AMERICAN BALANCED FUND
Semi-Annual Report
for the six months ended June 30, 1997
[Illustration: Napa, California vineyard]
The American Funds Group (r)
[marble design in top border throughout Semi-annual Report]
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.
American Balanced Fund is one of 28 mutual funds managed by Capital Research
and Management Company, one of the world's oldest and largest investment
advisers.
About our cover: The colorful rows of a vineyard cover a hillside in Napa,
California.
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, 1997,
assuming payment of the 5.75% maximum sales charge at the beginning of the
stated periods:
<TABLE>
<CAPTION>
Average Annual
Total Return Compound Return
<S> <C> <C>
Ten years: +187.68% +11.15%
Five years: +81.52% +12.66%
One year: +14.81% -
</TABLE>
Sales charges are lower for accounts of $50,000 or more. The fund's 30-day
yield as of July 31, 1997, calculated in accordance with the Securities and
Exchange Commission formula, was 3.22%.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS AND ARE NOT PREDICTIVE OF
FUTURE 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 U.S. stock market gathered strength from the economy and continued its long
run upward during the first six months of this year. At the same time, the
economic strength tempered the bond market, keeping prices in check and
prompted the Federal Reserve Board to nudge interest rates higher in March.
Your investment in American Balanced Fund earned a total return of 12.8% for
the half-year ended June 30, outpacing the 11.2% return of the Lipper Balanced
Funds Index. The fund's total return assumes that you reinvested your dividends
and capital gains, as most shareholders do. In the half-year, the fund paid
dividends totaling 28 cents a share and a capital gain distribution of 15 cents
a share.
Stocks, as measured by the unmanaged Standard & Poor's 500 Composite Index,
gained 20.6% in the six months with dividends reinvested. Bonds produced a 3.1%
return on a reinvested basis, as measured by the unmanaged Lehman Brothers
Aggregate Bond Index.
While pleased with the fund's first-half return, we continue to be concerned by
the historically high valuations being accorded common stocks. Consistent with
its balanced approach, the fund's investment in stocks will range between 50%
and 75% of assets. At June 30, common stocks made up 56% of the portfolio, a
slight increase from 53% at the end of 1996.
In looking at the fund's results for the six months, we wish to remind our
shareholders that such strong results are unusual and caution against expecting
such high total returns to continue.
During the first half, some of the fund's stock investments were especially
strong. Warner-Lambert, a leading maker of over-the-counter and prescription
pharmaceuticals, rose 65.7% and became the fund's largest single equity holding
at 1.8% of assets. Other pharmaceutical stocks, such as Schering-Plough and
Merck, also recorded significant gains. We accumulated these stocks a few years
ago when they came under severe price pressure amid discussions of health care
reform. As their prices have risen we have taken advantage of the opportunity
to realize some profits and trimmed our holdings in this industry to 4.4% of
the portfolio, from 5.3% at the beginning of the period. Your fund also cut
back its holdings in bank stocks to 4.4% from 5.2% at the beginning of the
period. Insurance stocks declined slightly to 4.1% from 5.2%. Most of this was
attributable to a reduction in our holdings of USLIFE, which was acquired by
American General. Because of the takeover, USLIFE's price rose 59% during the
period.
Energy sources remains the fund's largest industry sector at 7.3% of net
assets, although results in the group were mixed during the period as the price
of crude oil fell. Pennzoil, the target of a proposed takeover, fared well, and
our two biggest energy holdings, Atlantic Richfield and Amoco, both rose in
price, though not as rapidly as the broader market.
Although stock prices rose sharply during the period, it was a different story
in the bond market. The economy's robust health prompted the Federal Reserve
Board to raise the federal funds rate, the rate banks charge each other for
overnight loans, to 5.50% from 5.25% in March. Despite the Fed's action, most
intermediate- and long-term rates ended the period close to where they were
when the year began.
In this fluctuating environment, your fund trimmed its holdings of government
bonds to 16% of the portfolio from 22% and increased its holdings in cash to
16% from 12%, while leaving its holdings of corporate bonds mostly unchanged at
11%. The larger cash position acts as a counterweight to lower prices if
interest rates begin rising again and gives us flexibility to invest in either
equities or bonds, wherever we find promising opportunities.
The number of shareholder accounts grew by more than 11,000 to 140,000 during
the first half of the year. We welcome all our new shareholders and look
forward to reporting to you again in six months.
