[THE AMERICAN FUNDS GROUP(R)]
AMCAP FUND
INVESTING FOR GROWTH WITH THE MARKET NEAR ALL-TIME HIGHS
[photographs: plumb bob, remote control, computer mouse, spoolful
of red liquid]
Annual Report for the year ended February 28, 1999
AMCAP FUND(R) SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING IN GROWING,
PROFITABLE COMPANIES.
AMCAP Fund is one of the 28 mutual funds in The American Funds Group,(r) the
nation's third-largest mutual fund family. For more than six decades, Capital
Research and Management Company, the American Funds adviser, has invested with
a long-term focus based on thorough research and attention to risk.
ABOUT OUR COVER. The central image is a plumb bob, a measuring device used to
determine depth and establish a precise vertical. It represents the hands-on
research and careful measurement done by AMCAP's investment professionals.
AMCAP'S LIFETIME RESULTS
for the period May 1, 1967, to February 28, 1999, with all distributions
reinvested
<TABLE>
<CAPTION>
<S> <C> <C>
Total Average Annual
Return Compound Return
AMCAP +6,007.4% +13.8%
Standard & Poor's 500 +4,084.3 +12.4
Composite Index
Consumer Price Index +397.0 +5.2
(inflation)
</TABLE>
Fund results in this report were computed without a sales charge unless
otherwise indicated. Here are the total returns and average annual compound
returns with all distributions reinvested for periods ended March 31, 1999 (the
most recent calendar quarter), assuming payment of the 5.75% maximum sales
charge at the beginning of the stated periods:
<TABLE>
<CAPTION>
<S> <C> <C>
Total Average Annual
Return Compound Return
ten years +335.62% +15.85%
five years +144.16 +19.55
one year +9.56 -
</TABLE>
Sales charges are lower for accounts of $50,000 or more.
Figures shown are past results. Share price and return will vary, so you may
lose money. Investing for short periods makes losses more likely. Investments
are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any
other entity.
PREPARING FOR THE YEAR 2000
The fund's key service providers - Capital Research and Management Company, the
investment adviser, and American Funds Service Company, the transfer agent -
have updated all significant computer systems to process date-related
information properly following the turn of the century. Testing of these and
other systems with business partners, vendors and other service providers will
continue through much of 1999. We will continue to keep you up to date in our
regular publications. If you would like more detailed information, call
Shareholder Services at 800/421-0180, ext. 21, or visit our Web site at
www.americanfunds.com.
[Begin Sidebar]
AMCAP'S ANNUAL RETURNS
For the past 10 fiscal years (ended 2/28 or 2/29)
<TABLE>
<CAPTION>
<S> <C>
1990 +14.0%
1991 +16.8
1992 +20.4
1993 +5.9
1994 +11.3
1995 +3.4
1996 +29.3
1997 +11.7
1998 +37.0
1999 +21.1
</TABLE>
Total Return over
Entire 10-Year Period +368.2%
Average Annual Compound
Return +16.7%
[End Sidebar]
FELLOW SHAREHOLDERS:
AMCAP Fund's strategy of investing in quality growth companies proved rewarding
in the turbulent 1999 fiscal year. Helped in large part by gains in its
entertainment and technology holdings, the fund clearly outpaced the benchmarks
we use to evaluate its results.
The value of your investment grew 21.1% in the 12-month period ended February
28 if you reinvested dividends totaling 13 cents a share and capital gain
distributions totaling $2.29 a share.
AMCAP OUTPACES RELEVANT INDEXES. AMCAP exceeded the 13.2% total return of the
average growth fund, as measured by Lipper, Inc., and also surpassed other
relevant unmanaged indexes. The Russell 2000 Index, a gauge of smaller U.S.
stocks, actually declined 14.1% over the year. Standard & Poor's 400 Midcap
Index, which tracks medium-size companies, rose only 2.1%. Standard & Poor's
500 Composite Index, a measure of the stocks of 500 mostly large U.S.
companies, increased 19.7% on a reinvested basis. We use these unmanaged
indexes for comparative purposes since AMCAP invests in a mix of large,
medium-size and small companies.
This was one of the most volatile years in recent history. In six short weeks
from July 17 to August 31, the S&P 500 Index dropped 19.3% and the Lipper
Growth Funds Average fell 21.6%. During this period, AMCAP held up slightly
better, declining 18.2%. In the market rebound that followed, which began
September 1, 1998, AMCAP rose sharply, reaching 31.2% as of February 28, 1999,
outpacing gains by the average growth fund (+29.9%) and the S&P 500 (+30.3%).
Large-company stocks posted the biggest gains during the past 12 months. Within
the S&P 500, for example, which is weighted by market capitalization, the
largest 50 stocks were responsible for nearly 75% of the index's return. While
AMCAP has investments in several of these companies, it also has significant
holdings in smaller and midsize firms.
CABLE AND TECHNOLOGY STOCKS LEAD THE WAY. Continuing strong results by cable
and entertainment stocks and a resurgence in the fund's largest technology
holdings were the keys to AMCAP's successful year.
Four of our 10 largest investments as of February 28, 1999, were cable
television and entertainment companies, and they all did well. Cable companies
experienced cash flow and revenue growth from improving operations and new
technologies such as high-speed cable modems and digital set-top boxes. AT&T's
$32 billion acquisition of Tele-Communications, TCI Group (one of our larger
holdings) at a generous premium to the company's market price helped focus
investor attention on the value of owning cable franchises. Comcast, the fund's
largest holding, rose 102.1% in price. Time Warner, the fund's second-largest
investment, increased 91.1%. Viacom (+84.1%) and Tele-Communications, Liberty
Media Group (+96.4%) were other big winners.
[Begin Sidebar]
TOTAL RETURN
For the 12 months ended February 28, 1999
<TABLE>
<CAPTION>
<S> <C>
AMCAP Fund +21.1%
Lipper Growth Funds Average +13.2
S&P 500 Composite Index +19.7
S&P 400 Midcap Index +2.1
</TABLE>
[End Sidebar]
[ruler depicting 4.89 mark]
[Begin Caption]
AMCAP's net assets grew from $4.89 billion to $5.94 billion during the year.
[End Caption]
TECHNOLOGY GROWTH HELPS FUND'S HOLDINGS. Many of the fund's larger technology
holdings also rose sharply. Strong sales of personal computers and explosive
growth in telecommunications, data communications and the Internet helped drive
up prices of many technology stocks. Software developer Oracle, the fund's
seventh-largest holding, increased 126.9%. Cisco Systems, a supplier of
computer networking systems, rose 122.7%. Both Oracle and Cisco attracted
investors because of their ties to the Internet boom and their growing
earnings. AirTouch Communications, a global supplier of mobile telephones and
wireless services, gained 102.6% because investors came to recognize the
company's solid position in the worldwide growth of cellular telephones and its
impressive cash flow growth.
Not all technology companies did so well, however. Among the fund's worst
investments for fiscal 1999 were PeopleSoft (-57.8%), Sequent Computer Systems
(-55.0%) and Adaptec (-24.6%). The companies that stumbled were mostly smaller
firms with less market and product breadth than some of their competitors.
