Washington Mutual Investors Fund
1996
Annual Report
(Photo 1)
A replica dinner plate used at Mount Vernon
(Logo)
The American Funds Group (R)
Washington Mutual Investors Fund...
seeks to produce income and to provide an opportunity for growth of
principal.
(Photo 2)
Miniature portrait, Martha Washington, 1776
Miniature portrait, Martha Washington, 1776
by Charles Willson Peale
(Photo)
About our cover...
A replica of the dinner plate from the "States" china service, designed and
presented to Martha Washington in 1796 by Andreas van Braam, director of
Canton operations for the Dutch East India Company. When the service was
created, two additional states (Vermont and Kentucky) had joined the Union,
bringing the number to fifteen. The motto states: "A glory and defense from
it."
Fund results in this report were computed without a sales charge unless
otherwise indicated. Here are the Fund's total returns and average annual
compound returns with all distributions reinvested, through March 31, 1996
(the most recent calendar quarter), assuming payment of the 5.75% maximum
sales charge at the beginning of the stated periods - 10 years: +232.11%,
or +12.75% a year; 5 years: +91.05%, or +13.82% a year; 12 months: +26.31%.
Sales charges are lower for accounts of $50,000 or more.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. ALL INVESTMENTS ARE
SUBJECT TO CERTAIN RISKS. FOR EXAMPLE, THOSE WHICH INCLUDE COMMON STOCKS
ARE AFFECTED BY FLUCTUATING STOCK PRICES SO YOU MAY GAIN OR LOSE MONEY BY
INVESTING IN THE FUND. INVESTORS SHOULD MAINTAIN A LONG-TERM INVESTMENT
PERSPECTIVE. FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR
GUARANTEED BY, THE U.S. GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, OR ANY OTHER AGENCY, ENTITY OR FPERSON.
Washington Mutual Investors Fund
(Photo 3)
Clay bust, George Washington
Fellow Shareholders:
Washington Mutual made excellent progress in fiscal 1996. Our shareholder
family of investors continued to grow; we added nearly 200,000 new
shareholder accounts during the year, bringing the total to 1.2 million.
Meanwhile, net assets passed the $20 billion mark.
The stock market, as measured by the unmanaged Standard & Poor's 500
Composite Index, made an exceptionally fine showing, up 30.2% for the 12
months ended April 30, 1996 on a total return basis. During the same
period, the value of your holdings in Washington Mutual showed a slightly
greater increase, up 30.4% with all distributions taken in shares.
During the year, 68% of the companies represented in Washington
Mutual's portfolio raised their dividends. This enabled the Fund to pay an
extra dividend of four cents per share on December 26, 1995. This pattern
of rising dividends has now been in evidence for well over a year, and it
continued in the February-April quarter, when 20% of all companies in the
portfolio announced increases.
Four new names appeared in the portfolio during the fourth quarter:
CoreStates Financial, General Re, Parker Hannifin, and Whitman. Five names
were eliminated: Chemical Banking, Clorox, Equitable Resources, Melville,
and U S WEST Media Group.
Since our last report to you in March, the Federal Reserve has made no
changes in short-term interest rates. However, longer term rates have risen
on inflation fears and the stock market has reacted with numerous
downturns. The declines have been followed by recoveries to new highs.
These developments are covered in greater detail in the Investment
Manager's Report on page 2.
Starting on page 6, you will find an article discussing the
characteristics that set your Fund apart from others in its universe, along
with some background information on the investment philosophy that
underlies Washington Mutual. We hope you will find this article interesting
and informative.
Located as we are in the nation's capital, close to historic Mount
Vernon, we have chosen to illustrate this report with memorabilia of George
Washington and his Mount Vernon home. This material was made available to
us by the Mount Vernon Ladies' Association. If your summer plans include
travel to Washington, D.C., we would encourage you to include a day-trip to
Mount Vernon on your itinerary.
As always, your questions and comments are welcome.
Cordially,
(Signatures)
Stephen Hartwell James H. Lemon, Jr. Harry J. Lister
Chairman Vice Chairman President
June 3, 1996
(Photo 4)
Mount Vernon Mansion
Investment Manager's Report
Stock prices rose sharply through the first three quarters of fiscal 1996,
then became increasingly erratic in the final quarter of our fiscal year.
Following a gain of 25.9% for the nine months ending in January, the
Standard & Poor's 500 Composite Index went up just 3.4% in the
February-April period on a total return basis. Washington Mutual followed a
similar pattern-which should not be surprising since it is virtually fully
invested and, like the S&P 500, its portfolio is made up chiefly of the
stocks of large, prominent companies.
The economic picture
The uncertainty that developed in the financial markets late in fiscal
'96 reflects concern over the course of the economy. For most of the fiscal
year, long-term interest rates declined, and business seemed to be flat or
losing momentum. However, starting in February the picture showed signs of
changing. Several key indicators-including employment figures and car
sales-pointed toward faster growth, raising the specter of increased
inflation. The price of gasoline, grain and a few other commodities moved
dramatically higher. So did long-term interest rates; the yield on 30-year
bonds rose about 100 basis points (one percentage point) in less than four
months.
Many investors became concerned that the economy might be on the verge
of overheating, in which case long-term rates could be headed still higher.
