[The American Funds Group(r)]
AMERICAN BALANCED FUND
ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 1999
[cover: illustration of evergreen trees in a meadow]
[Begin sidebar]
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 constituted the complete
investment program of the prudent investor.
American Balanced Fund is one of 29 mutual funds in The American Funds
Group(r), 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.
[End sidebar]
AMERICAN BALANCED FUND RESULTS OVER THE PAST 24 YEARS*
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Value of Income Total
Principal Return Return(+)
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
1996 +9.2 +4.0 +13.2
1997 +17.1 +3.9 +21.0
1998 +7.5 +3.6 +11.1
1999 -0.1 +3.6 +3.5
</TABLE>
Average annual compound
return for 24 full calendar years: +12.9%
*Full calendar years since Capital Research and Management Company became the
fund's investment adviser on July 26, 1975.
(+)Total return measures capital appreciation and income return, which includes
reinvestment of 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, 2000, calculated
in accordance with the Securities and Exchange Commission formula, was 3.68%.
FIGURES SHOWN ARE PAST 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.
[Begin caption]
On our cover: Trees line
a canola field on the
northern plains.
[End caption]
FELLOW SHAREHOLDERS:
The U.S. stock market continued to produce extraordinary returns in 1999 while
bonds reversed their recent trend and lost ground. In this mixed environment,
American Balanced Fund earned a total return of 3.5%. The fund's results assume
reinvestment of income dividends totaling 56 cents a share and $1.30 a share in
capital gain distributions. The fund trailed the Lipper Balanced Funds Index,
which rose 9.0%. Stocks, as measured by Standard & Poor's 500 Composite Index,
had a total return of 21.0%. It was the fifth consecutive year that the S&P
index had gained more than 20% with distributions reinvested, an unprecedented
event. U.S. investment-grade bonds, as measured by the Lehman Brothers
Aggregate Bond Index, had a return of -0.8%. All indexes are unmanaged.
What these results do not reflect is the strong contrast of returns from
various kinds of stocks. Although the S&P 500 rose strongly, the stock market's
rising tide has not lifted all boats. We noted last year that the market's
gains had come from an increasingly narrow base, and this trend continued even
more strongly in 1999. The S&P's 21% rise during 1999 was accounted for by just
30 stocks, with only 14 companies accounting for two-thirds of the gain.
Indeed, 51% of the stocks in the index for the whole year actually lost value.
The S&P 500's rise in 1999 has been driven primarily by gains in technology
stocks. Without those gains the index would have risen only 7%. American
Balanced Fund owns some stocks that benefited from that sector's strength,
including Nokia, the Finnish telecommunications company, and Corning, which has
gained from growing demand for fiber optic cable. It would be easy to say, in
retrospect, that the fund should have owned more technology stocks. At the same
time we observe what can only be termed rampant speculation in some areas, with
Internet stocks being only the most obvious example. In the past, when stocks'
values have been based on hopes and dreams rather than sales and earnings,
disappointment has typically followed. With that in mind, we have limited our
exposure to some of the market's most highly valued sectors. This hurt the
relative results of the fund in 1999 and will continue to do so as long as this
speculative environment continues.
[Begin sidebar]
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>
<S> <C> <C>
Average
Cumulative Annual
Total Compound
For the Period 7/26/75-12/31/99 Return Return
AMERICAN BALANCED FUND +1,841.9% +12.9%
Standard & Poor's 500 Stock +3,880.1 +16.3
Composite Index
Lehman Brothers Aggregate Bond +780.3 +9.3
Index*
Consumer Price Index +210.5 +4.7
</TABLE>
Figures are based on the assumption that all distributions were reinvested.
*The Lehman Brothers Aggregate Bond Index did not exist until December 31,
1975. For the period July 31, 1975, to December 31, 1975, Lehman Brothers
Government/Corporate Bond Index results were used. The Lehman Brothers indexes
are based on July 31, 1975, index value. All indexes are unmanaged.
[End sidebar]
ATTENTION TO RISK
The prospectus states that the fund is managed as if it "constituted the
complete investment program of the prudent investor." With that in mind, the
portfolio is structured with an eye to diversification, preservation of
principal and long-term results. This approach has proved rewarding over time.
In the 24 full calendar years since 1975, when Capital Research assumed
management of American Balanced Fund, the fund has had an average annual
compound return of 12.9% and experienced only one year with a negative return.
While the fund's limited exposure to technology stocks hurt its relative
results, the oil sector, the fund's largest industry holding throughout the
year, had a good year as rising oil prices boosted prices of oil stocks. Our
investments in basic materials also did well. We had limited exposure in 1999
to two of the weakest areas of the market - banking and health care. Toward
year-end, as bank stock valuations became attractive, we increased our exposure
to banks slightly.
BONDS FARED POORLY
The past year saw inflation fears increase and interest rates rise. The U.S.
economy continued its strong growth, labor markets tightened and the price of
oil rose sharply. There was concern that commodity prices would move up and
competition for workers would push wages higher, touching off a wage-price
spiral. To nip inflation in the bud, the Federal Reserve Board nudged up the
federal funds rate - the rate banks charge each other for overnight loans -
three times during the second half of 1999. As a result, yields rose across the
fixed-income spectrum. The yield on 10-year U.S. Treasury bonds, for example,
rose over the course of the year from 4.6% to just below 6.4%. Late in the
year, as higher interest rates pushed prices lower, we increased our bond
exposure slightly. It is the fund's policy to have between 50% and 75% of the
portfolio invested in common stocks at all times. This allocation will change
as our view of the relative values offered by these asset classes shifts. At
the end of 1999, 56% was invested in common stocks and 34% in bonds with the
rest in cash.
The number of shareholder accounts grew 10.3% during 1999. We welcome our new
shareholders and look forward to reporting to you again in six months. In the
meantime, we will continue to take the reasonably cautious approach to
investing that has characterized American Balanced Fund throughout its history
and that we feel is appropriate for prudent investors.
Cordially,
/s/Walter P. Stern /s/Robert G. O'Donnell
Walter P. Stern Robert G. O'Donnell
Chairman of the Board President
February 11, 2000
[Begin sidebar]
This chart shows how a $10,000 investment in American Balanced Fund grew from
July 26, 1975 - when Capital Research and Management Company became the fund's
investment adviser - to December 31, 1999.
As you can see, the $10,000 grew to $182,974 with all distributions reinvested.
Since the fund invests in both stocks and bonds, it should not be surprising
that its return lies between the 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 reinvested all your distributions and want to know how
your investment has done since December 31, 1989. At that time, according to
the table, the value of the investment illustrated here was $60,915. It has
since more than tripled to $182,974.
THE VALUE OF A LONG-TERM PERSPECTIVE
Average Annual Compound Returns*
(For Periods Ended December 31, 1999)
Ten Years: +10.96%
Five Years: +13.55%
One Year: <UNDEF>2.48%
*Assumes reinvestment of all distributions and payment of the current 5.75%
maximum sales charge at the beginning of the stated periods.
[chart]
[illustration: same as cover[
<TABLE>
<CAPTION>
Year Ended Dec. 31 1975# 1976 1977 1978 1979 1980 1981 1982
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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 1996 1997 1998
TOTAL VALUE
Dividends Reinvested 3,684 3,816 4,072 4,131 4,335 4,684 5,167 5,781
Value at Year-End/1/ 74,765 81,853 91,080 91,386 116,179 131,475 159,131 176,846
AMBAL Total Return 24.7 9.5 11.3 0.3 27.1 13.2 21.0 11.1
Year Ended Dec. 31 1999
TOTAL VALUE
Dividends Reinvested 6,428
Value at Year-End/1/ 182,974
AMBAL Total Return 3.5
</TABLE>
- -----
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Year Ended 7/26/75 1975 1976 1977 1978 1979 1980
December 31
American Balanced Fund
with Dividends
Reinvested /1//2/ 9,425 9,948 12,533 12,620 13,404 14,427 16,498
S&P 500 with
dividends reinvested 10,000 10,317 12,773 11,855 12,629 14,958 19,812
Lehman Brothers
Aggregate Bond Index/3/ 10,000 10,558 12,205 12,576 12,751 12,997 13,348
Year Ended 1981 1982 1983 1984 1985 1986 1987
December 31
American Balanced Fund
with Dividends
Reinvested /1//2/ 17,224 22,280 25,869 28,291 36,527 42,690 44,406
S&P 500 with
dividends reinvested 18,845 22,897 28,039 29,783 39,207 46,506 48,915
Lehman Brothers
Aggregate Bond Index/3/ 14,182 18,809 20,381 23,468 28,655 33,031 33,940
Year Ended 1988 1989 1990 1991 1992 1993 1994
December 31
American Balanced Fund
with Dividends
Reinvested/1//2/ 50,123 60,915 59,959 74,765 81,853 91,080 91,386
S&P 500 with
dividends reinvested 56,984 74,985 72,650 94,689 101,892 112,116 113,638
Lehman Brothers
Aggregate Bond Index/3/ 36,616 41,937 45,694 53,006 56,930 62,480 60,658
Year Ended 1995 1996 1997 1998 1999
December 31
American Balanced Fund
with Dividends
Reinvested /1//2/ 116,179 131,475 159,131 176,846 182,974
S&P 500 with
dividends reinvested 156,189 191,955 255,906 328,892 398,004
Lehman Brothers
Aggregate Bond Index/3/ 71,864 74,473 81,663 88,756 88,027
</TABLE>
[end chart]
Average annual compound return for 24-1/2 years: 12.6%/1/
/1/These figures, unlike those shown elsewhere 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. 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 $68,911 and reinvested capital gain
distributions of $73,487.
