<PAGE>
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BULK RATE
AMWAY MUTUAL FUND, INC. U.S. POSTAGE
7575 Fulton Street East PAID
Ada, Michigan 49355-7150 ADA, MI
PERMIT 100
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AMWAY
MUTUAL
FUND,
INC.
SEMI-ANNUAL
REPORT
1997
AMWAY
MUTUAL
FUND
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- --------------------------------------------------------------------------------
<PAGE>
AMWAY MUTUAL FUND, INC.
Dear Shareholders:
I am pleased to provide you with the Semi-Annual Report to Shareholders for
Amway Mutual Fund, Inc., for the six months ended June 30, 1997. During the
first six months of calendar year 1997, we have continued to experience another
extraordinarily successful period for investments in stocks with performance
well surpassing historical norms. Your Fund participated in that performance
with a total return of 13.9%. The market continues to thrive due to several
factors including relatively low and stable interest rates, economic growth, a
low inflation rate and a stable global environment.
Ark Investment Management, the sub-adviser for the Fund, has an investment
style which continues to reflect a strong value discipline in the investment
process. When considering Ark's investment strategy of maximizing value, the
Fund has continued to perform well in the rising markets. Conversely, one of
the primary objectives of the value strategy is to position the Fund to perform
well in a declining market. During any market declines, they will be looking to
take advantage of any downturns in the market by acquiring attractive long-term
issues at a lower price, and on the other hand, they will be selling any issues
that appear to be over valued during upward trends in the market.
We continue to feel that investments in stocks will be rewarded over the
long term. We will always use our best efforts to provide you with excellent
long term results.
Sincerely,
James J. Rosloniec
President
DIRECTORS
Richard A. DeWitt
Allan D. Engel
Donald H. Johnson
Walter T. Jones
James J. Rosloniec
TRANSFER AGENT
Amway Stock Transfer Co.
7575 Fulton Street, East
Ada, Michigan 49355-7150
CUSTODIAN
Michigan National Bank
77 Monroe Center
Grand Rapids, Michigan 49501
AUDITORS
BDO Seidman, LLP
99 Monroe Avenue, N.W.
Grand Rapids, Michigan 49503
LEGAL MATTERS
John Dougherty
Attorney at Law
Suite 500
1155 Connecticut Ave., N.W.
Washington, DC 20036
INVESTMENT ADVISOR
Amway Management Company
7575 Fulton Street, East
Ada, Michigan 49355-7150
SUB-ADVISOR
Ark Asset Management Co., Inc.
One New York Plaza
New York, NY 10004
August 26, 1997
2
<PAGE>
AMWAY MUTUAL FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1997
(UNAUDITED)
SHARES OR MARKET
COMMON STOCK-98.46% PAR VALUE VALUE
--------- ------
$
APPAREL AND ACCESSORY STORES-1.33%
Gap (The), Inc. 45,900 1,784,362
BANKING-3.33%
Bankers Trust NY Corp. 12,800 1,113,600
Chase Manhattan Corp. (New) 10,200 990,038
First Chicago NBD Corp. 15,800 955,900
Wells Fargo & Co. 5,200 1,401,400
------------
4,460,938
------------
BUSINESS SERVICES-3.94%
Nynex Corp. 46,300 2,668,038
Xerox Corp. 33,000 2,602,875
------------
5,270,913
------------
CHEMICALS & ALLIED PRODUCTS-4.08%
American Home Products 17,600 1,346,400
Bristol-Meyers Squibb Co. 11,000 891,000
Dupont (E.I.) De Nemours & Co. 36,500 2,294,937
Grace (W.R.) & Co. Del (New) 2,100 115,763
Hercules, Inc. 16,900 809,087
------------
5,457,187
------------
COMMUNICATION-8.22%
AT&T Corp. 47,700 1,672,481
Fluor Corp. 14,000 772,625
GTE Corp. 61,900 2,715,863
SBC Communications, Inc. 23,400 1,447,875
TCI Series - A TCI Group *139,200 2,066,250