PHARMACEUTICAL COMPANIES DID WELL. Pharmaceutical companies made strong
contributions as well. They included Pfizer (+49.1%) and Schering-Plough
(+47.1%). Last year, Pfizer introduced Viagra, a new drug for male sexual
dysfunction that had tremendous sales and created a great deal of investor
interest. The drug had one of the most successful product launches in the
history of the pharmaceutical industry. Investors were attracted to
Schering-Plough because of strong sales growth for Claritin, an antihistamine
used to combat allergies, and Rebetron, a new drug treatment for hepatitis C.
BANKS HAD MIXED RESULTS FOR THE YEAR. In July and August, concerns about loans
made in Asia, Latin America and Russia caused stock prices of large
money-center banks and even some regional banks to decline. Some bank prices
moved up in the second half of the year when global liquidity improved after
the Federal Reserve and European central banks lowered interest rates. For the
full fiscal year, Northern Trust rose 17.5% largely because its private wealth
management group, one of its most important profit centers, did well as a
result of the booming stock market. Marshall & Ilsley, a regional Milwaukee,
Wisconsin, bank, fell 4.5% after it lost a large contract for data processing,
and Wells Fargo declined 10.2% because of investors' concerns about its merger
with Norwest.
THE IMPORTANCE OF MAINTAINING REALISTIC EXPECTATIONS. We are happy with the
fund's results in recent years (up 147.7% in the past five years) and are
optimistic about opportunities to invest in growth companies over the long
term. However, we think it is important to caution shareholders about
maintaining realistic expectations. It is not likely that the stock market will
continue to grow at this torrid pace indefinitely. Over the past four calendar
years, the S&P 500 has produced an unusually high average annual compound
return of 30.4%. In contrast, since 1926 the S&P 500 has produced a much more
modest annual return of 11.2%, according to Ibbotson Associates. In addition,
the more recent S&P returns are misleading because the index is weighted by
market capitalization and therefore does not accurately reflect how all
companies did. About half of the 500 companies in the index had a negative
return for the 12 months ended in February.
That means it is particularly important that we pay close attention to our
mission of investing in companies that have a proven growth record, strong
management, a sustainable market edge - and a reasonable price. It takes an
all-out effort to find quality companies at reasonable prices at any time, but
it is even more difficult today. So we are devoting our feature article,
beginning on page 6, to the challenge of investing for growth with the market
near all-time highs. We hope you will better understand how we seek to find
these investments - and the opportunities and challenges that lie ahead.
We look forward to reporting to you again in the autumn.
Cordially,
/s/R. Michael Shanahan
R. Michael Shanahan
Chairman of the Board
/s/Claudia P. Huntington
Claudia P. Huntington
President
April 12, 1999
[photographs of Michael Shanahan, Claudia Huntington, measuring device]
[Begin Caption]
Michael Shanahan and Claudia Huntington
[End Caption]
HOW A $10,000 INVESTMENT HAS GROWN
AVERAGE ANNUAL COMPOUND RETURNS*
(for periods ended February 28, 1999)
<TABLE>
<CAPTION>
<S> <C>
ten years +16.00%
five years +18.49%
one year +14.13%
</TABLE>
*Assumes reinvestment of all distributions and payment of the 5.75% current
maximum sales charge at the beginning of the stated periods.
[Begin mountain chart]
<TABLE>
<CAPTION>
Year ended 2/28 or 29 S&P 500 with Consumer Price Index
dividends reinvested (inflation) /3/
<S> <C> <C>
5/1/67 $10,000 $10,000
1968 9,747 10,332
1969 11,039 10,816
1970 10,404 11,480
1971 11,674 12,054
1972 13,258 12,477
1973 14,293 12,961
1974 12,716 14,260
1975 11,306 15,861
1976 14,404 16,858
1977 14,984 17,855
1978 13,703 19,003
1979 15,976 20,876
1980 19,891 23,837
1981 24,192 26,556
1982 21,965 28,580
1983 30,441 29,577
1984 33,720 30,937
1985 40,747 32,024
1986 53,179 33,021
1987 68,925 33,716
1988 66,959 35,045
1989 74,851 36,737
1990 88,933 38,671
1991 101,986 40,725
1992 118,322 41,873
1993 130,943 43,233
1994 141,799 44,320
1995 152,298 45,589
1996 205,095 46,798
1997 258,809 48,218
1998 349,461 48,912
1999 418,430 49,698
</TABLE>
$575,089/1,2/
AMCAP
with dividends
reinvested
$418,430
S&P 500
with dividends
reinvested
$49,698/3/
Consumer
Price Index
(inflation)
$10,000/1/
original
investment
[end chart]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
TOTAL VALUE 1968/#/ 1969 1970 1971
Dividends Reinvested -$ 75 190 200
Value At Year End/1/ $10,057 12,212 11,835 12,643
AMCAP TOTAL RETURN 0.6% 21.4 -3.1 6.8
TOTAL VALUE 1972 1973 1974 1975
Dividends Reinvested 244 228 196 294
Value At Year End/1/ 14,902 13,978 11,037 9,903
AMCAP TOTAL RETURN 17.9 -6.2 -21.0 -10.3
TOTAL VALUE 1976 1977 1978 1979
Dividends Reinvested 328 208 263 335
Value At Year End/1/ 13,883 14,173 16,612 22,738
AMCAP TOTAL RETURN 40.2 2.1 17.2 36.9
TOTAL VALUE 1980 1981 1982 1983
Dividends Reinvested 438 724 2,594 1,231
Value At Year End/1/ 33,541 40,548 42,643 61,456
AMCAP TOTAL RETURN 47.5 20.9 5.2 44.1
TOTAL VALUE 1984 1985 1986 1987
Dividends Reinvested 1,591 1,944 1,548 1,629
Value At Year End/1/ 62,128 72,165 88,738 115,664
AMCAP TOTAL RETURN 1.1 16.2 23.0 30.3
TOTAL VALUE 1988 1989 1990 1991
Dividends Reinvested 3,017 3,167 3,160 3,293
Value At Year End/1/ 112,037 122,827 140,027 163,492
AMCAP TOTAL RETURN -3.1 9.6 14.0 16.8
TOTAL VALUE 1992 1993 1994 1995
Dividends Reinvested 2,156 2,252 1,918 2,399
Value At Year End/1/ 196,856 208,557 232,137 240,047
AMCAP TOTAL RETURN 20.4 5.9 11.3 3.4
Total Value 1996 1997 1998 1999
Dividends Reinvested 3,363 2,643 2,465 3,727
Value At Year End/1/ 310,345 346,783 475,003 575,089
AMCAP TOTAL RETURN 29.3 11.7 37.0 21.1
</TABLE>
Average
annual
compound
return for
31-3/4 years
13.6%/1/
/#/For the period May 1, 1967 (when the fund began operations), through
February 29, 1968.
/1/These figures, unlike those shown elsewhere in this report, reflect payment
of the maximum sales charge of 5.75% on the $10,000 investment. Thus, the net
amount invested was $9,425. As outlined in the prospectus, the sales charge is
reduced for larger investments. There is no sales charge on dividends or
capital gain distributions that are reinvested in additional shares. The
maximum initial sales charge was 8.50% prior to July 1, 1988. Results shown do
not take into account income or capital gain taxes.
