AMERICAN BALANCED FUND
1995
ANNUAL REPORT
for the year ended December 31, 1995
[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.
RESULTS OVER THE PAST 20 YEARS
1995
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
1995 +22.4 +4.7 +27.1
</TABLE>
AVERAGE ANNUAL COMPOUND RETURN: 13.1%
*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 value of principal (the changes in the fund's net
asset value) and income return (from dividends), assuming reinvestment of all
dividends and capital gain distributions.
Fund results in this report were computed without a sales charge unless
otherwise indicated. The fund's 30-day yield as of January 31, 1996, calculated
in accordance with the Securities and Exchange Commission formula, was 3.49%.
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:
The year just ended was an exceptional one for American Balanced Fund. On the
strength of higher earnings, low inflation and declining interest rates, both
stocks and bonds generated substantially above-average returns.
The value of your investment in American Balanced Fund increased 27.1% during
1995 - the 19th year of positive total returns in the 20 since Capital Research
and Management Company (CRMC) became the fund's investment adviser in 1975.
This compares favorably with the 24.6% increase in the Lipper Balanced Funds
Index during the same period. The fund's total return assumes that, like most
investors, you reinvested the quarterly dividends totaling 56 cents a share and
the capital gain distribution of 47 cents a share paid in December.
As measured by the unmanaged Standard & Poor's 500 Composite Index, the U.S.
stock market gained 37.5% for the year with dividends reinvested. In the bond
market, prices rose sharply as interest rates declined. The Lehman Brothers
Aggregate Bond Index, an unmanaged measure of corporate and government bonds,
rose 18.5% on a reinvested basis.
STOCK AND BOND HOLDINGS:
A BRIEF RETROSPECTIVE
At year's end, American Balanced Fund held approximately 57% of its total
assets in carefully selected, high-quality common stocks. Broad strength in
this portion of the portfolio contributed to the fund's fine showing.
Certain groups of stocks did especially well - most notably, health care and
financial companies, which together account for approximately 20% of the fund's
assets. Our bank holdings, which we increased during the year, benefited from
the continuing decline of interest rates as well as cost savings associated
with mergers and consolidations. In the health care area, we reduced our
exposure slightly. However, we retain significant holdings in pharmaceutical
and health care companies, which continued to generate solid earnings growth.
These stocks also benefited greatly when the threat of federal health care
reform receded.
As always, some sections of the portfolio proved a disappointment. This was the
case with manufacturers of many basic commodities. Paper stocks, in particular,
were very weak as investors reacted to concern over weakening orders and rising
inventories. We began the year with limited exposure to the group (1.2% of net
assets), but built it up substantially in late 1995 to a 4.1% position. We
believe the stocks already reflect the effects of a difficult economic
environment and represent very good value.
The fund's position in corporate and government bonds, which accounted for 27%
of net assets at year-end, provided attractive income and capital appreciation
as interest rates fell throughout the year. With the Federal Reserve again
lowering interest rates in early 1996, bonds may continue to do well. The cash
portion of the fund - 15% of the fund's assets at year-end - should enable us
to take advantage of buying opportunities as they arise. Meanwhile, with a
relatively flat yield curve during 1995, it also provided an income return not
greatly different from that of our longer maturity bonds.
A LONGER PERSPECTIVE
The table below shows how American Balanced Fund has fared since CRMC became
its investment adviser 20 years ago.
HOW AMERICAN BALANCED FUND HAS FARED WITH CAPITAL RESEARCH AND MANAGEMENT
COMPANY AS INVESTMENT ADVISER
Since the fund invests in both stocks and bonds, its results should be weighed
against a combination of stock and bond indexes.
<TABLE>
<CAPTION>
Average
Cumulative Annual
For the period Total Compound
7/26/75 - 12/31/95 Return Return
<S> <C> <C>
AMERICAN BALANCED FUND +1,133.0% +13.1%
Standard & Poor's 500
Composite Index +1,468.0% +14.4%
Lehman Brothers Aggregate
Bond Index+622.4%+10.2%
Consumer Price Index +183.2% +5.2%
</TABLE>
Figures are based on the assumption that all distributions were reinvested.
There are several achievements which we feel are worth noting about these
longer term results.
- - The fund's overall gain of 1,133% means that the fund produced an average
compound return of 13.1% a year.
- - Although American Balanced Fund's equity position has varied from 50% to 75%
of the portfolio, it has generated an average annual compound return that is
90% of the S&P 500's with just two-thirds of the volatility. It has also
outpaced the major bond indexes.
- - American Balanced Fund has helped shareholders successfully cope with the
rising cost of living. The fund's gain of 1,133% for the period was several
times greater than the 183% increase in the rate of inflation, as measured by
the Consumer Price Index.
LOOKING AHEAD
We approach 1996 with some caution. On the one hand, it seems reasonable to
think that interest rates will continue their decline and that inflation will
remain low. On the other hand, the current valuation of common stocks is
extraordinarily high by historic standards. The dividend yield on the S&P 500
is about 2.2%, the lowest level ever recorded, at least since reliable stock
market records began to be kept in 1926. Such a level of valuation leaves
little room for disappointment. Just as, by definition, one cannot predict a
surprise, we make no claim to knowing when or whether a problem may develop.
However, given this background, we feel it appropriate to remain near the lower
end of the fund's 50% to 75% range in common stocks.
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.
On the following pages, American Balanced Fund's four portfolio counselors
discuss how they have employed a balanced approach to investing over the 20
years since CRMC became the fund's investment adviser. We hope you find their
observations interesting.
Cordially,
Walter P. Stern
Chairman of the Board
Robert G. O'Donnell
President
February 15, 1996
Following the course of an investment in American Balanced Fund
This chart shows how a $10,000 investment in the fund grew between July 26,
1975 - when Capital Research and Management Company became American Balanced
Fund's investment adviser - and December 31, 1995.
As you can see, that $10,000 would have grown to $116,179 with all
distributions reinvested. Since the fund invests in both stocks and bonds, it
should not be surprising that its return lies between the two major unmanaged
stock and bond indexes tracked on the chart.