/3/The Lehman Brothers Aggregate Bond Index did not exist until December 31,
1975. For the period July 31, 1975, to December 31, 1975, Lehman Brothers
Government/Corporate Bond Index results were used. The Lehman Brothers indexes
are based on July 31, 1975, index value.
/4/For the period July 26, 1975 (when Capital Research and Management Company
became the fund's 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.
[End sidebar]
DETERMINING A SECURITY'S VALUE
A PROCESS OF THOROUGH RESEARCH AND ANALYSIS
[Begin Sidebar]
ESTIMATED PRICE PER SHARE VS. EARNINGS PER SHARE
[bar chart]
Company A: price $10
P/E ratio 10 earnings $1
Company B: price $120
P/E ratio 40 earnings $3
[end bar chart]
[photo: Bob O'Donnell]
"I try to look at the future stream of income that will flow to the investor.
There are a lot of variables, of course, but when you put them all together,
it's pretty clear that the faster a company's earnings grow, the more value it
will have." - Bob O'Donnell, portfolio counselor
HOW MUCH WILL YOU GET?
"To be a successful long-term investor, it helps to view things in a historical
context. What we're seeing today is similar to the early $70s when investors
focused on a narrow universe of growth stocks." - Victor Parachini, portfolio
counselor
[photo: Victor Parachini]
(Mr. Parachini will retire from management of the fund in late February. The
officers and directors thank him for his contributions to American Balanced
Fund.)
[End sidebar]
Few ventures in life are as driven by statistics as investing. Investors face a
blizzard of details every time they look at a newspaper, listen to the radio or
watch the TV news. Thanks to the Internet, they can follow indexes such as the
Dow Jones Industrial Average and Standard & Poor's 500 Stock Composite Index by
the minute. Reports on inflation, interest rates and bond prices are updated
frequently.
But all the figures don't necessarily tell investors which stocks are good
investments. It's the same dilemma faced by a woodworker who wants to find two
or three good trees but is inundated with statistics on the whole forest and
deluged with details about each tree.
In 1999, for example, the S&P 500 rose 21%, the fifth consecutive year that it
has gained more than 20% with distributions reinvested. But this statistic can
be misleading. Of the 471 stocks in the index for the full year, only 143
gained as much or more than the index itself. In fact, more than half the
stocks in the index for the whole year declined in price.
How do the portfolio counselors and analysts at Capital Research and Management
Company, investment adviser to American Balanced Fund and the other 28 funds in
the American Funds family, find good investments? They begin by asking, "What
is the value of this security?" It's a simple question, but one that can be
very hard to answer. In the next few pages, we'll look at how the investment
professionals at Capital Research determine the value of a security. In many
ways, the methodology is the same for stocks and bonds, but there are some
interesting differences.
OF POPEYE AND FUTURE PAYMENTS
Popeye the Sailor Man probably doesn't show up much in graduate business school
lectures about how to value stocks. But Popeye's friend Wimpy captured the
dilemma facing every investor when he offered to "gladly pay you on Tuesday for
a hamburger today." The key question - which professional investors ask about
every stock or bond - is "How much am I willing to pay today for an uncertain
return in the future?"
Capital Research's investment professionals ask similar questions: "How much
income will this investment produce for the fund and when will the fund receive
it?" The calculation is more certain with a fixed-income investment than an
equity investment because a bond's interest payments are usually predetermined.
Investors also know when they will receive their interest payments and when
their initial principal will be returned. That doesn't mean bonds are without
risk, however.
"The more doubt you have about whether you're going to get your money, the more
you should receive to compensate for the risk," says John Smet, a fixed-income
portfolio counselor for American Balanced Fund. Smet points out that when
you'll get your money back is also an important question in judging a bond's
value. At times, securities, especially those guaranteed by federal agencies
such as the Government National Mortgage Association and Fannie Mae, which make
up 20% of American Balanced Fund's fixed-income holdings, are paid off ahead of
schedule. Typically, prepayment occurs when you least want it. "When they
prepay, you may have to reinvest at lower rates, so prepayment is a big
concern. You need to be paid for taking the risk that the bonds will prepay,"
Smet says.
"Stocks can be even harder to judge because dividends can change from year to
year and, unlike a bond, there is no maturity date. In addition, you expect a
stock's dividend payments will rise over time," says Bob O'Donnell, a portfolio
counselor and president of American Balanced Fund. "In most cases, the faster a
company's earnings grow, the more value it will have. But that's the really
tricky part - estimating what the company's growth rate will be."
[Begin sidebar]
[line chart]
ESTIMATED FUTURE EARNINGS
Earnings per share 1995
<$25 Company A
<$25 Company B
Earnings per share 2005
$75 Company A
$50 Company B
[end chart]
[photo: Dale Harvey]
"I use interest rates as the baseline for evaluating any investment. U.S.
Treasury bonds are as close to risk-free investing as you can get, so other
investments have to give the investor a higher return. Then I look at the
overall market for equities, and finally focus on a specific company. I like to
have at least a three-year time horizon when I'm looking at a company." - Dale
Harvey, portfolio counselor
WHEN WILL YOU GET YOUR MONEY?
[End sidebar]
THE VALUE OF KICKING TIRES
"Anyone can read a company's annual report or look at its income statement. But
to truly understand the future of a company, you have to know the people
running it," says Smet. Capital Research's portfolio counselors and analysts go
well beyond just adding up the numbers. They visit every company they invest
in. "We go out and kick the tires. We talk to the senior managers and the
company's suppliers and competitors. We ask ourselves questions such as, $Do
they have the right technology? Are they growing too fast? Do they have good
internal controls?'"
[Begin sidebar]
[photo: John Smet]
"To try to get to the true value of a bond, there are two things I try to
understand: Am I going to get the money back and when will I get it? With both
of those questions, the more doubt I have, the more I need to be compensated
for the risk I'm taking." - John Smet, portfolio counselor
WHAT IS A FAIR PRICE?
JUDGING THE RISK
PAYMENTS TO INVESTORS
[graphic depiction of data: purple dollars represent Company A; green dollars
represent Company B]
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Company A $$ $<UNDEF> $$$
vs vs vs
Company B $ $ $<UNDEF>
Year 2000 2005 2010
</TABLE>
[End sidebar]
Investors must also understand the whole industry, not just one company, adds
O'Donnell. American Balanced Fund's holdings are spread among more than 30
industries. "You have to judge the industry's prospects because a company could
have excellent management, but if its industry is doing poorly it's hard to
project much of a growth rate," O'Donnell notes.
The portfolio counselors and analysts also have to judge the wider economic
environment. Are interest rates rising? What's the outlook for inflation? Both
interest rates and inflation expectations play a key role in determining the
current value of payments the fund will receive. If inflation is picking up or
interest rates are high, the value of payments the fund receives will be lower.
THE PRICE OF EARNINGS
In the past few years, the stock market's surge has been fueled in part by
high-growth companies, such as Nokia, the Finnish telecommunications company,
whose stock rose 216% in 1999. While American Balanced Fund's portfolio
counselors and analysts invest in high-growth companies, they also look for
good opportunities among well-established firms like May Department Stores.
"Nokia is selling cellular phones, has a dominant position and is growing very
quickly," O'Donnell says. "On the other hand, a company like May is in a
business that grows at about the same rate as the economy. That doesn't mean
one is automatically a better value for shareholders, though. It comes down to
how much you're paying for the company's earnings."
A stock's price-to-earnings ratio - referred to as a P/E - is a way of
describing how much an investor is paying for earnings. The faster the company
is growing, the higher its P/E often is because investors are willing to pay
more today for potentially higher future growth. At the end of 1999, Nokia had
a P/E ratio of 64 based on projected earnings in 2000, which is high by
historical standards. "Is this a good value? We think it is because this is a
company with a very strong position," says O'Donnell. "If its earnings could
grow 30% a year for five years without the price changing, the P/E would fall
to 17. At the same time, May Department Stores has a P/E of 11, and that seems
to us to be a pretty good value too, given its prospects. The important
question we have to ask ourselves about companies with high P/E ratios is, $Are
people paying a lot of money for the stocks of these companies because they
think they'll be making money in the future or because they think someone else
will pay them more for the stock later?'" That, in essence, is the difference
between investing and speculating.
