WASHINGTON MUTUAL INVESTORS FUND, INC.
PART B
STATEMENT OF ADDITIONAL INFORMATION
June 22, 1997
(As amended October 20, 1997)
This document is not a prospectus but should be read in conjunction with the
current prospectus dated June 22, 1997 of Washington Mutual Investors Fund,
Inc. (the fund or WMIF). The prospectus may be obtained from your investment
dealer or financial planner or by writing to the fund at the following address:
WASHINGTON MUTUAL INVESTORS FUND, INC.
Attention: Secretary
1101 Vermont Avenue, N.W.
Washington, D.C. 20005
(202) 842-5665
Shareholders who purchase shares at net asset value through eligible retirement
plans should note that not all of the services or features described below may
be available to them, and they should contact their employer for details.
TABLE OF CONTENTS
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<CAPTION>
ITEM PAGE NO.
<S> <C>
The fund and Its Investment Objective and Policies 1
Investment Restrictions 2
Fund Directors, Advisory Board Members and Officers 3
Director and Advisory Board Compensation 3
Management 8
Dividends, Distributions and Federal Taxes 10
Purchase of Shares 12
Redeeming Shares 17
Shareholder Account Services and Privileges 19
Execution of Portfolio Transactions 20
General Information 20
Investment Results 21
Financial Statements Attached
</TABLE>
THE FUND AND ITS INVESTMENT OBJECTIVE AND POLICIES
The fund has Investment Standards based upon criteria established by the United
States District Court for the District of Columbia for determining eligibility
under the Court's Legal List procedure which was in effect for many years. The
fund has an Eligible List of investments, originally based upon the Court's
List of Legal Investments for Trust Funds in the District of Columbia. The
Investment Adviser is required to select the fund's investments exclusively
from the Eligible List. The Investment Adviser monitors the Eligible List and
makes recommendations to the Board of Directors of changes necessary for
continued compliance with the fund's Investment Standards. Any issue deleted
from the Eligible List and held by the fund must be sold by the fund as soon as
deemed practical by the Investment Adviser but in no event later than six
months following such deletion.
It is believed that in applying the above disciplines and procedures, the fund
makes available to pension and profit-sharing trustees and other fiduciaries a
prudent stock investment and an assurance of continuity of investment quality
which it has always been the policy of the fund to provide. However, fiduciary
investment responsibility and the Prudent Investor Rule involve a mixed
question of law and fact which cannot be conclusively determined in advance.
Moreover, recent changes to the Prudent Investor Rule in some jurisdictions
speak to an allocation of funds among a variety of investments. Therefore, each
fiduciary should examine the common stock portfolio of the fund to see that it,
along with other investments, meets the requirements of the specific trust.
INVESTMENT RESTRICTIONS
The fund has adopted certain fundamental policies and investment restrictions
for the protection of shareholders that may not be changed without shareholder
approval. Approval requires the affirmative vote of 67% or more of the
voting securities present at a meeting of shareholders, provided more than 50%
of such securities are represented at the meeting or the vote of more than
50% of the outstanding voting securities, whichever is less.
The fund may not:
Purchase any security which is not legal for the investment of trust funds in
the District of Columbia;
Purchase or sell real estate or commodities;
Make a purchase which would cause more than 5% of the value of the total
assets of the Fund to be invested in the securities of any one issuer;
Make a purchase which would cause more than 10% of the outstanding securities
of any issuer to be held in the portfolio of the fund;
Invest in companies for the purpose of exercising control or management and
may not invest in securities of other investment companies;
Purchase securities on margin or sell securities short;
Lend money;
Borrow money except for temporary or emergency purposes and not for investment
purposes and then only from banks in an amount not exceeding at the time of
borrowing 10% of the fund's net assets, nor pledge or hypothecate more than 10%
of its net assets and then only to secure such borrowing, provided that the
fund may not purchase portfolio securities during any period when loans
amounting to 5% or more of the fund's net assets are outstanding;
Purchase any securities which would cause 25% or more of the value of its
total assets at the time of such purchase to be invested in the securities of
one or more issuers having their principal business activities in the same
industry. The Board of Directors, acting upon the recommendations of the
Advisory Board, may from time to time establish lower limitations on the amount
of investment in specific industries.
It is the declared policy of the Fund to maintain a fully invested position
with cash equivalents not to exceed 5% of total capital assets, which shall be
invested in short-term U.S. Treasury or other U.S.
Government guaranteed short-term obligations, at the discretion of the Fund's
Treasurer or Investment Adviser, after allowing for sales of portfolio
securities and Fund shares within thirty days and the accumulation of cash
balances representing undistributed net investment income and realized capital
gains.
Notwithstanding the restriction on investing in the securities of other
investment companies, the fund may invest in securities of other investment
companies if deemed advisable by its officers in connection with the
administration of a deferred compensation plan adopted by Directors pursuant to
an exemptive order granted by the Securities and Exchange Commission.
The fund does not act as an underwriter of securities issued by others, except
to the extent that the disposal of an investment position may technically
constitute the fund an underwriter as the term is defined in the Securities Act
of 1933.
FUND DIRECTORS, ADVISORY BOARD MEMBERS AND OFFICERS
(WITH THEIR PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS)#
DIRECTOR AND ADVISORY BOARD COMPENSATION
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH PRINCIPAL OCCUPATION(S) AGGREGATE COMPENSATION TOTAL COMPENSATION TOTAL
NUMBER
REGISTRANT DURING PAST 5 YEARS# (INCLUDING VOLUNTARILY DEFERRED FROM ALL FUNDS OF
FUND
COMPENSATION/1/) FROM FUND AFFILIATED WITH THE BOARDS ON
DURING FISCAL YEAR ENDED AMERICAN FUNDS WHICH
4/30/97 GROUP INDIVIDUAL
SERVES/2/
<S> <C> <C> <C> <C> <C>
Charles T. Akre Director Emeritus Miller & Chevalier, $17,000 $17,000 1
700 John Ringling Blvd. Chartered,
Apt. 1108 Of Counsel
Sarasota, FL 34236
Age: 87
Cyrus A. Ansary Director Investment Services $50,400 $54,100 3
1725 K Street, N.W., Suite 410 International Co.,
Washington, D.C. 20006 President
Age: 63
Nathan A. Baily Director Emeritus Management, Marketing, $16,000 $16,000 1
5516 Greystone Street Education Consultant
Chevy Chase, MD 20815
Age: 76
John A. Beck*{ Director The Johnston-Lemon none/4/ none/4/ 1
Age: 71 Group, Incorporated,
Vice Chairman
Fred J. Brinkman*{ Director Washington Management none/4/ none/4/ 1
Age: 68 Corporation, Senior
Financial Consultant
Charles A. Bowsher Advisory Board Retired Comptroller $3,000/6/ $3,000 1
4503 Boxwood Road Member General of
Bethesda, MD 20816 The United States
Age: 66
Mary K. Bush Advisory Board Bush & Company, $6,000 $6,000 1
4201 Cathedral Ave., N.W. Member President
Number 1016 East
Washington, D.C. 20016
Age: 49
Daniel J. Callahan III Director The Morris & Gwendolyn $24,700/5/ $24,700 1
1825 K Street, N.W. Cafritz Foundation,
Washington, D.C. 20006 Vice Chairman &
Age: 65 Treasurer
Frank M. Ewing Director Emeritus Frank M. Ewing Co., Inc. $17,500 $19,600 3
P. O. Box 2248 President and Chairman of
Gaithersburg, MD 20886 the Board
Age: 82
Stephen Hartwell*{ Chairman of the Board Washington Management none/4/ none/4/ 3
Age: 82 Corporation, Chairman of
the Board
Vernon W. Holleman, Jr. Advisory Board Vernon W. Holleman, Jr. $5,000/3/ $5,000 1
5550 Friendship Drive Member Company, President
Suite 502
Chevy Chase, MD 20815
Age: 61
James H. Lemon, Jr.*{ Vice Chairman of the The Johnston-Lemon none/4/ none/4/ 3
Age: 61 Board Group, Incorporated,
Chairman of the Board
and
Chief Executive Officer
Harry J. Lister*{ President Washington Management none/4/ none/4/ 3
Age: 61 Corporation, President
and Director
James C. Miller III Director Citizens for a Sound $49,500 $49,500 1
1250 H Street, N.W., Suite 700 Economy, Counselor
Washington, D.C. 20005
Age: 54
Bernard J. Nees Chairman Emeritus of Johnston, Lemon & Co. none/4/ none/4/ 1
1101 Vermont Avenue, N.W. the Board Incorporated,
Washington, D.C. 20005 Executive Vice President
Age: 89 and
Director Emeritus
Katherine D. Ortega Advisory Board Former Treasurer of the $2,000/6/ $2,000 1
800 25th Street, NW Member United States
Suite 1003
Washington, D.C. 20038
Age: 63
Thomas J. Owen Director The CAFRITZ Company, $47,800 $47,800 1
6006 Onondaga Road President and Chief
Bethesda, MD 20816 Executive Officer
Age: 62
Mr. John Knox Singleton Advisory Board President, INOVA $3,000/6/ $3,000 1
8001 Braddock Road Member Health System
Springfield, VA 22151
Age:
Jean Head Sisco Director Sisco Associates, $51,500 $55,200 3
2517 Massachusetts Avenue, N.W. Management Consulting
Washington, D.C. 20008 Firm, Partner
Age: 71
T. Eugene Smith Director T. Eugene Smith, Inc., $50,200 $53,900 3
666 Tintagel Lane President
McLean, VA 22101
Age: 66
William B. Snyder Advisory Board Southern Heritage $6,000 $6,000 1
P. O. Box 30690 Member Holdings, Inc.
Bethesda, MD 20824 and Merastar Corporation
Age: 67 Chairman, President and
CEO
Leonard P. Steuart II Director Steuart Investment $22,700/5/ $22,700 1
5454 Wisconsin Avenue Company, Vice President
Suite 504
Chevy Chase, MD 20815
Age: 62
Robert F. Tardio Advisory Board Independent Consultant $5,000 $5,000 1
11517 Highland Farm Road Member
Potomac, MD 20854
Age: 68
Margita E. White Director Association for Maximum $46,100 $46,100 1
1776 Massachusetts Avenue, N.W. Service Television Inc.,
Suite 310 President
Washington, D.C. 20036
Age: 59
Stephen G. Yeonas Director Stephen G. Yeonas $51,500/3/ $55,200 3
1355 Beverly Road, Suite 102 Company, Chairman of
McLean, VA 22101 the Board and Chief
Age: 72 Executive Officer
</TABLE>
# Positions within the organizations listed may have changed during this
period.
* Directors who are considered "interested persons" as defined in the 1940 Act,
on the basis of their affiliation with the fund's Business Manager, Washington
Management Corporation.
{ Address is 1101 Vermont Avenue, N.W., Washington, D.C. 20005.
/1/Amounts may be deferred by eligible Directors and Advisory Board members
under a non-qualified deferred compensation plan adopted by the fund in 1993.
Deferred amounts accumulate at an earnings rate determined by the total return
of one or more funds in The American Funds Group as designated by the Director
or Advisory Board member.
/2/In each instance where a Director of the fund serves on other funds
affiliated with The American Funds Group, such service is as a trustee of The
Tax-Exempt Fund of Maryland and The Tax-Exempt Fund of Virginia, both
portfolios of The American Funds Tax-Exempt Series I. Earnings from these
funds reflect the latest fiscal year (8/1/95 -- 7/31/96).
/3/Since the plan's adoption, the total amount of deferred compensation accrued
by the fund (plus earnings thereon) through 3/31/97, the latest calendar
quarter, for participants is as follows: Director Stephen G. Yeonas ($192,882),
and Advisory Board member Vernon W. Holleman, Jr. ($18,046). Amounts deferred
and accumulated earnings thereon are not funded and are general unsecured
liabilities of the fund until paid to the participant.
/4/John A. Beck, Fred J. Brinkman, Stephen Hartwell, James H. Lemon, Jr. and
Harry J. Lister are affiliated with the Business Manager and, accordingly,
receive no remuneration from the fund.
/5/Messrs. Callahan and Steuart each received $8,250 as members of the fund's
Advisory Board. Both were elected Directors of the fund effective January 1,
1997. The remaining compensation shown reflects Director's fees.
/6/Mr. Bowsher, Mrs. Ortega and Mr. Singleton were elected to the Advisory
Board on March 21, 1997 and, therefore, did not receive a full year of
compensation.
OTHER OFFICERS
(WITH THEIR PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS)#
1101 VERMONT AVENUE, N.W., WASHINGTON, D.C. 20005.
HOWARD L. KITZMILLER (Age: 67)
Senior Vice President, Secretary
and Assistant Treasurer
Washington Management Corporation,
Senior Vice President, Secretary,
Assistant Treasurer and Director
RALPH S. RICHARD (Age: 78)
Vice President and Treasurer
Johnston, Lemon & Co. Incorporated,
Executive Vice President and Director
LOIS A. ERHARD (Age: 45)
Vice President
Washington Management Corporation,
Vice President
MICHAEL W. STOCKTON (Age: 30)
Assistant Vice President, Assistant Secretary and Assistant Treasurer
Washington Management Corporation,
Assistant Vice President and Assistant Treasurer
# Positions within the organizations listed may have changed during this
period.
All of the officers listed are officers of the Business Manager. Most of the
Directors and officers are also officers and/or directors and/or trustees of
one or more of the other funds for which Washington Management Corporation
serves as Business Manager. All unaffiliated Directors receive from the fund
$7,500 quarterly and an attendance fee of $2,000 for each board meeting
attended. The chairman of a committee receives an attendance fee of $1,000 and
committee members receive $700 for each committee meeting attended. No
Director compensation is paid by the fund to any officer or Director who is a
director, officer or employee of the Business Manager, the Investment Adviser
or affiliated companies. Directors Emeritus receive from the fund $3,750
quarterly plus $500 per Board meeting attended.
The Board of Directors has established an Advisory Board whose members
are, in the judgment of the Directors, highly knowledgeable about political and
economic matters. In addition to holding meetings with the Board of Directors,
members of the Advisory Board, while not participating in specific investment
decisions, consult from time to time with the Investment Adviser, primarily
with respect to trade and business conditions. Members of the Advisory Board,
however, possess no authority or responsibility with respect to the fund's
investments or management. Members of the Advisory Board receive $2,000
semi-annually plus $1,000 per meeting attended.
Directors and Advisory Board Members, but not Directors Emeritus, may
elect, on a voluntary basis, to defer all or a portion of these fees through a
deferred compensation plan in effect for the fund. The fund also reimburses
certain meeting-related expenses of the Directors, Directors Emeritus and
Advisory Board members. For deferred compensation, see footnote 3 at page 7.
As of May 31, 1997 the directors, officers and Advisory Board members, as a
group, owned beneficially or of record less than 1% of the outstanding shares.
MANAGEMENT
BUSINESS MANAGER - Since its inception, the fund has operated under a Business
Management Agreement with Washington Management Corporation or its
predecessors, 1101 Vermont Avenue, N.W., Washington, D.C. 20005.
The Business Manager provides all services required to carry on the fund's
general administrative and corporate affairs. These services include all
executive personnel, clerical staff, office space and equipment, arrangements
for and supervision of all shareholder services, Federal and state regulatory
compliance and responsibility for accounting and record keeping facilities. The
Business Manager provides similar services to other mutual funds.
The fund pays all expenses not specifically assumed by the Business Manager,
including, but not limited to, custodian, transfer and dividend disbursing
agency fees and expenses; costs of the designing, printing, and mailing of
reports, prospectuses, proxy statements, and notices to its shareholders;
expenses of shareholders' meetings; taxes; insurance; expenses of the issuance,
sale (including stock certificates, registration and qualification expenses),
or repurchase of shares of the fund; legal and auditing expenses; expenses
pursuant to the fund's Plan of Distribution; fees and expense reimbursements
paid to Directors and Advisory Board members; association dues; and costs of
stationery
and forms prepared exclusively for the fund.
The Business Manager has agreed to pay to the fund annually, immediately after
the fiscal year end, the amount by which the total expenses of the fund for any
particular fiscal year, except taxes and interest, exceed an amount equal to 1%
of the average net assets of the fund for the year. No such reimbursement was
necessary in fiscal 1997. The Business Manager receives a monthly fee, accrued
daily, at the annual rate of 0.175% of the first $3 billion of the fund's net
assets, 0.15% of net assets in excess of $3 billion but not exceeding $5
billion, 0.135% of net assets in excess of $5 billion but not exceeding $8
billion, 0.12% of net assets in excess of $8 billion but not exceeding $12
billion, 0.095% of nets assets in excess of $12 billion but not exceeding $21
billion and 0.075% of net assets in excess of $21 billion but not exceeding
$34 billion and 0.06% of net assets in excess of $34 billion.
During the fiscal years ended April 30, 1997, 1996 and 1995, the Business
Manager's fees amounted to $28,014,000, $22,468,000 and $18,180,000,
respectively.
INVESTMENT ADVISER - The Investment Adviser, founded in 1931, maintains
research facilities in the U.S. and abroad (Los Angeles, San Francisco, New
York, Washington, D.C., London, Geneva, Singapore, Hong Kong and Tokyo), with a
staff of professionals, many of whom have a number of years of investment
experience. The Investment Adviser is located at 333 South Hope Street, Los
Angeles, CA 90071, and at 135 South State College Boulevard, Brea, CA 92821.
The Investment Adviser's professionals travel several million miles a year,
making more than 5,000 research visits in more than 50 countries around the
world. The Investment Adviser believes that it is able to attract and retain
quality personnel. The Investment Adviser is a wholly owned subsidiary of The
Capital Group Companies, Inc.
An affiliate of the Investment Adviser compiles indices for major stock markets
around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for more than $100 billion of stocks,
bonds and money market instruments and serves over five million investors of
all types throughout the world. These investors include privately owned
businesses and large corporations, as well as schools, colleges, foundations
and other non-profit and tax-exempt organizations.
