ENDOWMENTS, INC.(SM)
AND
BOND PORTFOLIO FOR
ENDOWMENTS, INC.(SM)
Endowments, Inc. seeks to provide long-term growth of principal with income as
a secondary objective, primarily through investments in stocks.
Bond Portfolio for Endowments, Inc. seeks to provide as high a level of current
income as is consistent with the preservation of capital through investments in
fixed-income securities.
ANNUAL REPORT
For the Year Ended July 31, 1996
ENDOWMENTS, INC. (ENDI)
Seeks long-term growth of principal
with income as a secondary objective.
BOND PORTFOLIO FOR ENDOWMENTS, INC. (BENDI)
Seeks as high a level of current income as is consistent with the preservation
of capital. Any capital appreciation is incidental to the fund's objective of
current income.
RESULTS AT A GLANCE
<TABLE>
<CAPTION>
STANDARD LEHMAN LIPPER CORPORATE
AVERAGE ANNUAL & POOR'S AGGREGATE A-RATED
COMPOUND RETURN ENDI 500 INDEX BENDI BOND INDEX BOND FUND AVERAGE
<S> <C> <C> <C> <C> <C>
For the past fiscal year 13.2% 16.5% 6.3% 5.5% 4.8%
August 1, 1995 through
July 31, 1996
For the past 21 years 14.3% 14.3% 9.8% NA 9.5%
From July 25, 1975, when
Capital Research and
Management Company
became the funds' investment adviser,
through July 31, 1996
</TABLE>
Here are the total returns and average annual compound returns with all
distributions reinvested for periods ended June 30, 1996 (the most recent
calendar quarter):
<TABLE>
<CAPTION>
Total Average Compound
Return Annual Return
<S> <C> <C> <C>
ENDI Ten Years +205.23% +11.81%
Five Years +84.48 +13.03
12 Months +19.78 <UNDEF><UNDEF>
BENDI Ten Years +127.60 +8.57
Five Years +52.16 +8.76
12 Months +5.81 <UNDEF><UNDEF>
</TABLE>
BENDI's 30-day yield as of August 31, 1996, calculated in accordance with the
Securities and Exchange Commission formula, was 6.81%.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN
WILL VARY, SO YOU MAY LOSE MONEY BY INVESTING IN THE FUNDS. THE SHORTER THE
TIME PERIOD OF YOUR INVESTMENT, THE GREATER THE POSSIBILITY OF LOSS. FUND
SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY, THE
U.S. GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON.
DEAR SHAREHOLDER:
In fiscal 1996, the major stock and bond indexes finished the period on
the plus side, and both ENDOWMENTS, INC. and BOND PORTFOLIO FOR ENDOWMENTS,
INC. recorded positive results.
ENDOWMENTS, INC. ("ENDI"):
The value of an investment in ENDI, with all distributions reinvested,
increased 13.2% for the 12 months ended July 31. Meanwhile, Standard & Poor's
500 Composite Index, a broad unmanaged measure of the U.S. equity market, went
up 16.5%, also on a total return basis.
Stock prices kept rising through most of the fiscal year, pushing
valuations to extraordinary levels. For the fund as well as for the market,
the gain for the full year was trimmed by a slight decline near the end of the
period. ENDI has typically held up better than the index when stock prices
have fallen and often has lagged it when prices rise sharply.
ENDI has clearly been participating in the long upward march of the
market. However, given the nature of the fund's clientele, we are very
conscious of the importance of conserving principal in managing the portfolio.
At this stage, we feel uncomfortable with the general level of valuations. In
some areas, we have found attractive values and added to our holdings - chiefly
in the oil and paper industries - but for the most part we have not been
aggressive purchasers of stocks. We continue to hold substantial cash and
equivalents. On July 31, this buying reserve equaled about 22% of net assets,
roughly the same as a year ago. That percentage is at the high end of our
normal range for cash and equivalents and represents a much larger reserve than
we would hold if valuations were more attractive.
In fiscal 1996, the fund's biggest gainers included health-care holdings.
American Home Products rose 43.7%, Johnson & Johnson 33.1%, Warner-Lambert
29.8%, and Merck 24.5%. Our health-care investments were built up in the early
1990s, at a time when the stocks were out of favor among many investors. The
strength shown by pharmaceuticals and other health-care securities, not only
during the past fiscal year but the past two years as well, reflected
consolidations within the industry and the demise earlier of the Clinton
Administration's health plan, which had been viewed by many investors as a
serious threat to profitability. As health-care stock prices have risen, we
have gradually trimmed back our positions in some of these securities and taken
profits for our shareholders. As a result, health and personal care remains
our second largest area of industry concentration (after banking); as a
percentage of net assets, it has declined to 7.5% from 9.2% at the start of the
fiscal year.
Much of the volatility in the market in the early part of the summer was
concentrated in high-technology stocks, notably semiconductor and
Internet-related issues, an area in which the fund has not been active. Many
of these stocks dropped 25% or more between late May and late July. This area
of the market had attracted a great deal of speculative buying earlier.
BOND PORTFOLIO FOR ENDOWMENTS, INC. ("BENDI"):
In a difficult environment for fixed-income investors, BENDI recorded a
total return of 6.3% for the 12 months ended July 31. This compares with 5.5%
for the unmanaged Lehman Aggregate Bond Index and an average return of 4.8% for
the 114 funds in the Lipper Corporate Debt A-Rated average. BENDI's total
return placed it seventh among the 114 A-rated bond funds during this 12-month
period, according to Lipper. For the five- and ten-year periods ended July 31,
BENDI ranked (respectively) 13th among 47 and 5th among 26 comparable funds in
existence throughout those periods.*
The fiscal year was marked by wide swings in interest rates. When it
began, the economy appeared to be slowing down and longer term as well as
intermediate rates were drifting lower. Then, in late December and early
January, concern about an accelerating pace of growth caused rates to turn
upward. They continued rising until mid-summer, when reports of weaker
corporate profits, smaller increases in commodity prices and other factors
combined to allay fears, at least for a few weeks, of an overheating economy.
During the fiscal year we continued to build additional downside
protection into BENDI's portfolio by shortening maturities. We also increased
the fund's holdings of corporate bonds, taking advantage of what we felt were
attractive values, including airline issues secured by aircraft or aircraft
leases. These airline investments currently represent BENDI's largest area of
industry concentration. On July 31, corporate securities accounted for 56.1%
of the fund's net assets compared with 51.4% at the start of the fiscal year.