American Balanced Fund's portfolio counselors typically prefer companies with a
long track record. "In this fund, we're only going to invest in something that
has been in business long enough to have a track record, one we can look at and
make a reasonable projection of what the company will be earning in the
future," O'Donnell says.
REACHING A PRICE
In the end, when the portfolio counselors and analysts have studied the
economic environment, considered inflation and interest rates, looked carefully
at the industry and researched each company's prospects, they are ready to
decide the answers to the key questions about amount and timing: How much will
the company pay investors and will it make the payments? After the investment
professionals have estimated the future return and the risks involved, they
will decide what they think is a good price.
But the research and analysis doesn't end there. The securities in the
portfolio must be reviewed constantly. As the stock and bond markets rise and
fall, as an industry's fortunes gain or ebb, the investment professionals have
to continually ask if a security has become overpriced or if there's an
opportunity to buy more at an attractive valuation. They also ask if stocks or
bonds not in the portfolio offer better value and are more attractive
investments than the fund's current holdings. Each day, the investment
professionals study statistics and economic indicators. But in the end, it
comes down to the same question: Which securities offer American Balanced
Fund's shareholders the best value?
[Begin sidebar]
INDUSTRY OVERVIEW
Wireless subscribership June 1985-June 1999 (in millions)
[line chart]
<TABLE>
<CAPTION>
<S> <C>
Date Estimated Total Subscribers
1985 203,600
1986 500,000
1987 883,778
1988 1,608,697
1989 2,691,793
1990 4,368,686
1991 6,380,053
1992 8,892,535
1993 13,067,318
1994 19,283,306
1995 28,154,415
1996 38,195,466
1997 49,705,553
1998 60,831,431
1999 76,284,735
</TABLE>
[End Chart]
Source: Cellular Telecommunications Industry Association
[photo: Hilda Applbaum]
"Inflation is a key ingredient when I'm looking at an investment, whether it's
a stock or a bond. Inflation will lower the value of all the future payments
investors receive. It's a little easier to calculate the impact on a bond
because the payments are fixed. With a stock, though, you have to make a
judgment <UNDEF> can this company adjust to higher prices? Can it pass the
added costs through to customers or become more efficient?" - Hilda Applbaum,
portfolio counselor
WILL IT KEEP GROWING?
[photo: Abner Goldstine]
"When looking at interest rates, it is important to look at global influences,
not just at the economic and financial environment in the United States.
Foreign trade is much more important than it was a decade ago, so what's
happening outside the U.S. is having an increasingly significant impact on our
economy. Moreover, financial markets are global now and money flows freely to
the most attractive investment opportunities." - Abner Goldstine, portfolio
counselor
[End sidebar]
WHAT MAKES THE AMERICAN FUNDS DIFFERENT?
[photo: American flag]
[Begin sidebar]
For more complete information about any of the American Funds, including
charges and expenses, please obtain a prospectus from your financial adviser,
download one from our Web site at www.americanfunds.com, or phone the funds'
transfer agent, American Funds Service Company, at 800/421-0180.
Please read the prospectus carefully before you invest or send money. For more
information, ask your financial adviser for a copy of our brochure A Portfolio
for Every Investor.
[End sidebar]
As a shareholder in American Balanced Fund, you are also a member of The
American Funds Group, the nation's third-largest mutual fund family. You won't
find us advertised, yet thousands of financial advisers recommend the American
Funds for their clients' serious money - money set aside for education, a home,
retirement and other important dreams.
What the 29 funds in our group have in common is a commitment to your best
interests and the proven approach of our investment adviser, Capital Research
and Management Company. In business since 1931, Capital's calling cards
include:
* A LONG-TERM, VALUE-ORIENTED APPROACH: Rather than follow short-term fads, we
rely on our own intensive research to find well-managed companies with
reasonably priced securities and solid, long-term potential. Despite our size,
we offer relatively few funds compared with many large fund families, allowing
us to maintain a careful focus on our objectives and benefit from economies of
scale.
* A GLOBAL PERSPECTIVE: We opened our first overseas office in 1962, well
before most mutual funds began investing internationally. Today, the American
Funds draw on one of the industry's most globally integrated research networks.
Capital Research spends substantial resources getting to know companies and
industries around the world.
* A MULTIPLE PORTFOLIO COUNSELOR SYSTEM: More than 40 years ago, we developed
a unique strategy for managing investments that blends teamwork with individual
accountability. Every American Fund is divided among a number of portfolio
counselors, each of whom manages his or her portion independently, within each
fund's objectives; in most cases, research analysts manage a portion as well.
Over time, this method has contributed to consistency of results and continuity
of management.
* EXPERIENCED INVESTMENT PROFESSIONALS: More than 75% of the portfolio
counselors who serve the American Funds were in the investment business before
the sharp stock market decline of October 1987. Long tenure and experience
through a variety of market conditions mean we aren't "practicing" with your
money.
* A COMMITMENT TO LOW OPERATING EXPENSES: You can't control market returns,
but you can control what you invest in and how much you pay to own it. The
American Funds provide exceptional value for shareholders, with operating
expenses that are among the lowest in the mutual fund industry. Our portfolio
turnover rates are low as well, keeping transaction costs and tax consequences
contained.
A PORTFOLIO FOR EVERY INVESTOR
Most financial advisers suggest that investors balance their portfolios by
investing across several types of investments. Which mix is right for you? That
depends on a number of things - including your risk tolerance, investment time
horizon and financial goals. The American Funds Group offers 29 funds with an
array of investment objectives to help you and your financial adviser build a
portfolio specifically tailored to your needs.
GROWTH FUNDS
Emphasis on long-term growth through stocks
* AMCAP Fund(r)
* EuroPacific Growth Fund(r)
* The Growth Fund of America(r)
* The New Economy Fund(r)
* New Perspective Fund(r)
* New World Fund(SM)
* SMALLCAP World Fund(r)
GROWTH-AND-INCOME FUNDS
Emphasis on long-term growth and dividends through stocks
* American Mutual Fund(r)
* Capital World Growth and Income Fund(SM)
* Fundamental Investors(SM)
* The Investment Company of America(r)
* Washington Mutual Investors Fund(SM)
EQUITY-INCOME FUNDS
Emphasis on above-average income and growth through stocks and/or bonds
* Capital Income Builder(r)
* The Income Fund of America(r)
BALANCED FUND
Emphasis on long-term growth and current income through stocks and bonds
* American Balanced Fund(r)
INCOME FUNDS
Emphasis on current income through bonds
* American High-Income Trust(SM)
* The Bond Fund of America(SM)
* Capital World Bond Fund(r)
* Intermediate Bond Fund of America(r)
* U.S. Government Securities Fund(SM)
TAX-EXEMPT INCOME FUNDS
Emphasis on tax-free current income through municipal bonds
* American High-Income Municipal Bond Fund(r)
* Limited Term Tax-Exempt Bond Fund of America(SM)
* The Tax-Exempt Bond Fund of America(r)
State-specific tax-exempt funds:
* The Tax-Exempt Fund of California(r)
* The Tax-Exempt Fund of Maryland(r)
* The Tax-Exempt Fund of Virginia(r)
MONEY MARKET FUNDS
Seeking stable monthly income through money market instruments
* The Cash Management Trust of America(r)
* The Tax-Exempt Money Fund of America(SM)
* The U.S. Treasury Money Fund of America(SM)
WE ALSO OFFER A FULL LINE OF RETIREMENT PLANS AND VARIABLE ANNUITIES.
<TABLE>
American Balanced Fund, Inc.
Investment Portfolio, December 31, 1999
[pie chart]
<S> <C> <C> <C>
Percent of
TEN LARGEST EQUITY HOLDINGS Net Assets
U S WEST 1.75%
May Department Stores 1.35
Corning 1.29
Sara Lee 1.29
Allstate 1.24
Phillips Petroleum 1.22
Texaco 1.00
Genuine Parts 1.00
Bank of America 0.97
Weyerhaeuser 0.96
Number of Market Percent
Shares Value of Net
Common Stocks (000) Assets
- -------------------------------------------- -------- ----------------
ENERGY
Energy Sources - 5.90%
Ashland Inc. 1,050,000 34,584 .58
Kerr-McGee Corp. 850,000 52,700 .88
Murphy Oil Corp. 900,000 51,637 .86
Phillips Petroleum Co. 1,550,000 72,850 1.22
Texaco Inc. 1,100,000 59,744 1.00
Ultramar Diamond Shamrock Corp. 1,800,000 40,838 .68
USX-Marathon Group 450,000 11,109 .19
Valero Energy Corp. 1,473,400 29,284 .49
Utilities: Electric & Gas - 2.14%
American Electric Power Co., Inc. 850,000 27,306 .46
Carolina Power & Light Co. 750,000 22,828 .38
Constellation Energy Group, Inc. 1,800,000 52,200 .87
FPL Group, Inc. 600,000 25,688 .43
------------------
480,768 8.04
------------------
MATERIALS
Chemicals - 3.40%
CK Witco Corp. (merger of Witco Corp. and 1,650,000 22,069 .37
Crompton & Knowles Corp.)
