republic of) Global 11.75% 2010
  
COP4,100,000
       2,039  
Colombia (Republic of) Global 8.25% 2014
   $ 5,950       7,021  
Colombia (Republic of) Global 12.00% 2015
  
COP26,904,000
       16,226  
Colombia (Republic of) Global 7.375% 2017
   $ 10,365       11,738  
Colombia (Republic of) Global 9.85% 2027
  
COP4,950,000
       2,819  
Colombia (Republic of) Global 7.375% 2037
   $ 1,000       1,095  
Russian Federation 7.50% 20303
     34,601       39,186  
Russian Federation 7.50% 20302,3
     136       154  
Finland (Republic of) 3.875% 2017
   € 23,230       34,581  
Venezuela (Republic of) 5.375% 2010
   $ 2,835       2,771  
Venezuela (Republic of) 8.50% 2014
     245       194  
Venezuela (Republic of) 7.65% 2025
     985       584  
Venezuela (Republic of) 9.25% 2027
     31,745       23,333  
Venezuela (Republic of) 9.25% 2028
     11,160       7,561  
Israeli Government 6.50% 20168
 
ILS27,375
       7,977  
Israeli Government 5.50% 20178
    63,060       17,306  
Israeli Government 5.125% 2019
   $ 8,250       8,375  
Treasury Corp. of Victoria 6.25% 2012  
   $ A32,500       29,974  
Croatian Government 6.75% 20192
   $ 22,450       24,224  
United Kingdom Government Agency-Guaranteed, Lloyds TSB Group PLC 2.80% 20122
     23,000       23,430  
Australia and New Zealand Government Agency-Guaranteed, Australia and New Zealand Banking Group Ltd. 3.25% 20122
    21,750       22,404  
Italian Government 4.25% 2013
   € 14,100       21,346  
Province of Ontario 1.875% 2012
   $ 17,250       17,090  
Argentina (Republic of) 0.354% 20121,3,8  
     24,755       8,478  
Argentina (Republic of) 7.00% 20158  
     9,345       7,884  
Argentina (Republic of) GDP-Linked 2035
  
ARS 9,238
       115  
Argentina (Republic of) 0.63% 20383,8,10  
     16,963       579  
Peru (Republic of) 8.375% 2016
   $ 9,005       10,919  
Peru (Republic of) 6.55% 20373
     4,200       4,389  
Thai Government 5.25% 2014
  
THB200,000
       6,452  
Thai Government 3.625% 2015
     290,700       8,708  
Uruguay (Republic of) 5.00% 20188,10
 
UYU270,315
       13,450  
Uruguay (Republic of) 7.625% 20363
   $ 1,250       1,359  
Panama (Republic of) Global 7.25% 2015
     2,275       2,599  
Panama (Republic of) Global 7.125% 2026
     690       781  
Panama (Republic of) Global 8.875% 2027
     250       326  
Panama (Republic of) Global 9.375% 2029
     340       454  
Panama (Republic of) Global 6.70% 20363
    5,748       6,093  
Nordic Investment Bank, Series C, 5.00% 2017
     9,000       9,661  
Corporación Andina de Fomento 6.875% 2012
     5,895       6,324  
Corporación Andina de Fomento 5.125% 2015
     2,000       2,010  
Corporación Andina de Fomento 8.125% 2019
     890       1,032  
Banque Centrale de Tunisie 4.75% 2011
   € 3,000       4,435  
Banque Centrale de Tunisie 7.375% 2012
   $ 4,500       4,894  
South Africa (Republic of) 6.875% 2019
     7,615       8,586  
Australia Government Agency-Guaranteed, Macquarie Bank Ltd. 5.00% 2014  
   $ A9,750       8,432  
Philippines (Republic of) 6.375% 2034
   $ 8,000       7,880  
Austrian Government 2.00% 20122
     7,250       7,332  
Iraq (Republic of) 5.80% 20283
     9,450       7,324  
Netherlands Government Agency-Guaranteed, ING Bank NV 3.90% 20142
     7,000       7,181  
Asian Development Bank 2.75% 2014  
     6,150       6,153  
Dominican Republic 9.50% 20112,3
     938       980  
Dominican Republic 9.04% 20182,3
    4,481       4,879  
El Salvador (Republic of) 7.65% 20352
     3,450       3,415  
Gabonese Republic 8.20% 2017
     2,450       2,579  
Guatemala (Republic of) 10.25% 20112
     1,000       1,125  
Ireland Government Agency-Guaranteed, Anglo Irish Bank Corp. plc 1.012% 20161
  € 1,400       568  
LCR Finance PLC 5.10% 2051
   £ 165       306  
              2,341,492  
                 