USWest Media Group *37,000 749,250
Viacom, Inc. Class B *52,700 1,581,000
------------
11,005,344
------------
ELECTRIC & ELECTRONIC EQUIPMENT-4.97%
Alliedsignal, Inc. 21,200 1,780,800
AMP Inc. 54,300 2,267,025
Raytheon Co. 32,300 1,647,300
Rockwell International Corp. (New) 16,300 961,700
------------
6,656,825
------------
ELECTRIC, GAS, & SANITARY SERVICES-4.48%
Enron Corp. 58,600 2,391,613
Texas Utilities Co. 60,600 2,086,912
Waste Management, Inc. 47,000 1,509,875
------------
5,988,400
------------
FABRICATED METAL PRODUCTS-1.34%
Masco Corp. 42,800 1,786,900
------------
FOOD AND KINDRED PRODUCTS-4.56%
Anheuser-Busch Cos., Inc. 57,100 2,394,631
Archer-Daniels-Midland 133,676 3,141,386
CPC International, Inc. 6,100 563,107
------------
6,099,124
------------
FOOD STORES-1.42%
Albertson's, Inc. 51,900 1,894,350
GENERAL MERCHANDISE STORES-6.25%
Dillard's, Inc. 67,500 2,337,187
Federated Department Stores *50,200 1,744,450
May Dept. Stores Co. 37,800 1,786,050
Sears, Roebuck & Company 46,300 2,488,625
------------
8,356,312
------------
HEALTH SERVICES-4.37%
Columbia/HCA Healthcare Corp. 99,100 3,895,869
Humana, Inc. *52,500 1,214,062
United Healthcare Corp. 14,100 733,200
------------
5,843,131
------------
HOLDING AND OTHER INVESTMENT OFFICES-1.24%
American General Corp. 34,800 1,661,700
------------
INSTRUMENTS AND RELATED PRODUCTS-1.67%
Eastman Kodak Co. 29,100 2,233,425
------------
INSURANCE CARRIERS-10.27%
Aetna Inc. 23,200 2,375,100
Allstate Corp. 37,800 2,759,400
Chubb Corp. 37,200 2,487,750
General RECorporation 18,600 3,385,200
Loews Corp. 21,200 2,122,650
Unum Corp. 14,600 613,200
------------
13,743,300
------------
LUMBER AND WOOD PRODUCTS-0.59%
Georgia-Pacific Corp. 9,300 793,987
------------
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
AMWAY MUTUAL FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1997
(UNAUDITED)
SHARES OR MARKET
COMMON STOCK-98.46% PAR VALUE VALUE
(CONTINUED) --------- ------
$
MACHINERY, EXCEPT ELECTRICAL-6.76%
Digital Equipment Corp. *19,400 687,488
Dresser Industries, Inc. 56,300 2,097,175
Hewlett-Packard Co. 17,400 974,400
International Business Machines 47,500 4,283,906
Seagate Technology *28,600 1,006,362
------------
9,049,331
------------
METAL MINING-1.82%
Newmont Mining Corp. 62,400 2,433,600
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MISCELLANEOUS MANUFACTURING INDUSTRIES-0.00%
Jan Bell Marketing Warrants *762 8
------------
OIL AND GAS EXTRACTION-6.94%
Baker Huges, Inc. 39,100 1,512,681
Burlington Resources 23,300 1,028,113
Occidental Petroleum Corp. 107,100 2,684,194
Tenneco, Inc. 11,300 510,619
Union Pacific Resources 56,100 1,395,487
Unocal Corp. 55,700 2,161,856
------------
9,292,950
------------
PAPER & ALLIED PRODUCTS-3.23%
Champion International Corp. 28,900 1,596,725
James River Corp. 35,700 1,320,900
Kimberly-Clark Corp. 28,200 1,402,950
------------
4,320,575
------------
PETROLEUM & COAL PRODUCTS-2.64%
Amerada Hess Corp. 31,600 1,755,775
Atlantic Ritchfield Company 16,300 1,149,150
Texaco, Inc. 5,800 630,750
------------
3,535,675
------------
PRIMARY METAL INDUSTRIES-1.56%
Aluminum Co. of America 27,700 2,087,887
------------
PRINTING AND PUBLISHING-0.45%
Gannett Co. 6,100 602,375
------------
RAILROAD TRANSPORTATION-3.98%
Burlington Northern Santa Fe 26,900 2,417,638
CSX Corp. 52,500 2,913,750
------------
5,331,388
------------
RUBBER AND MISC. PLASTICS PRODUCTS-0.40%
Goodyear Tire & Rubber Co. 8,400 531,825
------------
SECURITY & COMMODITY BROKERS & SERVICES-0.93%
Morgan Stanley, Dean Witter 29,000 1,248,812
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STONE, CLAY & GLASS PRODUCTS-1.64%
