ENDOWMENTS, INC.
AND
BOND PORTFOLIO FOR ENDOWMENTS, INC.
Part B
Statement of Additional Information
October 1, 1995
(as amended January 1, 1996)
This document is not a prospectus but should be read in conjunction with
the current Prospectus of Endowments, Inc. and Bond Portfolio for Endowments,
Inc. dated October 1, 1995. The Prospectus may be obtained by writing to the
funds at the following address:
Endowments, Inc.
Bond Portfolio for Endowments, Inc.
Attention: Secretary
Four Embarcadero Center
P.O. Box 7650
San Francisco, CA 94120
Telephone: (415) 421-9360
Table of Contents
Item Page No.
DESCRIPTION OF CERTAIN SECURITIES 1
FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS 4
FUND OFFICERS AND DIRECTORS 8
MANAGEMENT 10
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES 11
PURCHASE OF SHARES 12
EXECUTION OF PORTFOLIO TRANSACTIONS 13
REDEMPTION OF SHARES 14
GENERAL INFORMATION 14
INVESTMENT RESULTS 15
FINANCIAL STATEMENTS ATTACHED
DESCRIPTION OF CERTAIN SECURITIES
BOND RATINGS - Endowments, Inc. may invest in debt securities, and a
majority of Bond Portfolio for Endowments, Inc.'s assets will ordinarily be
invested in bonds and debentures (including straight debt securities), which
are rated in the top three quality categories by any national rating service
(or determined to be equivalent by Capital Research and Management Company)
including bonds rated at least A by Standard & Poor's Corporation or Moody's
Investors Service, Inc. The top three rating categories for Standard & Poor's
and Moody's are described below:
Standard & Poor's Corporation:
"Debt rated 'AAA' has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong."
"Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in a small degree."
"Debt rated 'A' has a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of change in
circumstances and economic conditions, than debt in higher categories."
Moody's Investors Service, Inc.:
"Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as 'gilt
edge.' Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues."
"Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than the Aaa
securities."
"Bonds rated A are judged to be of upper medium grade obligations. These
bonds possess many favorable investment attributes. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future."
BOND PORTFOLIO FOR ENDOWMENTS, INC.
Investments may also be made in securities rated BBB by S&P or Baa by
Moody's or in unrated securities of equivalent quality. S&P considers bonds
rated BBB as having an "adequate capacity to pay interest and repay principal.
Whereas they normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal than for debt in higher rated
categories." Moody's considers bonds which are rated Baa as "medium grade
obligations, I.E., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and, in fact, have speculative characteristics as
well."
The fund has no current intention of investing in securities rated BB or
below by S&P and Ba or below by Moody's (commonly known as "junk" bonds) or
equivalent securities that are not rated. The fund is not normally required to
dispose of a security in the event that its rating is reduced below BBB or Baa
(or it is not rated and its quality becomes equivalent to such a security).
The fund, however, has no current intention to hold more than 5% of its net
assets in junk bonds. Junk bonds are subject to greater fluctuations in value
than are higher rated securities because the values of these securities tend to
reflect short-term corporate and market developments and investor perceptions
of the issuer's credit quality to a greater extent.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION CERTIFICATES - Certificates
issued by the Government National Mortgage Association (GNMA) are
mortgage-backed securities representing part ownership of a pool of mortgage
loans, which are issued by lenders such as mortgage bankers, commercial banks
and savings and loan associations, and are either insured by the Federal
Housing Administration or guaranteed by the Veterans Administration. A pool of
these mortgages is assembled and, after being approved by GNMA, is offered to
investors through securities dealers. The timely payment of interest and
principal on each mortgage is guaranteed by GNMA and backed by the full faith
and credit of the U.S. Government.
Principal is paid back monthly by the borrower over the term of the loan.
Reinvestment of prepayments may occur at higher or lower rates than the
original yield on the certificates. Due to the prepayment feature and the need
to reinvest prepayments of principal at current market rates, GNMA certificates
can be less effective than typical bonds of similar maturities at "locking in"
yields during periods of declining interest rates. GNMA certificates typically
appreciate or decline in market value during periods of declining or rising
interest rates, respectively. Due to the regular repayment of principal and
the prepayment feature, the effective maturities of mortgage pass-through
securities are shorter than stated maturities, will vary based on market
conditions and cannot be predicted in advance. The effective maturities of
newly-issued GNMA certificates backed by relatively new loans at or near the
prevailing interest rates are generally assumed to range between approximately
9 and 12 years.
FNMA AND FHLMC MORTGAGE-BACKED OBLIGATIONS - FNMA, a federally chartered and
privately-owned corporation, issues pass-through securities representing
interests in a pool of conventional mortgage loans. FNMA guarantees the timely
payment of principal and interest but this guarantee is not backed by the full
faith and credit of the U.S. Government.
FHLMC, a corporate instrumentality of the U.S. Government, issues
participation certificates which represent an interest in a pool of
conventional mortgage loans. FHLMC guarantees the timely payment of interest
and the ultimate collection of principal, and maintains reserves to protect
holders against losses due to default, but the certificates are not backed by
the full faith and credit of the U.S. Government.
As is the case with GNMA certificates, the actual maturity of and realized
yield on particular FNMA and FHLMC pass-through securities will vary based on
the prepayment experience of the underlying pool of mortgages.
WHEN-ISSUED SECURITIES, FIRM COMMITMENT AGREEMENTS AND "ROLL" TRANSACTIONS -
The fund may purchase securities on a delayed delivery or "when-issued" basis
and enter into firm commitment agreements (transactions whereby the payment
obligation and interest rate are fixed at the time of the transaction but the
settlement is delayed). The fund as purchaser assumes the risk of any decline
in value of the security beginning on the date of the agreement or purchase.
The fund will segregate liquid assets such as cash, U.S. Government
securities or other appropriate high-grade debt obligations in an amount
sufficient to meet its payment obligations in these transactions. Although
these transactions will not be entered into for leveraging purposes, to the
extent the fund's aggregate commitments under these transactions exceed its
holdings of cash and securities that do not fluctuate in value (such as
short-term money market instruments), the fund temporarily will be in a
leveraged position (because it will have an amount greater than its net assets
subject to market risk). Should market values of the fund's portfolio
securities decline while the fund is in a leveraged position, greater
depreciation of its net assets would likely occur than were it not in such a
position. The fund will not borrow money to settle these transactions and,
therefore, will liquidate other portfolio securities in advance of settlement
if necessary to generate additional cash to meet its obligations thereunder.
Roll transactions are the sale of GNMA certificates or other securities
together with a commitment (for which the fund typically receives a fee) to
purchase similar, but not identical, securities at a later date. The fund
intends to treat roll transactions as two separate transactions: one involving
the purchase of a security and a separate transaction involving the sale of a
security. Since the fund does not intend to enter into roll transactions for
financing purposes, it may treat these transactions as not falling within the
definition of "borrowing" set forth in Section 2(a)(23) of the Investment
Company Act of 1940.
REVERSE REPURCHASE AGREEMENTS - This type of agreement involves the sale of a
security by the fund and its commitment to repurchase the security at a
specified time and price. The fund will maintain in a segregated account with
its custodian liquid assets such as cash, U.S. Government securities or other
appropriate high-grade debt obligations in an amount sufficient to cover its
obligations under reverse repurchase agreements with broker-dealers (but no
collateral is required on reverse repurchase agreements with banks). Under the
Investment Company Act of 1940, as amended (the "1940 Act"), reverse repurchase
agreements may be considered borrowings by the fund. The use of reverse
repurchase agreements by the fund creates leverage which increases the fund's
investment risk. As the fund's aggregate commitments under these reverse
repurchase agreements increases, the opportunity for leverage similarly
increases. If the income and gains on securities purchased with the proceeds
of reverse repurchase agreements exceed the costs of the agreements, the fund's
earnings or net asset value will increase faster than otherwise would be the
case; conversely if the income and gains fail to exceed the costs, earnings or
net asset value would decline faster than otherwise would be the case.
ENDOWMENTS, INC.
CURRENCY TRANSACTIONS - The fund has the ability to hold a portion of its
assets in U.S. dollars and other currencies and to enter into certain currency
contracts in connection with investing in non-U.S. dollar denominated
securities. A forward currency contract is an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. The fund might purchase a particular currency or enter into a
forward currency contract to preserve the U.S. dollar price of securities it
intends or has contracted to purchase.
The fund does not currently intend to engage in any transactions other
than purchasing and selling currencies and foreign exchange contracts which
will be used to facilitate settlement of trades. For example, the fund might
purchase a currency or enter into a foreign exchange contract to preserve the
U.S. dollar price of securities it has contracted to purchase.
ENDOWMENTS, INC. AND BOND PORTFOLIO FOR ENDOWMENTS, INC.
CASH EQUIVALENTS - These securities include (1) commercial paper (short-term
notes up to 9 months in maturity issued by corporations or governmental
bodies), (2) commercial bank obligations (E.G., certificates of deposit,
bankers' acceptances (time drafts on a commercial bank where the bank accepts
an irrevocable obligation to pay at maturity) and documented discount notes
(corporate promissory discount notes accompanied by a commercial bank guarantee
to pay at maturity)), (3) savings association and savings bank obligations
(E.G., certificates of deposit issued by savings banks or savings
associations), (4) securities of the U.S. Government, its agencies or
instrumentalities that mature, or may be redeemed, in one year or less, and (5)
corporate bonds and notes that mature, or that may be redeemed, in one year or
less.
FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS
The funds have adopted certain fundamental policies and investment
restrictions which cannot be changed without shareholder approval. (Approval
requires the affirmative vote of 67% or more of the voting securities present
at a meeting of shareholders, provided more than 50% of such securities are
represented at the meeting, or the vote of more than 50% of the outstanding
voting securities, whichever is less.)
ENDOWMENTS, INC.
