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Previous: DUPONT E I DE NEMOURS & CO, SC 13D/A, 1995-04-10 |
Next: ESTERLINE TECHNOLOGIES CORP, SC 13G/A, 1995-04-10 |
ENDOWMENTS, INC. (SM)
AND
BOND PORTFOLIO FOR
ENDOWMENTS, INC. (SM)
SEMI-ANNUAL REPORT
For the Six Months Ended
January 31, 1995
ENDOWMENTS, INC. SEEKS TO PROVIDE LONG-TERM GROWTH OF PRINCIPAL
WITH INCOME AS A SECONDARY OBJECTIVE, PRIMARILY THROUGH INVESTMENTS IN STOCKS.
BOND PORTFOLIO FOR ENDOWMENTS, INC. SEEKS TO PROVIDE AS HIGH A LEVEL OF CURRENT
INCOME AS IS CONSISTENT WITH THE PRESERVATION OF CAPITAL THROUGH INVESTMENTS IN
FIXED-INCOME SECURITIES.
DEAR SHAREHOLDER:
The six months ended January 31 were marked by continued economic expansion and
by further anti-inflationary moves on the part of the Federal Reserve. The
period saw further deterioration in the bond market and a continuation of the
low-return, low-volatility climate that has characterized the stock market for
more than a year. In this environment, both ENDOWMENTS, INC. and BOND
PORTFOLIO FOR ENDOWMENTS, INC. generated positive total returns for the first
half of fiscal 1995.
ENDOWMENTS, INC. ("ENDI"):
The value of an investment in ENDI, with all distributions reinvested,
increased 4.5% in the fiscal half-year. During this period, Standard & Poor's
500 Composite Index, a broad unmanaged measure of the U.S. equity market, rose
4.1% measured the same way.
Nearly all of the increase, for the market and for ENDI, came in August 1994
and January 1995. From September through December, stock prices traded in a
very narrow range. They were, and to some extent still are, caught between two
opposing forces: the impact of rising interest rates and an abundance of
favorable corporate earnings reports. Meantime, valuations generally remain
high by historical standards.
ENDI benefited during the six months from its sizable investments in
pharmaceuticals, one of the few industry groups that did well. The fund's five
best gainers were drug stocks: Merck, Johnson & Johnson, American Home
Products, Schering-Plough and Warner-Lambert; the five posted increases of
between 20% and 35%. The strength shown by these and other pharmaceutical
stocks reflected consolidations within the industry and the demise of the
Clinton Administration's health plan, which had been viewed by many investors
as a serious threat to the industry's profitability.
At the same time, ENDI's six-month results were held back by weakness among
interest-rate-sensitive stocks, notably banking, insurance and financial
services. The fund took advantage of this price weakness and added to a number
of its holdings. In our view, much of the negative news that has been hurting
these stocks appears to be behind us. Banking, insurance and financial
services now account for about one-fourth of net assets and are by far the
fund's largest area of concentration.
In past reports we have often mentioned that ENDI has shown good defensive
characteristics during weak or lackluster periods in the market. In 1994, a
decidedly dull year for stocks, the Lipper Growth and Income Fund Index, which
tracks the 30 largest funds in this category, showed a loss of 0.7% while ENDI
posted a gain of 1.5%. In 1990, an even poorer year, the index declined 6.0%,
while ENDI managed to show a gain of 0.4%. (These percentages include
reinvestment.) This record of holding its ground better than most comparable
funds when stock prices have softened is a key reason why, through the years,
ENDI has shown below-average volatility while providing shareholders with a
rewarding investment experience.
BOND PORTFOLIO FOR ENDOWMENTS, INC. ("BENDI"):
BENDI ended the fiscal half-year January 31 with a fractional gain of 0.9% on
a total return basis. This compares with an average increase of 0.4% for the
105 corporate A-rated bond funds tracked by Lipper. For the same period, the
unmanaged Lehman Aggregate Bond Index recorded a total return of 1.0%.
BENDI's six-month results reflected extremely poor conditions in the
fixed-income market. Prices continued to fall during most of the period before
rallying to some degree in late 1994 and early '95. It is worth noting that
1994 was one of the worst years in history for bonds. In an effort to
forestall inflation, the Federal Reserve has raised interest rates seven times
in the past 13 months. The latest increase, on February 1, was anticipated by
the financial markets and came as no great surprise.
During the fiscal half-year, we continued to build additional downside
protection into BENDI's portfolio by shortening maturities. The average
maturity is now about five years, compared with around 11 years 18 months ago.
We also have been positioning the fund to take advantage of new investment
opportunities in the months ahead.
A LONG-TERM PERSPECTIVE:
Recently we have seen greater turmoil in the bond market than in the stock
market, which is unusual. At times like this, it is important to maintain a
long-term perspective on your holdings in both ENDI and BENDI. Both funds have
enjoyed several uncommonly good years of late. ENDI has recorded gains in
excess of 20% (including reinvestment) in three of the past ten calendar years.
