Washington Mutual Investors Fund
45 Years of Planning for the Future
[PHOTO]
[Logo]
The American Funds Group(R)
1997 Annual Report
Washington Mutual Investors Fund... seeks to provide income and growth of
principal through quality common stocks.
[Photo]
About our cover...
A stylized illustration of George Washington surveying his properties. At
one point he had accumulated 50,000 acres of land.
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 for periods ended March
31, 1997 (the most recent calendar quarter), assuming payment of the 5.75%
maximum sales charge at the beginning of the stated periods - 10 years:
+226.08%, or +12.55% a year; 5 years: +107.00%, or +15.66% a year; 12
months: +12.23%. Sales charges are lower for accounts of $50,000 or more.
THE FIGURES SHOWN 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 PERSON.
[PHOTO]
Fellow Shareholders
Washington Mutual Investors Fund enjoyed another excellent year in
fiscal 1997. For the 12 months ended April 30, the Fund's share value
increased 22.4% with all dividends reinvested. This follows gains of 30.4%
in 1996 and 17.0% in 1995. For the three years, the total increase amounts
to a little over 86% after taking into account the effects of compounding.
As gratifying as these results have been, we feel obliged, once again,
to sound a cautionary note. It is unrealistic to expect that your fund can
continue chalking up gains of this magnitude for any extended period. We
would remind all of our investors that nothing rises in a straight line
forever, and that there are going to be years when the share value
declines. Accordingly, we encourage you to maintain a long-term
perspective toward your holdings.
In fiscal 1997, the unmanaged Standard & Poor's 500 Composite Index
rose 25.1% on a total return basis. Both the market and the Fund had their
gains trimmed by a downswing in stock prices in March and April. This
correction was tied to an interest-rate increase by the Federal Reserve and
is discussed in greater detail in the Investment Manager's Report on page
2.
Debate continues over the extent to which the lengthy bull market has
resulted in an overvaluation of common stocks. While valuations seem high
by historical standards, the current level of valuations could be
considered somewhat more rational than in the past due to the greater
profit opportunities presented by ongoing corporate restructurings.
Whatever the outcome of this debate, Washington Mutual continues to be
guided by the strict criteria which must be met by all investments for its
portfolio. This approach has produced favorable long-term results for the
Fund in the past, and we are confident it will continue to do so in the
future.
During the fourth quarter of fiscal 1997, six new names were added to
the portfolio: Caterpillar, Echlin, Genuine Parts, Kellogg, Phelps Dodge
and Wisconsin Energy. Pacific Telesis no longer appears in the portfolio
because it was merged into SBC Communications in April. Also, five other
holdings were eliminated during the quarter: ACNielsen, Conrail, Lucent
Technologies, NCR and Union Pacific Resources Group.
Washington Mutual's family of investors now numbers about
one-and-a-quarter million accounts, including 157,000 trustees, guardians
and custodians and 85,000 corporate pension and retirement funds. Your
management is grateful for the continued support shown by all of our
institutional and individual shareholders.
On page 6 you will find an article entitled "Planning Ahead," which
highlights the early efforts of George Washington as a surveyor and relates
those efforts to the need for long-range planning, including planning for
retirement. We hope you find the article interesting and informative.
Questions and comments from shareholders are always welcome. We look
forward to reporting to you again in September.
Cordially,
(Signatures)
Stephen Hartwell James H. Lemon, Jr. Harry J. Lister
Chairman Vice Chairman President
June 3, 1997
[PHOTO]
Investment Manager's Report
After pushing upward to new highs, the U.S. stock market recorded a decline
toward the end of fiscal 1997. Between mid-March and mid-April, the market
fell 9.8% as measured by the Dow Jones Industrial Average, and 9.3% as
measured by the S&P 500. (Both indexes are unmanaged.) The correction,
however, was short-lived. Stock prices subsequently staged an impressive
rally, regaining all of the lost ground in a matter of weeks.
The brief but sharp decline came on the heels of a four-month span
when the U.S. economy showed extraordinary strength. Government figures
for December and the first quarter of calendar 1997 suggested that business
might be expanding at a pace that could lead to a significant increase in
inflation. The Federal Reserve Board reacted by raising the federal funds
rate _ the rate banks charge each other for overnight loans _ for the
first time in more than two years. This led to an increase in prime
lending rates. While not entirely unanticipated, the Fed's action
nonetheless unsettled a great many investors and sent stock prices
tumbling.