It is the fundamental policy of the fund:
1. To invest primarily in common stocks or senior securities with equity
provisions of well-known companies which appear to offer prospects for
long-term growth of both capital and income. Although common stocks and
convertible issues will ordinarily be used for the attainment of the fund's
investment objective, preferred stocks and bonds and other fixed income issues
may be purchased whenever and to the extent deemed advisable by the fund's
investment adviser in consideration of the fund's income objective and for
defensive purposes. The fund may also hold cash and cash equivalents
(commercial paper and other money market instruments) for cash needs and for
defensive purposes.
2. Not to concentrate its investments in one industry. (The amount invested
in an industry will not be 25% or more of the fund's total assets.)
3. Not to invest in companies for the purpose of exercising control or
management.
4. Not to invest more than 5% of the value of the total assets of the fund in
the securities of any one issuer, provided that this limitation shall apply
only to 75% of the value of the fund's total assets and, provided further, that
the limitation shall not apply to obligations of the government of the U.S. or
of any corporation organized as an instrumentality of the U.S. under a general
Act of Congress.
5. Not to acquire more than 10% of the outstanding voting securities of any
one corporation.
6. Not to borrow more than 5% of the value of its total assets at the time of
such borrowing, and to borrow only temporarily for extraordinary or emergency
purposes and not for purchase of investment securities, and each such borrowing
to be specifically approved by the Board of Directors of the fund.
7. Not to mortgage, pledge, hypothecate, or in any manner transfer as security
for any indebtedness, any securities owned or held by the fund except to secure
borrowings pursuant to policy 6 hereinabove, and in no event to an extent
greater than 15% of the gross assets of the fund taken at cost.
8. Not to underwrite the sale, or participate in any underwriting or selling
group in connection with the public distribution, of any security; provided,
however, that the fund may invest not more than 10% of its assets in, and
subsequently distribute, as permitted by law, securities and other assets for
which there is no ready market.
9. Not to participate on a joint or a joint and several basis in any trading
account in securities.
10. Not to purchase securities on margin, except that the fund may obtain such
short-term credits as may be necessary for clearance of purchases or sales of
securities.
11. Not to effect short sales, except for short sales "against the box" (I.E.,
sales when the fund owns or has the right to acquire at no additional cost
securities identical to those sold short).
12. Not to make loans to any person or firm, provided, however, that the
acquisition of a portion of an issue of bonds, debentures, notes and other
evidences of indebtedness of any corporation or government shall not be
construed to be the making of a loan.
13. Not to purchase or sell securities from or to officers or directors of the
fund, or of the Investment Adviser.
14. Not to purchase securities if one or more of the officers or directors of
the fund or Investment Adviser owns beneficially more than 1/2 of 1% of the
securities of such issuer and if together they own beneficially more than 5% of
such securities.
15. Not to invest in real estate, commodities, or commodity contracts.
(Investments in real estate investment trusts are not deemed purchases of real
estate.)
16. Not to purchase puts, calls or hedges.
17. Not to invest more than 5% of the value of the fund's total assets in the
securities of companies which (together with predecessors) have a record of
less than three years' continuous operation.
18. Not to invest in securities of other investment companies, except by
purchase on the open market at regular brokerage rates or pursuant to a merger
or consolidation.
19. That the shares of the fund may not be owned, held, sold, transferred,
assigned, pledged, hypothecated, or otherwise transferred except by or to an
organization which has established its tax-exempt status under Section
501(c)(3) of the Internal Revenue Code.
Although not fundamental policies, the fund has further agreed that it
will not invest more than 5% of the value of the fund's net assets in warrants,
valued at the lower of cost or market, with no more than 2% being unlisted on
the New York or American Stock Exchanges (warrants acquired by the fund in
units or attached to securities may be deemed to be without value); or invest
in oil, gas or other mineral leases.
If a percentage restriction on investment is adhered to at the time an
investment is made, a later change in percentage resulting from changing values
will not be considered a violation of the fund's investment policies or
restrictions.
The fund's portfolio turnover rate will depend primarily on market
conditions. Short-term trading profits are not the fund's objective and
changes in its investments are generally accomplished gradually, though
short-term transactions may occasionally be made.
BOND PORTFOLIO FOR ENDOWMENTS, INC.
It is the fundamental policy of the fund:
1. To invest primarily in bonds and debentures which appear to offer
attractive current yields without undue risk of principal. To attain its
investment objective, the fund may invest in domestic and foreign corporate
bonds and debentures (a portion of which may have conversion or stock purchase
rights), bonds and debentures issued or guaranteed by the U.S. Government or
its agencies or instrumentalities, and bonds and debentures issued by foreign
governments. The fund may also invest in short- and medium-term obligations
and hold cash and cash equivalents as dictated by cash needs and market
conditions.
2. Not to concentrate its investments in one industry. (The amount invested
in an industry will not be 25% or more of the fund's total assets.)
3. Not to invest in companies for the purpose of exercising control or
management.
4. Not to invest more than 5% of the value of the total assets of the fund in
the securities of any one issuer, provided that this limitation shall apply
only to 75% of the value of the fund's total assets and, provided further, that
the limitation shall not apply to obligations of the government of the U.S. or
of any corporation organized as an instrumentality of the U.S. under a general
Act of Congress.
5. Not to acquire more than 10% of the outstanding voting securities of any
one corporation, and to acquire voting securities only through the exercise of
conversion or stock purchase rights attached to convertible debt securities
held in the fund's portfolio.
6. Not to borrow more than 5% of the value of its total assets at the time of
such borrowing, and to borrow only temporarily for extraordinary or emergency
purposes and not for purchase of investment securities, and each such borrowing
to be specifically approved by the Board of Directors of the fund.
7. Not to mortgage, pledge, hypothecate, or in any manner transfer as security
for any indebtedness, any securities owned or held by the fund except to secure
borrowings pursuant to policy 6 hereinabove, and in no event to an extent
greater than 15% of the gross assets of the fund taken at cost.
8. Not to underwrite the sale, or participate in any underwriting or selling
group in connection with the public distribution, of any security, nor invest
more than 15% of the value of its net assets in securities for which there is
no ready market.
9. Not to participate on a joint or a joint and several basis in any trading
account in securities.
10. Not to purchase securities on margin, except that the fund may obtain such
short-term credits as may be necessary for clearance of purchases or sales of
securities.
11. Not to effect short sales, except for short sales "against the box" (I.E.,
sales when the fund owns or has the right to acquire at no additional cost
securities identical to those sold short).
12. Not to purchase puts, calls, or hedges.
13. Not to make loans to any person or firm, provided, however, that the
acquisition of a portion of an issue of publicly distributed bonds, debentures,
notes and other evidences of indebtedness of any corporation or government
shall not be construed to be the making of a loan.
14. Not to purchase or sell securities from or to officers or directors of the
fund, or of the Investment Adviser.
15. Not to purchase securities if one or more of the officers or directors of
the fund or Investment Adviser owns beneficially more than 1/2 of 1% of the
securities of such issuer and if together they own beneficially more than 5% of
such securities.
16. Not to invest in real estate, commodities, or commodity contracts.
(Investments in real estate investment trusts are not deemed purchases of real
estate.)
17. Not to invest more than 5% of the value of the fund's total assets in the
securities of companies which (together with predecessors) have a record of
less than three years' continuous operation.
18. Not to invest in securities of other investment companies, except by
purchase on the open market at regular brokerage rates or pursuant to a merger
or consolidation.
19. That the shares of the fund may not be owned, held, sold, transferred,
assigned, pledged, hypothecated, or otherwise transferred except by or to an
organization which has established its tax-exempt status under Section
501(c)(3) of the Internal Revenue Code.
Although not fundamental policies, the fund has further agreed that it
will not invest more than 5% of the value of the fund's net assets in warrants,
valued at the lower of cost or market, with no more than 2% being unlisted on
the New York or American Stock Exchanges (warrants acquired by the fund in
units or attached to securities may be deemed to be without value); nor invest
in oil, gas or other mineral leases.
If a percentage restriction on investment is adhered to at the time an
investment is made, a later change in percentage resulting from changing values
will not be considered a violation of the fund's investment policies or
restrictions.
Management's appraisal of changing economic conditions and trends may
cause a change in emphasis within the portfolio, both among individual
securities and among various types of fixed-income securities in order to
achieve the objective of the company. Major changes in economic conditions
could necessitate substantial portfolio turnover. Such turnover will normally
consist of shifts in grade, types of issuers, and maturity composition of the
company's securities in order to preserve principal and maintain current
income.
FUND OFFICERS AND DIRECTORS
(with their principal occupations for the past five years#)
Directors
(and the organization for which they serve as designated representative ++)
ROBERT B. EGELSTON+*. Senior Partner, The Capital Group Partners, L.P.;
former Chairman of the Board, The Capital Group Companies, Inc.; (213)
486-9200.
FRANK L. ELLSWORTH+++, 333 South Grand Avenue, 26th Floor, Los Angeles, CA
90071-1504. President, Independent Colleges of Southern California; former
President, Pitzer College; (213) 680-1330; Designated Representative:
Independent Colleges of Southern California.
STEVEN D. LAVINE, 24700 McBean Parkway, Valencia, CA 91355. President,
California Institute of the Arts; (805) 255-1050; Designated Representative:
California Institute of the Arts.
PATRICIA A. McBRIDE, 4933 Mangold Circle, Dallas, TX 75229. Chief Financial
Officer, Kevin L. McBride, D.D.S., Inc.; (214) 368-0268; Designated
Representative: St. Mark's School of Texas.
JOHN R. METCALF, 2864 Broadway - A, San Francisco, CA 94115. Private
investor; former Vice President, Alexander & Alexander, Inc.; (415) 775-2864;
Designated Representative: Alpine Winter Foundation.
