THE BOND FUND OF AMERICA - ANNUAL REPORT
for the year ended December 31, 1995
[The American Funds Group(R)]
THE BOND FUND OF AMERICA(SM)
seeks as high a level of current income as is consistent with preservation of
capital through a diversified portfolio of bonds and other fixed-income
obligations.
RESULTS AT A GLANCE
assuming distributions reinvested or interest compounded
<TABLE>
<CAPTION>
Average Annual Compound Returns
12 months 5 years 10 years Lifetime
(1/1/95 - (1/1/91 - (1/1/86 - (5/28/74 -
12/31/95) 12/31/95) 12/31/95) 12/31/95)
<S> <C> <C> <C> <C>
THE BOND FUND OF +18.2% +11.6% %+9.8 +10.6%
AMERICA
Lehman Brothers
Aggregate Bond +18.5 + 9.5 +9.6 +10.01
Index
Salomon Brothers
Broad Investment +18.5 + 9.6 +9.7 n/a/2/
Grade Bond Index
Rank versus
comparable funds/3/ 51st out of 107 3rd out of 47 3rd out of 25 1st out of 15
Average savings
institution/4/ + 3.1 + 3.9 +5.4 + 6.9
Consumer Price + 2.5 + 2.8 +3.5 + 5.5
Index/5/
</TABLE>
The bond market indexes are unmanaaged.
/1/From May 31, 1974 through December 31, 1975, the Lehman Brothers Corporate
Bond Index was used because the Lehman Brothers Aggregate Bond Index did not
yet exist. Since January 1, 1976, the Lehman Brothers Aggregate Bond Index has
been used.
/2/This index was first introduced in 1980.
/3/BFA's rank based on total return versus comparable corporate A-rated bond
funds, according to Lipper Analytical Services. Lipper rankings do not include
the effects of sales charges.
/4/Based on figures, supplied by the U.S. League of Savings Institutions and
the Federal Reserve Board, that reflect all kinds of savings deposits,
including longer term certificates. Unlike investments in the fund, such
deposits are insured and, if held to maturity, offer a guaranteed return of
principal and a fixed rate of interest, but no opportunity for capital growth.
Maximum allowable interest rates were imposed by law until 1983.
/5/Computed from data supplied by the U.S. Department of Labor, Bureau of Labor
Statistics.
Fund results in this report were computed without a sales charge unless
otherwise indicated. The fund's 30-day yield as of January 31, 1996, calculated
in accordance with the Securities and Exchange Commission formula, was 5.92%.
The fund's distribution rate as of that date was 6.79%. The SEC yield reflects
dividend and interest income earned by the fund, while the distribution rate
reflects only dividends actually paid by the fund. See the fund's Statement of
Additional Information for more details.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN WILL
VARY, SO YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE SHORTER THE TIME
PERIOD OF YOUR INVESTMENT, THE GREATER THE POSSIBILITY OF LOSS. FUND SHARES ARE
NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY, THE U.S.
GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON.
FELLOW SHAREHOLDERS:
Last year was an excellent one for the bond market and for The Bond Fund of
America. The value of your holdings increased 18.2% if, like most shareholders,
you reinvested monthly dividends which totaled $1.045 a share. If you took your
dividends in cash, your investment rose 9.4% and your dividends provided 8.2%
in income.
Few investors expected that 1995 would be so good for bonds. At the start of
the year, economic growth looked strong, the prices of many commodities were
increasing rapidly and inflation appeared as though it might be ready to rise.
Instead, the economy surprised nearly everyone by settling into a path of
moderate growth coupled with rising corporate profits and continued low
inflation. Interest rates declined sharply. Bond prices, which move inversely
to interest rates, moved higher.
The Bond Fund of America entered 1995 with a relatively short average effective
maturity of 6.4 years. This conservative posture was designed to protect
capital in the event that interest rates moved higher. As the year progressed
and the market's prospects improved, we lengthened maturities modestly. At the
end of 1995, the average effective maturity of the bonds in the portfolio was
7.2 years.
Over the course of the year the fund benefited from an improvement in the
credit quality of many of the corporate bonds in the portfolio, due in part to
healthy corporate earnings. This was evident, for example, among our airline
holdings. The fund's investment adviser anticipated the upturn in industry
conditions. Investors became more willing to buy airline bonds. And, as a
result, our holdings of the debt obligations of Alaska Airlines, American
Airlines, Delta and United showed greater price gains than many bonds with
comparable maturities. (Please see pages 7-8 for a fuller discussion.)
The Bond Fund of America's 18.2% gain in 1995 brings its lifetime total return
since inception in 1974 to 788.7%, or an average annual compound return of
10.6% a year. As you can see in the table to the left, while the fund slightly
lagged the broad unmanaged bond market indexes last year, over longer, more
meaningful time periods it has consistently outpaced the indexes as well as
most comparable funds. In addition, the fund has provided a higher return than
the average savings account and helped investors stay well ahead of inflation.
We think that prospects for continued modest economic growth and low inflation
indicate a favorable outlook for the bond market in the months ahead. But 1995
is also a reminder of how quickly things can change. On the following pages, we
discuss in some detail the complex, fast-changing environment in which BFA
operates. We hope this section of the report will help you understand more
about the nature of your investment and some of the factors that have
contributed to the fund's long-term record.
Cordially,
Paul G. Haaga,
Jr.Chairman of the Board
Abner D. Goldstine
President
February 14, 1996
HOW A $10,000 INVESTMENT HAS GROWN OVER THE FUND'S 21-YEAR LIFETIME FROM MAY
28, 1974, WHEN THE FUND BEGAN OPERATIONS, THROUGH DECEMBER 31, 1995
Here's how a $10,000 investment grew between May 28, 1974 - when The Bond Fund
of America began operations - and December 31, 1995, the end of its latest
fiscal year.
Unlike figures presented earlier in the report, the fund's results in this
chart reflect payment of the maximum sales charge of 4.75%, so the net amount
invested was $9,525 versus $10,000 in the Lehman Brothers Aggregate Bond Index,
which is unmanaged and has no sales charges, commissions or expenses.
As you can see, the investment in The Bond Fund of America would have grown to
$84,645 versus $78,693 in the Lehman index.
$84,645 /1/ /2/ BFA with dividends reinvested
$78,693/3/ Lehman Brothers Aggregate Bond Index
$31,584/4/ Consumer Price Index
$10,000/1/ original investment
AVERAGE ANNUAL COMPOUND RETURNS
(for periods ended December 31,1995)
Lifetime +10.40%
10 Years + 9.30%
5 Years +10.47%
1 Year +12.66%
Assumes reinvestment of all distributions and payment of the maximum 4.75%
sales charge at the beginning of the stated periods.
<TABLE>
<CAPTION>
Year ended 1974* 1975 1976 1977 1978 1979 1980 1981 1982 1983
December 31
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL VALUE
Dividends $413 897 1,010 1,114 1,198 1,387 1,706 2,096 2,408 2,529
Reinvested
Value at $9,884 11,137 13,15 13,83 14,11 14,55 15,07 16,07 21,361 23,382
Year-End/1/ 4 1 2 6 2 3
BFA's Total (1.2)% 12.7 18.1 5.1 2.0 3.1 3.5 6.6 32.9 9.5
Return
Year ended 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
December 31
TOTAL VALUE
Dividends 2,838 3,193 3,566 3,746 3,912 4,425 4,650 4,859 5,221 5,269
Reinvested
Value at 26,175 33,140 38,16 38,91 43,08 47,44 48,99 59,30 66,028 75,362
Year-End/1/ 6 5 0 3 3 3
BFA's Total 11.9 26.6 15.2 2.0 10.7 10.1 3.3 21.0 11.3 14.1
Return
Year ended 1994 1995
December 31
TOTAL VALUE
Dividends 5,673 6,112
Reinvested
Value at 71,582 84,645
Year-End/1/
BFA's Total (5.0) 18.2
Return
</TABLE>
AVERAGE ANNUAL COMPOUND RETURN FOR 21 1/2 YEARS: 10.40%/1/
* For the period May 28 through December 31, 1974.
/1/Results reflect payment of the maximum sales charge of 4.75% on the $10,000
investment. As outlined in the prospectus, the sales charge is reduced for
investments of $25,000 or more. The maximum initial sales charge was 8.5% prior
to December 15, 1986. There is no sales charge on dividends or capital gain
distributions that are reinvested in additional shares. Results shown do not
take into account income or capital gains taxes.
/2/Includes reinvested dividends of $68,222 and reinvested capital gain
distributions of $3,490.
/3/From May 31, 1974 through December 31, 1975, the Lehman Brothers Corporate
Bond Index was used because the Lehman Brothers Aggregate Bond Index did not
yet exist. As of January 1, 1976, the Lehman Brothers Aggregate Bond Index has
been used.
/4/Computed from data supplied by the U.S. Department of Labor, Bureau of Labor
Statistics.
Past results are not predictive of future results.
THE VAST, COMPLEX WORLD OF BOND INVESTING
SEARCHING FOR VALUE...CAPITALIZING ON CHANGE
There was once a time when the world of bond investing was quiet, uncomplicated
and fairly predictable. A time when it was largely the domain of well-to-do
investors who, for the most part, took a passive approach to fixed-income
investing.
Today's world of bond investing could not be more different. The giant markets
that perform the vital function of bringing borrowers and lenders together are
multi-faceted and extremely sensitive to change. What is more, they continue to
grow in size, scope and complexity.
Two decades ago, The Bond Fund of America's portfolio had a market value of $57
million. It consisted mainly of corporate bonds and U.S. Treasury bonds. Today,
you will still find these types of securities among its holdings. But you will
also find zero-coupon bonds, floating rate notes and convertible debentures.
There are mortgage-backed securities such as Ginnie Maes, Fannie Maes, Freddie
Macs and CMOs, as they are colloquially known, as well as their more recent
cousins, asset-backed securities (see glossary on page 11). To its advantage,
BFA has had the flexibility to roam widely across a rapidly expanding universe
of fixed-income securities in search of attractive investment opportunities. At
the end of 1995 the fund held more than 500 securities collectively worth
nearly $6.3 billion.
All told, there is now more than $8 trillion outstanding of publicly traded
debt obligations in the United States. Bonds issued by the U.S. government and
its agencies make up nearly $5 trillion of this universe. Those issued by U.S.
corporations account for more than $1.5 trillion. And those issued by
governments and corporations abroad but denominated in U.S. dollars compose the
better part of another $1 trillion. There is also about $1 trillion of
tax-exempt obligations issued by state and local governments.
Maturities cover a broad spectrum, from overnight loans to bonds that do not
come due for 30 years or - in a few cases - even 100 years. Quality also covers
a wide range, from Treasury issues at the top of the credit quality spectrum to
highly leveraged companies with limited current cash flow.
[Sidebar]The Bond Fund of America was launched 21 years ago to provide
investors with a convenient, economical way to take advantage of opportunities
in bond investing.[End Sidebar]
Because the debt markets have grown enormously in size and sophistication, bond
investing today more than ever requires informed, active management for the
achievement of better income and capital results.