ASSET-BACKED OBLIGATIONS3 — 2.73%
                
CPS Auto Receivables Trust, Series 2005-B, Class A-2, FSA insured, 4.36% 20122   
   $ 4,213       4,263  
CPS Auto Receivables Trust, Series 2005-D, Class A-2, FSA insured, 5.06% 20122   
     2,626       2,673  
CPS Auto Receivables Trust, Series 2006-A, Class 1-A-4, FSA insured, 5.33% 20122   
     5,072       5,164  
CPS Auto Receivables Trust, Series 2006-B, Class A-4, MBIA insured, 5.81% 20122    
     18,983       19,213  
CPS Auto Receivables Trust, Series 2007-A, Class A-4, MBIA insured, 5.05% 20132   
     15,100       15,503  
CPS Auto Receivables Trust, Series 2006-C, Class A-4, XLCA insured, 5.14% 20132   
     20,035       20,371  
CPS Auto Receivables Trust, Series 2007-B, Class A-4, FSA insured, 5.60% 20142    
     20,000       20,674  
CPS Auto Receivables Trust, Series 2007-C, Class A-4, FSA insured, 5.92% 20142  
     18,950       19,693  
Washington Mutual Master Note Trust, Series 2007-B1, Class B-1, 4.95% 20142   
     4,000       4,019  
Washington Mutual Master Note Trust, Series 2007-A4A, Class A-4, 5.20% 20142   
     30,055       30,716  
Washington Mutual Master Note Trust, Series 2006-A2A, Class A, 0.283% 20151,2     
     31,000       30,655  
GS Auto Loan Trust, Series 2006-1, Class A-4, 5.38% 2014   
     51,689       52,621  
GS Auto Loan Trust, Series 2006-1, Class A-4, 5.60% 2014   
     4,842       4,893  
Drive Auto Receivables Trust, Series 2006-1, Class A-4, FSA insured, 5.54% 20132   
     40,514       41,255  
Drive Auto Receivables Trust, Series 2006-2, Class A-3, MBIA insured, 5.33% 20142
     12,138       12,431  
Honda Auto Receivables Owner Trust, Series 2006-3, Class A-4, 5.11% 2012   
     31,573       31,979  
Honda Auto Receivables Owner Trust, Series 2006-2, Class A-4, 5.28% 2012   
     14,951       15,133  
Long Beach Acceptance Auto Receivables Trust, Series 2006-B, Class A-4, FSA insured, 5.18% 2013   
     27,750       28,292  
Long Beach Acceptance Auto Receivables Trust, Series 2007-A, Class A-4, FSA insured, 5.025% 2014   
     15,500       15,885  
AmeriCredit Automobile Receivables Trust, Series 2005-C-F, Class A-4, FSA insured, 4.63% 2012   
     6,517       6,538  
AmeriCredit Automobile Receivables Trust, Series 2007-D-F, Class A-3-A, FSA insured, 5.49% 2012   
     4,765       4,816  
AmeriCredit Automobile Receivables Trust, Series 2006-B-G, Class A-4, FGIC insured, 5.21% 2013   
     25,224       25,922  
AmeriCredit Automobile Receivables Trust, Series 2007-C-M, Class A-4-A, MBIA insured, 5.55% 2014   
     4,572       4,710  
Hertz Vehicle Financing LLC, Rental Car Asset-backed Notes, Series 2005-2, Class A-6, AMBAC insured, 5.08% 20112    
     14,500       14,755  
Hertz Vehicle Financing LLC, Rental Car Asset-backed Notes, Series 2009-2A, Class A-1, 4.26% 20142   
     9,000       8,977  
Hertz Vehicle Financing LLC, Rental Car Asset-backed Notes, Series 2009-2A, Class A-2, 5.29% 20162
     17,500       17,486  
Nissan Auto Lease Trust, Series 2008-A, Class A-3a, 5.14% 2011   
     40,250       41,179  
Capital One Auto Finance Trust, Series 2006-A, Class A-4, AMBAC insured, 0.243% 20121   
     2,381       2,360  
Capital One Auto Finance Trust, Series 2006-C, Class A-4, FGIC insured, 0.263% 20131   
     22,502       22,067  
Capital One Auto Finance Trust, Series 2007-B, Class A-4, MBIA insured, 0.263% 20141    
     12,425       12,018  
CarMax Auto Owner Trust, Series 2007-2, Class A-3, 5.23% 2011   