BENDI has posted double-digit total returns in five of those years, including
returns of 20% of more twice. It should not be surprising when occasionally
there are periods in which either or both funds give back part of their large
gains.
During their 19-1/2 fiscal years under the stewardship of Capital Research and
Management Company, ENDI and BENDI have built solid records while fluctuating
less than the comparable indexes. ENDI's average annual compound growth rate
for the 19-1/2 years is 14.0% including reinvestment. BENDI's average annual
compound return for the period is 9.9%. During this time, inflation, as
measured by the Consumer Price Index, rose at an average annual rate of 5.4%.
We would like to remind you that the progress of investments in both funds can
be followed in the financial sections of major daily newspapers. They usually
appear, alphabetically separated, under the symbols "Endow" and "BdEndw."
In February, Directors of ENDI and BENDI elected as Senior Vice Presidents of
both funds Abner D. Goldstine, George A. Miller and Robert G. O'Donnell. All
three are directors and Senior Vice Presidents of Capital Research and
Management Company.
We look forward to reporting to you again in another six months.
Cordially,
Robert B. Egelston
Chairman of the Board
Thomas E. Terry
President
March 6, 1995
Here are the total returns and average annual compound returns for periods
ended December 31, 1994 (the most recent calendar quarter) on an investment
with all distributions reinvested - For ENDI: 10 years: +230.35%, or +12.69%
a year; 5 years: +50.02%, or +8.45% a year; 12 months: +1.54%, and for BENDI:
10 years: +164.30%, or +10.21% a year; 5 years: +49.89%, or +8.43% a year; 12
months: -4.31%. BENDI's 30-day yield as of February 28, 1995, calculated in
accordance with the Securities and Exchange Commission formula, was 7.27%.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN WILL
VARY, SO YOU MAY HAVE A GAIN OR LOSS OF PRINCIPAL WHEN YOU SELL YOUR SHARES.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OR, OR INSURED OR GUARANTEED BY,
THE U.S. GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON. All investments are
subject to certain risks. For example, those which include common stocks are
affected by fluctuating stock prices, and those which include bonds are
affected by interest rate fluctuations. High-yield bonds tend to be subject to
greater price swings and default risks than higher rated bonds. Investments in
securities outside the U.S. are subject to additional risks, including currency
fluctuations, political and social instability, differing securities
regulations and accounting standards, limited public information, possible
changes in taxation, and periods of illiquidity. Accordingly, investors should
maintain a long-term perspective.
ENDOWMENTS, INC.
INVESTMENT PORTFOLIO, JANUARY 31, 1995
<TABLE>
<CAPTION>
INDUSTRY DIVERSIFICATION Percent of
Net Assets
<S> <C>
Banking 10.43%
Insurance 10.00
Health & Personal Care 9.60
Utilities: Electric & Gas 8.51
Energy Sources 4.86
Real Estate 4.56
Beverages & Tobacco 4.54
Financial Services 3.45
Business & Public Services 3.27
Chemicals 3.18
Transportation: Rail & Road 3.17
Electrical & Electronics 2.92
Data Processing & Reproduction 2.45
Food & Household Products 2.14
Transportation: Airlines 1.73
Forest Products & Paper 1.70
Telecommunications 1.63
Merchandising 1.32
Broadcasting & Publishing 1.15
Multi-Industry .99
Metals: Nonferrous .89
Aerospace & Military Technology .84
-------
83.33
Short-Term Securities 17.76
Excess of payables over cash and receivables 1.09
-------
Net Assets 100.00%
=======
</TABLE>
- ----------------------------
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS Acquisition Market Value Percent of
Cost of Holdings Net Assets
<S> <C> <C> <C>
American Home Products $2,157,022 $2,384,250 4.49%
American Brands 1,462,117 1,520,000 2.86
Ohio Casualty 1,040,161 1,397,000 2.63
American General 953,083 1,244,250 2.34
Texas Utilities 1,347,533 1,239,116 2.33
TNT Freightways 526,875 1,181,250 2.22
General Mills 1,097,852 1,135,000 2.14
Weingarten Realty Investors 1,023,214 1,124,000 2.12
Dun & Bradstreet 845,203 1,050,000 1.97
Honeywell 971,560 1,030,000 1.95
----------- ----------- ------
$11,424,620 $13,309,866 25.05%
=========== =========== ======
</TABLE>
- -----------------------
<TABLE>
<CAPTION>
Percent
Number Market of Net
COMMON STOCKS of Shares Value Assets
<S> <C> <C> <C>
ENERGY
Energy Sources-3.92%
Amoco Corp. 8,600 $498,800 .94%
Atlantic Richfield Co. 5,000 532,500 1.00
Exxon Corp. 10,000 625,000 1.18
Phillips Petroleum Co. 29,000 924,375 1.74
Utilities: Electric & Gas-8.51%