While the goal of the Federal Reserve is to moderate the recent surge
in business activity and forestall inflationary pressures, any strategy to
institute a series of interest rate hikes would not be without risk to the
economic expansion. However, the Fed clearly believes that the greater
danger would be to allow wages and prices to accelerate. From a positive
standpoint, the March 25 hike can be viewed as part of a mid-course
correction designed to keep the six-year-old expansion moving forward,
albeit at a slower pace. This is the second such correction engineered by
the nation's central bank during the current business cycle. The first, in
the winter of 1994-95, proved successful in curtailing inflationary
concerns without stifling the economy.
The Impact on Washington Mutual
In absolute terms, fiscal 1997 was another banner year for your Fund.
However, the stock market's response to the March interest-rate hike had a
definite bearing on our 12-month results. When the market turned down,
financial and yield-oriented issues such as banks and utilities were among
the hardest hit securities. This type of investment has served Washington
Mutual well in the past and continues to figure prominently in its
portfolio, which is oriented toward income as well as growth. For the
month of April, however, these interest-rate-sensitive stocks fared poorly,
causing the Fund to trail the S&P 500 by 2.7%. Had it not been for that
one month, Washington Mutual would have outpaced the index for the fiscal
year.
Relative to the vast majority of its peers, your Fund continues to do
well. According to Lipper Analytical Services, Washington Mutual's return
ranked in the top 10% (5th out of 54) among growth-and-income funds in
existence throughout the past 30 years; for the ten years ended April 30,
it ranked in the top 19% (24th out of 130) among comparable funds; for the
five years, in the top 15% (32nd out of 215); and for the 12 months ended
April 30, in the top 17% (91st out of 546). (Lipper rankings do not
reflect the effects of sales charges.)
Diversification and Strict Standards
The portfolio which begins on page 10 shows how the Fund's assets were
diversified at fiscal year-end. The largest industry positions were
Banking, with 15.2% of net assets, followed by Health & Personal Care
(11.9%), Energy Sources (11.1%), Telecommunications (8.6%) and Electric &
Gas Utilities (8.3%). Our five largest individual investments on April 30
were Atlantic Richfield, DuPont, Ameritech, AT&T and Texaco.
We will continue to focus our research efforts on identifying
long-term investment opportunities which meet Washington Mutual's strict
standards. 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.
[Chart 1]
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,
1997.
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, 1997.
As you can see, that $10,000 investment in Washington Mutual, with all
distributions reinvested, would have grown to $2,763,026. Over the same
period, that $10,000 would have grown to $1,708,803 in the unmanaged
Standard & Poor's 500 Composite Index of U.S. common stocks and to $100,562
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, 1987. At that time, according to the
table, the value of the investment illustrated here was $771,947. Since
then it has gone up almost fourfold to $2,763,026. Thus, in the same
10-year period, the value of your 1987 investment _ regardless of its size
_ has almost quadrupled.
[Chart 2 as described above]
[Footnotes to Chart]
<F1> Results 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 of
$50,000 or more. There is no sales charge on dividends or capital gain
distributions that are reinvested in additional shares. The maximum initial
sales charge was 8.5% prior to July 1, 1988. Results shown do not take into
account income or capital gain taxes.
<F2> Capital Value includes capital gain distributions of $146,397, but
does not reflect income dividends of $162,059 taken in cash.
<F3> Total Value includes reinvested dividends of $666,340 and reinvested
capital gain distributions of $621,556.
<F4> Since the Fund's inception on July 31, 1952.
During the period illustrated, stock prices fluctuated and were higher at
the end than at the beginning. These results should not be considered as a
representation of the results which may be realized from an investment made
in the Fund today.
<F5> Based on figures, supplied by the U.S. League of Savings Institutions
and the Federal Reserve Board, that reflect all kinds of savings deposits,
including longer term certificates. Unlike investments in the Fund, such
deposits are insured and, if held to maturity, offer a guaranteed return
of principal and a fixed rate of interest, but no opportunity for capital
growth. Maximum allowable interest rates were imposed by law until 1983.
[Photo]
Planning Ahead
An early start: George Washington received his formal commission as a
surveyor from the College of William and Mary in Williamsburg, on July 20,
1749. He traveled to Culpeper County, Virginia, to take his oath and
conduct his first licensed survey. He was all of seventeen years old.
Many people are unaware that George Washington started his career as a
surveyor - mapping out boundaries, plotting routes and planning cities.
Indeed, his surveying tools were among his most cherished possessions and
may still be seen today at his home at Mount Vernon, Virginia. During and
after his Presidency, he continued to think and plan ahead; he was
instrumental in choosing the site of the national capital city that would
bear his name and in selecting surveyors and architects to make the plan a
reality.
The groundwork for an investment plan requires similar forethought.
You've probably heard the expression "people don't plan to fail; they
simply fail to plan." Have you ever set out for a destination only to
realize you've misplaced the map? Or failed to buy one? There's nothing
worse than knowing you are supposed to be at a certain place at a specific
time and you end up either late or lost!