The task is a demanding one. It calls for people who are prepared to work at it
full time and whose training and temperament qualify them for the job. It takes
considerable resources and contacts. It means staying abreast of economic and
financial developments both here and abroad, keeping a close watch on credit
supply and demand, and continually monitoring changes in fiscal and monetary
policy. It means weighing the prospects for different industries and studying
the relative values among various sectors of the market. It means examining the
credit standing of scores of individual issuers and traveling many miles for a
first-hand look at companies and their managements.
The Bond Fund of America was launched more than two decades ago to handle these
tasks and provide individual as well as institutional investors with a
convenient, economical way to take advantage of opportunities in bonds. The
fund follows a conservative, quality-oriented approach geared to a clearly
defined objective: to produce high current income consistent with the
preservation of capital.
BFA's investment adviser is one of the country's largest and most successful
investment management firms - Capital Research and Management Company (CRMC).
It traces its roots to 1931 and has achieved a history of consistently superior
long-term investment results. CRMC currently oversees assets totaling more than
$125 billion in stocks and fixed-income securities for The American Funds
Group. These investments represent the holdings of more than 8 million mutual
fund accounts, including those of hundreds of leading corporations and
institutions.
The organization's research activities are conducted from offices in Los
Angeles, San Francisco, New York, Washington, D.C., London, Geneva, Singapore,
Hong Kong and Tokyo. Last year alone, CRMC investment professionals made more
than 5,000 research visits in the United States and overseas.
THE MULTIPLE PORTFOLIO COUNSELOR SYSTEM
The individuals actually charged with the responsibility of managing The Bond
Fund of America are called portfolio counselors. Like all of the funds in The
American Funds Group, BFA employs the multiple portfolio counselor system. The
fund has four portfolio counselors with an aggregate of 105 years of investment
experience. Each counselor manages a portion of the portfolio as though it were
a separate fund. In addition, the fund utilizes a team of about 10 fixed-income
research analysts who make buy and sell recommendations to the portfolio
counselors. Together these analysts also manage a portion of the fund, giving
them the ability to act on their greatest convictions.
The multiple portfolio counselor system has several advantages. It allows for
an increased diversity of ideas, strategies and styles. It helps provide
greater consistency in fund results, because one counselor's off year is often
counterbalanced by the success of others. It also offers continuity of
management if one portfolio counselor assumes other responsibilities or leaves
the fund.
BFA's experienced traders concentrate on obtaining the best possible price in
buying and selling securities for the fund. They have the advantage of trading
bonds in large amounts and dealing directly with "market makers" who maintain a
ready market for many fixed-income securities. Individual investors, by
contrast, often pay higher transaction costs and obtain less favorable prices.
Another critical area is fixed-income investment administration/operations. The
individuals in this department are charged with a myriad of exacting tasks. To
start with, they operate a system of checks and balances to verify that all of
the fund's transactions and holdings are consistent with its objectives,
prospectus limitations, guidelines and operating policies. They see that trades
are properly recorded and processed. They work with the fund's custodian to
minimize any delays when interest or principal payments are not received on
schedule. They let the fund's portfolio counselors know when securities are
being called or prepaid. And they have a hand in the accurate pricing of the
fund's securities each day. Overseeing the entire process are legal, accounting
and administrative associates as well as officers of the fund who work with the
Board of Directors to ensure that BFA is operating in the best interests of its
shareholders.
A VALUE-ORIENTED PHILOSOPHY
In managing The Bond Fund of America, CRMC adheres to an investment philosophy
that characterizes both its equity and fixed-income activities, and which has
contributed importantly to its long record of success. At the heart of this
philosophy is a search for the best values that can be found through
fundamental in-depth research. The adviser's task is to anticipate changes in
the bond market as a whole, in specific parts of the market and in individual
securities before they are generally perceived by other investors. This
requires close and continuous supervision of the fund's portfolio and
modifications in its composition whenever it seems advantageous.
The search for the best values falls into three general areas - sector
analysis, credit analysis and interest-rate analysis - each of which merits a
closer look.
[Sidebar]At the heart of the fund's investment philosophy is the search for the
best values that can be found through fundamental, in-depth research.[End
Sidebar]
SECTOR ANALYSIS
What is sector analysis and what part does it play in looking for values in the
bond market?
Professional bond investors tend to group obligations in the same industries or
areas of economic activity into market segments or sectors. Securities within
those sectors, and with similar maturities, call provisions, coupons and
ratings, tend to share certain similarities in yield and price movements. The
price and yield relationship among sectors, however, can change significantly
over time. Being alert to developments that can alter those price relationships
is one way to improve investment results.
Here is an example. In the early 1990s, many U.S. air carriers were faced with
large operating losses, significant capital expenditures, and the need to raise
substantial amounts of money in the bond market. Investors were understandably
wary, which had a negative impact on the prices of outstanding issues. Airlines
were forced to offer higher and higher yields in relation to other types of
securities.
After scrutinizing the airline sector, the fund's investment adviser found that
many commercial carriers were cutting their orders for new aircraft and taking
other steps to enhance cash flow, leading to a shrinking of operating losses
and a likely return to profitability once the economy improved. The fund, as a
result, built up its investments in the airline sector.
The decision to invest proved to be a good one. As airline profitability
improved, investors became more willing to own bonds issued by many carriers,
and prices in that sector of the market rose higher in relation to prices in
other sectors.
[Sidebar]The challenge is to spot changes before they are recognized in the
market.[End Sidebar]
CREDIT ANALYSIS
Another very important step in the decision-making process is to determine how
strong a specific issuer is financially and detect changes that could affect
its relative credit strength and thus the market value of its securities.
Within CRMC's fixed-income group, there are analysts who spend the majority of
their time researching the credit quality of individual issuers. In analyzing
companies, they often work closely with CRMC's equity analysts. This exchange
of information, insights and perspectives between analysts who focus on the
stock market and those who concentrate on credit developments is extremely
helpful and figures importantly in the decision-making process.
The bond ratings assigned by Moody's Investors Service, Standard & Poor's
Corporation and other credit-rating organizations provide a starting point in
credit analysis. However, these independent services must judge the credit
strength of thousands of issuers. The investment adviser's credit analysts, on
the other hand, concentrate on a smaller group of issuers. They can bring to
bear their own industry and company insights and extend their range of vision
beyond the issuer's present credit standing. The challenge is to uncover bonds
that are currently misrated or mispriced as well as those that are likely to
benefit from credit strengthening or hurt by credit weakening in the future.
Analysts and portfolio counselors must also be concerned with the specific
conditions, or "indenture provisions," of individual securities. These contract
provisions spell out the bondholder's claim on the issuer, the terms under
which all or part of the issue can be redeemed or refunded before maturity, and
other conditions that can have an important effect on the market value of the
security.
One very significant trend over BFA's lifetime has been the "securitization" of
various types of income-producing financial assests. This trend started with
the issuance of Ginnie Maes and other types of mortgage-backed securities.
Instead of holding the mortgage loans they made, financial institutions pooled
them together and sold certificates representing ownership in the pool. As
interest and principal payments are made, they are passed on to investors.
Today, in an extension of this practice, there are also publicly traded
securities backed by pools of auto, boat and credit card loans, to name just
three examples. With mortgage-backed and asset-backed securities, investment
professionals need to have the analytical and quantitative skills to spot extra
value due to the type of attached credit enhancements or due to prepayment
assumptions linked to factors such as the type of loan as well as when, where
and to whom the loans were issued. Mortgage-backed and asset-backed securities
have grown phenomenally - to the point where they surpass the corporate bond
sector in size. As for BFA itself, at the end of 1995, approximately 23% of the
fund's net assets was invested in these types of securities.
INTEREST-RATE ANALYSIS
While sector and credit analysis play important roles in fixed-income
management, perhaps the most critical area has to do with the outlook for
interest rates. A great deal of time and effort is spent in analyzing factors
which may determine the path that interest rates may take in the near future
and over a longer period of time, since such changes affect the market values
of the securities in the portfolio.
[Sidebar]With economics becoming more interrelated, the organization's global
research emphasis also plays a valuable role.[End Sidebar]
The fund's adviser examines virtually every facet of the investment scene that
influence interest rates. Its people keep an eye on the rate of inflation as
well as inflationary expectations. They closely watch other economic measures
such as industrial output, capital spending, the level of inventories,
employment and unemployment, personal income, savings, housing starts, auto
production and retail sales. They try to judge the degree to which the Federal
Reserve will permit the nation's banks to accommodate credit demands from
business, consumer and public borrowers. They consider federal, state and local
budgets and their effect on the economy. They monitor the political environment
and assess the impact of actions by legislative and regulatory bodies.
Contributing to this effort are associates in the adviser's research office in
the nation's capital.
The organization's global research emphasis also plays a valuable role in
developing the outlook for interest rates. With economies and markets becoming
more and more interrelated and interdependent, being able to evaluate the
investment outlook from an international viewpoint is not only an advantage, it
is a necessity.
In addition to trying to anticipate changes in interest rates in general, the
adviser looks at expected changes in the shape of the "yield curve" - that is,
the relationships between the yields of securities with various maturities. The
yield curve typically slopes upward with shorter term securities offering lower
yields than their longer term counterparts. Sometimes, however, there is little
difference in yields (i.e., the yield curve is "flat") and, on occasion, it
becomes inverted, with short-term securities offering higher yields than longer
term securities. Changes in the shape of the yield curve can have important
implications in the search for value.
While anticipating interest rate changes is, to be sure, an inexact science,
timely adjustments in the maturity mix of the fund's portfolio over "full
cycle" periods - those which include both rising and declining interest rates -
have meaningfully enhanced the fund's long-term investment results.
INTENSIVE, WIDE-RANGING RESEARCH
In addition to keeping a watch on the overall environment, members of CRMC's
fixed-income group maintain daily contact with market specialists and traders
around the country and around the world. They meet periodically with financial
consultants, economic advisers, corporate executives and government officials.
Studies prepared by in-house economists at Capital are supplemented by material
from a wide variety of other sources. The comprehensive data that is gathered
is discussed thoroughly on an informal, ongoing basis by the adviser's
fixed-income specialists and is also reviewed at meetings which bring together
portfolio counselors and analysts from the credit and equity areas, economists
and fixed-income traders. Such meetings serve as an excellent forum for the
exchange of information, ideas and insights.
The investment strategy that comes out of this intensive, wide-ranging effort
is then translated into "buy" or "sell" decisions with each portfolio counselor
and analyst free to act on his or her best ideas. Key to effectively
implementing these decisions are the skills and talents of a group of
experienced securities traders with direct-line phones to dealers around the
country. These traders also use computerized systems to continuously monitor
the market for new developments and investment opportunities.
Actively managing fixed-income investments in today's highly charged
environment is clearly no small task. It is a difficult and demanding job that
most individuals are unable or unwilling to tackle. The men and women at
Capital Research and Management Company pictured on this and previous pages
welcome the challenge. Because they operate in an uncertain and ever-changing
environment - and because they are human - their judgments can be far from
perfect. But over the years they have made many more right decisions than wrong
ones. The result of those decisions is what you see reflected in the pattern of
success that has become the Capital organization's hallmark.