Allegheny Power System, Inc. 15,000 358,125 0.67
Carolina Power & Light Co. 20,000 567,500 1.07
Central and South West Corp. 15,000 365,625 0.69
Consolidated Edison Co. of New York, Inc. 17,000 480,250 0.9
Entergy Corp. 25,000 609,375 1.15
Houston Industries Inc. 10,000 398,750 0.75
Pacific Gas and Electric Co. 20,000 505,000 0.95
Texas Utilities Co. 35,658 1,239,116 2.33
------------- ----------
7,104,416 13.37
------------- ----------
MATERIALS
Chemicals-3.18%
Armor All Products Corp. 28,000 602,000 1.13
Dow Chemical Co. 8,000 499,000 0.94
Monsanto Co. 8,000 588,000 1.11
Forest Products & Paper-1.70%
James River Corp. of Virginia 20,000 432,500 0.81
Union Camp Corp. 10,000 471,250 0.89
Metals: Nonferrous-0.89%
Aluminum Co. of America 6,000 471,750 0.89
------------- ----------
3,064,500 5.77
------------- ----------
CAPITAL EQUIPMENT
Aerospace & Military Technology-0.84%
Boeing Co. 10,000 445,000 0.84
Data Processing & Reproduction-2.45%
International Business Machines Corp. 10,500 757,313 1.42
Xerox Corp. 5,000 546,875 1.03
Electrical & Electronics-2.92%
General Electric Co. 10,000 515,000 0.97
Honeywell Inc. 30,000 1,035,000 1.95
------------- ----------
3,299,188 6.21
------------- ----------
CONSUMER GOODS
Beverages & Tobacco-4.54%
American Brands, Inc. 40,000 1,520,000 2.86
Philip Morris Companies Inc. 15,000 894,375 1.68
Food & Household Products-2.14%
General Mills, Inc. 20,000 1,135,000 2.14
Health & Personal Care-9.60%
American Home Products Corp. 34,000 2,384,250 4.49
Johnson & Johnson 10,000 581,250 1.09
Merck & Co., Inc. 20,000 805,000 1.52
Schering-Plough Corp. 7,000 549,500 1.03
Warner-Lambert Co. 10,000 780,000 1.47
------------- ----------
8,649,375 16.28
------------- ----------
SERVICES
Broadcasting & Publishing-1.15%
Gannett Co., Inc. 12,000 $610,500 1.15%
Business & Public Services-3.27%
Deluxe Corp. 10,000 267,500 0.5
Dun & Bradstreet Corp. 21,000 1,050,000 1.97
WMX Technologies, Inc. 15,000 425,625 0.8
Merchandising-1.32%
Melville Corp. 8,000 246,000 0.46
Super Food Services, Inc. 40,000 455,000 0.86
Telecommunications-1.63%
Ameritech Corp. 10,000 438,750 0.83
Sprint Corp. 15,000 427,500 0.8
Transportation: Airlines-1.73%
Delta Air Lines, Inc. 17,000 918,000 1.73
Transportation: Rail & Road-3.17%
TNT Freightways Corp. 45,000 1,181,250 2.22
Union Pacific Corp. 10,000 502,500 0.95
------------- ----------
6,522,625 12.27
------------- ----------
FINANCE
Banking-10.43%
AmSouth Bancorporation 15,000 408,750 0.77
Bankers Trust New York Corp. 10,000 626,250 1.18
Comerica Inc. 35,000 879,375 1.65
First Hawaiian, Inc. 20,000 495,000 0.93
First Union Corp. 10,000 427,500 0.8
Huntington Bancshares Inc. 44,062 804,132 1.51
J.P. Morgan & Co. Inc. 14,000 882,000 1.66
U.S. Bancorp 18,000 447,750 0.84
Washington Mutual Savings Bank 33,150 580,125 1.09
Financial Services-3.45%
American Express Co. 25,000 787,500 1.48
Beneficial Corp. 12,000 481,500 0.91
Student Loan Marketing Assn. 15,000 560,625 1.06
Insurance-10.00%
Allstate Corp. 20,000 482,500 0.91
AMBAC Inc. 20,000 755,000 1.42
American General Corp. 42,000 1,244,250 2.34
Liberty Corp. 20,000 495,000 0.93
Ohio Casualty Corp. 44,000 1,397,000 2.63
Paul Revere Corp. 30,000 510,000 0.96
Trenwick Group Inc. 10,000 430,000 0.81
Real Estate-4.56%
Property Trust of America 20,000 340,000 0.64
Weingarten Realty Investors 32,000 1,124,000 2.12
Western Investment Real Estate Trust 75,000 956,250 1.8
------------- ----------
15,114,507 28.44
------------- ----------
MULTI-INDUSTRY
Multi-Industry-0.99%
Minnesota Mining and Manufacturing Co. 10,000 $523,749 0.99%
------------- ----------
TOTAL COMMON STOCKS (cost: $39,190,399) 44,278,360 83.33
------------- ----------
Principal
Amount
SHORT-TERM SECURITIES (000)
Corporate Short-Term Notes-17.76%
Anheuser-Busch Companies, Inc. 5.70% due 2/6/95 $1,500 1,498,575 2.82
Associates Corp. of North America 5.83% due 2/1/95 569 568,908 1.07
Commercial Credit Co. 5.82% due 2/23/95 1,100 1,095,910 2.06
H.J. Heinz Co. 5.80% due 2/17/95 1,000 997,261 1.87
Kimberly-Clark Corp. 5.95% due 3/21/95 1,300 1,289,472 2.43
Melville Corp. 5.80% due 3/1/95 1,100 1,094,861 2.06
PACCAR Financial Corp. 5.75% due 2/1/95 1,000 999,840 1.88
U.S. Central Credit Union 5.70% due 2/17/95 1,000 997,308 1.88
U S WEST Communications, Inc. 6.05% due 2/16/95 900 897,580 1.69
------------ ----------
TOTAL SHORT-TERM SECURITIES (cost: $9,439,715) 9,439,715 17.76
------------ ----------
TOTAL INVESTMENT SECURITIES (cost: $48,630,114) 53,718,075 101.09
Excess of payables over cash and receivables 579,460 1.09
------------- ----------
NET ASSETS $53,138,615 100.00%
============= ==========
</TABLE>
See Notes to Financial Statements
Endowments, Inc.