Investments in U.S. and other government issues represented 38.7% of net assets
on July 31, down from 43.7% a year earlier. Cash and equivalents were 5.2%,
compared with 4.9% at the start of fiscal 1996.
We believe the portfolio is positioned in a way that will allow BENDI to
continue pursuing its objective of high current income and to benefit if
interest rates decline and bond prices rally. At the same time, we have tried
to structure the portfolio so it is not exposed to excessive risk if the
fixed-income markets move moderately lower instead.
* Lipper rankings do not include the effects of other funds' sales charges.
At the moment, the signals on bonds and the economy are mixed. There is
some evidence, including lagging exports, pressure on profit margins and a
tapering off of housing and car sales, which suggests that business may expand
slowly in the months ahead, generating little or no upward pressure on wages
and prices. That, of course, would be beneficial for bonds. Other evidence,
however, points toward a continuation of above-normal growth. It is worth
bearing in mind that, with the nation's unemployment rate already low (around
5%), even a small increase in the pace of the expansion could renew fears of
higher inflation and lead to an upturn in interest rates.
This past summer, George Miller, a Senior Vice President of the fund's
investment adviser, retired after 21 years with the Capital organization. We
wish to thank George for his splendid contributions to ENDI and BENDI. He
participated in the founding of both funds and served as an ENDI portfolio
counselor since the fund began. George has been succeeded on ENDI's team of
portfolio counselors by Claudia Huntington, who has been with the Capital
organization since 1975.
We would like to remind shareholders of both ENDI and BENDI that it is
important to maintain a long-term perspective on your holdings. On the
following pages, you will find an article containing background on the funds
along with a discussion of their investment philosophy, which is geared toward
tax-exempt organizations and emphasizes a patient, value-oriented approach to
the equity and fixed-income markets. We believe the article will be of
interest to new investors as well as to those who have been with us for some
time.
Cordially,
Robert B. Egelston
Chairman of the Board
Thomas E. Terry
President
September 16, 1996
[CHART]
How A $50,000 Investment Has Grown
(under CRMC management 7/25/75 - 7/31/96)
ENDOWMENTS, INC.
ENDI $828,238 /1/
S&P 500 $823,561 /1/
Consumer Price Index (inflation) $144,834
AVERAGE ANNUAL COMPOUND RETURNS /1/
(FOR PERIODS ENDED JULY 31, 1996)
10 YEARS 11.78%
5 YEARS 11.94%
1 YEAR 13.21%
[chart]
<TABLE>
<CAPTION>
Date ENDI S&P 500 Consumer
Price Index
(inflation)
<S> <C> <C> <C>
7/25/75 $50,000 $50,000 $50,000
7/31/76 63,476 60,269 52,675
7/31/77 67,590 60,145 56,273
7/31/78 74,525 64,526 60,609
7/31/79 82,131 70,226 67,435
7/31/80 96,277 86,842 76,291
7/31/81 110,942 98,071 84,502
7/31/82 106,860 84,944 89,945
7/31/83 166,726 135,430 92,159
7/31/84 166,157 131,380 96,033
7/31/85 216,736 173,983 99,446
7/31/86 272,155 223,417 101,015
7/31/87 326,885 311,203 104,982
7/31/88 319,347 274,924 109,317
7/31/89 393,501 362,553 114,760
7/31/90 409,739 385,779 120,295
7/31/91 471,326 434,923 125,646
7/31/92 545,533 490,602 129,613
7/31/93 600,349 533,369 133,210
7/31/94 616,980 560,740 136,900
7/31/95 731,561 706,843 140,683
7/31/96 828,238 823,561 144,834
</TABLE>
BOND PORTFOLIO FOR ENDOWMENTS, INC.
BENDI $356,493 /1/
Lipper Average of Corporate Debt A-Rated Funds $338,621 /1/ /2/
Lehman Aggregate Bond Index $337,115 /1/ /3/
Consumer Price Index (inflation) $144,834
AVERAGE ANNUAL COMPOUND RETURNS /1/
(FOR PERIODS ENDED JULY 31, 1996)
10 YEARS 8.63%
5 YEARS 8.44%
1 YEAR 6.25%
<TABLE>
<CAPTION>
Date BENDI Lehman Lipper Consumer
Aggregate Average of Price
Bond Corporate Index
Index Debt A-Rated (inflation)
Funds
<S> <C> <C> <C> <C>
7/25/75 $50,000 $50,000 $50,000 $50,000
7/31/76 56,123 53,140 57,028 52,675
7/31/77 63,169 59,040 63,965 56,273
7/31/78 63,633 60,315 65,310 60,609
7/31/79 68,078 64,340 69,376 67,435
7/31/80 70,604 65,365 69,954 76,291
7/31/81 67,372 62,090 66,844 84,502
7/31/82 79,771 74,845 78,731 89,945
7/31/83 98,881 91,240 98,294 92,159
7/31/84 106,746 99,170 105,159 96,033
7/31/85 128,775 122,885 128,891 99,446
7/31/86 155,776 149,300 152,434 101,015
7/31/87 162,649 156,040 160,432 104,982
7/31/88 176,667 167,850 172,329 109,317
7/31/89 200,841 193,375 196,854 114,760
7/31/90 214,609 207,045 207,508 120,295
7/31/91 237,739 229,205 227,734 125,646
7/31/92 282,164 263,075 265,654 129,613
7/31/93 315,292 289,825 296,197 133,210
7/31/94 310,743 290,095 292,429 136,900
7/31/95 335,522 319,420 321,579 140,683
7/31/96 356,493 337,115 338,621 144,834
</TABLE>
/1/With dividends reinvested.
/2/ The Lipper inception date was 7/31/75.
/3/ Lehman Aggregate Bond Index began 12/31/75.
Sales charges do not apply to either fund.
Past results are not predictive of future results.
[end chart]
In 1986, the funds' Board of Directors adopted a nonfundamental policy
prohibiting investments in securities of companies operating in South Africa
and issues of the government of South Africa. The 1986 policy was rescinded in
1994. The comparative indexes do not have such a policy and are unmanaged.
[END CHART]
MORE THAN TWO DECADES OF
PRUDENT INVESTING AND POSITIVE RESULTS
ENDI and BENDI are designed to meet the special needs of educational,
charitable and other tax-exempt institutions; both funds aim to maintain
portfolios that are consistent with high standards of quality.