CHARLES R. REDMOND, Times Mirror Square, Los Angeles, CA 90053. Chairman,
Pfaffinger Foundation; former President and Chief Executive Officer, Times
Mirror Foundation and Executive Vice President and Member of the Management
Committee, The Times Mirror Company; (213) 237-3977; Designated Representative:
Loyola Marymount University.
THOMAS E. TERRY+*. Consultant; former Vice President and Secretary, Capital
Research and Management Company (retired 1994); (213) 486-9410; Designated
Representative: Citizens' Scholarship Foundation of America.
ROBERT C. ZIEBARTH, P.O. Box 839, Dover, MA 02030. Management Consultant,
Ziebarth Company; (508) 785-1937; Designated Representative: Foundation for
Reproductive Research & Education.
Officers
ROBERT B. EGELSTON, Chairman of the Boards.
THOMAS E. TERRY, President.
Fund officers whose other positions are not described above are:
ABNER D. GOLDSTINE, 11100 Santa Monica Boulevard, Los Angeles, CA 90025,
Senior Vice President. Senior Vice President and Director, Capital Research
and Management Company.
GEORGE A. MILLER***, Senior Vice President. Senior Vice President and
Director, Capital Research and Management Company.
ROBERT G. O'DONNELL***, Senior Vice President. Senior Vice President and
Director, Capital Research and Management Company.
STEVEN N. KEARSLEY**, Vice President and Treasurer. Vice President and
Treasurer, Capital Research and Management Company; Director, American Funds
Service Company; (714) 671-7000.
PATRICK F. QUAN***, Secretary. Vice President - Fund Business Management
Group, Capital Research and Management Company; (415) 421-9360.
LISA G. HATHAWAY*, Assistant Vice President. Assistant Vice President -
Fund Business Management Group, Capital Research and Management Company; (213)
486-9200.
LOUISE M. PESCETTA***, Assistant Vice President and Assistant Secretary.
Assistant Vice President - Fund Business Management Group, Capital Research and
Management Company; (415) 421-9360.
MARY C. HALL**, Assistant Treasurer. Senior Vice President - Fund Business
Management Group, Capital Research and Management Company; (714) 671-7000.
ROBERT P. SIMMER, 5300 Robin Hood Road, Norfolk, VA 23513, Assistant
Treasurer. Vice President - Fund Business Management Group, Capital Research
and Management Company; (804) 670-4900.
_________________
* Address is 333 South Hope Street, Los Angeles, CA 90071.
** Address is 135 South State College Boulevard, Brea, CA 92621.
*** Address is P.O. Box 7650, San Francisco, CA 94120.
# Positions within the organizations listed may have changed during this
period.
+ An "interested person" within the meaning of the Investment Company Act of
1940 (the 1940 Act) on the basis of his affiliation with Capital Research and
Management Company, the funds' Investment Adviser.
++ The Certificate of Incorporation provides that no person shall serve as a
director of the funds (except for the Chairman of the Board or the President),
unless he or she is a designated representative of at least one charitable
institution which is a shareholder of the funds.
+++ Mr. Ellsworth serves as a director or trustee on the boards of a total of
three funds, which are managed by Capital Research and Management Company.
Only Anchor Pathway Fund pays a directors fee. His total compensation from
that fund for the 12 months through July 31, 1995 was $13,000.
All of the officers listed are officers or employees of the Investment
Adviser or affiliated companies. The funds do not pay any salaries or fees to
their directors or officers.
The following directors serve or have served on boards of tax-exempt
501(c)(3) organizations and have had experience in dealing with the
administrative and financial needs of these institutions: Robert B. Egelston -
California Institute of the Arts, Claremont University Center, Los Angeles
Festival, The Los Angeles Philharmonic Association, The Music Center of Los
Angeles County, The Wharton School of Finance and Commerce, University of
Pennsylvania; Frank L. Ellsworth - Claremont University Center, English
Village, Seattle, Foundation for Independent Higher Education, Global Partners,
Canada, Graphic Arts Counsel, Los Angeles County Museum of Art, The Los Angeles
Dance Center, Independent Colleges of Southern California, Inc., The
Japanese-American National Museum, Pitzer College, The Seasons Fund,
Southwestern University School of Law; Steven D. Lavine - The Music Center
Operating Company, The Music Center of Los Angeles County, American Council on
the Arts, KCRW-FM National Public Radio; Patricia A. McBride - Dallas Symphony
Orchestra Association, Dallas Symphony Orchestra League, Dallas Museum of Art
League, Girl Scout Council, Inc., McDermott Foundation, St. Mark's School of
Texas, Southwest Museum of Science and Technology; John R. Metcalf - Radiology
Research and Education Foundation, The Yosemite Fund; Thomas E. Terry -
Citizens' Scholarship Foundation of America, Elvehjem Museum of Art, National
Football Scholarship Foundation; Charles R. Redmond - AMAN Folk Ensemble,
Catholic Charities of the Archdiocese of Los Angeles, The Music Center of Los
Angeles County, Loyola Marymount University, Pasadena Playhouse, Pfaffinger
Foundation, Times Mirror Foundation; Robert C. Ziebarth - Chicago Maternity
Center, Choate School, Foundation for Reproductive Research & Education, Latin
School of Chicago, National Association of Independent Schools, Naval
Historical Foundation, Northwestern Memorial Hospital.
MANAGEMENT
INVESTMENT ADVISER - The Investment Adviser, founded in 1931, maintains
research facilities in the U.S. and abroad, with a staff of professionals, many
of whom have a number of years of investment experience. The Investment
Adviser's professionals travel several million miles a year, making more than
5,000 research visits in more than 50 countries around the world. The
Investment Adviser believes that it is able to attract and retain quality
personnel.
An affiliate of the Investment Adviser compiles indices for major stock
markets around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for more than $100 billion of
stocks, bonds and money market instruments and serve over five million
investors of all types. These investors include privately owned businesses and
large corporations as well as schools, colleges, foundations and other
non-profit and tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENTS - The Investment Advisory and
Service Agreements (the Agreements) between the funds and the Investment
Adviser, dated July 28, 1975, may be renewed from year to year, provided that
any such renewal has been specifically approved at least annually by (i) the
boards of the funds, or by the vote of a majority (as defined in the 1940 Act)
of the outstanding voting securities of the funds, and (ii) the vote of a
majority of directors who are not parties to the Agreements or interested
persons (as defined in said Act) of any such party, cast in person, at a
meeting called for the purpose of voting on such approval. Renewal of the
Agreements was approved by the unanimous vote of the boards of the funds on May
11, 1995 for the period through July 27, 1996. The Agreements also provide
that either party has the right to terminate it without penalty, upon 60 days'
written notice to the other party, and that the Agreements automatically
terminate in the event of their assignment (as defined in said Act).
The Investment Adviser, in addition to providing investment advisory
services, furnishes the services and pays the compensation and travel expenses
of persons to perform the executive, administrative, clerical and bookkeeping
functions of the funds, and provides suitable office space, necessary small
office equipment and utilities, and provides general purpose accounting forms,
supplies, and postage used at the offices of the funds. The funds pay all
expenses not specifically assumed by the Investment Adviser, including, but not
limited to, custodian, stock transfer and dividend disbursing fees and
expenses; costs of the designing, printing and mailing of reports,
prospectuses, proxy statements, and notices to shareholders; taxes; expenses of
the issuance and redemption of shares of the funds (including stock
certificates, registration and qualification fees and expenses); legal and
auditing expenses; expenses paid to directors unaffiliated with the Investment
Adviser; association dues; and costs of stationery and forms prepared
exclusively for the funds.
The Agreements provide for an advisory fee reduction to the extent that
the funds' annual ordinary operating expenses exceed 1-1/2% of the first $30
million of the average net assets of the funds and 1% of the average net assets
in excess thereof. Expenses which are not subject to this limitation are
interest, taxes, and extraordinary expenses. Expenditures, including costs
incurred in connection with the purchase or sale of portfolio securities, which
are capitalized in accordance with generally accepted accounting principles
applicable to investment companies, are accounted for as capital items and not
as expenses.
Effective December 1, 1995, the Investment Adviser has agreed to
voluntarily waive management fees to the extent that each fund's annual
operating expenses exceed 0.75% of its average net assets per annum. There can
be no assurance that this voluntary fee waiver will continue in the future.
During the years ended July 31, 1995, 1994 and 1993, the Investment
Adviser received from Endowments, Inc. advisory fees of $273,381, $308,941, and
$329,042, and from Bond Portfolio for Endowments, Inc. advisory fees of
$223,573, $250,998, and $313,110, respectively.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
The funds are tax-exempt organizations under Section 501(c)(2) of the
Internal Revenue Code. In addition, each fund intends to operate as a
"regulated investment company" under Subchapter M of the Internal Revenue Code.
If, in the future, the funds elect to be treated as regulated investment
companies, they will be subject to the provisions described below.
To qualify as a "regulated investment company," each fund must (a) derive
at least 90% of its gross income from dividends, interest, certain payments
with respect to securities loans, and gains from the sale or other disposition
of stock, securities, currencies or other income derived with respect to its
business of investing in such stock, securities or currencies; (b) derive less
than 30% of its gross income from the gains or sale or other disposition of
stock or securities held less than three months; and (c) diversify its holdings
so that, at the end of each fiscal quarter, (i) at least 50% of the market
value of the fund's assets is represented by cash, cash items, U.S. Government
securities, securities of other regulated investment companies, and other
securities (but such other securities must be limited, in respect of any one
issuer, to an amount not greater than 5% of the fund's assets and 10% of the
outstanding voting securities of such issuer), and (ii) not more than 25% of
the value of its assets is invested in the securities of any one issuer (other
than U.S. Government securities or the securities of other regulated investment
companies), or in two or more issuers which the fund controls and which are
engaged in the same or similar trades or businesses or related trades or
businesses.
