[The American Funds Group(r)]
American Balanced Fund
Semi-Annual Report
For The Six Months Ended June 30, 2000
[cover: field of evergreen]
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 the 29 American Funds, the nation's
third-largest mutual fund family. For nearly seven decades, Capital Research
and Management Company, the American Funds adviser, has invested with a
long-term focus based on thorough research and attention to risk.
Fund results in this report were calculated for Class A shares at net asset
value (without a sales charge) unless otherwise indicated. Here are the total
returns and average annual compound returns on a $1,000 investment for periods
ended June 30, 2000, with all distributions reinvested:
<TABLE>
<CAPTION>
10 years 5 years 12 months
<S> <C> <C> <C>
CLASS A SHARES
reflecting 5.75% maximum sales charge
Cumulative return +189.99% +70.97% -7.79%
Average annual compound return + 11.23% +11.32% -
</TABLE>
Results for Class B shares are not shown because of the brief time between
their introduction on March 15 and the end of the fund's fiscal period.
Please see the back cover for important information about Class A and Class B
shares.
The fund's 30-day yield for Class A shares as of July 31, 2000, calculated in
accordance with the Securities and Exchange Commission formula, was 3.86%. The
fund's distribution rate as of that date for Class A shares at the maximum
offering price was 3.38%. The SEC yield reflects income the fund expects to
earn based on its current portfolio of securities, while the distribution rate
is based solely on the fund's past dividends. Accordingly, the fund's SEC yield
and distribution rate may differ.
Figures shown are past results and are not predictive of future results. Share
price and return will vary, so you may lose money. Investing for short periods
makes losses more likely. Investments are not FDIC-insured, nor are they
deposits of or guaranteed by a bank or any other entity.
Fellow Shareholders:
The stock market had one of its most volatile periods in history during the
past six months ended June 30, 2000, but it finished just about where it began.
Bonds generally provided a reasonable return, with U.S. Treasury bonds doing
particularly well as the result of a squeeze on the market supply of government
bonds.
In this environment, American Balanced Fund earned a total return of 3.0% for
the period, outpacing the Lipper Balanced Fund Index, which posted a total
return of 1.7%. Large-capitalization U.S. stocks, as measured by Standard &
Poor's 500 Composite Index, ended nearly flat, declining 0.4%. Fueled by strong
returns from Treasury bonds, the Lehman Brothers Aggregate Bond Index rose
4.0%.
Dramatic Daily Stock Fluctuations
The stock market's daily fluctuations in the first half of the year were the
second most volatile since the 1930s, according to The Leuthold Group. Over the
first six months, 44% of the trading days qualified as high-volatility days
(when the S&P 500 moves up or down 1% or more). The S&P 500 was up or down 2%
or more on 23 days during the period, or 18% of all trading days. The
technology-dominated Nasdaq Index was even more volatile. In the first half,
the Nasdaq was up or down more than 1% on more than 79% of the trading days.
In times like these, we continue to manage the fund with an eye to
diversification, preservation of principal and long-term results. It is in
periods of high volatility that our intensive research on individual companies
is especially important.
Defensive Stocks Gain
Defensive stocks - those that are less sensitive to the economy, like food
companies, pharmaceutical manufacturers, electric utilities, health care
providers and real estate investment trusts - helped the fund in the recent
period. Nabisco Group Holdings rose 144%; after the period ended, Phillip
Morris Companies agreed to acquire the food company for nearly $15 billion. Two
of our pharmaceutical companies - Pfizer (+61%) and Pharmacia (+45%) -
benefited. Health and personal care stocks now represent the second-largest
industry in the portfolio. UnitedHealth Group Inc. rose 61%. Oil stocks, our
largest industry, also did well. In addition, U S WEST, our largest individual
position, rose 19%.
Increasing concerns about a slowing economy hurt returns of stocks exposed to
the economic cycle. Basic materials stocks such as paper and chemicals were
especially weak. International Paper fell 47% and Weyerhaeuser declined 40%.
Consumer cyclicals such as retailers were also weak. May Department Stores
declined 26%.
Bonds Help Fund's Results
The U.S. economy continued its longest expansion in history. The second quarter
began with strong domestic demand and intensifying wage pressures. Meanwhile,
the cost of raw materials crept up, and oil prices rose to their highest levels
in almost a decade. Reflecting concern about an overheating economy and rising
inflation, the Federal Reserve Board boosted short-term interest rates in
February, March and May. The federal funds rate, the rate at which banks lend
each other money, rose from 5.5% to 6.5%.
In spite of this, high-quality bonds did reasonably well, led by U.S. Treasury
bonds. A sharp slowdown in government borrowing - compounded by the launch of
an unprecedented program to buy back publicly held debt - left investors with a
shrinking pool of securities. A worldwide scramble for U.S. Treasuries sent
government bond prices surging. For example, Treasury bonds in 30-year
maturities returned 9.7% over the six-month period. In comparison, corporate
bonds, as measured by the Salomon Smith Barney Corporate Bond Index, produced
a 3.6% gain. About 37% of the fund's bonds are in U.S. Treasuries, 21% are in
federal agency obligations, with the remainder in investment-grade corporate
bonds and asset-backed obligations.
It is American Balanced Fund's policy to maintain between 50% and 75% of its
assets in equities at all times. At the end of this fiscal period, 57% was
invested in common stocks and 33% in bonds, with the remainder in cash and
equivalents, only a slight change from the beginning of the year.
Large-capitalization U.S. stocks, as measured by the S&P 500, have compounded
at almost 24% annually for the past five years. We believe these returns are
not sustainable over the long term, and therefore maintain a relatively
cautious posture. We do believe, however, that over the long term, our balanced
approach should continue to yield successful investment results for
shareholders.
We look forward to reporting to you again early next year.