/2/Includes reinvested dividends of $47,820 and reinvested capital gain
distributions of $292,101.
/3/Computed from data supplied by the U.S. Department of Labor, Bureau of Labor
Statistics.
The indexes are unmanaged and do not reflect sales charges, commissions or
expenses.
Past results are not predictive of future results.
[ruler measuring 5.05 through 5.15]
[photographs of various measuring devices and plumb bob]
CHARTING THE COURSE OF AN INVESTMENT IN AMCAP
Here's how a $10,000 investment in AMCAP grew between May 1, 1967 - when the
fund began operations - and February 28, 1999. As you can see, that $10,000
grew to $575,089 with all distributions reinvested, a gain of 5,651%. Over the
same period, $10,000 would have grown to $418,430 in Standard & Poor's 500
Composite Index. The chart also records the fund's progress relative to the
rate of inflation as measured by the Consumer Price Index.
The fund's year-by-year results appear in the table under the chart. You can
use this table to estimate how much the value of your own holdings has grown.
Let's say, for example, that you have been reinvesting all your dividends and
capital gain distributions since February 28, 1989. At that time, according to
the table, the value of the investment illustrated here was $122,827. Since
then, it has more than quadrupled in value to $575,089. Thus, in that same
10-year period, the value of your investment - regardless of size - has also
more than quadrupled.
[photographs of various office scenes]
[Begin Caption]
Banking Services, Data Processing, Internet Technologies
[End Caption]
[photograph of plumb bob]
INVESTING FOR GROWTH WITH THE MARKET NEAR ALL-TIME HIGHS
HOW AMCAP MEASURES QUALITY AND FINDS OPPORTUNITIES
By most measures, growth stocks are selling at or near all-time historical
highs. At the end of AMCAP's fiscal year in February, the stocks in Standard &
Poor's 500 Composite Index, a widely quoted measure of large-company U.S.
stocks, were selling at 32 times their recent 12 months' earnings. Just four
years ago, S&P stocks were selling at only half that valuation.
These valuation measures do not necessarily indicate that stocks will decline.
Bullish pundits have argued that powerful new technologies, low inflation and
the end of the Cold War mean that the long bull market will continue. But for
value-oriented investors who seek to purchase quality stocks with proven growth
records at reasonable prices, these high prices present a dilemma. How can
AMCAP invest for growth in this environment?
Careful research by experienced investment professionals is the answer. By
understanding companies thoroughly, AMCAP's analysts and portfolio counselors
have been able to invest in quality companies when their stocks have suffered
occasional declines in their upward growth. It's been a tough challenge because
AMCAP invests in companies with many favorable attributes including: proven
growth, solid management, a sustainable market advantage and a reasonable
price. Let's take a look at how AMCAP has been able to seize investment
opportunities regardless of overall market conditions.
LOOKING FOR POCKETS OF OPPORTUNITY
Claudia Huntington, AMCAP's president, believes the fund's emphasis on
investing for the long term gives it a distinct advantage over investors taking
a short-term approach. "Although the market is historically at very high
levels, there are always pockets of opportunity as companies or industries fall
in and out of favor in this short term-oriented market," notes Claudia.
ANALYZING WHY A STOCK FALLS. Even though the overall market is high, the prices
of some very good companies have been driven down at times for "market reasons"
rather than "fundamental reasons," Claudia says. "For companies with high
price-to-earnings ratios (stock price divided by earnings per share) and no
dividends, the slightest whiff of a problem or a slowdown in growth can cause
major damage to the stock price. Smaller companies sometimes decline in an
exaggerated way because there aren't enough shares available when investors
need to sell. When stocks fall for market considerations and not fundamental
problems, we try to take advantage of the situation."
CAPITALIZING ON SHORT-TERM NEGATIVE DEVELOPMENTS. Even the best companies have
their bad days, months or years, but if we believe in the underlying strength
of a company, those are the times we buy more stock if the price is down. "We
are very willing to look at strong companies that have fallen from favor
because of a weak quarter or two, but which have excellent long-term
opportunities," says Michael Shanahan, chairman of AMCAP. "We focus on
understanding the companies and their long-term potential. Then if a stock
declines because of short-term concerns, even if some of them are valid, it
gives us a buying opportunity."
TAKING ADVANTAGE OF SHORT-TERM MARKET CORRECTIONS. When a market correction
occurs, as it did last summer from July 17 to August 31, strong stocks with the
attributes that AMCAP seeks are often affected along with other equities.
During the correction, when Standard & Poor's 500 Stock Composite Index fell
19.3%, AMCAP purchased shares of Avon Products, PepsiCo and Cisco Systems. The
move turned out to be propitious. From September 1 to the end of our fiscal
year on February 28, 1999, the S&P rebounded 30.3% and AMCAP rose 31.2%. The
three stocks also rose sharply.
Now let's see how this strategy works out in the fund's larger industry
concentrations: technology, business services and media and entertainment.
TAKING A FUNDAMENTAL APPROACH TO TECHNOLOGY
Technology stocks had a spectacular run-up in calendar 1998, advancing 54.6%
(as measured by the Pacific Stock Exchange Technology 100 Index) compared with
the S&P 500's gain of 28.5%. Indeed, throughout the 1990s (from 1990 through
1998), technology stocks have risen 632.9% compared with 338.6% for the S&P
500. Many of AMCAP's technology holdings were likewise among the fund's
strongest investments.
[photographs of spoonful of red liquid, consumer, computer mouse]
[rules reflecting 5.30 to 5.40]
[Begin Caption]
Pharmaceuticals, Consumer Products, Personal Computing
[End Caption]
[Begin Sidebar]
Specialized investment analysts help AMCAP identify companies that have been
RELIABLE performers across the spectrum of market industries.
[End Sidebar]
[photograph of measuring device]
[Begin Caption]
Microprocessors, Cosmetics, Telecommunications
[End Caption]
But market history is full of examples of technology companies whose shares
suddenly rose to unforeseen heights and then fell just as precipitously.
Technology develops in waves, and individual companies boom, then often bust.
So AMCAP portfolio counselors feel it is important to use the same sound
investment principles to assess these companies as we use to identify quality
businesses in other industries.
SEARCHING FOR A SUSTAINABLE COMPETITIVE ADVANTAGE. Successful technology
analysts have an eye for businesses with clear and sustainable competitive
advantages. The analyst must have a keen understanding of the structure of the
industry, all the players and the risks inherent in the business. The analyst
has to be able to synthesize all this information to determine whether a
company truly has a market edge.
EXPLOITING VOLATILITY. Scott Bonham is one of several analysts who cover
technology companies for Capital Research and Management Company, the
investment adviser for AMCAP and the 27 other American Funds. Before he joined
Capital Research in 1996, Scott marketed computer workstations and worked as a
business consultant. Asked how it is possible to buy great technology stocks at
today's high prices, Scott says: "We exploit volatility. We try to buy a great
company at the point of maximum pain, when investors' feelings about the stock
are at their worst." At that point, many investors have given up on the stock
and have sold their shares, driving the price down. The key is determining
whether the situation is temporary or a harbinger of more bad things to come.
In the rapidly changing technology field, stocks are especially volatile.