Glossary
ZERO-COUPON BONDS: securities that pay all their interest and principal in one
lump sum at maturity
FLOATING RATE NOTES: securities whose income varies with changes in market
interest rates
CONVERTIBLE DEBENTURES: bonds that are convertible into stocks
GINNIE MAES: pools of mortgages backed as to timely payment of principal and
interest by the Government National Mortgage Association and the full faith and
credit of the U.S. government
FANNIE MAES: pools of mortgages backed as to timely payment of principal and
interest by the Federal National Mortgage Association, a federally chartered
and privately owned corporation
FREDDIE MACS: pools of mortgages backed as to timely payment of principal and
interest by the Federal Home Loan Mortgage Association, an agency of the U.S.
government
CMOS (COLLATERALIZED MORTGAGE OBLIGATIONS): pools of mortgages structured to
pay principal and/or interest in a predetermined manner
ASSET-BACKED SECURITIES: pools of financial assets such as credit card, boat or
auto loans
THE BOND FUND OF AMERICA
Corporate Bonds 41%
Mortgage and Asset-Backed Securities 23%
U.S. Treasury Securities 21%
Cash Equivalents 9%
Non-U.S. Government Bonds and
Development Agencies 6%
<TABLE>
<CAPTION>
Principal Market Percent of
INVESTMENT PORTFOLIO DECEMBER 31, 1995 Amount Value Net Assets
(000) (000)
<S> <C> <C> <C>
ELECTRICAL & GAS UTILITIES
UTILITIES: ELECTRICAL & GAS
Big Rivers Electric Corp. 10.70% 2017 17,000 19,156 .31%
CEZ Finance BV 8.875% 1999/1/ 7,000 7,656 .12
CMS Energy 0%/9.50% 1997/2/ 2,000 2,063 .03
Columbia Gas System:
Series A 6.39% 2000 10,000 10,152
Series C 6.80% 2005 22,000 22,629 1.16
Series D 7.05% 2007 5,000 5,181
Series F 7.42% 2015 35,000 35,437
Long Island Lighting Co.: .00
6.25% 2011 4,000 3,833 .06
8.90% 2019 5,000 5,050 .08
8.20% 2023 10,000 9,800 .16
United Illuminating Co. 9.76% 2006 5,388 5,658 .09
--------- --------
126,615 2.01
INDUSTRIAL & SERVICE --------- --------
AUTOMOBILES
General Motors Corp.:
9.45% 2011 20,000 25,164
8.80% 2021 52,000 64,092 1.42
--------- --------
89,256 1.42
--------- --------
BEVERAGES & TOBACCO
Canandaigua Wine Co., Inc. 8.75% 2003 2,000 2,010 .03
Dr Pepper Bottling Co. of Texas 10.25% 2000 8,500 8,967 .14
--------- --------
10,977 .17
--------- --------
BROADCASTING & PUBLISHING
American Media Operations, Inc. 11.625% 2004 11,500 11,615 .18
Infinity Broadcasting Corp. 10.375% 2002 10,500 11,287 .18
Marvel Holdings Inc. 0% 1998 55,250 39,780 .63
People's Choice TV Corp. 0%/13.125% 2004/2/ 23,250 13,543 .22
Univision Television Group, Inc.:
11.75% 2001 5,500 5,968 .09
7.00% 2002 3,498 2,217 .04
Young Broadcasting Inc. 10.125% 2005 3,000 3,165 .05
--------- --------
87,575 1.39
--------- --------
CONSTRUCTION & HOUSING
Del Webb Corp. 9.75% 2003 10,000 10,175 .17
Kaufman and Broad Home Corp. 10.375% 1999 7,500 7,650 .12
M.D.C. Holdings, Inc. 11.125% 2003 12,000 11,430 .18
--------- --------
29,255 .47
--------- --------
DATA PROCESSING & REPRODUCTION
AST Research, Inc. 0% 2013 31,500 10,710 .17
Data General Corp.:
7.75% convertible debentures 2001 8,000 7,840 .13
8.375% 2002 1,250 1,228 .02
Maxtor Corp. 5.75% convertible debentures 2012 2,000 1,550 .02
Neodata Services, Inc. 0%/12.00% 2003/2/ 13,000 11,960 .19
VLSI Technology, Inc. 8.25% convertible 4,000 3,670 .06
debentures 2005
--------- --------
36,958 .59
--------- --------
DIVERSIFIED MEDIA & CABLE TELEVISION
Adelphia Communications Corp. 9.50% 2004 2,498 1,980 .03
Bell Cablemedia PLC 0%/11.95% 2004/2/ 39,500 27,847 .44
Cablevision Industries Corp.:
10.75% 2004 1,000 1,055 .02
9.875% 2013 5,000 5,312 .08
CAI Wireless Systems, Inc. 12.25% 2002 5,250 5,604 .09
Century Communications Corp.:
9.50% 2000 3,500 3,631 .06
9.75% 2002 4,550 4,755 .08
Comcast Corp.:
10.25% 2001 13,000 14,072 .22
9.375% 2005 3,000 3,173 .05
1.125% convertible debentures 2007 25,000 12,687 .20
Continental Cablevision, Inc.:
8.50% 2001 22,050 22,877 .36
10.625% 2002 4,500 4,804 .08
8.625% 2003 4,000 4,160 .07
8.875% 2005 10,000 10,475 .17
8.30% 2006/1/ 15,750 15,809 .25
11.00% 2007 3,000 3,352 .05
9.00% 2008 9,000 9,450 .15
9.50% 2013 10,500 11,287 .18
Heartland Wireless Communications, Inc. 4,000 4,510 .07
13.00% 2003/1/
Insight Communications Co.,LP 8.25% 2000/3/ 11,250 11,137 .18
International CableTel Inc.:
0%/10.875% 2003/2/ 9,500 6,840 .11
0%/12.75% 2005/2/ 17,750 11,227 .18
News America Holdings Inc.:
10.125% 2012 26,000 31,465 .50
8.625% 2014 A$3,250 2,117 .03
8.45% 2034 10,000 11,537 .18
Rogers Communications Inc. 10.875% 2004 3,500 3,658 .06
Storer Communications, Inc. 10.00% 2003 11,087 11,156 .18
Tele-Communications, Inc. 9.25% 2023 7,500 8,187 .13
Time Warner Inc.:
9.625% 2002 15,000 17,376 .27
10.15% 2012 17,500 21,691 .34
0% convertible debentures 2013 40,000 16,500 .26
9.125% 2013 21,000 23,666 .38
TKR Cable I, Inc. 10.50% 2007 27,500 31,969 .51
Turner Broadcasting System, Inc. 0% 2007/1/ 15,000 6,863 .11
Viacom International Inc.:
9.125% 1999 5,000 5,225 .08
10.25% 2001 2,600 2,990 .05
Videotron Holdings PLC 0%/11.125% 2004/2/ 20,500 14,299 .23
--------- --------
404,743 6.43
--------- --------
ELECTRICAL & ELECTRONICS
General Electric Co. 8.625% 2008 3,000 3,617 .06
MagneTek, Inc. 10.75% 1998 7,500 7,706 .12
Samsung Electronics Co., Ltd. 8.50% 2002/1/ 27,850 30,983 .49
--------- --------
42,306 .67
--------- --------
ENERGY & RELATED COMPANIES
BP America Inc. 10.00% 2018 4,000 4,532 .07
California Energy Co., Inc.:
9.875% 2003 14,000 14,700 .23
0%/10.25% 2004/2/ 38,600 36,477 .58
Flores & Rucks, 13.50% 2004 4,300 4,880 .08
Global Marine, Inc. 12.75% 1999 4,250 4,696 .07
Mesa Capital Corp. 0%/12.75% 1998/2/ 7,500 6,637 .11
Midland Cogeneration Venture LP:
10.33% 2002 8,052 8,374 .13
secured lease obligation bonds, 10.33% 2002 7,398 7,694 .12
Mobil Corp. 8.00% 2032 10,000 11,058 .18
Occidental Petroleum Corp. 9.25% 2019 12,000 15,098 .24
Oil Co. Ltd. 8.90% 2000/1/ 20,000 20,800 .33
Oryx Energy Co. 9.50% 1999 3,500 3,765 .06
Parker & Parsley Petroleum 8.25% 2007 11,000 11,893 .19
Subic Power Corp. 9.50% 2008/1/ 7,845 7,394 .12
TransTexas Gas Corp. 11.50% 2002 15,000 15,488 .25
--------- --------
173,486 2.76
--------- --------
FOOD RETAILING
Allied Supermarkets Inc. 6.625% 1998 3,590 3,554 .06
Carr-Gottstein Co. 12.00% 2005 9,000 9,090 .14
Safeway Inc. 10.00% 2002 1,500 1,755 .03
Smith's Food & Drug Centers, Inc., Series 94A2,
0%/8.64% 2012/2/ 14,000 14,822 .24
Star Markets Co., Inc. 13.00% 2004 1,500 1,530 .02
Stater Bros. Holdings Inc. 11.00% 2001 9,500 9,453 .15
Vons Companies, Inc. 9.625% 2002 1,000 1,060 .02
--------- --------
41,264 .66
--------- --------
FOREST PRODUCTS & PAPER
Container Corp. of America:
10.75% 2002 4,300 4,364 .07
9.75% 2003 36,000 35,100 .56
11.25% 2004 2,500 2,575 .04
Fort Howard Corp.:
9.25% 2001 7,750 7,866 .13
11.00% 2002 3,746 3,915 .06
10.00% 2003 5,250 5,407 .09
Fort Howard Paper Co.:
8.25% 2002 3,000 2,925 .04
9.00% 2006 6,750 6,615 .11
Grupo Industrial Durango, SA de CV:
9.25% 1996/1/ /3/ 7,500 7,219 .11
12.00% 2001 3,000 2,655 .04
PT Indah Kiat Paper & Pulp Corp.:
8.875% 2000 2,000 1,890 .03
8.875% 2000/1/ 9,135 8,633 .13
11.875% 2002 2,000 2,020 .03
P.T. Inti Indorayon Utama 9.125% 2000 3,000 2,801 .04
Pacific Lumber Co. 10.50% 2003 500 474 .01
Repap Wisconsin 9.875% 2006 12,250 11,576 .18
Riverwood International Corp.:
10.75% 2000 4,500 4,838 .08
Series II 10.75% 2000 1,500 1,613 .03
11.25% 2002 1,000 1,085 .02
Tjiwi Kimia International Finance Co. 8,500 9,201 .15
13.25% 2001
--------- --------
122,772 1.95
--------- --------