Hercules Inc. 700,000 19,512 .33
Imperial Chemical Industries PLC (ADR) 375,000 15,961 .27
Mallinckrodt Inc. 1,150,000 36,584 .61
Millennium Chemicals Inc. 2,250,000 44,438 .74
Monsanto Co. 1,100,000 39,187 .66
PPG Industries, Inc. 400,000 25,025 .42
Forest Products & Paper - 3.00%
Georgia-Pacific Corp., Timber Group 700,000 17,237 .29
International Paper Co. 1,000,000 56,438 .94
Potlatch Corp. 350,000 15,619 .26
Sonoco Products Co. 670,200 15,247 .25
Westvaco Corp. 550,000 17,944 .30
Weyerhaeuser Co. 800,000 57,450 .96
Metals: Nonferrous - 0.62%
Alcoa Inc. 450,000 37,350 .62
Metals: Steel - 0.45%
Allegheny Technologies Inc. (formerly Allegheny 450,000 10,097 .17
Teledyne Inc.)
USX-U.S. Steel Group 500,000 16,500 .28
------------------
446,658 7.47
------------------
CAPITAL EQUIPMENT
Aerospace & Military Technology - 1.18%
Boeing Co. 600,000 24,938 .42
Lockheed Martin Corp. 1,200,000 26,250 .44
United Technologies Corp. 300,000 19,500 .32
Data Processing & Reproduction - 2.11%
Computer Associates International, Inc. 300,000 20,981 .35
Hewlett-Packard Co. 300,000 34,181 .57
International Business Machines Corp. 300,000 32,400 .54
Xerox Corp. 1,700,000 38,569 .65
Electrical & Electronics - 2.45%
Emerson Electric Co. 400,000 22,950 .38
Harris Corp. 400,000 10,675 .18
Hitachi, Ltd. 1,180,000 18,939 .32
Nokia Corp., Class A (ADR) 250,000 47,500 .79
York International Corp. 1,700,000 46,644 .78
Electronic Components - 1.57%
Corning Inc. 600,000 77,363 1.29
Intel Corp. 200,000 16,463 .28
Energy Equipment - 0.38%
Schlumberger Ltd. 400,000 22,500 .38
Industrial Components - 1.97%
Dana Corp. 1,100,000 32,931 .55
Eaton Corp. 350,000 25,419 .42
Genuine Parts Co. 2,400,000 59,550 1.00
Machinery & Engineering - 1.30%
Caterpillar Inc. 550,000 25,884 .43
Deere & Co. 900,000 39,037 .65
Pall Corp. 600,000 12,937 .22
------------------
655,611 10.96
------------------
CONSUMER GOODS
Appliances & Household Durables - 0.29%
Newell Rubbermaid Inc. 608,000 17,632 .29
Automobiles - 0.47%
Suzuki Motor Corp. 1,900,000 27,725 .47
Beverages & Tobacco - 1.77%
Imperial Tobacco Ltd. 2,500,000 20,586 .34
Philip Morris Companies Inc. 2,300,000 53,331 .89
R.J. Reynolds Tobacco Holdings, Inc. 600,000 10,575 .18
UST Inc. 850,000 21,409 .36
Food & Household Products - 2.54%
General Mills, Inc. 1,400,000 50,050 .84
Nabisco Group Holdings Corp. 2,300,000 24,438 .41
Sara Lee Corp. 3,500,000 77,219 1.29
Health & Personal Care - 2.59%
AstraZeneca PLC (ADR) 900,000 37,575 .63
Avon Products, Inc. 750,000 24,750 .41
Bergen Brunswig Corp. 3,000,000 24,937 .42
Eli Lilly and Co. 400,000 26,600 .44
Warner-Lambert Co. 500,000 40,969 .69
Recreation & Other Consumer Products - 0.75%
Pennzoil-Quaker State Co. 2,122,600 21,624 .36
Stanley Works 775,000 23,347 .39
Textiles & Apparel - 0.60%
NIKE, Inc., Class B 725,000 35,933 .60
------------------
538,700 9.01
------------------
SERVICES
Broadcasting & Publishing - 1.76%
Gannett Co., Inc. 550,000 44,859 .75
Knight-Ridder, Inc. 275,000 16,363 .27
New York Times Co., Class A 900,000 44,213 .74
Business & Public Services - 1.44%
IKON Office Solutions, Inc. 4,000,000 27,250 .45
United HealthCare Corp. 600,000 31,875 .53
Waste Management, Inc. 1,600,000 27,500 .46
Diversified Telecommunication Services - 2.45%
AT&T Corp. 250,000 12,687 .21
Koninklijke PTT Nederland NV 302,419 29,480 .49
U S WEST, Inc. 1,450,000 104,400 1.75
Leisure & Tourism - 0.30%
Seagram Co. Ltd. 400,000 17,975 .30
Merchandising - 2.58%
Albertson's, Inc. 1,403,000 45,247 .76
J.C. Penney Co., Inc. 1,400,000 27,912 .47
May Department Stores Co. 2,500,000 80,625 1.35
Transportation: Rail & Road - 1.08%
Burlington Northern Santa Fe Corp. 1,200,000 29,100 .49
CSX Corp. 475,000 14,903 .25
Norfolk Southern Corp. 1,000,000 20,500 .34
------------------
574,889 9.61
------------------
FINANCE
Banking - 3.43%
Bank of America Corp. 1,150,000 57,716 .97
Bank of Tokyo-Mitsubishi, Ltd. (ADR) 1,300,000 18,119 .30
BANK ONE CORP. 1,200,000 38,475 .64
FleetBoston Financial Corp. (formerly Fleet 650,000 22,628 .38
Financial Group, Inc.)
