American Balanced Fund
1994
Annual Report
For The Year Ended December 31
[The American Funds Group(R)]
YOUR FUND'S OBJECTIVE
American Balanced Fund(R) seeks conservation of capital, current income, and
long-term growth of both capital and income by investing in stocks and
fixed-income securities. It is managed as though it constitutes the complete
investment program of the prudent investor.
RESULTS OVER THE PAST 19 YEARS
1994
Total return year by year*
<TABLE>
<CAPTION>
VALUE OF INCOME TOTAL
PRINCIPAL RETURN RETURN
<S> <C> <C> <C>
1976 +20.0% +6.0% +26.0%
1977 -4.5 +5.2 +0.7
1978 +0.6 +5.6 +6.2
1979 +1.6 +6.0 +7.6
1980 +7.1 +7.3 +14.4
1981 -3.5 +7.9 +4.4
1982 +20.8 +8.6 +29.4
1983 +8.4 +7.7 +16.1
1984 +2.2 +7.2 +9.4
1985 +22.3 +6.8 +29.1
1986 +10.9 +6.0 +16.9
1987 -2.4 +6.4 +4.0
1988 +6.6 +6.3 +12.9
1989 +15.0 +6.5 +21.5
1990 -7.3 +5.7 -1.6
1991 +18.6 +6.1 +24.7
1992 +4.4 +5.1 +9.5
1993 +6.3 +5.0 +11.3
1994 -4.2 +4.5 +0.3
AVERAGE ANNUAL COMPOUND RATE +12.4%
OF RETURN:
</TABLE>
American Balanced Fund has experienced a negative total return only once in the
past 19 years. In some years the fund's net asset value declined, but that was
more than offset by the income it generated. While there are bound to be
periods when the value of an investment in the fund declines (since both stocks
and bonds fluctuate in value), this record demonstrates that careful attention
to value can help provide consistency, even in turbulent markets.
*All of the full calendar years since Capital Research and Management Company
became the fund's investment adviser on July 26, 1975.
Total return measures both changes in principal value and income return,
assuming reinvestment of all dividends and capital gain distributions.
[Photo Caption]
ON OUR COVER: PATTERNS OF LIGHT AND SHADOW DANCE UPON AN ASPEN-COVERED SLOPE OF
THE COLORADO ROCKIES.
[End Photo Caption]
Fund results in this report were computed without a sales charge unless
otherwise indicated. The fund's 30-day yield as of January 31, 1995, calculated
in accordance with the Securities and Exchange Commission formula, was 4.57%.
Fund results through August 1988 do not reflect service and distribution
expenses now paid under its Plan of Distribution. Such expenses may not exceed
0.25% of the fund's average net assets per year and currently amount to
approximately 0.21%.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN WILL
VARY, SO YOU MAY HAVE A GAIN OR LOSS OF PRINCIPAL WHEN YOU SELL YOUR SHARES.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY,
THE U.S. GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON. All investments are subject
to certain risks. For example, those which include common stocks are affected
by fluctuating stock prices, and those which include bonds are affected by
interest rate fluctuations. Accordingly, investors should maintain a long-term
perspective.
FELLOW SHAREHOLDERS:
The past year was a difficult one for the securities markets in which American
Balanced Fund invests. During 1994, the stock market gained 1.3% with income
reinvested, as measured by the unmanaged Standard & Poor's 500 Composite Index.
Meanwhile, the bond market declined 2.9% for the year with income reinvested,
as tracked by the unmanaged Lehman Brothers Aggregate Bond Index.
In this environment, American Balanced Fund produced a total return of 0.3% for
shareholders who reinvested their quarterly dividends totaling 56 cents and
their capital gain distributions totaling five cents paid in February and
December last year. One can hardly be pleased to report such a modest increase
in the value of your investment. Nevertheless, we believe it is quite
respectable when viewed in the context of 1994's investment climate. It also
compares favorably to the decline of 2.2% registered by the Lipper Balanced
Fund Index during the same time frame. Moreover, this past year marked the
fund's eighteenth positive total return in the last nineteen years.
TRENDS IN THE EQUITY MARKET
The improving U.S. economy and repeated efforts by the Federal Reserve to keep
inflation at bay were key forces behind developments in the financial markets
during the past 12 months.
Simply stated, stocks experienced a year of low returns and low volatility. The
equity market seemed unable to decide between the positive impact of higher
corporate profits and the negative impact of rising interest rates. It
reflected this indecision by trading within a much narrower range than normal
and ended 1994 at virtually the same level at which it had begun the year.
Within this environment, the fund benefited significantly from its investments
in cyclically sensitive areas of the economy, including chemicals, papers,
metals and technology. Chemical stocks had a considerable impact as they had
represented the fund's fourth-largest industry holding, accounting for nearly
4% of the portfolio at the beginning of the year.
In last year's annual report, we discussed the reasoning behind the significant
increase in the fund's position in health care stocks during 1993. You will
recall that they represented 8.3% of fund assets at the end of that year, more
than double the exposure of the prior year. This sector helped the fund
considerably in 1994 as the stocks rallied after the demise of the health care
reform package. We still like this area, and it remains the largest industry in
the portfolio at 7.2% of assets.
In contrast, our interest-sensitive equity holdings fared poorly in the face of
rising interest rates. The banking sector, which remained the fund's
second-largest industry throughout the year, slightly lagged the overall
market. Electric utility stocks, reacting both to rising rates and increasing
competition, had a very disappointing 1994. These stocks represented 3.5% of
the portfolio at the beginning of the year. We responded to their weakness by
increasing our investment in them to 4.5% of fund assets by year-end. While
there are serious questions regarding electric utilities, we believe the
battering they took in 1994 will prove to have been an overreaction.
BONDS HURT BY RISING INTEREST RATES
While stocks as a whole showed little change for the year, bonds took the brunt
of the Federal Reserve's moves to thwart inflation. It was anticipated that
bond prices would
[Pull quote]
The fund benefited significantly from its investments in cyclically sensitive
areas of the economy, including chemicals, papers, metals and technology.
[End Pull quote]
weaken somewhat as interest rates increased. What shook the fixed-income
market, however, was the large number of highly leveraged investors who
incorrectly believed that long-term interest rates would continue to decline.
When their loans were called and cash had to be raised, these investors sold
many of their holdings in a market saturated with sellers. Consequently, bond
prices that were already in retreat last February and March were pushed lower
still.
With the expectation that interest rates would continue to rise, we gradually
shortened the average maturity of this portfolio during 1994. It is important
to remember that the shorter a bond's maturity, the less its price will
fluctuate with interest rate changes. In fact, the shortest maturities produced
the best results last year.
Throughout the year, the fund held a considerably larger portion of its assets
in cash equivalents than is typical. Its cash position averaged 17% of assets
and was 21% at year-end. This reflected not only some concern about the outlook
for the securities markets but also the attraction of cash as an asset in its
own right during certain periods. Indeed, of the three asset classes in which
the fund can invest, cash had the highest total return - at nearly 5% - by a
considerable margin. This kind of pattern is rarely the case on a long-term
basis, but is quite common when the Fed is aggressively raising rates.
As we have pointed out before, the fund's common stock holdings typically range
from 50% to 75% of assets, depending on the attractiveness of stock values
relative to other investment alternatives. We ended the year at 52%,
essentially unchanged from last year. This continues to reflect a generally
cautious posture, though we should note that in the first weeks of 1995 we have
begun to increase our exposure to equities.
BENEFITS OF THE BALANCED APPROACH
Our prospectus states that the "fund approaches the management of its
investments as if they constituted the complete investment program of the
prudent investor." We are confident that careful selection of a balanced
portfolio of stocks and bonds will continue to serve the prudent investor, as
it has throughout the fund's long history.