While it often seems easier to view investments in the short term, it
is far more important to keep your long-term goal in sight. Not straying
from your investment plans is the best thing you can do to attain your
goal. Once you've decided on your destination, you will want to figure out
the safest and best way to reach it.
People save for a variety of reasons, but one very common reason is
retirement. Many younger people are beginning to realize that Social
Security will not provide enough income in their golden years and will have
to be supplemented by a plan dedicated to ensuring financial independence
at retirement. In this 45th year of the Fund's operation, it is fitting to
take the hypothetical example of a 20-year-old who, on the inception date
of the Fund, July 31, 1952, was able to start saving for
_______
[Photo]
Plotting it out: George Washington spent many of his early years mapping
the extensive lands owned by his father, as well as neighboring farms in
the area in which he grew up.
[Photo]
Auspicious beginnings: George Washington was chosen by Lord Fairfax to
assist in laying out the map of the busy new port town of Alexandria,
Virginia.
[Photo]
Far-reaching: The moccasin-worn trail that the young surveyor widened
through the Maryland Appalachians became the National Pike, America's first
road to the West. It is now US Route 40 (paralleled by Interstate 70).
__________
retirement with the minimum $250 initial investment, adding $50 a month
over the years. Now nearing retirement age at 65, this retiree, through
the use of a systematic investment plan, is able to enjoy a nest egg of
some $1,397,869 which includes reinvested dividends and capital gain
distributions. That's an average annual compound return of 13.4%, better
than the Standard & Poor's 500 average annual compound return of 12.0% (and
$869,511) for the same period (inception date through April 30, 1997).
Another example of a long-term savings strategy is an investment plan
to save for college tuition. The skyrocketing costs for both public and
private institutions may seem like the least of concerns to a family just
starting out, but they will become more and more pressing as the children
approach college age.
The cost of a college education keeps rising. For the 1996-97 college
year, the average four-year price tag for public and private institutions
was $42,211 and $89,072, respectively. To accumulate those sums in
Washington Mutual by the end of 1996, a person would have had to invest $29
a month (for a public university) or $62 a month (for a private college)
throughout the past 18 years, starting on December 31, 1978. Or they would
have had to invest a lump sum equal to $2,420 (for public) or $5,106 (for
private) at the start of the 18-year period. These figures assume
reinvestment of all dividends and capital gain distributions and an average
compound return of 17.2% a year. This represents Washington Mutual's
average return over the 18 years, but it is substantially higher than the
13.4% compound return generated by the Fund over its 45-year lifetime and
also higher than the 12.0% compound return recorded by the S&P 500 over the
Fund's lifetime.
These examples, of course, are compiled with the benefit of hindsight.
Past results are no guarantee of future performance and the results
achieved by the Fund in the past may or may not be duplicated in the
[Photo]
Long-term view: As President, he personally selected surveyors and
architects to lay out the Federal City of Washington, D.C., instructing
artist-engineer Pierre-Charles L'Enfant "to delineate a grand and general
plan" for the formation of the Capital City's public spaces, roads and
neighborhoods.
future. What is a certainty, however, is that preparation for the future
begins in the present. If you haven't done so already, sit down with your
broker or financial planner and determine your financial objectives and
chart a course to meet them, whether by setting aside a lump-sum investment
now or starting with a smaller amount and adding to it on a monthly,
quarterly or even yearly basis. The benefits of time will compound your
investment.
Even the best-laid plans can suffer setbacks. While it is impossible
to accurately predict the time and severity of a setback in the financial
markets, history suggests that they will occur. One should make every
effort to be prepared for them and take them in stride. Setbacks can cause
investors to reassess their financial destination and try to find an
alternate route - a route that might ultimately lead them astray.
Inexperienced investors are frequently concerned with the timing of their
investments; but for the long-term investor, time _ not timing _ is the
more important consideration. Therefore: don't fail to plan and don't let
your plan fail!
[Photo]
A man, a plan, a canal:
Washington! George Washing-ton's interest in navigation led him to map out
an inland waterway route to the Mississippi River from Washington, D.C.,
the canal section of which is the precursor of what is today the Chesapeake
and Ohio Canal National Park (a route whose 170-mile length he had
navigated on the paralleling Potomac River as a younger man).