The Investment Adviser manages the investment portfolio of the fund subject to
the policies established by the Board of Directors and places orders for the
fund's portfolio securities transactions. The Investment Adviser receives a
monthly fee, accrued daily, at the annual rate of 0.225% of the first $3
billion of the fund's net assets, 0.21% of net assets in excess of $3 billion
but not exceeding $8 billion, 0.20% of net assets in excess of $8 billion but
not exceeding $21 billion, 0.195% of net assets in excess of $21 billion
but not exceeding $34 billion and 0.19% in excess of $34 billion.
During the fiscal years ended April 30, 1997, 1996 and 1995, the Investment
Adviser's fees amounted to $49,383,000, $36,371,000, and $27,370,000,
respectively.
BUSINESS MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENT - The current
Business Management Agreement and Investment Advisory Agreement, unless sooner
terminated, will continue in effect until August 31, 1997 and may be renewed
from year to year thereafter, provided that any such renewal has been
specifically approved at least annually by (i) the Board of Directors, or by
the vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the fund, and (ii) the vote of a majority of directors who are
not parties to the Agreements or interested persons (as defined in the 1940
Act) of any such party, cast in person at a meeting called for the purpose of
voting on such approval. The Agreements provide that the Investment Adviser
and Business Manager have no liability to the fund for their acts or omissions
in the performance of their obligations to the fund not involving willful
misfeasance, bad faith, gross negligence or reckless disregard of their
obligations under the Agreements. The Agreements also provide that either party
has the right to terminate them, without penalty, upon sixty (60) days' written
notice to the other party and that the Agreements automatically terminate in
the event of their assignment (as defined in the 1940 Act).
PRINCIPAL UNDERWRITER - American Funds Distributors, Inc. (the Principal
Underwriter) is the principal underwriter of the fund's shares. The Principal
Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92821, 8000 IH-10 West, San Antonio, TX
78230, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240 and 5300 Robin
Hood Road, Norfolk, VA 23513. The fund has adopted a Plan of Distribution (the
Plan), pursuant to rule 12b-1 under the 1940 Act (see "Principal Underwriter"
in the prospectus). The Principal Underwriter receives amounts payable
pursuant to the Plan (described below) and commissions consisting of that
portion of the sales charge remaining after the discounts which it allows to
investment dealers. Commissions retained by the Principal Underwriter on sales
of fund shares during the fiscal year ended April 30, 1997 amounted to
$22,625,000 after allowance of $117,572,000 to dealers including $815,000
earned by Johnston, Lemon & Co. Incorporated on its retail sales of shares and
the Distribution Plan of the fund. During the fiscal years ended April 30,
1996 and 1995, the Principal Underwriter retained $16,734,000 and $7,073,000,
respectively.
As required by rule 12b-1, the Plan (together with the Principal Underwriting
Agreement) has been approved by the full Board of Directors and separately by a
majority of the Directors who are not "interested persons" of the fund and who
have no direct or indirect financial interest in the operation of the Plan or
the Principal Underwriting Agreement, and the Plan has been approved by the
vote of a majority of the outstanding voting securities of the fund. The
officers and Directors who are "interested persons" of the fund may be
considered to have a direct or indirect financial interest in the operation of
the Plan. Potential benefits of the Plan to the fund include improved
shareholder services, savings to the fund in transfer agency costs, savings to
the fund in advisory fees and other expenses, benefits to the investment
process from growth or stability of assets and maintenance of a financially
healthy management organization. The selection and nomination of directors who
are not "interested persons" of the fund are committed to the discretion of the
directors who are not "interested persons" during the existence of the Plan.
Expenses under the Plan are reviewed quarterly and the Plan must be considered
for renewal annually by the Board of Directors.
Under the Plan the fund may expend up to 0.25% of its average net assets
annually to finance any activity which is primarily intended to result in the
sale of fund shares, provided the fund's Board of Directors has approved the
category of expenses for which payment is being made. The following categories
of expenses have been approved: service fees for qualified dealers; dealer
commissions and wholesaler compensation on sales of shares exceeding $1 million
(including purchases by any employer-sponsored 403(b) plan or purchases by any
defined contribution plan qualified under Section 401(a) of the Internal
Revenue Code including a 401(k) plan with 200 or more eligible employees);
expenses of the Principal Underwriter for providing shareholder services
(including supporting those by dealers); and payments to wholesalers for
efforts to support shareholder services by dealers. Only expenses incurred
during the preceding 12 months and accrued while the Plan is in effect are paid
by the fund. During the fiscal year ended April 30, 1997, the fund paid or
accrued $52,997,000 under the Plan, for compensation to dealers. As of April
30, 1997, distribution expenses accrued but unbilled amounted to $9,282,000.
The Glass-Steagal Act and other applicable laws, among other things, generally
prohibit commercial banks from engaging in the business of underwriting,
selling or distributing securities, but permit banks to make shares of mutual
funds available to their customers and to perform administrative and
shareholder servicing functions. However, judicial or administrative decisions
or interpretations of such laws, as well as changes in either federal or state
statutes or regulations relating to the permissible activities of banks or
their subsidiaries or affiliates, could prevent a bank from continuing to
perform all or a part of its servicing activities. If a bank were prohibited
from so acting, shareholder clients of such bank would be permitted to remain
shareholders of the fund and alternate means of servicing such shareholders
would be sought. In such event, changes in the operation of the fund might
occur and shareholders serviced by such bank might no longer be able to avail
themselves of any automatic investment or other services then being provided by
such bank. It is not expected that shareholders would suffer adverse financial
consequences as a result of any of these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and financial
institutions may be required to be registered as dealers pursuant to state law.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
The fund intends to meet all the requirements and has elected the tax status of
a "regulated investment company" under the provisions of Subchapter M of the
Internal Revenue Code of 1986 (the Code). Under Subchapter M, if the fund
distributes within specified times at least 90% of the sum of its investment
company taxable investment income, it will be taxed only on the portion of the
investment company taxable income which it retains.
To qualify as a regulated investment company, the fund must (a) derive at least
90% of its gross income from dividends, interest, certain payments with respect
to securities loans and gains from the sale or other disposition of stock or
securities or other income derived with respect to its business of investing in
such stock or securities; (b) derive less than 30% of its gross income from the
sale or other disposition of stock or securities held for less than three
months; and (c) diversify its holdings so that at the end of each fiscal
quarter, (i) at least 50% of the market value of the fund's assets is
represented by cash, U.S. Government securities and other securities which must
be limited, in respect of any one issuer, to an amount not greater than 5% of
the fund's assets and 10% of the outstanding voting securities of such issuer,
and (ii) not more than 25% of the value of its assets is invested in the
securities of any one issuer.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gain net income (both long-term and
short-term) for the one-year period ending on October 31 (as though the
one-year period ending on October 31 were the regulated investment company's
taxable year), and (iii) the sum of any untaxed, undistributed net investment
income and capital gain net income of the regulated investment company for
prior periods. The term "distributed amount" generally means the sum of (i)
amounts actually distributed by the fund from its current year's ordinary
income and capital gain net income and (ii) any amount on which the fund pays
income tax during the periods described above. The fund intends, to the extent
practicable, to meet these distribution requirements to minimize or avoid the
excise tax liability.
The fund intends to distribute to shareholders all of its capital gain net
income. If the net asset value of shares of the fund should, by reason of a
distribution of realized capital gains, be reduced below a shareholder's cost,
such distribution would to that extent be taxable to the shareholder even
though it is a return of capital to that shareholder, and a sale of shares by a
shareholder at net asset value at that time would establish a capital loss for
federal tax purposes. In particular, investors should consider the tax
implications of purchasing shares just prior to a dividend or distribution
record date. Those investors purchasing shares just prior to such a date will
then receive a partial return of capital upon the dividend or distribution,
which will nevertheless be taxable to them as an ordinary or capital gains
dividend.
Corporate shareholders of the fund may be eligible for the dividends-received
deduction on the dividends (excluding the net capital gains dividends) paid by
the fund to the extent that the fund's income is derived from dividends (which,
if received directly, would qualify for such deduction) received from domestic
corporations. In order to quality for the dividends-received deduction, a
corporate shareholder must hold the fund shares paying the dividends upon which
the deduction is based for at least 46 days.
Dividends generally are taxable to shareholders at the time they are paid.
However, dividends declared payable as of a date in October, November and
December are deemed under the Code to have been received by the shareholder on
December 31 of that calendar year and subject to income tax for that year even
though the dividend is actually paid no later than the following January.
Under the Code, if, within 90 days after fund shares are purchased, such shares
are redeemed and either reinstated in the same fund or exchanged for shares of
any other fund in The American Funds Group and the otherwise applicable sales
charge is waived, then the amount of the sales charge previously incurred in
purchasing Fund shares shall not be taken into account for purposes of
determining the amount of any gain or loss on the redemption, but will be
treated as having been incurred in the purchase of the fund shares acquired in
the reinstatement or exchange.
The tax status of a gain realized on a redemption will not be affected by
exercise of the reinstatement privilege, but a loss may be nullified if you
reinvest in the same fund within 30 days.