Cordially,
/s/ Walter P. Stern
Walter P. Stern
Chairman of the Board
/s/ Robert G. O'Donnell
Robert G. O'Donnell
President
August 11, 2000
<TABLE>
AMERICAN BALANCED FUND
Investment Portfolio, June 30, 2000 (Unaudited)
<S> <C> <C> <C>
INVESTMENT MIX BY SECURITY TYPE
Common Stocks 57%
Government Bonds 19%
Corporate Bonds 14%
Convertible Debentures and Preferred Stock 1%
Short-Term Securities and Cash Equivalents 9%
Percent of
TEN LARGEST EQUITY HOLDINGS Net Assets
U S WEST 1.29%
Allstate 1.28
Philip Morris Companies 1.20
May Department Stores 1.16
American General 1.15
Bristol-Myers Squibb 1.09
Phillips Petroleum 1.09
CSX 1.06
Household International 1.00
Texaco 1.00
Percent of
COMMON STOCKS Net Assets
ENERGY
ENERGY SOURCES - 5.51%
Ashland Inc. 0.66
Chevron Corp. 0.20
Kerr-McGee Corp. 0.50
Murphy Oil Corp. 0.53
Phillips Petroleum Co. 1.09
Royal Dutch Petroleum Co. (New York registered) 0.39
Texaco Inc. 1.00
Ultramar Diamond Shamrock Corp. 0.80
USX-Marathon Group Number of Market Value 0.34
UTILITIES: ELECTRIC & GAS - 2.28% Shares (000)
American Electric Power Co., Inc. 0.45
Constellation Energy Group, Inc. 0.87
CP&L Energy, Inc. (formerly Carolina Power & Light Co.) 1,050,000 $ 36,816 0.43
FPL Group, Inc. 130,000 11,026 0.53
475,000 27,995 7.79
500,000 29,719
MATERIALS 1,200,000 60,825
CHEMICALS - 1.97% 355,000 21,855
Crompton Corp. (formerly CK Witco Corp.) 1,050,000 55,912 0.60
Hercules Inc. 1,800,000 44,662 0.18
Imperial Chemical Industries PLC (ADR) 750,000 18,797 0.27
Millennium Chemicals Inc. 0.68
PPG Industries, Inc. 850,000 25,181 0.24
FOREST PRODUCTS & PAPER - 1.99% 1,500,000 48,844
International Paper Co. 750,000 23,953 0.64
Potlatch Corp. 600,000 29,700 0.27
Westvaco Corp. 435,285 0.31
Weyerhaeuser Co. 0.77
METALS: STEEL - 0.17%
USX-U.S. Steel Group 0.17
2,750,000 33,687 4.13
700,000 9,844
CAPITAL EQUIPMENT 500,000 15,406
AEROSPACE & MILITARY TECHNOLOGY - 1.60% 2,250,000 38,250
Lockheed Martin Corp. 300,000 13,294 0.93
United Technologies Corp. 0.67
DATA PROCESSING & REPRODUCTION - 2.07% 1,200,000 35,775
BMC Software, Inc. (1) 450,000 14,906 0.26
Hewlett-Packard Co. 700,000 17,369 0.67
International Business Machines Corp. 1,000,000 43,000 0.59
Microsoft Corp. (1) 0.36
Xerox Corp. 500,000 9,281 0.19
ELECTRICAL & ELECTRONICS - 1.27% 230,812
Nokia Corp., Class A (ADR) 0.50
York International Corp. 0.77
ELECTRONIC COMPONENTS - 0.93%
Dallas Semiconductor Corp. 2,105,600 52,245 0.20
Intel Corp. 635,000 37,386 0.48
Texas Instruments Inc. 0.25
ELECTRONIC INSTRUMENTS - 0.15% 400,000 14,594
Agilent Technologies, Inc. (1) 300,000 37,462 0.15
INDUSTRIAL COMPONENTS - 1.49% 300,000 32,869
Dana Corp. 250,000 20,000 0.21
Eaton Corp. 525,000 10,894 0.42
Genuine Parts Co. 0.86
MACHINERY & ENGINEERING - 1.40% 560,000 27,965
Caterpillar Inc. 1,700,000 42,925 0.33
Deere & Co. 0.53
Fluor Corp. 275,000 11,206 0.34
Pall Corp. 200,000 26,737 0.20
200,000 13,738 8.91
CONSUMER GOODS 115,320 8,505
APPLIANCES & HOUSEHOLD DURABLES - 0.32%
Newell Rubbermaid Inc. 550,000 11,653 0.32
AUTOMOBILES - 0.58% 350,000 23,450
Suzuki Motor Corp. 2,400,000 48,000 0.58
BEVERAGES & TOBACCO - 1.92%
Imperial Tobacco Ltd. 550,000 18,631 0.22
Philip Morris Companies Inc. 800,000 29,600 1.20
R.J. Reynolds Tobacco Holdings, Inc. 600,000 18,975 0.50
FOOD & HOUSEHOLD PRODUCTS - 3.39% 600,000 11,100
General Mills, Inc. 497,935 0.96
H.J. Heinz Co. 0.94
Nabisco Group Holdings Corp. 0.93
Sara Lee Corp. 0.56
HEALTH & PERSONAL CARE - 5.45% 700,000 18,025
AstraZeneca PLC (ADR) 0.46
Avon Products, Inc. 2,500,000 32,206 0.76
Bergen Brunswig Corp. 0.30
Bristol-Myers Squibb Co. 1,300,000 12,470 1.09
Guidant Corp. (1) 2,525,000 67,070 0.31
Kimberly-Clark Corp. 1,000,000 27,938 0.36
Mallinckrodt Inc. 0.89
Pfizer Inc (formerly Warner-Lambert Co.) 1,400,000 53,550 0.82
Pharmacia Corp. (formerly Monsanto Co.) 1,200,000 52,500 0.46
RECREATION & OTHER CONSUMER PRODUCTS - 0.92% 2,000,000 51,875
Pennzoil-Quaker State Co. 1,625,000 31,383 0.59
Stanley Works 0.33
TEXTILES & APPAREL - 0.60% 550,000 25,575
NIKE, Inc., Class B 950,000 42,275 0.60
