ENDOWMENTS
INVESTMENTS FOR NONPROFIT INSTITUTIONS
ANNUAL REPORT
For the Year Ended July 31, 1999
[LOGO]
Capital Research And Management Company
RESULTS AT A GLANCE
(with all distributions reinvested)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Lipper
Standard & Lipper Lehman A-Rated
Poor's 500 Growth Brothers Bond
Composite & Income Aggregate Funds
ENDI Index Funds Index BENDI Bond Index Average
Total return for
the past fiscal year
August 1, 1998 -
July 31, 1999 +18.2% +20.2% +13.1% +1.7% +2.5% +0.7%
Average annual
Compound return
for the past 24 years/1/ 15.1% +16.1% +14.9% +9.4% +9.4%/2/ 0.092
</TABLE>
/1/From July 25, 1975, when Capital Research and Management Company became the
investment adviser of the funds' assets, through July 31, 1999.
/2/The Lehman Brothers Aggregate Bond Index did not exist until December 31,
1975. For the period from July 25, 1975 through December 31, 1975, the Lehman
Brothers Government/Corporate Bond Index was used.
The indexes are unmanaged.
ENDOWMENTS is managed by Capital Research and Management Company, which also
manages the 29 funds in The American Funds Group.(r) Since 1931, Capital has
invested with a long-term focus based on thorough research and attention to
risk.
GROWTH AND INCOME PORTFOLIO (ENDI) seeks to provide long-term growth of
principal, with income and preservation of capital as secondary objectives,
primarily through investments in common stocks.
BOND PORTFOLIO (BENDI) seeks to provide as high a level of current income as is
consistent with the preservation of capital through investments in
quality-oriented fixed-income securities.
Here are the total returns and average annual compound returns with all
distributions reinvested for periods ended June 30, 1999 (the most recent
calendar quarter): ENDI - 10 years: +302.13%, or +14.93% a year; 5 years:
+151.11%, or +20.22% a year; 12 months: +16.58%. BENDI - 10 years: +117.49%, or
+8.08% a year; 5 years: +40.28%, or +7.00% a year; 12 months: +2.12%.
BENDI's 30-day yield as of August 31, 1999, calculated in accordance with the
Securities and Exchange Commission formula, was 6.48%.
FIGURES SHOWN ARE PAST RESULTS AND ARE NOT PREDICTIVE OF FUTURE RESULTS. SHARE
PRICE AND RETURN WILL VARY, SO YOU 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.
PREPARING FOR THE YEAR 2000
The fund's key service providers - Capital Research and Management Company, the
investment adviser, and American Funds Service Company, the transfer agent -
have updated all computer systems to process date-related information properly
following the turn of the century. Other preparations continue, including
external monitoring and contingency planning. If you would like more detailed
information, call 800/421-0180, ext. 21, or visit www.americanfunds.com on the
World Wide Web.
DEAR SHAREHOLDERS:
Fiscal 1999 - the 12 months ended July 31 - saw continued volatility in the
financial markets, with stocks and bonds moving in different directions. In
this environment, the Growth and Income Portfolio (ENDI) recorded positive
absolute results, while the Bond Portfolio (BENDI) showed a modest total
return, higher than most similar funds, in a period of declining bond prices.*
GROWTH AND INCOME PORTFOLIO (ENDI):
The first half of fiscal 1999 was marked by a severe selloff in stocks followed
by a rally led by a small number of large-capitalization issues carrying very
high valuations. In the second half, the gains broadened to include more
attractively valued stocks in which ENDI was invested. For the 12 months ended
July 31, the Growth and Income Portfolio posted a gain of 18.2%./+/ This gain
exceeded the 13.1% increase recorded by the Lipper Growth & Income Funds Index,
which tracks the 30 largest funds in this category. The unmanaged Standard &
Poor's 500 Composite Index did somewhat better, registering a 12-month total
return of 20.2%.
The Growth and Income Portfolio typically displays greater resiliency than the
S&P 500 when that index declines and often lags when the index rises sharply.
This pattern held true in fiscal 1999. ENDI held its ground comparatively well
during all four months when the S&P 500 went down, including the difficult
month of August 1998, and trailed during seven of eight months when the S&P 500
showed an increase. The exception was April 1999, the month when leadership in
the market began to broaden. ENDI's total return was 9.0% in April while the
S&P 500 recorded a gain of 3.8%.
The shifting pattern of market leadership continued, with minor interruptions,
through the remainder of the fiscal year. It is illustrated by a pair of
figures: In the second quarter of calendar 1999, nearly 60% of all stocks in
the S&P 500 did better than the index versus only about one-third during the
first quarter. (The index showed a gain of about 7% from April through June,
and about 5% for January through March.)
*The acronyms ENDI and BENDI have been commonly used since before these
investment vehicles became a series within the ENDOWMENTS fund in 1998.
/+/All percentage gain/loss figures include reinvestment of distributions
unless otherwise indicated.
ENDI's fiscal 1999 results benefited from investments in a number of stocks
that have been in the portfolio for some time but were ignored by the
marketplace until recently. These include Alcoa, which rose 73% for the 12
months; Weyerhaeuser, up 54%; and Kimberly-Clark, one of the fund's largest
holdings, which rose 36% in price.
Our results also reflected merger and acquisition activity involving several of
the fund's holdings. They include Browning-Ferris Industries, Orion Capital and
several companies (e.g., American Stores and Union Camp) that no longer appear
in our portfolio because they were taken over during the year.
Additions made to the portfolio in fiscal 1999 were solid, well-run firms,
primarily in insurance, retailing and the food and household products
industries. Examples include Campbell Soup, Allstate, Mercury General and May
Department Stores.
In managing ENDI, our focus is on individual companies rather than on
industries or the stock market as a whole. At the same time, since the market
discounts future earnings, we have some concern about how well the broad market
can continue to do in an environment of higher interest rates. In view of the
current high level of valuations, we believe that holding a cash reserve is a
prudent strategy. On July 31, ENDI's holdings of short-term investments
amounted to just under 20% of net assets, about the same as at the start of the
fiscal year.
BOND PORTFOLIO (BENDI):
Fiscal 1999 was a very rough year in the fixed-income markets. The troubles
began after Russia devalued the ruble and defaulted on several debt issues.
This produced a great deal of global turmoil, as did the near-collapse a month
later of a large Wall Street hedge fund that deals in fixed-income securities.
In the uneasy atmosphere prevailing throughout the early part of the fiscal
year, investors seeking safety flocked to U.S. Treasury issues, pushing yields
down and prices up. Other bonds - all along the credit spectrum, but
particularly at the lower end - fared poorly by comparison. As credit
conditions eased, however, a major change in the fixed-income markets began
taking place. In early calendar 1999, the U.S. economic expansion picked up
speed, triggering concern that inflation might get out of hand. Medium- and
long-term interest rates turned up, and expectations rose for an increase in
the federal funds rate, an action finally taken by the Federal Reserve in late
June and again in August.