FINANCIAL STATEMENTS
Statement of Assets and Liabilties
at January 31, 1995
<TABLE>
<CAPTION>
- ---------------------------------------- ------------ ------------
<S> <C> <C>
Assets:
Investment securities at market
(cost: $48,630,114) $53,718,075
Cash 51,844
Receivables for-
Sales of investments $293,350
Sales of fund's shares 500
Dividends and accrued interest 64,360 358,210
------------ ------------
54,128,129
Liabilities:
Payables for-
Purchases of investments 944,958
Management services 22,143
Accrued expenses 22,413 989,514
------------ ------------
Net Assets at January 31, 1995-
Equivalent to $16.20 per share on
3,280,491 shares of $1 par value
capital stock outstanding (authorized
capital stock--10,000,000 shares) $53,138,615
=============
Statement of Operations
for the six months ended January 31, 1995
------------ ------------
Investment Income:
Income:
Dividends $906,345
Interest 263,195 $1,169,540
Expenses: ------------
Management services fee 132,487
Custodian fee 1,270
Registration statement and prospectus 10,784
Auditing fees 16,700
Legal Fees 3,530
Taxes other than federal income tax 18,415
Other expenses 8,944 192,130
------------ ------------
Net investment income 977,410
------------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 900,807
Net increase in unrealized
appreciation on investments:
Beginning of period 4,636,464
End of period 5,087,961
Net unrealized appreciation on ------------
investments 451,497
------------
Net realized gain and unrealized
appreciation on investments 1,352,304
------------
Net Increase in Net Assets Resulting
from Operations $2,329,714
============
See Notes to Financial Statements
Statement of Changes in Net
Assets
- ---------------------------------------- ------------- -------------
Six
Months Ended Year Ended
1/31/95 7/31/94
Operations: ------------- -------------
Net investment income $977,410 $2,298,858
Net realized gain on investments 900,807 4,620,262
Net unrealized appreciation
(depreciation) on investments 451,497 (5,114,351)
Net increase in net assets resulting ------------- -------------
from operations 2,329,714 1,804,769
------------- -------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (962,286) (2,366,161)
Distributions from net realized
gain on investments (4,141,493) (4,366,435)
------------- -------------
Total dividends and distributions (5,103,779) (6,732,596)
------------- -------------
Capital Share Transactions:
Proceeds from shares sold:
106,811 and 529,049
shares, respectively 1,785,215 9,373,981
Proceeds from shares issued in
reinvestment of net investment income
dividends and distributions of net
realized gain on investments:
315,355 and 340,985 shares,
respectively 4,858,738 5,905,920
Cost of shares repurchased:
222,497 and 1,670,177
shares, respectively (3,652,997) (28,940,446)
------------- -------------
Net increase (decrease) in net assets resulting
from capital share transactions 2,990,956 (13,660,545)
------------- -------------
Total Increase (Decrease) in Net Assets 216,891 (18,588,372)
Net Assets:
Beginning of period 52,921,724 71,510,096
------------- -------------
End of period (including undistributed
net investment income: $192,216 and
$177,092, respectively) $53,138,615 $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
period or, for listed securities having no sales reported and for unlisted
securities, upon last-reported bid prices on that date. 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 $1,270 includes $891 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 January 31, 1995, net unrealized appreciation on investments for book
and federal income tax purposes aggregated $5,087,961, of which $6,496,186
related to appreciated securities and $1,408,225 related to depreciated
securities. There was no difference between book and tax realized gains on
securities transactions for the six months ended January 31, 1995. The cost of
portfolio securities for book and federal income tax purposes was $48,630,114
at January 31, 1995.