National City Corp. 1,400,000 33,162 .55
Sakura Bank, Ltd. 3,000,000 17,381 .29
Washington Mutual, Inc. 700,000 18,200 .30
Financial Services - 0.84%
Household International, Inc. 1,350,000 50,288 .84
Insurance - 3.91%
Aetna Inc. 850,000 47,441 .79
Allstate Corp. 3,100,000 74,400 1.24
American General Corp. 650,000 49,319 .83
Enhance Financial Services Group Inc. 367,306 5,969 .10
Lincoln National Corp. 600,000 24,000 .40
Royal & Sun Alliance Insurance Group PLC 4,500,000 32,530 .55
Real Estate - 1.57%
Apartment Investment and Management Co., Class A 550,000 21,897 .37
Equity Residential Properties Trust 700,000 29,881 .50
Spieker Properties, Inc. 1,150,000 41,903 .70
------------------
583,309 9.75
------------------
MISCELLANEOUS
Multi-Industry - 0.38%
Dover Corp. 500,000 22,688 .38
------------------
Miscellaneous - 0.43%
Other common stocks in initial period of acquisition 25,962 .43
------------------
Total Common Stocks 3,328,58 55.65
------------------
Shares or
Principal
Convertible Securities and Preferred Stock Amount
- -------------------------------------------- --------
SERVICES
Business & Public Services - 0.11%
Waste Management, Inc. 4.00% convertible $8,000,000 6,800 .11
debentures 2002
------------------
Transportation: Rail & Road - 0.02%
Union Pacific Capital Trust 6.25% TIDES 30,000 1,222 .02
convertible preferred (1)
------------------
8,022 .13
------------------
FINANCE
Banking - .11%
NB Capital Corp. 8.35% exchangeable depositary 300,000 6,450 .11
------------------
Financial Services - .32%
Bell Atlantic Financial Services, Inc., senior $7,150,000 8,794
exchangeable notes, 4.25% 2005
Bell Atlantic Financial Services, Inc., senior $10,000,000 10,100 .32
exchangeable notes, 5.75% 2003
------------------
18,894 .32
------------------
Real Estate - 0.15%
ProLogis Trust, Series D, 7.92% preferred 500,000 9,125 .15
------------------
34,469 .58
------------------
MATERIALS
Chemicals - 0.10%
Monsanto Co. 6.50% ACES convertible preferred 2001 Units 175,000 5,797 .10
------------------
MISCELLANEOUS
Multi-Industry - 0.12%
Swire Pacific Capital Ltd. 8.84% cumulative 370,000 7,493 .12
guaranteed perpetual capital securities (1)
------------------
Total Convertible Securities and Preferred Stock 55,781 .93
------------------
Total Equity Securities (cost: $3,123,372,000) 3,384,36 56.58
------------------
Principal
Amount
BONDS AND NOTES (000)
- -------------------------------------------- --------
Industrials - 3.96%
British Sky Broadcasting Group PLC 8.20% 2009 5,000 4,835 .08
Ceridian Corp. 7.25% 2004 4,750 4,587 .08
Columbia/HCA Healthcare Corp. 7.15% 2004 4,000 3,760 .06
Conoco Inc. 6.35% 2009 3,500 3,243 .05
Cooper Tire & Rubber Co. 7.25% 2002 2,000 1,978 .03
Deere & Co. 8.95% 2019 7,330 7,642 .13
Equistar Chemicals, LP 8.50% 2004 2,500 2,458 .04
Fox/Liberty Networks, LLC, FLN Finance, Inc. 11,550 11,752 .20
8.875% 2007
Freeport-McMoRan Copper & Gold Inc. 7.50% 2006 4,000 2,934
Freeport-McMoRan Copper & Gold Inc. 7.20% 2026 12,500 9,443 .21
Hearst-Argyle Television, Inc. 7.00% 2018 7,500 6,664 .11
Husky Terra Nova Finance 8.45% 2012 (1) 2,500 2,441 .04
Hutchison Whampoa Finance (CI) Ltd., 8,000 7,505 .12
Series D, 6.988% 2037 (1)
Hyundai Semiconductor America, Inc. 8.625% 2007 (1) 11,025 9,165 .15
Inco Ltd. 9.60% 2022 5,000 4,844 .08
J.C. Penney Co., Inc. 6.50% 2002 1,215 1,172
J.C. Penney Co., Inc. 7.60% 2007 3,200 2,975
J.C. Penney Co., Inc. 7.95% 2017 11,000 9,780
J.C. Penney Co., Inc. 8.25% 2022 3,000 2,667 .28
Liberty Media Corp. 7.875% 2009 (1) 6,000 5,972 .10
Lilly Del Mar Inc. 7.355% 2029 (1)(2) 8,000 8,008 .13
Louis Dreyfus Natural Gas Corp. 6.875% 2007 4,475 4,051 .07
Magma Copper Co. 8.70% 2005 4,000 4,078 .07
May Department Stores Co. 9.875% 2021 6,500 6,974 .12
Mirage Resorts, Inc. 6.75% 2007 3,750 3,305 .05
Norcen Energy Resources Ltd. 7.375% 2006 5,000 4,867 .08
OXYMAR 7.50% 2016 (1) 6,000 3,987 .07
PDVSA Finance Ltd. 9.75% 2010 (1) 2,500 2,359
PDVSA Finance Ltd. 7.40% 2016 2,350 1,731 .07
Petrozuata Finance, Inc., Series B, 8.22% 2017 (1) 4,000 2,980 .05
Pioneer Natural Resources Co. 7.20% 2028 4,075 2,971 .05
Reliance Industries Ltd. 10.50% 2046 (1) 1,500 1,427
Reliance Industries Ltd., Series B, 10.25% 2097 5,000 4,402 .10
Royal Caribbean Cruises Ltd. 7.00% 2007 7,000 6,586 .11
Samsung Electronics Co., Ltd. 7.45% 2002 (1) 2,000 1,967 .03
Scotia Pacific Co. LLC, Timber Collateralized 6,406 6,039
Notes, Series B, Class A-1, 6.55% 2028
Scotia Pacific Co. LLC, Timber Collateralized 3,750 2,700 .15
Notes, Series B, Class A-3, 7.71% 2028
Sotheby's Holdings, Inc. 6.875% 2009 3,000 2,680 .04
TCI Communications, Inc. 8.75% 2015 2,000 2,182 .04
Time Warner Inc. 9.125% 2013 8,000 8,761
Time Warner Inc. 6.85% 2026 4,825 4,755 .23
TRW Inc. 7.125% 2009 9,000 8,521 .14
Tyco International Group SA 6.875% 2002 (1) 8,000 7,889 .13
Union Pacific Resources Group, Inc. 7.30% 2009 9,000 8,643 .14
USA Waste Services, Inc. 6.50% 2002 2,190 2,028
USA Waste Services, Inc. 7.125% 2007 1,830 1,601 .06
USX Corp. 6.65% 2006 2,500 2,372 .04
Waste Management, Inc. 6.875% 2009 (1) 3,250 2,738 .05
Wharf International Finance Ltd., Series A, 11,500 10,678 .18
7.625% 2007
------------------
237,097 3.96
------------------
Electric Utilities - 0.62%
Commonwealth Edison Co. 9.875% 2020 11,000 11,860 .20
Edison Mission Energy 7.73% 2009 (1) 3,000 2,968 .05
Israel Electric Corp. Ltd. 7.75% 2009 (1) 13,500 13,033
Israel Electric Corp. Ltd. 7.75% 2027 (1) 7,500 6,481 .33
Transener SA 9.25% 2008 (1) 3,050 2,661 .04
------------------
37,003 .62
------------------
Gas Utilities - 0.04%
Energen Corp., Series B, 7.125% 2028 2,500 2,208 .04
------------------
Telephone - 0.20%
Cable & Wireless Communications PLC 6.625% 2005 7,000 6,913
Cable & Wireless Communications PLC 6.75% 2008 5,000 4,926 .20
------------------
11,839 .20
------------------
Transportation - 1.03%
Airplanes Pass Through Trust, pass-through 9,977 9,278 .16
certificates, Series 1, Class C, 8.15% 2019 (4)
Continental Airlines, Inc., pass-through certificates, 1,860 1,886
Series 1996-2, Class B, 8.56% 2014 (4)
Continental Airlines, Inc., pass-through certificates, 2,448 2,266
Series 1997-4, Class A, 6.90% 2018 (4)
Continental Airlines, Inc., pass-through certificates, 5,000 4,537
Series 1998-3, Class A-2, 6.32% 2008 (4)
Continental Airlines, Inc., pass-through certificates, 3,000 2,872
Series 1998-3, Class C-2, 7.25% 2005 (4)
Continental Airlines, Inc., pass-through certificates, 7,000 6,362 .30
Series 1999-1, Class B, 6.795% 2020 (4)
Delta Air Lines, Inc., pass-through certificates, 1,500 1,555
Series 1992-A2, 9.20% 2014 (4)
Delta Air Lines, Inc., pass-through certificates, 5,000 5,691 .12
Series 1993-A2, 10.50% 2016 (4)
Jet Equipment Trust, Series 1995-B, Class B, 7,202 7,028
7.83% 2015 (1)(4)
Jet Equipment Trust, Series 1995-A, Class B, 4,485 4,606 .19
8.64% 2015 (1)(4)
United Air Lines, Inc. 10.67% 2004 5,000 5,476
United Air Lines, Inc., pass-through certificates, 5,812 5,835
Series 1995-A1, 9.02% 2012 (4)
United Air Lines, Inc., pass-through certificates, 4,000 4,153 .26
Series 1995-A2, 9.56% 2018 (4)
------------------
61,545 1.03
------------------
Financial - 3.61%
Abbey National PLC 6.70% (undated) (2) 5,000 4,509 .08
AB Spintab 7.50% (undated) (1)(2) 2,600 2,489 .04
Ahmanson Capital Trust I, capital securities, 4,000 3,802
Series A, 8.36% 2026 (1)
Washington Mutual Capital I, subordinated 4,050 3,855 .12
capital income securities 8.375% 2027
Allfirst Preferred Capital Trust 7.678% 5,000 4,950 .08
SKATES 2029 (2)
Bank of Nova Scotia 6.0625% Eurodollar 4,000 3,221 .05
Note (undated) (2)
Bank of Scotland 7.00% (undated) (1)(2) 4,225 3,909 .07
BANK ONE CORP., Series A, 6.00% 2009 2,500 2,224 .04
Bankers Trust New York Corp. 6.70% 2007 4,000 3,761 .06