GENERAL RETAILING & MERCHANDISING
Ann Taylor, Inc. 8.75% 2000 4,500 3,735 .06
Barnes & Noble, Inc. 11.875% 2003 10,000 11,100 .17
Dayton Hudson Corp.:
10.00% 2010 10,000 10,784 .17
8.50% 2022 5,000 6,244 .10
Levitz Furniture Corp. 12.375% 1997 425 385 .01
Thrifty PayLess, Inc.:
11.75% 2003 15,000 16,200 .26
12.25% 2004 16,500 17,573 .28
Units 12.25% 2004 5,000 5,750 .09
--------- --------
71,771 1.14
--------- --------
HEALTH & PERSONAL CARE
FHP International Corp. 7.00% 2003 5,000 4,934 .08
Merit Behaviorial Care Corp. 11.50% 2005/1/ 3,000 3,105 .05
--------- --------
8,039 .13
--------- --------
LEISURE & TOURISM
Discovery Zone 0% convertible debentures 2013 28,500 7,410 .12
Euro Disney SCA 6.75% convertible FF108,780 20,068 .32
debentures 2001
Foodmaker, Inc.:
9.25% 1999 12,200 11,712 .19
9.75% 2002 8,300 7,677 .12
Four Seasons Hotels Inc. 9.125% 2000 6,000 5,985 .09
Harrah's Jazz Finance Corp. 14.25% 2001 3,000 825 .01
Harrah's Jazz Co. 8.75% 2000 2,000 2,025 .03
Kloster Cruise Ltd. 13.00% 2003 25,750 19,570 .31
Plitt Theatres, Inc. 10.875% 2004 6,850 6,199 .10
Station Casinos, Inc. 9.625% 2003 1,000 993 .02
--------- --------
82,464 1.31
--------- --------
MACHINERY & ENGINEERING
Coltec Industries Inc.:
9.75% 1999 7,000 7,210 .11
9.75% 2000 7,500 7,725 .12
John Deere Capital Corp. 8.625% 2019 9,150 10,493 .17
NL Industries 11.75% 2003 1,000 1,067 .02
--------- --------
26,495 .42
--------- --------
METALS
Acme Metals Inc.:
0%/13.50% 2004/2/ 9,000 7,403 .12
12.50% 2004 4,500 4,545 .07
AK Steel Corp. 10.75% 2004 6,500 7,215 .12
Inco Ltd.:
9.875% 2019 7,500 8,413 .13
9.60% 2022 16,000 18,505 .30
ISPAT Mexicana:
(Euro) 10.375% 2001 4,650 4,266 .07
10.375% 2001/1/ 2,000 1,835 .03
Kaiser Aluminum and Chemical Corp.:
9.875% 2002 1,400 1,438 .02
12.75% 2003 18,500 20,257 .32
Tubos de Acero de Mexico, SA 13.750% 1999/1/ 2,500 2,531 .04
UCAR Global Enterprises Inc. 12.00% 2005 3,430 3,962 .06
USX Corp. 9.125% 2013 15,000 17,246 .27
--------- --------
97,616 1.55
--------- --------
MISCELLANEOUS MATERIALS & COMMODITIES
Building Materials Corp. of America 6,000 4,140 .07
0%/11.75% 2004/2/
Exide Corp. 10.00% 2005 5,500 5,967 .09
Owens-Illinois, Inc. 11.00% 2003 5,000 5,650 .09
Tolmex, SA de CV 8.375% 2003 5,500 4,441 .07
--------- --------
20,198 .32
--------- --------
Multi-Industry
Hanson America, Inc. 144A 2.39% convertible
debentures 2001/1/ 20,000 16,650 .26
Swire Pacific Ltd. 8.50% 2004/1/ 25,000 27,459 .44
Tenneco Inc. 7.875% 2002 3,000 3,277 .05
--------- --------
47,386 .75
--------- --------
OTHER
ADT Operations 9.25% 2003 2,500 2,681 .04
ASH Capital Finance, Ltd. 9.50% 2006 Pound4,500 4,997 .08
Protection One Alarm Monitoring, Inc. 17,000 14,185 .23
0%/13.625% 2005/2/
--------- --------
21,863 .35
--------- --------
TELECOMMUNICATIONS
CellNet Data Systems, Inc. 0%/13.00% 2005/1/ /2/ /4/ 40,750 24,654 .39
Cellular Communications International, 15,071 9,043 .14
Inc. 0% 2000
Cellular, Inc. 0%/11.75% 2003/2/ 10,500 8,347 .13
CenCall Communications Corp. 0%/10.125% 2004/2/ /5/ 26,500 14,972 .24
Centennial Cellular Corp. 8.875% 2001 19,000 18,715 .30
Comcast Cellular Corp.:
Series A, 0% 2000 22,500 17,325 .28
Series B, 0% 2000 18,400 14,168 .23
Comcast UK Cable Partners Ltd. 0%/11.20% 2007/2/ 18,000 10,530 .17
Commnet Cellular Inc. 11.25% 2005 5,500 5,803 .09
Comunicacion Celular S.A. Units 17,550 10,025 .16
0%/13.125% 2003/1/ /2/
Dial Call Communications, Inc. 0%/12.25% 2004/2/ /5/ 37,750 21,517 .34
Geotek Communications, Inc. 0%/15.00% 2005/2/ 8,750 4,134 .07
Horizon Cellular Telephone Co., LP 15,500 13,485 .21
0%/11.375% 2000/2/
IntelCom Group, Inc. 0%/13.50% 2005/1/ /2/ 16,250 9,466 .15
MFS Communications Co., Inc. 0%/9.375% 2004/2/ 42,500 34,319 .55
MobileMedia Communications, Inc. 0%/10.50% 2003/2/ 8,600 6,708 .11
NEXTEL Communications, Inc./5/:
0%/11.50% 2003/2/ 42,500 26,775 .42
0%/9.75% 2004/2/ 51,750 28,074 .45
Northern Telecom Ltd. 8.75% 2001 3,500 3,946 .06
Omnipoint Corp. 6.00%/12.00% 2000 /4/ 12,500 12,500 .20
Paging Network, Inc. 11.75% 2002 10,275 11,354 .18
PanAmSat, LP PanAmSat Capital Corp. 9.75% 2000 10,150 10,759 .17
PriCellular Wireless Corp.:
0%/14.00% 2001/2/ 6,000 5,295 .08
0%/12.25% 2003/2/ 12,200 9,425 .15
Rogers Cantel Mobile Communications Inc. 31,975 33,654 .53
10.75% 2001
TCI Communications, Inc Deb 8.75% 2015 10,000 11,087 .18
Telecom Argentina STET - France Telecom 5,500 5,871 .09
S. A. 12.00% 1999
Tele West plc:
9.625% 2006 3,000 3,060 .05
0%/11.00% 2007/2/ 16,000 9,660 .15
--------- --------
394,671 6.27
--------- --------
TEXTILES & APPAREL
Tultex Corp. 10.625% 2005 1,250 1,281 .02
WestPoint Stevens Inc. 8.75% 2001 2,500 2,500 .04
--------- --------
3,781 .06
--------- --------
TRANSPORTATION
Air Wis Services, Inc. 7.75% convertible 4,000 3,540 .06
debentures 2010
Alaska Airlines:
Series A, 9.50% 2010 2,397 2,548 .04
Series B, 9.50% 2010 3,024 3,214 .05
Series C, 9.50% 2010 2,927 3,128 .05
Series D, 9.50% 2012 4,889 5,219 .08
American Airlines Inc., 1991-C2, pass-through
certificates 9.73% 2014/6/ 6,000 7,080 .11
American Airlines, Inc., 1991-A, mortgage
pass-through
certificates, 9.71% 2007/6/ 9,244 10,734 .17
AMR Corp.:
10.40% 2011 13,000 16,043 .26
10.42% 2011 5,000 6,144 .10
Atlas Air,Inc., pass-through certificates, .00
12.25% 2002
Delta Air Lines, Inc.: 11,000 11,220 .18
9.875% 2000 2,000 2,261 .04
10.375% 2011 2,500 3,127 .05
9.25% 2022 5,000 5,906 .09
10.375% 2022 3,000 3,928 .06
pass-through certificates:
Series 1992-A2, 9.20% 2014/6/ 11,750 13,350 .21
Series 1992-B1, 9.375% 2007/6/ 9,200 10,451 .17
Series 1993-A2, 10.50% 2016/6/ 15,000 18,910 .30
Series 1993-B2, 10.06% 2016/6/ 2,000 2,445 .04
Series 1993-C2, 9.59% 2017/6/ 5,000 5,925 .09
1990 Equipment trust certificates:
Series J, 10.00% 2014/1/ 10,000 12,092 .19
Series I, 10.00% 2014/1/ 8,000 9,674 .15
Series F, 10.79% 2014/1/ 1,700 2,172 .04
Federal Express Corp. 8.40% 2010 10,000 10,875 .17
Jet Equipment Trust:
Series 1994-A, 10.91% 2006/1/ 6,989 8,186 .13
Series 1995-B 10.91% 2014/1/ 5,000 5,381 .09
Series 1995-A, 10.69% 2015/1/ 10,500 12,613 .20
Series 1995B-A, 7.63% 2015/1/ 23,500 24,704 .39
Series 1995B-C, 9.71% 2015/1/ 5,500 6,119 .10
MC-Cuernavaca Trust 9.25% 2001/1/ 5,161 3,529 .06
Northwest Airlines, Inc. 12.0916% 2000 8,015 8,366 .13
TNT Transport (Euro) PLC/TNT (USA) Inc. 4,750 4,964 .08
11.50% 2004
United Air Lines, Inc.:
10.67% 2004 9,000 10,857 .17
pass-through certificates:
Series 1993-A3, 8.39% 2011/6/ 7,500 8,008 .13
Series 1995-A1, 9.02% 2012/6/ 8,659 9,691 .15
USAir, pass-through trust, Series 2,000 1,880 .03
1993-A3, 10.375% 2013
Viking Star Shipping Inc. 9.625% 2003 4,000 4,100 .07
--------- --------
278,384 4.43
--------- --------
FINANCE
BANKING & THRIFTS
Bank of Scotland 8.80% 2004/1/ 16,000 18,362 .29
Den Danske Bank Aktieselskab 7.25% 2005/1/ 14,025 14,804 .24
First Nationwide 12.25% 2001 9,000 10,170 .16
Kansallis-Osak-Pankki 9.75% 1998 5,000 5,527 .09
Maybank-New York 7.125% 2005 10,000 10,505 .17
Midland American Capital 12.75% 2003 12,150 14,340 .23
New American Capital, Inc. 9.60% 1999/1/ 15,000 15,113 .24
Skandinaviska Enskilda Banken (N.Y. City) 14,000 14,083 .22
6.875% 2009
State Bank of New South Wales Euronotes 3,000 3,403 .05
10.375% 1999
--------- --------
106,307 1.69
--------- --------
FINANCIAL SERVICES
Beneficial Corp. 12.875% 2013 3,800 4,596 .07
Ford Motor Credit Co. 9.50% 2000 7,350 8,280 .13
General Electric Capital Corp. 8.875% 2009 8,000 10,043 .16
General Motors Acceptance Corp.:
7.00% 2000 5,000 5,193 .08
8.75% 2005 10,000 11,615 .19
8.875% 2010 2,500 3,043 .05