Under Subchapter M, if each fund distributes within specified times at
least 90% of the sum of its investment company taxable income (net investment
income and the excess of net short-term capital gains over long-term capital
losses) and its tax-exempt interest, if any, it will be taxed only on that
portion of such investment company taxable income that it retains.
Under the Internal Revenue Code, a nondeductible excise tax of 4% is
imposed on the excess of a regulated investment company's "required
distribution" for the calendar year ending within the regulated investment
company's taxable year over the "distributed amount" for such calendar year.
The term "required distribution" means the sum of (i) 98% of ordinary income
(generally net investment income) for the calendar year, (ii) 98% of capital
gain net income (both long-term and short-term) for the one-year period ending
on October 31 (as though the one-year period ending on October 31 were the
regulated investment company's taxable year), and (iii) the sum of any untaxed,
undistributed net investment income and net capital gains of the regulated
investment company for prior periods. The term "distributed amount" generally
means the sum of (i) amounts actually distributed by the fund from its current
year's ordinary income and capital gain net income and (ii) any amount on which
the fund pays income tax for the year. The funds intend to distribute net
investment income and net capital gains so as to minimize or avoid the excise
tax liability.
PURCHASE OF SHARES
The purchase of shares may be paid in cash or in a like value of
acceptable securities. Such securities will i) be acquired for investment and
not for resale; ii) be liquid securities which are not restricted as to
transfer either by law or liquidity of market; and iii) have a value which is
readily ascertainable.
PRICE OF SHARES - The price you pay for shares is the net asset value per share
which is calculated once daily at the close of trading (currently 4:00 p.m.,
New York time) each day the New York Stock Exchange is open. The New York
Stock Exchange is currently closed on weekends and on the following holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas Day. Such net asset value is effective
for orders to purchase shares of the funds received by the funds before the
close of trading on the New York Stock Exchange; orders received after the
close of trading will be entered at the net asset value as computed as of the
close of trading on the next business day of the New York Stock Exchange.
Prices which appear in the newspaper are not always indicative of prices at
which you will be purchasing and redeeming shares of the funds, since such
prices generally reflect the previous day's closing price whereas purchases and
redemptions are made at the next calculated price. The net asset value per
share is determined as follows:
ENDOWMENTS, INC.
Common stocks, and convertible bonds and debentures, are stated at market
value based upon closing sales prices reported on recognized securities
exchanges on the day of valuation or, for listed securities having no sales
reported, upon last-reported bid prices on that date. Non-convertible bonds
and debentures, and other long-term debt securities, normally are valued at
prices obtained for the day of valuation from a bond pricing service, when such
prices are available; however, in circumstances where the Investment Adviser
deems it appropriate to do so, an over-the-counter or exchange quotation may be
used. 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 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. Securities for
which market quotations are not readily available are valued at fair value as
determined in good faith by the board. Cash and receivables are added and
liabilities are deducted to arrive at the net asset value. This figure is
divided by the number of shares outstanding to give the net asset value per
share.
BOND PORTFOLIO FOR ENDOWMENTS, INC.
Bond 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 their representative quoted bid
and asked prices or, if such prices are not available, at the mean of such
prices for securities of comparable maturity, quality, and type. Short-term
securities with original or remaining maturities in excess of 60 days 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. Stock and convertible bonds and debentures traded
on the New York Stock Exchange are valued at the last sale price on such
exchange on the day of valuation, or if there is no sale on the day of
valuation, at the last-reported bid price. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by the board. Cash and receivables are added and liabilities are
deducted to arrive at the net asset value. This figure is divided by the
number of shares outstanding to give the net asset value per share.
EXECUTION OF PORTFOLIO TRANSACTIONS
There are occasions on which portfolio transactions for the funds may be
executed as part of concurrent authorizations to purchase or sell the same
security for other funds served by the Investment Adviser, or for trusts or
other accounts served by affiliated companies of the Investment Adviser.
Although such concurrent authorizations potentially could be either
advantageous or disadvantageous to the funds, they are effected only when the
Investment Adviser believes that to do so is in the interest of the funds.
When such concurrent authorizations occur, the objective is to allocate the
executions in an equitable manner. The funds will not pay a mark-up for
research in principal transactions.
ENDOWMENTS, INC.
The fund is required to disclose information regarding investments in the
securities of broker-dealers (or parents of broker-dealers that derive more
than 15% of their revenue from broker-dealer activities) which have certain
relationships with the fund. During the last fiscal year, Ford Motor Credit
Corp. and General Electric Capital Corp. were among the top 10 dealers that
acted as principals in portfolio transactions. The fund held equity securities
of Ford Motor Credit Corp. and General Electric Co. in the amounts of $578,000
and $590,000, respectively, as of the close of its most recent fiscal year.
_______________
Brokerage commissions paid on portfolio transactions, including
concessions on underwritings, during the fiscal years ended July 31, 1995, 1994
and 1993, amounted to $38,000, $100,000, and $72,000 for Endowments, Inc., and
$24,000, $3,000, and $14,000 for Bond Portfolio for Endowments, Inc.,
respectively.
REDEMPTION OF SHARES
For redemption requests received after the close of trading on the New
York Stock Exchange, the redemption price will be the net asset value
determined as of the close of trading on the next business day of the New York
Stock Exchange. There is no charge to the shareholder for redemption. Payment
in cash or in kind is made as soon as reasonably practicable after tender in
proper form (as described above), and must, in any event, be made within seven
days thereafter. The funds may, however, suspend the right of redemption
during any period when: (a) trading on the New York Stock Exchange is
restricted as determined by the Securities and Exchange Commission or such
exchange is closed for other than weekends or holidays; (b) the Securities and
Exchange Commission has by order permitted such suspension; or (c) any
emergency as determined by the Securities and Exchange Commission exists,
making disposal of portfolio securities or valuation of net assets of the funds
not reasonably practicable.
Although they would not normally do so, the funds have the right to pay
the redemption price in whole or in part in portfolio securities as selected by
the boards, taken at their value as used in determining net asset value for
purposes of computing the redemption price. A shareholder that redeems fund
shares, and is given by the fund a proportionate amount of the fund's portfolio
securities in lieu of cash, may incur brokerage commissions in the event of a
sale of the securities through a broker. However, the funds have elected to be
governed by Rule 18f-1 under the 1940 Act pursuant to which the funds are
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the net asset value of the funds during any 90-day period for any one
shareholder.
GENERAL INFORMATION
CUSTODIAN OF ASSETS - Securities and cash owned by the funds, including
proceeds from the sale of shares of the funds and of securities in the funds'
portfolios, are held by The Chase Manhattan Bank N.A., One Chase Manhattan
Plaza, New York, NY 10081, as Custodian.
INDEPENDENT ACCOUNTANTS - Deloitte & Touche LLP, located at 1000 Wilshire
Boulevard, Los Angeles, CA 90017, serves as the funds' independent accountants,
providing audit services, preparing tax returns and reviewing certain documents
of the funds to be filed with the Securities and Exchange Commission. The
financial statements included in this statement of additional information from
the Annual Report have been so included in reliance on the report of Deloitte &
Touche LLP given on the authority of said firm as experts in auditing and
accounting.
COUNSEL - Morrison & Foerster, 345 California Street, San Francisco, CA 94104,
has passed upon the legality of the shares offered hereby.
REPORTS TO SHAREHOLDERS - The funds' fiscal year ends on July 31. Shareholders
are provided at least semi-annually with reports showing the investment
portfolio, financial statements and other information audited by the funds'
independent accountants, Deloitte & Touche LLP, whose selection is determined
annually by the boards.
The financial statements including the investment portfolio and the report
of Independent Auditors contained in the Annual Report are included in this
statement of additional information.
PERSONAL INVESTING POLICY - Capital Research and Management Company and its
affiliated companies have adopted a personal investing policy consistent with
Investment Company Institute guidelines. This policy includes: a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; pre-clearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; disclosure of personal
holdings by certain investment personnel prior to recommendation for purchase
for the fund; blackout periods on personal investing for certain investment
personnel; ban on short-term trading profits for investment personnel;
limitations on service as a director of publicly traded companies; and
disclosure of personal securities transactions.
REMOVAL OF DIRECTORS BY SHAREHOLDERS - At any meeting of shareholders, duly
called and at which a quorum is present, the shareholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be cast
thereon, remove any director or directors from office and may elect a successor
or successors to fill any resulting vacancies for the unexpired terms of
removed directors. The funds have made an undertaking, at the request of the
staff of the Securities and Exchange Commission, to apply the provisions of
section 16(c) of the 1940 Act with respect to the removal of directors as
though the funds were a common-law trust. Accordingly, the directors of the
funds shall promptly call a meeting of shareholders for the purpose of voting
upon the question of removal of any director when requested in writing to do so
by the record holders of not less than 10% of the outstanding shares.
INVESTMENT RESULTS
Endowments, Inc.'s yield is 3.80% and Bond Portfolio for Endowments,
Inc.'s yield is 6.89% based on a 30-day (or one month) period ended July 31,
1995, computed by dividing the net investment income per share earned during
the period by the maximum offering price per share on the last day of the
period, according to the following formula:
YIELD = 2[(a-b/cd+1)/6/-1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
(Endowments, Inc. and Bond Portfolio for Endowments, Inc. do not have a sales
charge.)
Endowments, Inc.'s average annual total return for the one, five and
ten-year periods ended on July 31, 1995 was +18.57%, +12.29 and +12.94%,
respectively. Bond Portfolio for Endowments, Inc.'s average annual total
return for the one, five and ten-year periods ended on July 31, 1995 was
+7.97%, +9.35 and +10.05%, respectively. The average annual total return (T)
is computed by equating the value at the end of the period (ERV) with a
hypothetical initial investment of $1,000 (P) over a period of years (n)
according to the following formula as required by the Securities and Exchange
Commission: P(1+T)/n/ = ERV.