MAKING THE DIFFICULT CALL ON INTERNET STOCKS. The story driving up Internet
stocks is compelling. "The Internet is changing the way we shop, communicate
and do business," says Tim Armour, a portfolio counselor for AMCAP. "Those
companies that lead the transformation may dominate the World Wide Web
marketplace of the future." But it is also very difficult to value Internet
stocks since most of them have little or no real earnings. As a result, AMCAP
"has invested primarily in companies that make equipment or help people and
businesses use the Internet - not necessarily in firms that directly provide
the Internet experience," says Michael Shanahan. Lexmark International, a large
manufacturer of laser and color inkjet printers for office and home use, is a
good example. "The more people use the Internet, the more they print pages off
the Internet," says Scott Bonham. "Internet users buy more printers and more
printer supplies such as ink cartridges and other printer-consumable products."
In fiscal 1999, Lexmark rose 141.4%, making it AMCAP's best-performing stock.
[photographs of remote control, measuring device, woman applying eye
make-up]
[Begin Caption]
A myriad of tried-and-true products and services from companies like Intel,
AirTouch and Avon provide a basis for SUSTAINED growth.
[End Caption]
[Begin Sidebar]
A CLOSER LOOK
CISCO SYSTEMS: PROVIDING NETWORKS FOR THE INTERNET
In today's Internet economy, seven people gain Internet access every second,
and electronic mail messages outnumber regular mail by nearly 10 to one. If you
have accessed the Internet or sent e-mail to a friend or co-worker, it is
likely that Cisco Systems products transferred your data. Founded in 1984 by a
small group of Stanford University computer scientists seeking an easier way to
connect different types of computer systems, Cisco today has grown to be one of
the world's largest multinational corporations. It has 18,000 employees in more
than 200 offices in 55 countries. Fiscal 1998 revenues were $8.5 billion. The
company provides routers, switches and network management software to link
computers and computer networks so people have easy access to information.
Cisco has consistently posted solid earnings growth, the hallmark of an AMCAP
investment. Last year more than 64% of its orders and nearly 70% of its
customer inquiries were handled over the Web.
- - Cisco Systems 1998 annual report and other sources
[End Sidebar]
[photograph of electronic component]
[illustration of ruler from 5.55 to 5.60]
[Begin Caption]
The Cisco 3600 series is a family of routers that integrate data, voice and
video information.
[end caption]
[photographs of Time magazine cover, measuring device, various video tape
jackets]
[Begin Sidebar page 10]
A CLOSER LOOK
TIME WARNER: MEDIA POWERHOUSE GAINS RECOGNITION
For three-quarters of a century, Time Warner has been a prime mover in
revolutionizing media and entertainment. It invented the newsmagazine, the
talking motion picture, photojournalism and cable television programming.
Today, it has "the greatest collection of media and entertainment assets in the
world," says Capital Research analyst Gordon Crawford. The company owns a
stable of household names ranging from Time magazine to Bugs Bunny and Batman.
Time Warner has leading market positions across a broad spectrum of media and
entertainment businesses from cable television to U.S. recorded music. In 1996,
the company acquired Turner Broadcasting System (home to CNN and other cable
assets) and added cable entrepreneur Ted Turner to its executive ranks. In
recent years, investors have been awarding the company greater recognition. "We
are exiting 1998 with strong operating momentum in all of our businesses, and
we expect 1999 to be another record-breaking year," chairman Gerald M. Levin
said in February.
- - Time Warner 1998 annual report and other sources
[End Sidebar]
[photograph of CNN broadcasting room]
[Begin Caption]
Time Warner's media and entertainment products range from Time magazine to
movie digital video disks (The Wedding Singer, L.A. Confidential and Gone With
The Wind shown) and CNN.
[End Caption]
[photographs of medical instrument, office worker, computer chip]
[Begin Caption]
Health Care, Business Services, Computer Hardware
[End Caption]
[photograph of plumb bob, ruler from 5.75 to 5.80]
[Begin Sidebar]
AMCAP relies on a process of investing called the "multiple portfolio counselor
system," which draws from the combined KNOWLEDGE of five experienced portfolio
counselors and many analysts.
[End Sidebar]
FINDING QUALITY STOCKS IN BUSINESS SERVICES
Business services is one of the fastest growing sectors of the U.S. economy. It
covers a broad range of services including advertising, payroll accounting,
personnel staffing, airline reservations, contract manufacturing and industrial
maintenance.
Jeff Lager, an analyst who covers business and environmental service companies,
says firms in this field are a good fit for AMCAP because they typically
produce "predictable, stable sources of revenue and are less exposed to the ups
and downs of the business cycle than many other industries." For example,
"companies need payroll processing no matter where they are in the business
cycle," Jeff says.
CHEAPER ISN'T ALWAYS BETTER. It's difficult, however, to find these small to
medium-size companies with a proven track record, says Blair Frank, an analyst
who covers emerging service companies. "The key here is picking the company
that will do the best job. It's rarely a good idea to choose a lower quality
company just because it has a cheaper stock price."
If you can identify the best company, it is better in the long run to pay a
premium for the industry leader, says Blair. Because there are low barriers to
enter many of these businesses, there are always alternative service providers,
so the key to long-run success is the quality of the service and the quality of
the company's management.
INVESTING FOR THE LONG RUN IN MEDIA AND ENTERTAINMENT
For the past two years, cable television, media and entertainment stocks have
been among the strongest contributors to AMCAP's results. But it wasn't always
so. In fiscal 1997, for example, many of these companies had mediocre results
at best. Their resurgence shows the value of staying with good companies
through temporarily difficult periods.
Gordon Crawford, a media and entertainment analyst, has been following these
companies since the early 1970s, not long after he joined Capital Research.
AMCAP has been a significant investor in these closely related industries for a
long time. So when many cable companies were in the investment doghouse from
1994 to 1997, Gordon saw their long-term potential and was not distracted by
their short-term difficulties.
UNDERSTANDING A COMPANY'S LONG-TERM POTENTIAL. Take Comcast, one of the fastest
growing cable operators in the U.S. and one of AMCAP's largest holdings. From
the beginning of 1994 to its market low in April 1997, Comcast's share price
fell almost 40%. Gordon explains: "A number of negative things happened. The
government regulated cable rates, reducing them by 17%. Investors feared that
direct satellite television would wipe out the industry. New products to help
cable revenues like high-speed modem lines and digital set-top boxes were
delayed." Gordon's knowledge of the industry and contacts with top cable
executives convinced him that these situations were temporary blips in cable
television's long-term growth trend.
In the spring of 1997, regulators allowed cable rates to be raised by 5% a
year. Later, high-speed modems and digital set-top boxes began to come on line,
spurring cable sales. Direct satellite service turned out to be less of a
threat than many investors had feared. In AMCAP's 1998 fiscal year, Comcast's
stock increased 96% in share price; in fiscal 1999, it rose 102%.
As we have seen, there are still opportunities today for investors in growth
companies. If they follow companies closely, understand the risks and are
willing to invest in quality companies when their stocks experience periodic
declines in their upward growth, they can be successful over the long term.
That is what AMCAP strives to do.