Under the Code, distributions of net investment income by the fund to a
shareholder who, as to the U.S., is a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, foreign corporation or foreign
partnership (a "foreign shareholder") will be subject to U.S. withholding tax
(at a rate of 30% or lower treaty rate). Withholding will not apply if a
dividend paid by the fund to a non-U.S. shareholder is "effectively connected"
with a U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens, U.S. residents or domestic
corporations will apply. However, if the distribution is effectively connected
with the conduct of the non-U.S. shareholder's trade or business within the
U.S., the distribution would be included in the net income of the shareholder
and subject to U.S. income tax at the applicable marginal rate. Distributions
of capital gains not effectively connected with a U.S. trade or business are
not subject to the withholding, but if the non-U.S. shareholder was an
individual who was physically present in the U.S. during the tax year for more
than 182 days and such shareholder is nonetheless treated as a nonresident
alien, the distributions would be subject to a 30% tax.
As of the date of this statement of additional information, the maximum federal
individual stated tax rate applicable to ordinary income is 39.6% (effective
tax rates may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual tax rate applicable to net
capital gain is 28%; and the maximum corporate tax applicable to ordinary
income and net capital gain is 35%. However, to eliminate the benefit of lower
marginal corporate income tax rates, corporations which have income in excess
of $100,000 for a taxable year will be required to pay an additional income tax
liability of up to $11,700 and corporations which have taxable income in excess
of $15,000,000 for a taxable year will be required to pay an additional amount
of tax of up to $100,000. Naturally, the amount of tax payable by an
individual will be affected by a combination of tax law rules covering, E.G.,
deductions, credits, deferrals, exemptions, sources of income and other
matters. Under the Code, an individual is entitled to establish an IRA each
year (prior to the tax return filing deadline for that year) whereby earnings
on investments are tax-deferred. In addition, in some cases, the IRA
contribution itself may be deductible.
The foregoing is limited to a summary discussion of federal taxation and should
not be viewed as a comprehensive discussion of all provisions of the Code
relevant to investors. Dividends and capital gain distributions may also be
subject to state or local taxes. Shareholders should consult their own tax
advisers for additional details as to their particular tax situations.
PURCHASE OF SHARES
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METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
See "Investment Minimums and $50 minimum (except where a lower
Fund Numbers" for initial minimum is noted under "Investment
investment minimums. Minimums and Fund Numbers").
By contacting Visit any investment dealer who is Mail directly to your investment dealer's address
your investment registered in the state where the printed on your account statement.
dealer purchase is made and who has a
sales agreement with American
Funds Distributors.
By mail Make your check payable to the fund and mail to the address indicated on the account application. Please indicate
an investment dealer on the account application. Fill out the account additions form at the
bottom of a recent account statement, make your check payable to the fund, write your
account number on your check, and mail the check and form in the envelope provided with your account statement.
By telephone Please contact your investment dealer to open account, then follow the procedures for additional investments.
Complete the "Investments by Phone"
section on the account application or
American FundsLink Authorization Form.
Once you establish the privilege, you, your financial advisor or any person with your
account information can call American FundsLineR and make investments by telephone (subject to conditions noted in "Shareholder
Account Services and Privileges -
Telephone Redemptions and Exchanges" below).
By wire Call 800/421-0180 to obtain Your bank should wire your additional
your account number(s), if investments in the same manner as
necessary. Please indicate an described under "Initial Investment."
investment dealer on the
account. Instruct your bank to
wire funds to:
Wells Fargo Bank
155 Fifth Street
Sixth Floor
San Francisco, CA 94106
(ABA #121000248)
For credit to the account of:
American Funds Service
Company
a/c #4600-076178
(fund name)
(your fund acct. no.)
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER.
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INVESTMENT MINIMUMS AND FUND NUMBERS - Here are the minimum initial investments
required by the funds in The American Funds Group along with fund numbers for
use with our automated phone line, American FundsLineR (see description below):
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FUND MINIMUM FUND
INITIAL NUMBER
INVESTMENT
STOCK AND STOCK/BOND FUNDS
AMCAP FundR 02
$1,000
American Balanced FundR 11
500
American Mutual FundR 03
250
Capital Income BuilderR 12
1,000
Capital World Growth and Income Fund$ 33
1,000
EuroPacific Growth FundR 16
250
Fundamental Investors$ 10
250
The Growth Fund of AmericaR 05
1,000
The Income Fund of AmericaR 06
1,000
The Investment Company of AmericaR 04
250
The New Economy FundR 14
1,000
New Perspective FundR 07
250
SMALLCAP World FundR 35
1,000
Washington Mutual Investors Fund$ 01
250
BOND FUNDS
American High-Income Municipal Bond FundR 40
1,000
American High-Income Trust$ 21
1,000
The Bond Fund of America$ 08
1,000
Capital World Bond FundR 31
1,000
Intermediate Bond Fund of America$ 23
1,000
Limited Term Tax-Exempt Bond Fund of America$ 43
1,000
The Tax-Exempt Bond Fund of AmericaR 19
1,000
The Tax-Exempt Fund of CaliforniaR* 20
1,000
The Tax-Exempt Fund of MarylandR* 24
1,000
The Tax-Exempt Fund of VirginiaR* 25
1,000
U.S. Government Securities Fund$ 22
1,000
MONEY MARKET FUNDS
The Cash Management Trust of AmericaR 09
2,500
The Tax-Exempt Money Fund of America$ 39
2,500
The U.S. Treasury Money Fund of America$ 49
2,500
___________
*Available only in certain states.
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For retirement plan investments, the minimum is $250, except that the money
market funds have a minimum of $1,000 for individual retirement accounts
(IRAs). Minimums are reduced to $50 for purchases through "Automatic
Investment Plans" (except for the money market funds) or to $25 for purchases
by retirement plans through payroll deductions and may be reduced or waived for
shareholders of other funds in The American Funds Group. TAX-EXEMPT FUNDS
SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS. The minimum is $50 for
additional investments (except as noted above).
SALES CHARGES- The sales charges you pay when purchasing the stock, stock/bond,
and bond funds of The American Funds Group are set forth below. The money
market funds of The American Funds Group are offered at net asset value. (See
"Investment Minimums and Fund Numbers" for a listing of the funds.)
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AMOUNT OF PURCHASE SALES CHARGE AS DEALER
AT THE OFFERING PRICE PERCENTAGE OF THE: CONCESSION
AS PERCENTAGE
OF THE
OFFERING
PRICE
NET AMOUNT OFFERING
INVESTED PRICE
STOCK AND STOCK/BOND FUNDS
Less than $50,000
6.10% 5.75% 5.00%
$50,000 but less than $100,000
4.71 4.50 3.75
BOND FUNDS
Less than $25,000
4.99 4.75 4.00
$25,000 but less than $50,000
4.71 4.50 3.75
$50,000 but less than $100,000
4.17 4.00 3.25
STOCK, STOCK/BOND, AND BOND FUNDS
$100,000 but less than $250,000
3.63 3.50 2.75
$250,000 but less than $500,000
2.56 2.50 2.00
$500,000 but less than $1,000,000
2.04 2.00 1.60
$1,000,000 or more (see below)
none none DEALER COMMISSIONS - Commissions of up to 1% will be paid to
dealers who initiate and are responsible for
purchases of $1 million or more, for purchases by any
employer-sponsored 403(b) plan or purchases by any
defined contribution plan qualified under Section 401(a) of the
Internal Revenue Code including a "401(k)"
plan with 200 or more eligible employees, and for purchases made
at net asset value by certain retirement
plans of organizations with collective retirement plan assets of
$50 million or more: 1.00% on amounts of $1
million to $2 million, 0.80% on amounts over $2 million to $3
million, 0.50% on amounts over $3 million to $50
million, 0.25% on amounts over $50 million to $100 million, and
0.15% on amounts over $100 million. The
level of dealer commissions will be determined based on sales
made over a 12-month period commencing
from the date of the first sale at net asset value. For certain
tax-exempt accounts open prior to September 1,
1969, sales charges and dealer commissions, as a percent of
offering price, are respectively 3% and 2.5%
(under $50,000); 2.5% and 2.0% ($50,000 but less than $100,000);
2.0% and 1.5% ($100,000 but less than
$250,000) and 1.5% and 1.25% ($250,000 but less than $1 million).
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American Funds Distributors, at its expense (from a designated percentage of
its income), will, during calendar year 1997, provide additional compensation
to dealers. Currently these payments are limited to the top one hundred dealers
who have sold shares of the fund or other funds in The American Funds Group.
These payments will be based on a pro rata share of a qualifying dealer's
sales. American Funds Distributors will, on an annual basis, determine the
advisability of continuing these payments.
Any employer-sponsored 403(b) plan or defined contribution plan qualified under
Section 401(a) of the Internal Revenue Code including a "401(k)" plan with 200
or more eligible employees or any other purchaser investing at least $1 million
in shares of the fund (or in combination with shares of other funds in The
American Funds Group other than the money market funds) may purchase shares at
net asset value; however, a contingent deferred sales charge of 1% is imposed
on certain redemptions made within twelve months of the purchase. (See
"Redeeming Shares--Contingent Deferred Sales Charge.") Investments by
retirement plans, foundations or endowments with $50 million or more in assets
may be made with no sales charge and are not subject to a contingent deferred
sales charge.
Qualified dealers currently are paid a continuing service fee not to exceed
0.25% of average net assets (0.15% in the case of the money market funds)
annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing
certain information and assistance with respect to the fund.