     5,684       5,774  
CarMax Auto Owner Trust, Series 2008-2, Class A-3a, 4.99% 2012   
     8,200       8,535  
CarMax Auto Owner Trust, Series 2007-2, Class A-4, 5.27% 2012   
     20,000       20,957  
Prestige Auto Receivables Trust, Series 2006-1A, Class A-2, FSA insured, 5.25% 20132    
     5,062       5,194  
Prestige Auto Receivables Trust, Series 2007-1, Class A-3, FSA insured, 5.58% 20142   
     27,581       28,429  
Vega ContainerVessel PLC, Series 2006-1, Class A, XLCA insured, 5.562% 20212    
     37,235       33,579  
USAA Auto Owner Trust, Series 2007-1, Class A-4, 5.55% 2013   
     26,000       27,025  
Vanderbilt Mortgage and Finance, Inc., Series 2002-C, Class A-4, 6.57% 2024   
     7,502       7,555  
Vanderbilt Mortgage and Finance, Inc., Series 1999-B, Class I-A-6, 6.925% 2024   
     5,036       5,061  
Vanderbilt Mortgage and Finance, Inc., Series 2000-C, Class A-4, 7.905% 2026   
     1,388       1,415  
Vanderbilt Mortgage and Finance, Inc., Series 1997-C, Class II-A-1, 0.445% 20271
     479       421  
Vanderbilt Mortgage and Finance, Inc., Series 2000-D, Class A-4, 7.715% 2027   
     1,524       1,559  
Vanderbilt Mortgage and Finance, Inc., Series 2000-C, Class A-5, 8.195% 2030   
     6,889       7,025  
Vanderbilt Mortgage and Finance, Inc., Series 2001-C, Class M-1, 6.76% 2032   
     849       772  
Vanderbilt Mortgage and Finance, Inc., Series 2002-C, Class M-1, 7.82% 2032   
     2,173       2,005  
CWHEQ Home Equity Loan Trust, Series 2006-S2, Class A-5, FGIC insured, 5.753% 2027   
     13,493       5,372  
CWHEQ Home Equity Loan Trust, Series 2006-S6, Class A-6, AMBAC insured, 5.657% 20341   
     13,126       5,737  
CWHEQ Home Equity Loan Trust, Series 2006-S4, Class A-6, AMBAC insured, 5.834% 20341   
     8,033       3,692  
CWHEQ Home Equity Loan Trust, Series 2007-S1, Class A-6, MBIA insured, 5.693% 20361
     28,309       9,287  
RAMP Trust, Series 2004-RS9, Class A-I-4, AMBAC insured, 4.767% 2032   
     3,625       2,968  
RAMP Trust, Series 2004-RS10, Class A-I-6, 4.55% 2034   
     21,801       20,022  
CWHEQ Revolving Home Equity Loan Trust, Series 2006-I, Class 2-A, FSA insured, 0.373% 20371   
     18,491       13,003  
CWHEQ Revolving Home Equity Loan Trust, Series 2007-C, Class A, FGIC insured, 0.383% 20371   
     12,512       3,633  
CWHEQ Revolving Home Equity Loan Trust, Series 2007-B, Class A, FSA insured, 0.383% 20371   
     4,098       2,878  
Chase Issuance Trust, Series 2008-4, Class A, 4.65% 2015   
     18,000       19,114  
AEP Texas Central Transitioning Funding II LLC, Secured Transition Bonds, Series A, Class A-3, 5.09% 2017   
     16,720       17,967  
GMAC Mortgage Loan Trust, Series 2006-HE3, Class A-5, FGIC insured, 5.809% 20361    
     4,812       2,324  
GMAC Mortgage Loan Trust, Series 2007-HE2, Class A-2, FGIC insured, 6.054% 20371   
     9,659       5,091  
GMAC Mortgage Loan Trust, Series 2007-HE2, Class A-3, FGIC insured, 6.193% 20371
     19,318       9,446  
Vanderbilt Acquisition Loan Trust, Series 2002-1, Class B-1, 7.30% 2021   
     5,252       5,017  
Vanderbilt Acquisition Loan Trust, Series 2002-1, Class A-4, 6.57% 2027   
     8,290       8,407  
Vanderbilt Acquisition Loan Trust, Series 2002-1, Class A-5, 7.12% 2032   
     3,000       2,990  
Spirit Master Funding LLC, Net-Lease Mortgage Notes, Series 2005-1, Class A-1, AMBAC insured, 5.05% 20232,8  
     23,682       15,393  