PPG Industries 37,800 2,197,125
------------
TRANSPORTATION EQUIPMENT-6.05%
Chrysler Corp. 82,400 2,703,750
Ford Motor Co. 73,100 2,759,525
Lockheed Martin Corp. 25,400 2,630,488
------------
8,093,763
------------
Total Common Stock-98.46% $131,761,512
Cash (Michigan National Bank Money Market
Account)-1.38% $ 1,849,460
All Other Assets Less Liabilities-(0.16%) $ 208,846
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NET ASSETS-100.00% $133,819,818
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*Non-dividend producing as of June 30, 1997.
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
AMWAY MUTUAL FUND, INC.
STATEMENT OF ASSETS
AND LIABILITIES FOR
THE SIX MONTHS ENDED
JUNE 30, 1997
(UNAUDITED)
ASSETS:
Investments in securities, at market
(identified cost $114,882,002)
(Notes 1-A, and 3) $131,761,512
Cash 1,849,460
Receivables:
Securities sold 722,347
Dividends 260,429
Miscellaneous 15,528
Interest 9,330
Capital stock sold 4,249
Prepaid insurance 7,566
------------
TOTAL ASSETS 134,630,421
------------
LIABILITIES:
Accounts payable:
Securities purchased 551,876
Advisory fee (Note 4) 172,356
Capital stock redeemed 64,204
Transfer agent fee (Note 4) 22,167
------------
TOTAL LIABILITIES 810,603
NET ASSETS:
Capital stock (20,000,000 shares of $1.00
par value authorized), amount paid in
on 15,410,309 shares outstanding (Note 2) $107,467,815
Undistributed net investment income 728,380
Accumulated net realized gain on investments 8,744,113
Net unrealized appreciation on investments 16,879,510
------------
Net assets equivalent to $8.68 per share $133,819,818
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------------
COMPUTATION OF MAXIMUM OFFERING PRICE OF THE
FUND'S SHARES-as of June 30, 1997:
Net asset value per share
($133,819,818 DIVIDED BY 15,410,309) $ 8.68
Offering price per share (net asset value
plus sales commission)
(1000/970 X $8.68) $ 8.95
AMWAY MUTUAL FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED
JUNE 30, 1997
(UNAUDITED)
INVESTMENT INCOME:
Income:
Dividends $ 1,184,835
Interest 91,530
Securities Litigation Settlement 31,232
------------
Total income 1,307,597
Expenses:
Advisory fee (Note 4) $ 342,628
Transfer agent fee (Note 4) 127,353
Custodian fee 24,653
Shareholder Communications 20,815
Data processing service (Note 5) 15,380
Audit fees 10,740
Corporate taxes 10,317
Insurance 9,021
Registration fees 5,430
Legal services 4,525
------------
Total expenses 570,862
Fees paid indirectly (Note 5) (15,380)
------------
Net Expenses 555,482
------------
NET INVESTMENT INCOME 752,115
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REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain (Note 3) 8,784,730
Unrealized appreciation on investments:
Beginning of year 9,913,786
June 30, 1997 16,879,510
------------
Net change in unrealized appreciation
on investments: 6,965,724
------------
NET GAIN ON INVESTMENTS 15,750,454
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $16,502,569
------------
------------
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
AMWAY MUTUAL FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
NET ASSETS FROM OPERATIONS:
Investment income-net $ 752,115 $ 1,146,351
Realized gain on investments-net 8,784,730 17,657,371
Increase in unrealized appreciation-net 6,965,724 1,783,552
------------ ------------
Net increase in net assets resulting from operations 16,502,569 20,587,274
DISTRIBUTIONS TO SHAREHOLDERS:
Investment income-net -- (1,149,246)
Realized gain from investment transactions-net -- (17,613,452)
------------ ------------
