SEC File Nos.
811-1884
2-34371
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 44 (X)
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 23 (X)
ENDOWMENTS, INC.
(Exact name of registrant as specified in charter)
P.O. Box 7650, One Market, Steuart Tower, San Francisco, California 94120
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (415) 421-9360
Patrick F. Quan
Secretary
Endowments, Inc.
P.O. Box 7650, One Market, Steuart Tower
San Francisco, California 94120
(Name and address of agent for service)
Copy to:
Robert E. Carlson, Esq.
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071
The Registrant has filed a declaration
pursuant to Rule 24f-2. On
September 17, 1996, it filed its 24f-2
Notice for fiscal 1996.
Approximate date of proposed public offering:
[X] It is proposed that this filing will
become effective on October 1, 1997
pursuant to paragraph (a) of Rule 485.
ENDOWMENTS, INC.
Cross Reference Sheet
<TABLE>
<CAPTION>
Item Number Captions in
of Part "A" Prospectus
of Form N-1A (Part "A")
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Fund Organization
and Management; Investment
Policies and Risks;
Securities and Investment
Techniques
5. Management of the Fund Fund Organization and
Management; Multiple
Portfolio Counselor
System
6. Capital Stock and Other Securities Investment Policies
and Risks; Fund
Organization and
Management; Dividends,
Distributions
and Taxes; Shareholder
Services
7. Purchase of Securities Being Offered Purchasing Shares; Fund
Organization
and Management;
8. Redemption or Repurchase Selling Shares
9. Legal Proceedings N/A
</TABLE>
<TABLE>
<CAPTION>
Captions in Statement
Item Number of Additional
of Part "B" Information
of Form N-1A (Part "B")
<S> <C> <C>
10. Cover Page Cover
11. Table of Contents Table of Contents
12. General Information and History None
13. Investment Objectives and Policies Description of Certain
Securities;
Fundamental
Policies and
Investment
Restrictions
14. Management of the Fund Fund Officers and
Directors
15. Control Persons and Principal General Information
Holders of Securities
16. Investment Advisory and Other Services Fund Officers and
Directors; Expenses (Part "A");
General Information;
Management
17. Brokerage Allocation and Other Practices Execution of Portfolio
Transactions; Fund
Organization and
Management (Part "A")
18. Capital Stock and Other Securities Part A
19. Purchase, Redemption and Pricing Purchase of Shares;
of Securities Being Offered Purchasing Shares
(Part "A");
General Information
20. Tax Status Dividends,
Distributions and
Federal Taxes
21. Underwriter None
22. Calculation of Performance Data Investment Results
23. Financial Statements Financial Statements
</TABLE>
<TABLE>
<CAPTION>
Item in
Part "C"
<S> <C>
24. Financial Statements and Exhibits
25. Persons Controlled by or under Common Control
with Registrant
26. Number of Holders of Securities
27. Indemnification
28. Business and Other Connections of Investment Adviser
29. Principal Underwriter
30. Location of Accounts and Records
31. Management Services
32. Undertakings
Signature Page
</TABLE>
Endowments, Inc.(SM)
Bond Portfolio for
Endowments, Inc.(SM)
PROSPECTUS
OCTOBER 1, 1997
Endowments, Inc.
Bond Portfolio for Endowments, Inc.
One Market
Steuart Tower, Suite 1800
P.O. Box 7650
San Francisco, CA 94120
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C> <C>
Expenses __ Investment Results __
Financial Highlights __ Dividends, Distributions and Taxes __
Investment Policies and Risks __ Fund Organization and Management __
Securities and Investment Techniques __ Shareholder Services __
Multiple Portfolio Counselor System __ Purchasing Shares __
Selling Shares __
</TABLE>
Endowments The primary investment objective of the fund is long-term growth of
principal with income and preservation of capital as secondary objectives. 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 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.
This prospectus presents information you should know before investing in the
fund(s). You should keep it on file for future reference.
YOU MAY LOSE MONEY BY INVESTING IN THE FUND(S). THE LIKELIHOOD OF LOSS IS
GREATER IF YOU INVEST FOR A SHORTER PERIOD OF TIME. YOUR INVESTMENT IN THE
FUND(S) IS NOT A DEPOSIT OR OBLIGATION OF, OR INSURED OR GUARANTEED BY, ANY
ENTITY OR PERSON INCLUDING THE U.S. GOVERNMENT AND THE FEDERAL DEPOSIT
INSURANCE CORPORATION.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
EXPENSES
THE EFFECT OF THE EXPENSES DESCRIBED BELOW IS REFLECTED IN THE FUNDS' SHARE
PRICES OR RETURNS.
Shareholders pay no shareholder transaction expenses when buying or selling
shares of the fund(s). Fund operating expenses are paid out of each fund's
assets and are factored into its share price.
Shareholder Transaction Expenses
The funds have no sales charges on purchases or reinvested dividends, deferred
sales charges, redemption fees or exchange fees.
Fund Operating Expenses
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER FEE WAIVER)
<TABLE>
<CAPTION>
Endowments Bond Portfolio
for Endowments
<S> <C> <C>
Management fees 0.__% 0.__%
12b-1 expenses none none
Other expenses 0.__% 0.__%
Total fund operating expenses 0.__% /1/ 0.__% /1/
</TABLE>
/1/ CAPITAL RESEARCH AND MANAGEMENT COMPANY HAS BEEN VOLUNTARILY WAIVING FEES
TO THE EXTENT NECESSARY TO ENSURE THAT EACH FUND'S EXPENSES DO NOT EXCEED 0.75%
OF AVERAGE NET ASSETS PER ANNUM. WITHOUT SUCH A WAIVER, FEES FOR BOND
PORTFOLIO FOR ENDOWMENTS, INC. (AS A PERCENTAGE OF AVERAGE NET ASSETS) WOULD
HAVE BEEN 0.__%.
Examples
Assuming a hypothetical annual return of 5% and shareholder transaction and
operating expenses as described above, for every $1,000 you invested, you would
pay the following total expenses over the following periods:
<TABLE>
<CAPTION>
1 Year 3 Year 5 Year 10 Years
<S> <C> <C> <C> <C>
Endowments $ $ $ $
Bond Portfolio for Endowments $ $ $ $
</TABLE>
THESE EXAMPLES ARE NOT MEANT TO REPRESENT YOUR ACTUAL INVESTMENT RESULTS OR
EXPENSES, WHICH MAY VARY. YOUR EXPENSES WILL BE LESS IF YOU QUALIFY TO
PURCHASE SHARES AT A REDUCED OR NO SALES CHARGE.
FINANCIAL HIGHLIGHTS
The following information for the seven years ended July 31, 1997 has been
audited by Deloitte & Touche LLP, independent auditors, and for the three years
ended July 31, 1990 by KPMG Peat Marwick, independent auditors. This table
should be read together with the financial statements which are included in the
statement of additional information and annual report.
Selected Per-Share Data*
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR ENDED JULY 31
ENDOWMENTS 1997 1996 1995 1994 1993
Net Asset Value, Beginning of Year $18.06 $17.18 $18.43 $18.26
Income from Investment Operations: .58 .63 .65 .66
Net investment income 1.73 2.21 (.16) 1.05
Net realized and unrealized gain (loss) on 2.31 2.84 .49 1.71
investments (.61) (.61) (.66) (.69)
Total income from investment operations (1.15) (1.35) (1.08) (.85)
Less Distributions: (1.76) (1.96) (1.74) (1.54)
Dividends from net investment income $18.61 $18.06 $17.18 $18.43
Distributions from net realized gains 13.22% 18.57% 2.77% 10.05%
Total distributions $59 $57 $53 $72
Net Asset Value, End of Year .72% .73% .73 .64%
Total Return 3.12% 3.70% 3.78% 3.72%
Ratios/Supplemental Data: 5.87 c 5.94 c 6.27 c 7.03 c
Net assets, end of year (in millions) 38.73% 24.04% 25.58% 29.70%
Ratio of expenses to average net assets
Ratio of net income to average net assets
Average commissions paid per share/2/
Portfolio turnover rate
ENDOWMENTS 1992 1991 1990 1989 1988
Net Asset Value, Beginning of Year $17.89 $16.91 $18.22 $16.71 $19.70
Income from Investment Operations: .78 .78 .89 .98 .82
Net investment income 1.74 1.60 (.16) 2.52 (1.16)
Net realized and unrealized gain (loss) on 2.52 2.38 .73 3.50 (.34)
investments (.73) (.87) (1.01) (.89) (.85)
Total income from investment operations (1.42) (.53) (1.03) (1.10) (1.80)
Less Distributions: (2.15) (1.40) (2.04) (1.99) (2.65)
Dividends from net investment income $18.26 $17.89 $16.91 $18.22 $16.71
Distributions from net realized gains 15.74% 15.03% 4.13% 23.22% (2.31)%
Total distributions $58 $46 $39 $43 $36
Net Asset Value, End of Year .70% .69% .68% .69% .63%
Total Return 4.37% 4.63% 5.08% 5.76% 4.86%
Ratios/Supplemental Data: 7.14 c _.__ c _.__ c _.__ c _.__ c
Net assets, end of year (in millions) 20.35% 34.43% 20.75% 19.70% 33.48%
Ratio of expenses to average net assets
Ratio of net income to average net assets
Average commissions paid per share/2/
Portfolio turnover rate
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR ENDED JULY 31
BOND PORTFOLIO FOR ENDOWMENTS 1997 1996 1995 1994 1993
Net Asset Value, Beginning of Year $16.82 $16.86 $19.66 $19.44
Income from Investment Operations: 1.22 1.26 1.32 1.49
Net investment income (.19) .01 (1.51) .64
Net realized and unrealized gain (loss) on 1.03 1.27 (.19) 2.13
investments (1.22) (1.24) (1.35) (1.48)
Total income from investment operations -- (.07) (1.26) (.43)
Less Distributions: (1.22) (1.31) (2.61) (1.91)
Dividends from net investment income $16.63 $16.82 $16.86 $19.66
Distributions from net realized gains 6.25% 7.97% (1.44)% 11.74%
Total distributions $41 $44 $46 $67
Net Asset Value, End of Year .75%/1/ .76% .77% .65%
Total Return 7.17% 7.52% 6.99% 7.69%
Ratios/Supplemental Data: 54.43% 69.22% 82.12% 35.97%
Net assets, end of year (in millions)
Ratio of expenses to average net assets
Ratio of net income to average net assets
Portfolio turnover rate
BOND PORTFOLIO FOR ENDOWMENTS 1992 1991 1990 1989 1988
Net Asset Value, Beginning of Year $17.76 $17.50 $17.83 $17.10 $17.62
Income from Investment Operations: 1.47 1.49 1.61 1.60 1.51
Net investment income 1.70 .28 (.46) .61 (.09)
Net realized and unrealized gain (loss) on 3.17 1.77 1.15 2.21 1.42
investments (1.49) (1.51) (1.48) (1.48) (1.40)
Total income from investment operations -- -- -- -- (.54)
Less Distributions: (1.49) (1.51) (1.48) (1.48) (1.94)
Dividends from net investment income $19.44 $17.76 $17.50 $17.83 $17.10
Distributions from net realized gains 18.69% 10.78% 6.86% 13.68% 8.62%
Total distributions $65 $46 $39 $40 $33
Net Asset Value, End of Year .68% .68% .69% .70% .64%
Total Return 8.04% 8.76% 9.25% 9.28% 8.69%
Ratios/Supplemental Data: 63.30% 54.86% 42.90% 64.21% 128.%
Net assets, end of year (in millions)
Ratio of expenses to average net assets
Ratio of net income to average net assets
Portfolio turnover rate
</TABLE>
*All per share data reflect the 100-for-1 stock split for Endowments and
50-for-1 stock split for Bond Portfolio for Endowments effected on February 16,
1988.
/1/ Had CRMC not waived management services fees, the fund's expense ratio
would have been __%.
/2/ Brokerage commissions paid on portfolio transactions increase the cost of
securities purchased or reduce the proceeds of securities sold and are not
separately reflected in the fund's statement of operations. Shares traded on a
principal basis (without commission), such as fixed-income transactions, are
excluded.
INVESTMENT POLICIES AND RISKS
ENDOWMENTS STRIVES FOR LONG-TERM GROWTH OF PRINCIPAL WITH INCOME AND CAPITAL
PRESERVATION.
The fund's primary investment objective is long-term growth of principal
with income and preservation of capital as secondary objectives. The fund will
normally invest in common stocks or securities convertible into common stock.
Emphasis will be given to stocks of companies which have favorable prospects
for long-term growth of both capital and income. The fund may also purchase
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). In
addition, cash and cash equivalents and U.S. government securities may also be
held. The fund may invest up to 10% of its assets (measured at the time of
purchase) in common stocks and other securities of issuers domiciled outside
the U.S. and not included in the Standard & Poor's 500 Composite Index (a broad
measure of the U.S. stock market). 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 STRIVES FOR AS HIGH A LEVEL OF CURRENT INCOME AS
IS CONSISTENT WITH THE PRESERVATION OF CAPITAL.
The investment objective of the fund is to seek 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. The fund
invests primarily in fixed-income securities, including bonds and debentures.
These securities will be investment grade, which are rated in the top four
quality categories by Standard & Poor's Corporation or Moody's Investors
Service, Inc. or unrated but determined to be of equivalent quality by Capital
Research and Management Company, the fund's investment adviser. 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 invest up to 10% (measured at the
time of purchase) of its assets in obligations of corporations or government
entities outside the U.S. and Canada. All Canadian and other non-U.S.
securities purchased by the fund will be liquid, U.S. dollar-denominated and
meet the quality standards set forth above.
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 measured at the time of purchase. 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' fundamental investment restrictions (described in the statement
of additional information) and objectives may not be changed without
shareholder approval. All other material investment practices may be changed
by the funds' board of directors.
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.
SECURITIES AND INVESTMENT TECHNIQUES
EQUITY SECURITIES
Endowments will ordinarily invest in equity securities, which represent an
ownership position in a company. These securities may include common stocks
and securities with equity conversion or purchase rights. The prices of equity
securities fluctuate based on changes in the financial condition of their
issuers and on market and economic conditions. The fund's results will be
related to the overall market for these securities.
DEBT SECURITIES
Bonds and other debt securities are used by issuers to borrow money. Issuers
pay investors interest and generally must repay the amount borrowed at
maturity. Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values.
The prices of debt securities fluctuate depending on such factors as interest
rates, credit quality and maturity. In general their prices decline when
interest rates rise and vice versa.
Endowments may invest in debt securities rated A or better by Moody's
Investors Service, Inc. or Standard & Poor's Corporation. Bond Portfolio for
Endowments may invest in debt securities rated Baa or BBB or better by Moody's
Investors Service, Inc. or Standard & Poor's Corporation or in unrated
securities that are determined to be of equivalent quality by Capital Research
and Management Company. These securities are considered to have speculative
characteristics.
OTHER SECURITIES
The funds may also invest in securities that have both equity and debt
characteristics such as non-convertible preferred stocks and convertible
securities. Non-convertible preferred stocks are similar to debt in that they
have a stated dividend rate akin to the coupon of a bond or note even though
they are often classified as equity securities. The prices and yields of
non-convertible preferred stocks generally move with changes in interest rates
and the issuer's credit quality, similar to the factors affecting debt
securities.
Bonds, preferred stocks, and other securities may sometimes be converted
into shares of common stock or other securities at a stated exchange ratio.
These securities prior to conversion pay a fixed rate of interest or a
dividend. Because convertible securities have both debt and equity
characteristics their value varies in response to many factors, including the
value of the underlying equity, general market and economic conditions,
convertible market valuations, as well as changes in interest rates, credit
spreads, and the credit quality of the issuer.
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.
Certain 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; and others are supported only by the credit of the issuing government
agency or instrumentality. Bond Portfolio for Endowments may invest in notes
and bonds issued by the U.S. Treasury and federal agencies whose interest
payments vary with the rate of inflation.
U.S. 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
such 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, all such private placements will be considered
illiquid unless they have been specifically determined to be liquid taking into
account factors such as the frequency and volume of trading and the commitment
of dealers to make markets under procedures adopted by the funds' board of
directors. Additionally, investing in private placement securities could have
the effect of increasing the level of illiquidity of the funds' portfolio to
the extent that "qualified" institutional investors become, for a period of
time, uninterested in purchasing these securities. Endowments and Bond
Portfolio for Endowments will not invest more than 10% and 15% of their total
assets in illiquid securities, respectively.
INVESTING IN VARIOUS COUNTRIES
Investing outside the U.S. involves special risks caused by, among other
things, fluctuating currency values; different accounting, auditing, and
financial reporting regulations and practices in some countries; changing local
and regional economic, political, and social conditions; greater market
volatility; differing securities market structures; and various administrative
difficulties such as delays in clearing and settling portfolio transactions or
in receiving payment of dividends. However, in the opinion of Capital Research
and Management Company, investing outside the U.S. also can reduce certain
portfolio risks due to greater diversification opportunities.