Triad Automobile Receivables Trust, Series 2006-C, Class A-3, AMBAC insured, 5.26% 2011   
     1,139       1,140  
Triad Automobile Receivables Trust, Series 2007-A, Class A-3, FSA insured, 5.28% 2012   
     2,279       2,290  
Triad Automobile Receivables Trust, Series 2006-C, Class A-4, AMBAC insured, 5.31% 2013   
     10,000       10,288  
Hyundai Auto Receivables Trust, Series 2006-A, Class A-4, 5.26% 2012   
     13,432       13,494  
Morgan Stanley ABS Capital I Inc., Series 2004-NC3, Class M-1, 1.026% 20341    
     18,822       11,986  
Morgan Stanley ABS Capital I Inc., Series 2004-HE9, Class M-5, 1.281% 20341    
     2,678       785  
Wachovia Auto Loan Owner Trust, Series 2006-1, Class A-4, 5.08% 20122    
     6,569       6,666  
Wachovia Auto Loan Owner Trust, Series 2006-1, Class B, 5.15% 20122    
     5,000       5,100  
Drivetime Auto Owner Trust, Series 2007-A, XLCA insured, 5.603% 20131,2
    10,245       10,439  
AmeriCredit Prime Automobile Receivables Trust, Series 2007-2-M, Class A-4-A, MBIA insured, 5.35% 2016   
     10,073       10,321  
Lehman ABS Manufactured Housing Contract Trust, Series 2001-B, Class A-3, 4.35% 2014   
     2,138       1,906  
Lehman ABS Manufactured Housing Contract Trust, Series 2001-B, Class A-4, 5.27% 2018   
     1,096       964  
Lehman ABS Manufactured Housing Contract Trust, Series 2001-B, Class A-5, 5.873% 2022   
     3,600       3,219  
Lehman ABS Manufactured Housing Contract Trust, Series 2002-A, Class A, 0.689% 20331    
     4,578       3,655  
Franklin Auto Trust, Series 2006-1, Class A-4, 5.03% 2014   
     7,005       7,137  
Franklin Auto Trust, Series 2006-1, Class B, 5.14% 2014   
     2,000       2,019  
MBNA Credit Card Master Note Trust, Series 2006-1, Class C, 0.653% 20151
     10,000       8,875  
Residential Funding Mortgage Securities II, Inc., Series 2005-HI1, Class A-4, FGIC insured, 4.70% 2034   
     1,223       1,176  
Residential Funding Mortgage Securities II, Inc., Series 2005-HS1, Class A-1-2, FGIC insured, 4.66% 20351   
     6,673       6,011  
Residential Funding Mortgage Securities II, Inc., Series 2006-HSA3, Class A, FSA insured, 0.361% 20361    
     2,098       1,579  
Residential Asset Securities Corp. Trust, Series 2001-KS3, Class A-I-6, 5.96% 2031   
     9,992       8,519  
UPFC Auto Receivables Trust, Series 2007-A, Class A-3, MBIA insured, 5.53% 2013   
     8,263       8,466  
Conseco Finance Securitizations Corp., Series 2002-2, Class A-2, 6.03% 2033   
     7,685       7,683  
Ford Credit Auto Owner Trust, Series 2006-B, Class B, 5.43% 2012   
     7,333       7,481  
Citibank Credit Card Issuance Trust, Series 2008, Class C6, 6.30% 2014     
     7,000       7,234  
Credit-Based Asset Servicing and Securitization LLC, Series 2007-MX1, Class A-3, 5.825% 20361,2     
     8,387       4,507  
Credit-Based Asset Servicing and Securitization LLC, Series 2007-MX1, Class M-5, 6.831% 20361,2    
     4,725       728  
Credit-Based Asset Servicing and Securitization LLC, Series 2007-MX1, Class M-6, 7.00% 20361,2     
     1,816       246  
Credit-Based Asset Servicing and Securitization LLC, Series 2007-CB4, Class A-2B, 5.723% 20371   
     3,061       1,591  
Green Tree Financial Corp., Series 1996-10, Class A-6, 7.30% 2028   
     1,312       1,343  
Green Tree Financial Corp., Series 1997-6, Class A-7, 7.14% 2029   
     4,309       4,415  
Green Tree Recreational, Equipment & Consumer Trust, Series 1997-D, 7.25% 2029   
     1,433       745  