The article on pages 4 through 11 features three families who have invested a
portion of their retirement savings in American Balanced Fund. We hope you find
it interesting reading and look forward to reporting to you again in six
months.
Cordially,
Walter P. Stern
Chairman of the Board
Robert G. O'Donnell
President
February 15, 1995
[Side Bar]
At the Board meeting on August 11, 1994, James W. Ratzlaff resigned after 12
years as Chairman of the Board. He will continue as a Director. Walter P.
Stern, Chairman of the Board of an affiliate of Capital Research and Management
Company, was elected to the Board of the fund and replaces Mr. Ratzlaff as
Chairman.
[End Side Bar]
[Pull Quote]
With the expectation that interest rates would continue to rise, we gradually
shortened the average maturity of the fund's fixed-income portfolio during
1994.
[End Pull Quote]
AMERICAN BALANCED FUND: AN INVESTMENT YOU CAN LIVE WITH
As our lives move from one stage to another, there are certain keepsakes we
don't want to live without.
A favorite toy from our childhood. A diary of our first trip abroad. An old
pair of jeans. Snapshots of ourselves when we were young.
Whether we come across these personal mementos in our daily routine or only
glance at them once in a while, we derive a sense of comfort from their
existence. By knowing they are near, we have the peace of mind to move forward.
In a similar way, the investments we make also should help put our minds at
ease. In a very real sense, they too must be there for us when we need them the
most.
For many shareholders, American Balanced Fund's middle-of-the-road approach
offers a relatively conservative alternative. The fund is an investment they
can live with - no matter what stage in life they have reached.
Whether you have already set aside a lump sum or invest a portion of your
paycheck each month, where you invest your money may be one of the most
important decisions you'll ever make.
The bottom line is that you want to feel confident that the investment you have
selected will do its best to preserve your hard-earned assets. You also want to
take every possible precaution to reduce the risk that your investment will
decline in value. Finally, you want some indication that, over the long term,
your investment choice will be a good one.
While no investment is perfect, American Balanced Fund can meet many of these
criteria.
Conservation of principal is one of the fund's key objectives.
In addition to seeking current income and long-term growth of capital, the fund
takes a conservative investment approach which strives to preserve your capital
in volatile financial environments.
The fund's broadly diversified portfolio is designed to lessen risk.
By investing in stocks, bonds and money market instruments, the fund offers you
wider diversification than many mutual funds. Diversification is a
well-recognized method of reducing risk by spreading your assets across a broad
range of securities.
The fund has a long-term record of providing growth and income.
American Balanced Fund has experienced a negative total return only once in the
past 19 years, as you can see on the inside front cover of this report. In some
other years, the fund's net asset value has declined, but that was more than
offset by the income it generated. While there are bound to be periods when the
value of an investment in the fund declines (since both stocks and bonds
fluctuate in value), this record demonstrates that prudent management of a
balanced portfolio can help to provide consistency even in turbulent markets.
If you are raising your children, sending them to college, paying your
mortgage, taking vacations, managing your career or all of the above, you can't
afford to be over-anxious about your investments. If you are looking for an
investment that you can live with, American Balanced Fund may be an appropriate
option.
On the following pages, we will introduce you to three shareholder families who
have invested with American Balanced Fund over many years. Their stories, of
course, do not necessarily reflect the experience of all fund shareholders.
KEEPING THEIR INVESTMENTS INTACT (FOR NOW)
THE BRUNKERS
MOUNTAIN HOME, ARKANSAS
[Photo Caption]
When the youngest of their nine children graduated from high school several
years ago, Bob and Joan Brunker yearned to move out of their house on the South
Side of Chicago. "I was tired of flat Illinois," says Joan, "and wanted
something scenic with a few bumps." They found their hilly retreat in the Ozark
Mountains of Arkansas just seven miles south of the Missouri border. The taxes
are low, the cost of living is reasonable and the scenery outside the Brunkers'
dining room window is dazzling.
[End Photo Caption]
Bob Brunker sometimes wishes that he and his wife, Joan, could be "a little
more aggressive" with their retirement investing. After all, he says, "We were
late in getting started and we could make a little more money."
"And we could lose a lot more," says Joan, who defines herself as a
"circle-the-wagons-and-hold-on-to-what-we've-got" kind of investor.
"We only began saving for retirement when we were in our forties," she adds,
"after our youngest child was born. The funds we have today will hopefully help
us through the rest of our lives. So we consider ourselves conservative
investors. That means we can't take big chances."
REINVESTING THEIR INCOME
The Brunkers also have no intention of touching the vast majority of their
retirement assets - a portion of which is held in shares of American Balanced
Fund - for several years. "We could take income out of our investments," says
Bob, "but then they wouldn't grow as much as they could. And we need them to
grow because we started so late in life."
There's another reason the Brunkers want to keep their savings intact.
"The one thing we don't want to be," says Joan, "is a burden to our kids. I
don't want to move in with any of them, and I don't want them to have to worry
about us at all."
By the same token, she adds, "We aren't planning to leave them anything either,
except that each is getting a quilt. That's their inheritance."
Lest anyone think otherwise, an original handstitched quilt by Joan Brunker
represents about six months of dedicated, detailed handiwork. Each is uniquely
designed and custom-tailored to each child's favorite colors and patterns. Joan
is in the midst of sewing her sixth quilt, with three more to go.
ENJOYING THEIR LIVES
While she finds her Mountain Home community a tad quiet after the bustle of
Chicago, Joan loves its library and drives up to Springfield, Missouri when she
gets "mall fever."
Bob is also enjoying retirement in his new neck of the woods. He plays as much
golf as he wants: "Eighteen holes if we ride, nine if we walk." He is a
volunteer fireman: "I've gone out on two or three fires, but this isn't
Chicago." He likes the pond in front and the trees in back of his home. "Except
the squirrels," he says. "They eat all of my bird food."
In a final observation, Joan points out, "A lot of retirees down here are
living on the edge of financial security, but a lot of them are also doing just
fine. It depends on how you planned it. That really makes a difference."
[Pull Quote]]
"We consider ourselves conservative investors. That means we can't take big
chances."
[End Pull Quote]
ALLOWING THEIR INVESTMENTS TO GROW
THE FUNAKOSHIS
ENCINITAS, CALIFORNIA
[Photo Caption]
Gary and Candy Funakoshi can barely remember the last time they took a
vacation. The rigors of expanding a business and supporting two sons in college
haven't left them with a lot of extra time or money. Fortunately, they live in
a naturally stunning beach community located 25 miles north of San Diego.
Even better, the lump sum they have set aside for their retirement is working
just as hard as they are.
[End Photo Caption]
Eight years ago, the Funakoshi family stood at a critical financial crossroads.
Gary Funakoshi, former director of personnel for a Big Six accounting firm, was
asked to transfer from his San Diego office to a city outside California. At
the time, his wife, Candy, was working in the local school district and their
two sons, Brent and Keith, were ensconced in their high school studies,
athletics and friendships.
"Our kids were at a point where we had to stay put," says Candy, "or we would
really disrupt their lives. Plus, we just liked living here."
"When you are faced with a decision," says Gary, "and you have a short time to
make it, you have to take advantage of the best opportunity you can find. We
found a wholesale food business we thought we could run and bought it."
OWNING A COMPANY
Corporate ownership, however, certainly has not left Gary and Candy set for
retirement. Quite the opposite: they have been plowing profits back into the
business to build it up. Moreover, with Keith attending UCLA
[Pull Quote]
"Right now, points out Candy, "our focus is on getting our sons through college
and building up our business. We hope our retirement funds will be there for us
down the road."