Meanwhile, spreads between Treasury issues and other portions of the bond
market - which had been unusually wide - narrowed for several months. In early
summer they changed course and began widening again, this time largely in
response to an abnormally heavy supply of new federal agency and corporate
borrowings. Quite a number of borrowers appear to be concerned about the
ability to raise new money in the capital markets as the new millennium
approaches.
All of this combined to create a challenging environment for bond investors.
BENDI continued to produce a satisfactory stream of current income;
shareholders who reinvested monthly dividends totaling $1.06 a share received
an income return of 6.4% for the 12 months ended July 31. This was offset by a
drop in market prices. The total return for the year of 1.7% was above the 0.7%
return recorded by the average of 159 corporate A-rated bond funds tracked by
Lipper, Inc. but below the 2.5% return for the unmanaged Lehman Brothers
Aggregate Bond Index.
Over longer, more meaningful periods, the Bond Portfolio has provided
shareholders with highly favorable returns. Since Capital Research became
investment adviser in 1975, the fund has achieved an average compound return of
9.4% a year.
We continue to steer a steady course in managing BENDI. In fiscal 1999, the
portfolio's maturity structure shortened slightly. On July 31, the average life
was 8.4 years compared with 8.6 years at the start of the fiscal year.
Drawing on the extensive research capabilities of our investment adviser, we
identified a number of attractive opportunities and added to our holdings of
high-grade corporate bonds, as well as mortgage-related and asset-backed issues
and government agency pass-through securities. These latter three categories
accounted for nearly 34% of the portfolio versus 19% at the start of the
fiscal year.
On the next few pages, you will find charts documenting the long-term results
of both BENDI and ENDI, followed by an article describing our investment
approach. We welcome your comments and questions and look forward to reporting
to you again in another six months.
Cordially,
/s/Robert B. Egleston /s/Frank L. Ellsworth
Robert B. Egelston Frank L. Ellsworth
Chairman of the Board President
September 3, 1999
AN INVESTMENT APPROACH
TAILORED FOR NONPROFITS
Nonprofit organizations today typically operate on tight budgets and often rely
on investments to provide a balance between income and growth. There are
distinct limits to how much risk they can afford to take in pursuit of loftier
returns and still remain faithful to their fiduciary responsibilities.
Generally, nonprofits find it sensible to adopt a very prudent approach -
frequently one involving exposure to both the bond and stock markets. There
will be periods when bonds do well while the stock market is hitting a rough
patch, and vice versa. An investment program encompassing both bonds and stocks
reduces risk and generates a considerably higher level of income than can be
achieved through investing in equities alone.
Endowments is managed with these concerns in mind. It is offered in two series,
allowing nonprofits to make their own allocations between fixed-income and
equity investments. The Bond Portfolio (BENDI) and the Growth and Income
Portfolio (ENDI) both aim for good returns while paying careful attention to
the preservation of capital.
Every investment choice, of course, involves some degree of risk, including a
decision not to invest. Money deposited in a certificate of deposit or savings
account is "safe" in the sense that the principal is federally insured (below
$100,000); but the return tends to be comparatively low and the money stands to
lose some of its purchasing power as a result of inflation.
MAGNIFYING THE BENEFITS OF DIVERSIFICATION
By their very nature as mutual funds, the Bond Portfolio and the Growth and
Income Portfolio eliminate one risk altogether - that of investing too heavily
in a single stock or bond. Both funds provide diversification by holding a
large number of securities selected through careful research. ENDI's portfolio
is diversified among more than 50 high-quality stocks. BENDI invests in dozens
of bonds and notes rated A or higher by Moody's Investors Service or Standard &
Poor's; its average portfolio maturity has ranged between seven and 10 years.
Both BENDI and ENDI use a method of managing money that magnifies the benefits
of diversification. This method, the multiple portfolio counselor system,
utilizes a number of managers to blend a variety of styles with individual
effort and has tended to smooth out some of the peaks and valleys of investing.
[Begin Pull Quote]
By their very nature as mutual funds, the Bond Portfolio and the Growth and
Income Portfolio eliminate one risk altogether -that of investing too heavily
in a single stock or bond.
[End Pull Quote]
Both portfolios have kept shareholders well ahead of inflation. Since Capital
Research and Management Company became investment manager in 1975, BENDI's
average annual compound return has been 9.4%. Through July 31, the comparable
figure for ENDI is 15.1%. Over this same period, the Consumer Price Index has
risen an average of 4.8% a year.
REASONABLE EXPECTATIONS
In formulating expectations of what can be achieved through an investment
program, we believe it makes sense to focus on historical returns. Admittedly,
when the stock market has been soaring, keeping one's sights fixed on realistic
returns can be quite a challenge. In the five calendar years from 1994 through
1998, the unmanaged Standard & Poor's 500 Composite Index generated a compound
annual return of 24.0% - nearly two-and-a-half times the average of 10.2%
recorded by this index from 1926 to 1994.*
*As measured by Ibbotson Associates
The S&P 500 has traditionally served as a benchmark for gauging the results of
most equity funds, including the Growth and Income Portfolio. Over the past few
years, however, this index, which uses a market capitalization weighting, was
driven higher by several dozen stocks - mainly large-capitalization and
high-technology issues - that rose to unusually high levels.
There are a number of different types of risk to which attention has to be paid
in investing. Some of them apply to both bonds and stocks, such as company
risk, which for simplicity's sake can be defined as the chance that a firm's
fortunes will unexpectedly turn down. Other types of risk apply primarily to
one market or the other. Credit risk, for example, is a particularly important
focal point of investment activity in the Bond Portfolio. In the stock market,
most people measure risk in terms of volatility, although that certainly does
not encompass all aspects of market risk.
SOFTENING THE IMPACT OF DECLINES
One of the ways the Growth and Income Portfolio tempers market risk is by
maintaining an equity portfolio with what we believe is a relatively low-risk
profile. Additionally, we try to temper risk at times by holding short-term
investments. During a period of attractive values, the amount of these
short-term investments or cash equivalents may be very low. At times when
valuations rise to levels that appear unattractive, the reserve will be larger.
Under normal circumstances, ENDI will not have less than 80% in equities.
[Begin Sidebar]
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Decline ENDI S&P 500 Difference*
9/21/76 - 3/6/78 -4.4% -13.8% 9.4
11/28/80 - 8/12/82 -0.6 -19.9 19.3
8/25/87 - 12/4/87 -19.6 -33.0 13.4
7/16/90 - 10/11/90 -11.6 -19.1 7.5
7/17/98 - 8/31/98 -12.0 -19.3 7.3
</TABLE>
With dividends and capital gains reinvested
*In percentage points
[End Sidebar]
The cash reserve frequently causes the Growth and Income Portfolio to lag the
market when stock prices rise sharply, but historically it has had a cushioning
effect that has enabled ENDI to hold its ground better than the market during
steep declines. This can be seen in the table at the left, which shows how ENDI
fared versus the S&P 500 during the five most significant downturns over the
past quarter-century.
