<PAGE>
ENDOWMENTS, INC.SM
AN INVESTMENT FOR TAX-EXEMPT INSTITUTIONS SEEKING LONG-TERM
GROWTH OF PRINCIPAL WITH INCOME
BOND PORTFOLIO FOR
ENDOWMENTS, INC.SM
AN INVESTMENT FOR TAX-EXEMPT INSTITUTIONS
SEEKING AS HIGH A LEVEL OF CURRENT INCOME AS IS CONSISTENT
WITH THE PRESERVATION OF CAPITAL
PROSPECTUS
OCTOBER 1, 1995
- --------------------------------------------------------------------------------
ENDOWMENTS, INC. The primary investment objective of the fund is long-term
growth of principal with income a secondary objective. The fund strives to
accomplish these objectives by investing primarily in common stocks or
securities convertible into common stock. Major investment emphasis will be
given to stocks of companies which appear to have favorable prospects for
long-term growth of capital and income.
BOND PORTFOLIO FOR ENDOWMENTS, INC. The investment objective of the fund is to
seek as high a level of current income as is consistent with the preservation of
capital. The fund strives to accomplish this objective by investing primarily in
quality-oriented bonds and debentures, as described further in this prospectus.
- -------------------
Shares of the funds are available only to institutions exempt from federal
taxation under Section 501(c)(3) of the Internal Revenue Code.
You may purchase shares directly from the funds. There is no sales or redemption
charge.
This prospectus presents information shareholders should know before investing
in the funds. It should be retained for future reference.
You may obtain the statement of additional information dated October 1, 1995,
which contains the funds' financial statements, without charge, by writing to or
telephoning the Secretary of the funds at the address or number below. These
requests will be honored within three business days of receipt.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED
BY, THE U.S. GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON. THE PURCHASE OF
FUND SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------------
FOUR EMBARCADERO CENTER
SUITE 1800, SAN FRANCISCO, CA 94111
TELEPHONE NO. (415) 421-9360
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary of Expenses................. 2
Financial Highlights................ 3
Investment Objectives and
Policies............................ 4
Risks of Investing in Certain
Securities.......................... 5
Investment Techniques............... 9
Investment Results.................. 10
Dividends, Distributions and
Taxes............................... 10
Fund Organization and Management.... 11
Shareholder Guide................... 13-14
Purchasing shares............... 13
Shareholder services............ 13
Redeeming shares................ 14
</TABLE>
SUMMARY
OF EXPENSES
AVERAGE ANNUAL
EXPENSES PAID OVER A
10-YEAR PERIOD FOR
ENDOWMENTS, INC. AND
BOND PORTFOLIO FOR
ENDOWMENTS, INC.
WOULD
BE APPROXIMATELY $9
EACH, ASSUMING A
$1,000
INVESTMENT AND A 5%
ANNUAL RETURN.
This table is designed to help you understand the costs of investing in the
funds. These are historical expenses; your actual expenses may vary.
SHAREHOLDER TRANSACTION EXPENSES
The funds have no sales charge on purchases or reinvested dividends,
deferred sales charge, redemption fees or exchange fees.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
BOND PORTFOLIO
ENDOWMENTS, FOR ENDOWMENTS,
INC. INC.
--------- -----------------
<S> <C> <C>
Management fees....................... 0.50%(1) 0.50%(1)
12b-1 expenses........................ none none
Other expenses (including audit,
legal, shareholder services,
transfer agent and
custodian expenses)................. 0.23% 0.26%
Total fund operating expenses......... 0.73% 0.76%
</TABLE>
EXAMPLE
- ----------------------------------------
You would pay the following
cumulative expenses on a
$1,000 investment, assuming
a 5% annual return.(2)
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
Endowments, Inc. $ 7 $ 23 $ 41 $ 91
Bond Portfolio for Endowments, Inc. $ 8 $ 24 $ 42 $ 94
(1) Capital Research and Management Company, the funds' investment adviser,
receives a management fee at the annual rates of 1/2 of 1% of the funds'
net assets up to $150,000,000 and 4/10 of 1% of such assets over
$150,000,000.
(2) Use of this assumed 5% return is required by the Securities and Exchange
Commission; it is not an illustration of past or future investment
results. THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
2
<PAGE>
FINANCIAL
HIGHLIGHTS The following information for the five years ended July
(FOR A SHARE* 31, 1995 hasbeen audited by Deloitte & Touche LLP,
OUTSTANDING independent accountants, andfor the five years ended
THROUGHOUT July 31, 1990 by KPMG Peat Marwick, independent
THE FISCAL YEAR) accountants. This information should be read in
conjunction with the financial statements and related
notes, which are included in the statement of
additional information.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ENDOWMENTS, INC.