Banque Nationale de Paris 6.765% (undated) (2) 3,000 2,906 .05
BHP Finance Ltd. 8.50% 2012 2,500 2,595
BHP Finance Ltd. 6.75% 2013 10,000 8,924 .19
BNP U.S. Funding LLC, Series A, 7.738% 15,000 13,965 .23
noncumulative preferred (1)
Canadian Imperial Bank of Commerce 6.0625% 1,600 1,276 .02
Eurodollar Note (undated) (2)
Chase Capital II, global floating rate capital 1,500 1,418
securities, Series B, 6.705% 2027 (2)
Chase Capital III, floating rate capital securities, 5,000 4,698 .10
Series C, 6.66% 2027 (2)
Conseco, Inc. 9.00% 2006 7,000 7,214 .12
Den Norske CreditBank 6.375% (undated) (2) 3,000 2,331 .04
Deutsche Bank Capital Funding Trust I 2,300 2,182 .04
7.872% (undated) (1)(2)
Dime Bancorp, Inc. 6.375% 2001 2,500 2,493 .04
Fleet Capital Trust 7.14% 2028 (2) 3,500 3,458 .06
Ford Motor Credit Co. 5.80% 2009 5,850 5,185
Ford Motor Credit Co. 7.375% 2009 13,000 12,834 .30
Fuji International Finance (Bermuda) Trust, 5,500 5,328 .09
Fuji Bank, Ltd. 7.30%/7.9391% Eurodollar
Note (undated) (2)(3)
Fuji JGB Investment LLC, Series A, 9.87% 6,500 6,500 .11
noncumulative preferred (1)
Household Finance Corp. 6.40% 2008 7,000 6,471 .11
HSBC America 7.808% 2026 (1) 2,500 2,236 .04
HSBC Holdings PLC 7.50% 2009 5,000 4,963 .08
J.P. Morgan & Co. Inc., Series A, 6.00% 2009 850 761 .01
Lindsey Morden Group Inc., Series B, 7.00% C$8,000 4,950 .08
2008 (1)
MBNA Corp., MBNA Capital A, Series A, $9,600 8,354 .14
8.278% 2026
Midland Bank PLC 6.4375% Eurodollar Note 4,000 3,370 .06
(undated) (2)
National Westminster Bank PLC 7.75% 10,000 9,609 .16
(undated) (2)
Providian National Bank 6.65% 2004 5,000 4,721 .08
ReliaStar Financial Corp. 8.00% 2006 9,250 9,302 .16
Riggs Capital Trust II 8.875% 2027 2,000 1,783 .03
SocGen Real Estate Co. LLC, Series A, 28,000 25,267 .42
7.64%/8.406% (undated) (1)(3)
Tokai Preferred Capital Co. LLC, Series A, 18,425 18,357 .31
9.98%/11.091% noncumulative preferred (1) (3)
------------------
216,171 3.61
------------------
Real Estate - 0.12%
EOP Operating LP 7.25% 2018 2,000 1,760 .03
ERP Operating LP 7.95% 2002 1,500 1,506 .03
ProLogis Trust 7.05% 2006 4,000 3,769 .06
------------------
7,035 .12
------------------
Collateralized Mortgage/Asset-Backed
Obligations (4) - 4.00%
Boston Edison Co., Series 1999-1, Class A-5, 5,000 4,882 .08
7.03% 2012
Chase Commercial Mortgage Securities Corp., 24,150 22,492
Series 1998-2, Class A-2, 6.39% 2030
Chase Commercial Mortgage Securities Corp., 2,500 2,067 .41
Series 1998-2, Class E, 6.39% 2030
ComEd Transitional Funding Trust, Transitional 7,500 6,953 .12
Funding Trust Note, Series 1998-1, Class A-6,
5.63% 2009
Commercial Mortgage Acceptance Corp., 4,491 4,322 .07
Series 1998-C1, Class A-1, 6.23% 2007
Conseco Finance Home Loan Trust, 5,000 4,969 .08
Series 1999-G, Class B-2, 10.96% 2029
CS First Boston Mortgage Securities Corp., 3,098 2,989 .05
Series 1998-C1, Class A-1A, 6.26% 2040
Deutsche Mortgage & Asset Receiving Corp., 8,930 8,585 .14
Series 1998-C1, Class A-1, 6.22% 2031
DLJ Mortgage Acceptance Corp., 2,512 2,514
Series 1997-CF1, Class A1A, 7.40% 2006 (1)
DLJ Mortgage Acceptance Corp., 6,000 5,945
Series 1996-CF2, Class A1B, 7.29% 2021 (1)
DLJ Mortgage Acceptance Corp., 6,000 5,930 .24
Series 1995-CF2, Class A1B, 6.85% 2027 (1)
First Consumer Master Trust, 5,000 4,798 .08
Series 1999-A, Class A, 5.80% 2005 (1)
FIRSTPLUS Home Loan Owner Trust, 12,500 12,371 .21
Series 1997-1, Class A-6, 6.95% 2015
GMAC Commercial Mortgage Securities, Inc., 2,780 2,768
Series 1997-C1, Class A1, 6.83% 2003
GMAC Commercial Mortgage Securities, Inc., 5,000 4,740 .13
Series 1997-C1, Class A3, 6.869% 2007
Green Tree Financial Corp., pass-through 4,197 3,282
certificates, Series 1995-8, Class B2, 7.65% 2026
Green Tree Financial Corp., pass-through 10,000 9,947
certificates, Series 1995-9, Class A-5, 6.80% 2027
Green Tree Financial Corp., pass-through 6,098 5,067
certificates, Series 1996-5, Class B-2, 8.45% 2027
Green Tree Financial Corp., pass-through 3,491 2,627 .35
certificates, Series 1996-10, Class B-2, 7.74% 2028
Grupo Financiero Banamex Accival, SA de 2,635 2,372 .04
CV 0% 2002 (1)
GS Mortgage Securities Corp. II, mortgage 10,000 8,987 .15
pass-through certificates, Series 1998-C1,
Class D, 7.2426% 2030 (2)
H.S. Receivables Corp., Series 1999-1, 7,500 7,425 .12
Class A, 8.13% 2004 (1)
J.P. Morgan Commercial Mortgage Finance 3,548 3,534 .06
Corp., Series 1996-C3, Class A-1, 7.33% 2028
L.A. Arena Funding, LLC, Series 1, 6,500 5,795 .10
Class A, 7.656% 2026 (1)
MBNA Master Credit Card Trust, Series 2,500 2,250 .04
1998-E, Class C, 6.60% 2010 (1)
Merrill Lynch Mortgage Investors, Inc., 1,974 1,965
Seller Manufactured Housing Contracts,
Series 1995-C2, Class A-1, 6.9108% 2021 (2)
Merrill Lynch Mortgage Investors, Inc., 7,000 6,888 .15
Series 1995-C3, Class A-3, 7.1894% 2025 (2)
Nomura Asset Securities Corp., 13,112 12,601 .21
Series 1998-D6, Class A-A1, 6.28% 2030 (2)
Norwest Asset Securities Corp., 12,618 11,964 .20
Series 1998-31, Class A-1, 6.25% 2014
PNC Mortgage Securities Corp., 5,923 5,286 .09
Series 1998-10, Class 1-B1, 6.50% 2028 (1)
PP&L Transition Bond Co. LLC, Series 1999-1, 6,000 5,968
Class A-5, 6.83% 2007
PP&L Transition Bond Co. LLC, Series 1999-1, 7,000 6,993 .22
Class A-7, 7.05% 2009
Providian Master Trust, Series 1999-2, 7,500 7,446 .12
Class A, 6.60% 2007
Puerto Rico Public Financing Corp., 9,549 9,262 .15
Series 1999-1, Class A, 6.15% 2008
Residential Funding Mortgage SecuritiesI, Inc., 9,020 8,569 .14
pass-through certificates, Series 1999-S17,
Class A-1, 6.50% 2014
Sears Credit Account Master Trust II, 5,000 4,686 .08
Series 1998-2, Class A, 5.25% 2008
Structured Asset Securities Corp., 9,659 9,879 .17
Series 1998-RF2, Class A, 8.5489% 2027 (1)(2) ------------------
239,118 4.00
------------------
Governments (excluding U.S. Government)
and Governmental Authorities - 0.09%
Canadian Government 4.25% 2026 (5) C$7,500 5,749 .09
------------------
Federal Agency Obligations - Mortgage
Pass-Throughs (4)- 6.00%
Fannie Mae 6.00%-12.00% 2008-2027 $89,958 88,168 1.47
Freddie Mac 7.50%-10.00% 2008-2024 9,207 9,541 .16
Government National Mortgage Assn. 263,919 261,284 4.37
6.00%-10.50% 2009-2029
------------------
358,993 6.00
------------------
Federal Agency Obligations - Other - 1.78%
Fannie Mae 5.25%-6.75% 2009-2028 63,000 55,453 .93
Fannie Mae, Series 1997-28, Class C, 7.00% 2027 5,000 4,753 .08
Freddie Mac 5.125%-6.60% 2004-2009 50,300 46,078 .77
------------------
106,284 1.78
------------------
U.S. Treasury Obligations - 12.94%
5.50% February 2000 50,000 50,008 .84
7.125% February 2000 20,000 20,056 .34
8.75% August 2000 7,500 7,622 .13
6.125% December 2001 50,000 49,890 .83
14.25% February 2002 2,000 2,311 .04
6.50% May 2002 85,000 85,411 1.43
3.7721% July 2002 (2)(5) 120,000 124,780 2.09
10.75% February 2003 7,300 8,171 .14
10.75% May 2003 5,000 5,651 .09
11.125% August 2003 1,000 1,146 .02
7.25% May 2004 61,800 63,664 1.06
7.25% August 2004 25,000 25,781 .43
6.50% May 2005 60,000 60,019 1.00
7.00% July 2006 50,000 51,211 .86
6.50% October 2006 20,000 19,947 .33
3.5697% January 2007 (2)(5) 5,000 5,002 .08
3.7601% January 2008 (2)(5) 50,000 49,581 .83
10.375% November 2009 15,000 17,255 .29
10.00% May 2010 4,500 5,160 .09
10.375% November 2012 45,500 55,311 .92
7.25% May 2016 30,000 31,359 .52
7.50% November 2016 5,000 5,349 .09
8.875% August 2017 24,425 29,520 .49
------------------
774,205 12.94
------------------
Total Bonds and Notes (cost: $2,122,973,000) 2,057,24 34.39
------------------
Principal Market Percent
Amount Value of Net
Short-Term Securities (000) (000) Assets
- -------------------------------------------- -------- ----------------
Corporate Short-Term Notes - 7.88%
AIG Funding, Inc. 5.84% due 1/20/2000 29,000 28,906 .48