But there is also a strong possibility that what we have witnessed recently
is a series of unusual events and uncertain statistics that only give the
appearance of an overheating economy-in which case the months ahead could
see a return to slower growth, with less evidence of inflation along with a
pull-back in longer term rates. Either way, the financial markets probably
will have to deal with a barrage of confusing political rhetoric in the
coming months. That rhetoric is likely to focus excessive attention on the
uncertainty surrounding current economic trends.
A high ranking
Washington Mutual continues to do better than the vast majority of its
peers. Based on a total return for the 30 years ended April 30, it ranked
in the top 13% (7th out of 54) among growth and income funds in existence
throughout that lengthy span, according to Lipper Analytical Services. For
the ten-, five- and one-year periods ended April 30, your Fund also
finished high in the Lipper rankings. For the ten years, it ranked 25th out
of 117 similar funds; for the five years, 53rd out of 198; and for the 12
months ended April 30, 94th out of 479 comparable funds. (Lipper rankings
do not reflect the effects of sales charges.)
Washington Mutual's fiscal '96 gain-30.4%-was more than double the
average annual total return over its lifetime, as well as the average of
the past 10 years. As gratifying as this fiscal year has been, we feel
obligated to
(Photo 5)
George Washington's surveying compass
sound a cautionary note. It is unrealistic to expect that either the stock
market or the Fund can chalk up gains of this magnitude over any extended
period. We would remind shareholders, too, that nothing rises in a straight
line forever. Just as there are always going to be rough periods in the
market, there are also bound to be times when the Fund's share value
declines.
We will continue to concentrate our research efforts on identifying
long-term investment opportunities which meet Washington Mutual's strict
investment standards. As the article on page 6 explains, those standards
provide a discipline that has helped us weather all kinds of investment
conditions in the past, and we believe they should continue to do so in the
future.
(Photo 6)
A mountain chart comparing the performance of Washington Mutual to the
Standard (and) Poor's 500 Composite Index and the Consumer Price Index as
required under Item 5A of Form N-1A-Management's Discussion of Fund
Performance. The chart covers the period from July 31, 1952 to April 30,
1996.
The Fund's Long-Term Results
How a $10,000 investment in Washington Mutual Investors Fund has grown
This chart shows how a $10,000 investment grew between July 31, 1952, when
the Fund began operations, and April 30, 1996.
As you can see, that $10,000 investment in Washington Mutual, with all
distributions reinvested, would have grown to $2,256,889. Over the same
period, that $10,000 would have grown to $1,365,892 in the unmanaged
Standard & Poor's 500 Composite Index of U.S. common stocks and to $95,192
in the average savings institution* with dividends reinvested or interest
compounded.
The year-by-year progress of the $10,000 investment is summarized in
the table below the chart. You can use those figures to estimate how the
value of your own holdings has grown. Let's say, for example, that you have
been reinvesting all your distributions and want to know how your
investment has done since April 30, 1986. At that time, according to the
table, the value of the investment illustrated here was $623,767. Since
then it has gone up almost fourfold to $2,256,889. Thus, in the same
10-year period, the value of your 1986 investment - regardless of its size
- -has also almost quadrupled.
(Photo 7)
A graphical mountain chart detailing the performance of Washington Mutual
since July 31, 1952. The chart indicates values with dividends taken in
cash and with dividends reinvested.
(Photo 8)
Mount Vernon Mansion
What Makes Washington Mutual Different?
Washington Mutual Investors Fund is one of the nation's premier equity
funds. It was created to provide a prudent approach to common stock
investing for fiduciaries and conservative individual investors. The Fund
seeks current income and an opportunity for capital growth through
investments in quality common stocks. Its history of success in achieving
these objectives has been the result of a sound concept thoughtfully and
consistently applied for more than forty-three years.
The origins of the concept
The Washington Mutual investment concept evolved from experiences
learned during the Depression years of the 1930s, when individuals and
institutions turned away from speculative excess to re-embrace sound
investment principles based on prudence, diligence and value. In 1937, the
United States District Court for the District of Columbia established a
"Legal List" of bonds suitable for trust funds. This List was composed of
high-quality issues selected from strict investment criteria which became
known as "Rule 23." The Court modified Rule 23 in 1947 to permit estates
and trusts to invest in an expanded Legal List of high-grade common stocks.
In 1952, Washington Mutual was established using those same Legal List
requirements.
(Photo 9)
Washington's coat-of-arms
(Photo 10)
Two English porcelain figurines
With its strict investment criteria, Washington Mutual became popular
with fiduciaries exercising control over trusts, estates, and retirement
plans, as well as individuals who wish to invest prudently. The Fund's
Board of Directors believed then, as they do today, that one of the best
ways to uncover investment value and help reduce risk is to first apply
stringent quality criteria against a broad base of stocks.
Meeting the criteria
With few exceptions, the investment standards established by the U.S.
District Court serve as the basis for the Fund's Eligible List. Some of
Washington Mutual's standards are:
- - A security must be listed on the New York Stock
Exchange (or be eligible and have applied for listing).
- - Except for banks, a company must have:
- fully earned its dividends in at least four of the past five years
- paid a dividend in at least nine of the past 10 years
- - The ratio of current assets to current liabilities for most industrial
companies must be at least 1.5 to 1, or their bonds must be rated at
least A- or A3.
- - Banks, insurance companies and other financial institutions must have
capital funds of at least $100 million.
- - Banks and savings & loans must have paid a dividend in four of the past
five years.