Additional costs could be incurred in connection with the fund's investment
activities outside the U.S. Brokerage commissions may be higher outside the
U.S. The fund may bear certain expenses in connection with its currency
transactions as it can purchase and sell currencies to facilitate transactions
in securities denominated in currencies other than the U.S. dollar.
Furthermore, increased custodian costs may be associated with the maintenance
of assets in certain jurisdictions.
--------------------------
APPLIES TO BOND PORTFOLIO FOR ENDOWMENTS:
PASS-THROUGH SECURITIES
The fund may invest in various debt obligations backed by a pool of mortgages
or other assets including loans on single family residences, home equity loans,
mortgages on commercial buildings, credit card receivables, and leases on
airplanes or other equipment. Principal and interest payments made on the
underlying asset pools backing these obligations are typically passed through
to investors. Prepayments by borrowers on underlying obligations can alter the
effective maturity of these instruments. For example, mortgage-backed
securities permit borrowers to prepay their underlying mortgages. Pass-through
securities may have either fixed or adjustable coupons. These securities
include those discussed below.
"Mortgage-backed securities" are issued both by U.S. government agencies,
including the Government National Mortgage Association (GNMA), the Federal
National Mortgage Association (FNMA), and the Federal Home Loan Mortgage
Corporation (FHLMC), and by private entities. The payment of interest and
principal on securities issued by U.S. government agencies is guaranteed by the
full faith and credit of the U.S. government (in the case of GNMA securities)
or the issuer (in the case of FNMA and FHLMC securities). However, the
guarantees do not apply to the market prices and yields of these securities,
which vary with changes in interest rates.
Mortgage-backed securities issued by private entities are structured similarly
to mortgage-backed securities issued by GNMA, FNMA, and FHLMC. These
securities and the underlying mortgages are not guaranteed by government
agencies. In addition, these securities generally are structured with one or
more types of credit enhancement.
"Collateralized mortgage obligations" (CMOs) are also backed by a pool of
mortgages or mortgage loans, which are divided into two or more separate bond
issues. CMOs issued by U.S. government agencies are backed by agency
mortgages, while privately issued CMOs may be backed by either government
agency mortgages or private mortgages. Payments of principal and interest are
passed-through to each bond at varying schedules resulting in bonds with
different coupons, effective maturities, and sensitivities to interest rates.
In fact, some CMOs may be structured in a way that when interest rates change
the impact of changing prepayment rates on these securities' effective
maturities is magnified.
"Commercial mortgage-backed securities" are backed by mortgages of
commercial property, such as hotels, office buildings, retail stores,
hospitals, and other commercial buildings. These securities may have a lower
prepayment risk than other mortgage-related securities because commercial
mortgage loans generally prohibit or impose penalties on prepayments of
principal. In addition, commercial mortgage-related securities often are
structured with some form of credit enhancement to protect against potential
losses on the underlying mortgage loans. Many of the risks of investing in
commercial mortgage-backed securities reflect the risks of investing in the
real estate securing the underlying mortgage loans, including the effects of
local and other economic conditions on real estate markets, the ability of
tenants to make loan payments, and the ability of a property to attract and
retain tenants.
"Asset-backed securities" are backed by other assets such as credit card,
automobile or consumer loan receivables, retail installment loans, or
participations in pools of leases. Credit support for these securities may be
based on the underlying assets and/or provided through credit enhancements by a
third party. The values of these securities are sensitive to changes in the
credit quality of the underlying collateral, the credit strength of the credit
enhancement, changes in interest rates, and at times the financial condition of
the issuer.
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, The fund only enters into repurchase agreements involving
securities in which it could otherwise invest and with selected banks and
securities dealers whose financial condition is monitored by Capital Research
and Management Company. If the seller under the repurchase agreements
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.
FORWARD COMMITMENTS
The fund may enter into commitments to purchase or sell securities at a future
date. When the fund agrees to purchase such securities, it assumes the risk of
any decline in value of the securities beginning on the date of the agreement.
When the fund agrees to sell such securities, it does not participate in
further gains or losses with respect to the securities beginning on the date of
the agreement. If the other party to such a transaction fails to deliver or
pay for the securities, the fund could miss a favorable price or yield
opportunity, or could experience a loss. In addition, the fund may also 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. The fund also may enter into "roll" transactions which are
the sale of GNMA certificates or other securities together with a commitment to
purchase similar, but not identical securities at a specified time and price at
a later date. The fund assumes the rights and risks of ownership, including
the risk of price and yield fluctuations as of the time of the agreement.
MULTIPLE PORTFOLIO COUNSELOR SYSTEM
The basic investment philosophy of Capital Research and Management Company is
to seek fundamental values at reasonable prices, using a system of multiple
portfolio counselors in managing mutual fund assets. Under this system a
fund's portfolio is divided into segments which are managed by individual
counselors. Counselors decide how their respective segments will be invested
(within the limits provided by a fund's objective(s) and policies and by
Capital Research and Management Company's investment committee). In 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 Endowments and Bond Portfolio for
Endowments are listed below.
ENDOWMENTS
<TABLE>
<CAPTION>
Years of Experience as
Investment Professional
(approximate)
Portfolio Counselors for Primary Years of Experience as With Capital Total Years
Endowments Title(s) Portfolio Counselor (and Research and
Research Professional, if Management
applicable) for Endowments Company or its
(approximate) Affiliates
<S> <C> <C> <C> <C>
ROBERT G. O'DONNELL Senior Vice 7 years (in addition to 19 22 years 25 years
President of years as a research
the fund. professional prior to
Senior Vice becoming a portfolio
President and counselor for the fund).
Director,
Capital
Research and
Management
Company
CLAUDIA P. HUNTINGTON Vice 1 year (in addition to __ 19 years 21 years
President of years as a research
the fund. professional prior to
Vice becoming a portfolio
President, counselor for the fund).
Capital
Research and
Management
Company
</TABLE>
BOND PORTFOLIO FOR ENDOWMENTS
<TABLE>
<CAPTION>
Years of Experience as
Investment Professional
(approximate)
Portfolio Counselors for Primary Years of Experience as With Capital Total Years
Bond Portfolio for Title(s) Portfolio Counselor for Bond Research and
Endowments Portfolio for Endowments Management
(approximate) Company or its
Affiliates
<S> <C> <C> <C> <C>
ABNER D. GOLDSTINE Senior Vice 21 years 30 years 44 years
President of
the fund.
Senior Vice
President and
Director,
Capital
Research and
Management
Company
JOHN H. SMET Vice 8 year 13 years 14 years
President of
the fund.
Vice
President,
Capital
Research and
Management
Company
</TABLE>
CAPITAL RESEARCH AND MANAGEMENT COMPANY HAS BEEN THE FUNDS' INVESTMENT ADVISER
SINCE JULY 26, 1975.
INVESTMENT RESULTS
THE FUNDS MAY FROM TIME TO TIME COMPARE INVESTMENT RESULTS TO VARIOUS INDICES
OR OTHER MUTUAL FUNDS. FUND RESULTS MAY BE CALCULATED ON A TOTAL RETURN, YIELD
AND/OR DISTRIBUTION RATE BASIS.
- - TOTAL RETURN is the change in value of an investment in either fund over a
given period, assuming reinvestment of any dividends and capital gain
distributions.
- - YIELD is computed by dividing the net investment income per share earned by
either fund over a given period of time by the maximum offering price per share
on the last day of the period, according to a formula mandated by the
Securities and Exchange Commission. A yield calculated using this formula may
be different than the income actually paid to shareholders.
- - DISTRIBUTION RATE reflects dividends that were paid by either fund. The
distribution rate is calculated by dividing the dividends paid over the last 12
months by the sum of the month-end price and the capital gain distributions
paid over the last 12 months.
Endowments
Investment Results
(for periods ended July 31, 1997)
<TABLE>
<CAPTION>
AVERAGE ANNUAL THE FUND AT NET S&P 500 /2/
TOTAL RETURNS: ASSET VALUE /1/
<S> <C> <C>
One year
Five years
Ten years
Lifetime /3/
</TABLE>
Yield /1/ ____%
Distribution Rate: ____%
Bond Portfolio for Endowments
Investment Results
(for periods ended July 31, 1997)
<TABLE>
<CAPTION>
AVERAGE ANNUAL THE FUND AT LIPPER LEHMAN AGGREGATE BOND
TOTAL RETURNS: NET ASSET AVERAGE OF INDEX /5/
VALUE /1/ CORPORATE DEBT A-
RATED FUNDS /4/
<S> <C> <C> <C>
One year
Five years
Ten years
Lifetime /3/ _____% /6/
</TABLE>
Yield /1/ ____%
Distribution Rate: ____%
/1/ THESE FUND RESULTS WERE CALCULATED ACCORDING TO A STANDARD THAT IS REQUIRED
FOR ALL STOCK AND BOND FUNDS.
/2/ THE STANDARD & POOR'S 500 COMPOSITE INDEX REPRESENTS STOCKS. THIS INDEX IS
UNMANAGED AND DOES NOT REFLECT SALES CHARGES, COMMISSION OR EXPENSES.
/3/ FOR THE PERIOD BEGINNING JULY 26, 1975 (WHEN CAPITAL RESEARCH AND
MANAGEMENT COMPANY BECAME THE FUNDS' INVESTMENT ADVISER).
/4/ THE LIPPER AVERAGE OF CORPORATE A-RATED DEBT FUNDS IS AN AVERAGE OF THE
CUMULATIVE TOTAL REINVESTMENT PERFORMANCE OF FUNDS THAT INVEST AT LEAST 65% OF
ASSETS IN CORPORATE DEBT ISSUES RATED "A" OR BETTER OR GOVERNMENT ISSUES.
/5/ LEHMAN BROTHERS AGGREGATE BOND INDEX REPRESENTS INVESTMENT GRADE DEBT.
THIS INDEX IS UNMANAGED AND DOES NOT REFLECT SALES CHARGES, COMMISSIONS OR
EXPENSES.
/6/ LEHMAN BROTHERS AGGREGATE BOND INDEX DID NOT EXIST UNTIL DECEMBER 31, 1975.
FOR THE PERIOD BETWEEN JULY 31, 1975 AND DECEMBER 31, 1975, LEHMAN BROTHERS
CORPORATE BOND INDEX RESULTS WERE USED. THE LEHMAN BROTHERS INDEXES ARE BASED
ON JULY 31, 1975 INDEX VALUE.
[GRAPH APPEARS HERE]
Past results are not an indication of future results.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions
The funds usually pay dividends, which may fluctuate, in March, June, September
and December. Capital gains, if any, are usually distributed in December.
When a dividend or capital gain is distributed, the net value per share is
reduced by the amount of the payment.
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 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 and your tax
adviser for further information.
FUND ORGANIZATION AND MANAGEMENT
Fund Organization and Voting Rights
The funds, which are open-end, diversified management investment companies,
were organized as Delaware corporations (Endowments, Inc. in 1969 and Bond
Portfolio for Endowments, Inc. in 1970). All fund operations are supervised by
the funds' board of directors who meet periodically and perform duties required
by applicable state and federal laws. Shareholders have one vote per share
owned. 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 by a majority vote. Since the funds use a combined prospectus, each
fund may be liable for misstatements, inaccuracies, or incomplete disclosure
concerning the other fund contained in this prospectus.
As of August 31, 1997, the following shareholders owned 5% or more of the
funds' outstanding stock:
Endowments--California Institute of the Arts, _______ shares (____%).
Bond Portfolio for Endowments--California Institute of the Arts, _______ shares
(_____%); and Hudson Institute, _______ shares (____%);
The Investment Adviser
Capital Research and Management Company, a large and experienced investment
management organization founded in 1931, has been the funds' investment adviser
since July 25, 1975 and is the investment adviser to other funds, including
those in The American Funds Group. Capital Research and Management Company, a
wholly owned subsidiary of The Capital Group Companies, Inc., is headquartered
at 333 South Hope Street, Los Angeles, CA 90071. Capital Research and
Management Company manages the investment portfolio and business affairs of the
funds. The management fee paid by the funds to Capital Research and Management
Company may not exceed 0.50% of each fund's average net assets annually and
declines at certain asset levels. The total management fees paid by the funds,
as a percentage of average net assets, for the previous fiscal year is
discussed earlier under "Expenses."
Capital Research and Management Company and its affiliated companies have
adopted a personal investing policy that is consistent with the recommendations
contained in the May 9, 1994 report issued by the Investment Company
Institute's Advisory Group on Personal Investing. This policy has also been
incorporated into the funds' "code of ethics."
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. 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 dealer, generally referred to as a concession or
discount. On occasion, securities may be purchased directly from an issuer, in
which case no commissions or discounts are paid. 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.
Subject to the above policy, when two or more brokers (either directly or
through their correspondent clearing agents) are in a position to offer
comparable prices and executions, preference may be given to brokers who have
sold shares of the funds or have provided investment research, statistical, and
other related services for the benefit of the funds and/or other funds served
by Capital Research and Management Company.
Transfer Agent
American Funds Service Company serves as the transfer agent for the funds and
performs shareholder service functions. An agent of American Funds Service
Company who performs transfer agent services for the funds is located at One
Market, Steuart Tower, Suite 1800, San Francisco, CA 94105.
Shareholder Services
The funds offer you a valuable array of services you can use to alter your
investment program as your needs and circumstances change. These services,
which are summarized below, are available only in states where they may be
legally offered and may be terminated or modified at any time upon 60 days'
written notice.
PURCHASING SHARES
Shares of the funds may be purchased directly from the funds only by
institutional investors exempt from federal income taxation under Section
501(c)(3) of the Internal Revenue Code. The minimum initial purchase is
$50,000 for either fund; there is no minimum on subsequent investments. The
minimum initial investment may be reduced by the boards for investments which
meet certain standards. Any shareholder which loses its tax-exempt status must
immediately transfer its shares to another tax-exempt institution or, at the
shareholder's option, sell its shares at net asset 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.
Various services are available as described below:
- - AUTOMATIC REINVESTMENT Dividends and capital gain 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 or Bond Portfolio for
Endowments, 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 and/or Bond Portfolio for Endowments. The
Cash 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.
Share Price
Each funds' share price, also called net asset value, is determined as of the
close of trading (normally 4:00 p.m., Eastern time) every day the New York
Stock Exchange is open. Each fund calculates its net asset value per share,
generally using market prices, by dividing the total value of its assets after
subtracting liabilities by the number of its shares outstanding. Shares are
purchased at the net asset value next determined after your investment is
received and accepted.
Share Certificates
Shares are credited to your account and certificates are not issued unless you
request them by writing.
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 "Selling Shares.")
SELLING SHARES
Shareholders may sell (redeem) their shares, by tendering a request in proper
form, at the offices of the funds, P.O. Box 7650, One Market, Steuart Tower
(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. Requests
to sell must be signed and the authorized signature(s) of the shareholder
guaranteed by an "eligible guarantor" which includes 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 sell 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 sold may be more or less than the
amount paid for them.
OTHER FUND INFORMATION
<TABLE>
<CAPTION>
<S> <C>
ANNUAL/SEMI-ANNUAL STATEMENT OF ADDITIONAL
REPORT TO SHAREHOLDERS INFORMATION (SAI)
Includes financial statements, detailed performance
information, portfolio holdings, a statement from Contains more detailed information on all
portfolio management and the independent auditor's aspects of the funds, including the
report. funds' financial statements.
A current SAI has been filed with the
CODE OF ETHICS Securities and Exchange Commission ("SEC").
Includes a description of the funds' personal It is incorporated by reference into this
investing policy. prospectus and is available along with other
related materials on the SEC's Internet Web
site at http://www.sec.gov.
To request a free copy of any of the documents above:
</TABLE>
Write to the Secretary
of the funds
P.O. Box 7650
San Francisco, CA 94120
This prospectus has been printed on recycled paper.
ENDOWMENTS, INC.
AND
BOND PORTFOLIO FOR ENDOWMENTS, INC.
Part B
Statement of Additional Information
October 1, 1997
This document is not a prospectus but should be read in conjunction with the
current Prospectus of Endowments and Bond Portfolio for Endowments dated
October 1, 1997. The Prospectus may be obtained by writing to the funds at the
following address:
Endowments, Inc.
Bond Portfolio for Endowments, Inc.
Attention: Secretary
One Market
Steuart Tower, Suite 1800
P.O. Box 7650
San Francisco, CA 94120
Telephone: (415) 421-9360
Table of Contents
Item Page No.
DESCRIPTION OF CERTAIN SECURITIES 1
FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS 6
FUND OFFICERS AND DIRECTORS 10
MANAGEMENT 12
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES 14
PURCHASE OF SHARES 14
EXECUTION OF PORTFOLIO TRANSACTIONS 16
REDEMPTION OF SHARES 16
GENERAL INFORMATION 17
INVESTMENT RESULTS 18
FINANCIAL STATEMENTS ATTACHED
DESCRIPTION OF CERTAIN SECURITIES
BOND RATINGS - Endowments may invest in 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. Bond Portfolio for Endowments invests in bonds and debentures (including
straight debt securities), which are rated in the top four quality categories
by any national rating service (or determined to be equivalent by Capital
Research and Management Company) including bonds rated at least BBB by Standard
& Poor's Corporation or Baa by Moody's Investors Service, Inc. The top four
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."