NET ASSET VALUE PURCHASES - The stock, stock/bond and bond funds may sell
shares at net asset value with no contingent deferred sales charge to: (1)
current or retired directors, trustees, officers and advisory board members of
the funds managed by Capital Research and Management Company, employees of
Washington Management Corporation, employees and partners of The Capital Group
Companies, Inc. and its affiliated companies, certain family members of the
above persons, and trusts or plans primarily for such persons; (2) current
registered representatives, retired registered representatives with respect to
accounts established while active, or full-time employees (and their spouses,
parents, and children) of dealers who have sales agreements with American Funds
Distributors (or who clear transactions through such dealers) and plans for
such persons or the dealers; (3) companies exchanging securities with the fund
through a merger, acquisition or exchange offer; (4) trustees or other
fiduciaries purchasing shares for certain retirement plans of organizations
with retirement plan assets of $50 million or more; (5) insurance company
separate accounts; (6) accounts managed by subsidiaries of The Capital Group
Companies, Inc.; and (7) The Capital Group Companies, Inc., its affiliated
companies and Washington Management Corporation. Shares are offered at net
asset value to these persons and organizations due to anticipated economies in
sales effort and expense.
STATEMENT OF INTENTION - The reduced sales charges and offering prices set
forth in the Prospectus apply to purchases of $50,000 or more made within a
13-month period subject to a statement of intention (the "Statement"). The
Statement is not a binding obligation to purchase the indicated amount. When a
shareholder elects to utilize a Statement in order to qualify for a reduced
sales charge, shares equal to 5% of the dollar amount specified in the
Statement will be held in escrow in the shareholder's account out of the
initial purchase (or subsequent purchases, if necessary) by the Transfer Agent.
All dividends and any capital gain distributions on shares held in escrow will
be credited to the shareholder's account in shares (or paid in cash, if
requested). If the intended investment is not completed within the specified
13-month period, the purchaser will remit to the Principal Underwriter the
difference between the sales charge actually paid and the sales charge which
would have been paid if the total of such purchases had been made at a single
time. If the difference is not paid within 45 days after written request by
the Principal Underwriter or the securities dealer, the appropriate number of
shares held in escrow will be redeemed to pay such difference. If the proceeds
from this redemption are inadequate, the purchaser will be liable to the
Principal Underwriter for the balance still outstanding. The Statement may be
revised upward at any time during the 13-month period, and such a revision will
be treated as a new Statement, except that the 13-month period during which the
purchase must be made will remain unchanged and there will be no retroactive
reduction of the sales charges paid on prior purchases. Existing holdings
eligible for rights of accumulation (see the prospectus and account
application) may be credited toward satisfying the Statement. During the
Statement period reinvested dividends and capital gain distributions,
investments in money market funds, and investments made under a right of
reinstatement will not be credited toward satisfying the Statement.
In the case of purchase orders by the trustees of certain retirement plans by
payroll deduction, the sales charge for the investments made during the
13-month period will be handled as follows: The regular monthly payroll
deduction investment will be multiplied by 13 and then multiplied by 1.5. The
current value of existing American Funds investments (other than money market
fund investments) and any rollovers or transfers reasonably anticipated to be
invested in non-money market American Funds during the 13-month period are
added to the figure determined above. The sum is the Statement amount and
applicable breakpoint level. On the first investment and all other investments
made pursuant to the Statement, a sales charge will be assessed according to
the sales charge breakpoint thus determined. There will be no retroactive
adjustments in sales charges on investments previously made during the 13-month
period.
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
AGGREGATION - Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and your
children under the age of 21, if all parties are purchasing shares for their
own account(s), which may include purchases through employee benefit plan(s)
such as an IRA, individual-type 403(b) plan or single-participant Keogh-type
plan or by a business solely controlled by these individuals (for example, the
individuals own the entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these individuals. Individual purchases
by a trustee(s) or other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or fiduciary account, including
an employee benefit plan other than those described above, or (2) made for two
or more employee benefit plans of a single employer or of affiliated employers
as defined in the Investment Company Act of 1940, again excluding employee
benefit plans described above, or (3) for a diversified common trust fund or
other diversified pooled account not specifically formed for the purpose of
accumulating fund shares. Purchases made for nominee or street name accounts
(securities held in the name of an investment dealer or another nominee such as
a bank trust department instead of the customer) may not be aggregated with
those made for other accounts and may not be aggregated with other nominee or
street name accounts unless otherwise qualified as described above.
PRICE OF SHARES - Purchases of shares are made at the offering price next
determined after the purchase order is received by the fund or American Funds
Service Company; this offering price is effective for orders received prior to
the time of determination of the net asset value and, in the case of orders
placed with dealers, accepted by the Principal Underwriter prior to its close
of business. In case of orders sent directly to the fund or American Funds
Service Company, an investment dealer MUST be indicated. The dealer is
responsible for promptly transmitting purchase orders to the Principal
Underwriter. Orders received by the investment dealer, the Transfer Agent, or
the fund after the time of the determination of the net asset value will be
entered at the next calculated offering price. Prices which appear in the
newspaper are not always indicative of prices at which you will be purchasing
and redeeming shares of the fund, since such prices generally reflect the
previous day's closing price whereas purchases and redemptions are made at the
next calculated price.
The price you pay for shares, the offering price, is based on the net asset
value per share which is calculated once daily at the close of regular trading
(currently 4:00 p.m., New York Time) each day the New York Stock Exchange is
open. The New York Stock Exchange is currently closed on weekends and on the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas Day. The net
asset value per share is determined as follows:
1.Securities listed or traded on the New York Stock Exchange are valued at the
last sale price or, if no sale, at the last-reported bid price. U.S. Treasury
Bills with original or remaining maturities in excess of 60 days are valued at
the mean of quoted bid and asked prices obtained from a major dealer in
short-term securities. Other Treasury Bills with 60 days or less to maturity
are amortized to maturity based on their cost to the fund if acquired within
60 days of maturity or, if already held by the fund on the 60th day, based on
the value determined on the 61st day. Other securities are valued on the basis
of last sale or bid prices in what is, in the opinion of the Investment
Adviser, the broadest and most representative market, which may be either a
securities exchange or the over-the-counter market. Where quotations are not
readily available, securities are valued at fair value as determined in good
faith by the Board of Directors. The fair value of all other assets is added
to the value of securities to arrive at the total assets;
2.There are deducted from the total assets, thus determined, the liabilities,
including accruals of taxes and other expense items; and
3. The net assets so obtained are then divided by the total number of shares
outstanding (excluding treasury shares), and the result, rounded to the nearer
cent, is the net asset value per share.
Any purchase order may be rejected by the Principal Underwriter or by
the fund. The Principal Underwriter will not knowingly sell shares (other than
for the reinvestment of dividends or capital gain distributions) directly or
indirectly or through a unit investment trust to any other investment company,
person or entity, where, after the sale, such investment company, person, or
entity would own beneficially directly, indirectly, or through a unit
investment trust more than 3% of the outstanding shares of the fund without the
consent of a majority of the Board of Directors.
REDEEMING SHARES
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By writing to American Funds Service Company (at the appropriate address indicated under "Fund Organization and Management -
Principal Underwriter and Transfer Agent" in the Send a letter of instruction specifying the name of the fund, the number of
shares or dollar amount to be sold, your name and account number. You should also enclose any share certificates you wish to
redeem. For redemptions over $50,000 and for certain redemptions of $50,000 or less (see below), your signature must be guaranteed
by a bank, savings association, credit union, or
prospectus) member firm of a domestic stock exchange or the National Association of Securities Dealers, Inc. that is
an eligible guarantor institution. You should verify with the institution that it is an eligible guarantor prior to signing.
Additional documentation may be required for redemption of shares held in corporate, partnership or fiduciary accounts.
Notarization by a Notary Public is not an
acceptable signature guarantee.
By contacting your investment dealer If you redeem shares through your investment dealer, you may be charged for this service.
SHARES HELD FOR YOU IN YOUR INVESTMENT DEALER'S STREET NAME MUST BE REDEEMED THROUGH THE DEALER.
You may have a redemption You may use this option, provided the account is registered in the name of an individual(s), a UGMA/UTMA
custodian, or a non-retirement plan trust. These redemptions may not exceed $50,000 per shareholder, per day account and the check
must be made payable to the shareholder(s) of record and be sent to the address of record provided the address has been used with
the account
check sent to you by using for at least 10 days. See "Fund Organization and Management - Principal Underwriter and Transfer
Agent" in the prospectus and "Exchange Privilege" below for the appropriate telephone or fax number.
American FundsLineR or by
telephoning, faxing, or
telegraphing American Funds Service Company (subject to the conditions noted in this section and in "Telephone Purchases, Sales and
Exchanges" in the prospectus)
In the case of the money Upon request (use the account application for the money market funds) you may establish telephone
redemption privileges (which will enable you to have a redemption sent to your bank account) and/or check writing privileges. If
you request check writing privileges, you will be provided with checks that you may use to draw against your account. These checks
may be made payable to
market funds, you may have anyone you designate and must be signed by the authorized number of registered shareholders exactly as
indicated on your checking account signature card.
redemptions wired to your
bank by telephoning American Funds Service Company ($1,000 or more) or by writing a check ($250 or more)
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A SIGNATURE GUARANTEE IS NOT CURRENTLY REQUIRED FOR ANY REDEMPTION OF $50,000
OR LESS PROVIDED THE REDEMPTION CHECK IS MADE PAYABLE TO THE REGISTERED
SHAREHOLDER(S) AND IS MAILED TO THE ADDRESS OF RECORD, PROVIDED THE ADDRESS HAS
BEEN USED WITH THE ACCOUNT FOR AT LEAST 10 DAYS.