Endowments, Inc. (ENDI) and Bond Portfolio for Endowments, Inc. (BENDI)
were created more than two decades ago to help trustees, directors and advisers
of tax-exempt organizations fulfill their fiduciary responsibilities. The funds
place experienced professional investment management within the reach of small
as well as large nonprofit institutions and are available only to institutions
exempt from taxation under section 501(c)(3) of the Internal Revenue Code.
Investments can be made in either or both funds with an initial minimum of
$50,000. There is no acquisition or redemption charge, and subsequent
investments may be made at any time in any amount.
Both funds offer a well-defined but flexible investment approach. Both
have built solid investment records while outdistancing inflation by a
comfortable margin. They provide diversification that can help reduce risk as
well as the ability to tailor and alter a client's investment program as
necessary. Their expenses have been kept low and their activities have been
overseen by a Board of Directors that includes designated representatives of
shareholder organizations.
Both ENDI and BENDI are accompanied by services that can increase the
usefulness and convenience of your investment. These include automatic
reinvestment of dividends, a systematic withdrawal plan, regular shareholder
reports, recordkeeping, an exchange privilege, and daily pricing of net asset
value, which is available in the mutual fund listings of most newspapers under
the symbols "Endow" and "BdEndw."
[CAPTION}
The Funds place experienced professional investment
management within the reach of small as well as
large nonprofit institutions [END CAPTION]
ENDOWMENTS, INC.
ENDI invests primarily for long-term growth of principal, with income as a
secondary objective. This fund concentrates on high-quality common stocks of
U.S.-based companies with favorable prospects for growth of capital and income.
Preservation of capital is an important aspect of ENDI's investment approach.
ENDI's record of investment success is documented in the mountain chart on
page 4. The fund's average compound growth rate over its 21-year lifetime under
the management of Capital Research and Management Company is 14.3% including
reinvestment, which is the same as the return recorded by the unmanaged
Standard & Poor's 500 Composite Index.
ENDI has generated this return with considerably less volatility than the
index has shown. This can be seen in the chart below, which compares the extent
to which the total return of the fund and the index have fluctuated over
various periods. During the past 20 years, a span of time that has seen both
rising and falling stock prices, ENDI kept pace with the U.S. stock market and
minimized fluctuations in its total returns through careful stock selection
and, at times, by holding cash equivalents and short-term fixed-income
obligations for defensive purposes.
This prudent approach is consistent with the fiduciary constraints which
limit the amount of risk and volatility that many tax-exempt institutions can
tolerate. This is a consideration worth keeping in mind when making comparisons
with a "fully invested" index, such as the S&P 500. It is worth noting that the
equity portion of the fund's portfolio has typically outpaced the S&P 500.
[CAPTION}
ENDI has kept pace with the U.S. stock market while minimizing fluctuations in
its share price. [END CAPTION]
VOLATILITY: ENDI VS. THE S&P 500
<TABLE>
<CAPTION>
ENDI S&P
<S> <C> <C>
5 Years 6.81% 9.16%
10 Years 9.88% 14.70%
20 Years 11.08% 14.30%
</TABLE>
These figures are the standard deviations of total return and measure
volatility. They show the extent to which the returns for the fund and the
unmanaged Standard & Poor's 500 Composite Index have varied from the mean
during three time periods, all ended June 30, 1996. In all three, ENDI's total
return has fluctuated at least 20% less than the index.
BOND PORTFOLIO FOR ENDOWMENTS, INC.
BENDI is also managed in a way that takes into account the nature and
requirements of the fund's shareholders and aims to maintain a portfolio
consistent with standards of quality that are considered prudent by most
nonprofit institutions.
However, in contrast to ENDI, Bond Portfolio for Endowments seeks
primarily current income combined with preservation of capital. The fund also
strives for capital appreciation when possible. It invests in a
quality-oriented selection of nonconvertible bonds and debentures offering
attractive yields. In the securities-selection process, issues rated A or
higher by Moody's Investors Service or Standard & Poor's are emphasized. The
fund does not invest in what are known as "junk" bonds. Its portfolio typically
contains a mix of both government and corporate issues; the average maturity
over time has ranged between seven and ten years.
BENDI, too, has built an impressive record of investment success during
the 21 years ended July 31; that record is documented in the mountain chart on
page 4. These 21 years include periods of rising as well as falling bond
prices; generally, the price swings have been wider and more frequent in recent
years.
[Photo Caption]
ENDI and BENDI share a joint Board of Directors. The current Board includes
designated representatives of shareholders from several tax-exempt
organizations. Left to right seated: John Metcalf, Alpine Winter Foundation;
Patricia McBride, St. Mark's School of Texas; Robert Ziebarth, Foundation for
Reproductive Research & Education. Left to right standing: Steven Lavine,
California Institute of the Arts; Frank Ellsworth, Independent Colleges of
Southern California; Charles Redmond, Loyola Marymount University.
[End Photo Caption]
ABOUT THE FUNDS' ADVISER:
Capital Research and Management Company (CRMC) has managed ENDI and BENDI
since 1975, when an investment-advisory business that managed the two funds was
acquired from an affiliate of American Express Company. CRMC manages more than
$140 billion in equities and fixed-income investments, chiefly for the more
than 8 million shareholder accounts in The American Funds Group of publicly
traded mutual funds. These shareholders include thousands of corporations and
institutions.
An affiliate of CRMC, Capital Guardian Trust Company, provides fiduciary
and investment management services to institutional accounts. Its Personal
Investment Management Division serves a number of high-income individuals and
families.
Both Capital Research and Management and Capital Guardian Trust are part
of The Capital Group Companies, one of the world's most experienced money
management organizations. Headquartered in Los Angeles, the organization also
has offices in several other major cities, including San Francisco, Washington
D.C., New York, London, Geneva, Singapore, Hong Kong and Tokyo.
The Capital organization's value-oriented approach to investing begins
with intensive research. In unearthing the facts that ultimately lead to
investment decisions, Capital's analysts and portfolio counselors log millions
of miles each year keeping a close watch on industry trends and government
actions and scrutinizing thousands of companies. This research effort combines
intensive company and industry analysis with a political and macroeconomic
overview, and we believe it has given our family of companies - and the funds
they manage, including ENDI and BENDI - an important competitive edge.