This resiliency during downturns is a key reason why the Growth and Income
Portfolio has done nearly as well as the market as a whole over longer periods,
while fluctuating substantially less. Since 1975, ENDI's average annual
compound return has been about 94% of the S&P 500's, with less than 80% of the
volatility. Over the past 10 years, its annualized return has equaled about 80%
of that of the index with only 72% of the volatility, according to standard
deviation, which measures volatility.
In assessing different types of risks and opportunities, Capital Research and
Management draws on the resources of an investment research network that
employs more than 100 investment professionals. They include specialists who
travel all over the world, evaluating thousands of opportunities each year. We
believe this commitment to in-depth, proprietary research gives our
organization and the funds it manages - including the Growth and Income
Portfolio and the Bond Portfolio - an important competitive edge.
[Begin Pull Quote]
Both portfolios have kept shareholders well ahead of inflation.
[End Pull Quote]
HOW A $50,000 INVESTMENT HAS GROWN
(Under Capital Research and Management Company's stewardship 7/25/75 - 7/31/99)
GROWTH AND INCOME PORTFOLIO (ENDI)
AVERAGE ANNUAL COMPOUND RETURNS
(for periods ended July 31, 1999)
Ten Years +14.15%
Five Years +19.09%
12 Months +18.21%
[begin line chart]
$1,788,553 S&P 500
$1,477,674 ENDI
$153,782 Consumer Price Index (inflation)
<TABLE>
<CAPTION>
Consumer
Price
Index
DATE ENDI S&P 500 (inflation)
<S> <C> <C> <C>
7/25/75 /1/ $50,000 $50,000 $50,000
7/31/76 63,476 60,269 52,675
7/31/77 67,590 60,145 56,273
7/31/78 74,525 64,526 60,609
7/31/79 82,131 70,226 67,435
7/31/80 96,277 86,842 76,291
7/31/81 110,942 98,071 84,502
7/31/82 106,860 84,944 89,945
7/31/83 166,726 135,430 92,159
7/31/84 166,157 131,380 96,033
7/31/85 216,736 173,983 99,446
7/31/86 272,155 223,417 101,015
7/31/87 326,885 311,203 104,982
7/31/88 319,347 274,924 109,317
7/31/89 393,501 362,553 114,760
7/31/90 409,739 385,779 120,295
7/31/91 471,326 434,923 125,646
7/31/92 545,533 490,602 129,613
7/31/93 600,349 533,369 133,210
7/31/94 616,980 560,740 136,900
7/31/95 731,561 706,843 140,683
7/31/96 828,238 823,561 144,834
7/31/97 1,146,270 1,252,663 148,063
7/31/98 1,250,053 1,493,932 150,554
7/31/99 1,477,674 1,788,553 153,782
</TABLE>
[end chart]
BOND PORTFOLIO (BENDI)
AVERAGE ANNUAL COMPOUND RETURNS
(for periods ended July 31, 1999)
Ten Years +7.88%
Five Years +6.66%
12 Months +1.75%
[begin line chart]
$435,839/2/ Lehman Brothers Aggregate Bond Index
$428,913 BENDI
$153,782 Consumer Price Index (inflation)
<TABLE>
<CAPTION>
Lehman Consumer
Aggregate Price
Bond Index
DATE BENDI Index (inflation)
<S> <C> <C> <C>
7/25/75 $50,000 $50,000 $50,000
7/31/76 56,123 53,140 52,675
7/31/77 63,169 59,040 56,273
7/31/78 63,633 60,315 60,609
7/31/79 68,078 64,340 67,435
7/31/80 70,604 65,365 76,291
7/31/81 67,372 62,090 84,502
7/31/82 79,771 74,845 89,945
7/31/83 98,881 91,240 92,159
7/31/84 106,746 99,170 96,033
7/31/85 128,775 122,885 99,446
7/31/86 155,776 149,300 101,015
7/31/87 162,649 156,040 104,982
7/31/88 176,667 167,850 109,317
7/31/89 200,841 193,375 114,760
7/31/90 214,609 207,045 120,295
7/31/91 237,739 229,205 125,646
7/31/92 282,164 263,075 129,613
7/31/93 315,292 289,825 133,210
7/31/94 310,743 290,095 136,900
7/31/95 335,522 319,420 140,683
7/31/96 356,493 337,115 144,834
7/31/97 395,088 394,235 148,063
7/31/98 421,544 425,255 150,554
7/31/99 428,913 435,839 153,782
</TABLE>
[end chart]
/1/The share value dipped below the $50,000 mark briefly in fiscal 1975 and
1976.
/2/Lehman Brothers Aggregate Bond Index did not exist until 12/31/75. For the
period from 7/31/75 to 12/31/75, the Lehman Brothers Government/Corporate Bond
Index was used.
All results calculated with dividends and capital gains reinvested.
Sales charges do not apply to ENDI or BENDI.
Past results are not predictive of future results.