Investment Portfolio
April 30, 1997
Five Largest Investment Categories
Percent of
Net Assets
Finance 25.13%
Energy 19.42
Services 18.42
Consumer Goods 16.36
Capital Equipment 7.20
Ten Largest Individual Holdings
Percent of
Net Assets
Atlantic Richfield 3.15%
DuPont 2.69
Ameritech 2.43
AT&T 2.41
Texaco 2.31
Warner-Lambert 2.23%
Amoco 2.21
U S WEST Communications 2.15
Bank of New York 1.94
Eli Lilly 1.87
<TABLE>
<CAPTION>
Market Percent
Value of Net
Common Stocks Shares (000) Assets
<S> <S> <C> <C> <C>
Energy Energy Sources (11.11%)
Amoco Corp. 7,450,000 $ 623,006 2.21%
Atlantic Richfield Co. 6,510,000 886,174 3.15
Chevron Corp. 5,700,000 390,450 1.39
Exxon Corp. 4,800,000 271,800 .97
Kerr-McGee Corp. 2,300,000 138,862 .49
Mobil Corp. 475,000 61,750 .22
Texaco Inc. 6,175,000 651,463 2.31
Unocal Corp. 2,740,100 104,466 .37
3,127,971 11.11
Utilities: Electric & Gas (8.31%)
American Electric Power Company, Inc. 3,750,000 151,875 .54
Atlantic Energy, Inc. 1,650,000 26,606 .09
Baltimore Gas and Electric Co. 2,000,000 51,000 .18
Brooklyn Union Gas Co. 900,000 24,638 .09
Carolina Power & Light Co. 3,500,000 119,000 .42
Central and South West Corp. 2,650,000 53,331 .19
CINergy Corp. 700,000 23,275 .08
Consolidated Edison Co. of New York, Inc. 6,000,000 166,500 .59
Consolidated Natural Gas Co. 2,100,000 105,787 .37
Dominion Resources, Inc. 595,000 20,453 .07
DTE Energy Co. 3,465,000 92,689 .33
Duke Power Co. 4,150,000 182,081 .65
Edison International 6,347,000 133,287 .47
Florida Progress Corp. 4,835,800 148,701 .53
FPL Group, Inc. 1,300,000 58,012 .21
Houston Industries Inc. 5,480,000 109,600 .39
Northeast Utilities 4,555,000 37,579 .13
OGE Energy Corp. 400,000 16,600 .06
PanEnergy Corp. 2,769,400 122,546 .43
PECO Energy Co. 4,000,000 79,000 .28%
PG&E Corp. 3,950,000 94,800 .34
PP & L Resources, Inc. 4,700,000 92,237 .33
Public Service Enterprise Group Inc. 3,820,000 92,158 .33
Puget Sound Power & Light Co. 1,000,000 24,500 .09
Southern Co. 8,000,000 163,000 .58
Union Electric Co. 3,900,000 138,938 .49
Wisconsin Energy Corp. 550,000 13,750 .05
2,341,943 8.31
Total Energy 5,469,914 19.42
Materials Building Materials & Components (.02%)
Masco Corp. 150,000 5,662 .02
Chemicals (3.93%)
E.I. du Pont de Nemours and Co. 7,142,500 757,998 2.69
Monsanto Co. 3,050,000 130,388 .46
PPG Industries, Inc. 2,350,000 127,781 .46
Sherwin-Williams Co. 3,000,000 90,750 .32
1,106,917 3.93
Forest Products & Paper (2.47%)
International Paper Co. 10,450,000 441,513 1.57
Louisiana-Pacific Corp. 5,380,000 100,202 .35
Westvaco Corp. 5,501,350 154,038 .55
695,753 2.47
Metals: Nonferrous (.23%)
Phelps Dodge Corp. 850,000 65,237 .23
Total Materials 1,873,569 6.65
Capital Aerospace & Military Technology (1.24%)
Equipment Boeing Co. 585,820 57,776 .20
Raytheon Co. 4,750,000 207,219 .74
United Technologies Corp. 1,100,000 83,188 .30
348,183 1.24
Data Processing & Reproduction (.93%)
Xerox Corp. 4,240,000 260,760 .93
Electrical & Electronics (.70%)
Emerson Electric Co. 1,700,000 86,275 .31
General Electric Co. 1,000,000 110,875 .39
197,150 .70
Electronic Components (.16%)
Thomas & Betts Corp. 1,020,000 46,282 .16
Energy Equipment (.18%)
Dresser Industries, Inc. 1,700,000 50,788 .18%
Industrial Components (3.12%)
Dana Corp. 3,150,000 100,406 .35
Eaton Corp. 2,100,000 157,238 .56
Echlin Inc. 3,000,000 97,875 .35
Genuine Parts Co. 5,587,500 180,895 .64
Goodyear Tire & Rubber Co. 2,200,000 115,775 .41
Rockwell International Corp. 1,235,000 82,128 .29
TRW Inc. 2,800,000 145,950 .52
880,267 3.12
Machinery & Engineering (.87%)
Caterpillar Inc. 1,816,100 161,633 .57
Ingersoll-Rand Co. 675,000 33,159 .12
Parker Hannifin Corp. 1,000,000 49,750 .18
244,542 .87
Total Capital Equipment 2,027,972 7.20
Consumer Appliances & Household Durables (.08%)
Goods Maytag Corp. 1,000,000 22,875 .08
Beverages (.90%)
PepsiCo, Inc. 7,257,100 253,092 .90
Food & Household Products (3.21%)