The fund's year-by-year results appear under the chart. You can use this table
to estimate how the value of your own holdings has grown. Let's say, for
example, that you have been reinvesting all your distributions and want to know
how your investment has done since December 31, 1985. At that time, according
to the table, the value of the investment illustrated here was $36,527. Since
then it has increased to $116,179, more than three times the original amount.
Average Annual Compound Returns*
(for periods ended December 31, 1995)
Ten Years: +11.60%
Five Years: +12.80%
One Year: +19.84%
*Assumes reinvestment of all distributions and payment of the 5.75% maximum
sales charge at the beginning of the stated periods.
$156,799
S&P 500 with dividends reinvested
$116,179 /1/ /2/
AMERICAN BALANCED FUND with dividends reinvested
$72,244 /3/
Lehman Brothers Aggregate Bond Index
$10,000 /1/
original investment
HOW A $10,000 INVESTMENT HAS GROWN
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended Dec. 31 1975# 1976 1977 1978 1979 1980 1981 1982
TOTAL VALUE
Dividends Reinvested $305 594 656 709 801 1,050 1,303 1,474
Value at Year-End/1/ $9,948 12,533 12,620 13,404 14,427 16,498 17,224 22,280
AMBAL Total Return (0.5)% 26.0 0.7 6.2 7.6 14.4 4.4 29.4
Year Ended Dec. 31 1983 1984 1985 1986 1987 1988 1989 1990
TOTAL VALUE
Dividends Reinvested 1,724 1,852 1,912 2,202 2,710 2,780 3,284 3,457
Value at Year-End/1/ 25,869 28,291 36,527 42,690 44,406 50,123 60,915 59,959
AMBAL Total Return 16.1 9.4 29.1 16.9 4.0 12.9 21.5 (1.6)
Year Ended Dec. 31 1991 1992 1993 1994 1995
TOTAL VALUE
Dividends Reinvested 3,684 3,816 4,072 4,131 4,335
Value at Year-End/1/ 74,765 81,853 91,080 91,386 116,179
AMBAL Total Return 24.7 9.5 11.3 0.3 27.1
</TABLE>
Average annual compound return for 20 1/2 years 12.8% /1/
/1/These figures, unlike those shown earlier in this report, reflect payment of
the maximum sales charge of 5.75% on the $10,000 investment. Thus, the net
amount invested was $9,425. As outlined in the prospectus, the sales charge is
reduced for larger investments. There is no sales charge on dividends or
capital gain distributions that are reinvested in additional shares. The
maximum initial sales charge was 8.5% prior to July 1, 1988. Results shown do
not take into account income or capital gain taxes.
/2/Includes reinvested dividends of $46,851 and reinvested capital gain
distributions of $28,095.
/3/Lehman Brothers Aggregate Bond Index did not exist until December 31, 1975.
For the period between July 31, 1975 and December 31, 1975, Lehman Brothers
Corporate Bond Index results were used. The Lehman Brothers indexes are based
on July 31, 1975 index value.
/#/For the period July 26, 1975 (when Capital Research and Management Company
became investment adviser) through December 31, 1975.
The indexes are unmanaged and do not reflect sales charges, commissions or
expenses.
Past results are not predictive of future results.
[Photo caption]
MEET THE FUND'S PORTFOLIO COUNSELORS:
left to right
[End photo caption]
TALKING ABOUT TWO DECADES WITH CAPITAL RESEARCH AND MANAGEMENT COMPANY
GEORGE A. MILLER
George's association with American Balanced Fund began in 1965. He is a
Director of the fund and also serves as a Senior Vice President and Director of
Capital Research and Management Company, the fund's investment adviser. He
served as the fund's President from 1986 to 1993.
ERIC S. RICHTER
Eric has been a Vice President of American Balanced Fund since May 1995 and a
portfolio counselor in the fund since 1994. He is also a Vice President of
CRMC's Investment Management Group.
ABNER D. GOLDSTINE
Abner is a Senior Vice President of American Balanced Fund and has served as
one of the fund's portfolio counselors since 1975. He is also a Senior Vice
President and Director of CRMC.
ROBERT G. O'DONNELL
Bob is the President of American Balanced Fund and has served as one of the
fund's portfolio counselors since 1986. He is also a Senior Vice President and
Director of CRMC.
AN AMERICAN BALANCED FUND ROUNDTABLE DISCUSSION
The 63-year-old American Balanced Fund, one of the nation's first mutual funds,
has provided shareholders with positive total returns for 19 of the past 20
years - a period reflecting the full tenure of Capital Research and Management
Company (CRMC) as the fund's investment adviser.
In light of this solid long-term record, we asked the fund's four portfolio
counselors - Abner Goldstine, Bob O'Donnell, Eric Richter and George Miller -
to offer their views on taking a balanced approach to investing. They also
discuss what managing the fund might be like without George, who will retire
later this year after 30 years with the fund (including a stint with the fund's
previous adviser). Their wide-ranging conversation starts below.
Looking back at 1995, how would you describe the investment environment?
GEORGE MILLER: Utopia!
ABNER GOLDSTINE: I was going to say "awesome."
BOB O'DONNELL: I guess I would say that in 1995 you had about the most ideal
environment one could imagine for a fund that invests in stocks and bonds.
Interest rates fell sharply. Long-term Treasury bonds returned almost as much
as the overall stock market. Corporate earnings, particularly in the early part
of the year, were in very good shape. But look at the annualized returns for
the stock and bond markets for the past 15 years. Standard & Poor's 500
Composite Index has compounded at almost 15% a year. The Lehman Brothers
Aggregate Bond Index has compounded at nearly 12% a year. We talk about the
investment environment in 1995 as utopian, but maybe one could really say the
past 15 years have also been a pretty ideal period for stock and bond
investors.
[Sidebar]
FUND LAUNCHED AS COMMONWEALTH INVESTMENT COMPANY
1932 1945
Net Assets reach $2.5 million
[End sidebar]
MILLER: Well, the stock and bond markets have benefited substantially since
1981 from an eight-percentage-point decline in long-term interest rates. Yields
on 30-year Treasury bonds have dropped from 14% to 6%. One of the few things I
feel safe in predicting is that long-term rates cannot decrease by another
eight percentage points over the next 15 years. So based on fairly recent
history, people's views of what sort of returns to expect may be distorted,
especially for relatively conservative funds like American Balanced.