[End Pull Quote]
and Brent about to graduate from USC, there is no doubt where any excess cash
has gone in recent years.
As a result, the Funakoshis' retirement investments are limited to the lump sum
Gary received from his profit-sharing plan when he left the accounting firm.
"When I got the lump sum," says Gary, "I talked to a number of investment
advisers about all types of options. I wanted some kind of diversity without
buying stocks in different companies on my own. I had tried that before, and
unless you are on top of it daily, it can get away from you. So we concluded
that mutual funds were the best alternative."
INVESTING FOR THE LONG TERM
"Coming from an accounting background, my approach was fairly conservative," he
continues. "We were looking for middle-of-the-road funds that offered good
growth potential, but not high risk. Our decision to invest a portion of our
retirement savings in American Balanced Fund has been a good one."
"It's held its own, so it's doing fine," Candy says. "That's the way I look at
it." Adds Gary: "Our investment philosophy is a long-term commitment. We're
just going to let our assets ride."
"Right now," points out Candy, "our focus is on getting our sons through
college and building up our business. We hope our retirement funds will be
there for us down the road."
DEALING WITH TOMORROW ONE DAY AT A TIME
THE SKETOS
GLENDALE, ARIZONA
[Photo Caption]
Mark and Stephanie Sketo rarely consider how they will spend their retirement
years. "It's just too far down the road," says Mark, "and we've got more
immediate things to be concerned about." Their thoughts and efforts primarily
revolve around the lives of their two young children - Jon, age 10, and Ryan,
age seven - and their own increasingly demanding careers. Yet notwithstanding
their current obligations, the Sketos have taken some initial steps toward
ensuring themselves a more comfortable future.
[End Photo Caption]
As Stephanie Sketo sees it, the way she and her husband have set aside money
for retirement is a sign of the times.
"You know how the economy is," says Stephanie, a business analyst for a large
software vendor. "You rarely stay with a company for 20 years anymore. I've
been with four companies already, and as I leave each one they give me what I
have invested in my 401(k) account and I give it to my broker to invest. Part
of it goes into American Balanced Fund. And that's how we are investing for
retirement."
"It's really hard to put anything away," stresses Mark, a computer programmer
with a privately held company, "but we are trying to do what we can.
Stephanie's company matches her current 401(k) contributions. Mine doesn't
because the company is too new. Both of us realize we've got a long haul."
SAVING FOR COLLEGE
The foremost expense on the Sketos' minds today, as with many parents, is the
cost of their children's college education. Although Ryan is only in the second
grade and Jon is in the fourth, the boys have been destined for higher learning
since "day one," according to Stephanie. While the grandparents promise to help
foot the tuition bills, the pressure to pay for several years of on-campus
living remains. It requires a savings commitment from the Sketos that takes
precedence over their own retirement plans.
"As you can see, we're trying to do a balancing act," says Stephanie. "We don't
want to be so conservative that we don't take vacations, go out to eat or go to
the movies. In fact, we actually do all that and have fun. But at the same
time, we're attempting to save money. So we take one day at a time."
MUSING ABOUT RETIREMENT
When prompted to express what he might do if and when he retires, Mark takes a
long pause and says, "I haven't actually thought that much about it. I guess
I'd like to do what my dad did. He worked hard all his life, and when he
retired he started volunteering at the computer lab at the boys' elementary
school. They decided to hire him, and now he works there three days a week and
is getting paid for it. That's the kind of activity that would be fine for me,
especially if it involved computers."
When asked about her conceivable retirement activities, Stephanie takes less
than a second to respond. "I'd volunteer like Mark's dad - and go shopping."
[Pull Quote]
"It's really hard to put anything away. Both of us realize we've got a long
haul."
[End Pull Quote]
AMERICAN BALANCED FUND PROVIDES ANOTHER LAYER OF "BALANCE":
THE MULTIPLE PORTFOLIO COUNSELOR SYSTEM
<TABLE>
<CAPTION>
PORTFOLIO COUNSELOR YEARS OF EXPERIENCE YEARS OF EXPERIENCE TOTAL YEARS
AS A PORTFOLIO COUNSELOR AS AN INVESTMENT OF INVESTMENT
FOR AMERICAN BALANCED PROFESSIONAL WITH EXPERIENCE
FUND CAPITAL RESEARCH
AND MANAGEMENT
COMPANY OR ITS
AFFILIATES
<S> <C> <C> <C>
ABNER D. GOLDSTINE 20 YEARS 28 YEARS 43 YEARS
GEORGE A. MILLER 29 YEARS/1/ 20 YEARS 34 YEARS
ROBERT G. O'DONNELL 9 YEARS/2/ 20 YEARS 23 YEARS
ERIC S. RICHTER LESS THAN ONE YEAR 3 YEARS 10 YEARS
</TABLE>
Capital Research and Management Company has been the fund's investment
adviser since July 26, 1975.
/1/ Prior to July 26, 1975, Mr. Miller was a portfolio counselor with American
Express Investment Management Company, the fund's previous investment adviser.
/2/ Mr. O'Donnell served 14 years as a research professional for the fund prior
to
becoming a portfolio counselor. Before July 26, 1975, he was a research
professional with American Express Investment Management Company, the fund's
previous investment adviser.
For more than 35 years, our investment adviser, Capital Research and Management
Company, has been using and refining a unique method of managing its
investments - the multiple portfolio counselor system.
Under this system, portions of the fund's assets are assigned to
different individuals - called portfolio counselors - each of whom manages that
portion as if it were an entire fund. The four portfolio counselors for
American Balanced Fund are Abner D. Goldstine, George A. Miller, Robert G.
O'Donnell and Eric S. Richter (pictured to the left).
The responsibility for overseeing the decision-making process rests with the
adviser's investment committee, which ensures that all transactions and
holdings are consistent with the fund's objectives. It meets regularly and can
be convened in a matter of minutes. The entire process is designed to enable
people to act on their strongest convictions and to permit quick response
without sacrificing orderly procedures and controls.
The multiple portfolio counselor system has helped maintain continuity of
management. When one counselor changes responsibilities or departs, only a
portion of the total fund changes hands. It has also contributed to consistency
in the fund's results and to its resistance to market declines, as one
counselor's off year has usually been offset by the success of others. And it
has provided the flexibility that has led to some of the fund's most rewarding
investments.
AMERICAN BALANCED FUND
INVESTMENT MIX
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Percent of
TEN LARGEST EQUITY HOLDINGS Net Assets
- ----------------------------------------- --------------
<S> <C>
AMERICAN HOME PRODUCTS 1.66%
MINNESOTA MINING & MANUFACTURING 1.62
WARNER-LAMBERT 1.48
ELI LILLY 1.42
SAFECO 1.41
AMERICAN BRANDS 1.33
DUN & BRADSTREET 1.27
PHILIP MORRIS 1.24
HONEYWELL 1.21
XEROX 1.19
INVESTMENT MIX BY SECURITY TYPE
- -----------------------------------------
COMMON STOCKS 52%
CONVERTIBLE DEBENTURES 1%
CORPORATE BONDS 9%
GOVERNMENT BONDS 17%
CASH 21%
</TABLE>
American Balanced Fund
Investment Portfolio December 31, 1994
<TABLE>
<CAPTION>
Market Percent
Number Value of Net
COMMON STOCKS of Shares (000) Assets
- ---------------------------------------------- ----------- ----------- --------
<S> <C> <C> <C>
ENERGY
ENERGY SOURCES- 4.36%
Amoco Corp. 280,000 $16,555 0.8%
Atlantic Richfield Co. 100,000 10,175 0.49
Chevron Corp. 100,000 4,462 0.21
Exxon Corp. 320,000 19,440 0.93
Kerr-McGee Corp. 160,000 7,360 0.35
Phillips Petroleum Co. 400,000 13,100 0.63
Royal Dutch Petroleum Co.