"Debt rated $BBB' has 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."
Standard & Poor's applies indicators "+", no character and "-" to its rating
categories. The indicators show relative standing within the major rating
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."
"Bonds rated Baa are judged to be 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."
Moody's also supplies numerical indicators 1, 2 and 3 to rating categories.
The modifier 1 indicates that the obligation ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and 3
indicates a ranking toward the lower end of that generic rating category.
BOND PORTFOLIO FOR ENDOWMENTS
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 of holding 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 - The Federal National Mortgage
Association (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.
The Federal Home Loan Mortgage Corporation (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.
FORWARD COMMITMENTS - The fund may enter into commitments to purchase or sell
securities at a future date. When a fund purchases such securities it assumes
the risk of any decline in value of the security beginning on the date of the
agreement. When a fund sells such securities it does not participate in
further gains or losses with respect to such securities beginning on the date
of the agreement. If the other party to such a transaction fails to deliver
or pay for the securities, the fund could miss a favorable price or yield
opportunity or could experience a loss.
As the fund's aggregate commitments under these transactions increase, the
opportunity for leverage similarly may increase. The fund will not use these
transactions for the purpose of leveraging and will segregate liquid assets
which will be marked to market daily 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 segregated assets, the fund
temporarily could 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.
The fund also may enter into "roll" transactions, which consist of the sale of
GNMA certificates or other securities together with a commitment to purchase
similar, but not identical, securities at a future 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 identify liquid assets which will be
marked to market daily 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
CURRENCY TRANSACTIONS - The fund has the ability to enter into forward
currency contracts to protect against changes in currency exchange rates. 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. Forward currency contracts entered into by the fund will involve the
purchase or sale of a currency against the U.S. dollar. The fund will
segregate liquid assets which will be marked to market daily to meet its
forward contract commitments to the extent required by the Securities and
Exchange Commission.
Certain provisions of the Internal Revenue Code may affect the extent to
which the fund may enter into forward contracts. Such transactions may also
affect, for U.S. federal income tax purposes, the character and timing of
income, gain or loss recognized by the fund.
ENDOWMENTS AND BOND PORTFOLIO FOR ENDOWMENTS
CASH AND CASH EQUIVALENTS - These securities include (1) commercial paper
(short-term notes issued by corporations or governmental bodies), (2)
commercial bank obligations (E.G., certificates of deposit (interest bearing
time deposits), and bankers' acceptances (time drafts on a commercial bank
where the bank accepts an irrevocable obligation 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, at the time of
purchase, or may be redeemed, in one year or less, and (5) corporate bonds and
notes that mature, at the time of purchase, or that may be redeemed, in one
year or less.
WARRANTS AND RIGHTS - In addition, the funds may purchase warrants, which
are usually issued together with bonds or preferred stocks. Warrants generally
entitle the holder to buy a proportionate amount of common stock at a specified
price. At the time the warrant is issued, the specified price is usually
higher than the current market price. Warrants may be issued with an
expiration date or in perpetuity. The funds may also invest in rights to
purchase common stocks. Rights are similar to warrants except that they
normally entitle the holder to purchase common stock at a lower price than the
current market price. Rights generally expire in less than four weeks.
PORTFOLIO TURNOVER - Portfolio changes will be made without regard to the
length of time particular investments may have been held. Short-term trading
profits are not the funds' objective and changes in their investments are
generally accomplished gradually, though short-term transactions may
occasionally be made. High portfolio turnover (100% or more) involves
correspondingly greater transaction costs in the form of dealer spreads or
brokerage commissions, and may result in the realization of net capital gains,
which are taxable when distributed to shareholders. Fixed-income securities
are generally traded on a net basis and usually neither brokerage commissions
nor transfer taxes are involved. The funds' portfolio turnover rate would
equal 100% if each security in the fund's portfolio were replaced once per
year. Under normal circumstances, it is anticipated that portfolio turnover
for common stocks in the fund's portfolio will not exceed 100% on an annual
basis, and that portfolio turnover for other securities will not exceed 100% on
an annual basis.
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
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.
For purposes of policy #8, restricted securities are treated as not readily
marketable by the fund, with the exception of those securities that have been
determined to be liquid pursuant to procedures adopted by the fund's board of
directors.
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
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.
For purposes of policy #8, restricted securities are treated as not readily
marketable by the fund, with the exception of those securities that have been
determined to be liquid pursuant to procedures adopted by the fund's board of
directors.
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 fund. 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 fund'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+, 333 South Hope Street, Los Angeles, CA 90071, Age: 66.
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 Hope Street, Los Angeles, CA 90071, Age: 54.
Vice President, Capital Research and Management Company; former President,
Independent Colleges of Southern California; (213) 486-9200; Designated
Representative: Independent Colleges of Southern California.
STEVEN D. LAVINE, Age: 50, 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, Age: 54, 4933 Mangold Circle, Dallas, TX 75229. Chief
Financial Officer, Kevin L. McBride, D.D.S., Inc.; (214) 368-0268; Designated
Representative: Madison Foundation.
JOHN R. METCALF, Age: 81, 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, Age: 71, Times Mirror Square, Los Angeles, CA 90053.
Chairman, Pfaffinger Foundation; former President and Chief Executive Officer,
Times Mirror Foundation; (213) 237-3977; Designated Representative: Loyola
Marymount University.
THOMAS E. TERRY+, 333 South Hope Street, Los Angeles, CA 90071, Age: 59.
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, Age: 61, P.O. Box 2156, Ketchum, ID 83340. Management
Consultant, Ziebarth Company; (208) 725-5035; Designated Representative:
Foundation for Reproductive Research & Education.
OFFICERS
<TABLE>
<CAPTION>
NAME AND ADDRESS AGE POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING
REGISTRANT PAST 5 YEARS#
<S> <C> <C> <C>
Robert G. O'Donnell 53 Senior Vice President Senior Vice President and
P.O. Box 7650 Director, Capital Research and
San Francisco, CA 94120 Management Company
Abner D. Goldstine 67 Senior Vice President Senior Vice President and
11100 Santa Monica Blvd. Director, Capital Research and
Los Angeles, CA 90025 Management Company
Claudia P. Huntington 45 Vice President of Senior Vice President, Capital
333 South Hope Street Endowments Research Company
Los Angeles, CA 90071
John H. Smet 41 Vice President of Vice President, Capital Research
11100 Santa Monica Blvd. Bond Portfolio for and Management Company
Los Angeles, CA 90025 Endowments
Patrick F. Quan 39 Secretary Vice President, Fund Business
P.O. Box 7650 Management Group, Capital
San Francisco, CA 94120 Research and Management Company
Lisa G. Hathaway 35 Assistant Vice Assistant Vice President, Fund
333 South Hope Street President Business Management Group,
Los Angeles, CA 90071 Capital Research and Management
Company
Louise M. Pescetta 47 Assistant Vice Assistant Vice President, Fund
P.O. Box 7650 President and Business Management Group,
San Francisco, CA 94120 Assistant Secretary Capital Research and Management
Company
Mary C. Hall 39 Treasurer Senior Vice President, Fund
135 South State College Business Management Group,
Blvd. Capital Research and Management
Brea, CA 92821 Company
Robert P. Simmer 36 Assistant Treasurer Vice President, Fund Business
5300 Robin Hood Road Management Group, Capital Research and Management Company
Norfolk, VA 23513
</TABLE>
_________________
# 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.
All of the officers listed are officers or employees of the investment adviser
or affiliated companies. Endowments and Bond Portfolio for Endowments do not
pay any salaries or fees to their directors or officers. However, the funds
reimburse certain expenses of the directors who are not affiliated with the
investment adviser.
The following directors serve or have served on boards of tax-exempt 501(c)(3)
organizations and have had experience in dealing with the administrative and
financial needs of these institutions: Robert B. Egelston - California
Institute of the Arts, Claremont University Center, Los Angeles Festival, The
Los Angeles Philharmonic Association, The Music Center of Los Angeles County,
The Wharton School of Finance and Commerce, University of Pennsylvania; Frank
L. Ellsworth - Claremont University Center, English Village, Seattle,
Foundation for Independent Higher Education, Global Partners, Canada, Graphic
Arts Counsel--Los Angeles County Museum of Art, Independent Colleges of
Southern California, Inc., The Japanese-American National Museum, Japanese
Foundation of International Education, The Los Angeles Dance Center, Pitzer
College, Southwestern University School of Law; Steven D. Lavine - American
Council on the Arts, KCRW-FM National Public Radio, The Music Center Operating
Company, The Music Center of Los Angeles County; Patricia A. McBride - Dallas
Museum of Art League, Dallas Symphony Orchestra Association, Dallas Symphony
Orchestra League, Girl Scout Council, Inc., McDermott Foundation, St. Mark's
School of Texas, Southwest Museum of Science and Technology; John R. Metcalf -
Radiology Research and Education Foundation, The Yosemite Fund; Thomas E. Terry
- - Citizens' Scholarship Foundation of America, Edgewood High School, Elvehjem
Museum of Art, Ketchum YMCA, Madison Opera, Inc., National Football Scholarship
Foundation; Charles R. Redmond - AMAN Folk Ensemble, Catholic Charities of the
Archdiocese of Los Angeles, Loyola Marymount University, The Music Center of
Los Angeles County, 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 (Los Angeles, San Francisco, New
York, Washington D.C., London, Geneva, Singapore, Hong Kong and Tokyo), with a
staff of professionals, many of whom have a number of years of investment
experience. The Investment Adviser is located at 333 South Hope Street, Los
Angeles, CA 90071, and at 1135 South College Boulevard, Brea, CA 92821. The
Investment Adviser's research 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 managing more than $100 billion of
stocks, bonds and money market instruments and serves 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
15, 1997 for the period through July 27, 1998. The Agreements also provide
that either party has the right to terminate them 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, 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.
Capital Research and Management Company 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.
The Agreements provide for an advisory fee reduction to the extent that the
funds' annual ordinary operating expenses exceed 1-1/2% of the first $30
million of the average net assets of the funds and 1% of the average net assets
in excess thereof. Expenses which are not subject to this limitation are
interest, taxes, and extraordinary expenses. Expenditures, including costs
incurred in connection with the purchase or sale of portfolio securities, which
are capitalized in accordance with generally accepted accounting principles
applicable to investment companies are accounted for as capital items and not
as expenses.
Effective December 1, 1995, the investment adviser has agreed to voluntarily
waive management fees to the extent that each fund's annual operating expenses
exceed 0.75% of its average net assets per annum. There can be no assurance
that this voluntary fee waiver will continue in the future.
During the years ended July 31, 1997, 1996 and 1995, the investment adviser
received from Endowments advisory fees of $_______, $300,818, and $273,381, and
from Bond Portfolio for Endowments advisory fees of $_______, $214,202, and
$223,573, 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 on 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
Common stocks, and convertible bonds and debentures, 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.
Non-convertible bonds and debentures, and other long-term debt securities,
normally 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. 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
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 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. Stocks
and convertible bonds and debentures 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. 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.
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.
BOND PORTFOLIO FOR ENDOWMENTS
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, ___________ was
among the top 10 dealers that acted as principals in portfolio transactions.
The fund held debt securities of in the amount of $______ as of the close of
its most recent fiscal year.
_______________
Brokerage commissions paid on portfolio transactions during the fiscal years
ended July 31, 1997, 1996 and 1995, amounted to $______, $52,000, and $38,000
for Endowments There are no brokerage commissions paid on portfolio
transactions for Bond Portfolio for Endowments.
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, One Chase Manhattan Plaza,
New York, NY 10081, as Custodian.
INDEPENDENT AUDITORS - Deloitte & Touche LLP, located at 1000 Wilshire
Boulevard, Los Angeles, CA 90017, serves as the funds' independent auditors,
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 - Paul, Hastings, Janofsky & Walker LLP, 555 South Flower Street, Los
Angeles, CA 90071, 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 auditors, 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 funds; 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' yield is ____% and Bond Portfolio for Endowments' yield is ____%
based on a 30-day (or one month) period ended July 31, 1997, 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 and Bond Portfolio for Endowments do not have a sales charge.)
Endowments' average annual total return for the one-, five- and ten-year
periods ended on July 31, 1997 was +_____%, +_____% and +_____%, respectively.
Bond Portfolio for Endowments' average annual total return for the one-, five-
and ten-year periods ended on July 31, 1997 was +____%, +____% and +____%,
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 boards; and (2) a
complete redemption at the end of any period illustrated.
The funds may also calculate a distribution rate on a taxable and tax
equivalent basis. The distribution rate is computed by dividing the dividends
paid by the fund over the last 12 months by the sum of the month-end net asset
value and the capital gains paid over the last 12 months. The distribution
rate may differ from the yield.
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 & Poor's 500 Stock
Composite Index and the Lipper Growth & Income Fund Index for Endowments and
the Lehman Aggregate Bond Index for Bond Portfolio for Endowments) 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>
1987 - 1997
1986 - 1996 +204% +330% +269% +220%
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 Lipper Average of
10-Year Brothers Corporate A-Rated
8/1 - 7/31 BENDI Aggregate /4/ Debt Funds /5/
<S> <C> <C> <C>
1987 - 1997
1986 - 1996 +129% +126% +119%
1985 - 1995 +161 +160 +148
1984 - 1994 +191 +193 +178
1983 - 1993 +219 +218 +201
1982 - 1992 +254 +251 +232
1981 - 1991 +253 +269 +233
1980 - 1990 +204 +217 +188
1979 - 1989 +195 +201 +184
1978 - 1988 +178 +178 +164
1977 - 1987 +157 +164 +151
1976 - 1986 +178 +181 +168
1975 - 1985 +157 N/A +158
1975# - 1985 +158 N/A 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 & 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.
/5/ The Lipper Average of Corporate A-Rated Debt Funds is an average of the
cumulative total reinvestment performance of funds that invest at least 65% of
assets in corporate debt issues rated "A" or better or government issues.
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 . . . 7/31/97
| |
<S> <C> <C>
Number
Periods
of Years Value
8/1 - 7/31
1 1996 - 1997
2 1995 - 1997 $
3 1994 - 1997
4 1993 - 1997
5 1992 - 1997
6 1991 - 1997
7 1990 - 1997
8 1989 - 1997
9 1988 - 1997
10 1987 - 1997
11 1986 - 1997
12 1985 - 1997
13 1984 - 1997
14 1983 - 1997
15 1982 - 1997
16 1981 - 1997
17 1980 - 1997
18 1979 - 1997
19 1978 - 1997
20 1977 - 1997
21 1976 - 1997
22 1975#- 1997
</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 . . . 7/31/97
| |
<S> <C> <C>
Number
Periods
of Years Value
8/1 - 7/31
1 1996 - 1997
2 1995 - 1997 $
3 1994 - 1997
4 1993 - 1997
5 1992 - 1997
6 1991 - 1997
7 1990 - 1997
8 1989 - 1997
9 1988 - 1997
10 1987 - 1997
11 1986 - 1997
12 1985 - 1997
13 1984 - 1997
14 1983 - 1997
15 1982 - 1997
16 1981 - 1997
17 1980 - 1997
18 1979 - 1997
19 1978 - 1997
20 1977 - 1997
21 1976 - 1997
22 1975#- 1997
</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, 1996)
<TABLE>
<CAPTION>
COST OF SHARES VALUE OF SHARES
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
1996 25,984 267,904 317,904 98,431 428,636 301,171 828,238
1997
</TABLE>
# From July 26, 1975
The dollar amount of capital gain distributions during the period was $_______.
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, 1996)
<TABLE>
<CAPTION>
COST OF SHARES VALUE OF SHARES
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
1996 25,003 284,777 334,777 47,223 30,879 278,391 356,493
1997
</TABLE>
# From July 26, 1975
The dollar amount of capital gain distributions during the period was $______.
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 January 1, 1966 (121 in all), those funds have had better
total returns than the Standard & Poor's 500 Composite Stock Index in 94 of the
121 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.
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
Financial Statements - To Be Provided by Amendment
Financial Highlights
Investment Portfolio
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Selected Per-Share Data and Ratios
Independent Auditors' Report
(b) Exhibits.
1. Copy of Certificate of Incorporation
2. Copy of By-Laws
3. None
4. Copy of specimen share certificate
5. Copy of Investment Advisory and Service Agreement
6. None
7. None
8. Copy of form of Global Custody Agreement
9. Copy of Shareholder Services Agreement
10. Not applicable to this filing
11. To be provided by amendment
12. None
13. None
14. None
15. None
16. On file (see SEC file nos. 811-1884 and 2-34371)
17. Financial Data Schedule (EDGAR)
Item 25. Persons Controlled by or under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities.
As of June 30, 1997
<TABLE>
<CAPTION>
<S> <C>
Title of Class Number of Record-Holders
Common Stock 61
($1.00 Par Value)
</TABLE>
Item 27. Indemnification.