ERIC RICHTER: One certainly has to question how long this can continue, even if
the aging of the baby boomers suggests that our nation's savings rate will
continue to rise.
O'DONNELL: We cautioned shareholders three years ago in a similar roundtable
discussion that they couldn't count on making an average of 14% a year in this
fund as they had for the previous 10 years. Last year alone they earned a 27%
total return, and over the past 15 years their investment has appreciated at a
compound rate of roughly 14% a year. However, I would offer that same caution
today. I don't think it's a reasonable expectation to believe this fund will
continue to compound forever - or even much longer - at an average annual rate
in the low teens.
[Caption] Balanced investing is a concept your fund helped pioneer..." from a
roundtable discussion featured in the fund's 1977 annual report[End Caption]
George, when Capital Research and Management Company became the new investment
adviser for American Balanced Fund 20 years ago, you had already been managing
the portfolio for 10 years. From your perspective, how have things gone since
CRMC came aboard?
MILLER: By that point 20 years ago, we had been through the terrible bear
markets of 1969-70 and 1973-74. There hasn't been a true bear market since. So
I would say the ensuing 20 years have been successful beyond my wildest dreams.
If you were in this business and able to make it to 1975, you felt fortunate
just to be alive.
O'DONNELL: I agree, and I had only been in the business for three years at that
point. I'd also say a few other things that George is too modest to mention.
For more than 30 years George has been the heart and soul of this fund. I think
he has done a terrific job in making sure this fund is positioned with the
people and the research it needs to do well as we move into the future.
[Sidebar]
Net assets reach $25 million
1950 1970 1975
Fund renamed American Express Investment Fund
Fund renamed American Balanced Fund
Capital Research and Management Company becomes fund's investment adviser[End
Sidebar]
What can shareholders expect now that you are retiring, George?
MILLER: I began my succession program in 1991, so I think the transition should
be smooth. I'm not one of those people who spend their lives making themselves
indispensable. I think you should spend your life getting on with getting on. A
team of very capable people will take this fund into next year and the next
century. Even though my picture won't appear in these reports anymore, I don't
believe I will be missed.
GOLDSTINE: Continuity of management is one of the benefits of our
organization's unique multiple portfolio counselor system, which typically has
a group of three or more of us each managing a portion of the fund
independently. But George will be missed by those of us who have had the
opportunity to work with him. It's really hard to overstate his contribution to
American Balanced Fund in terms of his investment record, the culture he
brought with him to CRMC, and his diligence in trying to do what's best for the
fund.
Let's talk about the balanced approach to investing. It has never meant that
you simply switch your portfolio mix from one type of asset to another as
market conditions change, right?
MILLER: That's more like an asset allocation fund. If you look at mutual funds
that carry that description, they tend to be all or nothing, black or white
deals. You allocate most of your assets to the most attractive asset class and
move elsewhere when it seems appropriate. Those funds tend to be pretty
volatile whereas a balanced fund, as the name implies, is a balance between
asset classes. The theory is, you never invest in only one asset class. That's
because you rarely have enough confidence to invest 100% of the portfolio in
either stocks or bonds, and even if you do, you shouldn't expose the
shareholders' money to that risk. In American Balanced Fund, the asset mix
shifts within ... I don't want to say narrow parameters, but not really wide
ones. Our equity holdings range from 50% to 75% of net assets. We don't try to
hit a home run every time we step up to the plate. Instead, we have a steady
game plan: We make it to first base, steal second, sneak over to third and then
try to score - again and again.
O'DONNELL: I think that point ties in very well to what we have talked about in
past shareholder reports - that the fund is managed as though it were the
complete investment program of a prudent investor. It follows, therefore, that
if you were responsible for investing the money for just one prudent investor,
you probably wouldn't be swinging wildly between stocks and bonds. To maximize
total return and minimize volatility, you would more likely invest between 50%
and 75% of the assets in stocks and the balance in bonds and, occasionally,
cash.
[Sidebar]
"Over the years, American Balanced Fund has successfully steered past the
extremes that are part of investing."
from the letter to shareholders in the 1982 annual report
[End sidebar]
[Sidebar]
Net assets reached $250 million
1982 1989 1990 1992
Best total return under CRMC (+29.4%)
Net assets reach $1 billion
Worst total return under CRMC (-1.6%)[End sidebar]
[Sidebar]
"Preserving your capital is every bit as important as making it grow."
from the letter to shareholders in the 1992 annual report
[End sidebar]
RICHTER: I'd like to point out that prudence isn't just for older investors.
Some financial planners promote the use of formulas like "100 minus your age
equals the percentage of assets you should have in equities," meaning that your
equity percentage should be high when you're young and low when you're old.
While this approach might make sense for many investors, the reality is that
even people of the same age may have very different risk tolerances. Someone
who is 30 years old and doesn't want to run the risk of losing half of his or
her money in a tough market may well be reasonable to be more cautious. We
approach the management of this fund as though we have shareholders who
recognize that stocks over time have tended to produce a higher return than
other asset classes - but that stocks are also the most volatile asset class.
So the blending of stocks and bonds together, combined with sound research from
our equity and fixed-income associates, can help us deliver solid long-term
investment results.
Have you changed the way you've managed the fund at all in 20 years? Perhaps to
accommodate a new financial product or investment trend?
MILLER: I don't believe so. For example, one area where the fund doesn't invest
is the high-yield debt market, the so-called "junk" bonds. That is not good or
bad. It's just different strokes for different folks. We have also decided not
to participate in derivatives.
GOLDSTINE: We will continue to manage this fund as we have for 20 years, by
using the same techniques and essentially the same instruments we've used
before. I can find as much value in plain vanilla fixed-income securities as I
can in more "exotic" instruments - and probably with a good deal less risk.