--------- --------
42,770 .68
--------- --------
INSURANCE
American Re Corp. 10.875% 2004 15,000 16,734 .27
CIGNA Corp. 6.375% 2006 15,000 14,782 .23
Fairfax Financial Holdings Ltd.:
7.75% 2003 7,750 8,145 .13
8.25% 2015 6,250 6,696 .11
Fidelity National Financial 0% 2009 20,000 9,150 .14
--------- --------
55,507 .88
--------- --------
REAL ESTATE
B.F. Saul REIT 11.625% 2002 20,000 20,400 .32
Beverly Finance Corp. 8.36% 2004/1/ 15,000 16,519 .26
Corporate Property Investors 9.00% 2002/1/ 2,000 2,274 .04
ERP Operating Limited Partnership 7.95% 2002 6,750 7,213 .11
IRVINE Co. 7.46% 2006 17,000 16,979 .27
Price REIT, Inc. 7.25% 2000 5,000 5,052 .08
Security Capital Industrial Trust 7.875% 2009 6,250 6,641 .10
Shopping Center Associates 6.75% 2004/1/ 12,000 12,015 .19
Wellsford Residential Property Trust:
7.75% 2005 1,000 1,064 .02
7.25% 2000 1,000 1,032 .02
Wharf Capital International, Ltd. 8.875% 2004 15,000 16,108 .26
--------- --------
105,297 1.67
--------- --------
COLLATERALIZED MORTGAGE/ASSET-
BACKED OBLIGATIONS/6/
(Excluding Those Issued by Federal Agencies)
Banco Nacional de Mexico 0% 2002/1/ 21,340 15,845 .25
Capstead Securities Corp. IV, collateralized
mortgage obligations, Series 1992-4, 8,750 9,625 .15
Class J, 18.3103% 2022/7/
Chase Manhattan Bank, N.A., Series 93-I, Class
2A5, 7.25% 2024 2024 10,000 9,987 .16
Countrywide Funding Corp., Series 94-2, Class
A-12,
5.6680% 2009/7/ 5,206 3,527 .06
CSFB Finance Co. Ltd. 7.00% 2005 30,000 29,797 .47
CS First Boston Mortgage Securities Corp.,
mortgage pass-through certificates:
Series 1995-AEW1, 6.665% 2027/3/ 997 1,006 .02
Series 1995-MBL1 Class A 6.425% 2030 17,922 18,012 .29
Electronic Transfer Master Trust 9.35% 2002/1/ 18,000 18,162 .29
GCC Home Equity Trust, asset-backed
certificates, Series 1990-1, 10.00% 2005 3,974 4,063 .06
G E Capital Mortgage Services:
Series 1994-15, Class A10, 6.00% 2009 16,376 15,230 .24
Series 1995-1, Class A8, 8.40% 2025 21,785 22,972 .37
Green Tree Financial Corp., pass-through
certificates:
Series 1994-A, Class NIM, 6.90% 2004 3,350 3,347 .05
Series 1995-A, Class NIM, 7.25% 2005 3,555 3,598 .06
Series 1993-2, Class B, 8.00% 2018 2,250 2,377 .04
Series 1995-9, Class A-5, 6.80% 2027 8,000 8,180 .13
J.P. Morgan Commercial Mortgage Finance Corp.,
pass-through certificates, Series 1995-C1,
Class A-2, 7.3517% 2010/3/ 1,000 1,054 .02
MBNA Credit Card Trust, asset-backed
certificates, Series 1991-1, 7.75% 1998 6,000 6,092 .10
Merrill Lynch Mortgage Investors, Inc.:
Seriies 1995-C2, Class D 8.0603% 2021/3/ 993 1,020 .02
Series 1995-C3, Class A1, 6.7889% 2025/3/ 1,993 2,035 .03
Morgan Stanley Capital Inc. Series 1995-GA1,
Class A1, 7.00% 2002/1/ 19,104 19,510 .31
Prudential Home Mortgage Securities Co., Inc.:
Series 1993-7, Class A-4, 8.00% 2003 9,323 9,416 .15
Series 1993-7, Class A-5, 8.00% 2003 5,406 5,413 .09
Series 1993-48, Class A-6, 6.25% 2008 4,466 4,318 .07
Series 1992-37, Class A-6, 7.00% 2022 2,460 2,457 .04
Series 1993-34, Class A-1, 7.00% 2023 16,910 17,021 .27
Residential Funding Mortgage Securities I, Inc.,
Series 1992-S6, Class A-10, 12.102% 2022/7/ 10,124 10,225 .16
Resolution Trust Corp.:
Series 1991-M5, Class B, 9.00% 2017 2,560 2,649 .04
Series 1992-6, Class A-2B, 8.40% 2024 9,062 9,175 .14
Series 1993-C1, Class D, 9.45% 2024 9,352 9,799 .16
Series 1993-C1, Class E, 9.50% 2024 755 750 .01
Series 1993-C2, Class C, 8.00% 2025 3,000 3,105 .05
Series 1993-C2, Class D, 8.50% 2025 3,290 3,422 .05
Series 1993-C2, Class E, 8.50% 2025 801 792 .01
Ryland Mortgage Securities Corp., Series 1991-14,
Class F, 21.528% 2021/7/ 1,070 1,113 .02
Structured Asset Securities Corp., pass-through
certificates, Series 1995-C1, Class A1A, 928 942 .01
7.375% 2024
SKW II Real Estate L.P.:
6.45% 2002/1/ 887 888 .01
6.90% 2002/1/ 4,646 4,658 .07
Standard Credit Card Master Trust I, credit card
participation certificates:
Series 1991-1A, 8.50% 1997 10,500 10,628 .17
Series 1994-2A, 7.25% 2008 5,000 5,389 .09
Standard Credit Card Trust, credit card
participation certificates:
Series 1990-3A, 9.50% 1998 5,000 5,245 .08
Series 1990-6A, 9.375% 1998 4,000 4,211 .07
Series 1991-3A, 8.875% 1999 11,000 11,839 .19
Travelers Mortgage Services, Inc., pass-through
certificates, Series 1989-9, Class Z-2, 802 815 .01
8.80% 2019
--------- --------
319,709 5.08
--------- --------
GOVERNMENTAL
GOVERNMENTS (EXCLUDING U.S. GOVERNMENT)
Argentina (Republic of):
8.375% 2003 15,000 12,638 .20
Eurobond 6.8125% 2005/3/ 30,500 21,731 .34
Eurobond 5.00% 2023/3/ 6,500 3,721 .06
Brazil (Republic of):
Debt Conversion Bond 6.875% 2012/3/ 2,000 1,148 .02
British Columbia Hydro & Power Authority:
15.50% 2011 17,000 18,979 .30
15.50% 2011 11,967 13,726 .22
12.50% 2013 4,000 4,806 .07
12.50% 2014 7,000 8,547 .14
Canadian Government:
10.50% 2001 C$5,000 4,277 .07
6.50% 2004 34,500 24,466 .39
9.00% 2004 37,750 31,201 .50
8.75% 2005 15,000 12,301 .19
4.524% 2021 2,000 1,514 .02
9.00% 2025 9,000 7,694 .12
Israel (State of) 6.375% 2005 13,000 13,130 .21
Italian Government National:
8.50% 2004 ITL7,200,000 4,033 .06
8.50% 2004 16,650,000 9,257 .15
Italy (Republic of) 6.875% 2023 38,000 37,109 .59
Netherlands Government DFL 7.50% 2023 FL41,300 28,167 .45
Nova Scotia (Province of):
7.25% 2013 4,000 4,192 .07
11.50% 2013 2,212 2,571 .04
Ontario (Province of):
7.75% 2002 3,500 3,810 .06
7.375% 2003 1,250 1,354 .02
7.625% 2004 5,000 5,497 .09
7.00% 2005 10,750 11,354 .18
17.00% 2011 11,250 12,979 .21
15.25% 2012 6,985 8,411 .13
11.50% 2013 5,000 5,793 .09
Panama Interest Reduction Bond 3.50% 2014 4,000 1,815 .03
Poland (Republic of):
7.75% 2000/1/ 3,000 3,069 .05
Discount Bond 7.125% 2024/3/ 750 568 .01
Past Due Interest Bond 3.75% 2014/3/ 2,000 1,300 .02
Quebec (Province of):
8.625% 2005 4,750 5,493 .09
13.25% 2014 5,500 7,006 .11
Queensland Global Treasury Note:
8.00% 2001 A$17,000 12,610 .20
12.00% 2001 5,000 4,384 .07
South Africa (Republic of) 13.00% 2010 ZAR24,500 6,192 .10
United Mexican States Government Eurobonds:
Series A, 6.25% 2019 1,000 656 .01
Series B, 6.25% 2019 6,500 4,266 .07
--------- --------
361,765 5.75
--------- --------
DEVELOPMENT AUTHORITIES
European Investment Bank 10.125% 2000 2,000 2,357 .04
Inter-American Development Bank 8.875% 2009 10,000 12,757 .20
International Bank for Reconstruction &
Development 14.90% 1997 2,500 2,816 .05
--------- --------
17,930 .29
--------- --------
FEDERAL AGENCY OBLIGATIONS - MORTGAGE
PASS-THROUGHS1/2
Federal Home Loan Mortgage Corp.:
8.00% 2003-2010 7,196 7,488 .12
8.25% 2007 3,386 3,529 .06
8.50% 2002-2020 43,350 45,234 .72
8.75% 2008 4,324 4,535 .07
9.00% 2021 1,338 1,408 .02
10.00% 2011-2019 2,020 744 .01
10.50% 2020 3,578 3,951 .06
10.75% 2010 148 164 .00
11.50% 2000 49 51 .00
12.00% 2010-2015 2,015 2,270 .04
12.50% 2009-2019 2,288 2,650 .04
12.75% 2015-2019 791 909 .02
13.00% 2014 78 91 .00
13.50% 2018 16 19 .00
13.75% 2014 28 32 .00
Federal National Mortgage Assn.:
7.50% 2009-2024 19,381 19,891 .32
8.00% 2023 3,666 3,797 .06
8.50% 2009-2023 16,433 17,215 .27
9.00% 2018-2025 9,194 9,695 .15
9.50% 2009-2019 1,372 1,472 .02
10.00% 2019 870 957 .02
10.50% 2012 4,566 5,086 .08
11.00% 2015-2020 4,395 4,924 .08
11.25% 2014 85 95 .00
11.50% 2010-2014 390 443 .01
12.00% 2015-2019 182 209 .00
12.50% 2015 390 456 .01
13.00% 2014 66 78 .00
13.25% 2015 28 33 .00
15.00% 2013 88 106 .00
Government National Mortgage Assn.:
5.00% 2024/3/ 2,000 1,973 .03
5.50% 2023-2024/3/ 151,765 153,444 2.44
6.00% 2022-2024/3/ 66,656 67,687 1.08
6.125% 2022/3/ 9,870 10,097 .16
6.50% 2008-2024/3/ 21,107 21,138 .34