Total distributions to shareholders -- (18,762,698)
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CAPITAL SHARE TRANSACTIONS: (Notes 2 and 4)
Net proceeds from sale of shares 16,324,342 31,252,559
Net asset value of shares issued to shareholders in
reinvestment of investment income and realized gain from
security transactions -- 18,195,824
16,324,342 49,448,383
Payment for shares redeemed (12,334,495) (15,193,852)
------------ ------------
Increase in net assets derived from capital share transactions 3,989,847 34,254,531
Total increase 20,492,416 36,079,107
NET ASSETS:
Beginning of period 113,327,402 77,248,295
------------ ------------
End of period (includes undistributed (over-distributed) net
investment income of $728,380 and ($23,735), respectively) $133,819,818 $113,327,402
------------ ------------
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</TABLE>
AMWAY MUTUAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
The company is registered under the Invested Company Act of 1940 as a
diversified, open-end management investment company.
(A) SECURITY VALUATION-Investments in securities listed or admitted to
trading on a national securities exchange are valued at their last
reported sale price before the time of valuation. If a security is
traded only in the over-the-counter market, or if no sales have been
reported for a listed security on that day, it will be valued at the
mean between the current closing bid and asked prices. Securities for
which market quotations are not readily available, including any
restricted securities, (none at June 30, 1997) and other assets of the
Fund are valued at fair market value as determined in good faith by
the Fund's Board of Directors.
(B) FEDERAL INCOME TAXES-The Fund's policy is to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to make distributions of income and capital
gains sufficient to relieve it from substantially all Federal income
taxes.
(C) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME-Security
transactions are accounted for on the trade date and dividend income
is recorded on the ex-dividend date. Interest income is recorded on
the accrual basis. Realized gains and losses from security
transactions and unrealized appreciation and depreciation of
investments are reported on a specific identification basis.
Dividends and distributions to shareholders are recorded by the Fund
on the ex-dividend date.
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
AMWAY MUTUAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
NOTE 2-CAPITAL STOCK
At June 30, 1997, there were 20,000,000 shares of $1.00 par value capital
stock authorized. Transactions in capital stock were as follows:
Six Months Year
Ended Ended
June 30, 1997 December 31, 1996
------------- -----------------
Shares:
Outstanding, beginning of period 14,871,253 10,399,006
----------
Sold 2,097,680 3,924,168
Issued in payment of dividends -- 2,435,854
---------- ----------
2,097,680 6,360,022
Redeemed 1,558,624 1,887,775
---------- ----------
Net increase for the period 539,056 4,472,247
---------- ----------
Outstanding, end of period 15,410,309 14,871,253
---------- ----------
---------- ----------
NOTE 3-INVESTMENT TRANSACTIONS
At June 30, 1997, for federal income tax purposes, the cost of investments
owned was $114,887,303. Aggregate gross unrealized gains on securities in which
there was an excess of market value over tax cost was $18,385,681. Aggregate
gross unrealized losses on securities in which there was an excess of tax cost
over market value was $1,511,471. Net unrealized gains for tax purposes was
$16,874,210 at June 30, 1997.