(New York Registered Shares) 140,000 15,050 0.72
Texaco Inc. 80,000 4,790 0.23
UTILITIES: ELECTRIC & GAS - 4.45%
Carolina Power & Light Co. 600,000 15,975 0.77
Central and South West Corp. 750,000 16,969 0.82
Consolidated Edison Co. of New York, Inc. 500,000 12,875 0.62
Entergy Corp. 600,000 13,125 0.63
Houston Industries Inc. 150,000 5,344 0.26
Long Island Lighting Co. 150,000 2,306 0.11
Pacific Gas and Electric Co. 700,000 17,063 0.82
Texas Utilities Co. 164,177 5,254 0.25
Unicom Corp. 150,000 3,600 0.17
----------- -----------
183,443 8.81
----------- --------
MATERIALS
BUILDING MATERIALS & COMPONENTS - 0.36%
Masco Corp. 330,000 7,466 0.36
CHEMICALS - 2.58%
Dow Chemical Co. 200,000 13,450 0.65
E.I. du Pont de Nemours and Co. 400,000 22,500 1.08
Monsanto Co. 250,000 17,625 0.85
FOREST PRODUCTS & PAPER - 1.18%
James River Corp. of Virginia 400,000 8,100 0.39
Union Camp Corp. 350,000 16,494 0.79
METALS: NONFERROUS - 0.83%
Aluminum Co. of America 200,000 17,325 0.83
----------- --------
102,960 4.95
----------- --------
CAPITAL EQUIPMENT
AEROSPACE & MILITARY TECHNOLOGY - 1.01%
Boeing Co. 450,000 21,038 1.01
DATA PROCESSING & REPRODUCTION - 1.58%
International Business Machines Corp. 110,000 8,085 0.39
Xerox Corp. 250,000 24,750 1.19
ELECTRICAL & ELECTRONIC - 1.94%
General Electric Co. 300,000 15,300 0.73
Honeywell Inc. 800,000 25,200 1.21
ELECTRONIC INSTRUMENTS - 0.72%
Hewlett-Packard Co. 150,000 14,981 0.72
#VALUE
----------- --------
109,354 5.25
----------- --------
CONSUMER GOODS
BEVERAGES & TOBACCO - 2.57%
American Brands, Inc. 740,000 27,750 1.33
Philip Morris Companies Inc. 450,000 25,875 1.24
HEALTH & PERSONAL CARE - 7.16%
Abbott Laboratories 135,000 4,404 0.21
American Home Products Corp. 550,000 34,512 1.66
Bristol-Myers Squibb Co. 200,000 11,575 0.56
Eli Lilly and Co. 450,000 29,531 1.42
Merck & Co., Inc. 510,000 19,444 0.93
Pfizer Inc. 50,000 3,863 0.19
Schering-Plough Corp. 200,000 14,800 0.71
Warner-Lambert Co. 400,000 30,800 1.48
----------- --------
202,554 9.73
----------- --------
SERVICES
BROADCASTING & PUBLISHING - 1.02%
Gannett Co., Inc. 400,000 21,300 1.02
BUSINESS & PUBLIC SERVICES - 2.12%
Dun & Bradstreet Corp. 480,000 26,400 1.27
Pitney Bowes Inc. 230,000 7,303 0.35
WMX Technologies, Inc. 400,000 10,500 0.5
MERCHANDISING - 1.19%
Melville Corp. 800,000 24,700 1.19
TELECOMMUNICATIONS - 2.65%
Ameritech Corp. 400,000 16,150 0.78
MCI Communications Corp. 400,000 7,350 0.35
Sprint Corp. 620,000 17,127 0.82
Telefonos de Mexico, SA de CV, Class L
(American Depositary Receipts) 180,000 7,380 0.36
U S WEST, Inc. 200,000 7,125 0.34
TRANSPORTATION: AIRLINES - 0.34%
Delta Air Lines, Inc. 140,000 7,070 0.34
TRANSPORTATION: RAIL & ROAD - 0.71%
Union Pacific Corp. 325,000 14,828 0.71
----------- --------
167,233 8.03
----------- --------
FINANCE
BANKING - 5.03%
Banc One Corp. 525,000 13,322 0.64
BankAmerica Corp. 620,000 24,490 1.18
First Chicago Corp. 180,000 8,595 0.41
First Hawaiian Bank 800,000 18,400 0.88
First Union Corp. 250,000 10,344 0.5
J.P. Morgan & Co. Inc. 120,000 6,720 0.32
U.S. Bancorp 300,000 6,713 0.32
Wachovia Corp. 500,000 16,125 0.78
FINANCIAL SERVICES - 1.52%
ADVANTA Corp., Class B 300,000 7,575 0.36
American Express Co. 450,000 13,275 0.64
Beneficial Corp. 90,000 3,510 0.17
Federal National Mortgage Assn. 100,000 7,287 0.35
INSURANCE - 4.96%
Allstate Corp. 850,000 20,081 0.97
American General Corp. 810,000 22,882 1.1
Lincoln National Corp. 230,000 8,050 0.39
SAFECO Corp. 565,000 29,380 1.41
St. Paul Companies, Inc. 160,000 7,160 0.34
USLIFE Corp. 450,000 15,694 0.75
----------- --------
239,603 11.51
----------- --------
MULTI-INDUSTRY & MISCELLANEOUS
MULTI-INDUSTRY - 1.62%
Minnesota Mining and Manufacturing Co. 630,000 33,626 1.62
MISCELLANEOUS - 1.83%
Other common stocks in initial period of
acquisition 38,174 1.83
----------- --------
71,800 3.45
----------- --------
TOTAL COMMON STOCKS 1,076,947 51.73
----------- --------
- ---------------------------------------------- --------- --------- ---------
Principal
Amount
CONVERTIBLE DEBENTURES (000)
- ---------------------------------------------- --------- --------- ---------
CONVERTIBLE PREFERRED SECURITIES
----------- --------
CONVERTIBLE DEBENTURES
BROADCASTING & PUBLISHING - 0.29%
Time Warner Inc. 0% 2012 $20,000 6,100 0.29
INDUSTRIALS - 0.85%
Hanson America Inc. 2.39% 2001 1 12,500 8,938 0.43
USX Corp. 0% 2005 20,000 8,750 0.42
TRANSPORTATION: AIRLINES - 0.29%
AMR Corp., quarterly income capital securities,
6.125% 2024 7,500 5,962 0.29
MISCELLANEOUS - 0.13%
Other convertible debentures in initial period
of acquisition 2,745 0.13
----------- --------
TOTAL CONVERTIBLE DEBENTURES 32,495 1.56
----------- --------
TOTAL COMMON STOCKS AND CONVERTIBLE DEBENTURES 1,109,442 53.29
----------- --------
- ---------------------------------------------- --------- --------- ---------
BONDS & NOTES
- ---------------------------------------------- --------- --------- ---------
INDUSTRIALS - 3.72%
Dayton Hudson Corp. 9.50% 2015 1,000 1,091 0.05
Dayton Hudson Corp. 9.52% 2015 4,000 4,372 0.21
Deere & Co. 8.95% 2019 3,400 3,524 0.17
Federal Paper Board Co., Inc. 10.00% 2011 10,000 10,737 0.52
General Motors Corp. 8.80% 2021 12,500 12,798 0.61
News America Holdings Inc. 10.125% 2012 6,000 6,189 0.3
News America Holdings Inc. 8.45% 2034 2,500 2,398 0.12
Occidental Petroleum Corp. 9.25% 2019 5,000 5,217 0.25
Oryx Energy Co. 9.50% 1999 1,000 957 0.05
Oryx Energy Co. 10.00% 1999 900 880 0.04
Polaroid Corp. 8.00% 1999 10,000 9,793 0.47
Samsung Electric Co., Ltd. 8.50% 2002 1 5,000 4,774 0.23
Tele-Communications, Inc. 9.25% 2023 1,000 907 0.04
Tenneco Credit Inc. 9.625% 2001 2,000 2,082 0.1