Net Asset Value, Beginning of Year.... $17.18 $18.43 $18.26 $17.89 $16.91 $18.22 $16.71 $19.70 $19.84 $18.07
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income From Investment Operations:
Net Investment Income............... .63 .65 .66 .78 .78 .89 .98 .82 .86 .90
Net realized and unrealized gain
(loss) on investments.............. 2.21 (.16) 1.05 1.74 1.60 (.16) 2.52 (1.16) 2.61 3.22
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Income from Investment
Operations....................... 2.84 .49 1.71 2.52 2.38 .73 3.50 (.34) 3.47 4.12
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment
income............................. (.61) (.66) (.69) (.73) (.87) (1.01) (.89) (.85) (.80) (.80)
Distributions from net realized
gains.............................. (1.35) (1.08) (.85) (1.42) (.53) (1.03) (1.10) (1.80) (2.81) (1.55)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions............... (1.96) (1.74) (1.54) (2.15) (1.40) (2.04) (1.99) (2.65) (3.61) (2.35)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Year.......... $18.06 $17.18 $18.43 $18.26 $17.89 $16.91 $18.22 $16.71 $19.70 $19.84
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Return.......................... 18.57% 2.77% 10.05% 15.74% 15.03% 4.13% 23.22% (2.30)% 20.11% 25.56%
Ratios/Supplemental Data:
Net Assets, End of Year (in
millions).......................... $57 $53 $72 $58 $46 $39 $43 $36 $38 $38
Ratio of Expenses to Average Net
Assets............................. .73% .73% .64% .70% .69% .68% .69% .63% .61% .61%
Ratio of Net Income to Average Net
Assets............................. 3.70% 3.78% 3.72% 4.37% 4.63% 5.08% 5.76% 4.86% 4.22% 4.88%
Portfolio Turnover Rate............. 24.04% 25.58% 29.70% 20.35% 34.43% 20.75% 19.70% 33.48% 12.98% 14.98%
</TABLE>
===========
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
BOND PORTFOLIO FOR ENDOWMENTS, INC.
Net Asset Value, Beginning of Year.... $16.86 $19.66 $19.44 $17.76 $17.50 $17.83 $17.10 $17.62 $18.42 $16.76
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income From Investment Operations:
Net Investment Income............... 1.26 1.32 1.49 1.47 1.49 1.61 1.60 1.51 1.52 1.67
Net realized and unrealized gain
(loss) on investments.............. .01 (1.51) .64 1.70 .28 (.46) .61 (.09) (.72) 1.71
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Income from Investment
Operations....................... 1.27 (.19) 2.13 3.17 1.77 1.15 2.21 1.42 .80 3.38
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment
income............................. (1.24) (1.35) (1.48) (1.49) (1.51) (1.48) (1.48) (1.40) (1.60) (1.72)
Distributions from net realized
gains.............................. (.07) (1.26) (.43) -- -- -- -- (.54) -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions............... (1.31) (2.61) (1.91) (1.49) (1.51) (1.48) (1.48) (1.94) (1.60) (1.72)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Year.......... $16.82 $16.86 $19.66 $19.44 $17.76 $17.50 $17.83 $17.10 $17.62 $18.42
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Return.......................... 7.97% (1.44)% 11.74% 18.69% 10.78% 6.86% 13.68% 8.62% 4.42% 20.97%
Ratios/Supplemental Data:
Net Assets, End of Year (in
millions).......................... $44 $46 $67 $65 $46 $39 $40 $33 $28 $23
Ratio of Expenses to Average Net
Assets............................. .76% .77% .65% .68% .68% .69% .70% .64% .67% .66%
Ratio of Net Income to Average Net
Assets............................. 7.52% 6.99% 7.69% 8.04% 8.76% 9.25% 9.28% 8.69% 8.12% 9.03%
Portfolio Turnover Rate............. 69.22% 82.12% 35.97% 63.30% 54.86% 42.90 % 64.21% 128.52% 83.76 % 140.00%
</TABLE>
* All per share data reflect the 100-for-1 stock split for Endowments,
Inc. and 50-for-1 stock split for Bond Portfolio for Endowments, Inc.
effected on February 16, 1988.
3
<PAGE>
INVESTMENT
OBJECTIVES ENDOWMENTS, INC. The fund's primary investment
AND POLICIES objective is long- term growth of principal with income
ENDOWMENTS, INC. a secondary objective.