Conseco Finance Home Equity Loan Trust, Series 2002-B, Class M-1, 1.983% 20331   
     808       333  
New Century Home Equity Loan Trust, Series 2004-A, Class A-II-5, FGIC insured, 5.25% 2034   
     7,114       6,799  
CNL Funding, Series 2000-AA, Class A-2, MBIA insured, 8.044% 20172
     9,873       6,569  
Advanta Business Card Master Trust, Series 2006-A5, Class A, 5.10% 2012   
     6,588       6,391  
First Horizon ABS Trust, Series 2006-HE2, Class A, FSA insured, 0.361% 20261   
     715       321  
First Horizon ABS Trust, Series 2007-HE1, Class A, FSA insured, 0.361% 20291
     11,088       5,030  
PECO Energy Transition Trust, Series 2001-A, Class A-1, 6.52% 2010   
     5,000       5,125  
UCFC Manufactured Housing Contract, Series 1996-2, Class A, MBIA insured, 7.135% 2028   
     4,822       4,454  
Consumers Funding LLC, Series 2001-1, Class A-5, 5.43% 2015   
     4,140       4,427  
SACO I Trust, Series 2005-5, Class I-A, 0.711% 20351    
     3,501       2,687  
SACO I Trust, Series 2006-10, Class A, 0.381% 20361    
     7,291       723  
SACO I Trust, Series 2006-4, Class A-3, 0.441% 20361    
     4,651       665  
SACO I Trust, Series 2006-5, Class II-A-3, 0.717% 20361
     5,379       322  
Origen Manufactured Housing Contract Trust, Series 2004-B, Class M-1, 5.73% 2035   
     2,185       2,058  
Origen Manufactured Housing Contract Trust, Series 2004-B, Class M-2, 6.51% 2035   
     1,750       1,636  
Home Equity Asset Trust, Series 2004-7, Class M-1, 0.851% 20351
    6,500       3,638  
Cendant Timeshare Receivables Funding, LLC, Series 2005-1, Class A-1, FGIC insured, 4.67% 20172
    4,169       3,587  
Morgan Stanley Mortgage Loan Trust, Series 2006-4SL, Class A-1, 0.381% 20361    
     19,370       3,023  
Structured Asset Securities Corp., Series 2005-S7, Class A2, 0.531% 20351,2
     8,724       2,936  
First Investors Auto Owner Trust, Series 2006-A, Class A-4, MBIA insured, 5.00% 20132
     1,989       2,035  
CWABS Revolving Home Equity Loan Trust, Series 2004-P, Class 2-A, MBIA insured, 0.553% 20341
     5,307       1,782  
SLM Student Loan Trust, Series 2003-10, Class A-4, 5.15% 20392   
   £ 1,160       1,739  
CS First Boston Mortgage Securities Corp., Series 2007-3, Class 1-A-3B, 5.846% 20371    
   $ 8,477       1,730  
CSAB Mortgage-backed Trust, Series 2007-1, Class 1-A-3B, 5.908% 20371
     5,757       1,408  
IndyMac Home Equity Mortgage Loan Asset-backed Trust, Series 2007-H1, Class A-1, FSA insured, 0.391% 20371   
     1,784       1,016  
ACLC Business Loan Receivables Trust, Series 2002-1, Class A-2, 7.462% 20222
     1,168       941  
Countryplace Manufactured Housing Contract, Series 2005-1, Class A-2, AMBAC insured, 4.42% 20351,2   
     876       821  
Home Equity Mortgage Trust, Series 2006-2, Class 1A-1, 5.367% 20361   
     1,597       295  
Home Equity Mortgage Trust, Series 2006-5, Class A-1, 5.50% 20371
     2,106       211  
IndyMac Home Equity Mortgage Loan Asset-backed Trust, Series SPMD 2001-A, Class AF-6, 6.537% 2030   
     636       449  
Chase Auto Owner Trust, Series 2006-B, Class B, 5.24% 2014   
     389       394  
Irwin Home Equity, Series 2006-2, Class 2-A3, FGIC insured, 6.40% 20361,2     
     2,000       358  
Merrill Lynch Mortgage Investors Trust, Series 2007-SL1, Class A-1, 0.531% 20371    
     7,136       263  
Option One Mortgage Loan Trust, Series 2002-1, Class M-1, 1.356% 20321
    167       61  
              1,080,143  
                 