O'DONNELL: Some things do change over 20 years. But if the essence of this fund
has been to construct a portfolio of stocks and bonds that a prudent investor
would want to own, I think any changes in the way we have gone about building
it are probably not substantive. I also think it's safe to say that our
investment approach will not vary too much over the next 20 years.
Thank you all for participating in this discussion today.
[Sidebar]
1994 1995
Shareholder accounts reach 100,000
Net assets reach $3 billion
[End sidebar]
AMERICAN BALANCED FUND
INVESTMENT PORTFOLIO DECEMBER 31, 1995
<TABLE>
<CAPTION>
- ---------------------------------------------- ----------- ----------- --------
Percent
Of
TEN LARGEST EQUITY HOLDINGS Net Assets
<S> <C> <C> <C>
Phillips Petroleum 2.02%
Wal-Mart Stores 1.95
Minnesota Mining and Manufacturing 1.74
Philip Morris 1.63
DuPont 1.44
Allstate 1.42
Warner-Lambert 1.27
Merck 1.19
Ford Motor 1.14
CSX 1.14
INVESTMENT MIX BY SECURITY TYPE
- ----------------------------------------------
Common Stocks 57%
Goverment Bonds 16
Corporate Bonds 11
Convertible Debentures 1
Cash 15
Market Percent
Number Value of Net
COMMON STOCKS of Shares (000) Assets
- ---------------------------------------------- ----------- ----------- -------
ENERGY
Energy Sources- 6.40%
Amoco Corp. 280,000 $20,125 .66%
Atlantic Richfield Co. 100,000 11,075 .36
Chevron Corp. 600,000 31,500 1.03
Exxon Corp. 270,000 21,634 .71
Kerr-McGee Corp. 210,000 13,335 .44
Phillips Petroleum Co. 1,800,000 61,425 2.02
Royal Dutch Petroleum Co.
(New York Registered Shares) 140,000 19,758 .65
Unocal Corp. 560,000 16,310 .53
Utilities: Electric & Gas - 3.15%
Consolidated Edison Co. of New York, Inc. 500,000 16,000 .53
Duke Power Co. 500,000 23,687 .78
Entergy Corp. 600,000 17,550 .58
Long Island Lighting Co. 150,000 2,456 .08
Pacific Gas and Electric Co. 700,000 19,863 .65
PP&L Resources, Inc. 650,000 16,250 .53
------- -------
290,968 9.55
------- -------
MATERIALS
Building Materials & Components - 0.37%
Masco Corp. 360,000 11,295 .37
Chemicals - 2.53%
Dow Chemical Co. 300,000 21,113 .69
E.I. du Pont de Nemours and Co. 630,000 44,021 1.44
Great Lakes Chemical Corp. 170,000 12,240 .40
Forest Products & Paper - 4.08%
Bowater Inc. 460,000 16,330 .54
Federal Paper Board Co., Inc. 400,000 20,750 .68
Georgia-Pacific Corp. 230,000 15,784 .52
International Paper Co. 500,000 18,937 .62
Louisiana-Pacific Corp. 1,075,000 26,069 .86
Union Camp Corp. 550,000 26,194 .86
Metals: Nonferrous - 0.69%
Aluminum Co. of America 400,000 21,150 .69
------- -------
233,883 7.67
------- -------
CAPITAL EQUIPMENT
Aerospace & Military Technology - 0.64%
Boeing Co. 250,000 19,593 .64
Data Processing & Reproduction - 0.78%
International Business Machines Corp. 110,000 10,093 .33
Xerox Corp. 100,000 13,700 .45
Electrical & Electronic - 0.71%
General Electric Co. 300,000 21,600 .71
Industrial Components - 0.54%
Goodyear Tire & Rubber Co. 360,000 16,335 .54
Machinery & Engineering- 0.54%
Caterpillar Inc. 280,000 16,450 .54
------- -------
97,771 3.21
------- -------
CONSUMER GOODS
Automobiles - 1.14%
Ford Motor Co., Class A 1,200,000 34,800 1.14
Beverages & Tobacco - 2.48%
Anheuser-Busch Companies, Inc. 170,000 11,369 .37
Philip Morris Companies Inc. 550,000 49,775 1.63
UST Inc. 440,000 14,685 .48
Health & Personal Care - 6.02%
Abbott Laboratories 135,000 5,636 .19
American Home Products Corp. 300,000 29,100 .96
Bristol-Myers Squibb Co. 200,000 17,175 .56
Eli Lilly and Co. 500,000 28,125 .92
Merck & Co., Inc. 550,000 36,163 1.19
Pfizer Inc 100,000 6,300 .21
Schering-Plough Corp. 400,000 21,900 .72
Warner-Lambert Co. 400,000 38,850 1.27
------- -------
293,878 9.64
------- -------
SERVICES
Broadcasting & Publishing - 1.53%
Dow Jones & Co., Inc. 400,000 15,950 .52
Gannett Co., Inc. 350,000 21,481 .70
Time Warner Inc.,preferred equity redemption
cumulative stock 135,000 4,219 .14
U S WEST Media Group/1/ 280,000 5,320 .17
Business & Public Services - 3.09%
Columbia/HCA Healthcare Corp. 250,000 12,688 .42
Dun & Bradstreet Corp. 530,000 34,317 1.13
Pitney Bowes Inc. 350,000 16,450 .54
U.S. Healthcare, Inc. 370,000 17,205 .56
WMX Technologies, Inc. 450,000 13,444 .44
Leisure & Tourism - 0.12%
Marriott International, Inc. 100,000 3,825 .12
Merchandising - 1.95%
Wal-Mart Stores, Inc. 2,650,000 59,294 1.95
Telecommunications - 2.29%
AT&T Corp. 300,000 19,425 .64
MCI Communications Corp. 540,000 14,107 .46
Pacific Telesis Group 360,000 12,105 .40
Sprint Corp. 350,000 13,956 .46
U S WEST Communications Group
(Formerly U S WEST Inc.) 280,000 10,010 .33
Transportation: Rail & Road - 1.94%
CSX Corp. 760,000 34,675 1.14
Union Pacific Corp. 370,000 24,420 .80
------- -------
332,891 10.92
------- -------
FINANCE
Banking - 7.21%
Banc One Corp. 450,000 16,987 .56
BankAmerica Corp. 400,000 25,900 .85
Boatmen's Bancshares, Inc. 400,000 16,350 .54
First Fidelity Bancorporation 150,000 11,306 .37
First Hawaiian Bank 769,000 23,070 .76
First Union Corp. 250,000 13,906 .46
First Virginia Banks, Inc. 320,300 13,373 .44
Fleet Financial Group, Inc. 750,000 30,563 1.00
Integra Financial Corp. 350,000 22,050 .72
J.P. Morgan & Co. Inc. 120,000 9,630 .32
NationsBank Corp. 300,000 20,887 .68
PNC Bank Corp. 175,000 5,644 .18
U.S. Bancorp 300,000 10,088 .33