CONTINGENT DEFERRED SALES CHARGE - A contingent deferred sales charge of 1%
applies to certain redemptions made within twelve months of purchase on
investments of $1 million or more and on any investment made with no initial
sales charge by any employer-sponsored 403(b) plan or defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive of reinvested dividends
and capital gain distributions) or the total cost of such shares. Shares held
for the longest period are assumed to be redeemed first for purposes of
calculating this charge. The charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12 months of the initial
purchase); for distributions from qualified retirement plans and other employee
benefit plans; for redemptions resulting from participant-directed switches
among investment options within a participant-directed employer-sponsored
retirement plan; for distributions from 403(b) plans or IRAs due to death,
disability or attainment of age 59$; for tax-free returns of excess
contributions to IRAs; for redemptions through certain automatic withdrawals
not exceeding 10% of the amount that would otherwise be subject to the charge;
and for redemptions in connection with loans made by qualified retirement
plans.
REDEMPTION OF SHARES - The Transfer Agent may redeem the shares of any
shareholder if the shares owned by such shareholder through redemptions, market
decline or otherwise, have a value of less than the minimum initial investment
amount required of new shareholders, (determined, for this purpose only as the
greater of the shareholder's cost or current net asset value of the shares,
including any shares acquired through reinvestment of income dividends and
capital gains distributions). Prior notice of at least 60 days will be given
to a shareholder before the involuntary redemption provision is made effective
with respect to the shareholder's account . The shareholder will have not less
than 30 days from the date of such notice within which to bring the account up
to the minimum determined as set forth above.
The Fund's Articles of Incorporation permit the Fund to direct the Transfer
Agent to redeem the shares of any shareholder if the value of shares in the
account is less than the minimum initial investment amount set forth in the
Fund's current registration statement under the 1940 Act, subject to such
further terms and conditions as the Board of Directors may adopt. Prior notice
of at least 60 days will be given to a shareholder before the involuntary
redemption provision is made effective with respect to the shareholder's
account to provide the shareholder with an opportunity to bring the account up
to the minimum.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN - The automatic investment plan enables shareholders
to make regular investments monthly or quarterly in shares through automatic
charges to their bank accounts. With shareholder authorization and bank
approval, the Transfer Agent will automatically charge the bank account for the
amount specified ($50 minimum), which will be automatically invested in shares
at the offering price on or about the dates you select. Bank accounts will be
charged on the day or a few days before investments are credited, depending on
the bank's capabilities, and shareholders will receive a confirmation statement
at least quarterly. Participation in the plan will begin within 30 days after
receipt of the account application. If the shareholder's bank account cannot
be charged due to insufficient funds, a stop-payment order or closing of the
account, the plan may be terminated and the related investment reversed. The
shareholder may change the amount of the investment or discontinue the plan at
any time by writing to the Transfer Agent.
AUTOMATIC REINVESTMENT - Dividends and capital gain distributions are
reinvested in additional shares at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, American
Funds Service Company or your investment dealer.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - A shareholder in one fund
may elect to cross-reinvest dividends or dividends and capital gain
distributions paid by that fund (the paying fund) into any other fund in The
American Funds Group (the receiving fund) subject to the following conditions:
(i) the aggregate value of the shareholder's account(s) in the paying fund(s)
must equal or exceed $5,000 (this condition is waived if the value of the
account in the receiving fund equals or exceeds that fund's minimum initial
investment requirement), (ii) as long as the value of the account in the
receiving fund is below that fund's minimum initial investment requirement,
dividends and capital gain distributions paid by the receiving fund must be
automatically reinvested in the receiving fund, and (iii) if this privilege is
discontinued with respect to a particular receiving fund, the value of the
account in that fund must equal or exceed the fund's minimum initial investment
requirement or the fund shall have the right, if the shareholder fails to
increase the value of the account to such minimum within 90 days after being
notified of the deficiency, automatically to redeem the account and send the
proceeds to the shareholder. These cross-reinvestments of dividends and
capital gain distributions will be at net asset value (without sales charge).
EXCHANGE PRIVILEGE - You may exchange shares into other funds in The American
Funds Group. Exchange purchases are subject to the minimum investment
requirements of the fund purchased and no sales charge generally applies.
However, exchanges of shares from the money market funds are subject to
applicable sales charges on the fund being purchased, unless the money market
fund shares were acquired by an exchange from a fund having a sales charge, or
by reinvestment or cross-reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to American Funds Service Company (see
"Redeeming Shares"), by contacting your investment dealer, by using American
FundsLineR (see "American FundsLineR" below), or by telephoning 800/421-0180
toll-free, faxing (see "Principal Underwriter and Transfer Agent" in the
prospectus for the appropriate fax numbers) or telegraphing American Funds
Service Company. (See "Telephone Redemptions and Exchanges" below.) Shares held
in corporate-type retirement plans for which Capital Guardian Trust Company
serves as trustee may not be exchanged by telephone, fax or telegraph. Exchange
redemptions and purchases are processed simultaneously at the share prices next
determined after the exchange order is received. (See "Purchase of
Shares--Price of Shares.") THESE TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS
ORDINARY SALES AND PURCHASES.
AUTOMATIC EXCHANGES - You may automatically exchange shares (in amounts of $50
or more) among any of the funds in The American Funds Group on any day (or
preceding business day if the day falls on a non-business day) of each month
you designate. You must either meet the minimum initial investment requirement
for the receiving fund OR the originating fund's balance must be at least
$5,000 and the receiving fund's minimum must be met within one year.
AUTOMATIC WITHDRAWALS - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the Fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.
ACCOUNT STATEMENTS - Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments and dividend reinvestments, will be reflected on regular
confirmation statements from American Funds Service Company. Purchases through
automatic investment plans and certain retirement plans will be confirmed at
least quarterly.
AMERICAN FUNDSLINER - You may check your share balance, the price of your
shares, or your most recent account transaction, redeem shares (up to $50,000
per shareholder, per day), or exchange shares around the clock with American
FundsLineR. To use this service, call 800/325-3590 from a TouchTonet telephone.
Redemptions and exchanges through American FundsLineR are subject to the
conditions noted above and in "Telephone Redemptions and Exchanges" below. You
will need your fund number (see the list of funds in The American Funds Group
under "Purchase of Shares--Investment Minimums and Fund Numbers"), personal
identification number (the last four digits of your Social Security number or
other tax identification number associated with your account) and account
number.
TELEPHONE REDEMPTIONS AND EXCHANGES - By using the telephone (including
American FundsLineR), fax or telegraph redemption and/or exchange options, you
agree to hold the fund, American Funds Service Company, any of its affiliates
or mutual funds managed by such affiliates, the Fund's Business Manager and
each of their respective directors, trustees, officers, employees and agents
harmless from any losses, expenses, costs or liability (including attorney
fees) which may be incurred in connection with the exercise of these
privileges. Generally, all shareholders are automatically eligible to use these
options. However, you may elect to opt out of these options by writing American
Funds Service Company (you may also reinstate them at any time by writing
American Funds Service Company). If American Funds Service Company does not
employ reasonable procedures to confirm that the instructions received from any
person with appropriate account information are genuine, it and/or the fund may
be liable for losses due to unauthorized or fraudulent instructions. In the
event that shareholders are unable to reach the fund by telephone because of
technical difficulties, market conditions, or a natural disaster, redemption
and exchange requests may be made in writing only.
EXECUTION OF PORTFOLIO TRANSACTIONS
Orders for the fund's portfolio securities transactions are placed by the
Investment Adviser. The Investment Adviser strives to obtain the best
available prices in its portfolio transactions taking into account the costs
and promptness of executions. When circumstances relating to a proposed
transaction indicate that a particular broker (either directly or through its
correspondent clearing agent) is in a position to obtain the best price and
execution, the order is placed with that broker. This may or may not be a
broker who has provided investment research, statistical, or other related
services to the Investment Adviser or has sold shares of the fund or other
funds served by the Investment Adviser. The fund does not consider that it has
an obligation to obtain the lowest available commission rate to the exclusion
of price, service and qualitative considerations.
There are occasions on which portfolio transactions for the fund may be
executed as part of concurrent authorizations to purchase or sell the same
security for other funds served by the Investment Adviser, or for trusts or
other accounts served by affiliated companies of the Investment Adviser.
Although such concurrent authorizations potentially could be either
advantageous or disadvantageous to the fund, they are effected only when the
Investment Adviser believes that to do so is in the interest of the fund. When
such concurrent authorizations occur, the objective is to allocate the
executions in an equitable manner. The fund will not pay a mark-up for research
in principal transactions.
As of the end of the fund's most recent fiscal year, it held certain equity
securities of some of its regular brokers and dealers or their parents that
derive more than 15% of gross revenues from securities-related activities which
included securities of The Chase Manhattan Bank and J.P. Morgan in the amounts
of $361,238,000 and $257,744,000, respectively, at the year ended April 30,
1997.