<TABLE>
ENDOWMENTS, INC.
INVESTMENT PORTFOLIO, JULY 31, 1996
Percent
of Net
INDUSTRY DIVERSIFICATION Assets
- --------------------------------------------------- ----------
<S> <C> <C> <C>
Common Stocks
Banking 10.27%
Health & Personal Care 7.52
Energy Sources 6.48
Insurance 6.29
Forest Products & Paper 4.87
Utilities: Electric & Gas 4.35
Business & Public Services 3.74
Transportation: Rail & Road 3.66
Real Estate 3.22
Machinery & Engineering 3.04
Beverages & Tobacco 2.85
Merchandising 2.43
Food & Household Products 2.29
Telecommunications 2.25
Chemicals 2.06
Recreation & Other Consumer Products 1.96
Data Processing & Reproduction 1.91
Broadcasting & Publishing 1.11
Automobiles 1.10
Financial Services 1.09
Metals: Nonferrous .98
Multi-Industry .96
Electrical & Electronics .59
Electronic Instruments .07
----------
75.09
Common stocks in initial period of acquisition 2.93
Short-Term Securities 21.77
Excess of cash and receivables over payables .21
----------
Net Assets 100.00%
==========
Percent
of Net
TEN LARGEST HOLDINGS Assets
- --------------------------------------------------- ----------
American Home Products 2.87%
Wal-Mart Stores 2.43
General Mills 2.29
Weingarten Realty Investors 2.17
Dun & Bradstreet 2.04
Washington Mutual Savings Bank 2.03
Phillips Petroleum 2.00
Atlantic Richfield 1.96
International Business Machines 1.91
Warner-Lambert 1.84
----------
21.54%
==========
Percent
Number Market Of Net
COMMON STOCKS of shares Value Assets
- --------------------------------------------------- --------------------------------
ENERGY
Energy Sources-6.48%
Amoco Corp. 10000 $ 668,750 1.13%
Atlantic Richfield Co. 10000 1160000 1.96
Exxon Corp. 10000 822500 1.39
Phillips Petroleum Co. 30000 1185000 2.00
Utilities: Electric & Gas-4.35%
Consolidated Edison Co. of New York, Inc. 17000 459000 .77
Duke Power Co. 15000 718125 1.21
Entergy Corp. 25000 637500 1.07
Pacific Gas and Electric Co. 20000 395000 .67
Union Electric Co. 10000 376250 .63
-----------------------
6422125 10.83
-----------------------
MATERIALS
Chemicals-2.06%
Armor All Products Corp. 40000 627500 1.06
Dow Chemical Co. 8000 595000 1.00
Forest Products & Paper-4.87%
Georgia-Pacific Corp. 10000 747500 1.26
International Paper Co. 15000 568125 .96
Louisiana-Pacific Corp. 30000 611250 1.03
Union Camp Corp. 20000 960000 1.62
Metals: Nonferrous-0.98%
Aluminum Co. of America 10000 580000 .98
-----------------------
4689375 7.91
-----------------------
CAPITAL EQUIPMENT
Data Processing & Reproduction-1.91%
International Business Machines Corp. 10500 1132688 1.91
Electrical & Electronics-0.59%
Nokia Corp., Class A (American Depositary Receipts)
(Finland) 10000 352500 .59
Electronic Instruments-0.07%
Imation Corp. /1/ 1880 42770 .07
Machinery & Engineering-3.04%
Caterpillar Inc. 8000 527000 .89
Crompton & Knowles Corp. 50000 750000 1.27
Parker Hannifin Corp. 15000 523125 .88
-----------------------
3328083 5.61
-----------------------
CONSUMER GOODS
Automobiles-1.10%
Ford Motor Co., Class A 20000 650000 1.10
Beverages & Tobacco-2.85%
Anheuser-Busch Companies, Inc. 10000 747500 1.26
Philip Morris Companies Inc. 9000 941625 1.59
Food & Household Products-2.29%
General Mills, Inc. 25000 1356250 2.29
Health & Personal Care-7.52%
American Home Products Corp. 30000 1702500 2.87
Johnson & Johnson 10000 477500 .80
Merck & Co., Inc. 10000 642500 1.08
Schering-Plough Corp. 10000 551250 .93
Warner-Lambert Co. 20000 1090000 1.84
Recreation & Other Consumer Products-1.96%
American Greetings Corp., Class A 20000 485000 .82
Duracell International Inc. 15000 676875 1.14
-----------------------
9321000 15.72
-----------------------
SERVICES
Broadcasting & Publishing-1.11%
Gannett Co., Inc. 10000 656250 1.11
Business & Public Services-3.74%
Alexander & Baldwin, Inc. 30000 712500 1.20
Dun & Bradstreet Corp. 21000 1207500 2.04
WMX Technologies, Inc. 10000 296250 .50
Merchandising-2.43%
Wal-Mart Stores, Inc. 60000 1440000 2.43
Telecommunications-2.25%
AT&T Corp. 15000 781875 1.32
Ameritech Corp. 10000 555000 .93
Transportation: Rail & Road-3.66%
CSX Corp. 20000 965000 1.63
Union Pacific Corp. 6000 411000 .69
USFreightways Corp. 45000 795938 1.34
-----------------------
7821313 13.19
-----------------------
FINANCE
Banking-10.27%
H.F. Ahmanson & Co. 30000 757500 1.28
Boatmen's Bancshares, Inc. 15000 600000 1.01
Central Fidelity Banks, Inc. 23400 508950 .86
Comerica Inc. 15000 658125 1.11
First Hawaiian, Inc. 20000 541250 .91
Jefferson BankShares, Inc. 30000 682500 1.15
National City Corp. 15000 519375 .88
U.S. Bancorp 18000 616500 1.04
Washington Mutual Savings Bank 33150 1205831 2.03
Financial Services-1.09%
Beneficial Corp. 12000 648000 1.09
Insurance-6.29%
AMBAC Inc. 20000 955000 1.61
American General Corp. 27000 938250 1.58
General Re Corp. 5000 733750 1.24
Liberty Corp. 20000 617500 1.04
Trenwick Group Inc. 10000 487500 .82
Real Estate-3.22%
Security Capital Pacific Trust 30000 622500 1.05
Weingarten Realty Investors 32000 1288000 2.17
-----------------------
12380531 20.87
-----------------------
MULTI-INDUSTRY
Multi-Industry-0.96%
Minnesota Mining and Manufacturing Co. 8800 571999 .96
-----------------------
MISCELLANEOUS
Other common stocks in initial period of acquisition 1737500 2.93
-----------------------
TOTAL COMMON STOCKS (cost: $37,638,444) 46271926 78.02
-----------------------
Principal
Amount
SHORT-TERM SECURITIES (000)
Corporate Short-Term Notes-18.57%
American Brands Inc. 5.45% due 10/16/96 $1,400 1383650 2.33%
Associates Corp. of North America 5.70% due 8/1/96 1,300 1299794 2.19
H.J. Heinz Co. 5.28% due 8/21/96 770 767628 1.29
Hewlett-Packard Co. 5.37% due 10/4/96 1,500 1485321 2.51
National Rural Utilities Cooperative Finance Corp.