<TABLE>
Endowments, Growth and Income Portfolio
Investment Portfolio, July 31, 1999
Market Percent
Shares Value Of Net
Equity Securitites Assets
- -------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
ENERGY
ENERGY SOURCES - 4.25%
Atlantic Richfield Co. 7,000 630,438 1.22%
Conoco Inc., Class A 13,000 338,813 0.66
Kerr-McGee Corp. 10,000 515,000 1.00
Ultramar Diamond Shamrock Corp. 30,000 708,749 1.37
UTILITIES: ELECTRIC & GAS - 5.84%
Ameren Corp. 10,000 390,000 0.76
BEC Energy 18,000 767,250 1.49
DPL Inc. 30,000 575,625 1.12
GPU, Inc. 20,000 767,500 1.49
TECO Energy, Inc. 25,000 509,375 0.98
---------- ----------
5,202,750 10.09
---------- ----------
MATERIALS
CHEMICALS - 6.31%
Hercules Inc. 10,000 348,750 0.68
International Flavors & Fragrances Inc. 15,000 679,688 1.32
Monsanto Co. 10,000 391,250 0.76
PPG Industries, Inc. 10,000 596,250 1.15
Praxair, Inc. 15,000 691,875 1.34
Witco Corp. 30,000 549,375 1.06
FOREST PRODUCTS & PAPER - 2.14%
Georgia-Pacific Corp., Timber Group 15,000 370,313 0.72
International Paper Co. (acquired Union Camp Corp.) 8,000 409,000 0.79
Weyerhaeuser Co. 5,000 323,437 0.63
METALS: NONFERROUS - 0.70%
Alcoa Inc. 6,000 359,250 0.70
METALS: STEEL - 1.25%
Allegheny Teledyne Inc. 30,000 643,125 1.25
---------- ----------
5,362,313 10.40
---------- ----------
CAPITAL EQUIPMENT
AEROSPACE & MILITARY TECHNOLOGY - 2.33%
Boeing Co. 15,000 680,625 1.32
Lockheed Martin Corp. 15,000 522,188 1.01
ELECTRICAL & ELECTRONICS - 1.64%
Emerson Electric Co. 7,000 417,813 0.81
Nokia Corp., Class A (ADR) (Finland) 5,000 425,312 0.83
ELECTRONIC COMPONENTS - 1.36%
Corning Inc. 10,000 700,000 1.36
ENERGY EQUIPMENT - 0.70%
Schlumberger Ltd. 6,000 363,375 0.70
INDUSTRIAL COMPONENTS - 2.44%
Eaton Corp. 8,000 791,500 1.54
Genuine Parts Co. 15,000 465,938 0.90
MACHINERY & ENGINEERING - 1.91%
Caterpillar Inc. 7,000 410,375 0.80
Deere & Co. 15,000 573,750 1.11
---------- ----------
5,350,876 10.38
---------- ----------
CONSUMER GOODS
BEVERAGES & TOBACCO - 1.78%
Imperial Tobacco Ltd. (United Kingdom) 35,000 358,108 0.69
Philip Morris Companies Inc. 15,000 558,750 1.09
FOOD & HOUSEHOLD PRODUCTS - 6.09%
Campbell Soup Co. 25,000 1,100,000 2.13
General Mills, Inc. 10,000 828,125 1.61
Sara Lee Corp. 55,000 1,210,000 2.35
HEALTH & PERSONAL CARE - 6.56%
Avon Products, Inc. 15,000 682,500 1.32
Eli Lilly and Co. 7,000 459,375 0.89
Glaxo Wellcome PLC (ADR) (United Kingdom) 15,000 782,813 1.52
Kimberly-Clark Corp. 15,000 915,000 1.77
Merck & Co., Inc. 8,000 541,500 1.06
RECREATION & OTHER CONSUMER PRODUCTS - 1.72%
Pennzoil-Quaker State Co. 60,000 888,750 1.72
---------- ----------
8,324,921 16.15
---------- ----------
SERVICES
BROADCASTING & PUBLISHING - 1.12%
Gannett Co., Inc. 8,000 578,000 1.12
BUSINESS & PUBLIC SERVICES - 2.13%
Browning-Ferris Industries, Inc. 15,000 673,125 1.30
United HealthCare Corp. 7,000 427,000 0.83
LEISURE & TOURISM - 1.20%
Seagram Co. Ltd. (Canada) 12,000 615,750 1.20
MERCHANDISING - 4.63%
Albertson's, Inc. (acquired American Stores Co.) 9,450 469,547 0.91
J.C. Penney Co., Inc. 35,000 1,531,250 2.97
May Department Stores Co. 10,000 386,875 0.75
TELECOMMUNICATIONS - 1.62%
GTE Corp. 2,000 147,375 0.29
U S WEST, Inc. 12,000 687,750 1.33
TRANSPORTATION: RAIL & ROAD - 1.13%
Norfolk Southern Corp. 20,000 585,000 1.13
---------- ----------
6,101,672 11.83
---------- ----------
FINANCE
BANKING - 6.55%
Bank of America Corp. 5,000 331,875 0.64
Bank of Tokyo-Mitsubishi, Ltd. (ADR) (Japan) 25,000 375,000 0.73
Fleet Financial Group, Inc. 10,000 405,000 0.79
Fulton Financial Corp. 27,500 564,180 1.10
Huntington Bancshares Inc. 30,479 918,207 1.78
Wells Fargo & Co. 20,000 780,000 1.51
INSURANCE - 7.56%
Aetna Inc. 5,000 410,000 0.80
Allstate Corp. 20,000 710,000 1.38
Mercury General Corp. 20,000 686,250 1.33
Orion Capital Corp. 25,000 1,189,063 2.31
Royal & Sun Alliance Insurance Group PLC (United Kingdom) 50,000 422,401 0.82
Trenwick Group Inc. 20,000 482,499 0.92
REAL ESTATE - 4.63%
Apartment Investment and Management Co., Class A 10,000 408,125 0.79
Archstone Communities Trust 34,285 739,270 1.43
Boston Properties, Inc. 15,000 513,750 1.00
CCA Prison Realty Trust 25,000 346,875 0.67
Spieker Properties, Inc. 10,000 382,499 0.74
---------- ----------
9,664,994 18.74
---------- ----------
MISCELLANEOUS
Other equity securities in initial period of acquisition 1,704,037 3.30
---------- ----------
TOTAL EQUITY SECURITIES (cost:$39,166,651) 41,711,563 80.89
---------- ----------
Principal
Short Term Securities Amount (000)
Corporate Short-Term Notes - 19.75%
A.I. Credit Corp. 5.03% due 8/25/1999 900 896,856 1.74
Bell Atlantic Network Funding Corp. 5.08% due 8/24/1999 900 896,952 1.74
BellSouth Capital Funding Corp. 5.06% due 9/21/1999 (1) 1,000 992,691 1.93
Coca-Cola Co. 5.06% due 8/26/1999 1,000 996,346 1.93
Eastman Kodak Co. 4.79% due 8/19/1999 620 618,364 1.20
Ford Motor Credit Co. 5.07% due 8/20/1999 1,000 997,183 1.93
General Electric Capital Corp. 5.10% due 8/2/1999 600 599,830 1.16
Motiva Enterprises LLC 5.07% due 8/6/1999 700 699,408 1.36
Motorola Inc. 5.05% due 8/4/1999 800 799,551 1.55
Pfizer Inc. 5.07% due 9/2/1999 (1) 1,000 995,353 1.93
Procter & Gamble Co. 5.10% due 10/21/1999 700 691,656 1.34
Wal-Mart Stores Inc. 5.05% due 8/4/1999 (1) 1,000 999,439 1.94
---------- ----------
TOTAL SHORT-TERM SECURITIES (cost: $10,183,910) 10,183,629 19.75
---------- ----------
TOTAL INVESTMENT SECURITIES (cost: $49,350,561) 51,895,192 100.64
Excess of payables over cash and receivables 332,204 0.64
---------- ----------
NET ASSETS 51,562,988 100.00
========== ==========
(1) Purchased in a private placement transaction;
resale may be limited to qualified institutional buyers;
resale to the public may require registration.
ADR = American Depositary Receipts
See Notes to Financial Statements
</TABLE>
Companies added to the portfolio since January 31, 1999
Allstate
Bank of America
Campbell Soup
Eli Lilly and Co.