AIMS TO PROVIDE The fund will ordinarily be invested in common stocks
SHAREHOLDERS or securities convertible into common stock. Major
WITH LONG-TERM investment emphasis will be given to stocks of
GROWTH OF companies which appear to have favorable prospects for
PRINCIPAL WITH long-term growth of both capital and income. The fund
INCOME A SECONDARY will normally be invested in such securities, although
OBJECTIVE. preferred stocks and straight corporate debt securities
(rated in the top three quality categories by Moody's
Investors Service, Inc. or Standard & Poor's
Corporation, or not rated but determined to be of
equivalent quality by the fund's investment adviser,
Capital Research and Management Company) may be
purchased to the extent deemed advisable by Capital
Research and Management Company. Cash and cash
equivalents and U.S. Government securities may also be
held. The fund may from time to time invest up to 10%
in common stocks and other securities of issuers
domiciled outside the U.S. The fund will normally
diversify its investments among different industries
although the degree of diversification will vary from
time to time in accordance with the judgment of
management.
BOND PORTFOLIO FOR
ENDOWMENTS, INC. BOND PORTFOLIO FOR ENDOWMENTS, INC. The investment
AIMS TO PROVIDE objective of the fund is to seek as high a level of
SHAREHOLDERS WITH current income as is consistent with the preservation
AS HIGH A LEVEL OF of capital. Any capital appreciation is incidental to
CURRENT INCOME AS the fund's objective of current income.
IS CONSISTENT WITH The fund invests primarily in fixed-income securities,
THE PRESERVATION including bonds and debentures. A majority of the
OF CAPITAL. fund's assets will be invested in fixed- income
securities rated in the three highest categories (those
rated A or above) by Moody's Investors Service, Inc. or
Standard & Poor's Corporation or that are determined to
be of equivalent quality by the fund's investment
adviser, Capital Research and Management Company. In
addition, the fund may invest in securities rated BBB
by S&P or Baa by Moody's or in unrated securities of
equivalent quality. Securities rated BBB or Baa may
have speculative characteristics and changes in
economic conditions may lead to a weaker capacity to
make principal and interest payments than is the case
with higher rate securities. 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 in unrated securities of equivalent
quality. The fund may also purchase up to 10% of its
assets in obligations of non-U.S. corporations or
government entities provided they are
dollar-denominated and highly liquid and meet the
quality standards set forth above.
<PAGE>
The fixed-income securities in which the fund invests
may have stock conversion or purchase rights; however,
such securities will generally not exceed 20% of the
fund's assets. The fund will not acquire common stocks
except through the exercise of conversion or stock
purchase rights and will retain such common stocks only
when it is consistent with the fund's objective of
current income. In addition, the fund may hold cash or
cash equivalents. (See the statement of additional
information for more about these securities and for a
description of bond ratings.)
--------------------------------------------
As the funds' shareholders are non-profit institutions,
investments will be made consonant with the standards
generally considered prudent by fiduciaries and
trustees of such institutions. Because of the
shareholders' tax-exempt status, the funds will not be
affected by the usual tax considerations in making
investment decisions.
The funds' investment restrictions (which are described
in the statement of additional information) and
objectives cannot be changed without shareholder
approval. All other investment practices may be changed
by the funds' boards.
ACHIEVEMENT OF THE FUNDS' INVESTMENT OBJECTIVES CANNOT,
OF COURSE, BE ASSURED DUE TO THE RISK OF CAPITAL LOSS
FROM FLUCTUATING PRICES INHERENT IN ANY INVESTMENT IN
SECURITIES.
RISKS OF
INVESTING IN RISKS OF INVESTING IN STOCKS AND BONDS Because
CERTAIN Endowments, Inc. invests primarily in common stocks or
SECURITIES securities convertible into common stocks, the fund is
THE FUNDS ARE subject to stock market risks. For example, the fund is
SUBJECT subject to the possibility that stock prices in general
TO CERTAIN RISKS. will decline over short or even extended periods.
THERE Endowments, Inc. may also, and Bond Portfolio for
IS NO ASSURANCE Endowments, Inc. will, invest in fixed-income
THAT securities, including bonds, which have market values
THEIR OBJECTIVES which tend to vary inversely with the level of interest
WILL BE rates--when interest rates rise, their values will tend
REALIZED. to decline and vice versa. Although under normal market
conditions longer term securities yield more than
shorter term securities of similar quality, they are
subject to greater price fluctuations. These
fluctuations in the value of each fund's investments
will be reflected in its net asset value per share. See
the statement of additional information under
"Description of Certain Securities" (pages 1 to 4), for
a description of bond ratings and other securities.
U.S. GOVERNMENT SECURITIES Securities guaranteed by
the U.S. Government include: (1) direct obligations of
the U.S. Treasury (such as Treasury bills, notes and
bonds) and (2) federal agency obligations guaranteed as
to principal and interest by the U.S. Treasury (such as
5
<PAGE>
securities issued by the Government National Mortgage
Association which are commonly known as "GNMA
certificates" (described below), and Federal Housing
Administration debentures).
Securities issued by U.S. Government instrumentalities
and certain federal agencies are neither direct
obligations of, nor guaranteed by, the Treasury.