MUNICIPALS — 0.38%
                
State of California, Los Angeles Unified School District (County of Los Angeles), General Obligation Bonds, Election of 2004,
               
Series 2009-I, 5.00% 2029
     20,000       20,564  
State of California, Los Angeles Unified School District (County of Los Angeles), General Obligation Bonds, Election of 2002,
               
Series 2009-D, 5.20% 2029
     8,665       9,041  
State of California, Los Angeles Unified School District (County of Los Angeles), General Obligation Bonds, Election of 2002,
               
Series 2009-D, 5.00% 2034
     4,530       4,557  
State of New York, Long Island Power Authority, Electric System General Revenue Bonds, Series 2009-A, 5.75% 2039
     24,330       26,264  
California Various Purpose General Obligation Bonds 7.50% 2034  
     6,530       6,407  
California Various Purpose General Obligation Bonds 6.00% 2038  
     10,000       10,248  
State of South Dakota, Educational Enhancement Funding Corp., Tobacco Settlement Asset-backed Bonds,
               
Series 2002-A, Class A, 6.72% 2025
     19,787       15,825  
State of Illinois, Regional Transportation Authority of Cook, DuPage, Kane, Lake, McHenry and Will Counties,
               
General Obligation Bonds, Series 2003-A, FGIC-National insured, 6.00% 2033
     12,120       14,440  
State of Indiana, Health and Educational Facility Financing Authority, Hospital Revenue Refunding Bonds
               
(Clarian Health Obligated Group), Series 2006-B, 5.00% 2033
     13,860       12,688  
State of Texas, City of San Antonio, Electric and Gas Systems Revenue Refunding Bonds, New Series 2009-A, 5.00% 2034
     10,000       10,392  
State of Wisconsin, General Fund Annual Appropriation Bonds, Series 2009-A, 5.75% 2033
     6,000       6,495  
State of Texas, SA Energy Acquisition Public Facility Corp., Gas Supply Revenue Bonds, Series 2007, 5.50% 2023
     6,000       6,257  
State of New York, Metropolitan Transportation Authority, Dedicated Tax Fund Bonds (Federally Taxable-Issuer
               
Subsidy-Build America Bonds), Series 2009-C, 7.336% 2039
     5,500       6,173  
State of Louisiana, Tobacco Settlement Financing Corp., Tobacco Settlement Asset-backed Bonds,
               
Series 2001-A, Class A, 6.36% 2025
     2,317       1,932  
              151,283  
                 
                 
Total bonds & notes (cost: $37,738,120,000)
           $ 38,084,303  
                 
                 
                 
   
Principal amount
          
Convertible securities — 0.05%
     (000 )        
                 
INFORMATION TECHNOLOGY — 0.04%
                
Linear Technology Corp., Series A, 3.00% convertible notes 2027
   $ 11,500       11,587  
Advanced Micro Devices, Inc. 6.00% convertible notes 2015
     4,380       3,964  
Advanced Micro Devices, Inc. 5.75% convertible notes 2012
     1,808       1,792  
              17,343  
                 
FINANCIALS — 0.01%
                
Equity Residential 3.85% convertible notes 2026
     1,000       990  
Boston Properties, Inc. 2.875% convertible notes 2037
     1,000       986  
              1,976  
                 
Total convertible securities (cost: $15,432,000)
             19,319  
                 
                 
                 
                 
Preferred securities — 1.49%
  
Shares
          
                 
FINANCIALS — 1.48%
                
BNP Paribas 7.195%1,2
     78,000,000       72,540  
BNP Paribas Capital Trust 9.003% noncumulative trust1,2
     15,000,000       14,850  
JPMorgan Chase & Co., Series I, 7.90%1
     72,620,000       75,149  
Barclays Bank PLC 7.434%1,2
    71,920,000       66,526  
Barclays Bank PLC 6.86%1,2
     4,000,000       3,320  
SMFG Preferred Capital USD 3 Ltd. 9.50%1,2  
     36,979,000       39,013  
SMFG Preferred Capital GBP 2 Ltd. 10.231%1
     3,100,000       5,665  
SMFG Preferred Capital USD 2 Ltd. 8.75% noncumulative2
     5,562,000       5,498  
AXA SA, Series B, 6.379%1,2
     48,770,000       39,504  
PNC Preferred Funding Trust I 6.517%1,2  
     45,000,000       33,731  
PNC Preferred Funding Trust III 8.70%1,2  
     1,400,000       1,438  
QBE Capital Funding II LP 6.797%1,2
    36,055,000       30,870  
Banco Bilbao Vizcaya Argentaria, SA, 5.919%1
     33,554,000       27,048  
Resona Preferred Global Securities (Cayman) Ltd. 7.191%1,2
     32,800,000       26,856  
Standard Chartered PLC 6.409%1,2
     33,200,000       26,387  
HSBC Capital Funding LP, Series 2, 10.176% noncumulative step-up1,2
     21,320,000       25,957  
Banco Santander, SA, Series 10, 10.50%
     797,505       22,627  
Wachovia Capital Trust III 5.80%1
     14,672,000       11,371  
Wells Fargo & Co. 7.98%1
     5,425,000       5,466  
Weingarten Realty Investors, Series D, 6.75%
     495,420       10,528  
Weingarten Realty Investors, Series E, 6.95% cumulative redeemable depositary shares
     250,000       5,350  
XL Capital Ltd., Series E, 6.50%1
     16,250,000       12,431  
Lloyds Banking Group PLC 6.657% preference shares1,2
     11,400,000       6,855  
Swire Pacific Ltd. 8.84% cumulative guaranteed perpetual capital securities2
     300,000       6,769  
Société Générale 5.922%1,2
     8,000,000       6,240  
Royal Bank of Scotland Group PLC, Series U, 7.64%1
     5,000,000       2,703  
RBS Capital Trust II 6.425% noncumulative trust1
     1,000,000       615  
GMAC LLC, Series G, 7.00%2,11
     403       266  
              585,573  
                 