Emerson Electric
Fleet Financial Group
Hercules
Lockheed Martin
May Department Stores
Mercury General
PPG Industries
TECO Energy
U.S. West
Companies Eliminated from the portfolio since January 31, 1999
Ameritech
Anheuser-Busch
Bankers Trust
BP Amoco
Dow Chemical
Herlett-Packard
Houston Industries
K N Energy
Morton International
Scottish and Southern Energy
Williams Companies
<TABLE>
Endowments, Bond Portfolio
Investment Portfolio, July 31, 1999
Shares or
Principal Market Percent
Amount Value Of Net
BONDS, NOTES & PREFERRED STOCKS (000) Assets
- -------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Industrials - 10.46%
BHP Finance Ltd. 8.50% 2012 $145 155,455 .50%
Ceridian Corp. 7.25% 2004 (1) 250 248,208 .79
Columbia/HCA Healthcare Corp. 8.85% 2007 125 124,375 .40
Comcast Cable Communications, Inc. 8.875% 2017 250 277,495 .88
Equistar Chemicals LP 8.75% 2009 (1) 250 251,445 .80
Hutchison Whampoa Finance Ltd., Series D, 6.988% 2037 (1) 300 275,883 .88
Hyundai Semiconductor America, Inc. 8.625% 2007 (1) 200 158,135 .50
Inco Ltd. 9.60% 2022 700 679,245 2.16
J. C. Penney Co., Inc. 7.95% 2017 200 198,580 .63
Petrozuata Finance, Inc., Series A, 7.63% 2009 (1) 250 208,795 .66
Scotia Pacific Co. LLC, Timber Collateralized Notes, Series B:
Class A-1, 6.55% 2028 (2) 237 214,043 1.26
Class A-3, 7.71% 2028 250 182,500
TRW Inc. 7.125% 2009 (1) 125 120,551 .38
Union Pacific Resources Group Inc. 7.30% 2009 200 193,218 .62
---------- ----------
3,287,928 10.46
---------- ----------
Electric Utilities - .88%
Israel Electric Corp. Ltd.: (1)
7.75% 2009 125 122,870
7.75% 2027 175 154,256 .88
---------- ----------
277,126 0.88
---------- ----------
Multi-Industry - 2.04%
Swire Pacific Capital Ltd. 8.84% cumulative guaranteed 10,000 shares 201,250 0.64
perpetual capital securities (1)
Wharf International Finance Ltd., Series A, 7.625% 2007 $500 440,459 1.40
---------- ----------
641,709 2.04
---------- ----------
Telecommunications - 2.97%
Bell Atlantic Financial Services, Inc., Senior Exchangeable Notes:
5.75% 2003 250 251,875 1.33
4.25% 2005 150 166,500
Sprint Capital Corp. 6.875% 2028 375 337,181 1.07
U S WEST Capital Funding, Inc. 6.50% 2018 200 177,808 .57
---------- ----------
933,364 2.97
---------- ----------
Transporation - 8.46%
Airplanes Pass Through Trust, pass-through certificates, 1,222 1,173,485 3.73
Series 1, Class C, 8.15% 2019 (2)
Continental Airlines, Inc., pass-through certificates, 125 116,074 .37
Series 1998-3, Class A-2, 6.32% 2008
Jet Equipment Trust, Series 1994-A, Class C1, 11.79% 2013 (1) 750 933,345 2.97
USAir, Inc., Enhanced Equipment Notes, Class B, 7.50% 2009 (2) 460 438,462 1.39
---------- ----------
2,661,366 8.46
---------- ----------
Financial - 8.44%
Abbey National PLC 6.70% (undated)(3) 250 229,975 .73
BNP U.S. Funding LLC, Series A, 7.738% noncumulative preferred (1), (3) 500 462,714 1.47
Chase Capital I, Capital Securities, Series A, 7.67% 2026 250 235,670 .75
Ford Motor Credit Co. 5.80% 2009 150 134,852 .43
Household Finance Corp. 6.40% 2008 250 234,060 .74
IBJ Preferred Capital Co. LLC, Series A, 8.79% noncumulative 250 211,250 .67
preferred (1), (3)
MBNA Corp., MBNA Capital A, Series A, 8.278% 2026 300 273,714 .87
NB Capital Corp. 8.35% exchangeable depositary shares 10,000 shares 246,250 .78
Newcourt Credit Group 6.875% 2005 (1) $150 143,523 .46
SocGen Real Estate Co. LLC, Series A, 7.64%/8.406% (undated) (1), (3) 250 234,643 .75
Washington Mutual Capital I Subordinated Capital 250 246,643 .79
Income Securities 8.375% 2027
---------- ----------
2,653,294 8.44
---------- ----------
Real Estate - .38%
ProLogis Trust 7.05% 2006 125 118,536 .38
---------- ----------
Collaterized Mortgage/Asset-Backed Obligations(2) - 13.19%
Boston Edison Co., Series 1999-1, Class A-5, 7.03% 2012 200 196,940 .63
Chase Commercial Mortgage Securities Corp., Series 1998-2, 250 235,669 .75
Class A-2, 6.39% 2030
CS First Boston Mortgage Securities Corp., Series 1998-C1, 231 225,338 .72
Class A-1A, 6.26% 2040
First Consumer Master Trust, Series 1999-A, Class A, 5.80% 2005 (1) 250 237,300 .76
GMAC Commercial Mortgage Securities, Inc., Series 125 121,984 .39
1997-C1, Class A3, 6.869% 2007
GS Mortgage Securities Corp. II, Mortgage Pass-Through
Certificates, Series 1998-C1: (3)
Class D, 7.243% 2030 250 224,631 1.43
Class E, 7.243% 2030 250 221,700
L.A. Arena Funding, LLC, Series 1, Class A, 7.656% 2026 (1) 325 304,363 .97
Merrill Lynch Mortgage Investors, Inc., 154 154,638 .49
Seller Manufactured Housing Contracts, Series 1995-C2,
Class A-1, 6.973% 2021 (3)
Morgan Stanley Capital I Inc., Series 1998-HF2, Class A-2, 6.48% 2030 500 475,893 1.51
Nomura Asset Securities Corp., Series 1998-D6, Class A-A1, 6.28% 2030 226 221,293 .70
Norwest Asset Securities Corp., Series 1998-31, Class A-1, 6.25% 2014 230 224,814 .72
PP&L Transition Bond Co. LLC, Series 1999-1, Class A-5, 6.83% 2007 250 249,603 1.58
PP&L Transition Bond Co. LLC, Series 1999-1, Class A-7, 7.05% 2009 250 249,538
Puerto Rico Public Financing Corp., Series 1, Class A, 6.15% 2008 236 230,544 .73
Sears Credit Account Master Trust II, Series 1998-2, Class A, 5.25% 2008 250 236,639 .75
Structured Asset Securities Corp., pass-through certificates: (3)
Series 1996-CFL, Class A2A, 7.75% 2028 4 4,058 1.06
Series 1998-RF2, Class A, 8.564% 2027 (1) 324 330,906
---------- ----------
4,145,851 13.19
---------- ----------
Governments (excluding U.S. Government) &
Governmental Authorities - 3.35%
Quebec (Province of) 13.25% 2014 1,000 1,053,820 3.35
---------- ----------
Federal Agency Obligations - Mortgage Pass-Throughs (2) - 14.85%
Fannie Mae:
7.00% 2012 178 177,570
9.00% 2020 121 127,427 3.36
7.00% 2026 424 415,389
5.812% 2033 (3) 345 338,710
Freddie Mac:
8.75% 2008 69 71,289
12.50% 2019 30 33,808 .56
9.00% 2020 66 69,768
Government National Mortgage Assn.:
8.50% 2008 210 220,149
10.00% 2019 194 212,140
7.50% 2023 189 189,359
8.00% 2023 761 775,777
7.00% 2024 367 358,429 10.93
7.50% 2024 371 371,348
7.00% 2025 629 614,792
6.00% 2029 249 229,790
7.00% 2029 475 462,611
---------- ----------
4,668,356 14.85
---------- ----------
Federal Agency Obligations - Other - 3.63%
Fannie Mae 5.25% 2009 250 224,728 .71
Federal Home Loan Bank Bonds 5.625% 2001 250 248,710 .79
Freddie Mac 5.125% 2008 750 668,790 2.13
---------- ----------
1,142,228 3.63
---------- ----------
U.S. Treasury Obligations - 19.37%
11.625% November 2002 500 584,685
11.625% November 2004 1,275 1,593,954