However, they generally involve federal sponsorship in
one way or another: some are backed by specific types
of collateral; some are supported by the issuer's right
to borrow from the Treasury; some are supported by the
discretionary authority of the Treasury to purchase
certain obligations of the issuer; others are supported
only by the credit of the issuing government agency or
instrumentality.
PRIVATE PLACEMENTS Private placements may be either
purchased from another institutional investor that
originally acquired the securities in a private
placement or directly from the issuers of the
securities. Generally, securities acquired in private
placements are subject to contractual restrictions on
resale and may not be resold except pursuant to a
registration statement under the Securities Act of 1933
or in reliance upon an exemption from the registration
requirements under the Act, for example, private
placements sold pursuant to Rule 144A. Accordingly, any
such obligation will be deemed illiquid unless it has
been specifically determined to be liquid under
procedures which may be adopted by the funds' board of
directors.
In determining whether these securities are liquid,
factors such as the frequency and volume of trading and
the commitment of dealers to make markets will be
considered. Additionally, the liquidity of any
particular security will depend on such factors as the
availability of "qualified" institutional investors and
the extent of investor interest in the security, which
can change from time to time.
INVESTING IN VARIOUS COUNTRIES The funds may invest in
non-U.S. issuers as described above. These issuers may
not be subject to uniform accounting, auditing and
financial reporting standards and practices or
regulatory requirements comparable to those applicable
to U.S. issuers. There may also be less public
information available about non-U.S. issuers.
Additionally, specific local political and economic
factors must be evaluated in making these investments
including trade balances and imbalances, and related
economic policies; expropriation or confiscatory
taxation; limitations on the removal of funds or other
assets; political or social instability; the diverse
structure and liquidity of the various securities
markets; and nationalization policies of governments
around the world. However, investing outside the U.S.
can also reduce certain of these risks due to greater
diversification opportunities.
--------------------------------------------
6
<PAGE>
APPLIES TO BOND PORTFOLIO FOR ENDOWMENTS, INC.:
MORTGAGE-RELATED SECURITIES The fund may invest in
GNMA certificates which are securities representing
part ownership of a pool of mortgage loans on which
timely payment of interest and principal is guaranteed
by the U.S. Government. GNMA certificates differ from
typical bonds because principal is repaid monthly over
the term of the loan rather than returned in a lump sum
at maturity. Although the mortgage loans in the pool
will have stated maturities of up to 30 years, the
actual average life or effective maturity of the GNMA
certificates typically will be substantially less
because the mortgages will be subject to normal
principal amortization and may be prepaid prior to
maturity.
The fund also may invest in securities representing
interests in pools of mortgage loans issued by private
institutions or governmental entities including the
Federal National Mortgage Association (FNMA) or by the
Federal Home Loan Mortgage Corporation (FHLMC).
OTHER MORTGAGE-RELATED SECURITIES The fund may invest
in mortgage-related securities issued by financial
institutions such as commercial banks, savings and loan
associations, mortgage bankers and securities
broker-dealers (or separate trusts or affiliates of
such institutions established to issue these
securities). These securities include mortgage
pass-through certificates, collateralized mortgage
obligations (including real estate mortgage investment
conduits as authorized under the Internal Revenue Code
of 1986) (CMOs) or mortgage-backed bonds. Each class of
bonds in a CMO series may have a different effective
maturity, bear a different coupon, and have a different
priority in receiving payments. All principal payments,
both regular principal payments as well as any
prepayment of principal, are passed through to the
holders of the various CMO classes dependent on the
characteristics of each class. In some cases, all
payments are passed through first to the holders of the
class with the shortest stated maturity until it is
completely retired. Thereafter, principal payments are
passed through to the next class of bonds in the
series, until all the classes have been paid off. In
other cases, payments are passed through to holders of
whichever class first has the shortest effective
maturity at the time payments are made. As a result, an
acceleration in the rate of prepayments that may be
associated with declining interest rates shortens the
expected life of each class. The impact of an
acceleration in prepayments affects the expected life
of each class differently depending on the unique
characteristics of that class. In the case of some CMO
series, each class may receive a differing proportion
of the monthly interest and principal repayments on the
underlying collateral. In these series the classes
would be more affected by an acceleration (or slowing)
in the rate of prepayments than CMOs which share
principal and interest proportionally.
7
<PAGE>
Mortgage-backed bonds are general obligations of the
issuer fully collateralized directly or indirectly by a
pool of mortgages. The mortgages serve as collateral
for the issuer's payment obligations on the bonds, but
interest and principal payments on the mortgages are
not passed through either directly (as with GNMA
certificates and FNMA and FHLMC pass-through
securities) or on a modified basis (as with CMOs).
Accordingly, a change in the rate of prepayments on the
pool of mortgages could change the effective maturity
of a CMO but not that of a mortgage-backed bond
(although, like many bonds, mortgage-backed bonds can
provide that they are callable by the issuer prior to
maturity).