7.00% 2008-2024/3/ 112,681 114,475 1.82
7.50% 2008-2024 85,223 87,774 1.40
8.00% 2023-2025 14,289 14,900 .24
8.50% 2020-2026 80,188 84,219 1.37
9.00% 2016-2025 24,683 26,145 .42
9.50% 2009-2020 19,485 20,964 .33
10.00% 2017-2019 3,069 3,380 .05
10.50% 2015-2019 976 1,092 .02
11.00% 2013-2016 1,715 1,941 .03
11.50% 2015 81 93 .00
12.00% 2014 167 192 .00
12.50% 2010-2015 1,165 1,373 .02
13.25% 2014 110 126 .00
--------- --------
748,545 11.91
--------- --------
FEDERAL AGENCY OBLIGATION - OTHER
Federal Home Loan Bank Bonds:
6.16% 2004 24,000 23,696 .38
6.27% 2004 5,000 4,938 .08
6.38% 2003 3,000 2,982 .05
6.41% 2003 18,580 18,455 .29
7.00% 2005 35,000 34,973 .56
8.23% 2004 5,000 5,070 .08
Federal Home Loan Mortgage Notes:
5.74% 2003 6,500 6,333 .10
5.78% 2003 12,175 11,762 .19
6.185% 2003 19,845 19,607 .31
6.19% 2004 11,000 10,849 .17
6.24% 2003 2,900 2,872 .05
6.27% 2004 2,500 2,471 .04
6.28% 2003 3,000 2,974 .05
6.30% 2003 2,000 1,988 .03
6.375% 2003 5,820 5,793 .09
6.39% 2003 10,330 10,269 .16
6.50% 2003 6,200 6,128 .10
7.00% 2002 25,000 25,098 .40
7.12% 2003 15,000 15,000 .24
7.29% 2004 6,000 6,103 .10
Federal National Mortgage Association Notes:
7.70% 2004 12,500 13,217 .21
medium-term note:
6.14% 2004 13,000 12,812 .20
7.43% 2005 30,000 30,225 .48
Callable Principal STRIPS 0%/8.25% 2022/2/ 4,500 3,764 .06
--------- --------
277,379 4.42
--------- --------
COLLATERALIZED MORTGAGE OBLIGATIONS - FEDERAL
AGENCIES/6/
Federal Home Loan Mortgage Corp.:
Series 1604, Class SA, 4.7763% 2008/7/ 2,000 1,411 .02
Series 1712, Class D, 6.00% 2009 7,500 7,024 .11
Series 1716, Class A, 6.50% 2009 4,750 4,596 .07
Series 1574, Class AB, 6.50% 2023 4,842 4,055 .07
Series 1657, Class SA, 5.9935% 2023/7/ 7,520 4,500 .07
Series 1673, Class SA, 4.4499% 2024/7/ 7,879 4,400 .07
Federal National Mortgage Assn.:
Series 90-142, Class J, 9.25% 2003 2,390 2,407 .04
Series 91-146, Class Z, 8.00% 2006 6,273 6,450 .10
Series 91-65, Class X, 6.50% 2019 19,711 19,169 .31
Series 90-93, Class G, 5.50% 2020 1,500 1,436 .02
Series 93-138, Class SA, 7.8532% 2023/7/ 3,758 2,691 .04
--------- --------
58,139 .92
--------- --------
U.S. TREASURY OBLIGATIONS
9.25% January 1996 15,000 15,021 .24
7.875% February 1996 14,250 14,292 .23
9.375% April 1996 10,000 10,114 .16
8.00% January 1997 53,000 54,449 .87
5.625% January 1998 3,500 3,529 .06
8.125% February 1998 130,750 138,268 2.20
5.375% May 1998 10,000 10,033 .16
9.25% August 1998 180,750 198,259 3.15
8.875% February 1999 43,500 47,959 .76
9.125% May 1999 20,750 23,156 .37
6.875% July 1999 58,000 60,900 .97
8.875% May 2000 10,000 11,350 .18
8.750% August 2000 25,000 28,394 .45
8.50% November 2000 63,000 71,269 1.13
7.75% February 2001 26,500 29,262 .47
13.125% May 2001 21,500 29,230 .46
14.25% February 2002 7,000 10,170 .16
6.375% August 2002 8,700 9,123 .15
11.625% November 2002 87,000 117,069 1.86
5.75% August 2003 10,000 10,120 .16
11.625% November 2004 78,500 111,102 1.77
6.50% August 2005 5,000 5,327 .08
10.375% November 2009 17,000 22,429 .36
12.75% November 2010 10,500 15,993 .25
10.375% November 2012 17,000 23,502 .37
12.00% August 2013 10,000 15,408 .24
11.25% February 2015 6,000 9,605 .15
10.625% August 2015 25,000 38,293 .61
8.875% August 2017 129,500 173,448 2.76
8.125% May 2021 8,000 10,116 .16
--------- --------
1,317,190 20.94
--------- --------
FLOATING RATE EURODOLLAR NOTES (UNDATED)/3/
Allied Irish Banks Ltd. 6.4375% 10,000 8,675 .14
Bank of Nova Scotia 6.00% 15,000 11,700 .19
Bergen Bank 6.00% 5,000 3,925 .06
Canadian Imperial Bank of Commerce 6.125% 25,000 19,625 .31
Christiana Bank Og Kreditkasse 6.0625% 11,000 8,745 .14
Financiere Credit Suisse 5.8125% 8,000 6,240 .10
Hongkong and Shanghai Banking Corp. 6.25% 10,000 8,013 .13
Lloyds Bank:
(#2) 6.062% 5,000 4,150 .07
(#3) 5.985% 5,000 4,125 .06
Midland Bank 5.8125% 5,000 4,010 .06
National Bank of Canada 3.03125% 5,000 3,250 .05
Standard Chartered Bank:
5.8125% 15,000 11,419 .18
5.775% 5,000 3,819 .06
--------- --------
97,696 1.55
--------- --------
EQUITY-TYPE SECURITIES & MISCELLANEOUS
EQUITY-TYPE SECURITIES
Dial Page, Inc., warrants/8/ 39 - .00
Geotek Comminications, Inc., warrants expire 263 656 .01
7/15/2005/8/
Glendale Federal Bank, FSB warrants expire 8 14 .00
3/10/00/8/
IntelCom Group Inc., warrants expire 8/8/05/8/ 48 215 .00
--------- --------
885 .01
--------- --------
MISCELLANEOUS
Investment securities in the initial period of 16,907 .28
acquisition
--------- --------
TOTAL BONDS, NOTES AND EQUITY-TYPE SECURITIES --------- --------
(cost: $5,585,511,000) 5,743,901 91.32
--------- --------
SHORT-TERM SECURITIES
COMMERCIAL PAPER
Albertson's Inc. 5.75% due 1/5/96 19,000 18,985 .30
American Express Credit Corp.:
5.78% due 1/18/96 15,900 15,855 .25
5.72% due 1/31/96 10,000 9,951 .16
Anhueuser-Busch Cos. 5.72% due 1/4/96 15,000 14,991 .24
Associates Corp. of North America 5.99% due 8,600 8,597 .14
1/2/96
Bayerische Landesbank Girozentrale 5.76% due 10,000 9,995 .16
1/3/96
Beneficial Corp.:
5.70% due 1/30/96 10,000 9,953 .16
5.71% due 2/9/96 28,500 28,321 .45
Chevron Oil Finance Co. 5.70% due 2/8/96 27,700 27,530 .44
CIT Group Holdings Inc.:
5.75% due 1/10/96 15,000 14,976 .24
5.73% due 2/2/96 10,000 9,948 .16
Ford Credit Europe PLC 5.76% due 1/11/96 25,000 24,956 .40
Gannett Co. 5.76% due 1/19/96 20,000 19,940 .32
General Electric Capital Corp. 5.73% due 2/2/96 25,000 24,870 .39
Haifax Building Society:
5.76% due 1/2/96 5,000 4,998 .08
5.77% due 1/10/96 15,000 14,976 .24
Hershey Foods Corp. 5.70% due 1/30/96 10,000 9,953 .16
H.J. Heinz Co. 5.79% due 1/5/96
5.79% due 1/5/96 22,000 21,983 .35
5.74% due 1/25/96 13,000 12,949 .20
5.76% due 1/29/96 10,000 9,954 .16
Motorola Inc. 5.70% due 1/11/96
5.70% due 1/11/96 18,000 17,969 .28
5.72% due 1/26/96 14,100 14,042 .22
PepsiCo, Inc. 5.72% due 1/19/96 5,500 5,484 .09
Sandoz Corp.:
5.73 due 2/5/96 3,500 3,480 .05
5.73 due 2/20/96 12,000 11,906 .19
Sony Capital Corp.:
5.80% due 1/12/96 5,591 5,580 .09
5.75% due 2/8/96 13,000 12,921 .20
--------- --------
385,063 6.12
--------- --------
Certificates of Deposit
ABN-AMRO Bank, NV (Netherlands) 5.72% due 2/1/96 30,000 30,001 .47
Bank of Montreal 5.76% due 1/17/96 20,000 20,000 .32
Bayer Landesbank 5.73% due 2/1/96 20,000 20,001 .32
National Westminster 5.82% due 1/12/96 25,000 25,000 .40
--------- --------
95,002 1.51
--------- --------
TOTAL SHORT-TERM SECURITIES (Cost $480,063,000) 480,065 7.63
--------- --------
TOTAL INVESTMENT SECURITIES (cost $6,065,574,000) 6,223,966 98.95
Excess of cash and receivables over payables 66,210 1.05
--------- --------
NET ASSETS 6,290,176 100.00%
========= ========
</TABLE>
/1/ Purchased in a private placement transaction; resale may be made to
qualified institutional buyers.
/2/ Represents a zero coupon bond which will convert to an interest-bearing
security at a later date.
/3/ Coupon rates may change periodically.
/4/ Valued under procedures established by the Board of Directors
/5/ CenCall Communications merged with NEXTEL on July 28, 1995, and Dial Call
is expected to merge with NEXTEL 1/19/96. After their repective closings, the
securities of Cencall and Dial Call will become obligations of NEXTEL.
/6/ Pass-through securities backed by a pool of mortgages or other loans on
which principal payments are periodically made. Therefore, the effective
maturity of these securities is shorter than the stated
/7/ Represents an inverse floater, which is a floating rate note whose
interest rate moves in the opposite direction of prevailing interest rates.
/8/ Non-income-producing security.