[End Caption]
[photographs: medical instrument; measuring device]
[illustration of ruler 5.85]
[Begin Sidebar Page 12]
A CLOSER LOOK
ALZA: PROVING THE POWER OF MEDICAL INNOVATION
ALZA has long been known in the pharmaceutical industry as an innovator in
drug-delivery systems. Founded in 1968, the company has developed skin patches,
implant systems and other methods to provide controlled release of drugs into
the bloodstream to expand their therapeutic value. Drugs produced with
controlled release generally are more effective and have fewer adverse side
effects than tablets or injections. Today ALZA has transformed itself into a
research-based pharmaceutical company, focusing on urology and oncology. Many
of the company's drugs have been developed through joint ventures with larger
drug companies. ALZA has 1,750 employees and projected fiscal 1999 revenues of
$740 million. It is one of the midsize growth companies that meet AMCAP's
objectives of proven growth.
- - ALZA 1998 annual report and other sources
[End Sidebar]
[photograph of person holding prescription]
[Begin Caption]
Among its many outstanding products, ALZA recently received FDA approval for
Ditropan(r) XL, a bladder-control medication that represents a significant
improvement over current urological treatments.
[End Caption]
[photographs of credit card, computer, person drinking beverage]
[Begin sidebar Page 13]
AMCAP will continue to seek out investment opportunities through PRECISE and
thorough research.
[End Sidebar]
[illustration of ruler from 5.90 through 6.00, arrow pointing to 5.95]
[Begin Caption]
Credit Lending Services, Electronic Components, Premium Beverages
[End Caption]
[photograph of plumb bob]
[THE AMERICAN FUNDS GROUP(R)]
<TABLE>
Amcap Fund Percent
Investment Portfolio, February 28, 1999 of Net
Assets
Largest Industry Holdings
<S> <C> <C> <C>
Broadcasting & Publishing 14.08%
Data Processing & Reproduction 10.71%
Health & Personal Care 9.66%
Business & Public Services 8.05%
Financial Services 5.35%
Other Industries 35.39%
Cash & Equivalents 16.76%
Largest Individual Equity Holdings
Comcast 3.79%
Time Warner 3.69%
Medtronic 3.04%
Philip Morris 2.70%
Viacom 2.62%
Fannie Mae 2.42%
Oracle 2.23%
Tele-Communications, Liberty Media Group 1.94%
AirTouch Communications 1.92%
SLM Holding 1.77%
Number of Market Percent
Shares Value Of Net
Equity Securitites (common stocks) (000) Assets
- -------------------------------------------- -------- -------- --------
BROADCASTING & PUBLISHING - 14.08%
Comcast Corp., Class A, special stock 2,925,000 $207,492 3.79%
Comcast Corp., Class A 260,000 17,647
Time Warner Inc. 3,400,000 219,300 3.69
Viacom Inc., Class B (1) 1,762,200 155,734 2.62
Tele-Communications, Inc., Series A, Liberty Media Group (1) 2,137,500 115,158 1.94
Harte-Hanks Communications, Inc. 2,140,000 55,372 .93
Tele-Communications, Inc., Series A, TCI Ventures Group (1) 945,876 26,189 .44
Infinity Broadcasting Corp., Class A (1) 712,200 16,915 .29
Tele-Communications, Inc., Series A, TCI Group (1) 212,421 13,343 .23
Clear Channel Communications, Inc. (1) 150,000 9,000 .15
DATA PROCESSING & REPRODUCTION - 10.71%
Oracle Corp. (1) 2,367,500 132,284 2.23
Microsoft Corp. (1) 450,000 67,556 1.14
Lexmark International Group, Inc., Class A (1) 650,000 67,072 1.13
Computer Associates International, Inc. 1,538,300 64,609 1.09
Intuit Inc. (1) 500,000 49,469 .83
Cisco Systems, Inc. (1) 450,000 44,016 .74
PeopleSoft, Inc. (1) 1,800,000 33,975 .57
Silicon Graphics, Inc. (1) 1,850,000 29,484 .50
HNC Software Inc. (1) 1,030,000 27,681 .47
Gateway 2000, Inc. (1) 375,000 27,258 .46
International Business Machines Corp. 150,000 25,500 .43
3Com Corp. (1) 700,000 22,006 .37
Cadence Designs Systems, Inc. (1) 600,000 14,437 .24
Compaq Computer Corp. 300,000 10,575 .18
Synopsys, Inc. (1) 200,000 9,250 .15
Ascend Communications, Inc. (1) 70,000 5,386 .09
Sequent Computer Systems, Inc. (1) 560,000 5,337 .09
HEALTH & PERSONAL CARE - 9.66%
Medtronic, Inc. 2,560,000 180,800 3.04
Pfizer Inc 700,000 92,356 1.56
Guidant Corp. 1,500,000 85,500 1.44
Gillette Co. 1,000,000 53,625 .90
Avon Products, Inc. 1,160,000 48,285 .81
Alza Corp. (1) 700,000 36,706 .62
Merck & Co., Inc. 400,000 32,700 .55
Bergen Brunswig Corp., Class A 500,000 12,219 .21
Schering-Plough Corp. 200,000 11,187 .19
Cardinal Health, Inc. 144,589 10,438 .18
Watson Pharmaceuticals, Inc. (1) 200,000 9,663 .16
BUSINESS & PUBLIC SERVICES - 8.05%
Concord EFS, Inc. (1) 2,246,900 71,760 1.21
Cendant Corp. (1) 3,975,000 65,836 1.11
Young & Rubicam Inc. (1) 1,493,500 56,380 .95
Interpublic Group of Companies, Inc. 600,000 44,887 .75
Avery Dennison Corp. 700,000 37,581 .63
First Data Corp. 800,000 30,600 .51
FIRST HEALTH Group Corp. (1) 1,400,000 22,400 .38
MSC Industrial Direct Co., Inc., Class A (1) 1,225,700 21,909 .37
ServiceMaster Co. 1,157,500 21,631 .36
Cambridge Technology Partners (Massachusetts), Inc. (1) 849,600 21,346 .36
Metamor Worldwide, Inc. (1) 850,000 16,044 .27
IKON Office Solutions, Inc. 1,000,000 14,125 .24
Paychex, Inc. 330,000 13,984 .24
Universal Health Services, Inc., Class B (1) 250,000 10,156 .17
ROMAC International, Inc. (1) 770,517 9,246 .16