REPURCHASE AGREEMENTS The fund may enter into
repurchase agreements, under which it buys a security
and obtains a simultaneous commitment from the seller
to repurchase the security at a specified time and
price. The seller must maintain with the fund's
custodian collateral equal to at least 100% of the
repurchase price including accrued interest, as
monitored daily by Capital Research and Management
Company. If the seller under the repurchase agreement
defaults, the fund may incur a loss if the value of the
collateral securing the repurchase agreement has
declined and may incur disposition costs in connection
with liquidating the collateral. If bankruptcy
proceedings are commenced with respect to the seller,
liquidation of the collateral by the fund may be
delayed or limited.
INVERSE FLOATING RATE NOTES The fund may invest to a
very limited extent in inverse floating rate notes (a
type of derivative instrument). These notes have rates
that move in the opposite direction of prevailing
interest rates. A change in prevailing interest rates
will often result in a greater change in the
instruments' interest rates. Therefore, these
securities have a greater degree of volatility than
other types of interest-bearing securities.
WHEN-ISSUED SECURITIES, FIRM COMMITMENT AGREEMENTS,
REVERSE REPURCHASE 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 also may enter into reverse
repurchase agreements, which are the sale of a security
by the fund and its agreement to repurchase the
security at a specified time and price at a later date,
and "roll" transactions, which 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.
8
<PAGE>
INVESTMENT
TECHNIQUES MULTIPLE PORTFOLIO COUNSELOR SYSTEM The basic
CAPITAL RESEARCH investment philosophy of Capital Research and
AND MANAGEMENT Management Company is to seek fundamental values at
COMPANY, THE reasonable prices, using a system of multiple portfolio
FUNDS' INVESTMENT counselors in managing mutual fund assets. Under this
ADVISER, USES A system the portfolio of the fund is divided into
SYSTEM segments which are managed by an individual counselor.
OF MULTIPLE Each counselor decides how their segment will be
PORTFOLIO invested (within the limits provided by the fund's
COUNSELORS TO objectives and policies and by Capital Research and
MANAGE FUND Management Company's investment committee). In
ASSETS. addition, Capital Research and Management Company's
research professionals may make investment decisions
with respect to a portion of the fund's portfolio. The
primary individual portfolio counselors for the funds
are listed below.
ENDOWMENTS, INC.
<TABLE>
<CAPTION>
YEARS OF EXPERIENCE AS
INVESTMENT
PROFESSIONAL
(APPROXIMATE)
WITH CAPITAL
RESEARCH AND
YEARS OF EXPERIENCE AS MANAGEMENT
PORTFOLIO PORTFOLIO COUNSELOR COMPANY OR
COUNSELORS FOR FOR ENDOWMENTS, INC. ITS TOTAL
ENDOWMENTS, INC. PRIMARY TITLE(S) (APPROXIMATE) AFFILIATES YEARS
<S> <C> <C> <C> <C>
George A. Miller Senior Vice President Since the fund began 20 years 34 years
of the fund, Senior operations*
Vice President and
Director, Capital
Research and
Management Company
Robert G. O'Donnell Senior Vice President 5 years 20 years 23 years
of the fund, Senior
Vice President and
Director, Capital
Research and
Management Company
</TABLE>
CAPITAL RESEARCH AND MANAGEMENT COMPANY HAS BEEN THE FUND'S INVESTMENT ADVISER
SINCE JULY 25,1975.
* PRIOR TO JULY 25, 1975, MR. MILLER WAS A PORTFOLIO COUNSELOR WITH AMERICAN
EXPRESS INVESTMENT MANAGEMENT COMPANY, THE FUND'S INITIAL INVESTMENT ADVISER.
BOND PORTFOLIO FOR ENDOWMENTS, INC.
<TABLE>
<CAPTION>
YEARS OF EXPERIENCE AS
INVESTMENT
PROFESSIONAL
(APPROXIMATE)
YEARS OF EXPERIENCE AS WITH CAPITAL
PORTFOLIO COUNSELOR RESEARCH AND
PORTFOLIO FOR MANAGEMENT
COUNSELORS FOR BOND PORTFOLIO FOR COMPANY OR
BOND PORTFOLIO FOR ENDOWMENTS, INC. ITS TOTAL
ENDOWMENTS, INC. PRIMARY TITLE(S) (APPROXIMATE) AFFILIATES YEARS
<S> <C> <C> <C> <C>
Abner D. Goldstine Senior Vice President 20 years 28 years 43 years
of the fund, Senior
Vice President and
Director, Capital
Research and
Management Company
John H. Smet Vice President of the 7 years 12 years 13 years
fund, Vice President,
Capital Research and
Management Company
</TABLE>
CAPITAL RESEARCH AND MANAGEMENT COMPANY HAS BEEN THE FUND'S INVESTMENT ADVISER
SINCE JULY 25, 1975.