The following assumptions will be reflected in computations made in
accordance with the formula stated above: (1) reinvestment of dividends and
distributions at net asset value on the reinvestment date determined by the
board; and (2) a complete redemption at the end of any period illustrated.
The funds may include information on their investment results and/or
comparisons of their investment results to various unmanaged indices (such as
The Dow Jones Average of 30 Industrial Stocks, The Standard and Poor's 500
Stock Composite Index and the Lipper Growth & Income Fund Index for Endowments,
Inc. and the Lehman Aggregate Bond Index for Bond Portfolio for Endowments,
Inc.) or results of other mutual funds or investment or savings vehicles in
advertisements or in reports furnished to present or prospective shareholders.
Total return for the unmanaged indices will be calculated assuming
reinvestment of dividends and interest, but will not reflect any deductions for
advisory fees, brokerage costs or administrative expenses.
The funds may refer to results compiled by organizations such as CDA
Investment Technologies, Ibbotson Associates, Lipper Analytical Services,
Morningstar, Inc., and Wiesenberger Investment Companies Services and by the
U.S. Department of Commerce. Additionally, the funds may, from time to time,
refer to results published in various newspapers and periodicals, including
Barrons, Forbes, Fortune, Institutional Investor, Kiplinger's Personal Finance
Magazine, Money, U.S. News and World Report and The Wall Street Journal.
The funds may, from time to time, compare their investment results with
the Consumer Price Index, which is a measure of the average change in prices
over time in a fixed market basket of goods and services (E.G. food, clothing,
fuels, transportation, and other goods and services that people buy for
day-to-day living).
The investment results for the funds set forth below were calculated as
described in the funds' prospectus. The percentage increases shown in the
table below or used in published reports of the funds are obtained by
subtracting the index results at the beginning of the period from the index
results at the end of the period and dividing the difference by the index
results at the beginning of the period.
ENDI vs. Various Unmanaged Indices
<TABLE>
<CAPTION>
10-Year Lipper Growth
8/1 - 7/31 ENDI DJIA/1/ S&P 500/2/ and Income/3/
<S> <C> <C> <C> <C>
1985 - 1995 +238% +391% +306% +255%
1984 - 1994 +271 +385 +327 +290
1983 - 1993 +260 +333 +294 +249
1982 - 1992 +411 +528 +478 +381
1981 - 1991 +325 +392 +343 +290
1980 - 1990 +326 +392 +344 +301
1979 - 1989 +379 +409 +416 +387
1978 - 1988 +328 +308 +326 +329
1977 - 1987 +384 +388 +417 +412
1976 - 1986 +329 +208 +271 +301
1975 - 1985 +335 +177 +250 +287
1975# - 1985 +333 +177 +248 +287
</TABLE>
BENDI vs. Various Unmanaged Indices
<TABLE>
<CAPTION>
Lehman
10-Year Brothers
8/1 - 7/31 BENDI Aggregate/4/
<S> <C> <C>
1985 - 1995 +161% +160%
1984 - 1994 +191 +193
1983 - 1993 +219 +218
1982 - 1992 +254 +251
1981 - 1991 +253 +269
1980 - 1990 +204 +217
1979 - 1989 +195 +201
1978 - 1988 +178 +178
1977 - 1987 +157 +164
1976 - 1986 +178 +181
1975 - 1985 +157 N/A
1975# - 1985 +158 N/A
</TABLE>
________________
# From July 26, 1975
/1/ The Dow Jones Average of 30 Industrial Stocks is comprised of 30 industrial
companies such as General Motors and General Electric.
/2/ The Standard and Poor's 500 Stock Composite Index is comprised of
industrial, transportation, public utilities, and financial stocks and
represents a large portion of the value of issues traded on the New York Stock
Exchange. Selected issues traded on the American Stock Exchange are also
included.
/3/ The Lipper Growth & Income Fund Index is a non-weighted index of the 30
largest funds within the Lipper Growth & Income investment objective. It is
calculated daily with adjustments for income dividends and capital gain
distributions as of the ex-dividend dates.
/4/ The Lehman Brothers Aggregate Bond Index covers all sectors of the fixed
income market and is a combination of the Lehman Brothers Treasury Bond Index,
the Agency Bond Index, the Corporate Bond Index, the Yankee Bond Index and the
Mortgage Backed Securities Index. Its inception date is December 31, 1975.
SEE THE DIFFERENCE TIME CAN MAKE IN AN INVESTMENT PROGRAM
<TABLE>
<CAPTION>
. . . and had taken
all dividends and
capital gain
distributions
in shares, your
If you had investment would
invested $50,000 have been worth
in ENDI this many this much at
years ago . . . 7/31/95
| |
<S> <C> <C>
Number Periods
of Years 8/1 - 7/31 Value
1 1994 - 1995 $59,286
2 1993 - 1995 60,928
3 1992 - 1995 67,050
4 1991 - 1995 77,607
5 1990 - 1995 89,272
6 1989 - 1995 92,955
7 1988 - 1995 114,540
8 1987 - 1995 111,898
9 1986 - 1995 134,403
10 1985 - 1995 168,768
11 1984 - 1995 220,141
12 1983 - 1995 219,392
13 1982 - 1995 342,291
14 1981 - 1995 329,702
15 1980 - 1995 379,930
16 1979 - 1995 445,379
17 1978 - 1995 490,812
18 1977 - 1995 541,190
19 1976 - 1995 576,269
20 1975#- 1995 731,561
</TABLE>
# From July 26, 1975
SEE THE DIFFERENCE TIME CAN MAKE IN AN INVESTMENT PROGRAM
<TABLE>
<CAPTION>
. . . and had taken
all dividends and
capital gain
distributions
in shares, your
If you had investment would
invested $50,000 have been worth
in BENDI this many this much at
years ago . . . 7/31/95
| |
<S> <C> <C>
Number Periods
of Years 8/1 - 7/31 Value
1 1994 - 1995 $53,987
2 1993 - 1995
53,208
3 1992 - 1995
59,455
4 1991 - 1995
70,565
5 1990 - 1995
78,171
6 1989 - 1995
83,529
7 1988 - 1995
94,959
8 1987 - 1995
103,141
9 1986 - 1995
107,694
10 1985 - 1995
130,271
11 1984 - 1995
157,158
12 1983 - 1995
169,661
13 1982 - 1995
210,302
14 1981 - 1995
249,009
15 1980 - 1995
237,611
16 1979 - 1995
246,429
17 1978 - 1995
263,636
18 1977 - 1995
265,567
19 1976 - 1995
298,905
20 1975#- 1995
335,522
</TABLE>
# From July 26, 1975
Illustration of a $50,000 investment in ENDI with
dividends reinvested and capital gain distributions taken in shares
(for the period July 26, 1975 through July 31, 1995)
COST OF SHARES VALUE OF SHARES
<TABLE>
<CAPTION>
Year Total From From
Ended Annual Dividends Investment From Initial Capital Gains Dividends Total
July 31 Dividends (cumulative) Cost Investment Reinvested Reinvested Value
<S> <C> <C> <C> <C> <C> <C> <C>
1975# $ 0 $ 0 $50,000 $49,769 $ 0 $ 0 $49,770
1976 2,408 2,408 52,408 60,781 0 2,695 63,476
1977 2,454 4,862 54,862 62,331 0 5,259 67,590
1978 2,899 7,761 57,761 65,910 0 8,615 74,525
1979 3,511 11,272 61,272 69,263 0 12,868 82,131
1980 4,322 15,594 65,594 77,021 0 19,256 96,277
1981 6,326 21,920 71,920 79,847 4,739 26,356 110,942
1982 7,869 29,789 79,789 64,678 13,443 28,739 106,860
1983 6,722 36,511 86,511 96,477 20,052 50,197 166,726
1984 7,502 44,013 94,013 83,847 31,536 50,774 166,157
1985 9,036 53,049 103,049 95,601 53,303 67,832 216,736
1986 10,623 63,672 113,672 104,971 81,000 86,184 272,155
1987 12,851 76,523 126,523 104,222 123,158 99,505 326,885
1988 15,733 92,256 142,256 88,382 130,787 100,178 319,347
1989 17,918 110,174 160,174 96,368 167,745 129,388 393,501
1990 22,799 132,973 182,973 89,440 178,016 142,283 409,739
1991 21,836 154,809 204,809 94,623 202,831 173,872 471,326
1992 20,318 175,127 225,127 96,580 249,826 199,127 545,533
1993 21,415 196,542 246,542 97,479 279,694 223,176 600,349
1994 22,417 218,959 268,959 90,868 296,050 230,062 616,980
1995 22,961 241,920 291,920 95,522 369,066 266,973 731,561
</TABLE>
# From July 26, 1975
The dollar amount of capital gain distributions during the period was $336,719.