Tenneco Credit Inc. 10.00% 2001 1,500 1,590 0.08
TKR Cable I, Inc. 10.50% 2007 2,100 2,148 0.1
USX Corp., Series A, 9.625% 2003 2,650 2,719 0.13
Xerox Corp. 9.75% 2000 5,000 5,255 0.25
----------- --------
77,431 3.72
----------- --------
ELECTRIC UTILITIES - 0.40%
Big Rivers Electric Corp. 10.70% 2017 4,000 4,379 0.21
Coso Funding Corp. 7.99% 1997 1 1,500 1,458 0.07
Coso Funding Corp. 8.87% 2001 1 1,000 962 0.05
Texas Utilities Electric Co. 9.75% 2021 1,500 1,558 0.07
----------- --------
8,357 0.4
----------- --------
TELEPHONE - 0.20%
GTE Corp. 10.25% 2020 4,000 4,207 0.2
----------- --------
TRANSPORTATION - 0.82%
American Airlines, 1991-A1, pass-through
certificates, 9.71% 2007 2 1,899 1,826 0.08
AMR Corp. 9.50% 1998 1,000 1,006 0.05
AMR Corp. 9.20% 2012 2,000 1,785 0.09
Delta Air Lines, Inc. 9.875% 1998 1,000 1,011 0.05
Delta Air Lines, Inc. 9.875% 2000 1,500 1,495 0.07
Delta Air Lines, Inc. 10.375% 2011 3,000 2,933 0.14
Delta Air Lines, Inc., 1992-A2, pass-through
certificates, 9.20% 2014 2 1,500 1,283 0.06
Federal Express Corp., A310-A1, pass-through
certificates, 7.53% 2006 2 2,000 1,845 0.09
United Air Lines, Inc. 9.00% 2003 1,500 1,371 0.07
United Air Lines, Inc. 10.67% 2004 2,500 2,518 0.12
----------- --------
17,073 0.82
----------- --------
FINANCIAL - 3.86%
H.F. Ahmanson & Co. 9.875% 1999 3,000 3,133 0.15
American Re Corp. 10.875% 2004 10,000 10,579 0.51
Bank of Nova Scotia 5.437% 3 4,000 3,174 0.15
Beneficial Corp. 12.875% 2013 1,500 1,756 0.09
Canadian Imperial Bank of Commerce 3.875% 3 1,600 1,280 0.06
Continental Bank, NA 12.50% 2001 2,000 2,370 0.11
Den Norske AS 5.25% 3 3,000 2,363 0.11
First Chicago Corp. 11.25% 2001 1,000 1,122 0.05
First Interstate Bancorp 8.625% 1999 4,300 4,317 0.21
First Interstate Bancorp 10.83% 2001 1,360 1,499 0.07
General Motors Acceptance Corp. 6.70% 1997 4,000 3,852 0.19
General Motors Acceptance Corp. 7.875% 1997 10,000 9,885 0.47
General Motors Acceptance Corp. 8.625% 1999 5,000 4,999 0.24
General Motors Acceptance Corp. 9.375% 2000 5,000 5,126 0.25
General Motors Acceptance Corp. 9.625% 2000 4,000 4,144 0.2
General Motors Acceptance Corp. 9.625% 2001 7,000 7,352 0.35
General Motors Acceptance Corp. 8.75% 2005 4,000 4,000 0.19
General Motors Acceptance Corp. 8.875% 2010 1,000 1,002 0.05
Golden West Financial Corp. 10.25% 2000 1,400 1,506 0.07
Security Pacific Corp. 11.00% 2001 3,000 3,331 0.16
Shopping Center Associates 6.75% 2004 1 3,000 2,606 0.13
Xerox Credit Corp. 10.125% 1999 1,000 1,023 0.05
----------- --------
80,419 3.86
----------- --------
OTHER - 0.07%
Trustees of Columbia University in the City of
New York, Series B, 8.62% 2001 1,500 1,522 0.07
----------- --------
COLLATERALIZED MORTGAGE/ASSET-BACKED
OBLIGATIONS 2 - 0.07%
Standard Credit Card Trust, 1990-6, Class A,
9.375% 1998 1,500 1,538 0.07
----------- --------
GOVERNMENTS (EXCLUDING U.S. GOVERNMENT) AND
GOVERNMENTAL AUTHORITIES - 0.35%
British Columbia Hydro & Power Authority
12.50% 2014 2,000 2,333 0.11
New York (City of) General Obligations Bonds,
Fiscal 1992 Series G, 9.10% 2000 1,310 1,313 0.07
New York (City of) General Obligations Bonds,
Fiscal 1991 Series D, 10.00% 2008 1,300 1,326 0.06
Ontario (Province of) 11.50% 2013 2,000 2,221 0.11
----------- --------
7,193 0.35
----------- --------
FEDERAL AGENCY OBLIGATIONS 2 - 0.61%
Federal Home Loan Mortgage Corp., participation
certificates, 8.50% 2008 379 373 0.02
Federal Home Loan Mortgage Corp.
8.50% 2020 11,845 11,653 0.56
Government National Mortgage Assn. 11.00% 2015 168 182 0.01
Government National Mortgage Assn. 9.50% 2018 213 220 0.01
Government National Mortgage Assn. 10.50% 2019 163 174 0.01
----------- --------
12,602 0.61
----------- --------
FEDERAL AGENCY OBLIGATIONS - OTHER - 1.99%
Federal Home Loan Bank 6.00% 1996 10,000 9,787 0.47
Federal National Mortgage Assn. 6.30% 1997 15,000 14,255 0.68
FNSM Callable Principal STRIPS 0%/8.20% 2022 4 10,000 6,475 0.31
FNSM Callable Principal STRIPS 0%/8.25% 2022 4 1,500 982 0.05
Student Loan Marketing Assn. 6.88% 1996 10,000 9,850 0.48
----------- --------
41,349 1.99
----------- --------
U.S. TREASURY OBLIGATIONS - 13.82%
7.50% January 1996 15,000 15,028 0.72
9.25% January 1996 15,000 15,286 0.73
8.875% February 1996 27,000 27,401 1.32
9.375% April 1996 15,000 15,333 0.74
4.25% May 1996 10,000 9,584 0.46
7.875% July 1996 4,000 4,016 0.19
7.25% August 1996 32,000 31,815 1.53
6.50% September 1996 15,000 14,731 0.71
8.00% October 1996 4,000 4,021 0.19
7.25% November 1996 15,000 14,883 0.71
6.75% February 1997 4,000 3,921 0.19
8.50% April 1997 32,000 32,480 1.56
8.50% July 1997 4,000 4,064 0.2
8.75% October 1997 5,000 5,113 0.25
8.875% November 1997 10,000 10,264 0.49
8.875% May 2000 8,000 8,368 0.4
8.75% August 2000 7,500 7,807 0.38
13.125% May 2001 2,000 2,525 0.12
14.25% February 2002 2,000 2,685 0.13
10.75% February 2003 12,800 14,960 0.72
11.125% August 2003 1,000 1,200 0.06
10.75% August 2005 8,500 10,211 0.49
8.75% November 2008 5,000 5,224 0.25
10.375% November 2009 6,750 7,836 0.38
10.375% November 2012 6,000 7,140 0.34
12.00% August 2013 1,600 2,128 0.1
13.25% May 2014 2,500 3,613 0.17
12.50% August 2014 2,000 2,771 0.13
8.875% August 2017 3,000 3,268 0.16
----------- --------
287,676 13.82
----------- --------
TOTAL BONDS & NOTES 539,367 25.91
----------- --------
- ---------------------------------------------- --------- --------- ---------
SHORT-TERM SECURITIES
- ---------------------------------------------- --------- --------- ---------
CORPORATE SHORT-TERM NOTES - 17.27%
Abbott Laboratories 5.90%-6.02% due 2/21/95 27,315 27,079 1.3
American Express Credit Corp. 5.80% due 1/3/95 1,665 1,664 0.08
American Telephone and Telegraph Co.