Financial Services - 1.22%
Beneficial Corp. 90,000 4,196 .14
Federal Home Loan Mortgage Corp. 200,000 16,700 .55
Federal National Mortgage Assn. 130,000 16,136 .53
Insurance - 5.15%
Allstate Corp. 1,050,000 43,181 1.42
American General Corp. 350,000 12,206 .40
CIGNA Corp. 188,200 19,432 .64
Lincoln National Corp. 230,000 12,363 .40
SAFECO Corp. 1,000,000 34,500 1.13
St. Paul Companies, Inc. 260,000 14,463 .47
USLIFE Corp. 700,000 20,912 .69
------- -------
413,843 13.58
------- -------
MULTI-INDUSTRY AND MISCELLANEOUS
Multi-Industry - 2.07%
Minnesota Mining and Manufacturing Co. 800,000 53,000 1.74
Tenneco Inc. 200,000 9,925 .33
Miscellaneous - 0.19%
Other common stocks in initial period of acquisition 5,660 .19
------- -------
68,585 2.26
------- -------
TOTAL COMMON STOCKS 1,731,819 56.83
------- -------
- ---------------------------------------------- --------- ------- -------
Principal
Amount
CONVERTIBLE DEBENTURES (000)
- ---------------------------------------------- --------- ------- -------
Broadcasting & Publishing - 0.21%
Time Warner Inc. 0% 2012 $6,500 2,283 .07
Time Warner Inc. 0% 2013 10,000 4,125 .14
Industrials - 0.27%
Hanson America Inc. 2.39% 2001/2/ 10,000 8,325 .27
Trasportation: Airlines - 0.10%
Airborne Freight Corp. 6.75% 2001 3,000 3,015 .10
Miscellaneous - 0.23%
Other convertible debentures in initial period
of acquisition 7,075 .23
------- -------
TOTAL CONVERTIBLE DEBENTURES 24,823 .81
------- -------
TOTAL COMMON STOCKS AND CONVERTIBLE DEBENTURES 1,756,642 57.64
------- -------
- ---------------------------------------------- --------- ------- -------
BONDS & NOTES
- ---------------------------------------------- --------- ------- -------
INDUSTRIALS - 4.90%
Dayton Hudson Corp. 10.00% 2010 5,000 6,244 .20
Dayton Hudson Corp. 9.50% 2015 1,000 1,232 .04
Deere & Co. 8.95% 2019 3,400 4,182 .14
Federal Paper Board Co., Inc. 10.00% 2011 10,000 13,337 .44
General Motors Corp. 8.80% 2021 12,500 15,407 .51
Inco Ltd. 9.875% 2019 3,000 3,365 .11
Inco Ltd. 9.60% 2022 5,000 5,783 .19
May Department Stores Co. 9.875% 2021 6,500 7,818 .26
Mobil Corp. 8.00% 2032 5,000 5,529 .18
News America Holdings Inc. 10.125% 2012 5,000 6,051 .20
News America Holdings Inc. 8.45% 2034 2,500 2,884 .09
Occidental Petroleum Corp. 8.50% 2004 2,500 2,686 .09
Occidental Petroleum Corp. 9.25% 2019 5,000 6,291 .21
Pohang Iron & Steel Co., Ltd. 7.375% 2005 5,000 5,312 .17
Polaroid Corp. 8.00% 1999 10,000 10,564 .35
Samsung Electric Co., Ltd. 8.50% 2002/2/ 5,000 5,563 .18
Swire Pacific Ltd. 8.50% 2004/2/ 7,500 8,238 .27
TCI Communications Inc. 8.75% 2015 4,000 4,435 .15
Tele-Communications, Inc. 9.25% 2023 7,500 8,187 .27
Tenneco Credit Inc. 9.625% 2001 2,000 2,329 .08
Tenneco Credit Inc. 10.00% 2001 1,500 1,764 .06
Time Warner Inc. 10.15% 2012 5,000 6,197 .20
TKR Cable I, Inc. 10.50% 2007 4,000 4,650 .15
USX Corp., Series A, 9.375% 2012 7,700 8,895 .29
USX Corp., Series A, 9.125% 2013 2,000 2,299 .07
------- -------
149,242 4.90
------- -------
ELECTRIC UTILITIES - 0.15%
Big Rivers Electric Corp. 10.70% 2017 4,000 4,507 .15
------- -------
GAS UTILITIES - 0.24%
The Columbia Gas System, Inc.7.32% 2010 5,000 5,144 .17
The Columbia Gas System Inc.7.42% 2015 2,000 2,025 .07
------- -------
7,169 .24
------- -------
TELEPHONE - 0.21%
AT&T Corp. 8.625% 2031 5,600 6,516 .21
------- -------
TRANSPORTATION - 0.90%
American Airlines, 1991-A1, pass-through
certificates, 9.71% 2007/3/ 1,849 2,147 .07
AMR Corp. 9.20% 2012 2,000 2,265 .07
Delta Air Lines, Inc. 9.875% 2000 1,500 1,696 .05
Delta Air Lines, Inc. 10.375% 2011 3,000 3,753 .12
Delta Air Lines, Inc., 1992-A2, pass-through
certificates, 9.20% 2014/3/ 1,500 1,704 .06
Delta Air Lines, Inc., 1993-A2, pass-through
certificates, 10.50% 2016/3/ 5,000 6,303 .21
Federal Express Corp., A310-A1, pass-through
certificates, 7.53% 2006/3/ 1,888 1,988 .07
United Air Lines, Inc. 9.00% 2003 1,500 1,668 .05
United Air Lines, Inc. 10.67% 2004 5,000 6,031 .20
------ -------
27,555 .90
------ -------
FINANCIAL - 2.97%
H.F. Ahmanson & Co. 9.875% 1999 3,000 3,399 .11
American Re Corp. 10.875% 2004 5,000 5,578 .18
Bank of Nova Scotia 6.00%/4/ 4,000 3,120 .10
Bankers Trust New York Corp. 8.25% 2005 2,000 2,246 .07
Beneficial Corp. 12.875% 2013 1,500 1,814 .06
Canadian Imperial Bank of Commerce 6.125%/4/ 1,600 1,256 .04
Capital One Bank 8.33% 1997 5,000 5,132 .17
CIGNA Corp. 6.375% 2006 5,000 4,927 .16
Continental Bank, NA 12.50% 2001 2,000 2,569 .08
Den Danske Bank 7.25% 2005 5,000 5,278 .17
Den Norske AS 6.125%/4/ 3,000 2,385 .08
First Interstate Bancorp 8.625% 1999 4,300 4,661 .15
General Motors Acceptance Corp. 7.875% 1997 10,000 10,257 .34
General Motors Acceptance Corp. 8.625% 1999 5,000 5,418 .18
General Motors Acceptance Corp. 9.375% 2000 5,000 5,605 .19
General Motors Acceptance Corp. 9.625% 2000 4,000 4,548 .15
General Motors Acceptance Corp. 9.625% 2001 7,000 8,235 .27
General Motors Acceptance Corp. 8.75% 2005 4,000 4,646 .15
General Motors Acceptance Corp. 8.875% 2010 1,000 1,217 .04
Golden West Financial Corp. 10.25% 2000 1,400 1,641 .05
Midland Bank 5.8125%/4/ 4,000 3,208 .11
Security Pacific Corp. 11.00% 2001 3,000 3,659 .12
------ -------
90,799 2.97
------ -------
REAL ESTATE - 0.59%
