AMERICAN BALANCED FUND
SEMI-ANNUAL REPORT
for the six months ended June 30, 1996
[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.
On our cover: A drama of color and form plays out in the mountains near Aspen,
Colorado.
Fund results in this report were computed without a sales charge unless
otherwise indicated. Here are the total returns and average annual compound
returns with all distributions reinvested for periods ended June 30, 1996,
assuming payment of the 5.75% maximum sales charge at the beginning of the
stated periods - 10 years: +173.14%, or +10.57% a year; 5 years: +71.67%, or
+11.41% a year; 12 months: +10.41%. Sales charges are lower for accounts of
$50,000 or more. The fund's 30-day yield as of July 31, 1996, calculated in
accordance with the Securities and Exchange Commission formula, was 3.75%.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN WILL
VARY, SO YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE SHORTER THE TIME
PERIOD OF YOUR INVESTMENT, THE GREATER THE POSSIBILITY OF LOSS. FUND SHARES ARE
NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY, THE U.S.
GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON.
FELLOW SHAREHOLDERS:
During the first half of this year, stock and bond prices moved in
different directions as equity prices rose while higher interest rates pushed
fixed-income prices lower.
Your investment in American Balanced Fund earned a total return of 4.8% in
the period. This was slightly higher than the 4.3% increase in the Lipper
Balanced Funds Index and assumes that, like most shareholders, you reinvested
quarterly dividends totaling 28 cents a share and the capital gain distribution
of eight cents a share paid in February.
The stock market, as measured by the unmanaged Standard & Poor's 500
Composite Index, returned 10.1% with dividends reinvested while the Lehman
Brothers Aggregate Bond Index, an unmanaged measure of corporate and government
bonds, lost ground with a total return of <UNDEF>1.2% on a reinvested basis.
MODEST PORTFOLIO CHANGES
As we write this, we believe the valuation of common stocks is still very
high by historical standards. While such high valuations can occasionally last
for some time, we know that markets cannot go up forever. To be consistent with
the fund's objective of capital conservation, we have remained near the lower
end of our defined range of 50% to 75% in common stocks. At June 30, our equity
position accounted for 55% of the portfolio, down slightly from 57% at the
beginning of the year.
During the first half, changes in the portfolio were relatively modest.
For a long time, the fund has had a large position in financial stocks,
including banking and insurance, which served us very well. We took advantage
of the stock market's strength to modestly reduce our exposure in this sector
to about 11% at June 30, from almost 14% at December 31. Oil stocks are now the
largest individual industry in the fund at just under 7%. Forest products and
paper company stocks remain significant at about 4%. This industry has been a
disappointing investment for us so far but we continue to find individual
company valuations very attractive.
While our overall position in common stocks declined slightly during the
period, we found attractive opportunities in the fixed-income market. As rising
interest rates pushed bond prices lower, we took advantage of the lower prices
to increase our investments in fixed-income securities to almost 33% from 28%
at the start of the period. The remaining portion of the portfolio is in
short-term money market instruments.
INVESTMENT-GRADE BONDS
Our bond investments are concentrated in high-grade instruments, with
nearly two-thirds in government bonds and AAA-rated corporate securities. As
you may know, our prospectus requires the purchase of only investment-grade
fixed-income securities. A significant portion of the fixed-income portfolio
consists of bonds secured by aircraft or aircraft leases. In many cases, these
bond issues were structured in a new way which both lowered the cost of
financing to the airlines and offered attractive yields to shareholders. Your
fund's fixed-income research analysts have a depth of knowledge about the
airline industry which enabled the fund to move quickly to take advantage of
the opportunities these bonds presented. They also worked closely with equity
analysts at Capital Research and Management Company (CRMC), the investment
adviser to American Balanced Fund. This type of cooperation among fixed-income
and equity analysts is typical of the way CRMC manages the fund.
On a closing note, we wish to thank George Miller, who played a key role
in American Balanced Fund for more than 30 years. George retired recently and
his contributions will be missed. We welcome Victor Parachini as one of the
fund's portfolio counselors. Vic has more than 20 years of experience as an
investment professional with CRMC and its affiliates, managing both
fixed-income and equity assets.
We look forward to reporting to you again at the end of the year.