Columbia/HCA Healthcare Corp. 500,000 8,937 .15
Galileo International, Inc. 114,000 5,757 .10
TeleTech Holdings, Inc. (1) 747,900 5,235 .09
ELECTRONIC COMPONENTS - 5.95%
Intel Corp. 600,000 71,962 1.21
Solectron Corp. (1) 1,600,000 71,500 1.20
ADC Telecommunications, Inc. (1) 1,420,000 57,510 .97
Texas Instruments Inc. 600,000 53,513 .90
SCI Systems, Inc. (1) 800,000 24,750 .41
Molex Inc. 800,000 21,400 .36
Analog Devices, Inc. (1) 825,000 20,677 .35
Sanmina Corp. (1) 237,500 12,409 .21
Littlefuse, Inc. (1) 590,000 10,067 .17
Adaptec, Inc. (1) 500,000 199,969 .17
FINANCIAL SERVICES - 5.35%
Fannie Mae 2,051,000 143,570 2.42
SLM Holding Corp. 2,450,000 105,044 1.77
Freddie Mac 700,000 41,213 .69
Capital One Financial Corp. 140,000 17,868 .30
Providian Financial Corp. 100,000 10,213 .17
MERCHANDISING - 4.51%
Consolidated Stores Corp. (1) 2,645,312 66,629 1.12
Kohl's Corp. (1) 950,000 65,550 1.10
AutoZone, Inc. (1) 1,800,000 63,000 1.06
Albertson's, Inc. 750,000 42,750 .72
Circuit City Stores, Inc. 560,000 30,380 .51
BEVERAGES & TOBACCO - 4.17%
Philip Morris Companies Inc. 4,100,000 160,413 2.70
PepsiCo, Inc. 1,600,000 60,200 1.01
Beringer Wine Estates Holdings, Inc., Class B (1) 365,000 14,714 .25
Robert Mondavi Corp., Class A (1) 366,700 12,605 .21
BANKING - 3.45%
Wells Fargo & Co. (formerly Norwest Corp.) 2,700,000 1,999,225 1.67
M&T Bank Corp. 85,923 40,878 .69
Northern Trust Corp. 450,000 40,219 .68
Marshall & Ilsley Corp. 346,400 19,398 .33
Imperial Bancorp (1) 270,000 4,928 .08
INSURANCE - 2.07%
American International Group, Inc. 587,500 66,938 1.13
MGIC Investment Corp. 650,000 22,141 .37
Mercury General Corp. 500,000 17,438 .29
Orion Capital Corp. 500,000 16,531 .28
TELECOMMUNICATIONS - 1.92%
AirTouch Communications (1) 1,250,000 113,828 1.92
CHEMICALS - 1.70%
Cambrex Corp. 1,130,000 27,049 .45
RPM, Inc. 1,700,000 23,481 .40
Ionics, Inc. (1) 621,000 17,310 .29
Sigma-Aldrich Corp. 600,000 15,825 .27
Praxair, Inc. 350,000 12,228 .20
Airgas, Inc. (1) 600,000 5,400 .09
LEISURE & TOURISM - 1.59%
Brinker International, Inc. (1) 2,950,000 85,366 1.44
Walt Disney Co. 250,000 8,797 .15
MACHINERY & ENGINEERING - 1.12%
Millipore Corp. 1,024,200 28,550 .48
IDEX Corp. 1,010,000 23,988 .41
Thermo Electron Corp. (1) 1,000,000 13,813 .23
ELECTRONIC INSTRUMENTS - 0.84%
Applied Materials, Inc. (1) 900,000 50,063 .84
TEXTILES & APPAREL - 0.80%
NIKE, Inc., Class B 640,000 34,320 .58
Liz Claiborne Inc. 385,000 12,970 .22
INDUSTRIAL COMPONENTS - 0.66%
Tower Automotive, Inc. (1) 1,400,000 26,075 .44
Lear Corp. (1) 365,000 12,889 .22
ENERGY EQUIPMENT - 0.51%
Schlumberger Ltd. (Netherlands Antilles) 624,232 30,314 .51
RECREATION & OTHER CONSUMER PRODUCTS - 0.46%
Harley-Davidson, Inc. 275,000 15,898 .27
Mattel, Inc. 431,900 11,391 .19
FOOD & HOUSEHOLD PRODUCTS - 0.29%
Colgate-Palmolive Co. 200,000 16,975 .29
WHOLESALE & INTERNATIONAL TRADE - 0.24%
Tech Data Corp. (1) 850,000 14,450 .24
TRANSPORTATION: RAIL & ROAD - 0.16%
Wisconsin Central Transportation Corp. (1) 675,000 9,281 .16
AEROSPACE & MILITARY TECHNOLOGY - 0.10%
Raytheon Co., Class A 112,480 5,947 .10
Miscellaneous - 4.85%
Other equity securities in initial
period of acquistion 288,314 4.85
TOTAL EQUITY SECURITIES (COST:$ 2,861,252) 4,943,462 83.24
Principal
Amount
Short-Term Securities (000)
Corporate Short-Term Notes - 15.01%
Coca-Cola Co. 4.77%-4.79% due 3/12-4/12/1999 75,500,000 75,214 1.27
CIT Group Holdings, Inc. 4.80%-4.81% due 3/1-4/20/1999 71,900,000 71,584 1.21
Eastman Kodak Co.4.79%-4.81% due 3/9-5/11/1999 70,000,000 69,667 1.17
E.I. du Pont de Nemours and Co. 4.77%-4.80% due 3/16-5/13/1999 64,800,000 64,554 1.09
Ciesco LP 4.80% due 3/19-4/6/1999 60,500,000 60,311 1.02
International Lease Finance Corp. 4.75%-4.79% due 3/30-5/7/1999 59,200,000 58,786 .99
Lucent Technologies Inc. 4.77%-4.81% due 3/23-4/14/1999 58,836,000 58,581 .99
Ford Motor Credit Co. 4.83% due 4/12-4/19/1999 57,800,000 57,446 .97
American Express Credit Corp. 4.79%-4.83% due 3/22-5/12/1999 56,700,000 56,348 .95
Associates First Capital Corp. 4.84%-4.85% due 3/4-3/17/1999 53,900,000 53,820 .91
Commercial Credit Co. 4.82%-4.85% due 3/2-4/13/1999 46,800,000 46,621 .78
BellSouth Telecommunications, Inc. 4.76%-4.80% due 3/3-4/5/1999 45,500,000 45,379 .76
A.I. Credit Corp. 4.76%-4.78% due 3/25-4/7/1999 43,400,000 43,213 .73
National Rural Utilities Cooperative Finance Corp. 4.78%-4.83% due 3/22- 43,300,000 43,120 .70
Motorola, Inc. 4.75% due 4/1/1999 37,000,000 36,844 .62
H.J. Heinz Co. 4.78% due 4/15/1999 37,000,000 36,774 .62
General Electric Capital Corp. 4.87% due 3/1/1999 13,400,000 13,398 .23
Federal Agency Discount Notes - 4.01%
Fannie Mae 4.70%-5.10% due 3/18-5/10/1999 105,800,000 105,120 1.78
Freddie Mac 4.73%-5.00% due 3/5-3/26/1999 7,199,900,00 79,787 1.34
Federal Home Loan Banks 4.76%-4.98% due 3/3-5/26/1999 53,300,000 52,877 .89
TOTAL SHORT-TERM SECURITIES (COST: $1,129,497) 1,129,444 19.02
TOTAL INVESTMENT SECURITIES (COST: $3,900,749) 6,072,906
Excess of payables over cash and receivables 133,988 2.26
----------------------
NET ASSETS 5,938,918 100.00
========= =========
(1) Non-income-producing securities.