Illustration of a $50,000 investment in BENDI with
dividends reinvested and capital gain distributions taken in shares
(for the period July 26, 1975 through July 31, 1995)
COST OF SHARES VALUE OF SHARES
<TABLE>
<CAPTION>
Year Total From From
Ended Annual Dividends Investment From Initial Capital Gains Dividends Total
July 31 Dividends (cumulative) Cost Investment Reinvested Reinvested Value
<S> <C> <C> <C> <C> <C> <C> <C>
1975# $ 0 $ 0 $50,000 $50,065 $ 0 $ 0 $50,064
1976 3,466 3,466 53,466 52,455 0 3,668 56,123
1977 4,395 7,861 57,861 54,854 0 8,315 63,169
1978 4,798 12,659 62,659 51,161 0 12,472 63,633
1979 5,595 18,254 68,254 50,165 0 17,913 68,078
1980 7,331 25,585 75,585 46,568 0 24,036 70,604
1981 7,990 33,575 83,575 39,235 0 28,137 67,372
1982 9,678 43,253 93,253 40,739 0 39,032 79,771
1983 10,518 53,771 103,771 45,384 0 53,497 98,881
1984 11,193 64,964 114,964 43,796 0 62,950 106,746
1985 12,231 77,195 127,195 47,570 0 81,205 128,775
1986 13,557 90,752 140,752 52,296 0 103,480 155,776
1987 13,829 104,581 154,581 50,040 0 112,609 162,649
1988 13,553 118,134 168,134 48,557 5,210 122,900 176,667
1989 15,800 133,934 183,934 50,630 5,433 144,778 200,841
1990 17,213 151,147 201,147 49,693 5,332 159,584 214,609
1991 19,146 170,293 220,293 50,432 5,411 181,896 237,739
1992 20,570 190,863 240,863 55,202 5,923 221,039 282,164
1993 22,376 213,239 263,239 55,827 12,805 246,660 315,292
1994 22,971 236,210 286,210 47,876 29,925 232,942 310,743
1995 23,564 259,774 309,774 47,762 31,232 256,528 335,522
</TABLE>
# From July 26, 1975
The dollar amount of capital gain distributions during the period was $33,339.
EXPERIENCE OF INVESTMENT ADVISER - Capital Research and Management Company
manages nine common stock funds that are at least 10 years old. In the rolling
10-year periods since 1964 (115 in all), those funds have had better total
returns than the Standard and Poor's 500 Composite Stock Index in 94 of the 115
periods.
Note that past results are not an indication of future investment results.
Also, the fund has different investment policies than the funds mentioned
above. These results are included solely for the purpose of informing
investors about the experience and history of Capital Research and Management
Company.
ENDOWMENTS, INC.
INVESTMENT PORTFOLIO, JULY 31, 1995
<TABLE>
<CAPTION>
Percent
of Net
INDUSTRY DIVERSIFICATION Assets
<S> <C> <C> <C>
- --------------------------------------------------- --------- ------------- ----------
Banking 10.20%
Insurance 9.53
Health & Personal Care 9.19
Utilities: Electric & Gas 6.93
Energy Sources 5.12
Real Estate 4.52
Transportation: Rail & Road 4.37
Merchandising 3.47
Business & Public Services 2.91
Chemicals 2.86
Forest Products & Paper 2.79
Telecommunications 2.68
Beverages & Tobacco 2.60
Data Processing & Reproduction 2.02
Financial Services 1.95
Food & Household Products 1.84
Aerospace & Military Technology 1.18
Broadcasting & Publishing 1.16
Electrical & Electronics 1.04
Automobiles 1.02
Metals: Nonferrous 1.00
Multi-Industry 1.00
----------
79.38
Short-Term Securities 20.52
Excess of cash and receivables over payables .10
----------
Net Assets 100.00%
==========
Percent
of Net
TEN LARGEST HOLDINGS Assets
- --------------------------------------------------- --------- ------------- ----------
American Home Products 3.48%
Ohio Casualty 2.50
Comerica 2.16
Texas Utilities 2.13
Wal-Mart Stores 2.11
Dun & Bradstreet 2.08
International Business Machines 2.02
Weingarten Realty Investors 2.01
Philip Morris 1.90
General Mills 1.84
----------
22.23%
==========
Percent
Number Market Of Net
COMMON STOCKS of shares Value Assets
- --------------------------------------------------- --------- ------------- ----------
ENERGY
Energy Sources-5.12%
Amoco Corp. 8,600 $ 578,350 1.02%
Atlantic Richfield Co. 5,000 576,250 1.01
Exxon Corp. 10,000 725,000 1.28
Phillips Petroleum Co. 29,000 1,025,875 1.81
Utilities: Electric & Gas-6.93%
Carolina Power & Light Co. 20,000 607,500 1.07
Consolidated Edison Co. of New York, Inc. 17,000 493,000 .87
Entergy Corp. 25,000 593,750 1.05
Houston Industries Inc. 10,000 437,500 .77
Pacific Gas and Electric Co. 20,000 590,000 1.04
Texas Utilities Co. 35,658 1,207,915 2.13
------------- ----------
6,835,140 12.05
------------- ----------
MATERIALS
Chemicals-2.86%
Armor All Products Corp. 28,000 472,500 .83
Dow Chemical Co. 8,000 593,000 1.05
Monsanto Co. 6,000 558,750 .98
Forest Products & Paper-2.79%
Louisiana-Pacific Corp. 30,000 738,750 1.30
Union Camp Corp. 15,000 843,750 1.49
Metals: Nonferrous-1.00%
Aluminum Co. of America 10,000 568,750 1.00
------------- ----------
3,775,500 6.65
------------- ----------
CAPITAL EQUIPMENT
Aerospace & Military Technology-1.18%
Boeing Co. 10,000 670,000 1.18
Data Processing & Reproduction-2.02%
International Business Machines Corp. 10,500 1,143,188 2.02
Electrical & Electronics-1.04%
General Electric Co. 10,000 590,000 1.04
------------- ----------
2,403,188 4.24
------------- ----------
CONSUMER GOODS
Automobiles-1.02%
Ford Motor Co., Class A 20,000 577,500 1.02
Beverages & Tobacco-2.60%
American Brands, Inc. 10,000 398,750 .70
Philip Morris Companies Inc. 15,000 1,074,375 1.90
Food & Household Products-1.84%
General Mills, Inc. 20,000 1,045,000 1.84
Health & Personal Care-9.19%
American Home Products Corp. 25,000 1,975,000 3.48
Johnson & Johnson 10,000 717,500 1.26
Merck & Co., Inc. 20,000 1,032,500 1.82
Schering-Plough Corp. 14,000 651,000 1.15
Warner-Lambert Co. 10,000 840,000 1.48
------------- ----------
8,311,625 14.65
------------- ----------
SERVICES
Broadcasting & Publishing-1.16%
Gannett Co., Inc. 12,000 657,000 1.16
Business & Public Services-2.91%
Dun & Bradstreet Corp. 21,000 1,181,250 2.08
WMX Technologies, Inc. 15,000 468,750 .83
Merchandising-3.47%
Melville Corp. 8,000 288,000 .51
Super Food Services, Inc. 40,000 480,000 .85
Wal-Mart Stores, Inc. 45,000 1,198,125 2.11
Telecommunications-2.68%
Ameritech Corp. 10,000 483,750 .85
AT&T Corp. 10,000 527,500 .93
Sprint Corp. 15,000 513,750 .90
Transportation: Rail & Road-4.37%
CSX Corp. 10,000 838,750 1.48
TNT Freightways Corp. 45,000 990,000 1.74
Union Pacific Corp. 10,000 651,250 1.15
------------- ----------
8,278,125 14.59
------------- ----------
FINANCE
Banking-10.20%
Bankers Trust New York Corp. 10,000 645,000 1.14
Central Fidelity Banks, Inc. 15,000 476,250 .84
Comerica Inc. 35,000 1,225,000 2.16
First Hawaiian, Inc. 20,000 545,000 .96
Huntington Bancshares Inc. 28,800 612,002 1.08
J.P. Morgan & Co. Inc. 14,000 1,023,750 1.80
U.S. Bancorp 18,000 470,250 .83
Washington Mutual Savings Bank 33,150 791,456 1.39
Financial Services-1.95%
Beneficial Corp. 12,000 568,500 1.00
Student Loan Marketing Assn. 10,000 538,750 .95
Insurance-9.53%
Allstate Corp. 15,000 468,750 .83
AMBAC Inc. 20,000 797,500 1.41
American General Corp. 27,000 982,125 1.73
Liberty Corp. 25,000 709,375 1.25
Ohio Casualty Corp. 44,000 1,419,000 2.50
Paul Revere Corp. 30,000 562,500 .99
Trenwick Group Inc. 10,000 465,000 .82
Real Estate-4.52%
Security Capital Pacific Trust
(formerly Property Trust of America) 30,000 543,750 .96
Weingarten Realty Investors 32,000 1,140,000 2.01
Western Investment Real Estate Trust 75,000 881,250 1.55
------------- ----------
14,865,208 26.20
------------- ----------
MULTI-INDUSTRY
Multi-Industry-1.00%
Minnesota Mining and Manufacturing Co. 10,000 566,250 1.00
------------- ----------
TOTAL COMMON STOCKS (cost: $35,674,988) 45,035,036 79.38
------------- ----------
Principal
Amount
SHORT-TERM SECURITIES (000)
Corporate Short-Term Notes-18.76%
Abbott Laboratories 5.72% due 8/24/95 $1,000 996,187 1.76
Associates Corp. of North America 5.86% due 8/1/95 1,120 1,119,818 1.97
Coca-Cola Co. 5.70% due 8/18/95 1,600 1,595,440 2.81
John Deere Capital Corp. 5.72% due 8/8/95 1,350 1,348,284 2.38
Emerson Electric Co. 5.69% due 9/7/95 1,600 1,590,390 2.80
H.J. Heinz Co. 5.72% due 8/16/95 1,300 1,296,695 2.29
PepsiCo, Inc. 5.91%-5.93% due 8/10-8/11/95 1,500 1,497,370 2.64
Wal-Mart Stores, Inc. 5.70% due 8/2/95 1,200 1,199,620 2.11
------------ ----------
10,643,804 18.76
------------ ----------
FEDERAL AGENCY DISCOUNT NOTES-1.76%
Federal National Mortgage Assn. 5.87% due 8/8/95 1,000 998,695 1.76