- - Companies must not derive the majority of their revenues from tobacco or
alcohol products.
Washington Mutual is committed to have at least 95% of its assets
invested in equity securities that meet its Eligible List criteria. Of
course, not every Eligible List stock is purchased. Only carefully
screened, quality stocks are considered for its portfolio. There are
approximately 5,300,000 companies and partnerships operating in the U.S.;
13,000 of these are publicly held; 2,500 are listed on the New York Stock
Exchange; 290 meet the standards of Washington Mutual's Eligible List; 133
of these appear in the current portfolio.
A superior record and time-tested management
Washington Mutual has outpaced the Standard & Poor's 500 Composite
Index in 32 of 34 rolling 10-year periods over the past 43 fiscal years on
a reinvested
(Photo 11)
Washington's swords
(Photo 12)
Chinese porcelain tea-pot
basis. It has generated a positive total return in 37 of the past 43 full
fiscal years, including 19 of the past 20. It also has held up better than
the S&P 500 in every stock market decline of 15% or more since the Fund was
established (excluding reinvestment).
Washington Mutual is a member of one of the oldest, largest and most
successful fund families in the country - The American Funds Group.(R) The
investment adviser for each of the 28 American Funds is Capital Research
and Management Company (CRMC), whose roots stretch back more than 60 years.
Today, CRMC manages more than $140 billion in assets.
CRMC employs a unique method of managing money called the Multiple
Portfolio Counselor System. This system, which CRMC created more than 35
years ago, blends the best attributes of single-manager and
committee-management systems. Each portfolio counselor invests his or her
portion autonomously, as if it were an entire fund. All investments are
monitored for consistency with Fund objectives and limits established by
CRMC's investment committee. Washington Mutual's seven portfolio counselors
have, on average, more than 20 years of investment experience.
Low expenses and rising dividends
Washington Mutual's expense ratio, which is the total annual cost of
running the Fund divided by its average annual net assets, is 0.66%,
compared to 1.36% for the average growth and income fund.<F1> This has
given the Fund a significant "built-in" advantage. The Fund's portfolio
turnover rate has been less than 26% a year over the past five fiscal
years, which further reduces costs associated with transactions.
Washington Mutual's dividend income has risen every calendar year
since its inception.<F2> Dividends have accounted for 53% of the Fund's
lifetime total return. Unlike bonds, dividend-paying common stocks have
provided growing income over time. Growing dividends from growing companies
have helped investors stay well ahead of inflation. Of the 133 companies
represented in the Fund's portfolio at the end of fiscal '96, 88 have paid
a dividend for at least 50 years; 38 have paid a dividend for at least 75
years; and 14 have paid a dividend for at least 100 years.
(Photo 13)
Spinning room at Mount Vernon
(Photo 14)
Washington's four-volume set of Don Quixote
The benefit of time
No matter when you invest in Washington Mutual, the longer you invest,
the greater your opportunity for reward. The chart shows the number of
positive and negative fiscal year results over various time periods from
5/1/53 through 4/30/96.<F3>
Of course, these results were not achieved without fluctuations along
the way. Even the stocks of well-run companies go down from time to time.
However, over the long run, Washington Mutual's diversified, carefully
managed portfolio made up of Eligible List stocks has provided solid
returns.
(Charts 15)
Three pie charts indicating the number of rolling one, five and ten year
periods Washington Mutual has had positive total returns and negative total
returns
Shareholders who remained invested made money in 67% of all one-year
periods, 97% of all five-year periods and in every single 10-year period.
[FN]
<F1> Source: CDA/Wiesenberger. Based on the most recent statistics
available for calendar year ends and do not include the effects of sales
charges. The average fund ratio includes some funds that have higher
distribution expenses in lieu of sales charges.
<F2> Excludes special dividends. Assumes reinvestment of capital gains.
<F3> These figures reflect reinvestment of all distributions and payment of
the maximum sales charge during these periods.
[/FN]
(Photo 16)
Brick wall and seed house at Mount Vernon
Working for You
(Photo 17)
Individual photos of all directors, advisory board members, directors
emeritus and officers of Washington Mutual
Directors
(Photo)
Stephen Hartwell
Chairman of the Board
Chairman,
Washington Management Corporation
(Photo)
James H. Lemon, Jr.
Vice Chairman of the Board
Chairman and Chief Executive Officer,
The Johnston-Lemon Group,
Incorporated
(Photo)
Harry J. Lister
President of the Fund
Director and President,
Washington Management Corporation
(Photo)
Cyrus A. Ansary
President,
Investment Services International Co.
(Photo)
John A. Beck
Of Counsel,
Reed Smith Shaw & McClay
(Photo)
James C. Miller III
Counselor,
Citizens for a Sound Economy
(Photo)
Thomas J. Owen
President and Chief
Executive Officer,
Cafritz Company
(Photo)
Jean Head Sisco
Partner,
Sisco Associates
(Photo)
T. Eugene Smith
President,
T. Eugene Smith Inc.
(Photo)
Margita E. White
President,
Association for Maximum
Service Television Inc.
(Photo)
Stephen G. Yeonas
Chairman and Chief Executive Officer,
Stephen G. Yeonas Company
Advisory Board
(Photo)
Mary K. Bush
Independent Consultant
(Photo)
Daniel J. Callahan III
President,
Willow Creek Corp.
(Photo)
Vernon W. Holleman, Jr.