Colgate-Palmolive Co. 800,000 88,800 .32
CPC International Inc. 2,120,200 175,181 .62
General Mills, Inc. 5,115,600 317,167 1.13
Kellogg Co. 2,207,700 153,987 .55
Procter & Gamble Co. 750,000 94,313 .33
Sara Lee Corp. 1,750,000 73,500 .26
902,948 3.21
Health & Personal Care (11.87%)
American Home Products Corp. 7,600,000 503,500 1.79
Bristol-Myers Squibb Co. 4,450,000 291,475 1.03
Johnson & Johnson 1,000,000 61,250 .22
Kimberly-Clark Corp. 4,440,000 227,550 .81
Eli Lilly and Co. 6,002,300 527,452 1.87
McKesson Corp. 375,000 27,141 .10
Merck & Co., Inc. 4,700,000 425,350 1.51
Pfizer Inc 2,001,600 192,154 .68
Pharmacia & Upjohn, Inc. 6,339,500 187,808 .67
Schering-Plough Corp. 2,750,000 220,000 .78
Tambrands Inc. 1,067,800 50,186 .18
Warner-Lambert Co. 6,414,200 628,591 2.23
3,342,457 11.87
Recreation & Other Consumer Products (.15%)
Eastman Kodak Co. 500,000 $ 41,750 .15%
Textiles & Apparel (.15%)
VF Corp. 600,000 43,275 .15
Total Consumer Goods 4,606,397 16.36
Services Broadcasting & Publishing (.37%)
Dow Jones & Co., Inc. 602,500 24,401 .09
Gannett Co., Inc. 900,000 78,525 .28
102,926 .37
Business & Public Services (3.65%)
Browning-Ferris Industries, Inc. 8,880,000 251,970 .89
Cognizant Corp. 5,356,100 174,743 .62
Deluxe Corp. 600,000 18,375 .07
Dun & Bradstreet Corp. 6,938,300 170,856 .61
Pitney Bowes Inc. 2,600,000 166,400 .59
WMX Technologies, Inc. 8,306,200 243,994 .87
1,026,338 3.65
Merchandising (3.81%)
Albertson's, Inc. 5,465,000 180,345 .64
J.C. Penney Co., Inc. 10,242,900 489,098 1.74
Walgreen Co. 880,100 40,485 .14
Wal-Mart Stores, Inc. 12,900,000 364,425 1.29
1,074,353 3.81
Telecommunications (8.59%)
Ameritech Corp. 11,212,300 685,352 2.43
AT&T Corp. 20,250,000 678,375 2.41
Bell Atlantic Corp. 1,472,100 99,735 .35
GTE Corp. 2,000,000 91,750 .33
SBC Communications Inc. 3,707,175 205,748 .73
Sprint Corp. 1,200,000 52,650 .19
U S WEST Communications Group 17,270,000 606,609 2.15
2,420,219 8.59
Transportation: Rail (2.00%)
CSX Corp. 1,100,000 51,288 .18
Norfolk Southern Corp. 2,520,000 226,485 .81
Union Pacific Corp. 4,470,200 284,975 1.01
562,748 2.00
Total Services 5,186,584 18.42
Finance Banking (15.23%)
Banc One Corp. 3,330,100 141,113 .50
Bank of New York Co., Inc. 13,800,000 545,100 1.94
BankAmerica Corp. 2,275,000 265,891 .94
Bankers Trust New York Corp. 1,940,000 157,868 .56
Barnett Banks, Inc. 1,850,000 90,419 .32
Chase Manhattan Corp. 3,900,000 361,238 1.28%
Comerica Inc. 546,200 31,953 .11
CoreStates Financial Corp 6,050,000 306,281 1.09
First Chicago NBD Corp. 5,300,000 298,125 1.06
First Union Corp. 2,575,000 216,300 .77
Fleet Financial Group, Inc. 6,717,400 409,761 1.45
KeyCorp 2,000,000 104,250 .37
J.P. Morgan & Co. Inc. 2,530,000 257,744 .92
National City Corp. 2,350,000 114,562 .41
NationsBank Corp. 5,700,000 344,137 1.22
Norwest Corp. 4,000,000 199,500 .71
PNC Bank Corp. 4,400,000 180,950 .64
Signet Banking Corp. 1,400,000 43,225 .15
SunTrust Banks, Inc. 2,000,000 101,500 .36
Wachovia Corp. 2,053,700 120,141 .43
4,290,058 15.23
Financial Services (3.70%)
American Express Co. 3,300,000 217,388 .77
Beneficial Corp. 2,548,180 163,084 .58
Federal National Mortgage Assn. 7,300,000 300,212 1.07
Household International, Inc. 4,103,300 361,090 1.28
1,041,774 3.70
Insurance (6.20%)
Aetna Inc. 2,400,000 218,700 .78
Allstate Corp. 5,400,000 353,700 1.25
American General Corp. 5,400,000 235,575 .84
CIGNA Corp. 1,050,000 157,894 .56
General Re Corp. 1,905,000 318,611 1.13
Lincoln National Corp. 2,600,000 145,600 .52
Marsh & McLennan Companies, Inc. 1,100,000 132,550 .47
St. Paul Companies, Inc. 2,725,000 182,575 .65
1,745,205 6.20
Total Finance 7,077,037 25.13
Multi-Industry Multi-Industry (.56%)
AlliedSignal Inc. 1,075,000 77,669 .28
Minnesota Mining and Manufacturing Co. 500,000 43,500 .15
Whitman Corp. 1,625,000 37,578 .13
Total Multi-Industry 158,747 .56
Miscellaneous Common stocks in initial period of
acquisition 738,790 2.62