Cordially,
/s/Walter P. Stern
Walter P. Stern
Chairman of the Board
/s/Robert G. O'Donnell
Robert G. O'Donnell
President
August 18, 1997
<TABLE>
American Balanced Fund unaudited
Investment Portfolio June 30, 1997
- ---------------------------------------------- ----------- ----------- --------
Percent
Of
TEN LARGEST EQUITY HOLDINGS Net Assets
<S> <C> <C> <C>
Warner-Lambert 1.84%
Atlantic Richfield 1.61
Aluminum Co. of America 1.56
Philip Morris 1.47
General Re 1.33
Amoco 1.32
Ameritech 1.26
Dow Chemical 1.23
Georgia-Pacific 1.21
Electronic Data Systems 1.20
INVESTMENT MIX BY SECURITY TYPE
- ----------------------------------------------
Common Stocks 55.7%
Goverment Bonds 16.5%
Corporate Bonds 11.2%
Convertible Debentures 1.0%
Cash 15.6%
Market Percent
Number Value of Net
COMMON STOCKS of Shares (000) Assets
- ---------------------------------------------- ----------- ----------- --------
ENERGY
Energy Sources- 5.95%
Amoco Corp. 700,000 $60,856 1.32%
Atlantic Richfield Co. 1,050,000 74,025 1.61
Kerr-McGee Corp. 200,000 12,675 .27
Pennzoil Co. 410,500 31,506 .69
Phillips Petroleum Co. 1,100,000 48,125 1.05
Royal Dutch Petroleum Co.
(New York Registered Shares) 560,000 30,450 .66
Texaco Inc. 300,000 32,625 .71
Ultramar Diamond Shamrock Corp. 1,350,000 44,044 .96
Utilities: Electric & Gas - 3.32%
Baltimore Gas and Electric Co. 1,000,000 26,688 .58
Consolidated Edison Co. of New York, Inc. 500,000 14,719 .32
Duke Energy Corp. 600,000 28,762 .63
FPL Group, Inc. 500,000 23,031 .50
Long Island Lighting Co. 675,000 15,525 .34
PP & L Resources, Inc. 800,000 15,950 .35
Southern Electric PLC (American Depositary Receipts) 1,750,000 13,123 .28
Southwestern Public Service Co. 375,000 14,742 .32
----------- -----------
486,846 10.59
----------- --------
MATERIALS
Chemicals - 3.08%
Air Products and Chemicals, Inc. 275,000 22,344 .49
Dow Chemical Co. 650,000 56,631 1.23
E.I. du Pont de Nemours and Co. 760,000 47,785 1.04
Lyondell Petrochemical Co. 675,000 14,723 .32
Forest Products & Paper - 4.10%
Bowater Inc. 464,600 21,488 .47
Georgia-Pacific Corp. 650,000 55,494 1.21
International Paper Co. 650,000 31,566 .68
Louisiana-Pacific Corp. 1,086,000 22,942 .50
Sonoco Products Co. 800,000 24,350 .53
Union Camp Corp. 650,000 32,500 .71
Metals: Nonferrous - 1.56%
Aluminum Co. of America 950,000 71,606 1.56
----------- --------
401,429 8.74
----------- --------
CAPITAL EQUIPMENT
Data Processing & Reproduction - 1.53%
Computer Associates International, Inc. 425,000 23,667 .51
Hewlett-Packard Co. 350,000 19,600 .43
International Business Machines Corp. 300,000 27,056 .59
Electrical & Electronic - 1.62%
Nokia Corp., Class A (American Depositary Receipts) 400,000 29,500 .64
Telefonaktiebolaget LM Ericsson, Class B
(American Depositary Receipts) 500,000 19,688 .43
York International Corp. 550,000 25,300 .55
Electronic Components - 0.54%
AMP Inc. 600,000 25,050 .54
Industrial Components - 1.59%
Echlin Inc. 600,000 21,600 .47
Genuine Parts Co. 1,312,500 44,461 .97
Rockwell International Corp. 117,500 6,932 .15
Machinery & Engineering- 1.48%
Caterpillar Inc. 350,000 37,581 .82
Parker Hannifin Corp. 500,000 30,344 .66
----------- --------
310,779 6.76
----------- --------
CONSUMER GOODS
Appliances & Household Durables - 0.67%
Philips Electronics NV (New York Registered Shares) 425,000 30,547 .67
Automobiles - 0.62%
Ford Motor Co., Class A 750,000 28,312 .62
Beverages & Tobacco - 1.89%