Cordially,
Walter P. Stern Robert G. O'Donnell
Chairman of the Board President
August 9, 1996
<TABLE>
American Balanced Fund
Investment Portfolio June 30, 1996 (Unaudited)
- ---------------------------------------------- ---------------------- --------
Percent
Of
TEN LARGEST EQUITY HOLDINGS Net Assets
<S> <C> <C> <C>
Phillips Petroleum 1.78%
Wal-Mart Stores 1.73
Philip Morris 1.62
DuPont 1.41
Atlantic Richfield 1.41
Fleet Financial 1.23
Georgia-Pacific 1.07
Warner-Lambert 1.06
American Home Products 1.02
American Greetings 1.01
INVESTMENT MIX BY SECURITY TYPE
- ----------------------------------------------
Common Stocks 55%
Goverment Bonds 20
Corporate Bonds 12
Convertible Debentures 1
Cash 12
Market Percent
Number Value of Net
COMMON STOCKS of Shares (000) Assets
- ---------------------------------------------- ---------------------- --------
ENERGY
Energy Sources- 6.59%
Amoco Corp. 450,000 $32,569 .92
Atlantic Richfield Co. 420,000 49,770 1.41
Chevron Corp. 400,000 23,600 .67
Exxon Corp. 270,000 23,456 .66
Phillips Petroleum Co. 1,500,000 62,813 1.78
Royal Dutch Petroleum Co.
(New York Registered Shares) 140,000 21,525 .61
Unocal Corp. 560,000 18,900 .54
Utilities: Electric & Gas - 2.68%
Baltimore Gas and Electric Co. 800,000 22,700 .64
Consolidated Edison Co. of New York, Inc. 500,000 14,625 .41
Duke Power Co. 500,000 25,625 .73
Pacific Gas and Electric Co. 700,000 16,275 .46
PP & L Resources, Inc. 650,000 15,356 .44
----------------------
327,214 9.27
----------- --------
MATERIALS
Chemicals - 2.25%
Dow Chemical Co. 250,000 19,000 .54
E.I. du Pont de Nemours and Co. 630,000 49,849 1.41
Great Lakes Chemical Corp. 170,000 10,582 .30
Forest Products & Paper - 3.63% #VALUE!
Bowater Inc. 460,000 17,308 .49
Georgia-Pacific Corp. 530,000 37,630 1.07
International Paper Co. 600,000 22,125 .63
Louisiana-Pacific Corp. 1,086,000 24,028 .68
Union Camp Corp. 550,000 26,812 .76
Metals: Nonferrous - 0.65%
Aluminum Co. of America 400,000 22,950 .65
----------- --------
230,284 6.53
----------- --------
CAPITAL EQUIPMENT
Aerospace & Military Technology - 0.49%
Boeing Co. 200,000 17,425 .49
Data Processing & Reproduction - 0.23%
International Business Machines Corp. 80,000 7,920 .23
Electrical & Electronic - 0.89%
Nokia Corp. (American Depositary Receipts) 850,000 31,450 .89
Industrial Components - 0.64%
Goodyear Tire & Rubber Co. 290,000 13,993 .40
Rockwell International Corp. 150,000 8,587 .24
Machinery & Engineering- 1.06%
Caterpillar Inc. 300,000 20,325 .58
Parker Hannifin Corp. 400,000 16,950 .48
----------- --------
116,650 3.31
----------- --------
CONSUMER GOODS
Appliances & Household Durables - 0.39%
Philips Electronics NV (New York Registered Shares) 425,000 13,866 .39
Automobiles - 1.07%
Ford Motor Co., Class A 750,000 24,281 .69
Volvo AB, Class B (American Depositary Receipts) 600,000 13,500 .38
Beverages & Tobacco - 2.41%
Anheuser-Busch Companies, Inc. 170,000 12,750 .36
Philip Morris Companies Inc. 550,000 57,200 1.62
UST Inc. 440,000 15,070 .43
Food & Household Products - 0.82%
General Mills, Inc. 350,000 19,075 .54
Sara Lee Corp. 300,000 9,712 .28
Health & Personal Care - 5.49%