President,
Vernon W. Holleman, Jr., Co.
(Photo)
William B. Snyder
Chairman, President and
Chief Executive Officer,
Southern Heritage Holdings, Inc.
and Merastar Corporation
(Photo)
Leonard P. Steuart II
Vice President,
Steuart Investment Company
(Photo)
Robert F. Tardio
Independent Consultant
(Photo)
W. Reid Thompson
Advisory Director,
Potomac Electric Power Co.
Directors Emeritus
(Photo)
Bernard J. Nees
Chairman Emeritus
Director Emeritus and
Executive Vice President,
Johnston, Lemon & Co. Incorporated
(Photo)
Charles T. Akre
Of Counsel,
Miller & Chevalier, Chartered
(Photo)
Dr. Nathan A. Baily
Management, Marketing
and Education Consultant
(Photo)
Frank M. Ewing
Chairman and President,
Frank M. Ewing Co., Inc.
Other Officers
(Photo)
Howard L. Kitzmiller
Senior Vice President, Secretary and
Assistant Treasurer of the Fund
Director, Senior Vice President,
Secretary and Assistant Treasurer,
Washington Management Corporation
(Photo)
Ralph S. Richard
Vice President and
Treasurer of the Fund
Executive Vice President,
Johnston, Lemon & Co. Incorporated
(Photo)
Lois A. Erhard
Vice President of the Fund
Vice President,
Washington Management Corporation
(Photo)
Michael W. Stockton
Assistant Treasurer of the Fund
Assistant Vice President and Assistant Treasurer,
Washington Management Corporation
(Photo 18)
Telescope
Investment Portfolio
April 30, 1996
5 Largest Industry Holdings
Percent of
Net Assets
Banking 15.72%
Health & Personal Care 11.55
Telecommunications 10.61
Energy Sources 9.62
Utilities: Electric & Gas 7.59
10 Largest Individual Holdings
Percent of
Net Assets
DuPont 2.64%
AT&T 2.43
Pacific Telesis 2.19
American Home
Products 2.18
Chevron 2.09
J.C. Penney 2.01
Dun & Bradstreet 1.98
Texaco 1.96
U S West
Communications 1.93
International Paper 1.77
Market Percent
Value of Net
Common Stocks Shares (000) Assets
Energy
Energy Sources (9.62%)
Amoco Corp. 3,450,000 $ 251,850 1.22%
Ashland Inc. 2,800,000 115,150 .56
Atlantic Richfield Co. 1,580,000 186,045 .90
Chevron Corp. 7,450,000 432,100 2.09
Exxon Corp. 3,450,000 293,250 1.42
Kerr-McGee Corp. 1,800,000 114,975 .55
Mobil Corp. 825,000 94,875 .46
Texaco Inc. 4,735,000 404,843 1.96
Unocal Corp. 3,000,000 96,375 .46
1,989,463 9.62
Utilities: Electric & Gas (7.59%)
American Electric Power
Company, Inc. 2,700,000 109,688 .53
Atlantic Energy, Inc. 1,650,000 26,813 .13
Baltimore Gas and Electric Co. 2,000,000 52,750 .26
Brooklyn Union Gas Co. 900,000 23,625 .11
Carolina Power & Light Co. 500,000 18,000 .09
Central and South West Corp. 1,900,000 51,775 .25
CINergy Corp. 700,000 20,300 .10
Consolidated Edison Co. of
New York, Inc. 5,000,000 146,875 .71
Consolidated Natural Gas Co. 1,158,900 54,179 .26
Dominion Resources, Inc. 595,000 22,908 .11
DTE Energy Co. 2,344,800 72,689 .35
Duke Power Co. 1,600,000 75,200 .36
Edison International
(formerly SCEcorp.) 5,671,000 90,736 .44
Florida Progress Corp. 2,196,000 72,468 .35
Houston Industries Inc. 5,480,000 117,135 .57
Kansas City Power & Light Co. 1,400,000 36,750 .18
Northeast Utilities 5,300,000 84,138 .41
Oklahoma Gas and Electric Co. 400,000 15,100 .07
Pacific Gas and Electric Co. 4,050,000 92,137 .45
PECO Energy Co. 1,850,000 46,019 .22
(Photo 19)
Mount Vernon cornerstone
Market Percent
Value of Net
Common Stocks Shares (000) Assets
PP & L Resources, Inc. 4,700,000 $ 106,337 .51%
Public Service Enterprise
Group Inc. 3,820,000 99,797 .48
Puget Sound Power & Light Co. 810,000 19,237 .09
Southern Co. 1,000,000 22,000 .11
Unicom Corp. 455,000 12,512 .06
Union Electric Co. 2,100,000 81,112 .39
1,570,280 7.59
Total Energy 3,559,743 17.21
Materials
Building Materials & Components (.17%)
Masco Corp. 1,250,000 34,063 .17
Chemicals (3.72%)
E.I. du Pont de Nemours and Co. 6,800,000 546,550 2.64
Monsanto Co. 1,011,600 153,257 .74
Sherwin-Williams Co. 1,500,000 70,125 .34
769,932 3.72
Forest Products & Paper (2.51%)
International Paper Co. 9,200,000 366,850 1.77
Westvaco Corp. 4,938,850 153,104 .74
519,954 2.51
Total Materials 1,323,949 6.40
Capital Equipment
Aerospace & Military Technology (1.31%)
Boeing Co. 1,150,000 94,444 .46
Raytheon Co. 2,288,800 115,870 .56
United Technologies Corp. 550,000 60,775 .29
271,089 1.31
Data Processing & Reproduction (1.58%)
Xerox Corp. 2,225,000 $ 325,963 1.58%
Electrical & Electronics (1.16%)
Emerson Electric Co. 600,000 50,175 .24
General Electric Co. 2,450,000 189,875 .92