Brokerage commissions paid on portfolio transactions, including dealer
concessions on underwritings, for the fiscal years ended April 30, 1997, 1996
and 1995 amounted to $14,511,000, $13,383,000 and $11,529,000, respectively.
During fiscal years 1997, 1996 and 1995 Johnston, Lemon & Co. Incorporated
received no commissions for executing portfolio transactions for the fund.
Johnston, Lemon & Co. Incorporated will not participate in commissions paid by
the fund to other brokers or dealers and will not receive any reciprocal
business, directly or indirectly, as a result of such commissions.
GENERAL INFORMATION
CUSTODIAN OF ASSETS - Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by The Chase Manhattan Bank, 3 Metrotech Center, Brooklyn, NY 11245,
as Custodian.
TRANSFER AGENT - American Funds Service Company, a wholly owned subsidiary of
the Investment Adviser, maintains the record of each shareholder's account,
processes purchases and redemptions of the fund's shares, acts as dividend and
capital gain distribution disbursing agent, and performs other related
shareholder service functions. American Funds Service Company was paid a fee
of $16,906,000 for the fiscal year ended April 30, 1997.
INDEPENDENT ACCOUNTANTS - Price Waterhouse LLP, 400 South Hope Street, Los
Angeles, CA 90071, has served as the fund's independent accountants since its
inception, providing audit services, preparation of tax returns and review of
certain documents to be filed with the Securities and Exchange Commission. The
financial statements included in this Statement of Additional Information, have
been so included in reliance on the report of Price Waterhouse LLP given on the
authority of said firm as experts in accounting and auditing. The selection of
the fund's independent accountant is reviewed and determined annually by the
Board of Directors.
REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on April 30.
Shareholders are provided at least semi-annually with reports containing the
financial statements, including the investment portfolio and other information.
The fund's annual financial statements are audited by the fund's independent
accountants, Price Waterhouse LLP.
PERSONAL INVESTING POLICY - Capital Research and Management Company and its
affiliated companies have adopted a personal investing policy consistent with
Investment Company Institute Guidelines. This policy includes: a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; pre-clearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; disclosure of personal
holdings by certain investment personnel prior to recommendation for purchase
for the fund; blackout periods on personal investing for certain investment
personnel; ban on short-term trading profits for investment personnel;
limitations on service as a director of publicly traded companies; and
disclosure of personal securities transactions.
The financial statements including the investment portfolio and the report of
Independent Accountants contained in the Annual Report are included in this
Statement of Additional Information. The following information is not included
in the Annual Report:
DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE -- APRIL 30, 1997
Net asset value and redemption price per share
(Net assets divided by shares outstanding) . . . . . . . . . . .
$25.93
Maximum offering price per share (100/94.25 of
net asset value per share, which takes into
account the fund's current maximum sales charge). . . . . $27.51
INVESTMENT RESULTS
The fund's yield is 2.35% based on a 30-day (or one month) period ended April
30, 1997, computed by dividing the net investment income per share earned
during the period by the maximum offering price per share on the last day of
the period, according to the following formula:
YIELD = 2[( a-b/cd + 1)/6/ -1]
Where:a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
The fund's total return over the past year and average total returns for the
five- and ten-year periods ending on April 30, 1997 was +15.39%, +15.40% and
+12.93%, respectively. The average annual total return (T) is computed by
equating the value at the end of the period (ERV) with a hypothetical initial
investment of $1,000 (P) over a period of years (n) according to the following
formula as required by the Securities and Exchange Commission: P(1+T)/n/ =
ERV.
To calculate total return, an initial investment is divided by the offering
price (which includes the sales charge) as of the first day of the period in
order to determine the initial number of shares purchased. Subsequent
dividends and capital gain distributions are reinvested at net asset value on
the reinvestment date determined by the Board of Directors. The sum of the
initial shares purchased and shares acquired through reinvestment is multiplied
by the net asset value per share as of the end of the period in order to
determine ending value. The difference between the ending value and the
initial investment divided by the initial investment converted to a percentage
equals total return. The resulting percentage indicates the positive or
negative investment results that an investor would have experienced from
reinvested dividends and capital gain distributions and changes in share price
during the periods. Total return may be calculated for the one year, five
year, ten year and for other periods: The average annual total return over
periods greater than one year may also be computed by utilizing ending values
as determined above.
The fund may also, at times, calculate total return based on net asset value
per share (rather than the offering price), in which case the figure would not
reflect the effect of any sales charges which would have been paid if shares
were purchased during the period reflected in the computation. Consequently,
total return calculated in this manner will be higher. These total returns may
be calculated over periods in addition to those described above.
The following assumptions will be reflected in computations made in accordance
with the formulas stated above: (1) deduction of the maximum sales charge of
5.75% from the $1,000 initial investment; (2) reinvestment of dividends and
distributions at net asset value on the reinvestment date determined by the
Board; and (3) a complete redemption at the end of any period illustrated. In
addition, the fund may provide lifetime average total return figures.
The fund may also calculate a distribution rate on a taxable and tax equivalent
basis. The distribution rate is computed by dividing the dividends paid by the
fund over the last 12 months by the sum of the month-end net asset value or
maximum offering price and the capital gains paid over the last 12 months. The
distribution rate may differ from the yield.
The fund may include information on its investment results and/or comparisons
of its investment results to various unmanaged indices (such as The Dow Jones
Average of 30 Industrial Stocks and The Standard & Poor's 500 Stock Composite
Index) or results of other mutual funds or investment or savings vehicles in
advertisements or in reports furnished to present or prospective shareholders.
Total return for the unmanaged indices will be calculated assuming reinvestment
if dividends and interest, but will not reflect any deductions for advisory
fees, brokerage costs or administrative expenses.
The fund may refer to results compiled by organizations such as CDA
Investment Technologies, Ibbottson Associates, Lipper Analytical Services,
Morningstar, Inc. and Wiesenberger Investment Companies Services and the U.S.
Department of Commerce. Additionally, the Fund may, from time to time, refer
to results published in various newspapers or periodicals, including Barron's,
Forbes, Fortune, Institutional Investor, Kiplinger's Personal Finance Magazine,
Money, U.S. News and World Report and The Wall Street Journal.
The fund may from time to time compare its investment results with the
following:
(1) Average of Savings Institutions deposits, which is a measure of all kinds
of savings deposits, including longer-term certificates (based on figures
supplied by the U.S. League of Savings Institutions and the Federal Reserve
Board). Savings deposits offer a guaranteed rate of return on principal, but
no opportunity for capital growth. The period shown may include periods during
which the maximum rates paid on some savings deposits were fixed by law.
(2) The Consumer Price Index, which is a measure of the average change in
prices over time in a fixed market basket of goods and services (e.g. food,
clothing, shelter, and fuels, transportation fares, charges for doctors' and
dentists' services, prescription medicines, and other goods and services that
people buy for day-to-day living).
The fund may also from time to time illustrate the benefits of tax-deferral by
comparing taxable investments to investments made through tax-deferred
retirement plans.
EXPERIENCE OF THE INVESTMENT ADVISER - Capital Research and Management Company
manages nine common stock funds that are at least 10 years old. In the rolling
10-year periods since January 1, 1967 (127 in all), those funds have had better
total returns than the Standard & Poor's 500 Composite Stock Index in 91 of the
127 periods.
Note that past results are not an indication of future investment results.
Also, the fund has different investment policies than some of the funds
mentioned above. These results are included solely for the purpose of
informing investors about the experience and history of Capital Research and
Management Company.
The investment results set forth below were calculated as described in the
fund's Prospectus. The fund's results will vary from time to time depending
upon market conditions, the composition of the fund's portfolio and operating
expenses of the fund, so that any investment results reported by the fund
should not be considered representative of what an investment in the fund may
earn in any future period. These factors and possible differences in
calculation methods should be considered when comparing the fund's investment
results with those published for other mutual funds, other investment vehicles
and unmanaged indices. The fund's results also should be considered relative
to the risks associated with the fund's investment objective and policies.
The investment results set forth below were calculated as described in the
fund's prospectus.
WMIF VS. VARIOUS UNMANAGED INDICES
<TABLE>
<CAPTION>
10-Year Periods WMIF DJIA/1/ S&P 500/2/ Average Savings
5/01 - 4/30 Deposit/3/
<S> <C> <C> <C> <C>
1987-1997 +237% +319% +275% +66%
1986-1996 +241 +333 +279 +70
1985-1995 +261 +385 +296 +76
1984-1994 +273 +355 +297 +86
1983-1993 +275 +312 +284 +97
1982-1992 +409 +498 +424 +109
1981-1991 +356 +351 +325 +120
1980-1990 +453 +418 +375 +125
1979-1989 +426 +360 +374 +125
1978-1988 +386 +302 +327 +125
1977-1987 +419 +319 +372 +125
1976-1986 +353 +207 +277 +123
1975-1985 +334 +162 +235 +120
1974-1984 +300 +140 +189 +114
1973-1983 +281 +127 +148 +108
1972-1982 +133 +49 +70 +98
1971-1981 +132 +72 +96 +88
1970-1980 +117 +77 +98 +80
1969-1979 +80 +40 +46 +76
1968-1978 +87 +40 +44 +72
1967-1977 +103 +54 +49 +70
1966-1976 +98 +58 +58 +67
1965-1975 +61 +30 +37 +64
1964-1974 +76 +48 +57 +61
1963-1973 +100 +83 +111 +58
1962-1972 +138 +105 +129 +55
1961-1971 +144 +98 +120 +53
1960-1970 +133 +73 +107 +50
</TABLE>
/1/ The Dow Jones Average of 30 Industrial Stocks is comprised of 30 industrial
companies such as General Motors and General Electric.