3,000,000 16,500 13.18
1,050,000 61,163
SERVICES 350,000 17,325
BROADCASTING & PUBLISHING - 1.42% 350,000 20,081
Gannett Co., Inc. 1,150,000 49,953 0.64
Knight-Ridder, Inc. 950,000 45,600 0.36
New York Times Co., Class A 500,000 25,844 0.42
BUSINESS & PUBLIC SERVICES - 2.07%
IKON Office Solutions, Inc. 2,750,000 33,172 0.31
Interpublic Group of Companies, Inc. 775,000 18,406 0.29
UnitedHealth Group Inc. (formerly United HealthCare Corp.) 0.62
Waste Management, Inc. 850,000 33,841 0.85
DIVERSIFIED TELECOMMUNICATION SERVICES - 2.51% 736,752
AT&T Corp. 0.45
GTE Corp. 0.29
Koninklijke PTT Nederland NV 0.48
U S WEST, Inc. 600,000 35,887 1.29
LEISURE & TOURISM - 0.62% 375,000 19,945
Carnival Corp. 600,000 23,700 0.22
Seagram Co. Ltd. 0.40
MERCHANDISING - 2.82% 4,500,000 17,437
Albertson's, Inc. 375,000 16,125 0.87
J.C. Penney Co., Inc. 400,000 34,300 0.79
May Department Stores Co. 2,506,700 47,627 1.16
TRANSPORTATION: RAIL & ROAD - 1.55%
Burlington Northern Santa Fe Corp. 790,000 24,984 0.49
CSX Corp. 260,000 16,185 1.06
604,838 27,062 10.99
840,000 72,030
FINANCE
BANKING - 3.61% 625,000 12,188
BancWest Corp. 385,500 22,359 0.16
Bank of America Corp. 0.96
Bank of Tokyo-Mitsubishi, Ltd. (ADR) 1,456,000 48,412 0.28
BANK ONE CORP. 2,400,000 44,250 0.57
FleetBoston Financial Corp. 2,700,000 64,800 0.24
National City Corp. 0.61
Sakura Bank, Ltd. 1,200,000 27,525 0.37
Washington Mutual, Inc. 2,800,000 59,325 0.42
FINANCIAL SERVICES - 1.00% 614,141
Household International, Inc. 1.00
INSURANCE - 4.03%
Aetna Inc. 0.98
Allstate Corp. 548,000 9,008 1.28
American General Corp. 1,250,000 53,750 1.15
Enhance Financial Services Group Inc. 1,300,000 15,763 0.10
Royal & Sun Alliance Insurance Group PLC 1,195,500 31,755 0.52
REAL ESTATE - 1.82% 400,000 13,600
Apartment Investment and Management Co., Class A 2,000,000 34,125 0.42
Equity Residential Properties Trust 3,000,000 20,708 0.58
Spieker Properties, Inc. 800,000 23,100 0.82
10.46
1,350,000 56,109
MISCELLANEOUS
MISCELLANEOUS - 1.23% 850,000 54,559
Other common stocks in initial perod of acquisition 3,200,000 71,200 1.23
1,050,000 64,050
Total Common Stocks 367,306 5,280 56.69
4,500,000 29,255
550,000 23,788 Percent of
CONVERTIBLE SECURITIES AND PREFERRED STOCK 700,000 32,200 Net Assets
SERVICES 1,000,000 46,000
BUSINESS & PUBLIC SERVICES - 0.13% 584,250
Waste Management, Inc. 4.00% 2002 0.13
TRANSPORTATION: RAIL & ROAD - 0.02%
Union Pacific Capital Trust 6.25% TIDES 0.02
convertible preferred (2)
2,041,600 68,820 0.15
CONSUMER GOODS 3,167,995
HEALTH & PERSONAL CARE - 0.14%
Monsanto 6.50% ACES convertible preferred 2001 Units 0.14
Shares or Market Value
FINANCE Principal Amount (000)
BANKING - 0.13%
NB Capital Corp. 8.35% exchangeable depositary shares 0.13
FINANCIAL SERVICES - 0.18% $8,000,000 7,420
Bell Atlantic Financial Services, Inc., 0.18
senior exchangeable notes, 5.75% 2003
REAL ESTATE - 0.18% 30,000 1,185
ProLogis Trust, Series D, 7.92% preferred 8,605 0.18
0.49
MISCELLANEOUS
MULTI-INDUSTRY - 0.13% 175,000 7,919
Swire Pacific Capital Ltd. 8.84% cumulative 0.13
guaranteed perpetual capital securities (2)
Total Convertible Securities and Preferred Stock $300,000 6,900 0.91
10,000,000 9,962
Total Equity Securities (cost: $3,113,338,000) 57.60
500,000 10,125
26,987
370,000 7,215 Percent of
BONDS AND NOTES Net Assets
INDUSTRIALS - 3.87%
BellSouth Capital Funding Corp., 7.75% 2010 50,726 0.05
British Sky Broadcasting Group PLC 8.20% 2009 0.08
Ceridian Corp. 7.25% 2004 0.08
Clear Channel Communications, Inc. 7.875% 2005 3,218,721 0.04
Columbia/HCA Healthcare Corp. 7.15% 2004 0.07
Cooper Tire & Rubber Co. 7.25% 2002 0.04
Deere & Co. 8.95% 2019 0.14
Dillard's Inc. 6.43% 2004 0.04
Equistar Chemicals, LP 8.50% 2004 Principal 0.04
Fox/Liberty Networks, LLC, FLN Finance, Inc. 8.875% 2007 Amount Market Value 0.21
Freeport-McMoRan Copper & Gold Inc. 7.50% 2006 (000) (000)
Freeport-McMoRan Copper & Gold Inc. 7.20% 2026 0.20
Hasbro, Inc. 7.95% 2003 3,000 3,000
Hasbro, Inc. 8.50% 2006 5,000 4,699 0.14
Hearst-Argyle Television, Inc. 7.00% 2018 4,750 4,554 0.05