9
<PAGE>
INVESTMENT
RESULTS The funds may from time to time compare their
ENDOWMENTS, INC. investment results to various unmanaged indices or
HAS AVERAGED A other mutual funds in reports to shareholders, sales
TOTAL RETURN OF literature and advertisements. The results may be
+14.23% A YEAR AND calculated on a yield and/or total return basis for
BOND PORTFOLIO FOR various periods. Total returns assume the reinvestment
ENDOWMENTS, INC. of all dividends and capital gain distributions.
HAS AVERAGED A ENDOWMENTS, INC. As of June 30, 1995, the fund's yield
TOTAL RETURN OF for the past 30-day period was 3.75%, and total return
+10.03% A YEAR over the past 12 months and average total returns over
UNDER CAPITAL the past five- and ten-year periods were +18.48%,
RESEARCH +11.29% and +12.49%, respectively.
AND MANAGEMENT BOND PORTFOLIO FOR ENDOWMENTS, INC. As of June 30,
COMPANY'S 1995, the fund's yield for the past 30-day period was
MANAGEMENT. 7.06%, and total return over the past 12 months and
(JULY 26, 1975 average total returns over the past five- and ten- year
THROUGH periods were +9.66%, +9.66% and +10.01%, respectively.
JUNE 30, 1995) These results were calculated in accordance with
Securities and Exchange Commission requirements. Of
course, past results are not an indication of future
results. Further information regarding the funds'
investment results are contained in the funds' annual
report which may be obtained without charge by writing
to the Secretary of the funds at the address indicated
on the cover of this prospectus.
DIVIDENDS,
DISTRIBUTIONS AND DIVIDENDS AND DISTRIBUTIONS Dividends are usually paid
TAXES in March, June, September and December. Capital gains,
INCOME if any, are usually distributed in December. When a
DISTRIBUTIONS dividend or capital gain is distributed, the net asset
ARE USUALLY MADE value per share is reduced by the amount of the
IN payment.
MARCH, JUNE, FEDERAL TAXES The funds are tax-exempt organizations
SEPTEMBER under Section 501(c)(2) of the Internal Revenue Code.
AND DECEMBER. In addition, each fund intends to operate as a
"regulated investment company" under the Internal
Revenue Code. If the funds elect to be treated as
regulated investment companies, and so qualify and
distribute to shareholders all of their net investment
income and net capital gains, the funds themselves are
relieved of federal income tax.
Since all of the shareholders of the funds are exempt
from taxation under Section 501(c)(3) of the Internal
Revenue Code, it is not anticipated that there will be
any tax consequences to the shareholders from
distribution of either net investment income or capital
gains realized on the sale of securities except where a
shareholder is defined as a "private foundation" under
Section 509(a) and therefore may be subject to the
taxes assessed under Chapter 42 of the Internal Revenue
Code.
This is a brief summary of some of the tax laws that
affect your investment in the funds. Please see the
statement of additional information for further
information.
10
<PAGE>
FUND
ORGANIZATION AND FUND ORGANIZATION AND VOTING RIGHTS The funds, which
MANAGEMENT are open-end, diversified management investment
THE FUNDS ARE companies, were organized as Delaware corporations
MANAGED BY ONE OF (Endowments, Inc. in 1969 and Bond Portfolio for
THE LARGEST AND Endowments, Inc. in 1970). The funds' boards supervise
MOST EXPERIENCED fund operations and perform duties required by
INVESTMENT applicable state and federal law. Shareholders have one
ADVISERS. vote per share owned and, at the request of the holders
of at least 10% of the shares of either fund, that fund
will hold a meeting at which any member of the board
could be removed and a successor elected. Since the
funds use a combined prospectus, each fund may be
liable for misstatements, inaccuracies, or incomplete
disclosure concerning any other fund contained in this
prospectus.
As of August 31, 1995, the following shareholders owned
5% or more of the funds' outstanding stock:
Endowments, Inc.--California Institute of the Arts,
272,049 shares (8.70%); St. Mark's School of Texas,
963,122 shares (30.79%); and San Francisco Opera
Association, 188,442 shares (6.03%).
As St. Mark's School of Texas owns in excess of 25% of
the voting shares of the fund, it is, pursuant to the
Investment Company Act of 1940, presumed to be a
controlling person of the fund.
Bond Portfolio for Endowments, Inc.--California
Institute of the Arts, 514,168 shares (19.71%);
Episcopal Homes Foundation, 172,955 shares (6.63%);
Hospitaller Foundation of California, 140,243 shares
(5.38%); St. Mark's School of Texas, 425,349 shares
(16.31%); and San Francisco Opera Association, 152,816
shares (5.86%).