Abbott Laboratories 135,000 5,872 .17
American Home Products Corp. 600,000 36,075 1.02
Bristol-Myers Squibb Co. 200,000 18,000 .51
Eli Lilly and Co. 200,000 13,000 .37
Kimberly-Clark Corp. 285,000 22,016 .62
Merck & Co., Inc. 450,000 29,081 .83
Pfizer Inc 100,000 7,138 .20
Schering-Plough Corp. 400,000 25,100 .71
Warner-Lambert Co. 680,200 37,411 1.06
Recreation & Other Consumer Products - 1.01%
American Greetings Corp., Class A 1,300,000 35,588 1.01
----------- --------
394,735 11.19
----------- --------
SERVICES
Broadcasting & Publishing - 1.69%
Dow Jones & Co., Inc. 400,000 16,700 .47
Gannett Co., Inc. 350,000 24,762 .70
Time Warner Inc., preferred equity redemption
cumulative stock 135,000 4,860 .52
Time Warner Inc. 340,000 13,345
Business & Public Services - 2.04%
Columbia/HCA Healthcare Corp. 350,000 18,681 .53
Dun & Bradstreet Corp. 350,000 21,875 .62
Pitney Bowes Inc. 350,000 16,712 .47
WMX Technologies, Inc. 450,000 14,738 .42
Merchandising - 1.96%
Circuit City Stores, Inc. 225,000 8,128 .23
Wal-Mart Stores, Inc. 2,400,000 60,900 1.73
Telecommunications - 2.37%
AT&T Corp. 500,000 31,000 .88
Ameritech Corp. 450,000 26,719 .76
MCI Communications Corp. 540,000 13,838 .39
U S WEST Communications Group 375,000 11,953 .34
Transportation: Rail & Road - 1.49%
CSX Corp. 440,000 21,230 .60
Union Pacific Corp. 450,000 31,444 .89
----------- --------
336,885 9.55
----------- --------
FINANCE
Banking - 5.68%
BankAmerica Corp. 400,000 30,300 .86
Boatmen's Bancshares, Inc. 400,000 16,050 .46
CoreStates Financial Corp 340,000 13,090 .37
First Hawaiian Bank 200,000 5,700 .16
First Virginia Banks, Inc. 320,300 12,812 .36
Fleet Financial Group, Inc. 1,000,000 43,500 1.23
J.P. Morgan & Co. Inc. 80,000 6,770 .19
National City Corp. 800,000 28,100 .80
NationsBank Corp. 400,000 33,050 .94
U.S. Bancorp 300,000 10,838 .31
Financial Services - 0.86%
Beneficial Corp. 90,000 5,051 .14
Federal Home Loan Mortgage Corp. 200,000 17,100 .49
Federal National Mortgage Assn. 240,000 8,040 .23
Insurance - 4.21%
Allstate Corp. 450,000 20,531 .58
American General Corp. 400,000 14,550 .41
General Re Corp. 167,300 25,471 .72
Lincoln National Corp. 230,000 10,638 .30
SAFECO Corp. 1,000,000 35,375 1.00
St. Paul Companies, Inc. 360,000 19,260 .55
USLIFE Corp. 700,000 23,013 .65
----------- --------
379,239 10.75
----------- --------
MULTI-INDUSTRY AND MISCELLANEOUS
Multi-Industry - 0.98%
Minnesota Mining and Manufacturing Co. 500,000 34,500 .98
Miscellaneous - 3.04%
Other common stocks in initial period of acquisition 107,746 3.04
----------- --------
142,246 4.02
----------- --------
TOTAL COMMON STOCKS 1,927,253 54.62
----------- --------
- ---------------------------------------------- --------- --------- ---------
Principal
Amount
CONVERTIBLE DEBENTURES (000)
- ---------------------------------------------- --------- --------- ---------
CONVERTIBLE PREFERRED SECURITIES
----------- --------
CONVERTIBLE DEBENTURES
Broadcasting & Publishing - 0.30%
Time Warner Inc. 0% 2012 $6,500 2,356
Time Warner Inc. 0% 2013 20,000 8,350 .30
Industrials - 0.24%
Hanson America Inc. 2.39% 2001 /1/ 10,000 8,500 .24
Telecommunications - 0.32%