5.36% due 9/25/96 1,200 1189957 2.01
J.C. Penney Funding Corp. 5.34% due 8/29/96 1,400 1393978 2.35
Pitney Bowes Credit Corp. 5.33% due 8/15/96 1,200 1197320 2.02
Raytheon Co. 5.26% due 8/9/96 1,000 998685 1.68
Weyerhaeuser Co. 5.27% due 8/8/96 1,300 1298446 2.19
------------ ----------
11014779 18.57
------------ ----------
Federal Agency Discount Notes-3.20%
Federal National Mortgage Assn. 5.24% due 8/23/96 1900 1,893,640 3.20
----------- ----------
TOTAL SHORT-TERM SECURITIES (cost: $12,908,668) 12908419 21.77
------------ ----------
TOTAL INVESTMENT SECURITIES (cost: $50,547,112) 59180345 99.79
Excess of cash and receivables over payables 124552 .21
-----------------------
NET ASSETS $59,304,897 100.00%
=======================
/1/ Non-income-producing security.
See Notes to Financial Statements
Common stocks added to the portfolio
since January 31, 1996
- --------------------------------------
H.F. Ahmanson
Alexander & Baldwin
American Greetings
Ameritech
Anheuser-Busch
Crompton & Knowles
Duracell International
General Re
Imation
Jefferson BankShares
National City
Nokia
Parker Hannifin
USFreightways
Common stocks eliminated from the portfolio
since January 31, 1996
- --------------------------------------
Allstate
Boeing
General Electric
Huntington Bancshares
Integra Financial
J.P. Morgan
Ohio Casualty
Paul Revere
TNT Freightways
Western Investment Real Estate Trust
</TABLE>
<TABLE>
Endowments, Inc.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
at July 31, 1996
<S> <C> <C>
Assets:
Investment securities at market
(cost: $50,547,112) $59,180,345
Cash 76,649
Receivables for dividends 79,241
------------
59,336,235
Liabilities:
Payables for-
Management services $25,305
Accrued expenses 6,033 31,338
------------ ------------
Net Assets at July 31, 1996-
Equivalent to $18.61 per share on
3,186,313 shares of $1 par value
capital stock outstanding (authorized
capital stock--6,000,000 shares) $59,304,897
=============
Statement of Operations
for the year ended July 31, 1996
Investment Income:
Income:
Dividends $ 1,574,072
Interest 730,449 $2,304,521
------------
Expenses:
Management services fee 300,818
Custodian fee 3,013
Registration statement and prospectus 13,660
Auditing fees 30,200
Legal fees 10,116
Taxes other than federal income tax 46,428
Other expenses 28,324 432,559
------------ -----------
Net investment income 1,871,962
------------
Realized Gain and Unrealized
Depreciation on Investments:
Net realized gain 6,351,802
Net change in unrealized
appreciation on investments:
Beginning of year 9,360,047
End of year 8,633,233
------------
Net unrealized depreciation on investments (726,814)
------------
Net realized gain and unrealized
depreciation on investments 5,624,988
------------
Net Increase in Net Assets Resulting
from Operations $7,496,950
============
Statement of Changes in Net Assets
Year ended July 31
1996 1995
Operations:
Net investment income $ 1,871,962 $ 2,026,933
Net realized gain on investments 6,351,802 2,706,488
Net unrealized appreciation (depreciation)
on investments (726,814) 4,723,583
------------ ------------
Net increase in net assets resulting
from operations 7,496,950 9,457,004
------------- -------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (1,975,816) (1,942,631)
Distributions from net realized
gain on investments (3,710,692) (4,141,493)
------------- -------------
Total dividends and distributions (5,686,508) (6,084,124)
------------- -------------
Capital Share Transactions:
Proceeds from shares sold:
279,532 and 317,243
shares, respectively 5,201,405 5,302,616
Proceeds from shares issued in
reinvestment of net investment income
dividends and distributions of net
realized gain on investments:
283,073 and 362,222 shares,
respectively 5,156,184 5,645,016
Cost of shares repurchased:
518,349 and 618,230
shares, respectively (9,598,279) (10,507,091)
------------- -------------
Net increase in net assets resulting
from capital share transactions 759,310 440,541
------------- -------------
Total Increase in Net Assets 2,569,752 3,813,421
Net Assets:
Beginning of year 56,735,145 52,921,724
------------- -------------
End of year (including undistributed
net investment income: $157,540 and
$261,394, respectively) $59,304,897 $ 56,735,145
============= =============
See Notes to Financial Statements
</TABLE>
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 fund
seeks to provide long-term growth of principal with income as a secondary
objective, primarily through investments in stocks. The following paragraphs
summarize the significant accounting policies consistently followed by the fund
in the preparation of its financial statements:
Common stocks traded on a national securities exchange (or reported on the
NASDAQ national market) and securities traded in the over-the-counter market
are stated at the last reported sales price on the day of valuation; other
securities, and securities for which no sale was reported on that date, are
stated at the last quoted 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. 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 federal 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 $3,013 includes $2,586 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 investment income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
As of July 31, 1996, net unrealized appreciation on investments for book and
federal income tax purposes aggregated $8,633,233, of which $9,435,862 related
to appreciated securities and $802,629 related to depreciated securities. There
was no difference between book and tax realized gains on securities
transactions for the year ended July 31, 1996. The cost of portfolio securities
for book and federal income tax purposes was $50,547,112 at July 31, 1996.
3. The fee of $300,818 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, 1996, no such fee reduction
was required.