3. The fee of $132,487 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 January 31, 1995 no such fee
reduction was required.
No fees were paid by the fund to its officers and Directors.
4. As of January 31, 1995, accumulated undistributed net realized gain on
investments was $328,087 and additional paid-in capital was $44,249,860.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $5,094,444 and $5,751,226, respectively, during the
six months ended January 31, 1995.
ENDOWMENTS, INC.
PER-SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
Six Months Year ended July 31
Ended -------- -------- -------- -------- --------
1/31/95 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $17.18 $18.43 $18.26 $17.89 $16.91 $18.22
-------- -------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income .32 .65 .66 .78 .78 .89
Net realized and unrealized
gain (loss) on investments .37 (.16) 1.05 1.74 1.60 (.16)
Total income from investment -------- -------- -------- -------- -------- --------
operations .69 .49 1.71 2.52 2.38 .73
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from net investment
income (.32) (.66) (.69) (.73) (.87) (1.01)
Distributions from net realized
gains (1.35) (1.08) (.85) (1.42) (.53) (1.03)
-------- -------- -------- -------- -------- --------
Total distributions (1.67) (1.74) (1.54) (2.15) (1.40) (2.04)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $16.20 $17.18 $18.43 $18.26 $17.89 $16.91
======== ======== ======== ======== ========== ========
Total Return 4.54% 2.77% 10.05% 15.74% 15.03% 4.13%
Ratios/Supplemental Data:
Net assets, end of period (in
millions) $53 $53 $72 $58 $46 $39
Ratio of expenses to average
net assets .36%/1/ .73% .64% .70% .69% .68%
Ratio of net income to
average net assets 1.85%/1/ 3.78% 3.72% 4.37% 4.63% 5.08%
Portfolio turnover rate 11.96%/1/ 25.58% 29.70% 20.35% 34.43% 20.75%
</TABLE>
/1/ Based on operations for the period shown and, accordingly, not
representative of
a full year's operations.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Endowments, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the investment portfolio, of Endowments, Inc. (the "fund") as of
January 31, 1995, the related statements of operations for the six months then
ended, the changes in net assets for the six months then ended and for the year
ended July 31, 1994, and the per-share data and ratios for the six months ended
January 31, 1995 and for each of the four years in the period ended July 31,
1994. These financial statements and the per-share data and ratios are the
responsibility of the fund's management. Our responsibility is to express an
opinion on these financial statements and the per-share data and ratios based
on our audits. The per-share data and ratios for the year ended July 31, 1990
were audited by other auditors whose report, dated August 23, 1990, expressed
an unqualified opinion on the per-share data and ratios.
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 January 31, 1995 by correspondence with the custodian and brokers.
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 referred to above and per-share
data and ratios for the six months ended January 31, 1995 and for each of the
four years in the period ended July 31, 1994 present fairly, in all material
respects, the financial position of Endowments, Inc. at January 31, 1995 and
the results of its operations, the changes in its net assets and the per-share
data and ratios for the respective stated periods in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche
Los Angeles, California
February 24, 1995
BOND PORTFOLIO FOR ENDOWMENTS, INC.
INVESTMENT PORTFOLIO, JANUARY 31, 1995
<TABLE>
<CAPTION>
Principal Percent
Amount Market of Net
BONDS & NOTES (000) Value Assets
<S> <C> <C> <C>
Industrials - 11.45%
General Motors Corp. 8.80% due 3/1/21 $2,000 $2,085,800 4.61%
Hanson America, Inc. 2.39% convertible debentures
due 3/1/01 /1/ 1,500 1,080,000 2.39
Time Warner Inc. 0% convertible debentures due 12/17/12 6,000 1,875,000 4.14
USX Corp. 0% convertible debentures due 8/9/05 5,000 2,225,000 4.92
-------- ---------
7,265,800 16.06
--------- ---------
Electric & Telephone Utilities - 4.88%