US WEST Communications Group 0% 2011 32,000 11,240 .32
Trasportation: Airlines - 0.09%
Airborne Freight Corp. 6.75% 2001 3,000 3,000 .09
----------- --------
TOTAL CONVERTIBLE DEBENTURES 33,446 .95
----------- --------
TOTAL COMMON STOCKS AND 1,960,699 55.57
CONVERTIBLE DEBENTURES
----------- --------
- ---------------------------------------------- --------- --------- ---------
BONDS & NOTES
- ---------------------------------------------- --------- --------- ---------
Industrials - 4.54%
3600 Communications Company 7.125% 2003 5,000 4,781
3600 Communications Company 7.50% 2006 7,500 7,116 .34
Dayton Hudson Corp. 10.00% 2010 5,000 5,844
Dayton Hudson Corp. 9.50% 2015 1,000 1,151 .20
Deere & Co. 8.95% 2019 7,330 8,298 .24
Federal Paper Board Co., Inc. 10.00% 2011 10,000 12,155 .34
General Motors Corp. 8.80% 2021 12,500 14,009 .40
Inco Ltd. 9.875% 2019 4,200 4,545
Inco Ltd. 9.60% 2022 5,000 5,242 .28
May Department Stores Co. 9.875% 2021 6,500 7,338 .21
Mobil Corp. 8.00% 2032 5,000 5,065 .14
News America Holdings Inc. 10.125% 2012 5,000 5,622
News America Holdings Inc. 8.45% 2034 2,500 2,653 .23
Occidental Petroleum Corp. 8.50% 2004 2,500 2,594
Occidental Petroleum Corp. 9.25% 2019 5,000 5,836 .24
OXYMAR 7.50% 2016 /1/ 6,000 5,475 .16
Philips Electronics NV 7.20% 2026 5,000 4,969 .14
Pohang Iron & Steel Co., Ltd. 7.375% 2005 3,500 3,439 .10
Polaroid Corp. 8.00% 1999 10,000 10,236 .29
Swire Pacific Ltd. 8.50% 2004 /1/ 7,500 7,804 .22
TCI Communications, Inc. 8.75% 2015 4,000 3,932 .11
Tele-Communications, Inc. 9.25% 2023 6,000 5,915 .17
Tenneco Credit Corp. 9.625% 2001 2,000 2,228 .06
Time Warner Inc. 10.15% 2012 5,000 5,759
Time Warner Inc. 9.125% 2013 5,000 5,222 .31
TKR Cable I, Inc. 10.50% 2007 4,000 4,385 .12
USX Corp., Series A, 9.375% 2012 7,700 8,489 .24
----------- --------
160,102 4.54
----------- --------
Electric Utilities - 0.12%
Big Rivers Electric Corp. 10.70% 2017 4,000 4,397 .12
----------- --------
Gas Utilities - 0.35%
Columbia Gas System, Inc.,Series F, 7.42% 2015 7,500 6,991 .20
Southern California Gas Co., Series Y, 8.75% 2021 5,000 5,199 .15
----------- --------
12,190 .35
----------- --------
Telephone - 0.28%
AT&T Corp. 8.625% 2031 9,350 9,808 .28
----------- --------
Transportation - 1.93%
AMR Corp. 9.20% 2012 2,000 2,163 .06
Airplanes Pass Through Trust, pass-through
certificates, Class B, 6.596% 2019 /2/ /3/ 4,945 4,973 .35
Airplanes Pass Through Trust, pass-through
certificates, Class C, 8.15% 2019 /2/ 7,500 7,472
Continental Airlines, Inc., pass-through certificates,
Series 1996-2B, 8.56% 2014 /1/ /2/ 2,000 2,125
Continental Airlines, Inc., pass-through certificates, .33
Series 1996-A, 6.94% 2015 /1/ /2/ 10,000 9,650
Delta Air Lines, Inc., 1992-A2, pass-through
certificates, 9.20% 2014 /2/ 1,500 1,645
Delta Air Lines, Inc., 1993-A2, pass-through .22
certificates, 10.50% 2016 /2/ 5,000 5,941
Federal Express Corp., 1996-A1, pass-through
certificates, 7.85% 2015 /2/ 10,000 10,125 .29
United Air Lines, Inc. 10.67% 2004 5,000 5,793
United Air Lines, Inc. 9.02% 2012 6,350 6,728 .48
United Air Lines, Inc. 9.56% 2018 4,000 4,393
USAir, Inc. 6.76% 2008 /1/ 7,500 7,134 .20