ERP Operating Limited Partnership 7.95% 2002 1,500 1,603 .05
Irvine Co. 7.46% 2006/2/ 2,500 2,497 .08
Security Capital Industrial Trust 7.875% 2009 5,000 5,313 .18
Shopping Center Associates 6.75% 2004/2/ 5,000 5,006 .16
Wharf Capital International Ltd. 8.875% 2004 3,500 3,759 .12
------ -------
18,178 .59
------ -------
OTHER - 0.06%
Trustees of Columbia University in the City of
New York, Series B, 8.62% 2001 1,500 1,685 .06
------ -------
COLLATERALIZED MORTGAGE/ASSET-BACKED
OBLIGATIONS/3/ - 1.38%
Case Equipment Loan Trust, 1995-A, 7.30% 2002 7,754 7,909 .26
Green Tree Financial Corp. 6.80% 2027 10,000 10,225 .33
Grupo Financiero Banamex Accival, SA de CV
0% 2002/2/ 6,467 4,801 .16
Jet Equipment Trust, Series 1995-A, Class B,
8.64% 2015/2/ 4,977 5,519 .18
Jet Equipment Trust, Series 1995-B, Class B,
7.83% 2015/2/ 8,000 8,410 .28
Merrill Lynch Mortgage Investors, Inc. 1995-A
7.4283% 2021 4,968 5,115 .17
------ -------
41,979 1.38
------ -------
GOVERNMENTS (EXCLUDING U.S. GOVERNMENT) AND
GOVERNMENTAL AUTHORITIES - 0.45%
British Columbia Hydro & Power Authority
12.50% 2014 2,000 2,442 .08
Israel (State of) 6.375% 2005 9,000 9,090 .30
Ontario (Province of) 11.50% 2013 2,000 2,317 .07
------ -------
13,849 .45
------ -------
FEDERAL AGENCY OBLIGATIONS/3/ - 0.53%
Federal Home Loan Mortgage Corp.
8.50% 2008 322 336 .01
Federal Home Loan Mortgage Corp.
8.50% 2020 10,240 10,691 .35
Government National Mortgage Assn. 11.00% 2015 135 153 .01
Government National Mortgage Assn. 9.50% 2018 145 156 .01
Government National Mortgage Assn. 10.50% 2019 100 112 .00
Government National Mortgage Assn. 8.50% 2025 4,422 4,644 .15
------ -------
16,092 .53
------ -------
FEDERAL AGENCY OBLIGATIONS - OTHER - 2.37%
Federal Home Loan Mortgage Corp. 6.945% 2005 6,500 6,617 .22
Federal National Mortgage Assn. 8.16% 2000 20,000 20,625 .68
Federal National Mortgage Assn. 8.71% 2005 22,000 23,269 .76
FNSM Callable Principal STRIPS 0%/8.20% 2022/5/ 10,000 8,181 .27
FNSM Callable Principal STRIPS 0%/8.25% 2022/5/ 1,500 1,255 .04
Student Loan Marketing Assn. 7.67% 2000 11,850 12,146 .40
------ -------
72,093 2.37
------ -------
U.S. TREASURY OBLIGATIONS - 12.99%
9.25% due 1/15/96 15,000 15,021 .49
7.50% due 1/31/96 15,000 15,026 .49
8.875% due 2/15/96 20,000 20,085 .66
9.375% due 4/15/96 15,000 15,171 .50
4.25% due 5/15/96 10,000 9,964 .33
7.25% due 8/31/96 20,000 20,244 .66
7.25% due 11/15/96 15,000 15,248 .50
4.75% February 1997 50,000 49,703 1.63
6.75% February 1997 4,000 4,068 .13
8.50% July 1997 4,000 4,193 .14
8.75% October 1997 5,000 5,299 .17
7.375% November 1997 25,000 25,945 .85
8.875% November 1997 10,000 10,644 .35
5.625% January 1998 25,000 25,207 .83
8.25% July 1998 25,000 26,758 .88
8.875% May 2000 8,000 9,080 .30
8.75% August 2000 7,500 8,518 .28
13.125% May 2001 2,000 2,719 .09
14.25% February 2002 2,000 2,906 .10
10.75% February 2003 12,800 16,702 .55
11.125% August 2003 1,000 1,342 .04
10.75% August 2005 8,500 11,678 .39
8.75% November 2008 10,000 11,928 .39
10.375% November 2009 6,750 8,906 .29
10.375% November 2012 32,000 44,240 1.45
10.625% August 2015 10,000 15,317 .50
------ -------
395,912 12.99
------ -------
TOTAL BONDS & NOTES 845,576 27.74
------ -------
- ---------------------------------------------- --------- ------ -------
SHORT-TERM SECURITIES
- ---------------------------------------------- --------- ------ -------
CORPORATE SHORT-TERM NOTES - 15.25%
A. I. Credit Corp. 5.70% due 1/4/96 20,000 19,987 .65
American Express Credit Corp. 5.68% due 2/1/96 21,000 20,894 .69
American Telephone & Telegraph Co. 5.57%-5.75%
due 2/2-2/22/96 24,900 24,733 .81
Associates Corp. of North America 5.99% due 1/2/96 11,020 11,016 .36
BellSouth Telecommunications Inc. 5.67%-5.70%
due 1/10/-2/21/96 25,000 24,931 .82
Chevron Oil Finance Co. 5.70% due 2/9/96 11,500 11,427 .37
CIT Group Holdings, Inc. 5.68% due 2/2/96 25,000 24,872 .82
Emerson Electric Co. 5.66% due 1/25/96 4,500 4,482 .15
Ford Motor Credit Co. 5.70%-5.72% due 1/5-2/7/96 36,600 36,550 1.20
General Electric Capital Corp. 5.68%-5.70%
due 1/17-1/25/96 47,700 47,537 1.56
Kimberly-Clark Corp. 5.75% due 1/26/96 15,000 14,938 .49
Eli Lilly and Co. 5.70%-5.71% due 1/5-1/12/96 24,700 24,659 .81
Motorola Inc. 5.72% due 1/30/96 21,100 20,999 .69
Pactel Capital Resources 5.90% due 1/2/96 7,600 7,598 .25
PepsiCo, Inc. 5.58% due 2/8/96 30,000 29,819 .98
Pitney Bowes Credit Corp. 5.64%-5.72% due 1/30-2/1/96 32,900 32,745 1.07
Procter & Gamble Co. 5.63%-5.66% due 1/29-2/12/96 29,000 28,837 .95
Safeco Credit Co., Inc. 5.68% due 1/12/96 10,000 9,981 .33
United Parcel Service of America Inc.
5.50% due 2/23/96 9,200 9,123 .30
Vermont American Corp. 5.70% due 1/19/96 15,000 14,955 .49
Xerox Corp. 5.68%-5.70% due 1/9-1/26/96 44,700 44,583 1.46
------ -------
464,666 15.25
------ -------
FEDERAL AGENCY DISCOUNT NOTES - 2.28%
Federal Home Loan Bank 5.61% due 1/18/96 19,000 18,947 .62
Federal National Mortgage Assn. 5.54%-5.67%
due 1/5-2/14/96 50,700 50,505 1.66
------ -------
69,452 2.28
------ -------
TOTAL SHORT-TERM SECURITIES 534,118 17.53
------ -------
TOTAL INVESTMENT SECURITIES
(cost: $2,720,196,000) 3,136,336 102.91
Excess of payables over cash and receivables 88,823 2.91
------ -------
NET ASSETS $3,047,513 100.00%
====== =======
</TABLE>