Registrant is a joint-insured under Investment Adviser/Mutual Fund Errors and
Omissions Policies written by American International Surplus Lines Insurance
Company, Chubb Custom Insurance Company, and ICI Mutual Insurance Company which
insures its officers and directors against certain liabilities.
The following are certain provisions of the Delaware Corporation Law
applicable to the Registrant:
Subsection (a) of Section 145 of the Delaware Corporation Law empowers a
corporation to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the corporation or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation or enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such person acted in
any of the capacities set forth above, against expenses actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that a court of equity or the court in which such
action or suit was brought shall determine that despite the adjudication of
liability such person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of
any action, suit or proceeding referred to in subsections (a) and (b) or in the
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith; that indemnification provided for by Section 145 shall
not be deemed exclusive of any other rights to which the indemnified party may
be entitled; that the scope of indemnification extends to directors, officers,
employees or agents of a constituent corporation absorbed in a consolidation or
merger and persons serving in that capacity at the request of the constituent
corporation for another; and empowers the corporation to purchase and maintain
insurance on behalf of a director or officer of the corporation against any
liability asserted against him or incurred by him in any such capacity or
arising out of his status as such whether or not the corporation would have the
power to indemnify him against such liabilities under Section 145.
The By-Laws of the Corporation state:
Section 11.01. The corporation shall indemnify its directors and officers and
may indemnify its employees and agents to the full extent permitted by the law
of the State of Delaware; provided, however, that the corporation shall not
indemnify any of its directors or officers against any liability to the
corporation or to its stockholders to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office
as described in Section 17(h) of the Investment Company Act of 1940 ("disabling
conduct"). The corporation shall indemnify any of its directors or officers
against any liability to the corporation or to its stockholders if:
(1) a court or other body before whom a proceeding relating to liability was
brought renders a final decision on the merits finding such director or officer
not liable by reason of disabling conduct or
(2) in the absence of such a decision either:
(a) a majority of a quorum of directors, who are neither interested persons
of the corporation as defined in Section 2(a)(19) of the Investment Company Act
of 1940 nor parties to the proceeding, or
(b) independent legal counsel in a written opinion makes a reasonable
determination, based on a review of the facts, that such director or officer is
not liable by reason of disabling conduct.
The corporation may advance funds to cover expenses, including attorneys'
fees, incurred by any director or officer in connection with the defense of any
such proceeding, provided that such director or officer undertakes to repay any
advance, unless a determination is made pursuant to the foregoing procedures
set forth herein that such indemnification is proper. As a condition to such
an advance (i) the director or officer shall provide security for his
undertaking; (ii) the corporation shall be insured against losses arising by
reason of any lawful advance; or (iii) a majority of a quorum of the directors,
who are neither "interested persons" of the corporation as defined in Section
2(a)(19) of the Investment Company Act of 1940 nor parties to the proceeding,
or independent legal counsel in a written opinion, shall determine, based on
review of readily available facts, that there is reason to believe that such
director or officer will be found entitled to indemnification.
Item 28. Business and Other Connections of Investment Adviser.
None.
Item 29. Principal Underwriters.
(a) Not Applicable.
(b) Not Applicable.
(c) Not Applicable.
Item 30. Location of Accounts and Records.
Accounts, books and other records required by Rules 31a-1 and 31a-2 under the
Investment Company Act of 1940 are maintained and held in the offices of its
investment adviser, Capital Research and Management Company, 333 South Hope
Street, Los Angeles, California 90071, and/or 135 South State College
Boulevard, Brea, California 92821, and/or the offices of the Registrant, One
Market, Steuart Tower (Suite 1800), San Francisco, California 94105.
Registrant's records covering shareholder accounts are maintained and kept by
the fund's transfer agent, American Funds Service Company, 135 South State
College Boulevard, Brea, California 92821, 8332 Woodfield Crossing Boulevard,
Indianapolis, IN 46240, 8000 IH-10, Suite 1400, San Antonio, Texas 78230 and
5300 Robin Hood Road, Norfolk, VA 23513.
Registrant's records covering portfolio transactions are also maintained and
kept by the fund's custodian, The Chase Manhattan Bank, One Chase Manhattan
Plaza, New York, New York 10081.
Item 31. Management Services.
None.
Item 32. Undertakings.
As reflected in the prospectus, the fund undertakes to provide each person to
whom a prospectus is delivered with a copy of the fund's latest annual report
to shareholders, upon request and without charge.
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City and County of San Francisco, and State of California on the 31st day
of July, 1997.
ENDOWMENTS, INC.
By /s/ Patrick F. Quan
Patrick F. Quan, Secretary
ATTEST:
Louise M. Pescetta
Pursuant to the requirements of the Securities Act of 1933, this amendment to
its registration statement has been signed below on July 31, 1997 by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title
(1) Principal Executive Officer:
/s/ Frank L. Ellsworth President
(Frank L. Ellsworth)
(2 ) Principal Financial Officer and
Principal Accounting Officer:
/s/ Mary C. Hall Treasurer
(Mary C. Hall)
(3) Directors:
Robert E. Egelston Chairman
Steven D. Lavine* Director
Patricia A. McBride* Director
John R. Metcalf* Director
Charles R. Redmond* Director
/s/ Thomas E. Terry
(Thomas E. Terry) Director
Robert C. Ziebarth* Director
</TABLE>
*By /s/ Patrick F. Quan
Patrick F. Quan, Attorney-in-Fact
RESTATED
CERTIFICATE OF INCORPORATION
OF
ENDOWMENTS, INC.
ENDOWMENTS, INC., a corporation organized and existing under the laws of the
State of Delaware, hereby certifies as follows:
1. The name of the corporation is ENDOWMENTS, INC., and the name under which
the corporation was originally incorporated is THE MANAGED ENDOWMENT FUND. The
date of filing its original Certificate of Incorporation with the Secretary of
State was May 26, 1969.
2. This Restated Certificate of Incorporation only restates and integrates
and does not further amend the provisions of the Certificate of Incorporation
of this corporation as heretofore amended or supplemented and there is no
discrepancy between those provisions and the provisions of this Restated
Certificate of Incorporation.
3. The text of the Certificate of Incorporation as amended or supplemented
heretofore is hereby restated without further amendments or changes to read as
herein set forth in full:
FIRST: Corporate name.
The name of this corporation is: ENDOWMENTS, INC.
SECOND: Registered office and registered agent.
The names of the County and the City within the County in which this
corporation's registered office is to be located in the State of Delaware are,
respectively, County of New Castle, and City of Wilmington. The name of this
corporation's registered agent is The Corporation Trust Company, a corporation.
The street and number of the registered office of this corporation and the
address by street and number of the registered agent of this corporation is No.
100 West Tenth Street in said City of Wilmington.
THIRD: Corporate purposes.
1. This corporation is formed to allow charitable organizations which have
established their tax exempt status under Internal Revenue Code of 1954 Section
501(c)(3) to pool their endowment assets in order that these assets may be
economically diversified and thereby increase the ability of said organizations
to carry out their charitable purposes.
2. This corporation shall only hold title to securities, collect the income
therefrom, and pay out all the income, less expenses, to its shareholders, all
of which shall be organizations which have established their tax exempt status
under Internal Revenue Code of 1954 Section 501(c)(3).
FOURTH: Powers and duties.
1. This corporation shall purchase securities for investment, shall
diversify its holdings in said securities and hold said securities for
investment.
2. This corporation shall subscribe for, contract to purchase, purchase and
acquire, own and hold title to, contract to sell, sell and dispose of
securities, for investment only.
3. This corporation shall not provide investment advisory or management
services on a fee basis to any shareholder or any other person. However, this
corporation may engage the services of a professional management company or any
other person (herein, the "manager") to advise, supervise, or manage its
investment portfolio.
4. This corporation shall collect the income from its securities and, no
later than 180 days after the close of its fiscal year, shall pay out all its
income, less expenses, to all of its shareholders which are charitable
organizations that have established their tax exempt status under Internal
Revenue Code Section 501(c)(3).
5. This corporation may engage only in those other activities which are
necessary and proper to carry out its purposes, powers and obligations as
specified in this Certificate of Incorporation.
FIFTH: Specific limitations on corporate powers.
Anything contained in this Certificate of Incorporation to the contrary
notwithstanding, this corporation shall not:
(1) Buy securities on margin, but it may obtain such short-term credits as
may be necessary for the clearance of purchases and sales of securities.
(2) Buy puts and calls, hedges, or commodities.
(3) Effect short sales of securities, but such limitation shall not prevent
any sale of securities where this corporation owns at the time of such sale
securities equivalent in kind and amount to those sold or where this
corporation owns at the time of such sale securities convertible into
securities equivalent in kind and amount to those sold.
(4) Lend any of its assets to any person, firm, or corporation for any
purpose whatsoever; provided, however, that the acquisition of bonds,
debentures, notes and other obligations or evidences of interest in or
indebtedness of any corporation, domestic or foreign, or of any government or
municipality shall not be held or construed to be as the making of a loan.
(5) Borrow any amount other than as a temporary measure in extraordinary or
emergency circumstances, and only when necessary to attain the purposes of this
corporation, each such borrowing to be specifically approved by the Board of
Directors. In no instance shall this corporation borrow amounts in the
aggregate in excess of five percent (5%) of the value of the total assets of
the corporation at the time of such borrowing, such value to be determined
pursuant to the provisions of Article Eleventh of this Certificate of
Incorporation.
(6) Mortgage, pledge, hypothecate, or in any manner transfer as securities
for any indebtedness, any securities owned or held by the corporation in any
circumstance other than as specified in paragraph (5) of this Article, nor to
an extent greater than fifteen percent (15%) of the gross assets of the
corporation taken at cost.
(7) Invest at any one time more than five percent (5%) of the value of the
total assets of the corporation in the securities of any one issuer, provided
that this limitation shall apply only to 75% of the value of the corporation's
total assets and, provided further that the limitation shall not apply to
obligations of the government of the United States or of any corporation
organized as an instrumentality of the United States under a general Act of
Congress.
(8) Make any purchase or purchases of the securities of any one issuer which
would cause the amount of such securities owned by the corporation, at the time
of any such purchase, to exceed more than ten percent (10%) of the outstanding
voting securities of such issuer.
(9) Invest at any one time more than five percent (5%) of the value of the
total assets of the corporation in the securities of companies which have a
record of less than three years continuous operation; provided that such three
year period may include the operation of any predecessor, company or companies,
partnership or individual enterprise if the company whose securities are
proposed as an investment has come into existence as the result of a merger,
consolidation, reorganization, or the purchase of substantially all of the
assets of such predecessor company or companies, partnership or individual
enterprise.
(10) Invest in securities issued by investment companies except by purchase
in the open market, to the extent not otherwise prohibited by law, where only
the customary broker's commission is paid on such purchase, or except when such
investment is acquired pursuant to a plan of merger or consolidation.
(11) Participate on a joint or a joint and several basis in any trading
account in securities, nor invest in real estate or commodities or commodity
contracts.
(12) Purchase or retain securities issued by an issuer if one or more of the
holders of the securities of such issuer or one or more of the officers or
directors of such issuer is an officer or director of this corporation or of
the manager and if to the knowledge of this corporation one or more of such
officers or directors of this corporation or of the manager owns beneficially
more than half of 1% of the shares or securities of such issuer and such
officers and directors owning more than half of 1% of such shares or securities
together own beneficially more than five percent (5%) of such shares or
securities.
SIXTH: Capital stock.
1. The total number of shares of stock which the corporation shall have
authority to issue is Forty Thousand (40,000) shares, all common stock, and the
par value of each of such shares shall be One Dollar ($1.00) per share. The
minimum amount of capital with which the corporation shall commence business is
One Thousand Dollars ($1,000).
2. Shares shall be sold only to charitable institutions which have
established their tax exempt status under Internal Revenue Code of 1954,
Section 501(c)(3). If any shareholder loses its exempt status for any reason
whatsoever, that shareholder must immediately transfer all its shares in this
corporation to another charitable institution which has established its tax
exempt status under Internal Revenue Code of 1954, Section 501(c)(3) or, at its
option, shall immediately sell all its shares to this corporation at the price
determined in Article Eleventh of this Certificate of Incorporation based on
the date on which the shareholder lost its exempt status.
3. All shares issued by this corporation shall bear the following legend:
"These shares may not be owned, held, sold, transferred, assigned, pledged,
hypothecated, or otherwise transferred except by or to a charitable
organization which has established its tax exempt status under Internal Revenue
Code of 1954, Section 501(c)(3). Any shareholder which loses its exempt status
must immediately transfer all its shares in this corporation to another
charitable institution so exempt or, at its election, shall sell all its shares
to the issuing corporation at the price determined in its Certificate of
Incorporation."
4. The first issuance and sale of shares of the common stock of the
corporation shall be at such price, not less than the par value thereof, as
shall be fixed by the Board of Directors. Stockholders shall have no
preemptive right to subscribe to any or all additional issues of stock of the
corporation.
5. The Corporation, at the option and discretion of the Board of Directors,
shall, if it appears that direct or indirect ownership of shares issued by the
Corporation have or may become concentrated in any stockholders to the extent
which would disqualify the Corporation as a "regulated investment company"
under the Internal Revenue Code, have the power, by lot or by other means
deemed equitable by them, to:
(a) redeem the number of shares of the Corporation sufficient to maintain or
bring the direct or indirect ownership of shares into conformity with the
requirements for such qualification, and
(b) refuse to issue shares to any one whose acquisition of the shares of the
Corporation would be likely to result in such disqualification.
SEVENTH: Incorporators and Directors.
Upon the formation of this corporation, the incorporators shall forthwith
elect a Board of Directors which shall consist of five (5) directors and shall
serve until the first shareholders' meeting, at which time the shareholders
shall elect a full board of directors. From and after the time of the first
meeting of shareholders, no person shall be elected a director (except for the
Chairman of the Board or the President of the Corporation) unless he is a
designated representative of at least one charitable institution which is a
shareholder of this Corporation or of Bond Portfolio for Endowments, Inc. A
person shall be deemed to be a designated representative of a shareholder if
the directors, trustees, or authorized officer of said shareholder has chosen
him to represent said shareholder on the Board of this corporation. The
incorporators shall make every effort in selecting the first board of directors
to include only individuals who are representatives of eligible charitable
institutions.
The Board of Directors shall exercise all corporate powers of the corporation
except as otherwise provided by law or herein provided.
Subject to any limitations contained in by-laws made by the stockholders or
incorporators, the Board of Directors may make by-laws and from time to time
may alter, amend or repeal any by-laws, but any by-laws made by the Board of
Directors may be altered, amended or repealed by the stockholders at any
meeting of stockholders by the affirmative vote of the holders of a majority of
the stock present and voting at such meeting, provided notice that an amendment
is to be considered and acted upon is inserted in the notice of waiver or
notice of such meeting.
EIGHTH: Life of the corporation and Distribution of Assets on Termination.
This corporation is to have perpetual existence. Upon liquidation,
dissolution or abandonment of the owner, after providing for the debts and
obligations thereof, the remaining assets will not inure to the benefit of any
private person but will be distributed to non-profit organizations which have
established their tax exempt status under Section 501(c)(3) of the Internal
Revenue Code or under any similar law which may succeed said Section.
NINTH: Bank accounts, auditing.
The corporation shall place and maintain all its cash and securities from
time to time owned by the corporation in the custody of one or more banks or
trust companies of good standing to be selected by the Board of Directors of
the corporation to act as custodian or custodians; provided, however, that each
such bank or trust company selected shall have an aggregate capital, surplus
and undivided profits of not less than $2,000,000.
The books of the corporation shall be audited at least semi-annually by
independent public accountants, and reports containing the audited financial
statements and lists of the securities held by the corporation shall be sent to
all stockholders of the corporation at least semi-annually.
TENTH: Amendment to this Certificate.
The corporation reserves the right to amend, alter, change or repeal any
provisions contained in this certificate of incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
ELEVENTH: Valuation of Stock of this Corporation.
Any holder of shares of this corporation may deposit the certificate or
certificates held by him representing such shares, duly endorsed in blank or
accompanied by a proper instrument of transfer executed in blank, at the office
of the corporation in the City and County of San Francisco, State of
California, together with an irrevocable offer in writing, in a form acceptable
to the corporation, to sell the shares represented by such certificate or
certificates to the corporation at the current net asset value of such shares,
which is next computed after the deposit of such shares, in accordance with the
regulations of the Securities and Exchange Commission, and this corporation,
within seven (7) full business days from the date on which the said offer and
deposit are received, will purchase such shares in exchange for a proportionate
share of this corporation's current net assets or the cash equivalent thereof,
to the extent, and only to such extent, of the fund which the corporation at
the time of the purchase may legally employ for such purpose. In the event,
however, that the corporation at the time of the receipt of such offer and
deposit shall have no assets whatsoever which may legally be applied to the
purchase of shares of its stock, the corporation will promptly give notice of
such fact and thereupon return the certificate or certificates deposited to the
holder thereof.