/2/ The Standard & Poor's 500 Composite Stock Index is comprised of
industrial, transportation, public utilities and financial stocks and
represents a large portion of the value of issues traded on the New York Stock
Exchange. Selected issues traded on the American Stock Exchange are also
included.
/3/ Based on figures supplied by the U.S. League of Savings Institutions and
the Federal Reserve Board which reflect all kinds of savings deposits,
including longer-term certificates. Savings deposits offer a guaranteed return
of principal and a fixed rate of interest, but no opportunity for capital
growth. Maximum allowable rates were imposed by law during a part of this
period.
SEE THE DIFFERENCE TIME CAN MAKE IN AN INVESTMENT PROGRAM
<TABLE>
<CAPTION>
If you had invested Periods ...and taken all
$10,000 in the fund distributions in shares,
this many years ago... your investment would
have been worth this
much at April 30, 1997
Number of Years 5/1-4/30 Value
<S> <C> <C>
1 1996 - 1997 11,538
2 1995 - 1997 15,048
3 1994 - 1997 17,610
4 1993 - 1997 18,058
5 1992 - 1997 20,467
6 1991 - 1997 23,377
7 1990 - 1997 26,816
8 1989 - 1997 28,567
9 1988 - 1997 35,043
10 1987 - 1997 33,739
11 1986 - 1997 41,742
12 1985 - 1997 57,579
13 1984 - 1997 69,686
14 1983 - 1997 71,884
15 1982 - 1997 110,401
16 1981 - 1997 113,067
17 1980 - 1997 157,326
18 1979 - 1997 159,527
19 1978 - 1997 180,655
20 1977 - 1997 185,669
21 1976 - 1997 200,518
22 1975 - 1997 265,083
23 1974 - 1997 295,810
24 1973 - 1997 290,874
25 1972 - 1997 272,756
26 1971 - 1997 278,633
27 1970 - 1997 361,624
28 1969 - 1997 304,611
29 1968 - 1997 358,502
30 1967 - 1997 399,209
</TABLE>
ILLUSTRATION OF A $10,000 INVESTMENT IN WMIF WITH
DIVIDENDS REINVESTED AND CAPITAL GAIN DISTRIBUTIONS TAKEN IN SHARES
(For the lifetime of the fund July 31, 1952 through April 30,1997)
<TABLE>
<CAPTION>
COST OF SHARES VALUE
OF SHARES
Fiscal Annual Total From From From Total
Year End Dividends Dividends Investment Initial Capital Gains Dividends Value
4/30 (cumulative) Cost Investment Reinvested Reinvested
<S> <C> <C> <C> <C> <C> <C> <C>
1953* $ 170 $ 170 $ 10,170 $ 9,161 ---- $ 169 $ 9,330
1954 450 620 10,620 10,781 ---- 713 11,494
1955 542 1,162 11,162 14,732 ---- 1,556 16,288
1956 654 1,816 11,816 17,447 $ 613 2,505 20,565
1957 756 2,572 12,572 17,145 1,553 3,179 21,877
1958 825 3,397 13,397 15,056 2,339 3,660 21,055
1959 885 4,282 14,282 21,119 3,915 6,037 31,071
1960 947 5,229 15,229 18,644 4,411 5,986 29,041
1961 1,097 6,326 16,326 21,113 6,918 8,136 36,167
1962 1,145 7,471 17,471 20,880 7,903 8,871 37,654
1963 1,279 8,750 18,750 21,292 10,289 10,697 42,278
1964 1,368 10,118 20,118 22,614 11,980 12,515 47,109
1965 1,463 11,581 21,581 25,782 15,757 15,951 57,490
1966 1,648 13,229 23,229 26,237 17,691 17,675 61,603
1967 1,906 15,135 25,135 25,833 19,766 19,671 65,270
1968 2,231 17,366 27,366 28,313 21,945 22,434 72,692
1969 2,626 19,992 29,992 31,708 27,163 26,705 85,576
1970 2,874 22,866 32,866 23,523 24,878 23,202 71,603
1971 3,193 26,059 36,059 26,927 33,989 32,471 93,387
1972 3,456 29,515 39,515 27,419 33,511 34,591 95,521
1973 3,671 33,186 43,186 23,933 31,776 33,813 89,522
1974 3,907 37,093 47,093 21,893 31,023 35,040 87,956
1975 4,829 41,922 51,922 22,959 33,179 42,177 98,315
1976 5,498 47,420 57,420 30,739 41,142 58,068 129,949
1977 6,171 53,591 63,591 31,274 44,673 64,401 140,348
1978 6,849 60,440 70,440 29,078 46,414 68,847 144,339
1979 7,785 68,225 78,225 33,575 50,187 79,313 163,075
1980 9,167 77,392 87,392 34,433 50,777 80,637 165,847
1981 14,603 91,995 101,995 28,652 86,269 115,502 230,423
1982 13,326 105,321 115,321 26,352 90,133 119,283 235,768
1983 15,516 120,837 130,837 36,494 142,811 182,987 362,292
1984 17,526 138,363 148,363 32,460 162,054 178,994 373,508
1985 20,783 159,146 169,146 34,910 204,484 213,103 452,497
1986 24,381 183,527 193,527 44,373 281,961 297,433 623,767
1987 28,229 211,756 221,756 50,179 356,068 365,700 771,947
1988 30,815 242,571 252,571 44,826 341,861 356,167 742,854
1989 27,837 270,408 280,408 53,157 405,403 453,047 911,607
1990 41,689 312,097 322,097 51,838 438,105 481,106 971,049
1991 44,572 356,669 366,669 56,626 482,927 574,191 1,113,744
1992 42,318 398,987 408,987 61,150 546,304 664,916 1,272,370
1993 44,627 443,614 453,614 66,315 607,607 768,464 1,442,386
1994 46,718 490,332 500,332 64,505 622,162 792,442 1,479,109
1995 55,058 545,390 555,390 71,140 726,340 933,211 1,730,691
1996 58,187 603,577 613,577 85,844 982,808 1,188,237 2,256,889
1997 62,763 666,340 676,340 97,757 1,245,507 1,419,762 2,763,026
</TABLE>
The dollar amount of capital gain distributions from inception was $621,556
/*/From July 31, 1952, the date the fund commenced operation.
THE BENEFITS OF SYSTEMATIC INVESTING IN WMIF.......
<TABLE>
<CAPTION>
An initial investment of $1,000 in WMIF on May 1 would have grown to
these amounts over the past 10, 20, 30 and 40 years:
<S> <C> <C> <C>
10 Years 20 Years 30 Years 40 Years
(5/1/87-4/30/97) (5/1/77 - 4/30/97) (5/1/67 - 4/30/97) (5/1/57-4/30/97)
$3,374 $18,567 $39,921 $119,307
</TABLE>
<TABLE>
<CAPTION>
$1,000 invested in WMIF followed by annual $500 investments (all
investments made on May 1) would have grown to these amounts over
the past 10, 20, 30 and 40 years:
<S> <C> <C> <C>
10 Years 20 Years 30 Years 40 Years
(5/1/87 - 4/30/97) (5/1/77 - 4/30/97) (5/1/67 - 4/30/97) (5/1/57-4/30/97)
$13,193 $78,174 $240,451 $661,774
</TABLE>
<TABLE>
<CAPTION>
$2,000 invested in WMIF on May 1 of each year would have grown to these
amounts over the past 10, 20, 30 and 40 years:
<S> <C> <C> <C>
10 Years 20 Years 30 Years 40 Years
(5/1/87-4/30/97) (5/1/77 - 4/30/97) (5/1/67 - 4/30/97) (5/1/57-4/30/97)
$46,024 $276,485 $884,263 $2,418,390
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Washington Mutual Investors Fund
Investment Portfolio
April 30, 1997 Market Percent
Value of Net
Common Stocks Shares (000) Assets
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 Equipment
Aerospace & Military Technology (1.24%)
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 Goods
Appliances & Household Durables (.08%)
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>
<TABLE>
<S> <C> <C>
Washington Mutual Investors Fund
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
(dollars in thousands)
Year Ended April 30
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
reinvestment 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
</TABLE>
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 day of valuation 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 $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 $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 $815,366 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
thus is considered an affiliate as defined in the Investment Company Act of
1940.
<TABLE>
<S> <C> <C> <C> <C> <C>
Per-Share
Data and Ratios
Year en ded Apr il 30
1997 1996 1995 1994 1993
Net Asset Value,
Beginning of Year $ 22. $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/1/ 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/2/ 5.29c 6.24c 6.87c 6.85c 7.49c
Portfolio turnover rate 20.41% 23.4 25.4 23.8 18.6
/1/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%.
/2/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.
</TABLE>
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, 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.
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.