240,050 1.16
Electronic Components (.19%)
Thomas & Betts Corp. 1,020,000 40,163 .19
Industrial Components (2.36%)
Dana Corp. 2,540,000 84,455 .41
Eaton Corp. 2,100,000 127,050 .61
Goodyear Tire & Rubber Co. 1,300,000 67,762 .33
Johnson Controls, Inc. 1,076,400 76,963 .37
TRW Inc. 1,400,000 131,425 .64
487,655 2.36
Machinery & Engineering (.20%)
Parker Hannifin Corp. 1,000,000 42,250 .20
Total Capital Equipment 1,407,170 6.80
Consumer Goods
Appliances & Household Durables (.19%)
Maytag Corp. 1,800,000 38,700 .19
Beverages (.49%)
PepsiCo, Inc. 1,600,000 101,600 .49
(photo 20)
Mount Vernon
Market Percent
Value of Net
Common Stocks Shares (000) Assets
Food & Household Products (2.37%)
Colgate-Palmolive Co. 1,900,000 $ 145,587 .70%
CPC International Inc. 1,840,000 127,190 .62
General Mills, Inc. 3,915,600 217,316 1.05
490,093 2.37
Health & Personal Care (11.55%)
American Home Products Corp. 4,280,000 451,540 2.18
Bristol-Myers Squibb Co. 3,160,000 259,910 1.26
Johnson & Johnson 500,000 46,250 .22
Kimberly-Clark Corp. 1,850,000 134,356 .65
Eli Lilly and Co. 5,762,300 339,976 1.64
McKesson Corp. 750,000 35,719 .17
Merck & Co., Inc. 5,250,000 317,625 1.54
Pfizer Inc 1,110,600 76,493 .37
Pharmacia & Upjohn, Inc. 5,772,500 220,798 1.07
Schering-Plough Corp. 1,855,800 106,476 .51
Tambrands Inc. 835,400 39,995 .19
Warner-Lambert Co. 3,232,100 361,187 1.75
2,390,325 11.55
Recreation & Other Consumer Products (.18%)
Eastman Kodak Co. 500,000 38,250 .18
Textiles & Apparel (.17%)
VF Corp. 600,000 34,200 .17
Total Consumer Goods 3,093,168 14.95
Services
Broadcasting & Publishing (.67%)
Dow Jones & Co., Inc. 1,000,000 37,375 .18
Gannett Co., Inc. 900,000 61,537 .30
Times Mirror Co., Series A 900,386 38,379 .19
137,291 .67
Business & Public Services (4.68%)
Browning-Ferris Industries, Inc. 2,100,000 $ 67,725 .33%
Deluxe Corp. 600,000 21,000 .10
Dun & Bradstreet Corp. 6,721,400 409,165 1.98
Pitney Bowes Inc. 5,375,000 262,031 1.26
WMX Technologies, Inc. 6,000,000 208,500 1.01
968,421 4.68
Merchandising (3.39%)
J.C. Penney Co., Inc. 8,420,000 416,790 2.01
Walgreen Co. 2,200,000 70,400 .34
Wal-Mart Stores, Inc. 9,000,000 214,875 1.04
702,065 3.39
Telecommunications (10.61%)
ALLTEL Corp. 2,500,000 82,188 .40
Ameritech Corp. 5,776,000 337,174 1.63
AT&T Corp. 8,200,000 502,250 2.43
Bell Atlantic Corp. 1,910,000 124,150 .60
GTE Corp. 2,850,000 123,619 .60
NYNEX Corp. 1,200,000 58,950 .28
Pacific Telesis Group 13,265,000 454,326 2.19
SBC Communications Inc. 1,410,000 70,500 .34
Sprint Corp. 1,020,000 42,967 .21
U S WEST Communications
Group 12,170,000 398,568 1.93
2,194,692 10.61
Transportation: Rail (3.37%)
Conrail, Inc. 1,156,500 80,666 .39
Norfolk Southern Corp. 3,935,000 330,540 1.60
Union Pacific Corp. 4,200,000 286,125 1.38
697,331 3.37
Total Services 4,699,800 22.72
(Photo 21)
Pistol
Market Percent
Value of Net
Common Stocks Shares (000) Assets
Finance
Banking (15.72%)
Banc One Corp. 6,490,000 $ 225,528 1.09%
Bank of New York Co., Inc. 6,900,000 334,650 1.62
BankAmerica Corp. 2,275,000 172,331 .83
Bankers Trust New York Corp. 1,625,000 112,734 .54
Barnett Banks, Inc. 913,680 57,904 .28
Chase Manhattan Corp. 4,150,000 285,831 1.38
Comerica Inc. 950,000 41,325 .20
CoreStates Financial Corp 1,500,000 58,500 .28
First Chicago NBD Corp. 4,179,000 172,384 .83
First Union Corp. 2,850,000 175,275 .85
Fleet Financial Group, Inc. 5,690,000 244,670 1.18
KeyCorp 1,850,000 71,456 .35
J.P. Morgan & Co. Inc. 3,093,700 260,258 1.26
National City Corp. 6,688,379 246,634 1.19
NationsBank Corp. 3,100,000 247,225 1.20
Norwest Corp. 2,900,000 104,763 .51
PNC Bank Corp. 4,900,000 148,225 .72
Signet Banking Corp. 1,238,800 30,351 .15
SunTrust Banks, Inc. 1,855,000 130,777 .63
Wachovia Corp. 2,970,000 130,680 .63
3,251,501 15.72
Financial Services (3.26%)
American Express Co. 3,100,000 150,350 .73
Beneficial Corp. 2,000,000 110,500 .53
Federal National Mortgage Assn. 5,850,000 179,156 .87
Household International, Inc. 2,650,000 183,181 .88
Student Loan Marketing Assn. 700,000 51,275 .25
674,462 3.26
Insurance (5.47%)
Aetna Life and Casualty Co. 3,570,000 $ 254,363 1.23%
Allstate Corp. 5,325,000 207,009 1.00
American General Corp. 6,400,000 224,800 1.09
CIGNA Corp. 1,150,000 130,381 .63
General Re Corp. 200,000 28,575 .14
Lincoln National Corp. 2,600,000 125,450 .60
Marsh & McLennan