In addition the board of directors may in its discretion authorize the making
of offers, or the acceptance of offers upon receipt thereof, for the repurchase
of shares by the corporation from time to time directly or through an agent or
agents, at the current net asset value of such shares, which is next computed
after the contract of repurchase is made, in accordance with the regulations of
the Securities and Exchange Commission. Upon the acceptance of any such offer,
delivery of the certificates shall be made to the corporation against payment
therefor within such time as shall be fixed in accordance with the direction of
the board of directors.
The net asset value of the shares of the corporation shall be determined each
business day at the close of the New York Stock Exchange in the following
manner:
(a) Securities owned by the Corporation shall be valued at their fair value
as determined in good faith by, or pursuant to the methods prescribed or
approved by, the Board of Directors. All other assets are added to the value
of securities to determine the total assets of the Corporation.
(b) From the total value of said assets determined as aforesaid, there shall
be deducted all indebtedness, interest, taxes, payable or accrued, including
estimated taxes on unrealized book profits, expenses and management charges
accrued to the appraisal date, all other items in the nature of liabilities
which shall be deemed by the board of directors of the corporation to be
appropriate, and all reserves carried on the books of the corporation which
shall be deemed by the board of directors to be proper deductions under
standard accounting practices for the determination of net worth. The
determination and computation of all such liabilities and deductions shall be
made in accordance with good accounting practices.
(c) The resulting amount, which shall represent the total net assets of the
corporation, shall be divided by the number of shares outstanding at the time
(excluding treasury shares) and the quotient so obtained shall be deemed to be
the net asset value of the shares.
For any period of time during which the New York Stock Exchange is closed
other than customary weekend and holiday closings, including in such period the
day on which the action is taken for closing the Exchange and the day on which
the Exchange is reopened, or for any period of time during which trading on the
New York Stock Exchange is restricted as hereinafter provided, or for any
period of time during which an emergency as hereinafter provided exists as a
result of which disposal by the corporation of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the corporation
to determine the value of its net assets, or for such other periods of time as
the Securities and Exchange Commission may by order permit for the protection
of stockholders of the corporation, the provisions of this paragraph Eleventh
relative to the deposit of and purchase of shares of the corporation shall be
suspended and ineffective. The corporation shall not be required to purchase
any shares represented by certificates deposited during the day, or the day
preceding the day on which the action is taken for closing said Exchange, and
may return or cause to be returned to the depositor in such case the deposited
certificate or certificates. The conditions under which trading shall be
deemed to be restricted as aforesaid and an emergency as aforesaid shall be
deemed to exist shall be determined by the rules and regulations of the
Securities and Exchange Commission.
No repurchase of shares hereunder shall be made after commencement of
proceedings to dissolve the corporation unless such proceedings are terminated
without dissolution of the corporation.
TWELFTH: Limitation on Management Contract.
Any management contract entered into by this corporation (a) shall limit the
aggregate charges per annum paid by this corporation, exclusive of interest and
taxes, to not more than half of 1% of the annual average asset value of this
corporation based upon computations of asset value made at least quarterly, (b)
shall become effective and continue in effect only if such continuance is
approved in accordance with the provisions of the Investment Company Act of
1940 as amended from time to time, and (c) shall (1) be terminable by this
corporation at any time upon not more than sixty (60) days written notice; (2)
provide that it will automatically terminate in the event of its assignment,
transfer, sale, pledge, or hypothecation by either party thereto without the
affirmative vote or written consent of the holders of a majority of the
outstanding stock of this corporation and (3) provide that it cannot be amended
except by the affirmative vote of the holders of a majority of the outstanding
stock of this corporation.
This Restated Certificate of Incorporation was duly adopted by the Board of
Directors in accordance with Section 245 of the General Corporation Law of the
State of Delaware on February 14, 1980.
IN WITNESS WHEREOF, said ENDOWMENTS, INC. has caused its corporate seal to be
hereunto affixed and this certificate to be signed by Thomas E. Terry, its Vice
President and Secretary, Treasurer, and attested by Isabelle V. Lindskoog, its
Assistant Secretary, this 14th day of February, 1980.
ENDOWMENTS, INC.
(CORPORATE SEAL)
By: /s/ THOMAS E. TERRY
Thomas E. Terry
Vice President and Secretary,
Treasurer
ATTEST:
By: /s/ ISABELLE V. LINDSKOOG
Isabelle V. Lindskoog
Assistant Secretary
STATE OF CALIFORNIA )
) ss.
CITY AND COUNTY OF SAN FRANCISCO )
BE IT REMEMBERED, that on this 14th day of February, 1980, personally came
before me, a Notary Public in and for the County and State aforesaid, Thomas E.
Terry, the Vice President and Secretary, Treasurer of ENDOWMENTS, INC., a
corporation of the State of Delaware, and he duly executed said certificate
before me and acknowledged the said certificate to be his act and deed and the
act and deed of said corporation and the facts stated therein are true; and
that the seal affixed to said certificate and attested by the Assistant
Secretary of said corporation is the common or corporate seal of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day
and year aforesaid.
/s/ PATRICK FRANCIS QUAN
Notary Public
(NOTARIAL SEAL)
ENDOWMENTS, INC.
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
ENDOWMENTS, INC. (the "Corporation"), a corporation duly organized and
existing under the laws of the State of Delaware, does hereby certify that:
1. At a meeting of the Board of Directors of the Corporation duly called and
held August 11, 1995, a resolution was unanimously adopted setting forth an
amendment to Article SIXTH of the Certificate of Incorporation of the
Corporation. The resolution setting forth the proposed amendment is as
follows:
RESOLVED, that Article SIXTH (paragraph 1) of the Certificate of Incorporation
of Endowments, Inc. be amended to read as follows:
1. The total number of shares of stock which the corporation shall have
authority to issue is Six Million (6,000,000) shares, all common stock, and the
par value of each of such shares shall be One Dollar ($1.00) per share. The
minimum amount of capital with which the corporation shall commence business is
One Thousand Dollars ($1,000).
2. At the annual meeting of shareholders duly called and held November 16,
1995, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware, said amendment was duly adopted by a favorable vote
by the holders of a majority of the stock of the Corporation (such stock being
of one class) in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
3. The capital of the Corporation will not be reduced under or by reason of
such amendment.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed
by its President and attested by its Secretary on November 21, 1995.
ENDOWMENTS, INC.
By: /s/Thomas E. Terry
Thomas E. Terry, President
ATTEST:
/s/ Patrick F. Quan
Patrick F. Quan, Secretary
STATE OF CALIFORNIA )
COUNTY OF SAN FRANCISCO ) /ss/
On December 1, 1995, before me, Barbara Preddy, personally appeared Thomas E.
Terry, President of Endowments, Inc., a corporation of the State of Delaware,
personally known to me to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument the person, or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Barbara Preddy
Notary Public
(NOTARIAL SEAL)
ENDOWMENTS, INC.
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
ENDOWMENTS, INC. (the "Corporation"), a corporation duly organized and
existing under the laws of the State of Delaware, does hereby certify that:
1. At a meeting of the Board of Directors of the Corporation duly called and
held August 11, 1995, a resolution was unanimously adopted setting forth an
amendment to Article SIXTH of the Certificate of Incorporation of the
Corporation. The resolution setting forth the proposed amendment is as
follows:
RESOLVED, that Article SIXTH (paragraph 1) of the Certificate of Incorporation
of Endowments, Inc. be amended to read as follows:
1. The total number of shares of stock which the corporation shall have
authority to issue is Six Million (6,000,000) shares, all common stock, and the
par value of each of such shares shall be One Dollar ($1.00) per share. The
minimum amount of capital with which the corporation shall commence business is
One Thousand Dollars ($1,000).
2. At the annual meeting of shareholders duly called and held November 16,
1995, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware, said amendment was duly adopted by a favorable vote
by the holders of a majority of the stock of the Corporation (such stock being
of one class) in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
3. The capital of the Corporation will not be reduced under or by reason of
such amendment.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed
by its President and attested by its Secretary on November 21, 1995.
ENDOWMENTS, INC.
By: /s/ THOMAS E. TERRY
Thomas E. Terry, President
ATTEST:
/s/ PATRICK F. QUAN
Patrick F. Quan, Secretary
STATE OF CALIFORNIA )
COUNTY OF SAN FRANCISCO ) /ss/
On December 1, 1995, before me, Barbara Preddy, personally appeared Thomas E.
Terry, President of Endowments, Inc., a corporation of the State of Delaware,
personally known to me to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument the person, or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ BARBARA PREDDY
Notary Public
(NOTARIAL SEAL)
BY-LAWS
OF
ENDOWMENTS, INC.
ARTICLE I
OFFICES
Section 1.01. The registered office of the Corporation in the State of
Delaware shall be located in the City of Wilmington, County of New Castle. The
Corporation shall also have an office in the City and County of San Francisco,
State of California, and the Corporation may have such other offices either
within or without the State of Delaware as shall be determined from time to
time by the Board of Directors.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.01. Place of Meeting. All meetings of stockholders shall be held at
the office of the Corporation in the City and County of San Francisco, State of
California, or at such other place, either within or without the State of
California, as shall be designated by the Board of Directors.
Section 2.02. Annual Meeting. The annual meeting of the stockholders shall be
held in the City and County of San Francisco, State of California, at a time as
shall from time to time be designated by the Board of Directors of the
Corporation. At each annual meeting there shall be elected a Board of
Directors to serve during the ensuing year and until their successors are
elected, and such other business shall be transacted as shall properly come
before the meeting.
Section 2.03. Special Meetings. Special meetings of the stockholders for any
purpose or purposes whatsoever may be called at any time by the Chairman of
the Board of Directors, or by the President, or by the Board of Directors, or
by one (1) or more stockholders holding not less than one-fifth (1/5) of the
voting power of the Corporation.
Section 2.04. Notice of Meetings. Notice of each meeting of stockholders,
whether annual or special, shall be given in writing to the stockholders
entitled to vote thereat, not less than ten (10) days before such meeting.
Notice of any meeting of stockholders shall specify the place, the day, and the
hour of the meeting, and, in the case of special meetings, the general nature
of the business to be transacted. A notice may be given by the Corporation to
any stockholder either personally, or by mail or other means of written
communication addressed to the stockholder at his address appearing on the
books of the Corporation.
When a meeting is adjourned for thirty (30) days or more, notice of the
adjourned meeting shall be given as in the case of an original meeting.
Section 2.05. Quorum - Adjournment. The presence in person or by proxy of the
holders of a majority of the shares entitled to vote thereat shall constitute a
quorum for the transaction of business at any meeting of the stockholders. In
the absence of a quorum any meeting of stockholders may be adjourned from time
to time by the vote of a majority of the shares, the holders of which are
either present in person or represented by proxy thereat, but no other business
may be transacted.
Section 2.06. Conduct of Meetings. Meetings of the stockholders shall be
presided over by the Chairman of the Board, or if he is not present, by the
President, or if neither the Chairman of the Board nor the President is
present, by a President pro-tem to be chosen at the meeting. The Secretary of
the Corporation, or in his absence an Assistant Secretary, shall act as
Secretary at the meeting; or if neither the Secretary nor an Assistant
Secretary is present, then the meeting shall choose its Secretary.
Section 2.07. Voting. Every stockholder shall be entitled to one vote for
each share of stock of the Corporation held by him. Each holder of a
fractional share shall have a fraction of one vote equivalent to the fraction
of a share held by him. At any election of directors the nominees receiving
the highest number of votes, up to the number of directors to be elected at
such election shall be deemed elected.
ARTICLE III
DIRECTORS
Section 3.01. Number and Election of Directors. The Board of Directors shall
consist of not less than five (5), nor more than twelve (12) directors and the
exact number of directors shall be fixed within said limit by a resolution duly
adopted by the Board of Directors. Any vacancy occurring in the Board of
Directors by reason of death, resignation, or for any other reason, may be
filled by a majority of the directors then in office at any meeting; provided,
however, that immediately after the filling of such vacancy the majority of the
directors then holding office shall have been elected to such office by the
stockholders. In the event that at any time less than a majority of the
directors were so elected by the stockholders, a special meeting of the
stockholders shall be held as promptly as possible for the purpose of electing
directors to fill any vacancies which cannot be filled by the directors in
office.
Section 3.02. General Powers. Subject to the limitation of the Certificate of
Incorporation or of any statute as to action to be authorized or approved by
the shareholders, all corporate powers shall be exercised by or under authority
of, and the business and affairs of the Corporation shall be controlled by, the
Board of Directors. The Board of Directors shall cause to be kept a record of
its proceedings and of those of the stockholders.
ARTICLE IV
DIRECTORS MEETINGS
Section 4.01. Place of Meeting. Meetings of the directors shall be held in
the City and County of San Francisco, State of California, or at such other
place either within or without the State of California, as shall be designated
by the Board of Directors.
Section 4.02. Regular Meetings. The next meeting of directors subsequent to
the annual meeting of stockholders shall be held for the purpose of organizing
the Board, electing officers and transacting such other business as may come
before the meeting. Thereafter regular meetings of the Board of Directors
shall be held at such time as may be designated by the Board. If the fixed day
for any regular meeting shall fall on a holiday, the meeting shall take place
on the next business day, unless otherwise ordered by the Board of Directors.
Section 4.03. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board of Directors, or by the President,
or by any two (2) directors.
Section 4.04. Notice of Meeting. Written notice of the time and place of each
meeting of the Board shall be delivered personally to each director, or mailed
or telegraphed to each director addressed to him at his residence or usual
place of business, at least twenty-four (24) hours before the time fixed for
the meeting; provided that notice of the time and place of holding an
adjournment of a regular or special meeting need not be given to absent
directors if the time and place of such meeting is fixed at the meeting
adjourned.
Section 4.05. Quorum and Manner of Acting. At all meetings of the Board of
Directors one-third of the total number of directors authorized but not less
than two directors shall be present in person at such meeting to constitute a
quorum. Unless a greater number is otherwise expressly required by statute,
every act or decision done or made by a majority of the directors present at a
meeting duly held, at which a quorum is present, shall be regarded as the act
of the Board of Directors. Any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if prior to such action a written consent thereto is signed
by all members of the Board or such committee, as the case may be, and such
written consent is filed with the minutes of the proceedings of the Board or
committee.
Section 4.06. Presiding Officer. The Chairman of the Board of Directors, or
in his absence, the President, or, in their absence, any director selected by
the directors present, shall preside as Chairman at meetings of the Board of
Directors.
ARTICLE V
OFFICERS AND COMMITTEES
Section 5.01. Principal Officers. The principal corporative officers of this
Corporation shall be a Chairman of the Board of Directors, a President, one or
more Vice Presidents, a Secretary, a Treasurer, and such other officers as the
Board of Directors may determine to elect in accordance with these By-Laws.
The Board of Directors shall designate as chief executive officer of the
Corporation either the Chairman of the Board or the President. Any two or more
of such offices, except those of President and Secretary may be held by the
same person.
Section 5.02. Election and Term of Office. Each officer shall be elected
annually by the Board of Directors at its organization meeting after the annual
meeting of stockholders, or any subsequent meeting of the Board of Directors,
and (subject to the power or removal by the Board of Directors) shall hold
office for one (1) year and until his successor is elected and qualified or
until his death or resignation. Any officer may be removed either with or
without cause by the Board of Directors.
Section 5.03. The Chairman of the Board of Directors. The Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors, and
at all meetings of stockholders. The Chairman of the Board of Directors shall
ex-officio be a member of all committees of the Board of Directors and shall
perform all such other duties as may be prescribed by the Board of Directors.
Section 5.04. The President. The President shall have general supervision
over the affairs of the Corporation, and shall perform all such other duties as
may be prescribed by the Board of Directors. In the absence of the Chairman of
the Board of Directors, he shall preside at meetings of the Board of Directors
and at meetings of stockholders. The President shall ex-officio be a member of
all committees of the Board of Directors.
Section 5.05. Vice President. Vice Presidents shall possess such powers and
perform such duties as may from time to time be assigned to them by the Board
of Directors or by the President.
Section 5.06. The Secretary. The Secretary shall see that all notices are
duly given in accordance with the provisions of these By-Laws or as required by
law. It shall be the duty of the Secretary to attend the meetings of the
stockholders and of the Board of Directors and keep the minutes of their
proceedings. He shall have charge of the minute books and shall make such
reports and perform such other duties as are incident to his office or as are
required of him by the Board of Directors, the Chairman of the Board of
Directors, or the President.
Section 5.07. The Treasurer. The Treasurer shall have general supervision
over the care and custody of all funds and securities of the Corporation
subject to the control of the Board of Directors. He shall sign or countersign
such instruments as require his signature and shall also perform such other
duties as may be required of him by the Board of Directors or by the President.
Section 5.08. Committees. The Board of Directors may appoint committees to
consist of such number as may be fixed by the Board, and may prescribe the
powers and authority of such committees.
ARTICLE VI
CERTIFICATES OF STOCK AND THEIR TRANSFER
Section 6.01. Certificates of Stock. The interest of each stockholder of the
Corporation shall be evidenced by certificates for shares of stock in such form
as shall be required by law and as shall be approved by the Board of Directors.