----------------------
68,142 1.93
----------- --------
Financial - 2.92%
American Re Corp. 10.875% 2004 5,000 5,437 .15
Bank of Nova Scotia 5.375% /3/ 4,000 3,300 .09
Beneficial Corp. 12.875% 2013 1,500 1,740 .05
Canadian Imperial Bank of Commerce 5.375% /3/ 1,600 1,320 .04
Capital One Bank 8.33% 1997 5,000 5,059
Capital One Bank 7.35% 2000 10,000 10,062 .43
CIGNA Corp. 6.375% 2006 5,000 4,600 .13
Continental Bank, NA 12.50% 2001 2,000 2,444 .07
Den Danske Bank Aklieselskab 7.25% 2005 /1/ 5,000 4,945 .14
Den Norske Creditbank 5.75% /3/ 3,000 2,497 .07
First Interstate Bancorp 8.625% 1999 4,300 4,503 .13
General Motors Acceptance Corp. 9.375% 2000 5,000 5,388
General Motors Acceptance Corp. 9.625% 2000 4,000 4,348
General Motors Acceptance Corp. 9.625% 2001 7,000 7,802 .61
General Motors Acceptance Corp. 8.75% 2005 4,000 4,334
Golden West Financial Corp. 10.25% 2000 1,400 1,575 .05
John Hancock Mutual Life Insurance Co. 7.375% 2024 /1/ 5,000 4,639 .13
Metropolitan Life Insurance Co. 7.45% 2023 /1/ 7,500 6,801 .19
Midland Bank plc 6.00% /3/ 4,000 3,427 .10
Security Pacific Corp. 11.00% 2001 3,000 3,478 .10
Terra Nova Insurance (UK) Holdings plc 10.75% 2005 5,000 5,550 .16
The Equitable Life Assurance Society of the
United States 7.70% 2015 /1/ 10,000 9,669 .28
----------- --------
102,918 2.92
----------- --------
Real Estate - 0.56%
ERP Operating LP 7.95% 2002 1,500 1,519 .04
Irvine Co. 7.46% 2006 /1/ /4/ 2,500 2,340 .07
Security Capital Industrial Trust 7.95% 2008 3,000 2,980 .08
Security Capital Industrial Trust 7.875% 2009 5,000 4,922 .14
Shopping Center Associates 6.75% 2004 /1/ 5,000 4,725 .13
Wharf Capital International, Ltd. 8.875% 2004 3,500 3,594 .10
----------- --------
20,080 .56
----------- --------
Other - 0.05%
Trustees of Columbia University in the City of
New York, Series B, 8.62% 2001 1,500 1,607 .05
----------- --------
Collateralized Mortgage/Asset-Backed
Obligations /2/- 1.80%
Collateralized Mortgage Obligation Trust 28,
Class Z, 8.45% 2017 20,709 20,968 .60
Case Equipment Loan Trust, 1995-A, 7.30% 2002 5,548 5,598 .16
Green Tree Financial Corp. 6.80% 2027 10,000 9,650 .27
Grupo Financiero Banamex Accival, SA de CV
0% 2002 /1/ 5,988 4,566 .13
J.P. Morgan Commercial Mortgage Finance Corp.,
pass-through certificates, Series 1996-C3, Class
A-1, 7.33% 2028 /3/ 5,000 4,937 .14
Jet Equipment Trust, Series 1995-A, Class B,
8.64% 2015 /1/ 4,919 5,263 .37
Jet Equipment Trust, Series 1995-B, Class B,
7.83% 2015 /1/ 7,857 7,835
Merrill Lynch Mortgage Investors, Inc. 1995-A
7.495% 2021 4,683 4,698 .13
----------- --------
63,515 1.80
----------- --------
Governments (excluding U.S. Government) and
Governmental Authorities - 0.31%
British Columbia Hydro and Power Authority
12.50% 2014 2,000 2,335 .07
Israel (State of) 6.375% 2005 9,000 8,364 .24
----------- --------
10,699 .31
----------- --------
Federal Agency Obligations /2/ - 1.08%
Federal Home Loan Mortgage Corp.
8.50% 2008 289 300 .01
Federal Home Loan Mortgage Corp.
8.50% 2020 9,271 9,595 .27
Federal Home Loan Mortgage Corp.
7.50% 2022 952 943 .03
Federal Home Loan Mortgage Corp.
7.50% 2024 2,827 2,794 .08
Federal National Mortgage Assn.