See Notes to Financial Statements
</TABLE>
<TABLE>
AMCAP FUND Financial Statements
- ------------------------------------------- --------- ---------
Statement of Assets and Liabilities
at February 28, 1999 (dollars in thousands, except per-share data)
- ------------------------------------------- --------- ---------
<S> <C> <C>
Assets:
Investment securities at market
(cost: $3,990,749) $6,072,906
Cash 4,097
Receivables for--
Sales of investments $9,203
Sales of fund's shares 9,271
Dividends 2,290 20,764
--------- ---------
6,097,767
Liabilities:
Payables for--
Purchases of investments 150,721
Repurchases of fund's shares 3,030
Management services 1,694
Other expenses 3,404 158,849
--------- ---------
Net Assets at February 28, 1999--
Equivalent to $17.84 per share on
332,834,083 shares of $1 par value
capital stock outstanding (authorized
capital stock--500,000,000 shares) $5,938,918
========
Statement of Operations for the year
ended February 28, 1999 (dollars in thousands)
--------- ---------
Investment Income:
Income:
Dividends $ 26,494
Interest 45,416 $ 71,910
---------
Expenses:
Management services fee 19,703
Distribution expenses 11,159
Transfer agent fee 2,686
Reports to shareholders 172
Registration statement and prospectus 261
Postage, stationery and supplies 563
Directors' fees 110
Auditing and legal fees 52
Custodian fee 93
Taxes other than federal income tax 66
Other expenses 157 35,022
--------- ---------
Net investment income 36,888
---------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 849,757
Net increase in unrealized
appreciation on investments:
Beginning of year 1,945,960
End of year 2,082,157
---------
Net unrealized appreciation
on investments 136,197
---------
Net realized gain and unrealized
appreciation on investments 985,954
---------
Net Increase in Net Assets Resulting
From Operations $1,022,842
=========
Statement of Changes in Net
Assets (dollars in thousands)
- --------------------------------------------- --------- ---------
Year ended February 28
1999 1998
Operations: --------- ---------
Net investment income $ 36,888 $ 26,218
Net realized gain on investments 849,757 509,966
Net unrealized appreciation
on investments 136,197 809,009
--------- ---------
Net increase in net assets
resulting from operations 1,022,842 1,345,193
--------- ---------
Dividends and Distributions
Paid to Shareholders:
Dividends from net investment income (38,213) (26,109)
Distributions from net realized
gain on investments (673,768) (646,989)
--------- ---------
Total dividends and distributions (711,981) (673,098)
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
46,252,114 and 23,535,997
shares, respectively 807,601 366,597
Proceeds from shares issued in
reinvestment of net investment income
dividends and distributions of net
realized gain on investments:
39,917,389 and 42,604,643 shares,
respectively 663,119 630,147
Cost of shares repurchased:
42,252,652 and 37,958,301
shares, respectively (733,197) (585,123)
--------- ---------
Net increase in net assets
resulting from capital share transactions 737,523 411,621
--------- ---------
Total Increase in Net Assets 1,048,384 1,083,716
Net Assets:
Beginning of year 4,890,534 3,806,818
--------- ---------
End of year (including undistributed
net investment income of $3,813 and
$5,138, respectively) $5,938,918 $4,890,534
========= =========
See Notes to Financial Statements
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies
Organization - AMCAP Fund, Inc. (the "fund") is registered under the
Investment Company Act of 1940 as an open-end, diversified management
investment company. The fund seeks long-term growth of capital by investing in
growing, profitable companies.
Significant Accounting Policies - The following is a summary of the
significant accounting policies consistently followed by the fund in the
preparation of its financial statements:
Security Valuation - Equity securities, including depositary receipts, are
valued at the last reported sale price on the exchange or market on which such
securities are traded, as of the close of business on the day the securities
are being valued or, lacking any sales, at the last available bid price. In
cases where equity securities are traded on more than one exchange, the
securities are valued on the exchange or market determined by the investment
adviser to be the broadest and most representative market, which may be either
a securities exchange or the over-the-counter market. Securities with original
maturities of one year or less having 60 days or less to maturity are amortized
to maturity based on their cost if acquired within 60 days of maturity or, if
already held on the 60th day, based on the value determined on the 61st day.
Securities and assets for which representative market quotations are not
readily available are valued at fair value as determined in good faith by a
committee appointed by the Board of Directors.
Security Transactions and Related Investment Income - 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. Discounts and premiums on
securities purchased are amortized.
Dividends and Distributions to Shareholders - Dividends and distributions
paid to shareholders are recorded on the ex-dividend date.
2. Federal Income Taxation
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 February 28, 1999, net unrealized appreciation on investments for book
and federal income tax purposes aggregated $2,082,157,000, of which
$2,298,943,000 related to appreciated securities and $216,786,000 related to
depreciated securities. There was no difference between book and tax realized
gains on securities transactions for the year ended February 28, 1999. The cost
of portfolio securities for book and federal income tax purposes was
$3,990,749,000 at February 28, 1999.
3. Fees and Transactions with Related Parties
Investment Advisory Fee - The fee of $19,703,000 for management services was
incurred pursuant to an agreement with Capital Research and Management
Company(CRMC), with which certain officers and Directors of the fund are
affiliated. The Investment Advisory and Service Agreement provides for monthly
fees, accrued daily, based on an annual rate of 0.485% of the first $1 billion
of average net assets; 0.385% of such assets in excess of $1 billion but not
exceeding $2 billion; 0.355% of such assets in excess of $2 billion but not
exceeding $3 billion; 0.335% of such assets in excess of $3 billion but not
exceeding $5 billion; 0.32% of such assets in excess of $5 billion but not
exceeding $8 billion; and 0.31% of such assets in excess of $8 billion.
Distribution Expenses - Pursuant to a Plan of Distribution, the fund may
expend up to 0.25% of its average net assets annually for any activities
primarily intended to result in sales of fund shares, provided the categories
of expenses for which reimbursement is made are approved by the fund's Board of
Directors. Fund expenses under the Plan include payments to dealers to
compensate them for their selling and servicing efforts. During the year ended
February 28, 1999, distribution expenses under the Plan were $11,159,000. As of
February 28, 1999, accrued and unpaid distribution expenses were $2,834,000.
American Funds Distributors, Inc. (AFD), the principal underwriter of the
fund's shares, received $1,596,000 (after allowances to dealers) as its portion
of the sales charges paid by purchasers of the fund's shares. Such sales
charges are not an expense of the fund and, hence, are not reflected in the
accompanying statement of operations.
Transfer Agent Fee - American Funds Service Company (AFS), the transfer agent
for the fund, was paid a fee of $2,686,000.
Deferred Director's Fees - Directors who are unaffiliated with CRMC may elect
to defer part or all of the fees earned for services as members of the Board.
Amounts deferred are not funded and are general unsecured liabilities of the
fund. As of February 28, 1999, aggregate amounts deferred and earnings thereon
were $536,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Directors and officers of the fund
are or may be considered to be affiliated with CRMC, AFS, and AFD. No such
persons received any remuneration directly from the fund.
4. Investment Transactions and Other Disclosures
The fund made purchases and sales of investment securities, excluding
short-term securities, of $1,615,721,000 and $2,041,889,000, respectively,
during the year ended February 28, 1999.
As of February 28, 1999, accumulated undistributed net realized gain on
investments was $273,729,000 and additional paid-in capital was $3,246,385,000.
The fund reclassified $29,640,000 from undistributed net realized gains to
paid-in capital, for the year ended February 28, 1999.
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 $93,000 includes $18,000 that was paid by these credits
rather than in cash.