Any subscriber to or purchaser of shares of the Corporation or fractions
thereof, may agree that the issuance of said certificates may be delayed until
he shall request the issuance thereof or the Corporation shall elect to issue
same, and in case of any such agreement, said shares or fractions thereof, upon
payment therefor, shall be treated and regarded for all purposes, including,
without being limited thereto, payment of dividends and voting right, as issued
and outstanding shares or fractions thereof.
Each certificate shall have the corporate seal affixed thereto by impression or
in facsimile and shall be signed by the Chairman of the Board of Directors, the
President, or any Vice President, and countersigned by the Secretary or any
Assistant Secretary; provided that certificates may be signed, countersigned or
authenticated by facsimile signatures as provided by law and in such event
shall be countersigned by a transfer agent or clerk and registered by an
incorporated bank or trust company as registrar of transfers.
Section 6.02. Transfer of Stock. The shares of stock of the corporation shall
be transferred on the books of the corporation by the holder thereof in person,
or by his attorney, upon presentation of an assignment or power of transfer
duly executed, with such proof of the authenticity of the signature as the
corporation or its agent may reasonably require and if certificates for such
shares have been issued, upon surrender of such certificates for cancellation.
The Board of Directors shall have the power to make such rules and regulations
as the Board may deem expedient concerning the issue, registration, and
transfer of shares of stock, and may appoint transfer agents or clerks and
registrars thereof; provided, however, that the transfer of shares or fractions
thereof, issued by the Corporation shall at all times be unrestricted, subject
to the charging of the customary transfer agent fee, if any.
Section 6.03. Stockholders Record Date. The Board of Directors may close the
stock transfer books of the Corporation for a period not exceeding fifty (50)
days preceding the date of any meeting of stockholders, or the date for payment
of any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of stock shall go into effect; or, in lieu of
closing the stock transfer books, the Board of Directors may fix in advance a
date, not exceeding fifty (50) days preceding the date of any meeting of
stockholders or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
stock shall go into effect, as a record date for the determination of the
stockholders entitled to notice of, and to vote at, any such meeting, or any
adjournment thereof, or entitled to receive payment of any such dividend, or to
any such allotment of rights, or to exercise the rights in respect to any such
change, conversion or exchange of stock, and in such case only such
stockholders as shall be stockholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting or any adjournment
thereof, or to receive payment of such dividend or to receive such allotment of
rights, or to exercise such rights, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation after any such record
date fixed as aforesaid.
ARTICLE VII
FISCAL YEAR
Section 7.01. Fiscal Year. The fiscal year of the Corporation shall begin
with the first day of August and shall end with the last day of July in each
year.
ARTICLE VIII
CUSTODIAN
Section 8.01. The Corporation shall enter into a written custodial contract
with one or more banks or trust companies selected by the Board of Directors
pursuant to the Certificate of Incorporation. All cash and corporate
securities from time to time owned by the Corporation shall be deposited with
said custodian in accordance with the contract.
ARTICLE IX
CHECKS, PROXIES AND OTHER INSTRUMENTS
Section 9.01. Signatures - Checks. Subject to the provisions of any agreement
entered into pursuant to Article VIII hereof, all checks and drafts on the
Corporation's bank accounts and all bills of exchange and promissory notes and
all acceptances, obligations and other instruments for the payment of money
shall be signed by such officer or officers or agent or agents as shall be
thereunto authorized from time to time by the Board of Directors.
Section 9.02. Execution of Proxies. The Chairman of the Board of Directors,
the President, any Vice President, Assistant Vice President, or any officer or
officers of the Corporation authorized so to do by the Board of Directors, may
execute, from time to time, proxies or powers of attorney authorizing any
person or persons, who may be designated by such officers for that purpose, to
represent the Corporation at any stockholders' meeting (either annual or
special) of any corporation of which the Corporation is or shall be a
stockholder.
Section 9.03. Execution of Other Instruments. All instruments, the execution
of which has not been otherwise provided for in these By-Laws, shall be validly
executed only when signed on behalf of the Corporation by (i) the Chairman of
the Board of Directors, the President, or any Vice President, or (ii) any other
officer together with the Secretary or the Treasurer, or (iii) any officer or
officers or attorney-in-fact or agent authorized by resolution of the Board of
Directors to execute the same.
ARTICLE X
WAIVER OF NOTICE
Section 10.01. Whenever any notice whatsoever is required to be given by
statute or by these By-Laws, a waiver thereof, in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE XI
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
Section 11.01. The corporation shall indemnify its directors and officers and
may indemnify its employees and agents to the full extent permitted by the law
of the State of Delaware; provided, however, that the corporation shall not
indemnify any of its directors or officers against any liability to the
corporation or to its stockholders to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office
as described in Section 17(h) of the Investment Company Act of 1940 ("disabling
conduct"). The corporation shall indemnify any of its directors or officers
against any liability to the corporation or to its stockholders if:
(1) a court or other body before whom a proceeding relating to liability was
brought renders a final decision on the merits finding such director or officer
not liable by reason of disabling conduct or
(2) in the absence of such a decision either:
(a) a majority of a quorum of directors, who are neither interested persons of
the corporation as defined in Section 2(a)(19) of the Investment Company Act of
1940 nor parties to the proceeding, or
(b) independent legal counsel in a written opinion makes a reasonable
determination, based on a review of the facts, that such director or officer is
not liable by reason of disabling conduct.
The corporation may advance funds to cover expenses, including attorneys'
fees, incurred by any director or officer in connection with the defense of any
such proceeding, provided that such director or officer undertakes to repay any
advance, unless a determination is made pursuant to the foregoing procedures
set forth herein that such indemnification is proper. As a condition to such
an advance (i) the director or officer shall provide security for his
undertaking; (ii) the corporation shall be insured against losses arising by
reason of any lawful advance; or (iii) a majority of a quorum of the directors,
who are neither 'interested persons' of the corporation as defined in Section
2(a)(19) of the Investment Company Act of 1940 nor parties to the proceeding,
or independent legal counsel in a written opinion, shall determine, based on
review of readily available facts, that there is reason to believe that such
director or officer will be found entitled to indemnification.
ARTICLE XII
AMENDMENT OF BY-LAWS
Section 12.01. The By-Laws of the Corporation may be altered, amended, or
repealed or added to at any meeting of the stockholders by the affirmative vote
of the holders of a majority of the shares present and voting at such meeting.
Except as otherwise provided by law or these By-Laws, the By-Laws of the
Corporation also may be altered, amended, or repealed or added to, at any
meeting of the Board of Directors, by the affirmative vote of a majority of the
whole Board.
NUMBER SHARES
LP 01010 (Void)
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE MAY 26, 1969.
ENDOWMENTS, INC.
SHARES OF THE PAR VALUE OF ONE DOLLAR EACH - ALL OF ONE CLASS
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 292645 10 8
This Certifies that is the owner of
full-paid and non-assessable shares of the par value of $1.00 per share of the
Capital Stock of Endowments, Inc., transferable on the books of the corporation
in person or by duly authorized attorney upon surrender of this certificate
properly endorsed. This certificate is not valid unless countersigned by the
Transfer Agent.
Witness the seal of the corporation and the signatures of its duly authorized
officers.
Dated:
/s/ Thomas E. Terry /s/ Richard H.M. Holmes
Secretary President
COUNTERSIGNED
AMERICAN FUNDS SERVICE COMPANY
Los Angeles, California
TRANSFER AGENT
BY
AUTHORIZED SIGNATURE
<PAGE>
In accordance with the Company's Certificate of Incorporation these 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 the Internal Revenue Code of 1954, Section 501(c)(3).
An investor which loses its exempt status must either immediately transfer all
its shares in the Company to another institution so exempt or, at the
shareholder's election, sell all its shares to the Company at net asset value
at the price next computed after receipt of the shares by the Company.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of survivorship under Uniform Gifts to Minors
and not as tenants in common Act
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign, and transfer unto
(please insert social security or other identifying number of assignee)
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
Shares of Capital Stock represented by the written Certificate, and to
hereby irrevocably constitute and appoint
Attorney to transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
Dated:
NOTICE: SIGNATURE(S) MUST CORRESPOND EXACTLY WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE.
Signatures(s) guarantee by:
(COMMERCIAL BANK OR
INVESTMENT DEALER)
INVESTMENT ADVISORY AND SERVICE AGREEMENT
THIS AGREEMENT, dated and effective as of the 28th day of July, 1975, is made
and entered into by and between ENDOWMENTS, INC., a Delaware corporation,
(hereinafter called the "Fund"), and CAPITAL RESEARCH AND MANAGEMENT COMPANY, a
Delaware corporation, (hereinafter called the "Adviser"). The parties agree as
follows:
1.
The Fund hereby employs the Adviser to furnish advice to the Fund with respect
to the investment and reinvestment of the assets of the Fund. The Adviser
hereby accepts such employment and agrees to render the services and to assume
the obligation to the extent herein set forth, for the compensation herein
provided. The Adviser shall, for all purposes herein, be deemed an independent
contractor and not an agent of the Fund.
2.
The Adviser agrees to provide supervision of the portfolio of the Fund and, to
the extent authorized by the Board of Directors of the Fund, to determine what
securities or other property shall be purchased or sold by the Fund, giving due
consideration to the policies of the Fund as expressed in the Fund's
Certificate of Incorporation, By-Laws, Registration Statement under the
Investment Company Act of 1940, as amended (the "1940 Act"), Registration
Statement under the Securities Act of 1933, as amended (the "1933 Act"), and
prospectus as in use from time to time, as well as to the factors affecting the
Fund's status as a regulated investment company under the Internal Revenue Code
of 1954, as amended.
The Adviser shall provide adequate facilities and qualified personnel for the
placement of orders for the purchase, or other acquisition, and sale, or other
disposition, of portfolio securities for the Fund. With respect to such
transactions, the Adviser, subject to such directions as may be furnished from
time to time by the Board of Directors of the Fund, shall endeavor as the
primary objective to obtain the most favorable prices and executions of orders.
Subject to such primary objective, the Adviser may place orders with brokerage
firms which have sold shares of the Fund or which furnish statistical and other
information to the Adviser, taking into account the value and quality of the
brokerage services of such broker-dealers, including the availability and
quality of such statistical and other information. Receipt by the Adviser of
any such statistical and other information and services shall not be deemed to
give rise to any requirement for abatement of the advisory fee payable pursuant
to Section 6 hereof.
3.
The Adviser shall furnish the services of persons to perform the executive,
administrative, clerical, and bookkeeping functions of the Fund, including the
daily determination of net asset value and offering price per share. The
Adviser shall pay the compensation and travel expenses of all such persons, and
they shall serve without additional compensation from the Fund. The Adviser
shall also, at its expense, provide the Fund with suitable office space (which
may be in the offices of the Adviser); all necessary small office equipment and
utilities; and general purpose accounting forms, supplies, and postage used at
the offices of the Fund.
4.
The Fund shall pay all its expenses not assumed by the Adviser as provided
herein. Such expenses shall include, but shall not be limited to, custodian,
registrar, stock transfer and dividend disbursing fees and expenses; costs of
the designing, printing and mailing of reports, prospectuses, proxy statements,
and notices to its shareholders; taxes; expenses of the issuance and redemption
of shares of the Fund (including stock certificates, registration and
qualification fees and expenses); legal and auditing expenses; compensation,
fees, and expenses paid to directors; association dues; and costs of stationery
and forms prepared exclusively for the Fund.
5.
For the services to be rendered and for the facilities to be furnished as
provided in Section 1 above, the Fund shall pay and the Adviser shall be
entitled to receive an aggregate fee as follows:
(a) On the first $150,000,000 of net asset value of the Fund, a fee of fifty
one-hundredths of one percent (50/lOOths of 1%) per annum;
(b) On any amount over $150,000,000 of net asset value of the Fund, forty
one-hundredths of one percent (40/lOOths of 1%) per annum.
Such fee shall be computed and accrued daily at one three-hundred-sixty-fifth
(1/365th) of the applicable annual rate set forth in (a) and (b) above. The
net asset value of the Fund shall be determined in the manner set forth in the
Certificate of Incorporation and prospectus of the Fund as of the close of the
New York Stock Exchange on each day on which said Exchange is open, and in the
case of Saturdays, Sundays, and other days on which said Exchange shall not be
open, as at the close of the last preceding day on which said Exchange shall
have been open. The amounts thus computed and accrued during each calendar
month shall be paid to the Adviser on or before the tenth (lOth) day of the
succeeding calendar month, provided, however, that in the event of any
termination of this Agreement, such fee shall be computed and paid to the date
of such termination.
6.
The Adviser agrees to reduce the fee payable to it under this Agreement by the
amount by which the ordinary operating expenses of the Fund for any fiscal year
of the Fund, excluding interest, taxes and extraordinary expenses, shall exceed
one and one-half percent (1 1/2%) of the first $30 million of average net
assets of the Fund determined pursuant to Section 5, plus one percent (1%) of
such average net assets in excess thereof. Costs incurred in connection with
the purchase or sale of portfolio securities, including brokerage fees and
commissions, which are capitalized in accordance with generally accepted
accounting principles applicable to investment companies, shall be accounted
for as capital items and not as expenses. Proper accruals shall be made by the
Fund for any projected reduction hereunder, and corresponding amounts shall be
withheld from the fees paid by the Fund to the Adviser. Any additional
reduction computed at the end of the fiscal year shall be deducted from the fee
for the last month of such fiscal year, and any excess shall be paid to the
Fund immediately after the fiscal year end, and in any event prior to
publication of the Fund's annual report as a reduction of the fees previously
paid during the fiscal year.
7.
Nothing contained in this Agreement shall be construed to prohibit the Adviser
from performing investment advisory, management, or distribution services for
other investment companies and other persons or companies, or to prohibit
affiliates of the Adviser from engaging in such businesses or in other related
or unrelated businesses.
8.
The Adviser shall have no liability to the Fund, or its shareholders, for any
error of judgment, mistake of law, or for any loss arising out of any
investment, or for any other act or omission in the performance of its
obligations to the Fund not involving willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties hereunder.
9.
This Agreement shall continue in effect until the close of business on July
27, 1977. It may thereafter be renewed from year to year by mutual consent,
provided that such renewal shall be specifically approved at least annually by
(i) the Board of Directors of the Fund, or by the vote of a majority (as
defined in the 1940 Act) of the outstanding voting securities of the Fund, and
(ii) a majority of those directors who are not parties to this Agreement or
interested persons (as defined in the 1940 Act) of any such party cast in
person at a meeting called for the purpose of voting on such approval. Such
mutual consent to renewal shall not be deemed to have been given unless
evidenced by a writing signed by both parties hereto.
10.
This Agreement may be terminated at any time, without payment of any penalty,
by the Board of Directors of the Fund or by the vote of a majority (as defined
in the 1940 Act) of the outstanding voting securities of the Fund, on sixty
(60) days' written notice to the Adviser, or by the Adviser on like notice to
the Fund. This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate originals by their officers thereunto duly authorized as
of the day and year first above written.
CAPITAL RESEARCH AND
MANAGEMENT COMPANY ENDOWMENTS, INC.
By /s/ ROBERT L. CODY By /s/ RICHARD H. M. HOLMES
By /s/ JAMES W. RATZLAFF By /s/ THOMAS E. TERRY
RENEWAL OF INVESTMENT ADVISORY AND SERVICE AGREEMENT
THIS AGREEMENT, made this 16th day of May, 1997, between ENDOWMENTS, INC., a
Delaware corporation (hereinafter called the "Fund") and Capital Research and
Management Company, a Delaware corporation (hereinafter called the "Investment
Adviser").
W I T N E S S E T H:
WHEREAS, there is now in effect an Investment Advisory and Service Agreement
dated July 28, 1975, to be in effect through July 27, 1997, between the Fund
and the Investment Adviser, providing for research, portfolio management
services, and administrative services, to be furnished to the Fund by the
Investment Adviser on certain terms and conditions and subject to certain
provisions set forth therein; and
WHEREAS, said Agreement was approved by the vote of the holders of a majority
of the outstanding shares of the capital stock of the Fund at the Special
Meeting of Stockholders held July 22, 1975, and said Agreement provides for
year to year renewals by mutual consent, upon certain specified conditions, and
the renewal of such Agreement has been approved by the Board of Directors of
the Fund on May 15, 1997; and
WHEREAS, the Fund and the Investment Adviser wish to renew said Agreement for
the additional period of one year from July 28, 1997 through July 27, 1998, and
such renewal has been approved as required by the terms of the Agreement;
NOW, THEREFORE, such parties agree as follows:
1. The Investment Advisory and Service Agreement dated July 28, 1975, is
hereby renewed for the additional period of one year, beginning July 28, 1997
and ending at the close of business on July 27, 1998.
2. In all other respects said Investment Advisory and Service Agreement, as
now amended and in effect, is reaffirmed and shall continue in effect for the
period provided by such Agreement as renewed by this Agreement.
3. This Agreement shall be executed in several counterparts, each of which
shall be original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their corporate names by their duly authorized officers as of the
day and year first above written.
ENDOWMENTS, INC.