Realized gains from sales of investments were determined on the basis of
specific identification. For tax purposes gains of $8,774,238 were realized on
investments.
For the period ended June 30, 1997, cost of purchases and proceeds from
sales of investments, other than corporate short-term notes, aggregated
$68,585,066 and $64,341,175, respectively.
NOTE 4-INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment advisory and service contract between the Fund and Amway
Management Company provides for an annual investment advisory and management
fee, computed daily and payable quarterly, of .55 of 1% of total net assets.
The advisory fees incurred by the Fund amounted to $342,628 for the period ended
June 30, 1997. Under the Principal Underwriter Agreement between the Fund and
Amway Management Company, the adviser receives a net commission for the
distribution of the Fund's shares. This commission amounted to $464,420 for the
period ended June 30, 1997.
Amway Stock Transfer Co. acts as the Fund's agent for transfer of the
Fund's shares and disbursement of the Fund's distributions. The transfer agent
fee incurred by the Fund amounted to $127,353 for the period ended June 30,
1997.
A beneficial shareholder of Amway Management Company and Amway Stock
Transfer Company is also a beneficial shareholder of approximately 19% (as of
June 30, 1997) of the outstanding capital shares of the Fund.
The officers serve without compensation from the Fund. Directors' fees,
amounting to $7,500 for the period ended June 30, 1997 were paid by Amway
Management Company, the Fund's investment adviser. The director's payments
consist of an annual retainer plus a per meeting fee.
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
AMWAY MUTUAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
NOTE 5-DATA PROCESSING SERVICE
Portfolio accounting services for the Fund in the amount of $15,380 for the
period ended June 30, 1997 are paid for through the use of directed brokerage
commissions.
NOTE 6-MATERIAL ISSUANCE OF STOCK
A certain class of distributors of Amway Corporation and Amway of Canada,
Ltd. ("corporations") received from each corporation part of its distributor's
profit-sharing bonus in Amway Mutual Fund, Inc. common stock shares. On January
9, 1997, the corporations purchased 1,657,275 Amway Mutual Fund shares valued at
$12,777,588 (based on the net asset value of $7.71 per share) and transferred
the shares to these distributors.
AMWAY MUTUAL FUND, INC.
SUPPLEMENTARY INFORMATION
(Selected data for each share of capital stock outstanding
throughout each period.)
<TABLE>
<CAPTION>
Six Months Year Ended
Financial Highlights Ended December
(Introduction) June 30, 1997 31, 1996
(Unaudited) (Audited)
---------- ---------
<S> <C> <C>
Net Asset Value, Beginning of Period $ 7.62 $ 7.43
Income From Investment Operations
Net Investment Income .05 .10
Net Gain (Loss) on Securities (both realized
and unrealized) 1.01 1.59
------------ ------------
Total From Investment Operations 1.06 1.69
Less Distributions
Dividends (from net investment income) -- .09
Distributions (from capital gains) -- 1.41
Returns of Capital -- --
------------ ------------
Total Distributions -- 1.50
------------ ------------
Net Asset Value, End of Period $ 8.68 $ 7.62
------------ ------------
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Total Return* 13.91% 23.18%
------------ ------------
------------ ------------
Ratios/Supplemental Data
Net Assets, End of Period 133,819,818 113,327,402
Ratio of Expenses to Average Net Assets .5% 1.0%
Ratio of Net Income to Average Net Assets .6% 1.2%
Portfolio Turnover Rate 53.2% 100.4%
Average commission rate per share $ .0583 $ .0600
</TABLE>
*The 3% sales charge is not reflected in the total return and the six months
ended June 30, 1997 is not annualized but an aggregate total return for the
period.
This report is prepared for the information of shareholders. It is
authorized for distribution to prospective investors only if preceded or
accompanied by an effective Prospectus.
The accompanying notes are an integral part of these financial statements.
8