Big Rivers Electric Corp. 10.70% due 9/15/17 2,000 2,207,900 4.88
--------- ---------
Transportation: Airlines - 4.17%
American Airlines, Inc., 1991-A, pass-through
certificates, 9.71% due 1/2/07 /2/ 933 923,864 2.04
Delta Air Lines, Inc., 1993-A2, pass-through
certificates, 10.50% due 4/30/16 /2/ 500 496,005 1.10
Federal Express Corp. 7.53% due 9/23/06 500 467,600 1.03
--------- ---------
1,887,469 4.17
--------- ---------
Financial - 14.60%
American Re Corp. 10.875% due 9/15/04 2,000 2,138,200 4.73
Bank of Nova Scotia 5.437% due 8/31/85 /3/ 1,000 774,400 1.71
Canadian Imperial Bank of Commerce 3.875% Euronotes
due 8/31/85 /3/ 500 397,500 0.8786051
General Electric Capital Corp. 8.875% due 5/15/09 1,000 1,042,400 2.30
Midland American Capital 12.75% due 11/15/03 825 944,939 2.09
Midland Bank 7.063% due 6/30/49 /3/ 1,000 795,000 1.76
Xerox Credit Corp. 10.125% due 4/15/99 500 513,555 1.13
-------- ---------
6,605,994 14.60
-------- ---------
Collateralized Mortgage/Asset-Backed
Obligations /2/ - 1.10%
Chase Mortgage Finance Corp., Series 91-A, Class A12,
25.033% due 4/25/22 /4/ 8 8,592 0.0189911
Prudential Home Mortgage Securities Co., Inc.,
Series 1992-2033, Class A-12, 7.50% due 11/25/22 500 489,840 1.08
-------- ---------
498,432 1.10
-------- ---------
Governments (excluding U.S. Government) &
Governmental Authorities - 7.12%
Ontario (Province of) 17.00% due 11/5/11 1,100 1,327,161 2.93
Ontario (Province of) 11.50% due 3/10/13 600 671,724 1.49
Quebec (Province of) 13.25% due 9/15/14 1,000 1,222,700 2.70
-------- ---------
3,221,585 7.12
-------- ---------
Other - 0.00%
0 0 0.00
-------- ---------
0 0.00
-------- ---------
U.S. Government & Federal Agency Obligations - 40.88%
Federal Farm Credit Bank 8.13% due 1/17/97 2,000 2,010,000 4.44
Federal Home Loan Mortgage Corp. 8.75% due 7/1/08 /2/ 181 180,388 0.3987165
Federal Home Loan Mortgage Corp., Series 1625,
Class SG, 7.118% due 12/15/08 /2/,/4/ 500 270,000 0.5967884
Federal Home Loan Mortgage Corp. 12.50% due 12/1/12 /2/ 87 99,475 0.2198723
Federal Home Loan Mortgage Corp. 9.00% due 3/1/20 /2/ 209 212,713 0.4701653
Federal National Mortgage Assn. 9.00% due 11/1/20 /2/ 393 399,528 0.8930876
Government National Mortgage Assn. 8.50% due 12/15/08 /2/ 531 541,459 1.20
Government National Mortgage Assn. 7.50% due 1/15/24 /2/ 706 665,862 1.47
Government National Mortgage Assn. 4.50% due 2/20/24 /2/ 991 913,516 2.02
Government National Mortgage Assn. 5.00% due 6/20/24 /2/ 1,008 943,101 2.09
U.S. Treasury 9.375% due 4/15/96 1,500 1,540,305 3.40
U.S. Treasury 7.25% due 8/31/96 1,000 1,001,250 2.21
U.S. Treasury 8.00% due 1/15/97 2,000 2,027,819 4.48
U.S. Treasury 8.875% due 11/15/97 2,000 2,073,120 4.58
U.S. Treasury 8.125% due 2/15/98 2,750 2,801,123 6.19
U.S. Treasury 9.25% due 8/15/98 750 790,433 1.75
U.S. Treasury 11.625% due 11/15/04 500 634,685 1.40
U.S. Treasury 8.875% due 8/15/17 1,250 1,389,650 3.07
-------- ---------
18,494,427 40.88
-------- ---------
TOTAL BONDS & NOTES (cost: $41,980,478) 40,181,607 88.81
-------- ---------
SHORT-TERM SECURITIES
Corporate Short-Term Notes - 5.85%
Associates Corp. of North America 5.83% due 2/1/95 1,650 1,649,733 3.65
U S WEST Communications, Inc. 5.80% due 2/21/95 1,000 996,617 2.20
U.S. Treasury Obligations - 3.39%
9.25% due 1/15/96 1,500 1,531,635 3.39
-------- ---------
TOTAL SHORT-TERM SECURITIES (cost: $4,191,818) 4,177,985 9.24
-------- ---------
TOTAL INVESTMENT SECURITIES (cost: $46,172,296) 44,359,592 98.05
Excess of cash and receivables over payables 882,577 1.95
-------- ---------
NET ASSETS $45,242,169 100.00%
========= =========
</TABLE>
/1/ Purchased in a private placement transaction; resale
potential extends to qualified institutional buyers.
/2/ Pass-through securities backed by a pool of mortgages
or other loans on which principal payments are
periodically made. Therefore, the effective maturity of
these securities is shorter than the stated maturity.
/3/ Coupon rates may change periodically.
/4/ Represents an inverse floater, which is a floating rate
note whose interest rate moves in the opposite direction
of prevailing interest rates.
See Notes to Financial Statements
Bond Portfolio for Endowments, Inc.