THE INVESTMENT ADVISER Capital Research and Management
Company, a large and experienced investment management
organization founded in 1931, is the investment adviser
to the funds and other funds, including those in The
American Funds Group. Capital Research and Management
Company is located at 333 South Hope Street, Los
Angeles, CA 90071 and at 135 South State College
Boulevard, Brea, CA 92621. Capital Research and
Management Company manages the investment portfolio and
business affairs of the funds. (See "Summary of
Expenses" for management fees.)
Capital Research and Management Company is a wholly
owned subsidiary of The Capital Group Companies, Inc.
(formerly "The Capital Group, Inc."), which is located
at 333 South Hope Street, Los Angeles, CA 90071. The
research activities of Capital Research and Management
Company are conducted by affiliated companies which
have offices in Los Angeles, San Francisco, New York,
Washington, D.C., London, Geneva, Singapore, Hong Kong
and Tokyo.
Capital Research and Management Company and its
affiliated companies have adopted a personal investing
policy that is consistent with the
11
<PAGE>
recommendations contained in the report dated May 9,
1994 issued by the Investment Company Institute's
Advisory Group on Personal Investing. (See the
statement of additional information.)
PORTFOLIO TRANSACTIONS Orders for the funds' portfolio
securities transactions are placed by Capital Research
and Management Company, which strives to obtain the
best available prices, taking into account the costs
and quality of executions.
In the over-the-counter market, purchases and sales are
transacted directly with principal market-makers except
in those circumstances where it appears better prices
and executions are available elsewhere.
Fixed-income securities are generally traded on a "net"
basis with a dealer acting as principal for its own
account without a stated commission, although the price
of the security usually includes a profit to the
dealer. In underwritten offerings, securities are
usually purchased at a fixed price which includes an
amount of compensation to the underwriter, generally
referred to as the underwriter's concession or
discount. On occasion, securities may be purchased
directly from an issuer, in which case no commissions
or discounts are paid.
Subject to the above policy, when two or more brokers
are in a position to offer comparable prices and
executions, preference may be given to brokers that
have provided investment research, statistical, and
other related services for the benefit of the funds
and/or of other funds served by Capital Research and
Management Company.
TRANSFER AGENT American Funds Service Company, a
wholly owned subsidiary of Capital Research and
Management Company, is the transfer agent and performs
shareholder service functions. An agent of American
Funds Service Company who performs transfer agent
services for the funds is located at Four Embarcadero
Center (Suite 1800), San Francisco, CA 94111.
12
<PAGE>
PURCHASING SHARES
SHARES MAY BE Shares of the funds may be purchased directly from the
PURCHASED DIRECTLY funds only by institutional investors exempt from
FROM federal income taxation under Section 501(c)(3) of the
THE FUNDS ONLY Internal Revenue Code. The minimum initial purchase is
BY INSTITUTIONS $50,000 for either fund; there is no minimum on
EXEMPT subsequent investments. The minimum initial investment
FROM FEDERAL may be reduced by the boards for investments which meet
TAXATION certain standards. Any shareholder which loses its
UNDER SECTION tax-exempt status must immediately transfer its shares
501(C)(3) to another tax-exempt institution or, at the
OF THE INTERNAL shareholder's option, redeem its shares at net asset
REVENUE CODE. value.
The purchase of shares may be paid in cash or in a like
value of acceptable securities, said securities to be
valued in accordance with the valuation procedures
described in the statement of additional information
under "Purchase of Shares--Price of Shares." Acceptable
securities shall be those securities deemed acceptable
by Capital Research and Management Company; that is,
those securities which management deems to be
consistent with the investment objectives and policies
of the funds.
SHARE PRICE Shares are sold to eligible institutions
at net asset value. The net asset value is determined
as of the close of trading (currently 4:00 p.m., New
York time) on each day the New York Stock Exchange is
open. The current value of the fund's total assets,
less all liabilities, is divided by the total number of
shares outstanding and the result, rounded to the
nearer cent, is the net asset value per share.
SHARE CERTIFICATES Shares are credited to the
shareholder's account and certificates are not issued
unless specifically requested. This eliminates the
costly problem of lost or destroyed certificates.
All stock certificates issued by the funds shall bear
the legend that the shares 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. Shares
of the funds are redeemable through the funds at net
asset value. (See "Redeeming Shares.")
SHAREHOLDER AUTOMATIC REINVESTMENT Dividends and capital gain
SERVICES distributions are reinvested in additional shares at no
sales charge unless you indicate otherwise. You also
may elect to have dividends and/or capital gain
distributions paid in cash.