Companies, Inc. 915,000 86,010 .41
St. Paul Companies, Inc. 1,430,000 75,969 .37
1,132,557 5.47
Total Finance 5,058,520 24.45
Multi-Industry
Multi-Industry (2.12%)
AlliedSignal Inc. 800,000 46,500 .22
Minnesota Mining and
Manufacturing Co. 5,395,000 354,722 1.71
Whitman Corp. 1,525,000 38,506 .19
Total Multi-Industry 439,728 2.12
Miscellaneous
Common stocks in initial
period of acquisition 251,087 1.21
TOTAL INVESTMENT SECURITIES
(cost: $13,945,388,000) 19,833,165 95.86
Excess of United States Treasury
bills, cash, and receivables
over payables 856,237 4.14
NET ASSETS $20,689,402 100.00%
See Notes to Financial Statements
Financial Statements
Statement of Assets and Liabilities
April 30, 1996 (dollars in thousands)
Assets:
Investment securities at market
(cost: $13,945,388) $19,833,165
United States Treasury bills
(cost: $869,949) 869,886
Cash 242
Receivables for-
Sales of investments $246,412
Sales of Fund's shares 44,348
Dividends and interest 46,535 337,295
21,040,588
Liabilities:
Payables for-
Purchases of investments 321,679
Repurchases of Fund's shares 15,633
Management services 5,540
Accrued expenses 8,334 351,186
Net Assets at April 30, 1996
Equivalent to $22.77 per share on
908,578,891 shares of $1 par value
capital stock outstanding (authorized
capital stock - 1,000,000,000 shares) $20,689,402
Statement of Operations
for the year ended April 30, 1996 (dollars in thousands)
Investment Income:
Income:
Dividends $ 597,468
Interest 40,609 $ 638,077
Expenses:
Investment management fee 36,371
Business management fee 22,468
Distribution expenses 37,753
Transfer agent fee 13,950
Reports to shareholders 790
Registration statement and prospectus 481
Postage, stationery and supplies 3,077
Directors' and Advisory Board fees 366
Auditing and legal fees 121
Custodian fee 253
Other expenses 193 115,823
Net investment income 522,254
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 1,227,501
Net increase in unrealized appreciation
on investments:
Beginning of year 3,129,816
End of year 5,887,714
Net increase in unrealized
appreciation on investments 2,757,898
Net realized gain and unrealized
appreciation on investments 3,985,399
Net Increase in Net Assets
Resulting from Operations $4,507,653
Statement of Changes in Net Assets
Year ended April 30
(dollars in thousands) 1996 1995
Operations:
Net investment income $ 522,254 $ 468,176
Net realized gain on investments 1,227,501 381,437
Net change in unrealized
appreciation on investments 2,757,898 1,242,019
Net Increase in Net Assets
Resulting from Operations 4,507,653 2,091,632
Dividends and Distributions
Paid to Shareholders:
Dividends from net investment income (503,739) (459,553)
Distributions from net realized gain
on investments (879,840) (299,287)
Total Dividends and Distributions (1,383,579) (758,840)
Capital Share Transactions:
Proceeds from shares sold:
172,566,749 and 94,281,478
shares, respectively 3,741,201 1,668,041
Proceeds from shares issued in
reinvestment of net investment income
dividends and distributions of net
realized gain on investments:
61,317,672 and 40,423,865 shares,
respectively 1,323,273 698,310
Cost of shares repurchased:
89,667,381 and 95,400,583
shares, respectively (1,924,927) (1,678,501)
Net Increase in Net Assets Resulting
from Capital Share Transactions 3,139,547 687,850
Total Increase in Net Assets 6,263,621 2,020,642
Net Assets:
Beginning of year 14,425,781 12,405,139
End of year (including undistributed
net investment income: $71,944 and
$53,429, respectively) $20,689,402 $14,425,781
See Notes to Financial Statements
(Photo 22)
Silver coffee pot
Notes to Financial Statements
1 Washington Mutual Investors Fund (the "Fund") is registered under the
Investment Company Act of 1940 as an open-end, diversified management
investment company. The Fund's investment objective is to produce income
and to provide an opportunity for growth of principal consistent with sound
common stock investing. The following paragraphs summarize the significant
accounting policies consistently followed by the Fund in the preparation of
its financial statements:
Investment securities are stated at market value based upon
closing sales prices reported on a national securities exchange on the
last business day of the fiscal year or, for listed securities having
no sales reported, upon last-reported bid prices on that date.