Philip Morris Companies Inc. 1,525,000 67,672 1.47
UST Inc. 700,000 19,425 .42
Food & Household Products - 1.42%
General Mills, Inc. 750,000 48,844 1.06
Sara Lee Corp. 400,000 16,650 .36
Health & Personal Care - 4.36%
American Home Products Corp. 300,000 22,950 .50
Eli Lilly and Co. 200,000 21,862 .48
Merck & Co., Inc. 200,000 20,700 .45
Pfizer Inc 100,000 11,950 .26
Schering-Plough Corp. 800,000 38,300 .83
Warner-Lambert Co. 680,000 84,490 1.84
----------- --------
411,702 8.96
----------- --------
SERVICES
Broadcasting & Publishing - 1.11%
Gannett Co., Inc. 350,000 34,562 .75
Time Warner Inc. 340,000 16,405 .36
Business & Public Services - 3.69%
Browning-Ferris Industries, Inc. 1,475,000 49,044 1.07
Cognizant Corp. 650,000 26,325 .57
Columbia/HCA Healthcare Corp. 750,000 29,484 .64
Electronic Data Systems Corp. 1,350,000 55,350 1.20
Waste Management, Inc. (formerly WMX Technologies, Inc.) 296,803 9,535 .21
Merchandising - 1.11%
Circuit City Stores, Inc. - Circuit City Group 675,000 24,005 .52
Wal-Mart Stores, Inc. 800,000 27,050 .59
Telecommunications - 2.58%
Ameritech Corp. 850,000 57,747 1.26
AT&T Corp. 1,000,000 35,062 .76
U S WEST Communications Group 675,000 25,439 .56
Transportation: Rail & Road - 0.99%
CSX Corp. 500,000 27,750 .61
Union Pacific Corp. 250,000 17,625 .38
----------- --------
435,383 9.48
----------- --------
FINANCE
Banking - 4.37%
Bank of Tokyo-Mitsubishi, Ltd. (American Depositary Receipts) 750,000 15,141 .33
BankAmerica Corp. 800,000 51,650 1.12
CoreStates Financial Corp 340,000 18,275 .40
First Chicago NBD Corp. 300,000 18,150 .39
First Virginia Banks, Inc. 320,300 19,318 .42
Fleet Financial Group, Inc. 410,000 25,932 .56
J.P. Morgan & Co. Inc. 80,000 8,350 .18
National City Corp. 500,000 26,250 .57
Sakura Bank, Ltd. (American Depositary Receipts) 240,000 18,240 .40
Financial Services - 0.73%
Beneficial Corp. 225,000 15,989 .35
Federal National Mortgage Assn. 400,000 17,450 .38
Insurance - 4.07%
Allstate Corp. 350,000 25,550 .56
American General Corp. 610,690 29,160 .63
General Re Corp. 335,000 60,970 1.33
Lincoln National Corp. 300,000 19,312 .42
SAFECO Corp. 275,000 12,839 .28
St. Paul Companies, Inc. 510,000 38,888 .85
----------- --------
421,464 9.17
----------- --------
MISCELLANEOUS
Miscellaneous - 2.03%
Other stocks in initial period of acquisition 93,256 2.03
----------- --------
93,256 2.03
----------- --------
TOTAL COMMON STOCKS 2,560,859 55.73
----------- --------
- ---------------------------------------------- --------- --------- ---------
Principal
Amount
CONVERTIBLE SECURITIES AND PREFERRED STOCK (000)
- ---------------------------------------------- --------- --------- ---------
Broadcasting & Publishing - 0.30%
Time Warner Inc. 0% 2012 $ 6,500 2,551
Time Warner Inc. 0% 2013 25,000 11,531 .30
Insurance - 0.39%
U S WEST, Inc., DECS convertible preferred shares
(convertible into Enhance Financial Services Group
common stock) 216,700 8,235 .18
Multi-Industry - 0.21%
Swire Pacific Capital Ltd. 8.84%
Cumulative Guaranteed Perpetual Capital Securities (1) 290,000 7,468
Swire Pacific Offshore Financing Ltd. 9.33%
Cumulative Guaranteed Perpetual Capital Securities (1) 80,000 2,190 .21
Telecommunications - 0.27%
U S WEST Communications Group 0% 2011 32,000 12,240 .27
Miscellaneous - 0.00%
Other convertible securities and preferred stock in initial
period of acquisition 3,465 .07
----------- --------
TOTAL CONVERTIBLE SECURITIES AND PREFERRED STOCK 47,680 1.03