U.S. GOVERNMENT AGENCY SECURITIES  — 0.01%
                
US AgBank 6.11%1,2
    5,000,000       3,063  
                 
                 
           
Value
  
Preferred securities
             (000 )
                 
Total preferred securities (cost: $596,665,000)
           $ 588,636  
                 
                 
                 
                 
Common stocks — 0.04%
  
Shares
          
                 
MATERIALS — 0.03%
                
Georgia Gulf Corp.11
     759,869       13,207  
                 
                 
INFORMATION TECHNOLOGY — 0.01%
                
ZiLOG, Inc.11
     475,000       1,681  
                 
                 
CONSUMER DISCRETIONARY — 0.00%
                
Adelphia Recovery Trust, Series Arahova11
     1,943,006       350  
Adelphia Recovery Trust, Series ACC-111
    3,366,231       108  
Adelphia Recovery Trust, Series ACC-6B8,11
     5,056,500       25  
Charter Communications, Inc., Class A11
     5,059       179  
American Media Operations, Inc.2,8,11
     295,801       3  
              665  
                 
HEALTH CARE — 0.00%
                
Clarent Hospital Corp. Liquidating Trust8,11,12
     331,291       17  
                 
                 
TELECOMMUNICATION SERVICES — 0.00%
                
XO Holdings, Inc.11
     7,614       4  
                 
                 
Total common stocks (cost: $32,598,000)
             15,574  
                 
                 
                 
                 
Warrants — 0.00%
                
                 
TELECOMMUNICATION SERVICES — 0.00%
                
XO Holdings, Inc., Series B, warrants, expire 201011
    11,424       —  
XO Holdings, Inc., Series A, warrants, expire 201011
    15,233       —  
XO Holdings, Inc., Series C, warrants, expire 201011
     11,424       —  
GT Group Telecom Inc., warrants, expire 20102,8,11
     2,750       —  
              —  
                 
INDUSTRIALS — 0.00%
                
Atrium Corp., warrants, expire 20182,8,11
     1,885       —  
                 
                 
Total warrants (cost: $143,000)
             —  
                 
                 
                 
   
Principal amount
    
Value
  
Short-term securities — 1.30%
     (000 )     (000 )
                 
U.S. Treasury Bills 0.18%–0.325% due 6/17–10/21/2010
   $ 152,200     $ 151,874  
Straight-A Funding LLC 0.14%–0.18% due 1/26–3/18/20102
     119,300       119,277  
Bank of America Corp. 0.30% due 6/1/2010
     75,000       74,902  
Fannie Mae 0.43% due 12/3/2010
     33,700       33,564  
Private Export Funding Corp. 0.18% due 3/18/20102
     29,100       29,091  
General Electric Capital Corp. 0.01% due 1/4/2010
     25,000       25,000  
Federal Farm Credit Banks 0.20% due 6/15/2010
     25,000       24,977  
JPMorgan Chase & Co. 0.03% due 1/4/2010
     23,400       23,400  
Coca-Cola Co. 0.22%–0.25% due 1/13–5/13/20102
     15,900       15,886  
Walt Disney Co. 0.11% due 1/15/20102
     10,200       10,199  
Freddie Mac 0.215% due 1/27/2010
     8,600       8,599  
                 
                 
Total short-term securities (cost: $516,834,000)
             516,769  
                 
Total investment securities (cost: $38,899,792,000)
             39,224,601  
Other assets less liabilities
             369,553  
                 