By
Robert B. Egelston, Chairman of the Board
By
Patrick F. Quan, Secretary
CAPITAL RESEARCH AND MANAGEMENT
COMPANY
By
James F. Rothenberg, President
By
Michael J. Downer, Secretary
FORM OF GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective _______________ and is between THE CHASE
MANHATTAN BANK (the "Bank") and [fund name] (the "Customer").
1. Customer Accounts.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) A custody account in the name of the Customer ("Custody Account")
for any and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase or subscribe for the same or evidencing or representing any other
rights or interests therein and other similar property whether certificated or
uncertificated as may be received by the Bank or its Subcustodian (as defined
in Section 3) for the account of the Customer ("Securities"); and
(b) A deposit account in the name of the Customer ("Deposit Account")
for any and all cash in any currency received by the Bank or its Subcustodian
for the account of the Customer, which cash shall not be subject to withdrawal
by draft or check.
The Customer warrants its authority to: 1) deposit the cash and Securities
("Assets") received in the Accounts and 2) give Instructions (as defined in
Section 11) concerning the Accounts. The Bank may deliver securities of the
same class in place of those deposited in the Custody Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional Accounts
under the terms of this Agreement.
2. Maintenance of Securities and Cash at Bank and Subcustodian Locations.
Unless Instructions specifically require another location acceptable to
the Bank:
(a) Securities will be held in the country or other jurisdiction in
which the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) Cash will be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or
non-interest bearing accounts as may be available for the particular currency.
To the extent Instructions are issued and the Bank can comply with such
Instructions, the Bank is authorized to maintain cash balances on deposit for
the Customer with itself or one of its affiliates at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as the Customer may direct, if acceptable to the Bank.
If the Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians as defined in Section 3
(or their securities depositories), such arrangement must be authorized by a
written agreement, signed by the Bank and the Customer.
3. Subcustodians and Securities Depositories.
The Bank may act under this Agreement through the subcustodians listed in
Schedule A of this Agreement with which the Bank has entered into subcustodial
agreements ("Subcustodians"). The Customer authorizes the Bank to hold Assets
in the Accounts in accounts which the Bank has established with one or more of
its branches or Subcustodians. The Bank and Subcustodians are authorized to
hold any of the Securities in their account with any securities depository in
which they participate.
The Bank reserves the right to add new, replace or remove Subcustodians.
The Customer will be given reasonable notice by the Bank of any amendment to
Schedule A. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other regulatory
authority that supervises or regulates such Subcustodian.
4. Use of Subcustodian.
(a) The Bank will identify such Assets on its books as belonging to
the Customer.
(b) A Subcustodian will hold such Assets together with assets
belonging to other customers of the Bank in accounts identified on such
Subcustodian's books as special custody accounts for the exclusive benefit of
customers of the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be subject
only to the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only to
the instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for holding
its customer's assets shall provide that such assets will not be subject to any
right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets will be freely transferable without the payment of
money or value other than for safe custody or administration. The foregoing
shall not apply to the extent of any special agreement or arrangement made by
the Customer with any particular Subcustodian.
5. Deposit Account Transactions.
(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include all information required by
the Bank.
(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, the Bank, in its
discretion, may advance the Customer such excess amount which shall be deemed a
loan payable on demand, bearing interest at the rate customarily charged by the
Bank on similar loans.
(c) If the Bank credits the Deposit Account on a payable date, or at
any time prior to actual collection and reconciliation to the Deposit Account,
with interest, dividends, redemptions or any other amount due, the Customer
will promptly return any such amount upon oral or written notification: (i)
that such amount has not been received in the ordinary course of business or
(ii) that such amount was incorrectly credited. If the Customer does not
promptly return any amount upon such notification, the Bank shall be entitled,
upon oral or written notification to the Customer, to reverse such credit by
debiting the Deposit Account for the amount previously credited. The Bank or
its Subcustodian shall have no duty or obligation to institute legal
proceedings, file a claim or a proof of claim in any insolvency proceeding or
take any other action with respect to the collection of such amount, but may
act for the Customer upon Instructions after consultation with the Customer.
6. Custody Account Transactions.
(a) Securities will be transferred, exchanged or delivered by the Bank
or its Subcustodian upon receipt by the Bank of Instructions which include all
information required by the Bank. Settlement and payment for Securities
received for, and delivery of Securities out of, the Custody Account may be
made in accordance with the customary or established securities trading or
securities processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation, delivery of
Securities to a purchaser, dealer or their agents against a receipt with the
expectation of receiving later payment and free delivery. Delivery of
Securities out of the Custody Account may also be made in any manner
specifically required by Instructions acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect to any sale,
exchange or purchase of Securities. Otherwise, such transactions will be
credited or debited to the Accounts on the date cash or Securities are actually
received by the Bank and reconciled to the Account.
(i) The Bank may reverse credits or debits made to the Accounts in its
discretion if the related transaction fails to settle within a reasonable
period, determined by the Bank in its discretion, after the contractual
settlement date for the related transaction.
(ii) If any Securities delivered pursuant to this Section 6 are
returned by the recipient thereof, the Bank may reverse the credits and debits
of the particular transaction at any time.
7. Actions of the Bank.
The Bank shall follow Instructions received regarding assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank
will:
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items
which call for payment upon presentation, to the extent that the Bank or
Subcustodian is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any transfers
of Assets to or from the Accounts. Such statements, advices or notifications
shall indicate the identity of the entity having custody of the Assets. Unless
the Customer sends the Bank a written exception or objection to any Bank
statement within sixty (60) days of receipt, the Customer shall be deemed to
have approved such statement. In such event, or where the Customer has
otherwise approved any such statement, the Bank shall, to the extent permitted
by law, be released, relieved and discharged with respect to all matters set
forth in such statement or reasonably implied therefrom as though it had been
settled by the decree of a court of competent jurisdiction in an action where
the Customer and all persons having or claiming an interest in the Customer or
the Customer's Accounts were parties.
All collections of funds or other property paid or distributed in respect
of Securities in the Custody Account shall be made at the risk of the Customer.
The Bank shall have no liability for any loss occasioned by delay in the actual
receipt of notice by the Bank or by its Subcustodians of any payment,
redemption or other transaction regarding Securities in the Custody Account in
respect of which the Bank has agreed to take any action under this Agreement.
8. Corporate Actions; Proxies.
Whenever the Bank receives information concerning the Securities which
requires discretionary action by the beneficial owner of the Securities (other
than a proxy), such as subscription rights, bonus issues, stock repurchase
plans and rights offerings, or legal notices or other material intended to be
transmitted to securities holders ("Corporate Actions"), the Bank will give the
Customer notice of such Corporate Actions to the extent that the Bank's central
corporate actions department has actual knowledge of a Corporate Action in time
to notify its customers.
When a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend, stock split or similar Corporate Action is received
which bears an expiration date, the Bank will endeavor to obtain Instructions
from the Customer or its Authorized Person, but if Instructions are not
received in time for the Bank to take timely action, or actual notice of such
Corporate Action was received too late to seek Instructions, the Bank is
authorized to sell such rights entitlement or fractional interest and to credit
the Deposit Account with the proceeds or take any other action it deems, in
good faith, to be appropriate in which case it shall be held harmless for any
such action.
The Bank will deliver proxies to the Customer or its designated agent
pursuant to special arrangements which may have been agreed to in writing.
Such proxies shall be executed in the appropriate nominee name relating to
Securities in the Custody Account registered in the name of such nominee but
without indicating the manner in which such proxies are to be voted; and where
bearer Securities are involved, proxies will be delivered in accordance with
Instructions.
9. Nominees.
Securities which are ordinarily held in registered form may be registered
in a nominee name of the Bank, Subcustodian or securities depository, as the
case may be. The Bank may without notice to the Customer cause any such
Securities to cease to be registered in the name of any such nominee and to be
registered in the name of the Customer. In the event that any Securities
registered in a nominee name are called for partial redemption by the issuer,
the Bank may allot the called portion to the respective beneficial holders of
such class of security in any manner the Bank deems to be fair and equitable.
The Customer agrees to hold the Bank, Subcustodians, and their respective
nominees harmless from any liability arising directly or indirectly from their
status as a mere record holder of Securities in the Custody Account.
10. Authorized Persons.
As used in this Agreement, the term "Authorized Person" means employees or
agents including investment managers as have been designated by written notice
from the Customer or its designated agent to act on behalf of the Customer
under this Agreement. Such persons shall continue to be Authorized Persons
until such time as the Bank receives Instructions from the Customer or its
designated agent that any such employee or agent is no longer an Authorized
Person.
11. Instructions.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information system
acceptable to the Bank which the Bank believes in good faith to have been given
by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may specify.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until canceled or superseded.
Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but the Customer will hold
the Bank harmless for the failure of an Authorized Person to send such
confirmation in writing, the failure of such confirmation to conform to the
telephone instructions received or the Bank's failure to produce such
confirmation at any subsequent time. The Bank may electronically record any
Instructions given by telephone, and any other telephone discussions with
respect to the Custody Account. The Customer shall be responsible for
safeguarding any testkeys, identification codes or other security devices which
the Bank shall make available to the Customer or its Authorized Persons.
12. Standard of Care; Liabilities.
(a) The Bank shall be responsible for the performance of only such
duties as are set forth in this Agreement or expressly contained in
Instructions which are consistent with the provisions of this Agreement as
follows:
(i) The Bank will use reasonable care with respect to its obligations
under this Agreement and the safekeeping of Assets. The Bank shall be liable
to the Customer for any loss which shall occur as the result of the failure of
a Subcustodian to exercise reasonable care with respect to the safekeeping of
such Assets to the same extent that the Bank would be liable to the Customer if
the Bank were holding such Assets in New York. In the event of any loss to the
Customer by reason of the failure of the Bank or its Subcustodian to utilize
reasonable care, the Bank shall be liable to the Customer only to the extent of
the Customer's direct damages, to be determined based on the market value of
the property which is the subject of the loss at the date of discovery of such
loss and without reference to any special conditions or circumstances.
(ii) The Bank will not be responsible for any act, omission, default or
for the solvency of any broker or agent which it or a Subcustodian appoints
unless such appointment was made negligently or in bad faith.
(iii) The Bank shall be indemnified by, and without liability to the
Customer for any action taken or omitted by the Bank whether pursuant to
Instructions or otherwise within the scope of this Agreement if such act or
omission was in good faith, without negligence. In performing its obligations
under this Agreement, the Bank may rely on the genuineness of any document
which it believes in good faith to have been validly executed.
(iv) The Customer agrees to pay for and hold the Bank harmless from any
liability or loss resulting from the imposition or assessment of any taxes or
other governmental charges, and any related expenses with respect to income
from or Assets in the Accounts.
(v) The Bank shall be entitled to rely, and may act, upon the advice
of counsel (who may be counsel for the Customer) on all matters and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.
(vi) The Bank need not maintain any insurance for the benefit of the
Customer.
(vii) Without limiting the foregoing, the Bank shall not be liable for
any loss which results from: 1) the general risk of investing, or 2) investing
or holding Assets in a particular country including, but not limited to, losses
resulting from nationalization, expropriation or other governmental actions;
regulation of the banking or securities industry; currency restrictions,
devaluations or fluctuations; and market conditions which prevent the orderly
execution of securities transactions or affect the value of Assets.
(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear fusion,
fission or radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions to the Customer or
an Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments or
the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any default
in the payment of principal or income of any security other than as provided in
Section 5(c) of this Agreement;
(iv) evaluate or report to the Customer or an Authorized Person
regarding the financial condition of any broker, agent or other party to which
Securities are delivered or payments are made pursuant to this Agreement;
(v) review or reconcile trade confirmations received from brokers.
The Customer or its Authorized Persons (as defined in Section 10) issuing
Instructions shall bear any responsibility to review such confirmations against
Instructions issued to and statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may have a
material interest in a transaction, or circumstances are such that the Bank may
have a potential conflict of duty or interest including the fact that the Bank
or any of its affiliates may provide brokerage services to other customers, act
as financial advisor to the issuer of Securities, act as a lender to the issuer
of Securities, act in the same transaction as agent for more than one customer,
have a material interest in the issue of Securities, or earn profits from any
of the activities listed herein.
13. Fees and Expenses.
The Customer agrees to pay the Bank for its services under this Agreement
such amount as may be agreed upon in writing, together with the Bank's
reasonable out-of-pocket or incidental expenses, including, but not limited to,
legal fees. The Bank shall have a lien on and is authorized to charge any
Accounts of the Customer for any amount owing to the Bank under any provision
of this Agreement.
14. Miscellaneous.
(a) Foreign Exchange Transactions. To facilitate the administration
of the Customer's trading and investment activity, the Bank is authorized to
enter into spot or forward foreign exchange contracts with the Customer or an
Authorized Person for the Customer and may also provide foreign exchange
through its subsidiaries, affiliates or Subcustodians. Instructions, including
standing instructions, may be issued with respect to such contracts but the
Bank may establish rules or limitations concerning any foreign exchange
facility made available. In all cases where the Bank, its subsidiaries,
affiliates or Subcustodians enter into a foreign exchange contract related to
Accounts, the terms and conditions of the then current foreign exchange
contract of the Bank, its subsidiary, affiliate or Subcustodian and, to the
extent not inconsistent, this Agreement shall apply to such transaction.
(b) Certification of Residency, etc. The Customer certifies that it
is a resident of the United States and agrees to notify the Bank of any changes
in residency. The Bank may rely upon this certification or the certification
of such other facts as may be required to administer the Bank's obligations
under this Agreement. The Customer will indemnify the Bank against all losses,
liability, claims or demands arising directly or indirectly from any such
certifications.
(c) Access to Records. The Bank shall allow the Customer's
independent public accountant reasonable access to the records of the Bank
relating to the Assets as is required in connection with their examination of
books and records pertaining to the Customer's affairs. Subject to
restrictions under applicable law, the Bank shall also obtain an undertaking to
permit the Customer's independent public accountants reasonable access to the
records of any Subcustodian which has physical possession of any Assets as may
be required in connection with the examination of the Customer's books and
records.
(d) Governing Law; Successors and Assigns. This Agreement shall be
governed by the laws of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and the
Bank.
(e) Entire Agreement; Applicable Riders. Customer represents that the
Assets deposited in the Accounts are (Check one):
Employee Benefit Plan or other assets subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA");
X Mutual Fund assets subject to certain Securities and Exchange
Commission ("SEC") rules and regulations;
Neither of the above.
This Agreement consists exclusively of this document together with
Schedule A, and the following Rider(s) [Check applicable rider(s)]:
ERISA
X MUTUAL FUND
X SPECIAL TERMS AND CONDITIONS
There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether written or oral, between the parties.
Any amendment to this Agreement must be in writing, executed by both parties.
(f) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or enforceable in any respect on the basis
of any particular circumstances or in any jurisdiction, the validity, legality
and enforceability of such provision or provisions under other circumstances or
in other jurisdictions and of the remaining provisions will not in any way be
affected or impaired.
(g) Waiver. Except as otherwise provided in this Agreement, no
failure or delay on the part of either party in exercising any power or right
under this Agreement operates as a waiver, nor does any single or partial
exercise of any power or right preclude any other or further exercise, or the
exercise of any other power or right. No waiver by a party
of any provision of this Agreement, or waiver of any breach or default, is
effective unless in writing and signed by the party against whom the waiver is
to be enforced.
(h) Notices. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses
or such other addresses as may subsequently be given to the other party in
writing:
Bank: The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, NY 11245
Attention: Global Custody Division
or telex:
Customer: Capital Research and Management Company
135 South State College Blvd.
Brea, CA 92821
or telex:
(i) Termination. This Agreement may be terminated by the Customer or
the Bank by giving sixty (60) days written notice to the other, provided that
such notice to the Bank shall specify the names of the persons to whom the Bank
shall deliver the Assets in the Accounts. If notice of termination is given by
the Bank, the Customer shall, within sixty (60) days following receipt of the
notice, deliver to the Bank Instructions specifying the names of the persons to
whom the Bank shall deliver the Assets. In either case the Bank will deliver
the Assets to the persons so specified, after deducting any amounts which the
Bank determines in good faith to be owed to it under Section 13. If within
sixty (60) days following receipt of a notice of termination by the Bank, the
Bank does not receive Instructions from the Customer specifying the names of
the persons to whom the Bank shall deliver the Assets, the Bank, at its
election, may deliver the Assets to a bank or trust company doing business in
the State of New York to be held and disposed of pursuant to the
provisions of this Agreement, or to Authorized Persons, or may continue to hold
the Assets until Instructions are provided to the Bank.
CUSTOMER
By:____________________________________________
Title:
THE CHASE MANHATTAN BANK
By:____________________________________________
Title:
SSA/AOA02F60.WP5-052693/020497
STATE OF )
: ss.
COUNTY OF )
On this day of , 19 , before me personally came
, to me known, who being by me duly sworn, did
depose and say that he/she resides in at
;
that he/she is of
, the entity described in and which executed the foregoing
instrument; that he/she knows the seal of said entity, that the seal affixed to
said instrument is such seal, that it was so affixed by order of said entity,
and that he/she signed his/her name thereto by like order.