Hyundai Semiconductor America, Inc. 8.625% 2007 (2) 2,500 2,507 0.17
Inco Ltd. 9.60% 2022 4,000 3,720 0.09
International Paper Co. 8.00% 2003 (2) 2,000 1,959 0.05
J.C. Penney Co., Inc. 6.50% 2002 7,330 7,638
J.C. Penney Co., Inc. 7.60% 2007 2,500 2,207
J.C. Penney Co., Inc. 7.95% 2017 2,500 2,480
J.C. Penney Co., Inc. 8.25% 2022 11,550 11,492 0.27
Lilly Del Mar, Inc. 7.80% 2029 (2)(3) 4,000 2,650 0.14
Louis Dreyfus Natural Gas Corp. 6.875% 2007 12,500 8,424 0.07
May Department Stores Co. 9.875% 2021 3,000 2,968 0.12
MGM Grand, Inc. 6.95% 2005 5,000 4,941
Mirage Resorts, Inc. 6.625% 2005 3,550 3,007
Mirage Resorts, Inc. 6.75% 2008 11,025 9,221 0.20
Norcen Energy Resources Ltd. 7.375% 2006 5,000 4,897 0.09
OXYMAR 7.50% 2016 (2) 3,000 3,012 0.08
PDVSA Finance Ltd. 9.75% 2010 1,215 1,137
PDVSA Finance Ltd. 7.40% 2016 3,200 2,796 0.08
Petrozuata Finance, Inc., Series B, 8.22% 2017 (2) 11,000 8,837 0.06
Phillips Petroleum Co. 8.50% 2005 3,000 2,335 0.09
Reliance Industries Ltd. 10.50% 2046 (2) 8,000 8,009
Reliance Industries Ltd., Series B, 10.25% 2097 4,475 4,008 0.10
Royal Caribbean Cruises Ltd. 7.00% 2007 6,500 6,930 0.11
Scotia Pacific Co. LLC, Series B, Class A-1, 6.55% 2007 4,500 4,194 0.10
Scotia Pacific Co. LLC, Series B, Class A-3, 7.71% 2014 2,950 2,694 0.05
Sears Roebuck Acceptance Corp. 6.25% 2009 4,500 4,026 0.12
Sotheby's Holdings, Inc. 6.875% 2009 (4) 5,000 4,887 0.04
TCI Communications, Inc. 8.75% 2015 6,000 4,315 0.04
Time Warner Inc. 6.85% 2026 2,500 2,394 0.08
TRW Inc. 7.125% 2009 2,350 1,841 0.08
USA Waste Services, Inc. 6.50% 2002 4,000 3,090
USA Waste Services, Inc. 7.125% 2007 5,000 5,165
Waste Management, Inc. 6.875% 2009 1,500 1,357
WMX Technologies, Inc. 7.10% 2026 5,000 4,321 0.30
Wharf International Finance Ltd., Series A, 7.625% 2007 7,000 5,974 0.16
5,862 5,588 3.87
3,750 2,700
7,500 6,611
ELECTRIC UTILITIES - 0.66% 3,000 2,287
Commonwealth Edison Co. 9.875% 2020 2,000 2,139 0.21
Edison Mission Energy 7.73% 2009 4,825 4,685 0.05
Israel Electric Corp. Ltd. 7.75% 2009 (2) 5,000 4,583
Israel Electric Corp. Ltd. 7.75% 2027 (2) 2,190 2,032 0.35
Transener SA 9.25% 2008 (2) 1,830 1,657 0.05
3,250 2,847 0.66
11,000 10,353
10,000 9,150
TRANSPORTATION - 1.11% 216,318
American Airlines, Inc., Pass Through Trust, 0.12
Series 1999-1, Class A-2, 7.024% 2009 (5)
Series 1996-2, Class B, 8.56% 2014 (5)
Continental Airlines, Inc., pass-through certificates,
Series 1997-4, Class A, 6.90% 2018 (5)
Continental Airlines, Inc., pass-through certificates, 11,000 11,759
Series 1998-3, Class A-2, 6.32% 2008 (5)
Continental Airlines, Inc., pass-through certificates, 3,000 2,926
Series 1998-3, Class C-2, 7.25% 2005 (5)
Continental Airlines, Inc., pass-through certificates, 13,500 13,110
Series 1999-1, Class B, 6.795% 2020 (5)
Continental Airlines, Inc., pass-through certificates, 7,500 6,595 0.50
Series 2000-1, Class A-1, 8.048% 2020 (5)
Delta Air Lines, Inc., pass-through certificates, 2,800 2,478
Series 1992-A2, 9.20% 2014 (5)
Delta Air Lines, Inc., pass-through certificates, 36,868 0.13
Series 1993-A2, 10.50% 2016 (5)
Jet Equipment Trust, Series 1995-A, Class B, 8.64%
2015 (2)(5)
Jet Equipment Trust, Series 1995-B, Class B, 0.20
7.83% 2015 (2)(5)
United Air Lines, Inc. 10.67% 2004
United Air Lines, Inc., pass-through certificates, 7,000 6,590 0.16
Series 1995-A2, 9.56% 2018 (5)
1,811 1,800 1.11
2,379 2,204
5,000 4,545
FINANCIAL - 4.37% 3,000 2,847
AB Spintab 7.50% (undated) (2)(3) 6,980 6,376 0.04
Abbey National PLC 6.70% (undated) (3) 10,250 10,270 0.06
Ahmanson Capital Trust I, capital securities, 1,500 1,443
Series A, 8.36% 2026 (2)
Great Western Financial Trust II, Series A, 8.206% 2027 5,000 5,446
Washington Mutual Capital I, subordinated capital 4,417 4,376
income securities, 8.375% 2027
Washington Mutual Finance, 8.25% 2005 7,067 6,794 0.23
Allfirst Preferred Capital Trust 7.781% 2029 (3) 5,000 5,086 0.09
Allstate Corp. 7.20% 2009 4,000 4,028 0.44
Bank of Nova Scotia 6.50% Eurodollar Note (undated) (3) 61,805 0.05
Bank of Scotland 7.00% (undated) (2)(3)
National Westminster Bank PLC 7.75% (undated) (3) 0.24