Net assets
           $ 39,594,154  
 
1  Coupon rate may change periodically.
2  Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the U.S. in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $5,187,968,000, which represented 13.10% of the net assets of the fund.
3  Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.
4  Loan participations and assignments; may be subject to legal or contractual restrictions on resale. The total value of all such loans was $255,264,000, which represented .64% of the net assets of the fund.
5  Scheduled interest and/or principal payment was not received.
6  Payment in kind; the issuer has the option of paying additional securities in lieu of cash.
7  Step bond; coupon rate will increase at a later date.
8  Valued under fair value procedures adopted by authority of the board of directors. The total value of all such securities was $579,205,000, which represented 1.46% of the net assets of the fund.
9  Purchased in a transaction exempt from registration under the Securities Act of 1933. This security (acquired 7/17/2009 at a cost of $5,523,000) may be subject to legal or contractual restrictions on resale.
10Index-linked bond whose principal amount moves with a government retail price index.
11Security did not produce income during the last 12 months.
12Represents an affiliated company as defined under the Investment Company Act of 1940.
 
 
Key to abbreviations and symbols
    
     
ARS = Argentine pesos
£ = British pounds
MYR = Malaysian ringgits
A$ = Australian dollars
IDR = Indonesian rupiah
NKr = Norwegian kroner
BRL = Brazilian reais
ILS = Israeli shekels
PLN = Polish zloty
COP = Colombian pesos
¥ = Japanese yen
THB = Thai baht
DKr = Danish kroner
KRW = South Korean won
TRY = New Turkish liras
€ = Euros
MXN = Mexican pesos
UYU = Uruguayan pesos




Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so you may lose money.

Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in the fund’s summary prospectus and prospectus, which can be obtained from your financial professional and should be read carefully before investing. You may also call American Funds Service Company (AFS) at 800/421-0180 or visit the American Funds website at americanfunds.com.
 
 
 
 
 
MFGEFP-908-0210O-S21489
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INVESTMENT PORTFOLIO

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

We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements of The Bond Fund of America, Inc. (the “Fund”) as of December 31, 2009, and for the year then ended and have issued our report thereon dated February 5, 2010, which report and financial statements are included in Item 1 of this Certified Shareholder Report on Form N-CSR.  Our audit also included the Fund’s investment portfolio (the “Schedule”) as of December 31, 2009, appearing in Item 6 of this Form N-CSR.  This Schedule is the responsibility of the Fund’s management.  Our responsibility is to express an opinion based on our audit.  In our opinion, the Schedule referred to above, when considered in relation to the basic financial statements taken as a whole of the Fund referred to above, presents fairly, in all material respects, the information set forth therein.



DELOITTE & TOUCHE LLP

Costa Mesa, California
February 5, 2010
 
 
ITEM 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
 
 
ITEM 8 – Portfolio Managers of Closed-End Management Investment Companies

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.


ITEM 9 – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.


ITEM 10 – Submission of Matters to a Vote of Security Holders

There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s board of directors since the Registrant last submitted a proxy statement to its shareholders.  The procedures are as follows.  The Registrant has a nominating and governance committee comprised solely of persons who are not considered ‘‘interested persons’’ of the Registrant within the meaning of the Investment Company Act of 1940, as amended. 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. While the committee normally is able to identify from its own 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 Registrant, c/o the Registrant’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 nominating and governance committee.
 
 
ITEM 11 – Controls and Procedures

(a)
The Registrant’s Principal Executive Officer and Principal Financial Officer have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures (as such term is defined in Rule 30a-3 under the Investment Company Act of 1940), that such controls and procedures are adequate and reasonably designed to achieve the purposes described in paragraph (c) of such rule.
   
(b)
There were no changes in the Registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.


ITEM 12 – Exhibits

(a)(1)
The Code of Ethics that is the subject of the disclosure required by Item 2 is attached as an exhibit hereto.
   
(a)(2)
The certifications required by Rule 30a-2 of the Investment Company Act of 1940 and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached as exhibits hereto.
 
 
 
 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
THE BOND FUND OF AMERICA, INC.
   
 
By /s/ John H. Smet
 
John H. Smet, President and
Principal Executive Officer
   
 
Date: February 26, 2010



Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.


By /s/ John H. Smet
John H. Smet, President and
Principal Executive Officer
 
Date: February 26, 2010



By /s/ Ari M. Vinocor
Ari M. Vinocor, Treasurer and
Principal Financial Officer
 
Date: February 26, 2010