10.375% November 2012 1,825 2,300,066 19.37
8.875% August 2017 1,275 1,610,285
---------- ----------
6,088,990 19.37
---------- ----------
Miscellaneous - 1.08%
Other bonds, notes & preferred stocks in initial period of acquisition 338,750 1.08
---------- ----------
Total Bonds, Notes & Preferred Stocks (cost: $29,511,340) 28,011,318 89.10
---------- ----------
SHORT TERM SECURITIES
- --------------------------------------------
Corporate Short-Term Notes - 11.86%
A.I. Credit Corp. 5.03% due 8/25/1999 600 597,904 1.90
Bell Atlantic Network Funding Corp. 5.08% due 8/24/1999 650 647,799 2.06
General Electric Capital Corp. 5.10% due 8/2/1999 685 684,806 2.18
Motorola Inc. 5.05% due 8/4/1999 800 799,551 2.54
Paccar Financial Corp. 5.06% due 8/13/1999 1,000 998,173 3.18
---------- ----------
Total Short-Term Securities (cost: $3,728,233) 3,728,233 11.86
---------- ----------
Total Investment Securities (cost: $33,239,573) 31,739,551 100.96
Excess of payables over cash and receivables 301,111 0.96
---------- ----------
NET ASSETS 31,438,440 100.00
(1) Purchased in a private placement transaction; resale
may be limited to qualified institutional buyers; resale
to the public may require registration.
(2) Pass-through securities backed by a pool of
mortgages or other loans on which principal payments
are periodically made. Therefore, the
effective maturities are shorter than the stated maturities.
(3) Coupon rate may change periodically.
See Notes to Financial Statements
</TABLE>
<TABLE>
Endowments
Statements of Assets and Liabilities
at July 31, 1999 Growth and IncomBond Portfolio
Portfolio
Assets:
<S> <C> <C>
Investment securities at market
(cost: $49,350,561 and $33,239,573, respectively $51,895,192 $31,739,551
Cash 50,719 61,372
Receivables for-
Sales of investments - 6,441
Sales of fund's shares 9,399 6,266
Dividends and accrued interest 86,942 413,808
------------ ------------
Total Assets 52,042,252 32,227,438
------------ ------------
Liabilities:
Payables for -
Purchases of investments 422,279 745,630
Management services 28,481 14,968
Accrued expenses 28,504 28,400
------------ ------------
Total Liabilities 479,264 788,998
------------ ------------
Net Assets at July 31, 1999 $51,562,988 $31,438,440
============= =============
Shares outstanding(1) 3,706,660 1,944,188
Net asset value per share $ $ 16.
(1)Shares of beneficial interest issued and outstanding;
unlimited shares authorized.
See Notes to Financial Statements
Endowments
Statements of Operations
for the year ended July 31, 1999 Growth and IncomBond Portfolio
Portfolio
Investment Income:
Income:
Dividends $ 1,177,592 $ 42,974
Interest 536,491 2,215,113
------------ ------------
Total Income 1,714,083 2,258,087
------------ ------------
Expenses:
Management services fee 236,741 148,454
Reports to shareholders 17,831 16,425
Registration statement and prospectus 16,448 8,434
Postage, stationery and supplies 4,587 5,452
Auditing fees 36,502 33,970
Legal fees 24,405 25,909
Trustees' meeting expenses 20,112 20,112
Custodian fee 1,132 569
Taxes other than federal income tax 4,094 14,837
Other expenses 10,864 9,330
------------ ------------
Total expenses before reimbursement 372,716 283,492
Reimbursement of expenses 17,655 60,812
------------ ------------
Net Expenses 355,061 222,680
------------ ------------
Net investment income 1,359,022 2,035,407
------------ ------------
Realized Gain and Change in Unrealized
(Depreciation) Appreciation on Investments:
Net realized gain (loss) 3,548,696 (81,253)
Net change in unrealized (depreciation)
appeciation on investments 3,069,731 (1,472,279)
------------ ------------
Net realized gain and change in unrealized
(depreciation) appreciation on investments 6,618,427 (1,553,532)
------------ ------------
Net Increase in Net Assets Resulting
from Operations $ 7,977,449 $ 481,875
============= =============
See Notes to Financial Statements
Endowments, Growth and Income Portfolio
Statement of Changes in Net Assets
Year ended July 31
1999 1998
Operations:
Net investment income $ 1,359,022 $ 1,259,180
Net realized gain on investments 3,548,696 13,791,367
Net unrealized appreciation (depreciation)
on investments 3,069,731 (10,940,194)
------------ ------------
Net increase in net assets resulting
from operations 7,977,449 4,110,353
------------- -------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (1,251,179) (1,382,106)
Distributions from net realized
gain on investments - (26,584,691)
------------- -------------
Total dividends and distributions (1,251,179) (27,966,797)
------------- -------------
Capital Share Transactions:
Proceeds from shares sold:
428,901 and 180,191
shares, respectively 5,431,127 3,165,176
Proceeds from shares issued in
reinvestment of net investment income
dividends and distributions of net
realized gain on investments:
71,284 and 1,930,591 shares,
respectively 890,752 27,173,082
Cost of shares repurchased:
362,633 and 647,743
shares, respectively (4,626,061) (11,068,403)
------------- -------------
Net increase in net assets
resulting from capital share transactions 1,695,818 19,269,855
------------- -------------
Total Increase (Decrease) in Net Assets 8,422,088 (4,586,589)
Net Assets:
Beginning of year 43,140,900 47,727,489
------------- -------------
End of year (including undistributed
net investment income: $107,548 and
$0, respectively) $51,562,988 $ 43,140,900
============= =============
See Notes to Financial Statements
Endowments, Bond Portfolio
Statement of Changes in Net Assets
Year ended July 31
1999 1998
Operations:
Net investment income $ 2,035,407 $ 2,122,993
Net realized (loss) gain on investments (81,253) 543,139
Net unrealized appreciation (depreciation) on
investments (1,472,279) (653,265)
----------------------------
Net increase in net assets resulting
from operations 481,875 2,012,867
----------------------------
Dividends Paid to
Shareholders:
Dividends from net investment income (1,880,282) (2,405,442)
----------------------------
Capital Share Transactions:
Proceeds from shares sold:
265,672 and 129,544
shares, respectively 4,421,000 2,202,671
Proceeds from shares issued in
reinvestment of net investment income
dividends and distributions of net
realized gain on investments:
49,414 and 57,517 shares,
respectively 819,899 968,653
Cost of shares repurchased:
88,164 and 393,839
shares, respectively (1,483,454) (6,732,042)
----------------------------
Net increase (decrease) in net assets resulting