----------- --------
TOTAL COMMON STOCKS, CONVERTIBLE SECURITIES AND PREFERRED STOCK 2,608,539 56.76
----------- --------
- ---------------------------------------------- --------- --------- ---------
BONDS & NOTES
- ---------------------------------------------- --------- --------- ---------
Industrials - 4.16%
Comcast Cable Communications, Inc. 8.375% 2007 (1) $5,250 5,554
Comcast Cable Communications, Inc. 8.875% 2017 (1) 2,000 2,180 .26
Comcast Cable Communications, Inc. 8.50% 2027 (1) 4,000 4,316
Dayton Hudson Corp. 10.00% 2010 5,000 6,062
Dayton Hudson Corp. 9.50% 2015 1,000 1,170 .16
Deere & Co. 8.95% 2019 7,330 8,279 .18
Federal Paper Board Co., Inc. 10.00% 2011 10,000 12,257 .27
Freeport McMoRan Copper & Gold Inc. 7.50% 2006 5,000 4,964
Freeport McMoRan Copper & Gold Inc. 7.20% 2026 12,500 12,341 .37
Hyundai Semiconductor America, Inc. 8.625% 2007 (1) 13,250 13,494 .29
Inco Ltd. 9.875% 2019 4,200 4,530
Inco Ltd. 9.60% 2022 5,000 5,423 .22
May Department Stores Co. 9.875% 2021 6,500 7,266 .16
Millennium America Inc. 7.00% 2006 5,000 4,854 .11
News America Holdings Inc. 10.125% 2012 2,000 2,254
News America Holdings Inc. 7.43% 2026 10,000 10,154 .27
Occidental Petroleum Corp. 8.50% 2004 2,500 2,575 .06
OXYMAR 7.50% 2016 (1) 6,000 5,750 .13
Pan Pacific Industrial Investments PLC 0% 2007 (1) 25,000 11,232 .24
Philips Electronics NV 7.20% 2026 7,500 7,529 .16
Tele-Communications, Inc. 9.80% 2012 10,000 11,446
Tele-Communications, Inc. 8.75% 2015 4,000 4,192
Tele-Communications, Inc. 8.75% 2023 3,000 2,994 .47
Tele-Communications, Inc. 9.25% 2023 3,000 3,127
Time Warner Inc. Pass-Through Asset Trust 1997-1, 6.10% 2001 (1) (2) 10,000 9,579
Time Warner Inc. 7.75% 2005 5,000 5,081
Time Warner Inc. 9.125% 2013 5,000 5,529 .54
Time Warner Inc. 6.85% 2026 4,825 4,746
TKR Cable I, Inc. 10.50% 2007 4,000 4,411 .10
Wharf International Finance Ltd. 7.625% 2007 (1) 8,000 7,964 .17
----------- --------
191,253 4.16
----------- --------
Electric Utilities - 0.51%
Big Rivers Electric Corp. 10.70% 2017 4,000 4,245 .09
Commonwealth Edison Co. 9.875% 2020 11,000 12,290 .27
Israel Electric Corp. Ltd. 7.25% 2006 (1) 7,000 6,944 .15
----------- --------
23,479 .51
----------- --------
Transportation - 1.23%
Airplanes Pass Through Trust, pass-through
certificates, Series 1, Class B, 6.788% 2019 (2) (3) 4,752 4,782
Airplanes Pass Through Trust, pass-through
certificates, Series 1, Class C, 8.15% 2019 (2) 7,500 7,800 .27
Continental Airlines, Inc., pass-through certificates,
Series 1996-2B, 8.56% 2014 (2) 1,944 2,100
Continental Airlines, Inc., pass-through certificates,
Series 1996-A, 6.94% 2015 (2) 9,804 9,612 .26
Delta Air Lines, Inc., pass-through certificates,
Series 1992-A2, 9.20% 2014 (2) 1,500 1,695
Delta Air Lines, Inc., pass-through certificates,
Series 1993-A2, 10.50% 2016 (2) 5,000 6,097 .17
United Air Lines, Inc. 10.67% 2004 5,000 5,870
United Air Lines, Inc., pass-through certificates,
Series 1995-A1, 9.02% 2012 (2) 6,235 6,777 .38
United Air Lines, Inc., pass-through certificates,
Series 1995-A2, 9.56% 2018 (2) 4,000 4,559
USAir, Inc., Class A, 6.76% 2008 7,216 6,994 .15
----------- -----------
56,286 1.23
----------- --------
Financial - 2.85%
Advanta National Bank 6.45% 2000 2,000 1,939 .04
Aetna Services, Inc. 6.97% 2036 10,000 10,099 .22
American Re Corp. 10.875% 2004 5,000 5,281 .11
Bank of Nova Scotia 5.75% (3) 4,000 3,560 .08