Treasury bills with original or remaining maturities in excess of 60
days are valued at the mean of their quoted bid and asked prices
obtained from a major dealer in short-term securities. Treasury bills
with 60 days or less to maturity are valued at amortized cost, which
approximates market value.
As is customary in the mutual fund industry, securities transactions
are accounted for on the date the securities are purchased or sold.
Realized gains and losses from securities transactions are reported on an
identified cost basis. Dividend and interest income is reported on the
accrual basis. Dividends and distributions paid to shareholders are
recorded on the ex-dividend date.
Pursuant to the custodian agreement, the Fund receives credits against
its custodian fee for imputed interest on certain balances with the
custodian bank. The custodian fee of $253,000 included $114,000 that
was paid by these credits rather than in cash.
2 It is the Fund's policy to continue to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and
to distribute all of its net taxable income, including any net realized
gain on investments, to its shareholders. Therefore, no federal income tax
provision is required.
As of April 30, 1996, net unrealized appreciation on investments for
book and federal income tax purposes aggregated $5,887,714,000, of which
$5,995,907,000 related to appreciated securities and $108,193,000 related
to depreciated securities. There was no difference between book and tax
realized gains on securities transactions for the year ended April 30,
1996. The cost of portfolio securities for book and federal income tax
purposes was $14,815,337,000 at April 30, 1996.
3 Officers of the Fund received no remuneration from the Fund in such
capacities. Their remuneration was paid by Washington Management
Corporation (WMC), a wholly owned subsidiary of The Johnston-Lemon Group,
Incorporated. WMC, business manager of the Fund, was paid a fee of
$22,468,000 for business management services. The business management
agreement provides for monthly fees, accrued daily, based on an annual rate
of 0.25% of the first $125 million of net assets; 0.175% of such assets in
excess of $125 million but not exceeding $3 billion; 0.15% of such assets
in excess of $3 billion but not
(Photo 23)
Greenhouse at Mount Vernon
exceeding $5 billion; 0.135% of such assets in excess of $5 billion but not
exceeding $8 billion; 0.12% of such assets in excess of $8 billion but not
exceeding $12 billion; and 0.095% of such assets in excess of $12 billion.
Under this agreement all expenses chargeable to the Fund, including
compensation to the business manager, shall not exceed 1% of the average
net assets of the Fund on an annual basis. Johnston, Lemon & Co.
Incorporated, a wholly owned subsidiary of The Johnston-Lemon Group,
Incorporated, has informed the Fund that it has earned $746,000 on its
retail sales of shares and under the distribution plan of the Fund but
received no net brokerage commissions resulting from purchases and sales of
securities for the investment account of the Fund. All officers of the Fund
and four of its directors are affiliated with The Johnston-Lemon Group,
Incorporated. Capital Research and Management Company, investment manager
of the Fund, was paid a fee of $36,371,000 for investment management
services. The investment advisory agreement provides for monthly fees,
accrued daily, based on an annual rate of 0.25% of the first $125 million
of net assets; 0.225% of such assets in excess of $125 million but not
exceeding $3 billion; 0.21% of such assets in excess of $3 billion but not
exceeding $8 billion; and 0.20% of such assets in excess of $8 billion.
Pursuant to a Plan of Distribution, the Fund may expend up to 0.25% of
its average net assets annually for any activities primarily intended to
result in sales of Fund shares, provided the categories of expenses for
which reimbursement is made are approved by the Fund's Board of Directors.
Fund expenses under the Plan include payments to dealers to compensate them
for their selling and servicing efforts and reimbursements to American
Funds Distributors, Inc. (AFD), the principal underwriter of the Fund's
shares, for its activities and expenses related to the sales of Fund shares
or servicing of shareholder accounts. During the year ended April 30, 1996,
distribution expenses under the Plan were $37,753,000 including accrued
expenses of $6,606,000.
American Funds Service Company, the transfer agent for the Fund, was
paid a fee of $13,950,000. AFD has informed the Fund that it has received
$16,734,000 (after allowances to dealers) as its portion of the sales
charges paid by purchasers of the Fund's shares. Such sales charges are not
an expense of the Fund and, hence, are not reflected in the accompanying
statement of operations.
Directors and Advisory Board members of the Fund who are unaffiliated
with WMC may elect to defer part or all of the fees earned for such
services. Amounts deferred are not funded and are general unsecured
liabilities of the Fund. As of April 30, 1996, aggregate amounts deferred
and earnings thereon were $122,000.
4 As of April 30, 1996, accumulated undistributed net realized gain on
investments was $656,091,000 and additional paid-in capital was
$13,165,074,000.
The Fund made purchases and sales of investment securities, excluding
short-term securities, of $5,884,163,000 and $3,940,656,000, respectively,
during the year ended April 30, 1996.