Effective December 1, 1995, CRMC has voluntarily agreed to waive its
management services fees to the extent necessary to ensure that the fund's
annual expenses do not exceed 0.75% of average net assets. As of July 31, 1996,
no such fee reduction was required.
No fees were paid by the fund to its officers and Directors.
4. As of July 31, 1996, accumulated undistributed net realized gain on
investments was $4,774,878 and additional paid-in capital was $42,552,933.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $18,036,311 and $22,375,618, respectively, during the
year ended July 31, 1996.
<TABLE>
ENDOWMENTS, INC.
PER-SHARE DATA AND RATIOS
Year ended July 31
----------------------------------------
1996 1995 1994 1993 1992
Net Asset Value, Beginning of Year $18.06 $ 17.18 $ 18.43 $ 18.26 $ 17.89
----------------------------------------
<S> <C> <C> <C> <C> <C>
Income from Investment Operations:
Net investment income .58 .63 .65 .66 .78
Net realized and unrealized
gain (loss) on investments 1.73 2.21 (.16) 1. 1.
----------------------------------------
Total income from investment operations 2.31 2.84 .49 1. 2.
----------------------------------------
Less Distributions:
Dividends from net investment income (.61) (.61) (.66) (.69) (.73)
Distributions from net realized gains (1.15) (1.35) (1.08) (.85) (1.42)
----------------------------------------
Total distributions (1.76) (1.96) (1.74) (1.54) (2.15)
----------------------------------------
Net Asset Value, End of Year $18.61 $ 18.06 $ 17.18 $ 18.43 $ 18.26
========================================
Total Return 13.22% 18.57% 2.77% 10.05% 15.74%
Ratios/Supplemental Data:
Net assets, end of year (in millions) $59 $57 $53 $72 $58
Ratio of expenses to average net assets .72% .73% .73% .64% .70%
Ratio of net income to average net assets 3.12% 3.70% 3.78% 3.72% 4.37%
Portfolio turnover rate 38.73% 24.04% 25.58% 29.70% 20.35%
</TABLE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Endowments, Inc.:
We have audited the accompanying statement of assets and liabilities of
Endowments, Inc. (the "fund"), including the schedule of portfolio investments,
as of July 31, 1996, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the per-share data and ratios for each of the five years
in the period then ended. These financial statements and the per-share data
and ratios are the responsibility of the fund's management. Our responsibility
is to express an opinion on these financial statements and the per-share data
and ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and the
per-share data and ratios are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at July 31, 1996 by correspondence with the custodian. 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 the per-share data and ratios
referred to above present fairly, in all material respects, the financial
position of Endowments, Inc. as of
July 31, 1996, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the per-share data and ratios for each of the five years in the period then
ended, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, California
August 30, 1996
<TABLE>
BOND PORTFOLIO FOR ENDOWMENTS, INC.
INVESTMENT PORTFOLIO, JULY 31, 1996
Principal Percent
Amount Market of Net
BONDS & NOTES (000) Value Assets
<S> <C> <C> <C>
Industrials - 17.28%
360/0/ Communications Co. 7.125% due 3/1/03 $550 $529,469
360/0/ Communications Co. 7.50% due 3/1/06 500 477035 2.43
General Motors Corp. 8.80% due 3/1/21 2000 2226140 5.37
Hanson America, Inc. 2.39% convertible
debentures due 3/1/01 /1/ 1000 855000 2.06
Inco Ltd. 9.875% due 6/15/19 300 323688
Inco Ltd. 9.60% due 6/15/22 700 729316 2.54
Philips Electronics N.V. 7.20% due 6/1/26 500 494130 1.19
TCI Communications, Inc. 8.75% due 8/1/15 500 479835 1.16
U S WEST, Inc. 0% convertible
debentures due 6/25/11 3000 1050000 2.53
------------- ---------
7164613 17.28
------------- ---------
Electric Utilities - 5.27%
Big Rivers Electric Corp. 10.70% due 9/15/17 2000 2186160 5.27
------------- ---------
Transportation /2/ - 10.63%
Airplanes Pass Through Trust, Class C, 8.15% due 3/15/19 1000 997500 2.41
Continental Airlines, Inc., Series 1996-A, 6.94% due 4/15/15 /1/ 500 481250 1.16
Delta Air Lines, Inc., Series 1993-A2, 10.50% due 4/30/16 500 588070 1.42
Jet Equipment Trust, Series 1994-A, 11.79% due 6/15/13 /1/ 750 860625
Jet Equipment Trust, Series 1995-B, Class A, 7.63%
due 2/15/15 /1/ 491 492743 4.46
Jet Equipment Trust, Series 1995-B, Class B, 7.83%
due 2/15/15 /1/ 491 494069
USAir, Inc., Series 1996-B, 7.50% due 4/15/08 /1/ 500 491250 1.18
-------------- ---------
4405507 10.63
-------------- ---------
Financial - 10.35%
American Re Corp. 10.875% due 9/15/04 1500 1625190 3.92
Equitable Life Assurance Society of the United States
7.70% due 12/1/15 /1/ 1000 965640 2.33
General Electric Capital Corp. 8.875% due 5/15/09 1000 1140770 2.75
Terra Nova (Bermuda) Holdings Ltd. 10.75% due 7/1/05 500 558125 1.35
------------- ---------
4289725 10.35
------------- ---------
Real Estate - 1.12%
Irvine Co. 7.46% due 3/15/06 /1/ /3/ 500 465000 1.12
------------- ---------
Collateralized Mortgage/Asset-Backed
Obligations /2/ - 5.39%
CSFB Finance Co. Ltd. 5.00% due 11/15/05 /1/ 500 481250 1.16
Green Tree Financial Corp., Series 1995-A, Class NIM,
7.25% due 7/15/05 389 386369 .93
Merrill Lynch Mortgage Investors, Inc., Series 1995-A,
7.251% due 6/15/21 /4/ 459 459555 1.11
Prudential Home Mortgage Securities Co., Inc.,
Series 1992-2033, Class A-12, 7.50% due 11/25/22 422 422186 1.02
Structured Asset Securities Corp, Series 1996-CFL,
Class A2A, 7.75% due 2/25/28 482 484715 1.17
-------------- ---------
2234075 5.39
-------------- ---------
Floating Rate Eurodollar Notes (Undated) /4/ - 6.10%
Bank of Nova Scotia 5.375% 1000 825000 1.99
Canadian Imperial Bank of Commerce 5.375% 1000 843750 2.04
Midland Bank 6.00% 1000 858800 2.07
-------------- ---------
2527550 6.10
-------------- ---------
Governments (excluding U.S. Government) &
Governmental Authorities - 5.81%
Ontario (Province of) 17.00% due 11/5/11 1100 1200694 2.90
Quebec (Province of) 13.25% due 9/15/14 1000 1207980 2.91
-------------- ---------
2408674 5.81
-------------- ---------
Federal Agency Obligations - Mortgage
Pass-Throughs /2/ - 12.85%
Federal Home Loan Mortgage Corp. 8.75% due 7/1/08 138 143639