TOTAL INVESTMENT SECURITIES
(cost: $18,455,562,000) 27,139,010 96.36
Excess of United States Treasury bills,
cash, and receivables over payables 1,025,986 3.64
NET ASSETS $28,164,996 100.00%
See Notes to Financial Statements
</TABLE>
Financial Statements
Statement of Assets and Liabilities
April 30, 1997 (dollars in thousands)
Assets:
Investment securities at market
(cost: $18,455,562) $27,139,010
United States Treasury bills
(cost: $1,000,298) 1,000,364
Cash 106
Receivables for-
Sales of investments $281,244
Sales of Fund's shares 48,675
Dividends and interest 58,279 388,198
28,527,678
Liabilities:
Payables for-
Purchases of investments 327,084
Repurchases of Fund's shares 17,288
Management services 6,980
Accrued expenses 11,330 362,682
Net Assets at April 30, 1997-
Equivalent to $25.93 per share on
1,086,206,095 shares of $1 par value
capital stock outstanding (authorized
capital stock - 2,000,000,000 shares) $28,164,996
Statement of Operations
for the year ended April 30, 1997 (dollars in thousands)
Investment Income:
Income:
Dividends $ 721,101
Interest 51,652 $ 772,753
Expenses:
Investment management fee 49,383
Business management fee 28,014
Distribution expenses 52,997
Transfer agent fee 16,906
Reports to shareholders 790
Registration statement and prospectus 1,857
Postage, stationery and supplies 3,837
Directors' and Advisory Board fees 478
Auditing and legal fees 124
Custodian fee 297
Other expenses 180 154,863
Net investment income 617,890
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 1,465,728
Net unrealized appreciation:
Beginning of year 5,887,714
End of year 8,683,514
Net change in unrealized
appreciation 2,795,800
Net realized gain and change in
unrealized appreciation 4,261,528
Net Increase in Net Assets
Resulting from Operations $4,879,418
Statement of Changes in Net Assets
Year ended April 30
(dollars in thousands) 1997 1996
Operations:
Net investment income $ 617,890 $ 522,254
Net realized gain on investments 1,465,728 1,227,501
Net change in unrealized
appreciation on investments 2,795,800 2,757,898
Net Increase in Net Assets
Resulting from Operations 4,879,418 4,507,653
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (607,336) (503,739)
Distributions from net realized gain
on investments (1,174,688) (879,840)
Total Dividends and Distributions (1,782,024) (1,383,579)
Capital Share Transactions:
Proceeds from shares sold:
215,746,819 and 172,566,749
shares, respectively 5,311,956 3,741,201
Proceeds from shares issued in rein-
vestment of net investment income
dividends and distributions of net
realized gain on investments:
67,871,052 and 61,317,672 shares,
respectively 1,671,650 1,323,273
Cost of shares repurchased:
105,990,667 and 89,667,381
shares, respectively (2,605,406) (1,924,927)
Net Increase in Net Assets Resulting
from Capital Share Transactions 4,378,200 3,139,547
Total Increase in Net Assets 7,475,594 6,263,621
Net Assets:
Beginning of year 20,689,402 14,425,781
End of year (including undistributed
net investment income: $82,498 and
$71,944, respectively) $28,164,996 $20,689,402
See Notes to Financial Statements
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
each valuation date or, for listed securities having no sales
reported, upon last-reported bid prices on that date. Treasury bills
with 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 $297,000 included $22,000 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, 1997, net unrealized appreciation on investments for
book and federal income tax purposes aggregated $8,683,514,000, of which
$9,009,917,000 related to appreciated securities and $326,403,000 related
to depreciated securities. There was no difference between book and tax
realized gains on securities transactions for the year ended April 30,
1997. The cost of portfolio securities for book and federal income tax
purposes was $19,455,860,000 at April 30, 1997.