------------ ----------
TOTAL SHORT-TERM SECURITIES (cost: $11,642,500) 11,642,499 20.52
------------ ----------
TOTAL INVESTMENT SECURITIES (cost: $47,317,488) 56,677,535 99.90
Excess of cash and receivables over payables 57,610 .10
------------- ----------
NET ASSETS $56,735,145 100.00%
============= ==========
</TABLE>
See Notes to Financial Statements
Common Stocks added to the portfolio
since January 31, 1995
- --------------------------------------
AT&T
CSX
Central Fidelity Banks
Ford Motor
Louisiana-Pacific
Wal-Mart Stores
Common Stocks eliminated from the portfolio
since January 31, 1995
- --------------------------------------
Allegheny Power System
American Express
AmSouth Bancorporation
Central and South West
Delta Air Lines
Deluxe
First Union
Honeywell
James River Corp. of Virginia
Xerox
ENDOWMENTS, INC.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
<S> <C> <C>
at July 31, 1995
- ---------------------------------------- ------------ ------------
Assets:
Investment securities at market
(COST: $47,317,488) $56,677,535
Cash 53,507
Receivables for--
Sales of investments $84,218
Dividends and accrued interest 54,271 138,489
------------ ------------
56,869,531
Liabilities:
Payables for--
Repurchased of fund's shares 110,000
Management services 23,918
Accrued expenses 468 134,386
------------ ------------
NET ASSETS AT JULY 31, 1995--
EQUIVALENT TO $18.06 PER SHARE ON
3,142,057 SHARES OF $1 PAR VALUE
CAPITAL STOCK OUTSTANDING (AUTHORIZED
CAPITAL STOCK -- 10,000,000 SHARES) $56,735,145
=============
Statement of Operations
FOR THE YEAR ENDED JULY 31, 1995
------------ ------------
Investment Income:
Income:
Dividends $ 1,797,707
Interest 627,464 $2,425,171
Expenses: ------------
Management services fee 273,381
Custodian fee 2,715
Registration statement and prospectus 23,974
Auditing fees 29,700
Legal fees 5,642
Taxes other than federal income tax 38,982
Other expenses 23,844 398,238
------------ ------------
Net investment income 2,026,933
------------
REALIZED GAIN AND UNREALIZED
APPRECIATION ON INVESTMENTS:
NET REALIZED GAIN 2,706,488
Net increase in unrealized
appreciation on investments:
Beginning of year 4,636,464
End of year 9,360,047
Net unrealized appreciation on ------------
investments 4,723,583
------------
NET REALIZED GAIN AND UNREALIZED
appreciation on investments 7,430,071
------------
NET INCREASE IN NET ASSETS RESULTING
from Operations $9,457,004
============
Statement of Changes in Net
Assets
- ---------------------------------------- ------------- -------------
Year ended July 31
1995 1994
Operations: ------------- -------------
Net investment income $ 2,026,933 $ 2,298,858
NET REALIZED GAIN ON INVESTMENTS 2,706,488 4,620,262
NET UNREALIZED APPRECIATION
(depreciation) on investments 4,723,583 (5,114,351)
NET INCREASE IN NET ASSETS RESULTING ------------- -------------
from operations 9,457,004 1,804,769
------------- -------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (1,942,631) (2,366,161)
Distributions from net realized
gain on investments (4,141,493) (4,366,435)
------------- -------------
Total dividends and distributions (6,084,124) (6,732,596)
------------- -------------
Capital Share Transactions:
Proceeds from shares sold:
317,243 AND 529,049
shares, respectively 5,302,616 9,373,981
Proceeds from shares issued in
reinvestment of net investment income
dividends and distributions of net
realized gain on investments:
362,222 and 340,985 shares,
respectively 5,645,016 5,905,920
Cost of shares repurchased:
618,230 and 1,670,177
shares, respectively (10,507,091) (28,940,446)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING
from capital share transactions 440,541 (13,660,545)
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 3,813,421 (18,588,372)
Net Assets:
Beginning of year 52,921,724 71,510,096
------------- -------------
End of year (including undistributed
NET INVESTMENT INCOME: $261,394 AND
$177,092, RESPECTIVELY) $56,735,145 $ 52,921,724
============= =============
</TABLE>
See Notes to Financial Statements
ENDOWMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
1. Endowments, 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:
Common stocks are stated at market value based upon closing sales prices
reported on recognized securities exchanges on the last business day of the
year 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 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.
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. Dividend and 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 and distributions paid to shareholders are recorded on the
ex-dividend date.
Shares of the fund may be owned only by organizations exempt from federal
income taxation under Section 501(c)(3) of the Internal Revenue Code. The fund
itself is exempt from taxation under Section 501(c)(2) of the Internal Revenue
Code.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $2,715 includes $1,737 that was paid by these 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 July 31, 1995, net unrealized appreciation on investments for book
and federal income tax purposes aggregated $9,360,047, of which $10,056,079
related to appreciated securities and $696,032 related to depreciated
securities. There was no difference between book and tax realized gains on
securities transactions for the year ended July 31, 1995. The cost of
portfolio securities for book and federal income tax purposes was $47,317,488
at July 31, 1995.
3. The fee of $273,381 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 0.50% 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 Agreement provides for a fee reduction to the extent the fund's annual
ordinary operating expenses exceed 1.50% of the first $30 million of the
average net assets of the fund and 1.00% of the average net assets in excess
thereof. Expenses which are not subject to this limitation are interest,
taxes, and extraordinary expenses. As of July 31, 1995, no such fee reduction
was required.
No fees were paid by the fund to its officers and Directors.
4. As of July 31, 1995, accumulated undistributed net realized gain on
investments was $2,133,768 and additional paid-in capital was $41,837,879.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $10,445,633 and $16,423,506, respectively, during the
year ended July 31, 1995.
ENDOWMENTS, INC.
<TABLE>
<CAPTION>
PER-SHARE DATA AND RATIOS
- ------------------------------ -------- -------- --------
Year ended
-------- -------- --------
<S> <C> <C> <C>
1995 1994 1993
-------- -------- --------
Net Asset Value, Beginning
of Year $17.18 $18.43 $18.26
-------- -------- --------
Income from Investment
Operations:
Net investment income .63 .65 .66
Net realized and unrealized
gain (loss) on investments 2.21 (.16) 1.05
Total income from investment -------- -------- --------
operations 2.84 .49 1.71
-------- -------- --------
Less Distributions:
Dividends from net investment
income (.61) (.66) (.69)
Distributions from net realized
gains (1.35) (1.08) (.85)
-------- -------- --------
Total distributions (1.96) (1.74) (1.54)
-------- -------- --------
Net Asset Value, End of Year $18.06 $17.18 $18.43
======== ======== ========
Total Return 18.57% 2.77% 10.05%
Ratios/Supplemental Data:
Net assets, end of year (in
millions) $57 $53 $72
Ratio of expenses to average
net assets .73% .73% .64%
Ratio of net income to
average net assets 3.70% 3.78% 3.72%
Portfolio turnover rate 24.04% 25.58% 29.70%
</TABLE>
- ---------------
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Endowments, Inc.:
We have audited the accompanying statement of assets and liabilities of
Endowments, Inc. (the "fund"), including the schedule of portfolio investments,
as of July 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 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 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, 1995 by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other 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 Endowments, Inc. as of July 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
August 23, 1995
BOND PORTFOLIO FOR ENDOWMENTS, INC.