See Notes to Financial Statements
The Bond Fund of America
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, 1995 (dollars in thousands)
Assets:
Investment securities at market
(cost: $6,065,574) $6,223,966
Cash 2,703
Prepaid expense
Receivables for--
Sales of investments $3,090
Sales of Fund's shares 15,065
Dividends and accrued interest 97,066 115,221
------------ ---------------
6,341,890
Liabilities:
Payables for--
Purchases of investments 35,924
Repurchases of fund's shares 10,815
Forward currency contracts 1,864
Dividends on Fund's shares 2
Management services 1,884
Accrued expenses 1,225 51,714
------------ ---------------
Net Assets at December 31, 1995--
Equivalent to $13.88 per share on
453,215,186 shares of $1 par value
capital stock outstanding (authorized
capital stock - 500,000,000 shares) $6,290,176
===============
STATEMENT OF OPERATIONS
for the year ended December 31, 1995 (dollars in thousands)
Investment Income:
Income:
Interest 482,948
Dividends from investment in stocks 1,001 $483,949
------------
Expenses:
Management services fee 20,858
Distribution expenses 13,834
Transfer agent fee 4,205
Reports to shareholders 487
Registration statement and prospectus 411
Postage, stationery and supplies 1,270
Directors' fees 36
Auditing and legal fees 51
Custodian fee 268
Taxes other than federal income tax 68
Other expense 43 41,531
------------ ---------------
Net investment income $442,418
===============
Realized Loss and Unrealized
Appreciation on Investments:
Net realized loss (13,362)
Net change in unrealized appreciation
(depreciation) on:
Investments 506,688
Open forward currency contracts (461)
------------
Net unrealized appreciation 506,227
---------------
Net realized loss and
unrealized appreciation
on investments 492,865
---------------
Net Increase in Net Assets Resulting $935,283
from Operations ===============
STATEMENT OF CHANGES IN NET ASSETS (dollars in thousands)
Year ended Year ended
December 31, December 31,
1995 1994
Operations:
Net investment income $442,418 $395,207
Net realized loss on investments (13,362) (36,092)
Net unrealized appreciation
(depreciation) on investments 506,227 (626,541)
------------ ---------------
Net increase (decrease) in net assets
resulting from operations 935,283 (267,426)
------------ ---------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net
investment income (438,147) (396,205)
------------ ---------------
Capital Share Transactions:
Proceeds from shares sold:
119,215,625 and 99,296,409
shares, respectively 1,591,640 1,337,647
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions
of net realized gain on investments:
23,407,092 and 20,827,138 shares,
respectively 312,925 277,618
Cost of shares repurchased:
78,844,004 and 96,388,393
shares, respectively (1,052,675) (1,295,101)
------------ ---------------
Net increase in net assets
resulting from capital share
transactions 851,890 320,164
------------ ---------------
Total Increase (Decrease) in Net Assets 1,349,026 (343,467)
Net Assets:
Beginning of year 4,941,150 5,284,617
------------ ---------------
End of year (including
undistributed net investment
income: $14,704 and $10,433
respectively) $6,290,176 $4,941,150
============ ===============
</TABLE>
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
1. 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 following paragraphs summarize the significant accounting policies
consistently followed by the fund in the preparation of its financial
statements:
Bonds and notes are valued at prices obtained from a bond-pricing service
provided by a major dealer in bonds, when such prices are available; however,
in circumstances where the investment adviser deems it appropriate to do so,
such securities will be valued at the mean of representative quoted bid and
asked prices or, if such prices are not available, at prices for securities of
comparable maturity, quality and type. Securities denominated in non-U.S.
currencies are generally valued on the basis of bid quotations. Equity-type
securities are stated at market value based upon closing sales prices reported
on recognized securities exchanges on the last business day of the period or,
for listed securities having no sales reported, upon last-reported bid prices
on that date. Securities traded in the over-the-counter market are valued at
the last available sale price prior to the time of valuation, or, lacking any
sales, at the last reported bid price. Short-term securities with original or
remaining maturities in excess of 60 days, including forward currency
contracts, are valued at the mean of their quoted bid and asked prices.
Short-term securities with 60 days or less to maturity are valued at amortized
cost, which approximates market value. The maturities of variable or floating
rate instruments are deemed to be the time remaining until the next interest
rate adjustment date. Securities for which market quotations are not readily
available are valued at fair value as determined in good faith by the Valuation
Committee of the Board of Directors.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses from securities transactions are reported on an identified cost
basis. Interest income is reported on the accrual basis. Discounts on
securities purchased are amortized over the life of the respective securities.
The fund does not amortize premiums on securities purchased. Dividends are
declared on a daily basis after determination of the fund$s net asset value and
are paid to shareholders on a monthly basis.
Investment securities and other assets and liabilities, including forward
currency contracts, denominated in non-U.S. currencies are recorded in the
financial statements after translation into U.S. dollars utilizing rates of
exchange on the last business day of the year. Interest income from such
investments is calculated using the approximate exchange rate as accrued or
when received. Purchases and sales of investment securities, income, and
expenses are calculated at the rates of exchange prevailing on the respective
dates of such transactions. The fund does not identify the portion of each
amount shown in the fund$s statement of operations under the caption "Realized
Loss and Unrealized Appreciation on Investments" that arises from changes in
non-U.S. currency exchange rates.
Pursuant to the custodian agreement, the fund receives credit against its
custodian fee for imputed interest on certain balances with the with the
custodian bank. The custodian fee of $268,000 includes $107,000 that was paid
by credits rather than in cash.
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision
is required.
As of December 31, 1995, net unrealized appreciation on investments,
excluding forward currency contracts, for book and federal income tax purposes
aggregated $158,387,000, of which $229,379,000 related to appreciated
securities and $70,992,000 related to depreciated securities. During the year
ended December 31, 1995, the fund realized, on a tax basis, a net capital loss
of $13,362,000 on securities transactions. The fund has available at December
31, 1995 a net capital loss carryforward of $49,122,000 which may be used to
offset capital gains realized during subsequent years through 2002 and thereby
relieve the fund and its shareholders of any federal income tax liability with
respect to the capital gains that are so offset. It is the intention of the
fund not to make distributions from capital gains while there is a capital loss
carryforward. The cost of portfolio securities, excluding foreign currency
contracts, for book and federal income tax purposes was $6,067,241,000 at
December 31, 1995.
3. The fee of $20,858,0000 for management services was paid pursuant to an
agreement with Capital Research and Management Company (CRMC), with which
certain officers and Directors of the fund are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily, based
on an annual rate of 0.30% of the first $60 million of average net assets;
0.21% of such assets in excess of $60 million but not exceeding $1 billion;
0.18% of such assets in excess of $1 billion but not exceeding $3 billion; and
0.16% of such assets in excess of $3 billion ("asset-based fee"); plus 3.00% on
the first $450,000 of the fund's monthly gross investment income; and 2.25% of
such income in excess of $450,000 ("income-based fee").
Pursuant to a Plan of Distribution, the fund may expend up to 0.25% of its
average net assets annually for any activities primarily intended to result in
sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the fund's Board of Directors. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the year ended December 31, 1995,
distribution expenses under the Plan were $13,834,000. As of December 31,
1995, accrued and unpaid distribution expenses were $926,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $4,205,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $4,814,000 (after
allowances to dealers) as its portion of the sales charges paid by purchasers
of the fund's shares. Such sales charges are not an expense of the fund and,
hence, are not reflected in the accompanying statement of operations.
Directors of the fund who are unaffiliated with CRMC may elect to defer
part or all of the fees earned for services as members of the Board. Amounts
deferred are not funded and are general unsecured liabilities of the fund. As
of December 31, 1995, aggregate amounts deferred and earnings thereon were
$38,868.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain of the Directors and officers of
the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No
such persons received any remuneration directly from the fund
4. As of December 31, 1995, accumulated net realized loss on investments was
$42,020,000 and paid-in capital was $5,714,717,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $2,995,429,000 and $2,209,896,000, respectively,
during the year ended December 31, 1995.
The fund purchases forward currency contracts in anticipation of, or to
protect itself against, fluctuations in exchange rates. The contracts are
recorded in the statement of assets and liabilities at their net unrealized
value; the fund$s maximum potential liability in these contracts is equal to
the full contract amounts. Risk may arise upon entering these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from the possible movements in foreign exchange rates and securities values
underlying these instruments.
- -----
<TABLE>
<CAPTION>
Contract Amount U.S. Valuations at 12/31/95
------------ --------- ---------- ---------
Unrealized
<S> <C> <C> <C> <C>
Appreciation
NON-U.S. CURRENCY SALES CONTRACTS Non-U.S. U.S. Amount (Depreciation)
French Francs expiring FF70,000,000 $12,091,000 $14,294,000 ($2,203,000)
11/25/96 to 9/9/98
Great Britain Pounds Pound2,000,000 3,082,000 3,101,000 (19,000)
expiring 3/19/96
Netherland Guilders expiring FL46,487,000 29,726,000 29,368,000 358,000
1/16/96 to 12/9/96
--------- ---------- ---------
$44,899,000 $46,763,000 ($1,864,000)
=========== ========== =========
</TABLE>
- -------
PER-SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993 1992 1991
Net asset value, beginning of year $12.69 $14.45 $13.99 $13.70 $12.39
------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C>
Income from investment operations:
Net investment income 1.05 1.05 1.09 1.15 1.21
Net realized and unrealized gain(loss) 1.18 (1.76) 0.84 0.34 1.28
ON INVESTMENTS
------- ------- ------ ------- -------
Total income (loss) from investment 2.23 (0.71) 1.93 1.49 2.49
OPERATIONS
------- ------- ------ ------- -------
Less distributions:
Dividends from net investment income (1.04) (1.05) (1.08) (1.16) (1.18)
Distributions from net realized gains -- -- (0.39) (0.04) --
-- -- -- -- --
------- ------- ------ ------- -------
Total distributions (1.04) (1.05) (1.47) (1.20) (1.18)
------- ------- ------ ------- -------
Net Asset Value, end of year $13.88 $12.69 $14.45 $13.99 $13.70
======= ======= ====== ======= =======
Total Return/1/ 18.25% (5.02%) 14.14% 11.34% 21.04%
Ratios/supplemental data:
Net assets, end of year (in millions) $6,290 $4,941 $5,285 $3,917 $2,859
Ratio of expenses to average net assets .74% .69% .71% .73% .77%
Ratio of net income to average net 7.87% 7.77% 7.53% 8.36% 9.28%
assets
Portfolio turnover rate 43.80% 56.98% 44.68% 49.70% 56.47%
</TABLE>
/1/ This was calculated without deducting a sales charge. The maximum sales
charge is 4.75% of the fund's offering price.
Independent Auditors' Report
To the Board of Trustees and Shareholders of
The Bond Fund of America, Inc.:
We have audited the accompanying statement of assets and liabilities of
The Bond Fund of America, Inc., including the schedule of portfolio investments
as of December 31,1995, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended, and the per-share data and ratios for each of the five
years in the period then ended. These financial statements and the per-share
data and ratios are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and the
per-share data and ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
per-share data and ratios are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at December 31, 1995 by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and per-share data and ratios
referred to above present fairly, in all material respects, the financial
position of The Bond Fund of America, Inc. as of December 31, 1995, 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 per-share data and
ratios for each of the five years in the period then ended, in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Los Angeles, California
January 26, 1996
FUND SERVICES
These handy services can add convenience and flexibility to your American Funds
investments.
ADDING TO YOUR INVESTMENT
There are three ways you can group your American Funds purchases to qualify for
a quantity discount:
Right of accumulation: You can combine the value of your existing shares with
those you are purchasing to qualify for a discount.
Statement of Intention: You can, without obligation, use a Statement of
Intention that allows you to combine the value of your existing shares and the
purchases you intend to make over a 13-month period so you can take immediate
advantage of the maximum quantity discount available.
Concurrent purchases: By purchasing shares in more than one of the American
Funds simultaneously, you may qualify for a quantity discount.
(Shares of money market funds purchased directly do not apply to quantity
discounts. Additionally, certain accounts may not be eligible to be grouped.
See the fund's prospectus or your investment professional for more details.)
Subsequent investments by mail: Once your account has been established and
you've selected a broker/dealer, simply send a check for $50 or more, along
with the bottom portion of your account statement, to American Funds Service
Company.
PUTTING YOUR INVESTMENTS ON AUTOPILOT
Automatic investment plan: You can make automatic investments regularly by
authorizing American Funds Service Company to deduct a specified sum from your
bank account.
Automatic exchange plan: You can automatically exchange $50 or more between
funds on a regular basis.
Automatic withdrawal plan: You can arrange to have regular checks for specified
amounts sent to you or to anyone you designate in any month(s) you choose.