from capital share transactions 3,757,445 (3,560,718)
----------------------------
Total Increase (Decrease) in Net Assets 2,359,038 (3,953,293)
Net Assets:
Beginning of year 29,079,402 33,032,695
----------------------------
End of year (including undistributed
net investment income: $155,125 and
$0, respectively) $31,438,440 $29,079,402
================ ===========
See Notes to Financial Statements
</TABLE>
ENDOWMENTS
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Endowments (the "trust") is registered under the Investment
Company Act of 1940 as an open-end, diversified management investment company
and has initially issued two series of shares, Growth and Income Portfolio and
Bond Portfolio (the "funds"). Growth and Income Portfolio seeks to provide
long-term growth of principal, with income and preservation of capital as
secondary objectives, primarily through investments in common stocks. Bond
Portfolio seeks to provide as high a level of current income as is consistent
with preservation of capital.
SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared
in conformity with generally accepted accounting principles which require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. The following is a summary of the significant accounting
policies consistently followed by the trust in the preparation of its financial
statements:
SECURITY VALUATION - Equity securities, including depositary receipts, are
valued at the last reported sale price on the exchange or market on which such
securities are traded, as of the close of business on the day the securities
are being valued or, lacking any sales, at the last available bid price. In
cases where equity securities are traded on more than one exchange, the
securities are valued on the exchange or market determined by the investment
adviser to be the broadest and most representative market, which may be either
a securities exchange or the over-the-counter market.
Fixed-income securities are valued at prices obtained from a pricing service,
when such prices are available; however, in circumstances where the investment
adviser deems it appropriate to do so, such securities will be valued at the
mean quoted bid and asked prices or at prices for securities of comparable
maturity, quality and type. The ability of the issuers of the debt securities
held by the trust to meet their obligations may be affected by economic
developments in a specific industry, state or region. Short-term securities
maturing within 60 days are valued at amortized cost, which approximates market
value. Securities and assets for which representative market quotations are not
readily available are valued at fair value as determined in good faith by a
committee appointed by the Board of Trustees.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions
are accounted for as of the trade date. Realized gains and losses from
securities transactions are determined based on specific identified cost. In
the event securities are purchased on a delayed delivery or "when-issued"
basis, the trust will instruct the custodian to segregate liquid assets
sufficient to meet its payment obligations in these transactions. Dividend
income is recognized on the ex-dividend date, and interest income is recognized
on an accrual basis. Market discounts and original issue discounts on
securities purchased are amortized daily over the expected life of the
security. The trust does not amortize premiums on securities purchased.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions paid
to shareholders are recorded on the ex-dividend date.
2. FEDERAL INCOME TAXATION
The funds comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and intend to distribute all of their net
taxable income and net capital gains for the fiscal year. As regulated
investment companies, the funds are not subject to income taxes if such
distributions are made. Required distributions are determined on a tax basis
and may differ from net investment income and net realized gains for financial
reporting purposes. In addition, 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 funds.
As of July 31, 1999, net unrealized appreciation on investments for book and
federal income tax purposes for Growth and Income Portfolio aggregated
$2,544,631, of which $4,399,064 related to appreciated securities and
$1,854,433 related to depreciated securities. For Bond Portfolio, net
unrealized depreciation aggregated $1,500,022, of which $72,155 related to
appreciated securities and $1,572,177 related to depreciated securities. There
was no difference between book and tax realized gains and losses on securities
transactions for the year ended July 31, 1999. The cost of portfolio securities
for book and federal income tax purposes was $49,350,561 and $33,239,573 for
Growth and Income and Bond Portfolios, respectively, at July 31, 1999.
3. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEE -
The fees of $236,741 and $148,454 for Growth and Income and Bond Portfolios,
respectively, for management services was incurred pursuant to agreements with
Capital Research and Management Company (CRMC), with which certain officers and
Trustees of the trust are affiliated. The Investment Advisory and Service
Agreements provide for monthly fees, accrued daily, based on an annual rate of
0.50% of the first $150 million of average net assets and 0.40% of such assets
in excess of $150 million.
The Investment Advisory and Service Agreements provide for fee reductions to
the extent that annual operating expenses exceed 0.75% of the average daily net
assets of the fund. Expenses that are not subject to these limitations are
interest, taxes, brokerage commissions, transaction costs, and extraordinary
expenses. Fee reductions were $17,655 and $60,812 for Growth and Income and
Bond Portfolios, respectively, for the year ended July 31, 1999 .
No fees were paid by the trust to its officers or Trustees. The independent
Trustees were reimbursed by the trust for expenses incurred while traveling to
fund meetings.
4. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
Pursuant to the custodian agreement, the funds receive credits against their
custodian fees for imputed interest on certain balances with the custodian
bank. The custodian fees of $1,132 and $569 for Growth and Income and Bond
Portfolios, respectively, were paid by these credits rather than in cash.