BankAmerica Capital III Series 3, 6.386% 2027 (3) 12,500 12,287
BankAmerica Corp. 8.95% 2004 1,900 2,001 .31
Beneficial Corp. 12.875% 2013 1,500 1,671 .04
BT Capital Trust 6.512% 2026 (3) 12,500 12,400 .27
Canadian Imperial Bank of Commerce
Eurodollar Note 5.688% (3) 1,600 1,422 .03
Capital One Bank 7.35% 2000 10,000 10,112
Capital One Bank 7.15% 2006 5,000 5,058 .33
Central Fidelity Capital Trust, pass-through securities,
6.832% 2027 (1,3) 7,500 7,676 .17
Chase Capital II, Global Floating Rate Capital Securities,
Series B, 6.359% 2027 (3) 7,950 7,751 .17
Den Danske Bank AS 7.25% 2005 (1) 5,000 5,021 .11
Den Norske CreditBank 6.063% (3) 3,000 2,715 .06
First Union Corp. 6.824%/7.574% 2026 (4) 4,500 4,490 .10
General Motors Acceptance Corp. 9.625% 2001 7,000 7,744 .17
Midland Bank PLC 6.125% (3) 4,000 3,613 .08
National Westminster Bank PLC 7.75% 10,000 10,279 .22
Terra Nova Insurance (UK) Holdings PLC 10.75% 2005 5,000 5,563 .12
Zurich Capital Trust 8.376% 2037 (1) 10,000 10,334 .22
----------- --------
131,016 2.85
----------- --------
Real Estate - 0.30%
ERP Operating LP 7.95% 2002 1,500 1,550 .03
Irvine Co. 7.46% 2006 (1) (5) 2,500 2,416 .05
Security Capital Industrial Trust 7.875% 2009 5,000 5,140 .11
Shopping Center Associates 6.75% 2004 (1) 5,000 4,875 .11
----------- --------
13,981 .30
----------- --------
Collateralized Mortgage/Asset-Backed
Obligations (2) - 2.18%
Aames Mortgage Trust, pass-through certificates,
Series 1996-D, Class A-1E, 6.87% 2024 5,000 4,975 .11
Case Equipment Loan Trust, Series 1995-A, 7.30% 2002 3,108 3,143 .07
Collateralized Mortgage Obligation Trust 28,
Class Z, 8.45% 2017 17,490 17,763 .39
DLJ Mortgage Acceptance Corp., Series 1997-CF1, Class A-1A,
7.40% 2006 (1) 3,000 3,069 .07
FIRSTPLUS Home Loan Owner Trust, Series 1996-4,
Class A-3, 6.28% 2009 5,000 4,957
FIRSTPLUS Home Loan Owner Trust, Series 1997-1,
Class A-6, 6.95% 2015 12,500 12,383 .38
Green Tree Financial Corp., Net Interest Margin
Trust, Series 1995-A, 7.25% 2005 5,831 5,839
Green Tree Financial Corp., Series 1995-9, Class A-5,
Class A-5, 6.80% 2027 10,000 9,941 .34
Grupo Financiero Banamex Accival, SA de CV
0% 2002 (1) 5,030 4,027 .09
IMC Home Equity Loan Trust, Series 1996-2,
Class A-2, 6.78% 2011 9,439 9,445
IMC Home Equity Loan Trust, Series 1996-4,
Class A-1, 6.59% 2011 2,901 2,900 .27
J.P. Morgan Commercial Mortgage Finance Corp.,
pass-through certificates, Series 1996-C3,
Class A-1, 7.33% 2028 4,848 4,920 .10
Jet Equipment Trust, Series 1995-B, Class B,
7.83% 2015 (1) 7,673 7,914
Jet Equipment Trust, Series 1995-A, Class B,
8.64% 2015 (1) 4,810 5,230 .28
Merrill Lynch Mortgage Investors, Inc., Seller
Manufactured Housing Contract, Series 1995-C2,
Class A-1, 7.436% 2021 3,728 3,768 .08
----------- --------
100,274 2.18
----------- --------
Governments (excluding U.S. Government) and
Governmental Authorities - 0.11%
United Mexican States 7.875% 2001 (1) (3) 5,000 5,009 .11
----------- --------
5,009 .11
----------- --------
Federal Agency Obligations - Mortgage Pass-Throughs (3) - 2.57%
Federal Home Loan Mortgage Corp. (2)
8.50% 2008 236 248
10.00% 2018 8,110 8,863
8.50% 2020 7,710 8,098 .45
7.50% 2022 766 773
7.50% 2024 2,678 2,691
Federal National Mortgage Assn.:
7.00% 2008 4,178 4,193
8.50% 2024 9,419 9,773 .30
Government National Mortgage Assn.:
11.00% 2015 95 108
9.50% 2018 123 133
10.50% 2019 80 89
6.875% 2022 3,167 3,255
8.00% 2023 4,742 4,917 1.82
8.00% 2024 4,492 4,596