FINANCIAL STATEMENTS
Statement of Assets and Liabilites
at January 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------- ---------------- -------------
<S> <C> <C>
Assets:
Investment securities at market
(cost: $46,172,296) $44,359,592
Cash 564,423
Receivables for-
Sales of investments $4,028
Sales of fund's shares 500
Accrued interest 862,473 867,001
---------------- -------------
45,791,016
Liabilities:
Payables for-
Purchases of investments 507,500
Management services 18,933
Accrued expenses 22,414 548,847
---------------- -------------
Net Assets at January 31, 1995-
Equivalent to $16.31 per share on
2,773,378 shares of $1 par value
capital stock outstanding (authorized
capital stock - 10,000,000 shares) $45,242,169
=============
Statement of Operations
for the six months ended January 31, 1995
---------------- -------------
Investment Income:
Interest income $1,883,171
Expenses:
Management services fee $113,094
Custodian fee 1,294
Registration statement and prospectus 12,707
Auditing fees 16,700
Legal Fees 3,557
Taxes other than federal income tax 18,415
Other expenses 8,825 174,592
---------------- -------------
Net investment income 1,708,579
-------------
Realized Loss and Unrealized
Depreciation on Investments:
Net realized loss (88,532)
Net change in unrealized
depreciation on investments:
Beginning of period (586,568)
End of period (1,812,704)
Net unrealized depreciation on ----------------
investments (1,226,136)
-------------
Net realized loss and unrealized
depreciation on investments (1,314,668)
-------------
Net Increase in Net Assets Resulting
from Operations $393,911
=============
See Notes to Financial Statements
Statement of Changes in Net
Assets
- ------------------------------------------------- ---------------- -------------
Six
Months Ended Year Ended
1/31/95 7/31/94
Operations: ---------------- -------------
Net investment income $1,708,579 $3,520,561
Net realized gain (loss) on investments (88,532) 2,492,967
Net unrealized depreciation
on investments (1,226,136) (5,795,572)
Net increase in net assets resulting ---------------- -------------
from operations 393,911 217,956
---------------- -------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (1,681,518) (3,697,320)
Distributions from net realized
gain on investments (191,002) 1,070,786,269
---------------- -------------
Total dividends and distributions (1,872,520) (6,652,875)
---------------- -------------
Capital Share Transactions:
Proceeds from shares sold:
134,429 and 454,387
shares, respectively 2,199,266 8,291,411
Proceeds from shares issued in
reinvestment of net investment income
dividends and distributions of net
realized gain on investments:
72,504 and 277,628 shares,
respectively 1,178,644 5,082,453
Cost of shares repurchased:
179,943 and 1,374,712
shares, respectively (2,963,305) (27,262,152)
---------------- -------------
Net increase (decrease) in net assets resulting
from capital share transactions 414,605 (13,888,288)
---------------- -------------
Total Decrease in Net Assets (1,064,004) (20,323,207)
Net Assets:
Beginning of period 46,306,173 66,629,380
---------------- -------------
End of period (including undistributed
net investment income: $302,911 and
$275,850, respectively) $45,242,169 $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 premium 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 $1,294 includes $1,134 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 January 31, 1995, net unrealized depreciation on investments for book
and federal income tax purposes aggregated $1,812,704, of which $163,085
related to appreciated securities and $1,975,789 related to depreciated
securities. There was no difference between book and tax realized gains on
securities transactions for the six months ended January 31, 1995. The cost of
portfolio securities for book and federal income tax purposes was $46,172,296
at January 31, 1995.
3. The fee of $113,094 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 January 31, 1995 no such fee
reduction was required.
No fees were paid by the fund to its officers and Directors.
4. As of January 31, 1995, accumulated undistributed net realized loss on
investments was $198,685 and additional paid-in capital was $44,177,269.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $15,435,953 and $15,241,777, respectively, during the
six months ended January 31, 1995.
BOND PORTFOLIO FOR ENDOWMENTS, INC.
PER-SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
- ------------------------------------ -------- -------- -------- ------ -------- --------
Six Months
Ended Year ended July 31
1/31/95 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $16.86 $19.66 $19.44 $17.76 $17.50 $17.83
-------- -------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income .63 1.32 1.49 1.47 1.49 1.61
Net realized and unrealized
gain (loss) on investments. (.49) (1.51) .64 1.70 .28 (.46)
Total income from investment -------- -------- -------- -------- -------- --------
operations .14 (.19) 2.13 3.17 1.77 1.15
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from net investment
income (.62) (1.35) (1.48) (1.49) (1.51) (1.48)
Distributions from net realized
gains (.07) (1.26) (.43) - - -
-------- -------- -------- -------- -------- --------
Total distributions (.69) (2.61) (1.91) (1.49) (1.51) (1.48)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $16.31 $16.86 $19.66 $19.44 $17.76 $17.50
======== ========= ======== ======== ========= ========
= =
Total Return .88%/1/ (1.44)% 11.74% 18.69% 10.78% 6.86%
Ratios/Supplemental Data:
Net assets, end of period (in
millions) $45 $46 $67 $65 $46 $39
Ratio of expenses to average
net assets .39%/1/ .77% .65% .68% .68% .69%
Ratio of net income to
average net assets 3.79%/1/ 6.99% 7.69% 8.04% 8.76% 9.25%
Portfolio turnover rate 38.11%/1/ 82.12% 35.97% 63.30% 54.86% 42.90%
</TABLE>
/1/ Based on operations for the period shown and, accordingly, not
representative of
a full year's operations.