Sworn to before me this
day of , 19 .
Notary
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this day of ,19 ,
before me personally came , to me known, who being by me
duly sworn, did depose and say that he/she resides in
at
; that he/she is a Vice
President of THE CHASE MANHATTAN BANK, the corporation described in and which
executed the foregoing instrument; that he/she knows the seal of said
corporation, that the seal affixed to said instrument is such corporate seal,
that it was so affixed by order of the Board of Directors of said corporation,
and that he/she signed his/her name thereto by like order.
Sworn to before me this
day of , 19 .
Notary
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank and
[fund name]
effective _________________
Customer represents that the Assets being placed in the Bank's custody are
subject to the Investment Company Act of 1940 (the Act), as the same may be
amended from time to time.
Except to the extent that the Bank has specifically agreed to comply with
a condition of a rule, regulation, interpretation promulgated by or under the
authority of the SEC or the Exemptive Order applicable to accounts of this
nature issued to the Bank (Investment Company Act of 1940, Release No. 12053,
November 20, 1981), as amended, or unless the Bank has otherwise specifically
agreed, the Customer shall be solely responsible to assure that the maintenance
of Assets under this Agreement complies with such rules, regulations,
interpretations or exemptive order promulgated by or under the authority of the
Securities Exchange Commission.
The following modifications are made to the Agreement:
Section 3. Subcustodians and Securities Depositories.
Add the following language to the end of Section 3:
The terms Subcustodian and securities depositories as used in this
Agreement shall mean a branch of a qualified U.S. bank, an eligible foreign
custodian or an eligible foreign securities depository, which are further
defined as follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined
in Rule 17f-5 under the Investment Company Act of 1940;
(b) "eligible foreign custodian" shall mean (i) a banking institution
or trust company incorporated or organized under the laws of a country other
than the United States that is regulated as such by that country's government
or an agency thereof and that has shareholders' equity in excess of $200
million in U.S. currency (or a foreign currency equivalent thereof), (ii) a
majority owned direct or indirect subsidiary of a qualified U.S. bank or bank
holding company that is incorporated or organized under the laws of a country
other than the United States and that has shareholders' equity in excess of
$100 million in U.S. currency (or a foreign currency equivalent thereof)(iii) a
banking institution or trust company incorporated or organized under the laws
of a country other than the United States or a majority owned direct or
indirect subsidiary of a qualified U.S. bank or bank holding company that is
incorporated or organized under the laws of a country other than the United
States which has such other qualifications as shall be specified in
Instructions and approved by the Bank; or (iv) any other entity that shall have
been so qualified by exemptive order, rule or other appropriate action of the
SEC; and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws of a
country other than the United States, which operates (i) the central system for
handling securities or equivalent book-entries in that country, or (ii) a
transnational system for the central handling of securities or equivalent
book-entries.
The Customer represents that its Board of Directors has approved each of
the Subcustodians listed in Schedule A to this Agreement and the terms of the
subcustody agreements between the Bank and each Subcustodian, and further
represents that its Board has determined that the use of each Subcustodian and
the terms of each subcustody agreement are consistent with the best interests
of the Fund(s) and its (their) shareholders. The Bank will supply the Customer
with any amendment to Schedule A for approval. The Customer has supplied or
will supply the Bank with certified copies of its Board of Directors
resolution(s) with respect to the foregoing prior to placing Assets with any
Subcustodian so approved.
Section 11. Instructions.
Add the following language to the end of Section 11:
Deposit Account Payments and Custody Account Transactions made pursuant to
Section 5 and 6 of this Agreement may be made only for the purposes listed
below. Instructions must specify the purpose for which any transaction is to
be made and Customer shall be solely responsible to assure that Instructions
are in accord with any limitations or restrictions applicable to the Customer
by law or as may be set forth in its prospectus.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions;
(b) When Securities are called, redeemed or retired, or otherwise
become payable;
(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment;
(d) Upon conversion of Securities pursuant to their terms into other
securities;
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities;
(f) For the payment of interest, taxes, management or supervisory
fees, distributions or operating expenses;
(g) In connection with any borrowings by the Customer requiring a
pledge of Securities, but only against receipt of amounts borrowed;
(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer;
(i) For the purpose of redeeming shares of the capital stock of the
Customer and the delivery to, or the crediting to the account of, the Bank, its
Subcustodian or the Customer's transfer agent, such shares to be purchased or
redeemed;
(j) For the purpose of redeeming in kind shares of the Customer
against delivery to the Bank, its Subcustodian or the Customer's transfer agent
of such shares to be so redeemed;
(k) For delivery in accordance with the provisions of any agreement
among the Customer, the Bank and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Customer;
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to the Bank of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the Bank will receive from brokers the Securities previously
deposited. The Bank will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such Securities which are not returned promptly when due
other than to make proper request for such return;
(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related transactions;
(n) For other proper purposes as may be specified in Instructions
issued by an officer of the Customer which shall include a statement of the
purpose for which the delivery or payment is to be made, the amount of the
payment or specific Securities to be delivered, the name of the person or
persons to whom delivery or payment is to be made, and a certification that the
purpose is a proper purpose under the instruments governing the Customer; and
(o) Upon the termination of this Agreement as set forth in Section
14(i).
Section 12. Standard of Care; Liabilities.
Add the following subsection (c) to Section 12:
(c) The Bank hereby warrants to the Customer that in its opinion,
after due inquiry, the established procedures to be followed by each of its
branches, each branch of a qualified U.S. bank, each eligible foreign custodian
and each eligible foreign securities depository holding the Customer's
Securities pursuant to this Agreement afford protection for such Securities at
least equal to that afforded by the Bank's established procedures with respect
to similar securities held by the Bank and its securities depositories in New
York.
Section 14. Access to Records.
Add the following language to the end of Section 14(c):
Upon reasonable request from the Customer, the Bank shall furnish the
Customer such reports (or portions thereof) of the Bank's system of internal
accounting controls applicable to the Bank's duties under this Agreement. The
Bank shall endeavor to obtain and furnish the Customer with such similar
reports as it may reasonably request with respect to each Subcustodian and
securities depository holding the Customer's assets.
Global Custody Agreement
With: [fund name]
Dated: __________________
Special Terms and Conditions
1. Add the following new paragraph to the end of Section 1:
"The Bank shall be accountable under the terms of this agreement to the
Customer for all Assets held in the accounts and shall take prompt and
appropriate action to remedy any discrepancies with respect to such Assets."
2. Add to the end of Section 6 (b) (i):
"; provided however that prior to taking action, the Bank will use every
reasonable effort to give Customer written notice of any such reversal which
may include back valuation."
3. Amend the second sentence of the second paragraph of Section 7 to read:
"Unless the Customer sends the Bank a written exception or objection to
certain bank statements as shall be mutually agreed upon in writing within 180
days of receipt,..."
4. Amend the first paragraph of Section 8 as follows:
"Whenever the Bank,...("Corporate Actions"), the Bank will give the
Customer prompt notice of such Corporate Actions to the extent that the Bank's
central corporate actions department has actual knowledge of a Corporate Action
in time to notify its customers.
5. In the first sentence of paragraph 13, after "legal fees", insert
"incurred on behalf of the Customer".
6. Add the following new sentence to the end of Section 14 (c):
"The Bank shall not unreasonably refuse to furnish to the Customer such
reports (or portions thereof) of the Bank's external auditors as they relate
directly to the Bank's system of internal accounting controls applicable to the
Bank's duties under this Agreement. The Bank shall endeavor to obtain and
furnish the Customer with such similar reports as the Customer may reasonably
request with respect to each Subcustodian holding Assets of the Customer.
Expenses of the Bank and any Subcustodians under this provision shall be paid
by the Customer."
7. Amend the last paragraph of Section 3 of the Mutual Fund Rider to read:
"The Customer represents that its Board of Directors will approve each of
the Subcustodians listed in Schedule A to this Agreement before Assets are
held by such Subcustodian and the form of the subcustody agreements between
the Bank and each Subcustodian, and further represents that its Board will
determine that the use of such Subcustodian and the terms of each subcustody
agreement are consistent with the best interests of the customer's fund(s) and
its (their) shareholders prior to placing Assets with any such Subcustodian.
The Bank will supply the Customer with any amendment to Schedule A for
approval within such reasonable period of time as agreed to by the Bank and the
Customer. Upon request, the Customer has supplied or will supply the Bank with
certified copies of its Board of Directors resolutions with respect to the
foregoing prior to placing Assets with any Subcustodian so approved."
8. Add as a new section to the end of Section 3 of the Mutual Fund Rider:
"The Bank shall furnish annually to the Customer information concerning
Subcustodians employed by the Bank. Such information shall be similar in kind
and scope to that furnished to the Customer in connection with the initial
approval of the subcustodian by the Customer's Board of Directors. In
addition, the Bank will promptly inform the Customer in the event that the
Bank learns of a material adverse change in the financial condition of a
Subcustodian or is notified by a foreign banking institution employed as a
Subcustodian that there appears to be a substantial likelihood that its
shareholders's equity as required by Rule 17f-5 or any order thereunder. With
regard to the foregoing paragraphs, the Bank shall not be deemed to have
assumed any fiduciary duties imposed upon Customer by law.
The Bank will supply periodically, as mutually agreed upon, a statement in
respect of any Securities and cash, including indentification of the foreign
entities having custody of the Securities and cash and descriptions thereof."
SHAREHOLDER SERVICES AGREEMENT
I. The parties to this Agreement which shall become effective on March 1,
1984 are Endowments, Inc., a Delaware corporation (hereinafter called "the
Fund") and American Funds Service Company, a California corporation
(hereinafter called "AFS"). AFS is a wholly owned subsidiary of The Capital
Group, Inc.
II. The Fund hereby employs AFS, and AFS hereby accepts such employment by
the Fund, as its transfer agent. In such capacity AFS will provide the
services of stock transfer agent, dividend disbursing agent, redemption agent,
and such additional related services as the Fund may from time to time require,
all of which services are sometimes referred to herein as "shareholder
services."
III. AFS has entered into similar agreements with other investment
companies for which Capital Research and Management Company serves as
investment adviser. (For the purposes of this Agreement, such investment
companies, including the Fund, are called "participating investment
companies.")
IV. It is the intention of the parties hereto that AFS will provide to the
participating investment companies the shareholder services referred to herein
under a schedule of charges that will result in AFS being reimbursed by the
participating investment companies for the costs incurred by it in providing
such services. The schedule of charges is not intended to provide a profit to
AFS, or its parent, nor is it intended that the charges paid by the
participating investment companies for shareholder services will result in the
accrual of any residual values to AFS, or its parent, in excess of the capital
provided by such parent to AFS. The costs of AFS incurred in providing
shareholder services to the participating investment companies shall be
reimbursed to AFS by the participating investment companies on the basis of a
schedule of charges described in Schedule A attached hereto. Such schedule
shall be adjusted from time to time to reflect the cost experience of AFS so
that the charges by AFS to the participating investment companies will
approximately equal the cost, as defined below, of AFS in providing shareholder
services to such participating investment companies. Adjustments in the
amounts of charges shall be reported by AFS to the AFS Review and Advisory
Committee as they are made effective. Any revision of the structure of the
schedule of charges set forth in Schedule A hereto shall be reviewed by the AFS
Review and Advisory Committee before becoming effective.
A. AFS will bill the Fund monthly, on or about the first of each calendar
month, and the Fund will pay to AFS within five days of such billing an amount
determined in accordance with the fee structure and amounts set forth in
Schedule A to this Agreement.
B. In addition to the charges described in Schedule A hereto, the Fund will
reimburse AFS for any amounts advanced or paid by it, directly or indirectly,
for stationery, postage, and supplies used by AFS in providing shareholder
services for the Fund.
C. The costs to AFS of providing shareholder services to the participating
investment companies, to be taken into account in setting charges provided in
this paragraph and Schedule A hereto, shall include:
1. The current operating expenses of AFS in providing shareholder services
to the participating investment companies.
2. Amortization of maintenance, expansion, and improvement costs. Any costs
incurred by AFS in maintaining, expanding or improving the capacity of AFS to
provide shareholder services to the participating investment companies will, if
not charged directly as current operating expenses, be amortized as determined
by AFS, with the review of AFS' Review and Advisory Committee.
3. Interest expense incurred by AFS in financing such preparation,
maintenance, expansion, or improvement costs, or incurred in borrowing
necessary additional operating or capital needs.
4. Amounts necessary to accrue and maintain such reserves as are deemed
necessary, after consultation with AFS' Review and Advisory Committee, to
provide for the working and other capital needs of AFS.
D. AFS will render to the Fund as soon as is practicable after the end of
each fiscal year of AFS an accounting of its costs and revenues during such
fiscal year, showing amounts paid to AFS by the Fund and by each other
participating investment company, and indicating the extent to which those
amounts represented regular charges or charges for special services rendered to
the respective participating investment companies.
V. This Agreement may be terminated on 180 days written notice from either
party to the other.
VI. In the event of termination of this Agreement, AFS and the Fund will
each extend full cooperation in effecting a conversion to whatever successor
shareholder service agent the Fund may select, it being understood that all
records relating to the Fund and its shareholders are property of the Fund.
VII. In the event of termination of this Agreement, the Fund will pay to AFS
a termination fee comprised of the following:
A. The Fund's proportionate share of any costs of conversion of the Fund's
transfer agency and related functions from AFS to a successor, including
interest expense on borrowed capital required to finance such conversion.
B. The Fund's proportionate share of any liability incurred by AFS to DST or
otherwise, in connection with the services provided by DST to AFS, to the
extent that any such liability has not been fully recovered by AFS from the
participating investment companies.
The foregoing shall include any lease obligations and any other expense or
obligation fairly attributable to the previously anticipated needs of the Fund.
C. The Fund's proportionate and equitable share of the balance of any costs
incurred prior to termination which are being amortized as described in
paragraph V hereof.
VIII. The estimated termination fee shall be paid monthly, in addition to the
charges paid pursuant to paragraph V hereof, in equal installments over the
remaining period during which shareholder services are being provided under
this Agreement, subject to adjustment as actual figures become available.
After payment of the entire adjusted termination fee, the Fund shall have no
further monetary obligation to AFS.
IX. In the event of termination of this Agreement and all corresponding
agreements with all the participating investment companies, all assets of AFS
will be sold or otherwise converted to cash, with a view to the liquidation of
AFS when it ceases to provide shareholder services for the participating
investment companies. To the extent any such assets are sold by AFS to The
Capital Group, Inc. and/or any of its subsidiaries, such sale shall be at fair
market value at the time of sale as agreed upon by AFS, the purchasing company
or companies, and the AFS Review and Advisory Committee. After all assets of
AFS have been converted to cash and all liabilities of AFS have been paid or
discharged, an amount equal to the capital and paid-in surplus of AFS shall be
set aside in cash for distribution to its stockholders upon liquidation of AFS.
Any assets of AFS remaining after the foregoing provision for liabilities and
return of capital shall be distributed to the participating investment
companies in such proportions as may be determined by AFS with the consent of
the AFS Review and Advisory Committee. If the assets of AFS remaining after
provision for the payment of all liabilities of AFS are less than the capital
and paid-in surplus of AFS, such deficiency shall be added to the termination
charges paid by the participating investment companies or shall be otherwise
paid to AFS, in such proportions as may be determined by AFS with the consent
of the AFS Review and Advisory Committee so that cash will be provided for
distribution upon the liquidation of AFS to the parent of AFS of the full
amount of capital and paid-in surplus of AFS.
X. In the event of disagreement between the Fund and AFS, or between the
Fund and other participating investment companies as to any matter arising
under this Agreement, which the parties to the disagreement are unable to
resolve, the question shall be referred to the AFS Review and Advisory
Committee for resolution. If the AFS Review and Advisory Committee is unable
to resolve the question to the satisfaction of both parties, either party may
elect to submit the question to arbitration; one arbitrator to be named by each
party to the disagreement and a third arbitrator to be selected by the two
arbitrators named by the original parties. The decision of a majority of the
arbitrators shall be final and binding on all parties to the arbitration. The
expenses of such arbitration shall be paid by the party electing to submit the
question to arbitration.
This Agreement was executed by the parties on March 1, 1984.
ENDOWMENTS, INC. AMERICAN FUNDS SERVICE COMPANY
By /s/ RICHARD H. M. HOLMES By /s/ EUGENE C. FREY
Richard H. M. Holmes Eugene C. Frey
Chairman of the Board President
By /s/ ISABELLE V. LINDSKOOG By /s/ THOMAS E. TERRY
Isabelle V. Lindskoog Thomas E. Terry
Secretary Secretary
Effective 10/1/84
SCHEDULE A
Pursuant to the agreements between the funds and AFS, the base charge per
shareholder account shall be as follows:
Monthly
Funds Paying Annual Dividends $ .60
Funds Paying Semi-Annual Dividends .64
Funds Paying Quarterly Dividends .72
Funds Paying Five Dividends .76
Funds Paying Monthly Dividends 1.04
CMTA 1.60
Closed Accounts .10