Bankers Trust New York Corp. 6.70% 2007 0.07
Banque Nationale de Paris 7.40% (undated) (3) 2,600 2,472
BNP U.S. Funding LLC, Series A, 7.738% noncumulative 3,750 3,342 0.30
preferred (2)(3)
BHP Finance Ltd. 8.50% 2012 4,000 3,637
BHP Finance Ltd. 6.75% 2013 2,000 1,741 0.21
Canadian Imperial Bank of Commerce 6.50% 4,050 3,591 0.02
Eurodollar Note (3)
Capital One Bank 8.25% 2005 4,000 4,035 0.21
Chase Capital III, floating rate capital securities, 5,000 4,892 0.08
Series C, 7.39% 2027 (3)
Conseco Financing Trust II, Capital Trust Pass-Through 25,500 24,376
Securities (TRUPS), 8.70% 2026 (5)
Conseco Financing Trust III 7.45% 2027 4,000 3,103 0.10
Den Norske CreditBank 7.125% (undated) (3) 4,225 3,862 0.04
DEV BNK SINGAPOR 7.875% 04-15-10 (2) 10,000 9,586 0.07
Dime Bancorp, Inc. 6.375% 2001 4,000 3,765 0.04
Fleet Capital Trust 7.775% 2028 (3) 3,000 2,832 0.06
FORD MOTOR CRED 7.25% 01-15-03 15,000 13,958
Ford Motor Credit Co. 5.80% 2009 2,500 2,587 0.18
Fuji JGB Investment LLC, Series A, 9.87% 10,000 8,926 0.04
noncumulative preferred (2)
Household Finance Corp. 8.00% 2005 1,600 1,247
Household Finance Corp. 6.40% 2008 12,000 11,937 0.10
HSBC America 7.808% 2026 (2) 5,000 4,667 0.04
HSBC Capital Funding LP, Series I, 9.547% noncumulative 10,075 4,332
preferred (undated) (2)(3)
Midland Bank PLC, 7.188% Eurodollar Note (undated) (3) 2,750 1,182 0.29
Lindsey Morden Group Inc., Series B, 7.00% 2008 3,000 2,309 0.08
MBNA Corp., MBNA Capital A, Series A, 8.278% 2026 4,000 3,937 0.14
REG DIV FUNDING 9.25% 03-15-30 (2) 2,500 2,479 0.11
ReliaStar Financial Corp. 8.00% 2006 3,500 3,367 0.17
ROYAL BK SCOTLND 9.118% 03-31-49 (undated) 5,000 4,965 0.05
Skandinaviska Enskilda Banken 6.50% (undated)(2)(3) 5,850 5,089 0.13
SocGen Real Estate Co. LLC, Series A, 7.64%/8.406% 2,500 2,414 0.46
(undated) (2)(3)(6)
Tokai Preferred Capital Co. LLC, Series A, 9.98%/11.091% 2,500 2,521 0.23
noncumulative preferred (2)(6)
3,500 3,176 4.37
2,500 2,138
REAL ESTATE - 0.13% 12,300 12,805
EOP Operating LP 7.25% 2018 4,000 3,166 0.03
ERP Operating LP 7.95% 2002 C$8,000 4,500 0.03
ProLogis Trust 7.05% 2006 $9,600 7,858 0.07
6,500 6,255 0.13
9,250 9,309
2,500 2,580
COLLATERLIZED MORTGAGE/ASSET-BACKED OBLIGATIONS - 3.51% 7,500 7,111
Airplanes Pass Through Trust, pass-through certificates, 28,000 25,626 0.21
Series 1, Class C, 8.15% 2019 (5)
Chase Commercial Mortgage Securities Corp., pass through 13,025 12,653 0.05
certificates, Series 1999-1, Class C, 7.625% 2009 (5)
Chase Commercial Mortgage Securities Corp., Series 244,328
1998-2, Class A-2, 6.39% 2030
Chase Commercial Mortgage Securities Corp., Series 0.44
1998-2, Class E, 6.39% 2030
Conseco Finance Home Equity Loan Trust, Series 2000-A,
Class BV-2, 7.451% 2031 (3)
Conseco Finance Home Loan Trust, Series 1999-G, 2,000 1,732
Class B-2, 10.96% 2029
Green Tree Financial Corp., pass-through certificates, 1,500 1,499
Series 1995-8, Class B2, 7.65% 2026 (5)
Green Tree Financial Corp., pass-through certificates, 4,000 3,774
Series 1996-5, Class B-2, 8.45% 2027 (5)
Green Tree Financial Corp., pass-through certificates, 7,005
Series 1996-10, Class B-2, 7.74% 2028 (5)
Series 1997-1, Class B-2, 7.76% 2028 (5) 0.29
DLJ Mortgage Acceptance Corp., Series 1995-CF2, 0.11
Class A1B, 6.85% 2027 (2)
DLJ Mortgage Acceptance Corp., Series 1996-CF2, 0.11
Class A1B, 7.29% 2021 (2)
FIRSTPLUS Home Loan Owner Trust, Series 1997-1, 12,781 11,510 0.22
Class A-6, 6.95% 2015
GMAC Commercial Mortgage Securities, Inc., 3,000 2,949 0.04
Series 1997-C1, Class A1, 6.83% 2003
Grupo Financiero Banamex Accival, SA de CV 0% 2002 (2) 24,150 22,586 0.03
GS Mortgage Securities Corp. II, pass-through 2,500 2,154 0.16
certificates, Series 1998-C1, Class D, 7.45% 2030 (3)(5)
H.S. Receivables Corp., Series 1999-1, Class A, 2,750 2,454 0.12
8.13% 2004 (2)
J.P. Morgan Commercial Mortgage Finance Corp., 5,000 4,204 0.06
Series 1996-C3, Class A-1, 7.33% 2028
L.A. Arena Funding, LLC, Series 1, Class A, 4,197 2,378 0.11
7.656% 2026 (2)
MBNA Master Credit Card Trust, Series 1998-E, 6,013 3,666 0.04