American Express Credit Corp. 5.72%-5.97% 69,600 69,158 1.16
due 1/24-2/18/2000
Associates Corp. of North America 6.02% 25,000 24,954 .42
due 1/11/2000
Associates First Capital Corp. 4.00% 7,490 7,488 .12
due 1/3/2000
AT&T Corp. 5.87% due 2/24/2000 16,000 15,854 .27
BellSouth Capital Funding Corp. 5.67% 48,500 48,121 .80
due 2/16/2000 (1)
Chevron USA Inc. 5.80%-6.16% due 1/12-2/3/2000 51,000 50,761 .85
Coca-Cola Co. 5.86%-6.04% due 2/4-2/15/2000 28,000 27,809 .46
Eastman Kodak Co. 5.85% due 2/9/2000 25,000 24,837 .42
Fortune Brands Inc. 5.85%-5.90% due 33,000 32,827 .55
1/18-2/10/2000 (1)
General Electric Capital Corp. 5.84% 21,000 20,811 .35
due 2/23/2000
Pfizer Inc 5.64%-5.80% due 2/2-3/31/2000 (1) 83,611 82,678 1.38
USAA Capital Corp. 5.72%-5.73% due 1/27/2000 25,000 24,890 .42
Walt Disney Co. 5.89% due 1/21/2000 12,300 12,258 .20
------------------
471,352 7.88
------------------
Federal Agency Short-Term Obligations - 0.62%
Freddie Mac 5.50%-5.79% due 2/15-6/15/2000 37,500 36,985 .62
------------------
Total Short-Term Securities (cost:$508,396,000) 508,337 8.50
------------------
Total Investment Securities (cost:$5,754,741,000) 5,949,95 99.47
Excess of cash and receivables over payables 31,499 .53
------------------
NET ASSETS 5,981,44 100.00
=================
(1) Purchased in a private placement transaction;
resale may be limited to qualified institutional
buyers; resale to the public may require registration.
(2) Coupon rate may change periodically.
(3) Step bond; coupon rate will increase
at a later date.
(4) Pass-through securities backed by a pool
of mortgages or other loans on which principal
payments are periodically made. Therefore,
the effective maturities are shorter than the
stated maturities.
(5) Index-linked bond whose principal amount
moves with a government retail price index.
ADR = American Depositary Receipts
See Notes to Financial Statements
</TABLE>
American Balanced Fund
Equity securities added to the portfolio
since June 30, 1999
American Electric Power
Avon Products
BANK ONE
Bergen Brunswig
Burlington Northern Santa Fe
CSX
Harris
Hitachi
Imperial Chemical Industries
Knight-Ridder
Koninklijke PTT Nederland
Lockheed Martin
National City
Newell Rubbermaid
Pall
Potlatch
Seagram
USX-Marathon Group
USX-U.S. Steel Group
Westvaco
Xerox
Equity securities eliminated from the portfolio
since June 30, 1999
Browning-Ferris Industries
Central and South West
Electronic Data Systems
GTE
Louisiana-Pacific
Nissan Motor
Pfizer
<TABLE>
American Balanced Fund
Financial Statements
<S> <C> <C>
- ---------------------------------------------- ------------ ------------
Statement of Assets and Liabilities (dollars in
at December 31, 1999 thousands)
- ---------------------------------------------- ------------ ------------
Assets:
Investment securities at market
(cost: $5,754,741) $5,949,950
Cash 204
Receivables for -
Sales of investments $ 88
Sales of fund's shares 11,431
Dividends and accrued interest 35,302 46,821
------------ ------------
5,996,975
Liabilities:
Payables for -
Repurchases of fund's shares 12,633
Management services 1,461
Accrued expenses 1,432 15,526
------------ ------------
Net Assets at December 31, 1999 -
Equivalent to $14.42 per share on
414,929,876 shares of $0.001 par value
capital stock outstanding (authorized
capital stock--1,500,000,000 shares) $5,981,449
============
Statement of Operations
for the year ended December 31, 1999 (dollars in
thousands)
- ---------------------------------------------- ------------ ------------
Investment Income:
Income:
Dividends $ 88,998
Interest 169,975 $258,973
------------
Expenses:
Management services fee 17,704
Distribution expenses 15,327
Transfer agent fee 4,994
Reports to shareholders 169
Registration statement and prospectus 462
Postage, stationery and supplies 990
Directors' fees 129
Auditing and legal fees 55
Custodian fee 155
Taxes other than federal income tax 2
Other expenses 133 40,120
------------ ------------
Net investment income 218,853
------------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 506,275
Change in unrealized appreciation on
investments:
Beginning of year 720,225
End of year 195,212 (525,013)
------------ ------------
Net realized gain and change in unrealized
appreciation on investments (18,738)
------------
Net Increase in Net Assets Resulting
from Operations $200,115
============
See Notes to Financial Statements
- ---------------------------------------------- --------------------------------
Statement of Changes in Net Assets
(dollars in thousands)
December 31
1999 1998
- ---------------------------------------------- --------------------------------
Operations:
Net investment income $ 218,853 $ 196,891
Net realized gain on investments 506,275 455,951
Net change in unrealized appreciation
on investments (525,013) (74,388)
--------------------------------
Net increase in net assets
resulting from operations 200,115 578,454
--------------------------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (213,797) (191,659)
Distributions from net realized gain on
investments (498,598) (366,100)
--------------------------------
Total dividends and distributions (712,395) (557,759)
--------------------------------
Capital Share Transactions:
Proceeds from shares sold: 98,494,695
and 87,886,110 shares, respectively 1,566,708 1,414,201
Proceeds from shares issued in reinvestment
of net investment income dividends and
distributions of net realized gain on
investments: 46,488,744 and 34,076,376 shares,
respectively 680,634 531,997
Cost of shares repurchased: 103,300,568
and 69,903,643 shares, respectively (1,635,010) (1,121,345)
--------------------------------
Net increase in net assets resulting from
capital share transactions 612,332 824,853
--------------------------------
Total Increase in Net Assets 100,052 845,548
Net Assets:
Beginning of year 5,881,397 5,035,849
--------------------------------
End of year (including undistributed net
investment income: $35,458 and $30,440, $5,981,449 $5,881,397
respectively) ================================
See Notes to Financial Statements
</TABLE>
AMERICAN BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
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. Effective December 23, 1999, the fund's par value
changed from $1 to $0.001.
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.
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 December 31, 1999, net unrealized appreciation on investments for
book and federal income tax purposes aggregated $195,209,000, of which
$658,388,000 related to appreciated securities and $463,179,000 related to
depreciated securities. During the year ended December 31, 1999, the fund
realized, on a tax basis, a net capital gain of $506,313,000 on securities
transactions. Net losses related to non-U.S. currency transactions of $38,000
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 $5,754,741,000 at December 31, 1999.
3. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEE - The fee of $17,704,000 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 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; 0.270% of such assets in excess of $2.5 billion but not
exceeding $4 billion; 0.262% of such assets in excess of $4 billion but not
exceeding $6.5 billion; 0.255% of such assets exceeding $6.5 billion but not
exceeding $10.5 billion; and 0.25% of such assets in excess of $10.5 billion.
DISTRIBUTION EXPENSES - 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, 1999, distribution expenses under the Plan were limited to
$15,327,000. Had no limitation been in effect, the fund would have paid
$18,666,000 in distribution expenses under the Plan. As of December 31, 1999,
accrued and unpaid distribution expenses were $918,000.