<TABLE>
AMCAP FUND
Per-Share Data and Ratios
- -------------------------------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Year ended February 28 or 29
------ ------ ------ ------ ------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
Net Asset Value, Beginning
of Year $16.93 $14.60 $14.40 $12.28 $12.98
------ ------ ------ ------ ------
Income from Investment
Operations:
Net investment income .12 .10 .12 .16 .14
Net gains on securities (both
realized and unrealized) 3.21 4.80 1.51 3.32 .24
------ ------ ------ ------ ------
Total from investment operations 3.33 4.90 1.63 3.48 .38
------ ------ ------ ------ ------
Less Distributions:
Dividends (from net investment
income) (.13) (.10) (.12) (.17) (.13)
Distributions (from capital gains) (2.29) (2.47) (1.31) (1.19) (.95)
------ ------ ------ ------ ------
Total distributions (2.42) (2.57) (1.43) (1.36) (1.08)
------ ------ ------ ------ ------
Net Asset Value, End of Year $17.84 $16.93 $14.60 $14.40 $12.28
====== ====== ====== ====== ======
Total Return /1/ 21.07% 36.97% 11.74% 29.29% 3.41%
Ratios/Supplemental Data:
Net assets, end of year (in
millions) $5,939 $4,891 $3,807 $3,693 $2,970
Ratio of expenses to average `
net assets .67% .68% .69% .71% .71%
Ratio of net income to
average net assets .70% .62% .81% 1.16% 1.16%
Portfolio turnover rate 36.46% 31.42% 24.14% 35.16% 17.92%
/1/Excludes maximum sales charge
of 5.75%.
</TABLE>
Independent Auditors' Report
To the Board of Directors and Shareholders of AMCAP Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of AMCAP
Fund, Inc.(the "fund"), including the investment portfolio as of February 28,
1999, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the per-share data and ratios for each of the five years in the
period then ended. These financial statements and per-share data and ratios are
the responsibility of the fund's management. Our responsibility is to express
an opinion on these financial statements and per-share data and ratios based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per-share data
and ratios are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures include confirmation of securities owned as of
February 28, 1999, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and per-share data and ratios
referred to above present fairly, in all material respects, the financial
position of AMCAP Fund, Inc. as of February 28, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the per-share data and ratios for
each of the five years in the period then ended, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, California
March 19, 1999
1999 Tax Information (Unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions received by shareholders
during such fiscal year. The distributions made during the fiscal year by the
fund were earned from the following sources:
<TABLE>
<CAPTION>
Dividends and Distributions per Share
To Shareholders Payment Date From Net From Net From Net
of Record Investment Realized Realized
Income Short-Term Long-Term
Gains Gains
<S> <C> <C> <C> <C>
June 19, 1998 June 22, 1998 $0.03 $0.113 $0.337
December 10, 1998 December 11, 1998 $0.10 - $1.840
</TABLE>
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 70% of the
dividends paid by the fund from net investment income represent qualifying
dividends.
Dividends and distributions received by retirement plans such as IRAs,
Keogh-type plans and 403(b) plans need not be reported as taxable income.
However, many plan retirement trusts may need this information for their annual
information reporting.
The fund also designates as a capital gain distribution a portion of earnings
and profits paid to shareholders in redemption of their shares.
SINCE THE AMOUNTS ABOVE ARE REPORTED FOR THE FUND'S FISCAL YEAR AND NOT THE
CALENDAR YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX
INFORMATION, WHICH WAS MAILED IN JANUARY 1999, TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR 1998 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT
THEIR TAX ADVISERS.
AMCAP FUND
BOARD OF DIRECTORS
H. FREDRICK CHRISTIE
Rolling Hills Estates, California
Private investor; former President and
Chief Executive Officer, The Mission Group;
former President, Southern California Edison
Company
MARY ANNE DOLAN
Los Angeles, California
Founder and President, M.A.D., Inc.
(communications company); former Editor,
The Los Angeles Herald Examiner
MARTIN FENTON
San Diego, California
Managing Director, Senior Resource Group,
LLC (development and management of senior
living communities)
HERBERT HOOVER III
San Marino, California
Private investor
CLAUDIA P. HUNTINGTON
Los Angeles, California
President of the fund
Senior Vice President,
Capital Research and Management Company
MARY MYERS KAUPPILA
Boston, Massachusetts
Private investor; former owner and President,
Energy Investment, Inc.
KIRK P. PENDLETON
Southampton, Pennsylvania
Chairman of the Board and Chief Executive
Officer, Cairnwood, Inc.
(venture capital investment)
JAMES W. RATZLAFF
San Francisco, California
Senior Partner, The Capital Group
Partners L.P.
OLIN C. ROBISON, PH.D.
Middlebury, Vermont
President of the Salzburg Seminar;
President Emeritus, Middlebury College
R. MICHAEL SHANAHAN
Los Angeles, California
Chairman of the Board of the fund
Chairman of the Board and
Principal Executive Officer,
Capital Research and Management Company
Chairman Emeritus
JAMES D. FULLERTON
Pasadena, California
Retired; former Chairman of the Board,
The Capital Group Companies, Inc.
Other Officers
TIMOTHY D. ARMOUR
Los Angeles, California
Senior Vice President of the fund
Director, Capital Research and Management
Company; Chairman of the Board and Chief
Executive Officer, Capital Research Company
PAUL G. HAAGA, JR.
Los Angeles, California
Senior Vice President of the fund
Executive Vice President and Director,
Capital Research and Management Company
JOANNA F. JONSSON
San Francisco, California
Vice President of the fund
Vice President and Director,
Capital Research Company
VINCENT P. CORTI
Los Angeles, California
Secretary of the fund
Vice President - Fund Business Management
Group, Capital Research and Management
Company
SHERYL F. JOHNSON
Norfolk, Virginia
Treasurer of the fund
Vice President - Fund Business Management
Group, Capital Research and Management
Company
ROBERT P. SIMMER
Norfolk, Virginia
Assistant Treasurer of the fund
Vice President - Fund Business Management
Group, Capital Research and Management
Company
OFFICES OF THE FUND AND OF THE
INVESTMENT ADVISER, CAPITAL RESEARCH
AND MANAGEMENT COMPANY
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92821-5823
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 2205
Brea, California 92822-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071-2899
INDEPENDENT AUDITORS
Deloitte & Touche LLP
1000 Wilshire Boulevard
Los Angeles, California 90017-2472
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
THIS REPORT IS FOR THE INFORMATION OF SHAREHOLDERS OF AMCAP FUND, BUT IT MAY
ALSO BE USED AS SALES LITERATURE WHEN PRECEDED OR ACCOMPANIED BY THE CURRENT
PROSPECTUS, WHICH GIVES DETAILS ABOUT CHARGES, EXPENSES, INVESTMENT OBJECTIVES
AND OPERATING POLICIES OF THE FUND. IF USED AS SALES MATERIAL AFTER JUNE 30,
1999, THIS REPORT MUST BE ACCOMPANIED BY AN AMERICAN FUNDS GROUP STATISTICAL
UPDATE FOR THE MOST RECENTLY COMPLETED CALENDAR QUARTER.
For information about your account or any of the fund's services, please
contact your financial adviser. You may also call American Funds Service
Company, toll-free, at 800/421-0180 or visit us at www.americanfunds.com on the
World Wide Web.
Printed on recycled paper
Litho in USA AGD/L/3912
Lit. No. AMCAP-011-0499