<TABLE>
<CAPTION>
Growth and Income Bond
Portfolio Portfolio
<S> <C> <C>
As of July 31,1999:
Accumulated undistributed
net realized gain (loss)
on investments $3,548,991 $(81,569)
Paid-in capital 45,361,727 32,864,906
During the year ended
July 31, 1999:
Purchases and sales of
investment securities,
excluding short-term
securities
Purchases 19,921,683 17,360,692
Sales 19,382,187 15,024,061
</TABLE>
<TABLE>
Endowments, Growth and Income Portfolio
Per-Share Data and Ratios
Year ended July 31
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.09 $22.66 $18.61 $18.06 $17.18
------------ ------------ ---------- ---------- ---------
Income From Investment Operations:
Net investment income .37 .51 .56 .58 .63
Net gains or losses on securities (both
realized and unrealized) 1.79 1.16 6.04 1.73 2.21
------------ ------------ ---------- ---------- ---------
Total from investment operations 2.16 1.67 6.60 2.31 2.84
----------- ----------- --------- ----------- ---------
Less Distributions:
Dividends (from net investment income) (.34) (.57) (.55) (.61) (.61)
Distributions (from capital gains) - (11.67) (2.00) (1.15) (1.35)
----------- ----------- --------- ----------- ---------
Total distributions (.34) (12.24) (2.55) (1.76) (1.96)
----------- ----------- --------- ---------- ---------
Net Asset Value, End of Year $13.91 $12.09 $22.66 $18.61 $18.06
========== ========== ======== ======== =======
Total Return 18.21% 9.05% 38.40% 13.22% 18.57%
Ratios/Supplemental Data:
Net assets, end of year (in millions) $52 $43 $48 $59 $57
Ratio of expenses to average net assets 0.75%(1) 0.75%(1) 0.74% 0.72% 0.73%
Ratio of net income to average net assets 2.90% 2.69% 2.73% 3.12% 3.70%
Portfolio turnover rate 52.36% 48.59% 50.69% 38.73% 24.04%
(1) Had CRMC not waived management services
fees, the fund's expense ratio would have been
0.79% and 0.89% for the fiscal years ended 1999 and
1998, respectively.
</TABLE>
<TABLE>
Endowments, Bond Portfolio
Per-Share Data and Ratios
Year ended July 31
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $16.93 $17.17 $16.63 $16.82 $16.86
--------------------------------------------
Income From Investment Operations:
Net investment income 1.14 1.19 1.21 1.22 1.26
Net gains or losses on securities (both
realized and unrealized) (.84) (.09) .52 (.19) .01
--------------------------------------------
Total from investment operations .30 1.10 1.73 1.03 1.27
--------------------------------------------
Less Distributions:
Dividends (from net investment income) (1.06) (1.34) (1.19) (1.22) (1.24)
Distributions (from capital gains) - - - - (.07)
--------------------------------------------
Total distributions (1.06) (1.34) (1.19) (1.22) (1.31)
--------------------------------------------
Net Asset Value, End of Year $16.17 $16.93 $17.17 $16.63 $16.82
========================== ======= =======
Total Return 1.75% 6.70% 10.83% 6.25% 7.97%
Ratios/Supplemental Data:
Net assets, end of year (in millions) $31 $29 $33 $41 $44
Ratio of expenses to average net assets 0.75% (1) 0.75% (10.75% (1)0.75% (1 0.76%
Ratio of net income to average net assets 6.84% 6.87% 7.04% 7.17% 7.52%
Portfolio turnover rate 53.66% 50.40% 22.18% 54.43% 69.22%
(1) Had CRMC not waived management services fees,
the fund's expense ratio would have been 0.95%,
1.08%, 0.85%, and 0.80% for the fiscal years ended 1999,
1998, 1997, and 1996, respectively.
</TABLE>
Independent Auditors' Report
To the Board of Trustees and Shareholders of Endowments:
We have audited the accompanying statements of assets and liabilities of
Endowments (the "trust"), comprising, respectively, the Growth and Income
Portfolio and the Bond Portfolio, including the investment portfolios, as of
July 31, 1999, and the related statements 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 per-share data and ratios for each of the five years
in the period then ended. These financial statements and per-share data and
ratios are the responsibility of the trust's management. Our responsibility is
to express an opinion on these financial statements and 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 as of July
31, 1999, 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 each of the respective portfolios constituting Endowments as of
July 31, 1999, the results of their operations for the year then ended, the
changes in their 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
August 27, 1999
ENDOWMENTS
BOARD OF TRUSTEES
ROBERT B. EGELSTON, Los Angeles, California
Chairman of the Board of the Trust
Former Chairman of the Board, The Capital Group Companies, Inc.
213/486-9444
FRANK L. ELLSWORTH, Ph.D., Los Angeles, California
President and Principal Executive Officer of the Trust
Vice President, Capital Research and Management Company
213/486-9560
STEVEN D. LAVINE, Ph.D., Valencia, California
President, California Institute of the Arts
805/255-1050
PATRICIA A. MCBRIDE, Dallas, Texas
Chief Financial Officer, Kevin L. McBride, D.D.S., Inc.
214/368-0268
GAIL L. NEALE, Burlington, Vermont
President, The Lovejoy Consulting Group, Inc.;
former Executive Vice President of the Salzburg Seminar
802/658-5674
CHARLES R. REDMOND, Los Angeles, California
Former Chairman, Pfaffinger Foundation; former President
and Chief Executive Officer, Times Mirror Foundation; former
Executive Vice President and Member of the Management
Committee, The Times Mirror Company
213/237-3977
THOMAS E. TERRY, Los Angeles, California
Consultant; former Vice President and Secretary,
Capital Research and Management Company
213/486-9410
ROBERT C. ZIEBARTH, Ketchum, Idaho
Management Consultant, Ziebarth Company
208/725-0535
OTHER OFFICERS
ABNER D. GOLDSTINE, Los Angeles, California
Senior Vice President of the Trust
Senior Vice President and Director,
Capital Research and Management Company
CLAUDIA P. HUNTINGTON, Los Angeles, California
Senior Vice President of the Trust
Senior Vice President,
Capital Research and Management Company
ROBERT G. O'DONNELL, San Francisco, California
Senior Vice President of the Trust
Senior Vice President and Director,
Capital Research and Management Company
JOHN H. SMET, Los Angeles, California
Senior Vice President of the Trust
Vice President,
Capital Research and Management Company
PATRICK F. QUAN, San Francisco, California
Vice President and Secretary of the Trust
Vice President - Fund Business Management Group,
Capital Research and Management Company
ANTHONY W. HYNES, Jr., Brea, California
Treasurer of the Trust
Vice President - Fund Business Management Group,
Capital Research and Management Company
SUSI M. SILVERMAN, Brea, California
Assistant Treasurer of the Trust
Assistant Vice President - Fund Business Management Group,
Capital Research and Management Company
OFFICE OF THE TRUST
One Market
Steuart Tower, Suite 1800
Mailing Address: P.O. Box 7650
San Francisco, California 94120-7650
INVESTMENT ADVISER
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071-1443
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
P.O. Box 7650
San Francisco, California 94120-7650
135 South State College Boulevard
Brea, California 92821-5823
CUSTODIAN OF ASSETS
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071-2371
INDEPENDENT AUDITORS
Deloitte & Touche LLP
1000 Wilshire Boulevard
Los Angeles, California 90017-2472
This report is for the information of shareholders of Endowments, 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 funds.
For more information about any of the American Funds, please ask your
investment professional for a prospectus.
Litho in USA KK/PL/4256
E1999 Endowments
Lit. No. ENDI-BENDI-011-0999 (NLS)