7.00% 2008 4,808 4,829 .14
Government National Mortgage Assn. 11.00% 2015 118 132 .00
Government National Mortgage Assn. 9.50% 2018 144 155 .00
Government National Mortgage Assn. 10.50% 2019 99 109 .00
Government National Mortgage Assn. 8.00% 2023 5,399 5,490 .16
Government National Mortgage Assn. 8.00% 2024 4,946 4,989 .14
Government National Mortgage Assn. 7.50% 2026 4,946 4,875 .14
Government National Mortgage Assn. 8.50% 2026 3,887 3,997 .11
----------- --------
38,208 1.08
----------- --------
Federal Agency Obligations - Other - 2.27%
Federal Home Loan Mortgage Corp. 6.945% 2005 6,500 6,300 .18
Federal Home Loan Mortgage Corp. 6.555% 2006 10,000 9,497 .27
Federal National Mortgage Assn. 8.16% 2000 20,000 20,278 .58
Federal National Mortgage Assn. 8.71% 2005 22,000 22,701 .64
FNSM Callable Principal STRIPS 0%/8.20% 2022 /5/ 10,000 8,037 .23
FNSM Callable Principal STRIPS 0%/8.25% 2022 /5/ 1,500 1,214 .03
Student Loan Marketing Assn. 7.67% 2000 11,850 11,976 .34
----------- --------
80,003 2.27
----------- --------
U.S. Treasury Obligations - 16.43%
7.25% August 1996 20,000 20,053 .57
7.25% November 1996 15,000 15,096 .43
4.75% February 1997 50,000 49,703 1.41
8.50% July 1997 20,000 20,522 .58
7.375% November 1997 25,000 25,445 .72
8.875% November 1997 25,000 25,934 .73
5.625% January 1998 30,000 29,817 .85
8.25% July 1998 25,000 25,988 .74
8.75% August 1998 20,000 19,878 .56
6.75% June 1999 15,000 15,174 .43
6.875% July 1999 25,000 25,356 .72
7.75% November 1999 25,000 26,031 .74
7.125% February 2000 50,000 51,133 1.45
8.875% May 2000 8,000 8,665 .24
8.75% August 2000 7,500 8,122 .23
13.125% May 2001 2,000 2,554 .07
14.25% February 2002 2,000 2,724 .08
10.75% February 2003 12,800 15,618 .44
11.125% August 2003 8,500 10,640 .30
7.25% May 2004 20,000 20,722 .59
7.25% August 2004 5,000 5,179 .15
10.75% August 2005 8,500 10,791 .30
8.75% November 2008 10,000 11,092 .31
10.375% November 2009 20,000 24,459 .69
10.375% November 2012 78,000 99,023 2.81
7.25% May 2016 10,000 10,234 .29
----------- --------
579,953 16.43
----------- --------
TOTAL BONDS & NOTES 1,151,622 32.64
----------- --------
- ---------------------------------------------- --------- --------- ---------
SHORT-TERM SECURITIES
- ---------------------------------------------- --------- --------- ---------
Corporate Short-Term Notes - 11.52%
Beneficial Corp. 5.33%-5.38% due 7/25-8/20/96 38,500 38,305 1.08
Coca-Cola Co. 5.34%-5.35% due 7/31-8/26/96 38,000 37,726 1.07
E.I. du Pont de Nemours and Co. 5.29%-5.35%
due 7/10-8/19/96 42,900 42,731 1.21
Ford Motor Credit Co. 5.29%-5.38% due 7/8-8/7/96 55,850 55,638 1.58
General Electric Capital Corp. 5.36%-5.38%
due 8/9-8/13/96 16,200 16,100 .46
IBM Credit Corp. 5.27%-5.37% due 7/11-7/30/96 33,000 32,887 .93
J.C. Penney Funding Corp. 5.32%-5.36%
due 7/29-8/19/96 21,500 21,387 .61
Lucent Technologies Inc. 5.28%-5.38%
due 7/18-8/28/96 46,700 46,506 1.32
Weyerhaeuser Co. 5.27%-5.35% due 8/13-8/27/96 49,700 49,321 1.40
Walt Disney Co. 5.25%-5.26% due 8/19-8/30/96 28,900 28,659 .81
Xerox Corp. 5.27%-5.38% due 7/19-8/22/96 37,400 37,215 1.05
----------- --------
406,475 11.52
----------- --------
Federal Agency Discount Notes - 0.09%
Federal Home Loan Mortgage Corp. 5.21% due 8/6/96 3,100 3,083 .09
----------- --------
3,083 .09
----------- --------
TOTAL SHORT-TERM SECURITIES 409,558 11.61
----------- --------
TOTAL INVESTMENT SECURITIES
(cost: $3,158,717,000) 3,521,879 99.82
Excess of cash and receivables over payables 6,730 .18
----------- --------
NET ASSETS $3,528,609 100.00%
=========== ========
/1/ Purchased in a private placement transaction;
resale to the public may require registration or
sale only to qualified institutional buyers.
/2/ Pass-through securities backed by a pool of
mortgages or other loans on which principal
payments are periodically made. Therefore,
the effective maturity of these securities is
shorter than the stated maturity.
/3/ Coupon rates may change periodically.
/4/ Valued under procedures established by the
Board of Directors.
/5/ Represents a zero coupon bond which will
convert to an interest-bearing security at a
later date.