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
$28,014,000 for business management services. The business management
agreement provides for monthly fees, accrued daily, based on an annual rate
of 0.175% of the first $3 billion of net assets; 0.15% of such assets in
excess of $3 billion but not 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
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$12 billion; 0.095% of such assets in excess of $12 billion but not
exceeding $21 billion, and 0.075% of such assets in excess of $21 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 $815,000 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 five 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 $49,383,000 for investment
management services. The investment advisory agreement provides for
monthly fees, accrued daily, based on an annual rate of 0.225% of the first
$3 billion of net assets; 0.21% of such assets in excess of $3 billion but
not exceeding $8 billion; 0.20% of such assets in excess of $8 billion but
not exceeding $21 billion; and 0.195% of such assets in excess of $21
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,
1997, distribution expenses under the Plan were $52,997,000 including
accrued expenses of $9,282,000.
American Funds Service Company, the transfer agent for the Fund, was
paid a fee of $16,906,000. AFD has informed the Fund that it has received
$22,625,000 (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, 1997, aggregate amounts deferred
and earnings thereon were $215,000.
4 As of April 30, 1997, accumulated undistributed net realized gain on
investments was $947,123,000 and additional paid-in capital was
$17,365,655,000.
The Fund made purchases and sales of investment securities, excluding
short-term securities, of $7,778,144,000 and $4,733,698,000, respectively,
during the year ended April 30, 1997.
The Fund owns 5.4% of the outstanding voting securities of Westvaco
Corp. and is thus considered an affiliate as defined in the Investment
Company Act of 1940.
<TABLE>
<CAPTION>
Per-Share Data and Ratios
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Year ended April 30
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $22.77 $18.87 $17.11 $17.59 $16.22
Income from Investment Operations:
Net investment income .62 .63 .63 .59 .56
Net realized and unrealized gain
(loss) on investments 4.36 4.98 2.16 (.12) 1.55
Total income from investment
operations 4.98 5.61 2.79 .47 2.11
Less Distributions:
Dividends from net investment income (.62) (.62) (.62) (.56) (.56)
Distributions from net realized gains (1.20) (1.09) (.41) (.39) (.18)
Total distributions (1.82) (1.71) (1.03) (.95) (.74)
Net Asset Value, End of Year $25.93 $22.77 $18.87 $17.11 $17.59
Total Return<F1> 22.43% 30.40% 17.01% 2.55% 13.36%
Ratios/Supplemental Data:
Net assets, end of year (in millions) $28,165 $20,689 $14,426 $12,405 $11,306
Ratio of expenses to average
net assets .64% .66% .69% .69% .70%
Ratio of net income to average
net assets 2.56% 2.98% 3.57% 3.29% 3.33%
Average commissions paid<F2> 5.29cents 6.24cents 6.87cents 6.85cents 7.49cents
Portfolio turnover rate 20.41% 23.41% 25.45% 23.86% 18.60%
<FN>
<F1> Excludes maximum sales charge of 5.75% of the Fund's offering price.
Total Return figure for 1993 has been revised. Previously shown for that
year was 13.38%.
<F2> Brokerage commissions paid on portfolio transactions increase the cost
of securities purchased or reduce the proceeds of securities sold, and are
not separately reflected in the Fund's Statement of Operations. Shares
traded on a principal basis are excluded.
</FN>
</TABLE>
Report of Independent Accountants
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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, 1997, 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
confirmation of securities at April 30, 1997 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.
(Signature)
Los Angeles, California
May 30, 1997
Tax Information
(Unaudited)
During the fiscal year ended April 30, 1997, 100% of the dividends paid by
the Fund from net investment income earned qualified for the corporate
dividends-received deduction. Six 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.
Directors
Stephen Hartwell
Chairman of the Board
Chairman,
Washington Management
Corporation
John A. Beck
Of Counsel,
Reed Smith Shaw & McClay
Thomas J. Owen
President and Chief
Executive Officer,
Cafritz Company
Margita E. White
President,
Association for Maximum
Service Television Inc.