7.50% 2026 15,221 15,263
8.00% 2026 36,845 37,697
8.00% 2027 16,838 17,225
----------- --------
117,922 2.57
----------- --------
Federal Agency Obligations - Other - 0.85%
Federal Home Loan Mortgage Corp. 6.945% 2005 6,500 6,360 .14
Federal National Mortgage Assn. 8.71% 2005 22,000 22,340 .49
FNSM Callable Principal STRIPS:
0%/8.20% 2022 (4) 10,000 8,881
0%/8.25% 2022 (4) 1,500 1,340 .22
----------- --------
38,921 .85
----------- --------
U.S. Treasury Obligations - 12.92%
8.50% July 1997 16,000 16,020 .35
8.875% November 1997 15,000 15,173 .33
5.625% January 1998 30,000 29,995 .65
6.125% March 1998 50,000 50,156 1.09
6.25% July 1998 50,000 50,203 1.09
5.875% August 1998 20,000 19,994 .43
6.875% July 1999 25,000 25,363 .55
7.75% November 1999 25,000 25,871 .56
7.125% February 2000 80,000 81,750 1.78
8.875% May 2000 8,000 8,554 .19
8.75% August 2000 7,500 8,021 .17
14.25% February 2002 2,000 2,621 .06
10.75% February 2003 7,300 8,767 .19
10.75% May 2003 5,000 6,038 .13
11.125% August 2003 8,500 10,480 .23
11.875% November 2003 15,000 19,179 .42
7.25% May 2004 25,000 26,059 .57
7.25% August 2004 25,000 26,063 .57
7.00% July 2006 30,000 30,863 .67
3.410% January 2007 (6) 30,000 29,633 .64
8.75% November 2008 10,000 11,088 .24
10.375% November 2009 15,000 18,230 .40
10.375% November 2012 47,000 59,660 1.30
7.250% May 2016 10,000 10,428 .23
8.875% August 2017 3,000 3,654 .08
----------- --------
593,863 12.92
----------- --------
TOTAL BONDS & NOTES 1,272,004 27.68
----------- --------
- ---------------------------------------------- --------- --------- ---------
SHORT-TERM SECURITIES
- ---------------------------------------------- --------- --------- ---------
Corporate Short-Term Notes - 14.93%
Associates Corp. of North America 6.15% due 7/1/97 5,460 5,459 .12
CIT Group Holdings, Inc. 5.54% due 7/28-8/19/97 53,000 52,656 1.15
Ciesco LP 5.52%-5.55% due 7/7-8/11/97 33,500 33,381 .73
Coca-Cola Co. 5.52%-5.57% due 7/31-8/29/97 53,200 52,824 1.15
E.I. du Pont de Nemours and Co. 5.50% due 7/10/97 (1) 19,000 18,959
E.I. du Pont de Nemours and Co. 5.51%-5.53% due 7/21-9/3/97 36,500 36,318 1.20
Ford Motor Credit Co. 5.52%-5.58% due 7/8-9/2/97 45,800 45,567 .99
Gannett Co., Inc. 5.50% due 7/11-8/12/97 (1) 24,600 24,527 .53
H.J. Heinz Co. 5.50%-5.54% due 7/1-7/17/97 47,300 47,208 1.03
International Lease Finance Corp. 5.53%-5.60% due 7/22-8/22/97 53,900 53,559 1.17
Lucent Technologies Inc. 5.51%-5.53% due 7/28-8/25/97 56,400 56,051 1.22
Monsanto Co. 5.56% due 7/31/97 15,000 14,928 .32
National Rural Utilities Cooperative Finance Corp.
5.52%-5.55% due 7/7-9/3/97 51,400 50,962 1.11
J.C. Penney Funding Corp. 5.53%-5.55% due 7/28-8/27/97 (1) 40,900 40,580 .88
PepsiCo, Inc. 5.48%-5.50% due 7/3-8/6/97 82,000 81,767 1.78
SAFECO Credit Co. Inc. 5.53% due 7/2/97 14,600 14,596 .32
Xerox Corp. 5.55% due 8/8-8/21/97 57,000 56,582 1.23
----------- --------
685,924 14.93
----------- --------
Federal Agency Short-Term Obligations - 1.10%
Federal Home Loan Mortgage Corp. 5.43%-5.55%
due 7/18-9/16/97 50,900 50,558 1.10
----------- --------
TOTAL SHORT-TERM SECURITIES 736,482 16.03
----------- --------
TOTAL INVESTMENT SECURITIES
(cost: $3,883,890,000) 4,617,025 100.47
Excess of payables over cash and receivables 21,590 .47
----------- --------
NET ASSETS $4,595,435 100.00%
=========== ========
(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 is shorter than the
stated maturity.