Class C, 6.60% 2010 (2)
Merrill Lynch Mortgage Investors, Inc., 3,446 1,930 0.24
Series 1995-C3, Class A-3, 7.067% 2025 (3)
Merrill Lynch Mortgage Investors, Inc., pass-through 2,465 1,379 0.12
certificates, Series 1999-C1, Class A-2, 7.56% 2031 (5)
Nomura Asset Securities Corp., Series 1998-D6, 6,000 5,928 0.22
Class A-A1, 6.28% 2030
Norwest Asset Securities Corp., Series 1998-31, 6,000 5,975 0.20
Class A-1, 6.25% 2014
Pegasus Aviation Lease Securitization, Series 2000-1, 12,500 12,392 0.10
Class A2, 8.37% 2030 (2)
PNC Mortgage Securities Corp., Series 1998-10, 2,085 2,082 0.09
Class 1-B1, 6.50% 2028 (2)
PP&L Transition Bond Co. LLC, Series 1999-1, 2,156 1,960 0.12
Class A-7, 7.05% 2009
PROVIDIAN MASTER TRU 7.801% 08-17-09 (2)(3) 10,000 9,143 0.11
Puerto Rico Public Financing Corp., Series 1999-1, 7,031 6,935 0.16
Class A, 6.15% 2008
Structured Asset Securities Corp., Series 1998-RF2, 3,227 3,215 0.16
Class A, 8.542% 2027 (2)(3)
6,500 6,082 3.51
2,500 2,313
13,500 13,278
6,750 6,778
GOVERNMENTS (excluding U.S. Government) AND 12,507 12,072
GOVERNMENTAL AUTHORITIES - 0.07%
Canadian Government 4.557% 2026 (3)(7) 11,948 11,376 0.07
5,500 5,545 0.07
5,890 5,296
FEDERAL AGENCY OBLIGATIONS -- MORTGAGE 7,000 6,946
PASS-THROUGHS (5) - 6.29%
Fannie Mae 6.00%-12.00% 2008-2030 6,000 6,000 1.01
Freddie Mac 7.00%-10.00% 2008-2024 9,334 8,778 0.21
Government National Mortgage Assn. 6.00%-10.50% 2009-2030 8,816 8,978 5.07
196,282 6.29
FEDERAL AGENCY OBLIGATIONS -- OTHER - 0.69%
Fannie Mae 5.25% 2009
Fannie Mae: Medium Term Note, 6.75% 2028 C$5,000 3,949 0.69
3,949 0.69
57,736 56,260
U.S. TREASURY OBLIGATIONS - 12.22% 11,706 11,873
8.75% August 2000 285,753 283,222
6.375% September 2001 351,355
6.125% December 2001
14.25% February 2002
6.50% May 2002
3.876% July 2002 (3)(7) $39,000 34,375
10.75% February 2003 5,000 4,317
5.50% March 2003 38,692
10.75% May 2003
7.25% August 2004
7.00% July 2006
3.648% January 2007 (3)(7)
3.842% January 2008 (3)(7) 7,500 7,521
10.375% November 2009 87,000 86,850
10.00% May 2010 50,000 49,758
10.375% November 2012 2,000 2,233
7.25% May 2016 85,000 85,106
8.875% August 2017 120,000 127,411 12.22
7,300 8,032 12.22
20,000 19,556
Total Bonds and Notes (cost: $1,891,430,000) 5,000 5,549 32.92
25,000 25,848
50,000 51,813
7,000 7,257
50,000 51,386
15,000 17,178
4,500 5,148 Percent of
SHORT-TERM SECURITIES 10,000 12,295 Net Assets
CORPORATE SHORT-TERM NOTES - 9.62% 30,000 33,066
Archer Daniels Midland Co. 6.55%-6.56% due 7/19-8/7/00 67,925 86,583 0.36
AT&T Corp. 6.51%-6.61% due 7/11-8/11/00 682,590 1.20
Ciesco LP 6.52%-6.55% due 7/12-8/4/00 1.58
Coca-Cola Co. 6.07%-6.55% due 7/6-7/31/00 1,839,192 1.12
Fortune Brands Inc. 6.46%-6.47% due 7/13-7/14/00 (2) 0.82
General Electric Capital Corp. 6.59%-6.95% due 7/3-9/11/00 1.23
Kimberly-Clark Corp. 6.51%-6.52% due 7/11-8/8/00 (2) 0.42
Motorola Inc. 6.53%-6.55% due 8/21-8/24/00 1.32
Park Avenue Receivables Corp. 6.54%-6.75% Principal 0.78
due 7/10-7/17/00 (2)
USAA Capital Corp. 6.55%-6.56% due 7/25-9/8/00 Amount Market Value 0.79
(000) (000) 9.62
20,000 19,896
Total Short-Term Securities (cost: $537,559,000) 67,300 66,964 9.62
Total Investment Securities (cost:$5,542,327,000) 88,600 88,185 100.14
Excess of payables over cash and receivables 62,500 62,381 0.14
Net Assets 45,900 45,789 100.00%
69,750 69,069
23,910 23,764
(1) Non-income-producing security. 74,400 73,666
(2) Purchased in a private placement transaction; 43,500 43,405
resale may be limited to qualified institutional
buyers; resale to the
! public may require registration. 44,800 44,434
(3) Coupon rate may change periodically. 537,553
(4) Valued under procedures established by the
Board of Directors.
(5) Pass-through securities backed by a pool of
mortgages or other loans on which principal
payments are periodically
!made. Therefore, the effective maturities are 537,553
shorter than the stated maturities.
(6) Step bond; coupon rate will increase at a later date. 5,595,466
(7) Index-linked bond whose principal amount moves 7,581
with a government retail price index.