5.97%-6.05% due 1/19-2/9/95 39,200 38,988 1.87
Beneficial Corp. 5.60%-6.02% due 1/13-2/28/95 37,500 37,217 1.79
Ford Motor Credit Co. 6.00%-6.05% due 1/4-1/19/95 39,200 39,136 1.88
H.J. Heinz Co. 5.55%-5.97% due 1/3-2/13/95 31,100 31,016 1.49
Eli Lilly and Co. 5.70%-6.08% due 1/9-2/21/95 52,585 52,270 2.51
National Rural Utilities Cooperative Finance
Corp. 5.97%-6.07% due 1/13-2/17/95 35,410 35,241 1.69
J.C. Penney Funding Corp. 5.57%-5.98% due 1/10/95 5,535 5,526 0.26
PepsiCo, Inc. 5.685%-5.92% due 1/6-1/20/95 34,550 34,472 1.65
Pitney Bowes Credit Corp. 5.70% due 1/20-1/24/95 20,000 19,926 0.96
Procter & Gamble Co. 5.85% due 1/26/95 21,500 21,409 1.03
Xerox Corp. 5.95% due 1/25/95 15,800 15,735 0.76
----------- --------
359,679 17.27
----------- --------
FEDERAL AGENCY DISCOUNT NOTES - 1.47%
Federal Farm Credit Banks
5.94%-6.04% due 1/23-3/2/95 30,800 30,556 1.47
----------- --------
30,556 1.47
----------- --------
U.S. TREASURY SHORT-TERM NOTES - 0.87%
7.75% due 2/15/95 15,000 15,040 0.72
11.50% due 11/15/95 3,000 3,110 0.15
----------- --------
18,150 0.87
----------- --------
TOTAL SHORT-TERM SECURITIES 408,385 19.61
----------- --------
TOTAL INVESTMENT SECURITIES
(cost: $2,018,582,000) 2,057,194 98.81
Excess of cash and receivables over payables 24,692 1.19
----------- --------
NET ASSETS $2,081,886 100%
=========== ========
1 Purchased in a private placement transaction;
resale potential extends to qualified
institutional buyers.
2 Pass-through securities backed by a pool of
mortgages or other loans on which principal
payments are periodically made. Therefore, the
effective maturity of these securities is
shorter than the stated maturity.
3 Coupon rates may change periodically.
4 Represents a zero coupon bond which will
convert to an interest-bearing security at a
later date.
See Notes to Financial Statements
- ---------------------------------------------- ----------- ----------- ---------
Equity-type securities appearing in the Equity-type securities eliminated from
portfolio since June 30, 1994 the portfolio since June 30, 1994
- ----------------------------------------------
----------- ----------- ---------
ADVANTA BFGoodrich
Banc One Commonwealth Edison
Federal National Mortgage Assn. Great Western Financial
General Electric GTE
Kerr-McGee ITT
Masco Johnson & Johnson
MCI Communications NBD Bancorp
Pitney Bowes Sundstrand
SAFECO United Technologies
Time Warner
Unicom
Union Pacific
USLIFE
U S WEST
</TABLE>
*******
American Balanced Fund
Financial Statements
<TABLE>
<CAPTION>
- ---------------------------------------------- ---------------- ----------------
<S> <C> <C>
Statement of Assets and Liabilities (dollars in
at December 31, 1994 thousands)
- ---------------------------------------------- ---------------- ----------------
Assets:
Investment securities at market
(cost: $2,018,582) $2,057,194
Cash 100
Receivables for -
Sales of investments $1,486
Sales of fund's shares 24,826
Dividends and accrued interest 15,850 42,162
---------------- ----------------
2,099,456
Liabilities:
Payables for -
Purchases of investments 13,634
Repurchases of fund's shares 3,042
Management services 562
Accrued expenses 332 17,570
---------------- ----------------
Net Assets at December 31, 1994 -
Equivalent to $12.00 per share on
173,543,068 shares of $1 par value
capital stock outstanding (authorized
capital stock--300,000,000 shares) $2,081,886
==============
Statement of Operations
for the year ended December 31, 1994 (dollars in
thousands)
- ---------------------------------------------- ---------------- ----------------
Investment Income:
Income:
Dividends $38,531
Interest 62,774 $101,305
----------------
Expenses:
Management services fee 6,234
Distribution expenses 3,935
Transfer agent fee 1,384
Reports to shareholders 251
Registration statement and prospectus 319
Postage, stationery and supplies 309
Directors' fees 72
Auditing and legal fees 40
Custodian fee 66
Taxes other than federal
income tax 2
Other expenses 35 12,647
---------------- ----------------
Net investment income 88,658
----------------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 4,768
Net change in unrealized appreciation on
investments:
Beginning of year 125,067
End of year 38,612 (86,455)
---------------- ----------------
Net realized gain and change in unrealized
appreciation on investments (81,687)
----------------
Net Increase in Net Assets Resulting
from Operations $6,971
==============
See Notes to Financial Statements
- ---------------------------------------------- ---------------- ----------------
Statement of Changes in Net Assets (dollars in
thousands)
Year Ended
December 31
--------------- ---------------
1994 1993
- ---------------------------------------------- ---------------- ----------------
Operations:
Net investment income $88,658 $66,790
Net realized gain on investments 4,768 62,345
Net change in unrealized appreciation
on investments (86,455) 16,008
---------------- ----------------
Net increase in net assets
resulting from operations 6,971 145,143
---------------- ----------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (86,005) (66,337)
Distributions from net realized gain on
investments (7,886) (59,148)
---------------- ----------------
Total dividends and distributions (93,891) (125,485)
---------------- ----------------
Capital Share Transactions:
Proceeds from shares sold: 54,791,351
and 52,519,100 shares, respectively 669,530 669,659
Proceeds from shares issued in reinvestment
of net investment income dividends and
distributions of net realized gain on
investments: 6,959,833 and 9,005,875 shares,
respectively 84,678 112,498
Cost of shares repurchased: 24,180,499
and 12,422,469 shares, respectively (294,907) (158,812)
---------------- ----------------
Net increase in net assets resulting from
capital share transactions 459,301 623,345
---------------- --------------
Total Increase in Net Assets 372,381 643,003
Net Assets:
Beginning of year 1,709,505 1,066,502
---------------- ----------------
End of year (including undistributed
net investment income: $5,690
and $3,037, respectively) $2,081,886 $1,709,505
================ ===============
</TABLE>
See Notes to Financial Statements
Notes to Financial Statements
1. American Balanced Fund, Inc. (the "fund") is registered under the Investment
Company Act of 1940 as an open-end, diversified management investment company.
The following paragraphs summarize the significant accounting policies
consistently followed by the fund in the preparation of its financial
statements:
Common stocks and convertible debentures are stated at market value based upon
closing sales prices reported on recognized securities exchanges on the last
business day of the year or, for listed securities having no sales reported and
for unlisted securities, upon last-reported bid prices on that date.