American Funds Distributors, Inc. (AFD), the principal underwriter of the
fund's shares, received $3,548,000 (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.
TRANSFER AGENT FEE - American Funds Service Company (AFS), the transfer
agent for the fund, was paid a fee of $4,994,000.
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 December 31, 1999, aggregate deferred amounts and earnings
thereon since the deferred compensation plan's adoption (1993), net of any
payments to Directors, were $524,000.
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. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding
short-term securities, of $2,772,959,000 and $2,590,015,000, respectively,
during the year ended December 31, 1999.
As of December 31, 1999, there were no accumulated undistributed net
realized gains on investments and additional paid-in capital was
$5,750,364,000. The fund reclassified $38,000 and $86,329,000 from
undistributed net investment income and undistributed net realized gains,
respectively, to additional paid-in capital for the year ended December 31,
1999 as a result of permanent differences between book and tax.
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 $155,000 includes $62,000 that was paid by these credits
rather than in cash.
<TABLE>
Per-Share Data and Ratios
<S> <C> <C> <C> <C> <C>
Year Ended December 31
1999 1998 1997 1996 1995
Net Asset Value, Beginning of Year $15.76 $15.68 $14.55 $14.15 $12.00
---------------------------------- ---------- ---------
Income From Investment Operations:
Net investment income .56 .56 .58 .57 .57
Net gains or losses on securities (both
realized and unrealized) (.04) 1.13 2.41 1.24 2.61
---------------------------------- ---------- ---------
Total from investment operations .52 1.69 2.99 1.81 3.18
----------- ----------- --------- --------------------
Less Distributions:
Dividends (from net investment income) (.56) (.56) (.56) (.56) (.56)
Distributions (from capital gains) (1.30) (1.05) (1.30) (.85) (.47)
----------- ----------- --------- --------------------
Total distributions (1.86) (1.61) (1.86) (1.41) (1.03)
----------- ----------- --------- ---------- ---------
Net Asset Value, End of Year $14.42 $15.76 $15.68 $14.55 $14.15
========== ========== ======== ======== =======
Total Return (1) 3.47% 11.13% 21.04% 13.17% 27.13%
Ratios/Supplemental Data:
Net assets, end of year (in millions) $5,981 $5,881 $5,036 $3,941 $3,048
Ratio of expenses to average net assets .66% .63% .65% .67% .67%
Ratio of net income to average net assets 3.59% 3.57% 3.74% 4.01% 4.38%
Portfolio turnover rate 48.47% 54.05% 44.01% 43.85% 39.03%
(1) Excludes maximum sales charge of 5.75%.
</TABLE>
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. (the "fund"), including the investment portfolio,
as of December 31, 1999, 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 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 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, 1999, by correspondence with the custodian. 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 December 31, 1999, 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 each of the five years in the period then ended, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, California
January 28, 2000
AMERICAN BALANCED FUND
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:
<TABLE>
<CAPTION>
<S> <C>
Dividends and Distributions per Share
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
To Shareholders Payment Date From Net From Net From Net
of Record Investment Realized Realized Long-
Income Short-term term Gains
Gains
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
February 19,1999 February 22, 1999 $0.14 - $0.191
May 21, 1999 May 24, 1999 0.14 - -
August 13, 1999 August 16, 1999 0.14 - -
December 13, 1999 December 14, 1999 0.14 - 1.110
</TABLE>
The fund also designates as a capital gain distribution a portion of earnings
and profits paid to shareholders in redemption of their shares.
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 35% 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.
Dividends and distributions received by retirement plans such as IRAs,
Keogh-type plans and 403(b) plans need not be reported as taxable income.
However, many retirement plan trusts may need this information for their annual
information reporting.
SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISERS.
RESULTS OF SHAREHOLDER MEETING (UNAUDITED) - HELD DECEMBER 1, 1999
Shares Outstanding on (record date) 390,133,741
September 15, 1999
Shares Voting on December 1, 1999 245,517,076 (62.9%)
PROPOSAL 1: ELECTION OF DIRECTORS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Percent of Percent of
Votes Shares Votes Shares
Director For Voting For Withheld Withheld
Robert A. Fox 241,644,988 98% 3,872,088 2%
Roberta L. Hazard 241,578,197 98 3,938,879 2
Leonade D. Jones 241,612,639 98 3,904,437 2
John G. McDonald 241,649,424 98 3,867,652 2
Robert G. O'Donnell 241,756,369 98 3,760,707 2
James K. Peterson 241,779,291 98 3,737,785 2
James W. Ratzlaff 241,685,802 98 3,831,274 2
Henry E. Riggs 241,739,906 98 3,777,170 2
Walter P. Stern 241,679,417 98 3,837,659 2
Patricia K. Woolf 241,512,490 98 4,004,586 2
</TABLE>
PROPOSAL 2: AMENDMENT TO ARTICLES OF INCORPORATION REDUCING THE PAR VALUE PER
SHARE OF CAPITAL STOCK
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Percent of Percent of Percent of
Votes Shares Votes Shares Voting Shares
For Voting For Against Against Abstentions Abstaining
225,910,644 92% 8,720,100 4% 10,886,332 4%
</TABLE>
PROPOSAL 3: ELIMINATE OR REVISE CERTAIN OF THE FUND'S INVESTMENT RESTRICTIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Percent of Percent of Percent of
Votes Shares Votes Shares Voting Shares
For Voting For Against Against Abstentions Abstaining
3A Borrowing 170,018,288 69% 12,028,055 5% 11,981,782 5%
(Broker non-votes = 51,488,952)
3B Joint Trading
Account 171,361,987 70 10,688,632 4 11,977,504 5
(Broker non-votes = 51,488,952)
3C Securities
Transactions
with 171,660,013 70 10,126,728 4 12,241,383 5
Affiliates
(Broker non-votes = 51,488,952)
3D 170,731,715 69 11,088,101 5 12,208,308 5
Affiliated
Ownership
(Broker non-votes = 51,488,952)
3E Purchasing Securities
of Other Investment
Companies 170,780,646 70 10,653,936 4 12,593,542 5
(Broker non-votes = 51,488,952)
Proposal 4: Ratification of Auditors
Percent of Percent of Percent of
Votes Shares Votes Shares Voting Shares
For Voting For Against Against Abstentions Abstaining
235,430,485 96% 2,318,281 1% 7,768,310 3%
</TABLE>
BOARD OF DIRECTORS
ROBERT A. FOX, Livingston, California
President and Chief Executive Officer,
Foster Farms Inc.
ROBERTA L. HAZARD, McLean, Virginia
Consultant; Rear Admiral, U.S. Navy (retired)
LEONADE D. JONES, Burlingame, California
Management consultant; former Treasurer,
The Washington Post Company
JOHN G. MCDONALD, Stanford, California
The IBJ Professor of Finance,
Graduate School of Business, Stanford University
ROBERT G. O'DONNELL, San Francisco, California
President of the fund
Senior Vice President and Director,
Capital Research and Management Company
JAMES K. PETERSON,* Tucson, Arizona
Managing Director, Oak Glen Consultancy, LLC;
former Director of Investment Management,
IBM Retirement Fund, IBM Corporation
JAMES W. RATZLAFF, San Francisco, California
Senior Partner, The Capital Group Partners L.P.
HENRY E. RIGGS, Claremont, California
President, Keck Graduate Institute
of Applied Life Sciences
WALTER P. STERN, New York, New York
Chairman of the Board of the fund
Vice Chairman of the Board,
Capital Group International, Inc.
PATRICIA K. WOOLF, PH.D., Princeton, New Jersey
Private investor; corporate director;
lecturer, Department of Molecular Biology,
Princeton University
*Effective December 1, 1999
OTHER OFFICERS
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
Executive Vice President and Director,
Capital Research and Management Company
HILDA L. APPLBAUM, San Francisco, California
Vice President of the fund
Vice President, Capital Research Company
J. DALE HARVEY, Los Angeles, California
Vice President of the fund
Vice President and Director,
Capital Research Company
ERIC S. RICHTER, Washington, D.C.
Vice President of the fund
Senior Vice President and Director,
Capital Research Company
PATRICK F. QUAN, San Francisco, California
Secretary of the fund
Vice President - Fund Business Management Group,
Capital Research and Management Company
ANTHONY W. HYNES, JR., Brea, California
Treasurer of the fund
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
[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
INDEPENDENT AUDITORS
Deloitte & Touche LLP
1000 Wilshire Boulevard
Los Angeles, California 90071-2472
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
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, 2000, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
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.
Printed on recycled paper
Litho in USA SG/CG/4476
Lit. No. AMBAL-011-0200
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