EXCHANGE FEATURE As a shareholder of Endowments, Inc.
or Bond Portfolio for Endowments, Inc., you may
exchange all or part of your shares at net asset value
for shares of the other, and for shares of The Cash
Management Trust of America or The U.S. Treasury Money
Fund of America, whose shares may be similarly
exchanged for shares of Endowments, Inc. and/or Bond
Portfolio for Endowments, Inc. The Cash
13
<PAGE>
Management Trust of America and The U.S. Treasury Money
Fund of America are money market funds whose shares are
sold at net asset value. This feature is available only
if the fund for which you are exchanging is qualified
in the state where you reside.
As the funds' shareholders are tax-exempt institutions,
it is not expected that such an exchange will result in
tax consequences to the shareholder.
AUTOMATIC WITHDRAWALS Shareholders may authorize
automatic withdrawals from their accounts. All shares
owned or purchased by a shareholder will be credited to
the shareholder's withdrawal account, and a sufficient
number of shares will be sold from the account to meet
the requested withdrawal payments. All income dividends
and other distributions, if any, must be reinvested in
fund shares at net asset value and credited to the
withdrawal account. Liquidation of shares in excess of
investment income will reduce and may deplete a
shareholder's invested capital. Withdrawal payments,
therefore, should not be considered as a yield or
income on the investment.
These services are available only in states where the
funds may be legally offered and may be terminated or
modified at any time upon 60 days' written notice.
ACCOUNT STATEMENTS A shareholder account is opened in
accordance with your registration instructions.
Transactions in the account, such as additional
investments and dividend reinvestments, will be
reflected on regular confirmation statements from
American Funds Service Company.
REDEEMING SHARES Shareholders may redeem their shares, upon tender in
proper form, at the net asset value as next determined
after receipt at the offices of the funds, P.O. Box
7650, Four Embarcadero Center (Suite 1800), San
Francisco, CA 94120. Proper tender of shares requires a
written request for redemption and, if the shareholder
has received certificates for its shares, the deposit
of the stock certificates is also required. Requests
for redemption must be signed and the authorized
signature(s) of the shareholder guaranteed by an
"eligible guarantor" including a bank or savings and
loan association that is federally insured or a member
firm of the National Association of Securities Dealers,
Inc. Notarization by a Notary Public is not an
acceptable signature guarantee.
The funds do not have dealer agreements and do not
accept redemption orders from broker-dealers.
The price you receive for the shares you redeem is the
net asset value next determined after your order and
all required documents are received. (See "Purchasing
Shares--Share Price.") Because the funds' net asset
values fluctuate, reflecting the market value of the
funds' portfolios, the amount a shareholder receives
for shares redeemed may be more or less than the amount
paid for them.
14
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
- --------------------------------------------------------------------------------
ENDOWMENTS, INC.
AN INVESTMENT FOR TAX-EXEMPT INSTITUTIONS SEEKING LONG-TERM
GROWTH OF PRINCIPAL WITH INCOME
BOND PORTFOLIO FOR
ENDOWMENTS, INC.
AN INVESTMENT FOR TAX-EXEMPT INSTITUTIONS
SEEKING AS HIGH A LEVEL OF CURRENT INCOME AS IS CONSISTENT
WITH THE PRESERVATION OF CAPITAL
FOUR EMBARCADERO CENTER (SUITE 1800)
P.O. BOX 7650, SAN FRANCISCO, CA 94120 PHONE: (415) 421-9360
MANAGED BY
CAPITAL RESEARCH AND MANAGEMENT COMPANY
333 SOUTH HOPE STREET
LOS ANGELES, CA 90071
THIS PROSPECTUS HAS BEEN PRINTED ON RECYCLED
[RECYCLING LOGO] PAPER THAT MEETS THE GUIDELINES OF THE
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY.
<PAGE>
ENDOWMENTS, INC.
AND
BOND PORTFOLIO FOR ENDOWMENTS, INC.
Part B
Statement of Additional Information
October 1, 1995
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
DESCRIPTION OF CERTAIN SECURITIES
FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS
FUND OFFICERS AND DIRECTORS
MANAGEMENT
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
PURCHASE OF SHARES
EXECUTION OF PORTFOLIO TRANSACTIONS
REDEMPTION OF SHARES
GENERAL INFORMATION
INVESTMENT RESULTS
FINANCIAL STATEMENTS
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, and President and Chief Executive Officer, Times Mirror
Foundation; former Executive Vice President and Member of the Management
Committee, The Times Mirror Company; (213) 237-3977; 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.
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. CREMIN**, 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 Partnership, Seattle,
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, 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, Girl
Scout Council, Inc., St. Mark's School of Texas, Southwest Museum of Science
and Technology; John R. Metcalf - Radiology Research and Education Foundation;
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.
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 Value
8/1 - 7/31
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 Value
8/1 - 7/31
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>
- ---------------
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>
<PAGE>
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.
/s/Deloitte & Touche LLP
Los Angeles, California
August 23, 1995