(3) Coupon rates may change periodically.
(4) Step-bond; coupon rate will increase at a later date.
(5) Valued under procedures established by the
Board of Directors.
(6) Index-linked bond, which is a floating rate bond whose
principal amount moves with a government retail price index.
See Notes to Financial Statements
- ----------------------------------------------
Equity-type securities appearing in the
portfolio since December 31, 1996
- ----------------------------------------------
Air Products and Chemicals
AMP
Bank of Tokyo-Mitsubishi
Columbia/HCA Healthcare
Computer Associates International
CSX
Electronic Data Systems
First Chicago NBD
FPL Group
Genuine Parts
Hewlett-Packard
Kerr-McGee
Long Island Lighting
Lyondell Petrochemical
Sakura Bank
Sonoco Products
Southern Electric
Texaco
Union Pacific
York International
- ----------------------------------------------
Equity-type securities eliminated from the
portfolio since December 31, 1996
- ----------------------------------------------
Abbott Laboratories
ACNielsen
ADVANTA
Airborne Freight
American Greetings
Bristol-Myers Squibb
Dun & Bradstreet
Exxon
Kimberly-Clark
MCI Communications
NationsBank
Pacific Gas and Electric
Pitney Bowes
PepsiCo
Polaroid
U.S. Bancorp
USLIFE
Volvo
</TABLE>
<TABLE>
American Balanced Fund
Financial Statements (Unaudited)
- ---------------------------------------------- ----------- -----------
Statement of Assets and Liabilities (dollars in
at June 30, 1997 thousands)
- ---------------------------------------------- ----------- -----------
<S> <C> <C>
Assets:
Investment securities at market
(cost: $3,883,890) $4,617,025
Cash 14,005
Receivables for -
Sales of investments $7,049
Sales of fund's shares 8,285
Dividends and accrued interest 26,069 41,403
----------- -----------
4,672,433
Liabilities:
Payables for -
Purchases of investments 57,732
Repurchases of fund's shares 17,290
Management services 1,113
Accrued expenses 863 76,998
----------- -----------
Net Assets at June 30, 1997 -
Equivalent to $15.95 per share on
288,037,123 shares of $1 par value
capital stock outstanding (authorized
capital stock--500,000,000 shares) $4,595,435
==============
Statement of Operations
for the six months ended June 30, 1997 (dollars in
thousands)
- ------------------------------------------ ----------- -----------
Investment Income:
Income:
Dividends $ 31,552
Interest 62,456 $ 94,008
-----------
Expenses:
Management services fee 6,335
Distribution expenses 5,278
Transfer agent fee 1,328
Reports to shareholders 144
Registration statement and prospectus 380
Postage, stationery and supplies 234
Directors' fees 37
Auditing and legal fees 40
Custodian fee 60
Taxes other than federal
income tax 2
Other expenses 41 13,879
----------- -----------
Net investment income 80,129
-----------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 183,016
Net increase in unrealized appreciation on
investments:
Beginning of period 479,439
End of period 733,135 253,696
----------- -----------
Net realized gain and increase in unrealized
appreciation on investments 436,712
-----------
Net Increase in Net Assets Resulting
from Operations $516,841
===========
See Notes to Financial Statements
- ------------------------------------------ ----------- -----------
Statement of Changes in Net Assets (dollars in
thousands)
Six months Year
ended ended
6/30/97* 12/31/96
- ------------------------------------------ ----------- -----------
Operations:
Net investment income $ 80,129 $ 141,171
Net realized gain on investments 183,016 240,061
Net increase in unrealized appreciation
on investments 253,696 63,299
----------- -----------
Net increase in net assets
resulting from operations 516,841 444,531
----------- -----------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (78,890) (135,064)
Distributions from net realized gain on
investments (41,813) (214,394)
----------- -----------
Total dividends and distributions (120,703) (349,458)
----------- -----------
Capital Share Transactions:
Proceeds from shares sold: 42,558,111
and 78,359,035 shares, respectively 638,486 1,133,395
Proceeds from shares issued in reinvestment
of net investment income dividends and
distributions of net realized gain on
investments: 7,499,973 and 22,959,812 shares,
respectively 113,605 330,564
Cost of shares repurchased: 32,899,595
and 45,858,362 shares, respectively (494,047) (665,292)
----------- -----------
Net increase in net assets resulting from
capital share transactions 258,044 798,667
----------- -----------
Total Increase in Net Assets 654,182 893,740
Net Assets:
Beginning of period 3,941,253 3,047,513
----------- -----------
End of period (including undistributed
net investment income: $17,600
and $16,361, respectively) $4,595,435 $3,941,253
=========== ===========
*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 stock, convertible securities and preferred stock 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 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 by
the Board of Directors or a committee thereof.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. In the event
the fund purchases securities on a delayed delivery or "when-issued" basis, it
will segregate with its custodian liquid assets in an amount sufficient to meet
its payment obligations in these transactions. 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 and premiums on
securities purchased are amortized over the life of the respective securities.