Federal Home Loan Mortgage Corp. 12.50% due 12/1/12 60 69861 .91
Federal Home Loan Mortgage Corp. 9.00% due 3/1/20 155 162807
Federal National Mortgage Assn. 9.00% due 11/1/20 268 281818 .68
Government National Mortgage Assn. 8.50% due 12/15/08 417 434573
Government National Mortgage Assn. 7.50% due 1/15/24 626 614760
Government National Mortgage Assn 6.50% due 2/20/24 876 878136
Government National Mortgage Assn. 6.00% due 6/20/24 904 911445 11.26
Government National Mortgage Assn. 8.50% due 10/15/25 443 454854
Government National Mortgage Assn. 8.50% due 5/15/26 808 828526
Government National Mortgage Assn. 10.00% due 7/15/26 500 543750
------------------------
5324169 12.85
------------------------
U.S. Treasury Obligations - 19.99%
9.25% due 8/15/98 2500 2641399
11.625% due 11/15/04 500 652110
10.375% due 11/15/12 2300 2902669 19.99
8.875% due 8/15/17 1750 2087698
-------------- ---------
8283876 19.99
-------------- ---------
TOTAL BONDS & NOTES (cost: $40,020,767) 39289349 94.79
-------------- ---------
SHORT-TERM SECURITIES
Corporate Short-Term Notes - 2.66%
Associates Corp. of North America 5.70% due 8/1/96 1100 1099826 2.66
-------------- ---------
TOTAL SHORT-TERM SECURITIES (cost: $1,099,826) 1099826 2.66
-------------- ---------
TOTAL INVESTMENT SECURITIES (cost: $41,120,593) 40389175 97.45
Excess of cash and receivables over payables 1058892 2.55
-------------- ---------
NET ASSETS $41,448,067 100.00%
============== =========
/1/ Purchased in a private placement transaction; resale
to the public may require registration or sale 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/ Valued under procedures established
by the Board of Directors.
/4/ Coupon rates may change periodically.
See Notes to Financial Statements
</TABLE>
<TABLE>
Bond Portfolio for Endowments, Inc.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
at July 31, 1996
<S> <C> <C>
Assets:
Investment securities at market
(cost: $41,120,593) $40,389,175
Cash 139,590
Receivables for-
Sales of investments $ 2,770
Accrued interest 940,588 943,358
-----------------------------
41,472,123
Liabilities:
Payables for-
Management services 19,005
Accrued expenses 5,051 24,056
-----------------------------
Net Assets at July 31, 1996-
Equivalent to $16.63 per share on
2,492,949 shares of $1 par value
capital stock outstanding (authorized
capital stock - 5,000,000 shares) $41,448,067
===========
Statement of Operations
for the year ended July 31, 1996
Investment Income:
Interest income $ 3,396,478
Expenses:
Management services fee $ 214,202
Custodian fee 2,796
Registration statement and prospectus 13,855
Auditing fees 30,200
Legal fees 10,059
Taxes other than federal income tax 43,221
Other expenses 28,126
----------------
Total expenses before fee waiver 342,459
Fee waiver 21,023 321,436
-----------------------------
Net investment income 3,075,042
-------------
Realized Gain and Unrealized
Depreciation on Investments:
Net realized gain 123,217
Net change in unrealized depreciation
on investments:
Beginning of year (205,230)
End of year (731,418)
----------------
Net unrealized depreciation on
investments (526,188)
-------------
Net realized gain and unrealized
depreciation on investments (402,971)
-------------
Net Increase in Net Assets Resulting
from Operations $ 2,672,071
===========
Statement of Changes in Net Assets
Year ended July 31
1996 1995
Operations:
Net investment income $ 3,075,042 $ 3,372,869
Net realized gain (loss) on investments 123,217 (339,552)
Net unrealized appreciation (depreciation) on
investments (526,188) 381,338
-----------------------------
Net increase in net assets resulting
from operations 2,672,071 3,414,655
-----------------------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (3,085,285) (3,338,883)
Distributions from net realized
gain on investments - (191,002)
-----------------------------
Total dividends and distributions (3,085,285) (3,529,885)
-----------------------------
Capital Share Transactions:
Proceeds from shares sold:
168,909 and 214,880
shares, respectively 2,838,556 3,539,415
Proceeds from shares issued in
reinvestment of net investment income
dividends and distributions of net
realized gain on investments:
94,993 and 130,272 shares,
respectively 1,596,233 2,134,210
Cost of shares repurchased:
377,703 and 484,790
shares, respectively (6,407,611) (8,030,465)
-----------------------------
Net decrease in net assets resulting
from capital share transactions (1,972,822) (2,356,840)
-----------------------------
Total Decrease in Net Assets (2,386,036) (2,472,070)
Net Assets:
Beginning of year 43,834,103 46,306,173
-----------------------------
End of year (including undistributed
net investment income: $299,593 and
$309,836, respectively) $41,448,067 $43,834,103
================ ===========
See Notes to Financial Statements
</TABLE>
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 fund seeks to provide as high a level of current income
as is consistent with the preservation of capital through investments in
fixed-income securities. 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 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 federal 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 $2,796 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 investment income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
As of July 31, 1996, net unrealized depreciation on investments for book and
federal income tax purposes aggregated $731,418, of which $388,952 related to
appreciated securities and $1,120,370 related to depreciated securities. There
was no difference between book and tax realized gains on securities
transactions for the year ended July 31, 1996. During the year ended July 31,
1996, the fund utilized a capital loss carryforward totaling $123,217 to
offset, for tax purposes, capital gains realized during the year. The fund has
available at July 31, 1996 a net capital loss carryforward totaling $326,488,
which may be used to offset capital gains realized during subsequent years
through July 31, 2003. It is the intention of the fund not to make
distributions from capital gains until the capital loss carryforward is
utilized. The cost of portfolio securities for book and federal income tax
purposes was $41,120,593 at July 31, 1996.