/1/ Non-income-producing security
/2/ Purchased in a private placement transaction; resale to the public may
require registration or may extend only to qualified institutional buyers.
/3/ 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.
/4/ Coupon rates may change periodically.
/5/ 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
PORTFOLIO SINCE JUNE 30, 1995
Anhauser-Busch
Boatmens's Bancshares
Bowater
Caterpillar
Duke Power
Federal Home Loan Mortage
Federal Paper Board
First Virginia Banks
Integra Financial
International Paper
NationsBank
PP&L Resources
U.S. Healthcare
UST
EQUITY-TYPE SECURITIES ELIMINATED FROM THE
PORTFOLIO SINCE JUNE 30, 1995
- ----------------------------------------------
American Brands
Ameritech
Burlington Northern
Carolina Power
Comerica
First Chicago
Houston Industries
Huntington Bancshares
Melville
Monsato
Northrop Grumman
Telefonos de Mexico
Texas Utilities
Textron
Wachovia
American Balanced Fund
Financial Statements
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES (dollars in
at December 31, 1995 thousands)
- ---------------------------------------------- --------- ----------
<S> <C> <C>
ASSETS:
Investment securities at market
(cost: $2,720,196) $3,136,336
Cash 64
Receivables for -
Sales of investments $ 6,982
Sales of fund's shares 9,227
Dividends and accrued interest 20,349 36,558
--------- ----------
3,172,958
LIABILITIES:
Payables for -
Purchases of investments 120,233
Repurchases of fund's shares 3,688
Management services 799
Accrued expenses 725 125,445
--------- ----------
NET ASSETS AT DECEMBER 31, 1995 -
Equivalent to $14.15 per share on
215,418,149 shares of $1 par value
capital stock outstanding (authorized
capital stock--300,000,000 shares) $3,047,513
==========
STATEMENT OF OPERATIONS
for the year ended December 31, 1995 (dollars in
thousands)
- ---------------------------------------------- --------- ----------
INVESTMENT INCOME:
Income:
Dividends $ 48,037
Interest 79,534 $127,571
---------
Expenses:
Management services fee 8,091
Distribution expenses 6,031
Transfer agent fee 1,928
Reports to shareholders 161
Registration statement and prospectus 234
Postage, stationery and supplies 322
Directors' fees 75
Auditing and legal fees 48
Custodian fee 84
Taxes other than federal income tax 2
Other expenses 40 17,016
--------- ----------
Net investment income 110,555
----------
REALIZED GAIN AND UNREALIZED
APPRECIATION ON INVESTMENTS:
Net realized gain 113,063
Net increase in unrealized appreciation on
investments:
Beginning of year 38,612
End of year 416,140 377,528
--------- ----------
Net realized gain and increase in unrealized
appreciation on investments 490,591
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 601,146
==========
See Notes to Financial Statements
- ---------------------------------------------- --------- ----------
STATEMENT OF CHANGES IN NET ASSETS (dollars in
thousands)
Year ended December 31
--------- ----------
1995 1994
- ---------------------------------------------- --------- ----------
OPERATIONS:
Net investment income $110,555 $88,658
Net realized gain on investments 113,063 4,768
Net increase (decrease) in unrealized appreciation
on investments 377,528 (86,455)
--------- ----------
Net increase in net assets
resulting from operations 601,146 6,971
--------- ----------
DIVIDENDS AND DISTRIBUTIONS PAID TO
SHAREHOLDERS:
Dividends from net investment income (105,991) (86,005)
Distributions from net realized gain on
investments (97,006) (7,886)
--------- ----------
Total dividends and distributions (202,997) (93,891)
--------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold: 64,847,892
and 54,791,351 shares, respectively 866,745 669,530
Proceeds from shares issued in reinvestment
of net investment income dividends and
distributions of net realized gain on
investments: 14,004,916 and 6,959,833 shares,
respectively 189,603 84,678
Cost of shares repurchased: 36,977,727
and 24,180,499 shares, respectively (488,870) (294,907)
--------- ----------
Net increase in net assets resulting from
capital share transactions 567,478 459,301
--------- ----------
TOTAL INCREASE IN NET ASSETS 965,627 372,381
NET ASSETS:
Beginning of year 2,081,886 1,709,505
--------- ----------
End of year (including undistributed
net investment income: $10,254
and $5,690, respectively) $3,047,513 $2,081,886
========= ==========
</TABLE>
American Balanced Fund
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 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.
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 $84,000 includes $61,000 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, 1995, net unrealized appreciation on investments for
federal income tax purposes aggregated $416,161,000, of which $431,952,000
related to appreciated securities and $15,791,000 related to depreciated
securities. There was no difference between book and tax realized gains on
securities transactions for the year ended December 31, 1995. The cost of
portfolio securities for federal income tax purposes was $2,720,196,000 at
December 31, 1995.
3. The fee of $8,091,000 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, 1995,
distribution expenses under the Plan were $6,031,000. As of December 31, 1995,