INVESTMENT PORTFOLIO, JULY 31, 1995
<TABLE>
<CAPTION>
Principal Percent
Amount Market of Net
<S> <C> <C> <C>
BONDS & NOTES (000) Value Assets
- ------------------------------------------------------- --------- ----------- --------
Industrials - 18.15%
General Motors Corp. 8.80% due 3/1/21 $2,000 $2,209,940 5.04%
Hanson America, Inc. 2.39% convertible
debentures due 3/1/01 /1/ 1,500 1,185,000 2.70
Inco Ltd. 9.60% due 6/15/22 700 752,780 1.72
Pohang Iron & Steel Co., Ltd. 7.375% due 5/15/05 1,000 1,004,360 2.29
TCI Communications, Inc.8.75% due 8/1/15 500 505,000 1.15
USX Corp. 0% convertible debentures due 8/9/05 5,000 2,300,000 5.25
----------- --------
7,957,080 18.15
----------- --------
Electric & Telephone Utilities - 5.14%
Big Rivers Electric Corp. 10.70% due 9/15/17 2,000 2,253,680 5.14
----------- --------
Transportation: Airlines - 4.78%
American Airlines, Inc., 1991-A, pass-through
certificates, 9.71% due 1/2/07 /2/ 924 1,032,989 2.36
Delta Air Lines, Inc., 1993-A2, pass-through
certificates, 10.50% due 4/30/16 /2/ 500 571,875 1.30
Federal Express Corp. 7.53% due 9/23/06 492 490,662 1.12
----------- --------
2,095,526 4.78
----------- --------
Financial - 17.77%
American Re Corp. 10.875% due 9/15/04 2,000 2,211,460 5.05
Bank of Nova Scotia 6.562% due 8/31/85 /3/ 1,000 783,800 1.79
Bankers Trust New York Corp. 8.25% due 5/1/05 1,000 1,062,390 2.42
Canadian Imperial Bank of Commerce 6.625% Euronotes
due 8/31/85 /3/ 1,000 792,550 1.81
General Electric Capital Corp. 8.875% due 5/15/09 1,000 1,155,460 2.63
Midland American Capital 12.75% due 11/15/03 825 968,418 2.21
Midland Bank 6.125% due 6/30/49 /3/ 1,000 815,000 1.86
----------- --------
7,789,078 17.77
----------- --------
Collateralized Mortgage/Asset-Backed
Obligations /2/ - 5.58%
CSFB Finance Co. Ltd. 7.00% due 11/15/05 /1/ 500 480,250 1.10
Jet Equipment Trust Series 1995-B, Class A, 7.63%
due 2/15/15 /1/ 500 501,875 1.15
Jet Equipment Trust Series 1995-B, Class B, 7.83%
due 2/15/15 /1/ 500 503,125 1.15
Prudential Home Mortgage Securities Co., Inc.,
Series 1992-2033, Class A-12, 7.50% due 11/25/22 500 501,560 1.14
SKW II Real Estate L.P. 6.45% due 4/15/02 /1/ 458 457,648 1.04
----------- --------
2,444,458 5.58
----------- --------
Governments (excluding U.S. Government) &
Governmental Authorities - 7.40%
Ontario (Province of) 17.00% due 11/5/11 1,100 1,307,482 2.98
Ontario (Province of) 11.50% due 3/10/13 600 688,464 1.57
Quebec (Province of) 13.25% due 9/15/14 1,000 1,248,070 2.85
----------- --------
3,244,016 7.40
----------- --------
U.S. Government & Federal Agency Obligations - 36.29%
Federal Home Loan Mortgage Corp. 8.75% due 7/1/08 /2/ 168 174,285 .40
Federal Home Loan Mortgage Corp. 12.50% due 12/1/12 /2/ 81 90,412 .21
Federal Home Loan Mortgage Corp. 9.00% due 3/1/20 /2/ 196 203,697 .46
Federal National Mortgage Assn. 9.00% due 11/1/20 /2/ 373 388,314 .89
Government National Mortgage Assn. 8.50% due 12/15/08 /2/ 490 512,485 1.17
Government National Mortgage Assn. 7.50% due 1/15/24 /2/ 679 678,100 1.55
Government National Mortgage Assn. 5.50% due 2/20/24 /2/ 969 953,415 2.17
Government National Mortgage Assn. 6.00% due 6/20/24 /2/ 990 982,133 2.24
Government National Mortgage Assn. 8.50% due 11/15/24 /2/ 500 518,336 1.18
Government National Mortgage Assn. 8.50% due 4/15/25 /2/ 990 1,026,195 2.34
U.S. Treasury 8.00% due 1/15/97 1,500 1,545,463 3.53
U.S. Treasury 8.125% due 2/15/98 1,250 1,311,713 2.99
U.S. Treasury 9.25% due 8/15/98 750 815,858 1.86
U.S. Treasury 11.625% due 11/15/04 500 676,640 1.54
U.S. Treasury 10.375% due 11/15/12 3,000 3,895,320 8.89
U.S. Treasury 8.875% due 8/15/17 1,750 2,132,813 4.87
----------- --------
15,905,179 36.29
----------- --------
TOTAL BONDS & NOTES (cost: $41,894,247) 41,689,017 95.11
----------- --------
SHORT-TERM SECURITIES
Corporate Short-Term Notes - 2.76%
Associates Corp. of North America 5.86% due 8/1/95 1,210 1,209,803 2.76
----------- --------
TOTAL SHORT-TERM SECURITIES (cost: $1,209,803) 1,209,803 2.76
----------- --------
TOTAL INVESTMENT SECURITIES (cost: $43,104,050) 42,898,820 97.87
Excess of cash and receivables over payables 935,283 2.13
----------- --------
NET ASSETS $43,834,103 100.00%
=========== ========
</TABLE>
/1/ Purchased in a private placement transaction; resale potential extends only
to qualified institutional buyers.
/2/ Pass-through securities backed by a pool of mortgages or other loans on
which principal payments are periodically made. Due to the possibility of early
principal payments, the effective maturity of these securities is shorter than
the stated maturity.
/3/ Coupon rates may change periodically.
See Notes to Financial Statements
BOND PORTFOLIO FOR ENDOWMENTS, INC.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
at July 31, 1995
- ------------------------------------- -------------- -------------
<S> <C> <C>
Assets:
Investment securities at market
(cost: $43,104,050) $42,898,820
Cash 57,903
Receivables for--
Sales of investments $ 518,760
Accrued interest 875,022 1,393,782
-------------- -------------
44,350,505
Liabilities:
Payables for--
Purchases of investments 497,200
Management services 18,712
Accrued expenses 490 516,402
-------------- -------------
Net Assets at July 31, 1995--
Equivalent to $16.82 per share on
2,606,750 shares of $1 par value
capital stock outstanding (authorized
capital stock - 10,000,000 shares) $43,834,103
=============
Statement of Operations
for the year ended July 31, 1995
-------------- -------------
Investment Income:
Interest income $ 3,713,162
Expenses:
Management services fee $ 223,573
Custodian fee 2,792
Registration statement and prospectus 15,882
Auditing fees 29,700
Legal fees 5,670
Taxes other than federal income tax 38,982
Other expenses 23,694 340,293
-------------- --------------
Net investment income 3,372,869
--------------
Realized Loss and Unrealized
Appreciation on Investments:
Net realized loss (339,552)
Net change in unrealized
depreciation on investments:
Beginning of year (586,568)
End of year (205,230)
Net unrealized appreciation on --------------
investments 381,338
--------------
Net realized loss and in unrealized
appreciation on investments 41,786
--------------
Net Increase in Net Assets Resulting
from Operations $3,414,655
==============
Statement of Changes in Net Assets
- ----------------------------------------- -------------- --------------
Year ended July 31
1995 1994
Operations: -------------- --------------
Net investment income $ 3,372,869 $ 3,520,561
Net realized gain (loss) on investments (339,552) 2,492,967
Net unrealized appreciation (depreciation)
on investments 381,338 (5,795,572)
Net increase in net assets resulting -------------- --------------
from operations 3,414,655 217,956
-------------- --------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (3,338,883) (3,697,320)
Distributions from net realized
gain on investments (191,002) (2,955,555)
-------------- --------------
Total dividends and distributions (3,529,885) (6,652,875)
-------------- --------------
Capital Share Transactions:
Proceeds from shares sold:
214,880 and 454,387
shares, respectively 3,539,415 8,291,411
Proceeds from shares issued in
reinvestment of net investment income
dividends and distributions of net
realized gain on investments:
130,272 and 277,628 shares,
respectively 2,134,210 5,082,453
Cost of shares repurchased:
484,790 and 1,374,712
shares, respectively (8,030,465) (27,262,152)
-------------- --------------
Net decrease in net assets resulting
from capital share transactions (2,356,840) (13,888,288)
-------------- --------------
Total Decrease in Net Assets (2,472,070) (20,323,207)
Net Assets:
Beginning of year 46,306,173 66,629,380
-------------- --------------
End of year (including undistributed
net investment income: $309,836 and
$275,850, respectively) $43,834,103 $46,306,173
============== ==============
</TABLE>
See Notes to Financial Statements
Bond Portfolio for Endowments, Inc.
Notes to Financial Statements
1. Bond Portfolio for Endowments, 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 their representative quoted bid
and asked prices or, if such prices are not available, at the mean of such
prices for securities of comparable maturity, quality, and type. Short-term
securities with original or remaining maturities in excess of 60 days 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. 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 and
distributions paid to shareholders are recorded on the ex-dividend date.
Shares of the fund may be owned only by organizations exempt from federal
income taxation under Section 501(c)(3) of the Internal Revenue Code. The fund
itself is exempt from taxation under Section 501(c)(2) of the Internal Revenue
Code.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $2,792 includes $2,148 that was paid by these 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 July 31, 1995, net unrealized depreciation on investments for book
and federal income tax purposes aggregated $205,230, of which $430,942 related
to appreciated securities and $636,172 related to depreciated securities.
There was no difference between book and tax realized gains on securities
transactions for the year ended July 31, 1995. The cost of portfolio securities
for book and federal income tax purposes was $43,104,050 at July 31, 1995.
3. The fee of $223,573 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 0.50% 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 Agreement provides for a fee reduction to the extent the fund's annual
ordinary operating expenses exceed 1.50% of the first $30 million of the
average net assets of the fund and 1.00% of the average net assets in excess
thereof. Expenses which are not subject to this limitation are interest,
taxes, and extraordinary expenses. As of July 31, 1995, no such fee reduction
was required.
No fees were paid by the fund to its officers and Directors.
4. As of July 31, 1995, accumulated net realized loss on investments was
$449,705 and additional paid-in capital was $41,572,452.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $28,409,850 and $28,754,997, respectively, during the
year ended July 31, 1995.
BOND PORTFOLIO FOR ENDOWMENTS, INC.
PER-SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
Year ended July 31
---------- ------- ------ ------- -------
1995 1994 1993 1992 1991
---------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year
$16.86 $19.66 $19.44 $17.76 $17.50
---------- ------- ------ ------- -------
Income from Investment
Operations:
Net investment income 1.26 1.32 1.49 1.47 1.49
Net realized and unrealized
gain (loss) on investments. .01 (1.51) .64 1.70 .28
Total income from investment ---------- ------- ------ ------- -------
operations 1.27 (.19) 2.13 3.17 1.77
---------- ------- ------ ------- -------
Less Distributions:
Dividends from net investment
income (1.24) (1.35) (1.48) (1.49) (1.51)
Distributions from net realized
gains (.07) (1.26) (.43) - -
---------- ------- ------ ------- -------
Total distributions (1.31) (2.61) (1.91) (1.49) (1.51)
---------- ------- ------ ------- -------
Net Asset Value, End of Year $16.82 $16.86 $19.66 $19.44 $17.76
========== ======= ======= ======= =======
=
Total Return 7.97% (1.44)% 11.74% 18.69% 10.78%
Ratios/Supplemental Data:
Net assets, end of year (in
millions) $44 $46 $67 $65 $46
Ratio of expenses to average
net assets .76% .77% .65% .68% .68%
Ratio of net income to
average net assets 7.52% 6.99% 7.69% 8.04% 8.76%
Portfolio turnover rate 69.22% 82.12% 35.97% 63.30% 54.86%
</TABLE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Bond Portfolio for Endowments, Inc.:
We have audited the accompanying statement of assets and liabilities of
Bond Portfolio for Endowments, Inc. (the "fund"), including the schedule of
portfolio investments as of July 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 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 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, 1995 by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other 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 Bond Portfolio for Endowments, Inc. as of July 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
August 23, 1995