(Photo 24)
Mount Vernon
Per-Share Data and Ratios
Year ended April 30
1996 1995 1994 1993 1992
Net Asset Value, Beginning of Year $18.87 $17.11 $17.59 $16.22 $15.02
Income from Investment Operations:
Net investment income .63 .63 .59 .56 .56
Net realized and unrealized gain
(loss) on investments 4.98 2.16 (.12) 1.55 1.50
Total income from investment
operations 5.61 2.79 .47 2.11 2.06
Less Distributions:
Dividends from net investment
income (.62) (.62) (.56) (.56) (.56)
Distributions from net
realized gains (1.09) (.41) (.39) (.18) (.30)
Total distributions (1.71) (1.03) (.95) (.74) (.86)
Net Asset Value, End of Year $22.77 $18.87 $17.11 $17.59 $16.22
Total Return<F1> 30.40% 17.01% 2.55% 13.36% 14.24%
Ratios/Supplemental Data:
Net assets, end of year
(in millions) $20,689 $14,426 $12,405 $11,306 $8,896
Ratio of expenses to average
net assets .66% .69% .69% .70% .74%
Ratio of net income to average
net assets 2.98% 3.57% 3.29% 3.33% 3.58%
Portfolio turnover rate 23.41% 25.45% 23.86% 18.60% 10.36%
[FN]
<F1> Excludes maximum sales charge of 5.75% of the Fund's offering price. Total
Return figures for 1992 and 1993 have been revised. Previously shown for these
years were 14.27% and 13.38%, respectively.
[/FN]
(Photo 25)
Dove of Peace Weathervane
Report of Independent Accountants
To the Board of Directors and Shareholders of Washington Mutual Investors
Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of
operations and of changes in net assets and the per-share data and ratios
present fairly, in all material respects, the financial position of
Washington Mutual Investors Fund, Inc. (the "Fund") at April 30, 1996, the
results of its operations, the changes in its net assets and the per-share
data and ratios for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and per-share
data and ratios (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
con-firmation of securities at April 30, 1996 by correspondence with the
custodian and brokers and the application of alternative auditing
procedures where confirmations from brokers were not received, provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
(Signature)
Los Angeles, California
May 31, 1996
Tax Information
(Unaudited)
During the fiscal year ended April 30, 1996, 98% of the dividends paid by
the Fund from net investment income earned qualified for the corporate
dividends-received deduction. Seven percent of such dividends paid by the
Fund represent interest on direct U.S. Treasury obligations. This
information is given to meet certain requirements of the Internal Revenue
Code.
(Photo 26)
Mansion cuploa, Mount Vernon
Directory of the Fund
Offices of the Fund and of the Business Manager
Washington Management Corporation
1101 Vermont Avenue, NW
Washington, DC 20005-3585
Investment Manager
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1443
135 South State College Boulevard
Brea, CA 92621-5804
Transfer Agent
American Funds Service Company
P.O. Box 2205
Brea, CA 92622-2205
P.O. Box 659522
San Antonio, TX 78265-9522
P.O. Box 6007
Indianapolis, IN 46206-6007
P.O. Box 2280
Norfolk, VA 23501-2280
Custodian
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, NY 10081-0001
Counsel
Thompson, O'Donnell, Markham, Norton & Hannon
805 Fifteenth Street, NW
Washington, DC 20005-2216
Independent Accountants
Price Waterhouse LLP
400 South Hope Street
Los Angeles, CA 90071-2889
Principal Underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1462
For information about your account or any of the Fund's services, please
contact your securities dealer or financial planner, or call the Fund's
transfer agent, toll-free, at 800/421-0180.
WMIF-011-0696
Photography courtesy of Mount Vernon Ladies' Association
Page
1 Clay bust, George Washington, modeled at Mount Vernon in 1785 by
French sculptor, Jean Antoine Houdon
2 Mount Vernon mansion from southeast
3 George Washington's surveying compass
4 French mantel clock in the Washingtons' bedchamber
6 "No estate...is more pleasantly situated..." George Washington, 1793
Washington's coat-of-arms in fireplace pediment, Front Parlor
7 English porcelain figures sent from London to George and Martha
Washington in 1759 Washington's swords exhibited at Mount Vernon
8 Chinese porcelain teapot bearing the insignia of the Society of the
Cincinnati Spinning room at Mount Vernon
9 George Washington's four-volume set of Don Quixote Brick wall and seed
house dividing kitchen garden and paddock at Mount Vernon
12 Washington's brass telescope
13 Mount Vernon cornerstone
14 Mount Vernon mansion flanked by office and kitchen dependencies and
facing a courtyard and bowling green
15 Washington's pistol, one of a pair made by Wooley
17 Silver coffee pot with Washington's coat-of-arms, made in Philadelphia
by Joseph Anthony, 1783
18 Interior of reconstructed greenhouse in George Washington's upper
garden
19 Palladian window and colonnade dominate north elevation of Mount
Vernon mansion
20 Dove of Peace weathervane made in Philadelphia, 1787, by Joseph
Rakestraw
Inside back cover, Mansion cupola, Mount Vernon's "Crown," restored in 1993
Cover photography, design and production by Alumena Inc., Washington, D.C.
This report is for the information of shareholders of Washington Mutual
Investors Fund, Inc., 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 June 30, 1996, this report must
be accompanied by an American Funds Group Statistical Update for the most
recently completed calendar quarter.
(Logo)
Printed on recycled paper
(Logo)
Washington Mutual Investors Fund
Washington Mutual Investors Fund, Inc.
1101 Vermont Avenue, NW
Washington, DC 20005
202/842-5665