accrued and unpaid distribution expenses were $380,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $1,928,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $1,918,000(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, 1995, aggregate amounts deferred were $90,000.
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 December 31, 1995, accumulated undistributed net realized gain on
investments was $15,997,000 and additional paid-in capital was $2,389,704,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $1,257,401,000 and $814,947,000, respectively, during
the year ended December 31, 1995.
PER-SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
Year ended December 31
------- ------- ------- ------- -------
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
------- ------- ------- ------- -------
Net Asset Value, Beginning of Year $12.00 $12.57 $12.28 $12.05 $10.32
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .57 .57 .59 .61 .62
Net realized and unrealized gain
(loss) on investments 2.61 (.53) .76 .49 1.86
------- ------- ------- ------- -------
Total income from
investment operations 3.18 .04 1.35 1.10 2.48
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment
income (.56) (.56) (.60) (.60) (.62)
Distributions from net realized
gains (.47) (.05) (.46) (.27) (.13)
------- ------- ------- ------- -------
Total Distributions (1.03) (.61) (1.06) (.87) (.75)
------- ------- ------- ------- -------
Net Asset Value, End of Year $14.15 $12.00 $12.57 $12.28 $12.05
======= ======= ======= ======= =======
Total Return * 27.13% .34% 11.27% 9.48% 24.69%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(in millions) $3,048 $2,082 $1,710 $1,067 $642
Ratio of expenses to average
net assets .67% .68% .71% .74% .82%
Ratio of net income to average
net assets 4.38% 4.76% 4.74% 5.19% 5.56%
Portfolio turnover rate 39.03% 32.05% 27.81% 17.00% 24.65%
</TABLE>
* This was calculated without deducting a sales charge. The
maximum sales charge is 5.75% of the fund's offering price.
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 of
American Balanced Fund, Inc., including the schedule of portfolio investments,
as of December 31, 1995, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended, and the per-share data and ratios for each of the five
years in the period then ended. These financial statements and per-share data
and ratios are the responsibility of the fund's management. Our responsibility
is to express an opinion on these financial statements and the per-share data
and ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and the
per-share data and ratios are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at December 31, 1995 by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and per-share data and ratios
referred to above present fairly, in all material respects, the financial
position of American Balanced Fund, Inc. at of December 31, 1995, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the per-share data and
ratios for the each of the five years in the period then ended, in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, California
January 26, 1996
1995 Tax Information (unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions received by shareholders
during such fiscal year. The distributions made during the fiscal year by the
fund were earned from the following sources:
Dividends and Distributions per Share
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
From Net From Net
Realized Realized
To From Net Short- Long-
Shareholders Investment Term Term
of Record Payment Date Income Gains Gains
February 10, February 13, $0.14 - -
1995 1995
May 19, 1995 May 22, 1995 0.14 - -
August 11, August 14, 0.14 - -
1995 1995
December 20, December 21, 0.14 $0.20 $0.27
1995 1995
</TABLE>
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 43% of the
dividends paid by the fund from net investment income represent qualifying
dividends.
Certain states may exempt from income taxation that portion of the dividends
paid from net investment income that was derived from direct U.S. Treasury
obligations. For purposes of computing this exclusion, 16% of the dividends
paid by the fund from net investment income were derived from interest on
direct U.S. Treasury obligations.
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 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 LLP
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 assets totaling more than $125
billion. These funds serve more than eight 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 primarily 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 63rd 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 current 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. It may invest up to
100% of its assets in bonds subject to the alternative minimum tax.
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 current 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.
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 investments in 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, 1996, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
Litho in USA MNC/GRS/2885
Lit. No. AMBAL-011-0296
Printed on recycled paper
[The American Funds Group(r)]