3. The fee of $214,202 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, 1996, no such fee reduction
was required.
Effective December 1, 1995, CRMC has voluntarily agreed to waive its
management services fees to the extent necessary to ensure that the fund's
expenses do not exceed 0.75% of average net assets. Fee reductions were $21,023
for the year ended July 31, 1996.
No fees were paid by the fund to its officers and Directors.
4. As of July 31, 1996, accumulated net realized loss on investments was
$326,488 and additional paid-in capital was $39,713,431.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $22,109,357 and $24,176,328, respectively, during the
year ended July 31, 1996.
<TABLE>
BOND PORTFOLIO FOR ENDOWMENTS, INC.
PER-SHARE DATA AND RATIOS
Year ended July 31
-----------------------------------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year 16.82 16.86 19.66 19.44 17.76
-----------------------------------------------------------------------
Income from Investment Operations
Net investment income 1.22 1.26 1.32 1.49 1.47
Net realized and unrealized
gain (loss) on investments (.19) .01 (1.51) .64 1.7
-----------------------------------------------------------------------
Total income from investment oper 1.03 1.27 (.19) 2.13 3.17
-----------------------------------------------------------------------
Less Distributions:
Dividends from net investment inco (1.22) (1.24) (1.35) (1.48) (1.49)
Distributions from net realized ga - (.07) (1.26) (.43) -
-----------------------------------------------------------------------
Total distributions (1.22) (1.31) (2.61) (1.91) (1.49)
-----------------------------------------------------------------------
Net Asset Value, End of Year 16.63 16.82 16.86 19.66 19.44
===================================================================
Total Return 6.25% /1/ 7.97% (1.44)% 11.74% 18.69%
Ratios/Supplemental Data:
Net assets, end of year (in million $41 $44 $46 $67 $65
Ratio of expenses to average net as .75% /1/ .76% .77% .65% .68%
Ratio of net income to average net 7.17% 7.52% 6.99% 7.69% 8.04%
Portfolio turnover rate 54.43% 69.22% 82.12% 35.97% 63.30%
/1/ Had CRMC not waived management services fees,
the fund's expense ratio would have been .80%.
</TABLE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Bond Portfolio for Endowments, Inc.:
We have audited the accompanying statement of assets and liabilities of Bond
Portfolio for Endowments, Inc. (the "fund"), including the schedule of
portfolio investments, as of July 31, 1996, 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, 1996 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, 1996, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the per-share
data and ratios for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, California
August 30, 1996
ENDOWMENTS, INC.
BOND PORTFOLIO FOR ENDOWMENTS, INC.
BOARD OF DIRECTORS
ROBERT B. EGELSTON, Los Angeles, California
Chairman of the Board and Chief Executive Officer of the funds
Former Chairman of the Board,
The Capital Group Companies, Inc.
FRANK L. ELLSWORTH, Ph.D., Los Angeles, California
President, Independent Colleges of Southern California
STEVEN D. LAVINE, Ph.D., Los Angeles, California
President, California Institute of the Arts
PATRICIA A. McBRIDE, Dallas, Texas
Chief Financial Officer, Kevin L. McBride, D.D.S., Inc.
JOHN R. METCALF, San Francisco, California
Private investor; former Vice President,
Alexander & Alexander, Inc.
CHARLES R. REDMOND, Los Angeles, California
Chairman, Pfaffinger Foundation; former President and
Chief Executive Officer, Times Mirror Foundation;
former Executive Vice President and Member of the
Management Committee, The Times Mirror Company
THOMAS E. TERRY, Los Angeles, California
President of the funds
Consultant; former Vice President and Secretary,
Capital Research and Management Company
ROBERT C. ZIEBARTH, Dover, Massachusetts
Management Consultant, Ziebarth Company
OTHER OFFICERS
ABNER D. GOLDSTINE, Los Angeles, California
Senior Vice President of the funds
Senior Vice President and Director,
Capital Research and Management Company
ROBERT G. O'DONNELL, San Francisco, California
Senior Vice President of the funds
Senior Vice President and Director,
Capital Research and Management Company
STEVEN N. KEARSLEY, Los Angeles, California
Vice President and Treasurer of the funds
Vice President and Treasurer,
Capital Research and Management Company
LISA G. HATHAWAY, Los Angeles, California
Assistant Vice President of the funds
Assistant Vice President - Fund Business Management Group,
Capital Research and Management Company
LOUISE M. PESCETTA, San Francisco, California
Assistant Vice President and Assistant Secretary of the funds
Assistant Vice President -
Fund Business Management Group,
Capital Research and Management Company
PATRICK F. QUAN, San Francisco, California
Secretary of the funds
Vice President - Fund Business Management Group,
Capital Research and Management Company
MARY C. HALL, Brea, California
Assistant Treasurer of the funds
Senior Vice President - Fund Business Management Group,
Capital Research and Management Company
ROBERT P. SIMMER, Norfolk, Virginia
Assistant Treasurer of the funds
Vice President - Fund Business Management Group,
Capital Research and Management Company
OFFICE OF THE FUNDS
Four Embarcadero Center, Suite 1800
P.O. Box 7650
San Francisco, California 94120-7650
INVESTMENT ADVISER
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071-1443
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
Four Embarcadero Center, Suite 1800
P.O. Box 7650
San Francisco, California 94120-7650
135 South State College Boulevard
Brea, California 92821-5804
CUSTODIAN OF ASSETS
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
Morrison & Foerster llp
345 California Street
San Francisco, California 94104-2675
INDEPENDENT AUDITORS
Deloitte & Touche llp
1000 Wilshire Boulevard
Los Angeles, California 90017-2472
This report is for the information of shareholders of Endowments, Inc. and Bond
Porfolio for Endowments, Inc. but it may also be used as sales literature when
preceded or accompanied by the current prospectus, which gives details about
charges, expenses, investment objectives and operating policies of the funds.
(c)1996 Endowments, Inc.
(c)1996 Bond Portfolio for Endowments, Inc.
Litho in USA DT/PL/3019
Lit. No. Endi-Bendi-011-0996 (NLS)