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,
including the investment portfolio, of Bond Portfolio for Endowments, Inc. (the
"fund") as of January 31, 1995, the related statements of operations for the
six months then ended, the changes in net assets for the six months then ended
and for the year ended July 31, 1994, and the per-share data and ratios for the
six months ended January 31, 1995 and for each of the four years in the period
ended July 31, 1994. These financial statements and the per-share data and
ratios are the responsibility of the fund's management. Our responsibility is
to express an opinion on these financial statements and the per-share data and
ratios based on our audits. The per-share data and ratios for the year ended
July 31, 1990 were audited by other auditors whose report, dated August 23,
1990, expressed an unqualified opinion on the per-share data and ratios.
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 January 31, 1995 by correspondence with the custodian and brokers.
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 referred to above and per-share
data and ratios for the six months ended January 31, 1995 and for each of the
four years in the period ended July 31, 1994 present fairly, in all material
respects, the financial position of Bond Portfolio for Endowments, Inc. at
January 31, 1995 and the results of its operations, the changes in its net
assets and the per-share data and ratios for the respective stated periods in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Los Angeles, California
February 24, 1995
ENDOWMENTS, INC.
BOND PORTFOLIO FOR ENDOWMENTS, INC.
==============================================================
BOARD OF DIRECTORS
ROBERT B. EGELSTON, Los Angeles, California
Chairman of the Board and
Chief Executive Officer of the funds
Former Chairman of the Board,
The Capital Group Companies, Inc.
FRANK L. ELLSWORTH, Ph.D., Los Angeles, California
President,
Independent Colleges of Southern California
STEVEN D. LAVINE, Ph.D., Los Angeles, California
President,
California Institute of the Arts
PATRICIA A. McBRIDE, Dallas, Texas
Chief Financial Officer,
Kevin L. McBride, D.D.S., Inc.
JOHN R. METCALF, San Francisco, California
Private Investor; former Vice President,
Alexander & Alexander, Inc.
CHARLES R. REDMOND, Los Angeles, California
Chairman, Pfaffinger Foundation; President and
Chief Executive Officer, Times Mirror Foundation;
former Executive Vice President and member of the
Management Committee, The Time Mirror Company
THOMAS E. TERRY, Los Angeles, California
President of the funds
Consultant; former Vice President and Secretary,
Capital Research and Management Company
ROBERT C. ZIEBARTH, Chicago, Illinois
Management Consultant,
Ziebarth Company
OTHER OFFICERS
ABNER D. GOLDSTINE, Los Angeles, California
Senior Vice President of the funds
Senior Vice President and Director,
Capital Research and Management Company
GEORGE A. MILLER, San Francisco, California
Senior Vice President of the funds
Senior Vice President and Director,
Capital Research and Management Company
ROBERT G. O'DONNELL, San Francisco, California
Senior Vice President of the funds
Senior Vice President and Director,
Capital Research and Management Company
STEVEN N. KEARSLEY, Los Angeles, California
Vice President and Treasurer of the funds
Vice President and Treasurer,
Capital Research and Management Company
LOUISE M. PESCETTA, San Francisco, California
Assistant Vice President and
Assistant Secretary of the funds
Assistant Vice President -
Fund Business Management Group,
Capital Research and Management Company
PATRICK F. QUAN, San Francisco, California
Secretary of the funds
Vice President - Fund Business Management Group,
Capital Research and Management Company
MARY C. CREMIN, Los Angeles, California
Assistant Treasurer of the funds
Senior Vice President -
Fund Business Management Group,
Capital Research and Management Company
ROBERT P. SIMMER, Los Angeles, California
Assistant Treasurer of the funds
Vice President - Fund Business Management Group,
Capital Research and Management Company
OFFICE OF THE FUNDS
Four Embarcadero Center, Suite 1800
P.O. Box 7650
San Francisco, California 94120-7650
INVESTMENT ADVISER
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071-1443
TRANSFER AGENT FOR
SHAREHOLDER ACCOUNTS
American Funds Service Company
Four Embarcadero Center, Suite 1800
P.O. Box 7650
San Francisco, California 94120-7650
135 South State College Boulevard
Brea, California 92621-5804
CUSTODIAN OF ASSETS
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
Morrison & Foerster
345 California Street
San Francisco, California 94104-2675
INDEPENDENT AUDITORS
Deloitte & Touche LLP
1000 Wilshire Boulevard
Los Angeles, California 90017-2472
This report if for the information of shareholders of Endowments, Inc. and Bond
Portfolio for Endowments, Inc., but it may also be used as sales literature
when preceded or accompanied by the current prospectus, which gives details
about charges, expenses, investment objectives and operating policies of the
funds.
(c)1995 Endowments, Inc.
(c)1995 Bond Portfolio for Endowments, Inc.
Lit. No. ENDI-BENDI-013-0395(NLS)
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