Non-convertible bonds, debentures, and other long-term debt securities are
valued at prices obtained from a bond pricing service provided by a major
dealer in bonds, when such prices are available; however, in circumstances
where the investment adviser deems it appropriate to do so, such securities
will be valued at the mean of their representative quoted bid and asked prices
or, if such prices are not available, at the mean of such prices for securities
of comparable maturity, quality, and type.
Short-term securities with original or remaining maturities in excess of 60
days are valued at the mean of their quoted bid and asked prices. Short-term
securities with 60 days or less to maturity are valued at amortized cost, which
approximates market value. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by the
Valuation Committee of the Board of Directors.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses from securities transactions are reported on an identified cost
basis. Dividend and interest income is reported on the accrual basis.
Discounts on securities purchased are amortized over the life of the respective
securities. The fund does not amortize premiums on securities purchased.
Dividends and distributions paid to shareholders are recorded on the
ex-dividend date.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $66,000 includes $22,000 that was paid by these credits
rather than in cash.
2.It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision
is required.
As of December 31, 1994, net unrealized appreciation on investments for
federal income tax purposes aggregated $38,632,000, of which $106,334,000
related to appreciated securities and $67,702,000 related to depreciated
securities. There was no difference between book and tax realized gains on
securities transactions for the year ended December 31, 1994. The cost of
portfolio securities for federal income tax purposes was $2,018,562,000 at
December 31, 1994.
3.The fee of $6,234,000 for management services was paid pursuant to an
agreement with Capital Research and Management Company (CRMC), with which
certain officers and Directors of the fund are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily, based
on an annual rate of 0.42% of the first $500 million of average net assets;
0.324% of such assets in excess of $500 million but not exceeding $1 billion;
0.30% of such assets in excess of $1 billion but not exceeding $1.5 billion;
0.282% of such assets in excess of $1.5 billion but not exceeding $2.5 billion;
0.27% of such assets in excess of $2.5 billion but not exceeding $4 billion;
and 0.264% of such assets in excess of $4 billion.
Pursuant to a Plan of Distribution, the fund may expend up to 0.25% of its
average net assets annually for any activities primarily intended to result in
sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the fund's Board of Directors. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the year ended December 31, 1994,
distribution expenses under the Plan were $3,935,000. As of December 31, 1994,
accrued and unpaid distribution expenses were $266,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $1,384,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $1,598,000 (after
allowances to dealers) as its portion of the sales charges paid by purchasers
of the fund's shares. Such sales charges are not an expense of the fund and,
hence, are not reflected in the accompanying statement of operations.
Directors of the fund who are unaffiliated with CRMC may elect to defer part
or all of the fees earned for services as members of the Board. Amounts
deferred are not funded and are general unsecured liabilities of the fund. As
of December 31, 1994, aggregate amounts deferred were $54,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Directors and officers of the fund
are or may be considered to be affiliated with CRMC, AFS, and/or AFD. No
affiliated officers, Directors, or employees of CRMC, AFS, or AFD received any
remuneration directly from the fund.
4.As of December 31, 1994, accumulated excess distributions of net realized
gain were $60,000 and additional paid-in capital was $1,864,101,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $682,083,000 and $503,882,000, respectively, during
the year ended December 31, 1994.
Per-Share Data and Ratios
<TABLE>
<CAPTION>
Year Ended December 31
------- ------- ------- ------- -------
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.57 $12.28 $12.05 $10.32 $11.41
------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income .57 .59 .61 .62 .63
Net realized and unrealized gain
(loss) on investments (.53) .76 .49 1.86 (.82)
------- ------- ------- ------- -------
Total income (loss) from investment
operations .04 1.35 1.10 2.48 (.19)
------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment
income (.56) (.60) (.60) (.62) (.63)
Distributions from net realized
gains (.05) (.46) (.27) (.13) (.27)
------- ------- ------- ------- -------
Total distributions (.61) (1.06) (.87) (.75) (.90)
------- ------- ------- ------- -------
Net Asset Value, End of Year $12.00 $12.57 $12.28 $12.05 $10.32
======= ======= ======= ======= =======
Total Return* .34% 11.27% 9.48% 24.69% (1.57%)
Ratios/Supplemental Data:
Net assets, end of year
(in millions) $2,082 $1,710 $1,067 $642 $370
Ratio of expenses to average
net assets .68% .71% .74% .82% .84%
Ratio of net income to average
net assets 4.76% 4.74% 5.19% 5.56% 5.95%
Portfolio turnover rate 32% 28% 17% 25% 26%
</TABLE>
*This was calculated without deducting
a sales charge. The maximum sales
charge is 5.75% of the fund's
Independent Auditors' Report
To the Board of Directors and Shareholders of American Balanced Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the investment portfolio, of American Balanced Fund, Inc. (the
"Fund") as of December 31, 1994, the related statement of operations for the
year then ended, the statements of changes in net assets for the years ended
December 31, 1994 and 1993 and the per-share data and ratios for each of the
four years in the period ended December 31, 1994. These financial statements
and the per-share data and ratios are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and the per-share data and ratios based on our audits. The
per-share data and ratios for the year ended December 31, 1990 were audited by
other auditors whose report dated January 25, 1991 expressed an unqualified
opinion on the per-share data and ratios.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
per-share data and ratios are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at December 31, 1994 by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above and per-share data
and ratios for each of the four years in the period ended December 31, 1994
present fairly, in all material respects, the financial position of American
Balanced Fund, Inc. as of December 31, 1994, and the results of its operations,
the changes in its net assets and the per-share data and ratios for the
respective stated years, in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
Los Angeles, California
January 27, 1995
U.S. Tax Information (unaudited)
During the fiscal year ended December 31, 1994, 42% of the dividends paid by
the fund from investment income earned qualified for the corporate
dividends-received deduction. Of those dividends, 25% was derived from
interest on direct U.S. Treasury obligations.
This information is given to meet certain requirements of the Internal Revenue
Code.
American Balanced Fund
BOARD OF DIRECTORS
ROBERT A. FOX, Livingston, California
President and Chief Executive Officer, Foster Farms Inc.
ROBERTA L. HAZARD, McLean, Virginia
Rear Admiral, U.S. Navy (Retired)
RICHARD H.M. HOLMES, Hillsborough, California
Retired; former Vice President,
Capital Research and Management Company
LEONADE D. JONES, Washington, D.C.
Treasurer, The Washington Post Company
JOHN G. McDONALD, Stanford, California
The IBJ Professor of Finance,
Graduate School of Business, Stanford University
GEORGE A. MILLER, San Francisco, California
Senior Vice President and Director,
Capital Research and Management Company
THEODORE D. NIERENBERG, Armonk, New York
Private investor; former President,
Dansk International Designs, Ltd.
JAMES W. RATZLAFF, San Francisco, California
Vice Chairman of the Board,
Capital Research and Management Company
HENRY E. RIGGS, Claremont, California
President and Professor of Engineering,
Harvey Mudd College
WALTER P. STERN, New York, New York
Chairman of the Board of the fund
Chairman of the Board, Capital Group International, Inc.