Dividends and distributions paid to shareholders are recorded on the
ex-dividend date.
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 $60,000 includes $27,000 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, 1997, net unrealized appreciation on investments for book
and federal income tax purposes aggregated $733,135,000, of which $752,975,000
related to appreciated securities and $19,840,000 related to depreciated
securities. During the six months ended June 30, 1997, the fund realized, on a
tax basis, a net capital gain of $183,004,000 on securities transactions. The
cost of portfolio securities for book and federal income tax purposes was
$3,883,890,000 at June 30, 1997.
3. The fee of $6,335,000 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,
1997, distribution expenses under the Plan were limited to $5,278,000,
representing 0.25% of average net assets. Had no limitation been in effect,
the fund would have paid $5,632,000 in distribution expenses under the Plan.
As of June 30, 1997, accrued and unpaid distribution expenses were $645,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $1,328,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $1,284,000 (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, 1997,
aggregate amounts deferred and earnings thereon were $218,000.
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, 1997, accumulated undistributed net realized gain on
investments was $182,867,000 and additional paid-in capital was $3,373,796,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $777,221,000 and $822,470,000, respectively, during
the six months ended June 30, 1997.
<TABLE>
Per-Share Data and Ratios
Six months
ended Year ended December 31
------- ------- ------- ------- -------
6/30/97 (1) 1996 1995 1994 1993 1992
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period 14.55 14.15 12.00 12.57 12.28 12.05
--------- - ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income 0.28 0.57 0.57 0.57 0.59 0.61
Net realized gain and change in unrealized
appreciation on investments 1.55 1.24 2.61 (0.53) 0.76 0.49
--------- ------- ------- ------- ------- -------
Total income from
investment operations 1.83 1.81 3.18 0.04 1.35 1.10
--------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment
income (0.28) (0.56) (0.56) (0.56) (0.60) (0.60)
Distributions from net realized
gains (0.15) (0.85) (0.47) (0.05) (0.46) (0.27)
--------- ------- ------- ------- ------- -------
Total Distributions (0.43) (1.41) (1.03) (0.61) (1.06) (0.87)
--------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $15.95 $14.55 $14.15 $12.00 $12.57 $12.28
========= ======= ======= ======= ======= =======
Total Return (2) 12.75% (3) 13.17% 27.13% .34% 11.27% 9.48%
Ratios/Supplemental Data:
Net assets, end of period
(in millions) $4,595 $3,941 $3,048 $2,082 $1,710 $1,067
Ratio of expenses to average
net assets .32% (3) .67% .67% .68% .71% .74%
Ratio of net income to average
net assets 1.89% (3) 4.01% 4.38% 4.76% 4.74% 5.19%
Average commissions paid per share (4) 5.07 c 5.78 c 6.16 c 6.25 c 6.82 c 7.21 c
Portfolio turnover rate 28.02% (3) 43.85% 39.03% 32.05% 27.81% 17.00%
(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 shown
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>
OFFICE OF THE FUND
One Market
Steuart Tower, 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 NEAREST 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
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071-2371
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. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE
COMPANY, TOLL-FREE, AT 800/421-0180, OR VISIT WWW.AMERICANFUNDS.COM ON THE
WORLD WIDE WEB.
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, 1997, THIS REPORT MUST BE ACCOMPANIED BY AN AMERICAN FUNDS GROUP
STATISTICAL UPDATE FOR THE MOST RECENTLY COMPLETED CALENDAR QUARTER.
[The American Funds Group (r)]
Printed on recycled paper
Litho in USA MNC/FS/3468
Lit. No. AMBAL-013-0897