See Notes to Financial Statements
</TABLE>
- ----------------------------------------------
Equity-type securities appearing in the
portfolio since December 31, 1995
- ----------------------------------------------
American Greetings
Ameritech
Baltimore Gas and Electric
Circuit City Stores
CoreStates Financial
General Mills
General Re
Kimberly Clark
National City
Nokia
Parker Hannifin
Philips Electronics
Rockwell International
Sara Lee
Volvo
- ----------------------------------------------
Equity-type securities eliminated from the
portfolio since December 31, 1995
- ----------------------------------------------
Banc One
CIGNA
Entergy
Federal Paper Board
First Fidelity Bancorporation
First Union
General Electric
Integra Financial
Kerr-McGee
Long Island Lighting
Marriott International
Masco
Pacific Telesis
PNC Bank
Sprint
Tenneco
U. S. Healthcare
Xerox
<TABLE>
American Balanced Fund
Financial Statements (Unaudited)
- ------------------------------------------------------------------------------
Statement of Assets and Liabilities (dollars in
at June 30, 1996 thousands)
- ------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investment securities at market
(cost: $3,158,717) $3,521,879
Cash 5,655
Receivables for -
Sales of investments $11,993
Sales of fund's shares 8,388
Dividends and accrued interest 24,979 45,360
--------------------------------
3,572,894
Liabilities:
Payables for -
Purchases of investments 15,758
Repurchases of fund's shares 27,107
Management services 886
Accrued expenses 534 44,285
--------------------------------
Net Assets at June 30, 1996 -
Equivalent to $14.46 per share on
243,949,408 shares of $1 par value
capital stock outstanding (authorized
capital stock--500,000,000 shares) $3,528,609
==============
Statement of Operations
for the six months ended June 30, 1996 (dollars in
thousands)
- ------------------------------------------------------------------------------
Investment Income:
Income:
Dividends $ 27,802
Interest 50,222 $ 78,024
----------------
Expenses:
Management services fee 5,122
Distribution expenses 4,101
Transfer agent fee 1,293
Reports to shareholders 155
Registration statement and prospectus 129
Postage, stationery and supplies 253
Directors' fees 42
Auditing and legal fees 43
Custodian fee 51
Taxes other than federal
income tax 2
Other expenses 26 11,217
--------------------------------
Net investment income 66,807
----------------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 141,665
Net change in unrealized appreciation on
investments:
Beginning of period 416,140
End of period 363,162 (52,978)
--------------------------------
Net realized gain and change in unrealized
appreciation on investments 88,687
----------------
Net Increase in Net Assets Resulting
from Operations $155,494
==============
See Notes to Financial Statements
- ------------------------------------------------------------------------------
Statement of Changes in Net Assets (dollars in
thousands)
Six months Year
ended ended
6/30/96* 12/31/95
- ------------------------------------------------------------------------------
Operations:
Net investment income $ 66,807 $ 110,555
Net realized gain on investments 141,665 113,063
Net change in unrealized appreciation
on investments (52,978) 377,528
--------------------------------
Net increase in net assets
resulting from operations 155,494 601,146
--------------------------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (64,717) (105,991)
Distributions from net realized gain on
investments (17,884) (97,006)
--------------------------------
Total dividends and distributions (82,601) (202,997)
--------------------------------
Capital Share Transactions:
Proceeds from shares sold: 44,759,170
and 64,847,892 shares, respectively 640,170 866,745
Proceeds from shares issued in reinvestment
of net investment income dividends and
distributions of net realized gain on
investments: 5,360,392 and 14,004,916 shares,
respectively 77,000 189,603
Cost of shares repurchased: 21,588,303
and 36,977,727 shares, respectively (308,967) (488,870)
--------------------------------
Net increase in net assets resulting from
capital share transactions 408,203 567,478
---------------- --------------
Total Increase in Net Assets 481,096 965,627
Net Assets:
Beginning of period 3,047,513 2,081,886
--------------------------------
End of period (including undistributed
net investment income: $12,344
and $10,254, respectively) $3,528,609 $3,047,513
===============================
*Unaudited
See Notes to Financial Statements
</TABLE>
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 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 following paragraphs summarize the
significant accounting policies consistently followed by the fund in
the preparation of its financial statements:
Common stocks and convertible 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.
Nonconvertible 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 $51,000 includes $36,000 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 June 30, 1996, net unrealized appreciation on investments for
federal income tax purposes aggregated $363,162,000, of which $409,837,000
related to appreciated securities and $46,675,000 related to depreciated
securities. There was no difference between book and tax realized gains on
securities transactions for the six months ended June 30, 1996. The cost of
portfolio securities for book and federal income tax purposes was
$3,158,717,000 at June 30, 1996.