PATRICIA K. WOOLF, Princeton, New Jersey
Private investor; lecturer, Department of Molecular
Biology, Princeton University
DIRECTOR EMERITUS
ROBERT L. CODY, Carmel, California
Retired; former Vice Chairman of the Board,
Capital Research and Management Company
OTHER OFFICERS
ROBERT G. O'DONNELL, San Francisco, California
President of the fund
Senior Vice President and Director,
Capital Research and Management Company
ABNER D. GOLDSTINE, Los Angeles, California
Senior Vice President of the fund
Senior Vice President and Director,
Capital Research and Management Company
PAUL G. HAAGA, JR., Los Angeles, California
Senior Vice President of the fund
Senior Vice President and Director,
Capital Research and Management Company
STEVEN N. KEARSLEY, Los Angeles, California
Vice President of the fund
Vice President and Treasurer,
Capital Research and Management Company
PATRICK F. QUAN, San Francisco, California
Secretary of the fund
Vice President - Fund Business Management Group,
Capital Research and Management Company
MARY C. CREMIN, Los Angeles, California
Treasurer of the fund
Senior Vice President - Fund Business Management
Group, Capital Research and Management Company
R. MARCIA GOULD, Los Angeles, California
Assistant Treasurer of the fund
Vice President - Fund Business Management Group,
Capital Research and Management Company
OFFICE OF THE FUND
Four Embarcadero Center, Suite 1800
Mailing Address: P.O. Box 7650
San Francisco, California 94120-7650
INVESTMENT ADVISER
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92621-5804
TRANSFER AGENT FOR
SHAREHOLDER ACCOUNTS
American Funds Service Company
P.O. Box 2205
Brea, California 92622-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
Morrison & Foerster
345 California Street
San Francisco, California 94104-2675
INDEPENDENT AUDITORS
Deloitte & Touche LLP
1000 Wilshire Boulevard
Los Angeles, California 90017-2472
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
The American Funds Group(R) A Portfolio for Every Investor
American Balanced Fund is a member of The American Funds Group- 28 funds with a
wide range of investment objectives and with assets totaling more than $90
billion. These funds serve more than seven million shareholders throughout the
world, including hundreds of leading corporations and institutions.
Growth Funds
AMCAP Fund
Seeks long-term growth of capital by investing in growing, profitable
companies.
EUROPACIFIC GROWTH FUND
Seeks long-term capital appreciation by investing in companies based outside
the U.S.
THE GROWTH FUND OF AMERICA
Invests in a wide range of companies that appear to offer superior
opportunities for growth of capital.
THE NEW ECONOMY FUND
Seeks long-term growth of capital through investments in companies operating in
services and information industries in the U.S. and around the world. (Can
invest up to 40% of its assets outside the U.S.)
NEW PERSPECTIVE FUND
Seeks long-term growth of capital through investments all over the world,
including the United States.
SMALLCAP WORLD FUND
Seeks long-term growth of capital by investing in the stocks of smaller
companies in the U.S. and around the world.
Growth and Income Funds
AMERICAN MUTUAL FUND
Strives for the balanced accomplishment of three objectives - current income,
capital growth and conservation of principal - through investments in companies
that participate in the growth of the American economy.
CAPITAL WORLD GROWTH AND INCOME FUND
Seeks growth and income over the long term through a global portfolio
emphasizing "blue chip" stocks.
FUNDAMENTAL INVESTORS
Seeks long-term growth of capital and income through investments in common
stocks.
THE INVESTMENT COMPANY OF AMERICA
Seeks long-term growth of capital and income, placing greater emphasis on
future dividends than on current income. Now in its 62nd year, ICA is one of
the nation's oldest and largest mutual funds.
WASHINGTON MUTUAL INVESTORS FUND
Seeks current income and an opportunity for capital growth through high-quality
common stocks considered eligible for the investment of trust funds in the
District of Columbia.
Equity-Income Funds
CAPITAL INCOME BUILDER
Seeks to provide a growing dividend - with higher income distributions every
quarter as far as possible - together with a current yield which exceeds that
paid by U.S. stocks generally. Concentrates on U.S. equity securities, but may
also invest in stocks and bonds all over the world.
THE INCOME FUND OF AMERICA
Seeks current income while secondarily striving for capital growth through
investments in stocks and fixed-income securities.
Balanced Fund
AMERICAN BALANCED FUND
Seeks conservation of capital, current income, and long-term growth of both
capital and income by investing in stocks and fixed-income securities. The fund
is managed as if it constituted the complete investment program of a prudent
investor.
Income Funds
AMERICAN HIGH-INCOME TRUST
Seeks a high level of current income and, secondarily, capital appreciation
through a diversified, carefully supervised portfolio consisting primarily of
lower rated, higher risk corporate bonds.
THE BOND FUND OF AMERICA
Seeks as high a level of current income as is consistent with preservation of
capital through a diversified portfolio of bonds and other fixed-income
obligations.
CAPITAL WORLD BOND FUND
Seeks high long-term total return, consistent with prudent management, by
investing in quality fixed-income securities issued by major governments and
corporations all over the world, including the U.S.
INTERMEDIATE BOND FUND OF AMERICA
Seeks current income, consistent with preservation of capital, through a
diversified portfolio of government and high-quality corporate debt obligations
with effective maturities between three and 10 years.
U.S. GOVERNMENT SECURITIES FUND
Seeks high income, consistent with prudent risk and preservation of capital, by
investing primarily in securities for which the timely payment of principal and
interest is guaranteed by the U.S. government.
Tax-Exempt Income Funds
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND*
Seeks a high level of current income exempt from regular federal income taxes
through a diversified, carefully researched portfolio of municipal bonds,
including higher yielding, lower rated, higher risk issues.
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
Seeks current income exempt from federal income taxes, while preserving
capital, through a quality-oriented municipal bond portfolio with an average
effective maturity between three and 10 years.
THE TAX-EXEMPT BOND FUND OF AMERICA
Seeks a high level of federally tax-free income, consistent with preservation
of capital, through a diversified portfolio consisting primarily of municipal
bonds.
THE TAX-EXEMPT FUND OF CALIFORNIA
Seeks a high level of current income free from federal and California income
taxes primarily through investments in California municipal bonds.
Additionally, the fund seeks to preserve capital.
THE TAX-EXEMPT FUND OF MARYLAND
Seeks a high level of current income free from federal, Maryland state and
local income taxes primarily through investments in Maryland municipal bonds.
Additionally, the fund seeks to preserve capital.
* May invest up to 100% of its assets in bonds subject to the alternative
minimum tax.
THE TAX-EXEMPT FUND OF VIRGINIA
Seeks a high level of current income free from federal and Virginia income
taxes primarily through investments in Virginia municipal bonds. Additionally,
the fund seeks to preserve capital.
Money Market Funds
THE CASH MANAGEMENT TRUST OF AMERICA
Seeks to provide income on cash reserves, while preserving capital and
maintaining liquidity, through high-quality money market instruments.
THE TAX-EXEMPT MONEY FUND OF AMERICA
Seeks to provide income free from federal taxes, while preserving capital and
maintaining liquidity, through investments in high-quality municipal securities
maturing in one year or less.
THE U.S. TREASURY MONEY FUND OF AMERICA
Seeks to provide income on cash reserves, while preserving capital and
maintaining liquidity, through investments in U.S. Treasury securities maturing
in one year or less.
Investments in the funds are neither insured nor guaranteed by the U.S.
government or any other entity. There can be no assurance that the money market
funds will maintain a constant net asset value of $1.00 per share.
For more complete information about any of the funds, including charges and
expenses, please obtain a prospectus from your securities dealer or financial
planner, or phone the fund's transfer agent, American Funds Service Company, at
800/421-0180. Please read the prospectus carefully before you invest or send
money.
Remember, as a shareholder of American Balanced Fund, whenever your objectives
change you can transfer some or all of your holdings to another fund in The
American Funds Group free of charge. Exchange privileges are subject to change
or termination.
This report is for the information of shareholders of American Balanced Fund,
but it may also be used as sales literature when preceded or accompanied by the
current prospectus, which gives details about charges, expenses, investment
objectives and operating policies of the fund. If used as sales material after
March 31, 1995, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
Litho in USA MNC/GAC
Lit. No. AMBAL-011-0295