$5,587,885
ADR = American Depositary Receipts
See Notes to Financial Statements
</TABLE>
<TABLE>
American Balanced Fund
FINANCIAL STATEMENTS
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES Unaudited
at June 30, 2000 (dollars in thousands)
Assets:
Investment securities at market
(cost: $5,542,327) $5,595,466
Cash 2,221
Receivables for --
Sales of investments $5,145
Sales of fund's shares 6,342
Dividends and accrued interest 34,887 46,374
5,644,061
Liabilities:
Payables for --
Purchases of investments 3,349
Repurchases of fund's shares 49,440
Management services 1,367
Accrued expenses 2,020 56,176
Net Assets at June 30, 2000 -- (authorized
capital stock -- 1,500,000,000 shares) $5,587,885
Class A shares, $.001 par value
Net assets $5,578,061
Shares outstanding 383,045,920
Net asset value per share $14.56
Class B shares, $.001 par value
Net assets $9,824
Shares outstanding 675,130
Net asset value per share $14.55
See Notes to Financial Statements
STATEMENT OF OPERATIONS Unaudited
for the six months ended June 30, 2000 (dollars in thousands)
Investment Income:
Income:
Dividends $52,650
Interest 84,053 $136,703
Expenses:
Management services fee 8,165
Distribution expenses - Class A 7,015
Distribution expenses - Class B 12
Transfer agent fee - Class A 3,420
Transfer agent fee - Class B 1
Reports to shareholders 131
Registration statement and prospectus 277
Postage, stationery and supplies 522
Directors' fees 65
Auditing and legal fees 50
Custodian fee 72
Taxes other than federal income tax 2
Other expenses 83 19,815
Net investment income 116,888
Realized Gain and Change in Unrealized
Appreciation on Investments:
Net realized gain 179,346
Net change in unrealized appreciation on
investments (142,081)
Net realized gain and change in unrealized
appreciation on investments 37,265
Net Increase in Net Assets Resulting from
Operations $154,153
STATEMENT OF CHANGES IN NET ASSETS (dollars in thousands)
Six months Year
ended ended
6/30/2000* 12/31/99
Operations:
Net investment income $116,888 $218,853
Net realized gain on investments 179,346 506,275
Net change in unrealized appreciation
on investments (142,081) (525,013)
Net increase in net assets
resulting from operations 154,153 200,115
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income:
Class A (110,120) (213,797)
Class B (42) -
Distributions from net realized gain
on investments:
Class A - (498,598)
Class B - -
Total dividends and distributions (110,162) (712,395)
Capital Share Tranactions:
Proceeds from shares sold 689,028 1,566,708
Proceeds from shares issued in reinvestment
of net investment income dividends and
distributions of net realized gain on
investments 103,369 680,634
Cost of shares repurchased (1,229,952) (1,635,010)
Net increase (decrease) in net assets
resulting from capital share transactions (437,555) 612,332
Total Increase (Decrease) in Net Assets (393,564) 100,052
Net Assets:
Beginning of period 5,981,449 5,881,397
End of period (including
undistributed net investment
income: $42,184 and $35,458 respectively) $5,587,885 $5,981,449
* Unaudited
See Notes to Financial Statements
</TABLE>
American Balanced Fund
Notes to Financial Statements
Unaudited
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - 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 fund offers Class A and Class B shares. Class A
shares are sold with an initial sales charge of up to 5.75%. Class B shares
are sold without an initial sales charge but subject to a contingent deferred
sales charge paid upon redemption. This charge declines from 5% to zero over a
period of six years. Class B shares have higher distribution expenses and
transfer agent fees than Class A shares. Class B shares are automatically
converted to Class A shares eight years after the date of purchase. Holders of
both classes of shares have equal pro rata rights to assets and identical
voting, dividend, liquidation and other rights, except that each class bears
different distribution and transfer agent expenses, and each class shall have
exclusive rights to vote on matters affecting only their class.
SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared
in conformity with generally accepted accounting principles which require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. The following is a summary of the significant accounting
policies consistently followed by the fund in the preparation of its financial
statements:
SECURITY VALUATION - Equity securities, including depositary receipts, are
valued at the last reported sale price on the exchange or market on which such
securities are traded, as of the close of business on the day the securities
are being valued or, lacking any sales, at the last available bid price. In
cases where equity securities are traded on more than one exchange, the
securities are valued on the exchange or market determined by the investment
adviser to be the broadest and most representative market, which may be either
a securities exchange or the over-the-counter market. Fixed-income securities
are valued at prices obtained from a pricing service, 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 quoted bid and
asked prices or at prices for securities of comparable maturity, quality and
type. The ability of the issuers of the debt securities held by the fund to
meet their obligations may be affected by economic developments in a specific
industry, state or region. Short-term securities maturing within 60 days are
valued at amortized cost, which approximates market value. Securities and
assets for which representative market quotations are not readily available are
valued at fair value as determined in good faith by a committee appointed by
the Board of Directors.
NON-U.S. CURRENCY TRANSLATION - Assets and liabilities initially expressed in
terms of non-U.S. currencies are translated into U.S. dollars at the prevailing
market rates at the end of the reporting period. Purchases and sales of
securities and income and expenses are translated into U.S. dollars at the
prevailing market rates on the dates of such transactions. The effects of
changes in non-U.S. currency exchange rates on investment securities and other
assets and liabilities are included with the net realized and unrealized gain
or loss on investment securities.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions are
accounted for as of the trade date. Realized gains and losses from securities
transactions are determined based on specific identified cost. In the event
securities are purchased on a delayed delivery or "when-issued" basis, the fund
will instruct the custodian to segregate liquid assets sufficient to meet its
payment obligations in these transactions. Dividend income is recognized on
the ex-dividend date, and interest income is recognized on an accrual basis.
Market discounts, premiums, and original issue discounts on securities
purchased are amortized daily over the expected life of the security.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions paid
to shareholders are recorded on the ex-dividend date.
ALLOCATIONS - Income, expenses other than class-specific expenses and realized
and unrealized gains and losses are allocated daily between the classes based
on their relative net asset values. Distribution expenses, transfer agent fees
and any other class-specific expenses, are accrued daily and charged to the
applicable share class.
2. FEDERAL INCOME TAXATION
The fund complies with the requirements of the Internal Revenue Code applicable
to regulated investment companies and intends to distribute all of its net
taxable income and net capital gains for the fiscal year. As a regulated
investment company, the fund is not subject to income taxes if such
distributions are made. Required distributions are determined on a tax basis
and may differ from net investment income and net realized gains for financial
reporting purposes. In addition, the fiscal year in which amounts are
distributed may differ from the year in which the net investment income and net
realized gains are recorded by the fund.
As of June 30, 2000, net unrealized appreciation on investments for book and
federal income tax purposes aggregated $53,139,000; $531,403,000 related to
appreciated securities and $478,264,000 related to depreciated securities.
During the six months ended June 30, 2000, the fund realized, on a tax basis, a
net capital gain of $179,498,000 on securities transactions. Net losses
related to non-U.S. currency transactions of $152,000 are treated as an
adjustment to ordinary income for federal income tax purposes. The cost of
portfolio securities for book and federal income tax purposes was
$5,542,327,000 at June 30, 2000.
3. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEE - The fee of $8,165,000 for management services was
incurred 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 the following rates and average net asset levels:
<TABLE>
<CAPTION>
AVERAGE NET ASSET LEVEL
RATE In Excess of Up to
<S> <C> <C>
0.420% $0 $500 million
0.324% $500 million $1 billion
0.300% $1 billion $1.5 billion
0.282% $1.5 billion $2.5 billion
0.270% $2.5 billion $4 billion
0.262% $4 billion $6.5 billion
0.255% $6.5 billion $10.5 billion
0.250% $10.5 billion
</TABLE>
DISTRIBUTION EXPENSES - Pursuant to a Plan of Distribution for Class A shares,
the fund may expend up to 0.25% of Class A average daily 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. Pursuant to a Plan of Distribution
for Class B shares, the fund may expend up to 1.00% of Class B average daily
net assets annually to compensate dealers for their selling and servicing
efforts. During the six months ended June 30, 2000, distribution expenses
under the Plan of Distribution for Class A were limited to $7,015,000. Had no
limitation been in effect, the fund would have paid $12,027,000 in distribution
expenses for Class A shares under the Plan. During the six months ended June
30, 2000, distribution expenses under the Plan of Distribution for Class B were
$12,000. As of June 30, 2000, accrued and unpaid distribution expenses for
Class A and Class B shares were $960,000 and $6,000, respectively. American
Funds Distributors, Inc. (AFD), the principal underwriter of the fund's shares,
received $1,044,000 (after allowances to dealers) as its portion of the sales
charges paid by purchasers of the fund's Class A shares. Such sales charges are
not an expense of the fund and, hence, are not reflected in the accompanying
statement of operations.
TRANSFER AGENT FEE - American Funds Service Company (AFS), the transfer agent
for the fund, was paid a fee of $3,421,000.
DEFERRED DIRECTORS' FEES - 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, 2000, aggregate deferred amounts and earnings thereon
since the deferred compensation plan's adoption (1993) net of any payments to
Directors, were $565,000.
AFFILIATED DIRECTORS' AND OFFICERS - 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. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding
short-term securities, of $1,213,030,000 and $1,631,351,000, respectively,
during the six months ended June 30, 2000.
As of June 30, 2000, net assets consisted of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
Capital paid in on shares of beneficial $5,313,224,000
interest
Undistributed net investment income 42,184,000
Accumulated net realized gain 179,346,000
Net unrealized appreciation 53,131,000
Net assets $5,587,885,000
</TABLE>
Capital shares transactions in the fund were as follows:
<TABLE>
Capital share transactions table:
(dollars in thousands)
Six months June 30, Year December 31,
ended 2000 ended 1999
Amount Shares Amount Shares
<S> <C> <C> <C> <C>
Class A Shares:
Sold $ 679,177 47,598,213 $1,566,708 98,494,695
Reinvested dividends 103,330 7,396,649 680,634 46,488,744
and distributions
Repurchased (1,229,880) (86,878,818) (1,635,010) (103,300,568)
Net increase in Class A (447,373) (31,883,956) 612,332 41,682,871
Class B Shares: +
Sold 9,851 677,351 - -
Reinvested dividends 39 2,699 - -
and distributions
Repurchased (72) (4,920) - -
Net increase in Class B 9,818 675,130 - -
Total net increase in fund $(437,555) (31,208,826) $ 612,332 41,682,871
+ Class B shares not
voffered before March 15, 2000.
</TABLE>
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 $72,000 includes $24,000 that was paid by these credits
rather than in cash.
<TABLE>
PER-SHARE DATA AND RATIOS (1)
<S> <C> <C> <C> <C>
Net
Net asset gains/(losses)
value, Net on securities
Period beginning investment (both realized
ended of period income and unrealized)
Class A:
2000 $14.42 $.30 (2) $0.12 (2)
1999 15.76 .56 (0.04)
1998 15.68 .56 1.13
1997 14.55 .58 2.41
1996 14.15 .57 1.24
1995 12.00 .57 2.61
Class B:
2000 13.65 .12 (2) 0.90 (2)
Dividends
Total from (from net Distributions
Period investment investment (from capital
ended operations income) gains)
Class A:
2000 $0.42 ($.28) $ -
1999 0.52 (.56) (1.30)
1998 1.69 (.56) (1.05)
1997 2.99 (.56) (1.30)
1996 1.81 (.56) (0.85)
1995 3.18 (.56) (0.47)
Class B:
2000 1.02 (.12) -
Net asset
Period Total value, end Total
ended distributions of period return
Class A:
2000 ($0.28) $14.56 3.01%
1999 (1.86) 14.42 3.47
1998 (1.61) 15.76 11.13
1997 (1.86) 15.68 21.04
1996 (1.41) 14.55 13.17
1995 (1.03) 14.15 27.13
Class B:
2000 (0.12) 14.55 7.50
Ratio of Ratio of
Net assets, expenses net income
Period end of period to average to average
ended (in millions) net assets net assets
Class A:
2000 $5,578 .70% (3) 4.16% (3)
1999 5,981 .66 3.59
1998 5,881 .63 3.57
1997 5,036 .65 3.74
1996 3,941 .67 4.01
1995 3,048 .67 4.38
Class B:
2000 10 1.42 (3) 3.43 (3)
(1) The periods 1995 through 1999 represent
fiscal years ended December 31. The
periods ended
2000 (unaudited) represent, for Class A
shares, the six month period ended
June 30, 2000, and,
for Class B shares, the 107-day period
ended June 30, 2000. Class B shares
were not offered
before March 15, 2000. Total returns
for such periods are based on activity
during the period
and thus are not representative of a full year.
Total returns exclude all sales charges,
including contingent deferred sales charges.
(2) Based on average shares outstanding.
(3) Annualized.
(4) Represents portfolio turnover rate
(equivalent for all share classes) for
the six months ended June 30, 2000.
</TABLE>
[The American Funds Group(r)]
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 92821-5823
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
There are two ways to invest in American Balanced Fund. Class A shares are
subject to a 5.75% maximum up-front sales charge that declines for accounts of
$25,000 or more. Class B shares, which are not available for certain
employer-sponsored retirement plans, have no up-front charge. They are,
however, subject to additional expenses of approximately 0.75% a year over the
first eight years of ownership. If redeemed within six years, they may also be
subject to a contingent deferred sales charge (5% maximum) that declines over
time.
For information about your account or any of the fund's services, or for a
prospectus for any of the American Funds, 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. Please read
the prospectus carefully before you invest or send money.
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, 2000, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
Printed on recycled paper
Litho in USA AGD/GRS/4678
Lit. No. AMBAL-013-0800