James H. Lemon, Jr.
Vice Chairman of the Board
Chairman and
Chief Executive Officer,
The Johnston-Lemon
Group, Incorporated
Fred J. Brinkman
Retired Senior Partner,
Arthur Andersen, LLP
Jean Head Sisco
Partner,
Sisco Associates
Stephen G. Yeonas
Chairman and
Chief Executive Officer,
Stephen G. Yeonas Company
Harry J. Lister
President of the Fund
Director and President,
Washington Management Corporation
Daniel J. Callahan III
Vice Chairman and
Treasurer,
The Morris and Gwendolyn
Cafritz Foundation
T. Eugene Smith
President,
T. Eugene Smith Inc.
Cyrus A. Ansary
President,
Investment Services
International Co.
James C. Miller III
Counselor,
Citizens for a Sound Economy
Leonard P. Steuart II
Vice President,
Steuart Investment Company
Advisory Board
Charles A. Bowsher
Retired Comptroller General of the United States
J. Knox Singleton
President,
INOVA Health Systems
Mary K. Bush
President,
Bush & Company
William B. Snyder
Chairman, President and
Chief Executive Officer,
Southern Heritage
Holdings, Inc. and
Merastar Corporation
Vernon W. Holleman, Jr.
President,
Vernon W. Holleman, Jr., Co.
Robert F. Tardio
Independent Consultant
Katherine D. Ortega
Former Treasurer of the United States
Directors Emeritus
Bernard J. Nees
Chairman Emeritus
Director Emeritus and
Executive Vice President,
Johnston, Lemon & Co.
Incorporated
Charles T. Akre
Of Counsel,
Miller & Chevalier,
Chartered
Dr. Nathan A. Baily
Management, Marketing
and Education Consultant
Frank M. Ewing
Chairman and President,
Frank M. Ewing Co., Inc.
Other Officers
Howard L. Kitzmiller
Senior Vice President,
Secretary and Assistant Treasurer of the Fund
Director, Senior Vice President, Secretary and
Assistant Treasurer,
Washington Management Corporation
Ralph S. Richard
Vice President and
Treasurer of the Fund
Executive Vice President,
Johnston, Lemon & Co.
Incorporated
Lois A. Erhard
Vice President of the Fund
Vice President,
Washington Management Corporation
Michael W. Stockton
Assistant Vice President,
Assistant Secretary and
Assistant Treasurer of the Fund
Assistant Vice President and Assistant Treasurer,
Washington Management Corporation
We welcome Messrs. Brinkman, Callahan and Steuart, who were recently
appointed to the Board of Directors and Ms. Ortega and Messrs. Bowsher and
Singleton, who were appointed to the Advisory Board.
Offices of the Fund and of the Business Manager
Washington Management Corporation
1101 Vermont Avenue, NW
Washington, DC 20005-3585
202/842-5665
Investment Manager
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1443
135 South State College Boulevard
Brea, CA 92821-5804
Transfer Agent
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 2205
Brea, CA 92822-2205
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
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 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.
Photographs courtesy of Mount Vernon Ladies' Association unless otherwise
noted.
Page
1. Survey of turnip field by George Washington, February 27, 1747
2. George Washington's surveying compass
3. Segment of cover illustration
6. Engraving, "Washington the Surveyor" by Bancroft
7. Top-Five Mount Vernon farms (Courtesy of Huntington Library)
1798 map of town of Alexandria
8. "Washington Reviewing the Western Army at Fort Cumberland, Maryland." By
Kemmelmeyer, 1800.(C) (Courtesy of Metropolitan Museum of Art)
9. Top-The Planning of Washington, 1791, 1931 oil on canvas by Garnet W.
Jex, The George Washington University Permanent Collection (Courtesy The
Dimock Gallery)
Engraving, "Washington Crossing the Allegheny," December 1753, with
frontiersman Christopher Gist
10. George Washington's crest
17. George Washington's drafting tools, comprised of a parallel rule,
square, ivory scales, protractor, dividers, inking pen and porcelain cups
in leather case with doeskin lining
18. Evolution of Mount Vernon mansion
19. George Washington's signature on Potomac Company manuscript, October
1787
Inside Back Cover. Engraving "Washington As a Surveyor" by Darley
Design and Production by Alumena, Inc., Washington, D.C .
Cover Illustration: Ralph Butler
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, 1997, this report must
be accompanied by an American Funds Group Statistical Update for the most
recently completed calendar quarter.
WMIF-011-0697 (Logo)
Printed on recycled paper
[Photo]
Washington Mutual Investors Fund, Inc.
1101 Vermont Avenue, NW
Washington, DC 20005
202/842-5665