3. The fee of $5,122,000 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 six months ended June 30,
1996, distribution expenses under the Plan were $4,101,000. As of June 30,
1996, accrued and unpaid distribution expenses were $406,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $1,293,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $1,464,000(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 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 June 30, 1996,
aggregate amounts deferred and earnings thereon were $136,000.
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 AFD. No such
persons received any remuneration directly from the fund.
4.As of June 30, 1996, accumulated undistributed net realized gain on
investments was $139,778,000 and additional paid-in capital was $2,769,376,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $1,127,493,000 and $707,141,000, respectively, during
the six months ended June 30, 1996.
<TABLE>
Per-Share Data and Ratios
Six months
ended Year ended December 31
------- ------- ------- ------- -------
6/30/96 /1/ 1995 1994 1993 1992 1991
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 14.15 $ 12.00 $ 12.57 $12.28 $12.05 $10.32
--------- - ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income .28 .57 .57 .59 .61 .62
Net realized and unrealized gain
(loss) on investments .39 2.61 (.53) .76 .49 1.86
--------- ------- ------- ------- ------- -------
Total income from
investment operations .67 3.18 .04 1.35 1.10 2.48
--------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment
income (.28) (.56) (.56) (.60) (.60) (.62)
Distributions from net realized
gains (.08) (.47) (.05) (.46) (.27) (.13)
--------- ------- ------- ------- ------- -------
Total Distributions (.36) (1.03) (.61) (1.06) (.87) (.75)
--------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $ 14.46 $14.15 $12.00 $12.57 $12.28 $12.05
========= ======= ======= ======= ======= =======
Total Return /2/ 4.77% /3/ 27.13% .34% 11.27% 9.48% 24.69%
Ratios/Supplemental Data:
Net assets, end of period
(in millions) $3,529 $3,048 $2,082 $1,710 $1,067 $642
Ratio of expenses to average
net assets .34% /2/ .67% .68% .71% .74% .82%
Ratio of net income to average
net assets 2.01% /3/ 4.38% 4.76% 4.74% 5.19% 5.56%
Average commissions paid per share /1/ /4/ 6.04 cents6.16 cents6.25 cents6.82 cents7.21 cents7.45 cents
Portfolio turnover rate 25.15% /3/ 39.03% 32.05% 27.81% 17.00% 24.65%
/1/ Unaudited
/2/ Calculated without deducting a sales
charge. The maximum sales charge is 5.75% of
the fund's offering price.
/3/ Based on operations for the period indicated
and, accordingly, not representative of a full
year's operations.
/4/ Brokerage commissions paid on portfolio transactions
increase the cost of securities
purchased or reduce the proceeds of securities sold,
and are not reflected in the fund's
statement of operations. Shares traded on a principal
basis, such as most over-the-counter
and fixed-income transactions, are excluded.
</TABLE>
BOARD OF DIRECTORS
ROBERT A. FOX
Livingston, California
President and Chief Executive Officer,
Foster Farms Inc.
ROBERTA L. HAZARD
McLean, Virginia
Consultant; 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
Senior Partner,
The Capital Group Partners L.P.
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
Brea, California
Vice President of the fund
Vice President and Treasurer,
Capital Research and Management Company
ERIC S. RICHTER
Washington, D.C.
Vice President of the fund
Vice President, Capital Research Company
PATRICK F. QUAN
San Francisco, California
Secretary of the fund
Vice President -
Fund Business Management Group,
Capital Research and Management Company
MARY C. HALL
Brea, California
Treasurer of the fund
Senior Vice President -
Fund Business Management Group,
Capital Research and Management Company
R. MARCIA GOULD
Brea, 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 92821-5804
TRANSFER AGENT FOR
SHAREHOLDER ACCOUNTS
American Funds Service Company
(Please write to the address closest to you.)
P.O. Box 2205
Brea, California 92822-2205
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 LLP
345 California Street
San Francisco, California 94104-2675
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, PLEASE
CONTACT YOUR FINANCIAL ADVISER OR CALL AMERICAN FUNDS SERVICE COMPANY,
TOLL-FREE, AT 800/421-0180.
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
September 30, 1996, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
Litho in USA AGD/GRS/3030
Lit. No. AMBAL-013-0896
[The American Funds Group(R)]
Printed on recycled paper