CHOOSING THE PAYOUT SYSTEM THAT'S RIGHT FOR YOU
Automatic reinvestment: All dividends and capital gain distributions can be
automatically reinvested in additional fund shares without a sales charge.
Cross-reinvestment: You can reinvest dividends and/or capital gains from one
fund to another fund at no charge if you have a balance of at least $5,000 in
the originating fund or meet the minimum initial investment for the receiving
fund.
Dividends in cash: You can elect to take dividends in cash.
REPORTS YOU'LL RECEIVE FROM US
Confirmations of transactions: You receive account statements reflecting the
transactions in your account.
Consolidated quarterly statements: If you have more than one account with the
American Funds, you can request a quarterly statement combining certain
accounts registered to the same individual.
Year-end tax reports: At the end of each year, you will receive an individual
report which shows the tax status of the distributions paid to you during the
year. In many instances, these reports can help you calculate taxes due on
shares sold by reporting average cost.
SPECIAL SERVICES
Exchange privileges: You can transfer some or all of your holdings into other
American Funds by mail or by phone. Certain restrictions apply (a sales charge
may apply if one has not already been paid), and it's important to remember
that an exchange constitutes a sale and purchase for tax purposes.
Telephone information service: American FundsLine(r) is a toll-free service
which gives you account information as well as current prices for all American
Funds. Just call 800/325-3590.
Safekeeping of certificates: Your shares are credited to your account and
certificates are not issued unless specifically requested. (Certificates are
not available for money market funds.)
Free check-writing withdrawal service: If you have a money market fund account,
this service enables you to write checks for $250 or more against the account.
The account continues to earn daily interest until checks clear the fund's
bank.
Retirement plans: A wide variety of plans is available.
FOR MORE COMPLETE INFORMATION ABOUT THESE SERVICES OR ABOUT ANY OF THE AMERICAN
FUNDS, INCLUDING CHARGES AND EXPENSES, PLEASE OBTAIN A PROSPECTUS FROM YOUR
SECURITIES DEALER OR FINANCIAL PLANNER, OR PHONE THE FUND'S TRANSFER AGENT,
AMERICAN FUNDS SERVICE COMPANY, AT 800/421-0180. PLEASE READ THE PROSPECTUS
CAREFULLY BEFORE YOU INVEST OR SEND MONEY. THESE SERVICES ARE SUBJECT TO CHANGE
OR TERMINATION.
THE AMERICAN FUNDS GROUP(R)
A PORTFOLIO FOR EVERY INVESTOR
The Bond Fund of America is a member of The American Funds Group - 28 funds
with a wide range of investment objectives and assets totaling more than $125
billion. These funds serve more than 8 million shareholders throughout the
world, including hundreds of leading corporations and institutions.
GROWTH FUNDS
AMCAP FUND
Seeks long-term growth of capital by investing in growing, profitable
companies.
EUROPACIFIC GROWTH FUND
Seeks long-term capital appreciation by investing in companies based outside
the U.S.
THE GROWTH FUND OF AMERICA
Invests in a wide range of companies that appear to offer superior
opportunities for growth of capital.
THE NEW ECONOMY FUND
Seeks long-term growth of capital through investments in companies operating in
services and information industries in the U.S. and around the world. (Can
invest up to 40% of its assets outside the U.S.)
NEW PERSPECTIVE FUND
Seeks long-term growth of capital through investments all over the world,
including the United States.
SMALLCAP WORLD FUND
Seeks long-term growth of capital by investing in the stocks of smaller
companies in the U.S. and around the world.
GROWTH AND INCOME FUNDS
AMERICAN MUTUAL FUND
Strives for the balanced accomplishment of three objectives - current income,
capital growth and conservation of principal - through investments in companies
that participate in the growth of the American economy.
CAPITAL WORLD GROWTH AND INCOME FUND
Seeks growth and income over the long term through a global portfolio
emphasizing "blue chip" stocks.
FUNDAMENTAL INVESTORS
Seeks long-term growth of capital and income through investments in common
stocks.
THE INVESTMENT COMPANY OF AMERICA
Seeks long-term growth of capital and income, placing greater emphasis on
future dividends than on current income. Now in its 63rd year, ICA is one of
the nation's oldest and largest mutual funds.
WASHINGTON MUTUAL INVESTORS FUND
Seeks current income and an opportunity for capital growth through high-quality
common stocks considered eligible for the investment of trust funds in the
District of Columbia.
EQUITY-INCOME FUNDS
CAPITAL INCOME BUILDER
Seeks to provide a growing dividend <UNDEF> with higher income distributions
every quarter as far as possible - together with a current yield which exceeds
that paid by U.S. stocks generally. Concentrates on U.S. equity securities, but
may also invest in stocks and bonds all over the world.
THE INCOME FUND OF AMERICA
Seeks current income while secondarily striving for capital growth through
investments in stocks and fixed-income securities.
BALANCED FUND
AMERICAN BALANCED FUND
Seeks conservation of capital, current income, and long-term growth of both
capital and income by investing in stocks and fixed-income securities. The fund
is managed as if it constituted the complete investment program of a prudent
investor.
INCOME FUNDS
AMERICAN HIGH-INCOME TRUST
Seeks a high level of current income and, secondarily, capital appreciation
through a diversified, carefully supervised portfolio consisting primarily of
lower rated, higher risk corporate bonds.
THE BOND FUND OF AMERICA
Seeks as high a level of current income as is consistent with preservation of
capital through a diversified portfolio of bonds and other fixed-income
obligations.
CAPITAL WORLD BOND FUND
Seeks high long-term total return, consistent with prudent management, by
investing in quality fixed-income securities issued by major governments and
corporations all over the world, including the U.S.
INTERMEDIATE BOND FUND OF AMERICA
Seeks current income, consistent with preservation of capital, through a
diversified portfolio of government and high-quality corporate debt obligations
with effective maturities between three and 10 years.
U.S. GOVERNMENT SECURITIES FUND
Seeks high current income, consistent with prudent risk and preservation of
capital, by investing primarily in securities for which the timely payment of
principal and interest is guaranteed by the U.S. government.
TAX-EXEMPT INCOME FUNDS
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND
Seeks a high level of current income exempt from regular federal income taxes
through a diversified, carefully researched portfolio of municipal bonds,
including higher yielding, lower rated, higher risk issues. It may invest up to
100% of its assets in bonds subject to the alternative minimum tax.
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
Seeks current income exempt from federal income taxes, while preserving
capital, through a quality-oriented municipal bond portfolio with an average
effective maturity between three and 10 years.
THE TAX-EXEMPT BOND FUND OF AMERICA
Seeks a high level of federally tax-free current income, consistent with
preservation of capital, through a diversified portfolio consisting primarily
of municipal bonds.
THE TAX-EXEMPT FUND OF CALIFORNIA
Seeks a high level of current income free from federal and California income
taxes primarily through investments in California municipal bonds.
Additionally, the fund seeks to preserve capital.
THE TAX-EXEMPT FUND OF MARYLAND
Seeks a high level of current income free from federal, Maryland state and
local income taxes primarily through investments in Maryland municipal bonds.
Additionally, the fund seeks to preserve capital.
THE TAX-EXEMPT FUND OF VIRGINIA
Seeks a high level of current income free from federal and Virginia income
taxes primarily through investments in Virginia municipal bonds. Additionally,
the fund seeks to preserve capital.
MONEY MARKET FUNDS
THE CASH MANAGEMENT TRUST OF AMERICA
Seeks to provide income on cash reserves, while preserving capital and
maintaining liquidity, through high-quality money market instruments.
THE TAX-EXEMPT MONEY FUND OF AMERICA
Seeks to provide income free from federal taxes, while preserving capital and
maintaining liquidity, through investments in high-quality municipal securities
maturing in one year or less.
THE U.S. TREASURY MONEY FUND OF AMERICA
Seeks to provide income on cash reserves, while preserving capital and
maintaining liquidity, through investments in U.S. Treasury securities maturing
in one year or less.
Investments in the funds are neither insured nor guaranteed by the U.S.
government or any other entity. There can be no assurance that the money market
funds will maintain a constant net asset value of $1.00 per share.
Remember, as a shareholder of The Bond Fund of America, whenever your
objectives change you can transfer some or all of your holdings to another fund
in The American Funds Group free of charge. Exchange privileges are subject to
change or termination.
BOARD OF DIRECTORS
H. FREDERICK CHRISTIE
Rolling Hills Estates, California
Private investor; former President and Chief Executive Officer, The Mission
Group; former President, Southern California Edison Company
DIANE C. CREEL
Long Beach, California
Chairwoman, Chief Executive Officer and President, The Earth Technology
Corporation (environmental engineering)
MARTIN FENTON, JR.
San Diego, California
Chairman of the Board, Senior Resource Group, Inc. (senior living centers
management)
LEONARD R. FULLER
Los Angeles, California
President, Fuller & Company, Inc. (financial management consulting)
ABNER D. GOLDSTINE
Los Angeles, California
Senior Vice President and Director, Capital Research and Management Company
PAUL G. HAAGA, JR.
Los Angeles, California
Chairman of the Board of the fund
Senior Vice President and Director, Capital Research and Management Company
HERBERT HOOVER III
Pasadena, California
Private investor
RICHARD G. NEWMAN
Los Angeles, California
Chairman of the Board, President and Chief Executive Officer, AECOM Technology
Corporation (architectural engineering)
PETER C. VALLI
Long Beach, California
Chairman of the Board, BW/IP International, Inc. (industrial manufacturing)
OTHER OFFICERS
RICHARD T. SCHOTTE
Los Angeles, California
Senior Vice President of the fund
Senior Vice President, Capital Research and Management Company
MICHAEL J. DOWNER
Los Angeles, California
Vice President of the fund
Senior Vice President - Fund Business Management Group, Capital Research and
Management Company
MARY C. HALL
Brea, California
Vice President and Treasurer of the fund
Senior Vice President - Fund Business Management Group, Capital Research and
Management Company
JOHN H. SMET
Los Angeles, California
Vice President of the fund
Vice President, Capital Research and Management Company
JULIE F. WILLIAMS
Los Angeles, California
Secretary of the fund
Vice President - Fund Business Management Group, Capital Research and
Management Company
KIMBERLY S. VERDICK
Los Angeles, California
Assistant Secretary of the fund
Assistant Vice President - Fund Business Management Group, Capital Research and
Management Company
ANTHONY W. HYNES, JR.
Brea, California
Assistant Treasurer of the fund
Vice President - Fund Business Management Group, Capital Research and
Management Company
OFFICES OF THE FUND AND OF THE INVESTMENT ADVISER, CAPITAL RESEARCH AND
MANAGEMENT COMPANY
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92621-5804
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
P.O. Box 2205
Brea, California 92622-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
Morrison & Foerster LLP
345 California Street
San Francisco, California 94104-2675
INDEPENDENT AUDITORS
Deloitte & Touche LLP
1000 Wilshire Boulevard
Los Angeles, California 90017-2472
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
This report is for the information of shareholders of The Bond Fund of America,
but it may also be used as sales literature when preceded or accompanied by the
current prospectus, which gives details about charges, expenses, investment
objectives and operating policies of the fund. If used as sales material after
March 31, 1996, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
Litho in USA AL/CD/2892
Lit. No. BFA-011-0296
