AMERICAN MUTUAL FUND
ANNUAL REPORT 1996
for the year ended October 31
[The American Funds Group(r)]
[photo: field of poppies]
ABOUT OUR COVER
A field of golden poppies, California's state flower, in the Mojave Desert. As
you can see in the feature that begins on page 6, just as from one flower can
grow a field of flowers, so too can an investment in American Mutual Fund grow
and compound over the years.
AMERICAN MUTUAL FUND(R)
Strives for the balanced accomplishment of three objectives - current income,
capital growth and conservation of principal - through investments in companies
that participate in the growth of the American economy.
DIVIDENDS AND CAPITAL GAIN DISTRIBUTION PAID IN CALENDAR 1996
For tax purposes, here are the income dividends and the capital gain
distribution you received in calendar 1996.
INCOME DIVIDENDS PER SHARE:
$0.21 paid 4/8/96
$0.21 paid 7/8/96
$0.21 paid 10/7/96
$0.21 paid 12/9/96
CAPITAL GAIN DISTRIBUTION PER SHARE:
$1.61* paid 12/9/96
*6.8 cents of the capital gain distribution represents net short-term gains
realized on the sale of portfolio securities. Short-term gains are taxable as
ordinary income.
A Form 1099-DIV, which provides the information you will need to prepare your
federal income tax return for 1996, will be mailed to you in late January.
FUND RESULTS IN THIS REPORT WERE COMPUTED WITHOUT A SALES CHARGE UNLESS
OTHERWISE INDICATED. THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE
PRICE AND RETURN WILL VARY, SO YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE
SHORTER THE TIME PERIOD OF YOUR INVESTMENT, THE GREATER THE POSSIBILITY OF
LOSS. FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED
BY, THE U.S. GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON.
[chart]
INCOME GROWTH*
Years ended October 31
<TABLE>
<CAPTION>
Year With dividends in cash With dividends and
and capital gain capital gain
distributions distributions
reinvested reinvested
<S> <C> <C>
1993 $418 $412
1994 452 430
1995 492 448
1996 533 470
</TABLE>
*Assumes $10,000 in the fund on 10/31/92
[end chart]
FELLOW INVESTORS:
American Mutual Fund posted another solid advance in fiscal 1996.
During the 12 months ended October 31, the value of your investment in the fund
increased 18.9% assuming you reinvested the four quarterly dividends which
totaled 84 cents a share, as well as the capital gain distribution in December
1995 of $1.15 a share. If you took your dividends in cash, the value of your
investment rose 15.1% and you received an income return of 3.6% based on AMF's
net asset value of $24.17 at the start of the fiscal year.
Over this same period, the Standard & Poor's 500 Composite Index gained 24.1%
with dividends reinvested. With dividends in cash, the unmanaged index gained
21.3% and its income return amounted to 2.5%. The S&P 500's advance this year
was again substantially above its 10.6% average annual total return since the
index began in 1926. (A comparison of the fund's lifetime return with that of
the S&P 500 appears in the chart on pages 4 and 5.)
Unlike the S&P 500, American Mutual Fund is actively managed for the balanced
accomplishment of three objectives - current income, capital growth and
conservation of principal. Let's look at AMF's results in the context of each
objective:
CURRENT INCOME American Mutual Fund seeks to provide attractive current income,
primarily through investments in the stocks of well-situated, financially
stable companies whose dividends appear well protected and where there is the
likelihood of higher dividends in the future.
The fund's income return of 3.6% after expenses in fiscal 1996 was roughly one
percentage point above that of the S&P 500. In addition to the above-average
dividends paid by many of the fund's holdings, the fund's income return was
augmented by attractive yields from cash equivalents and bonds. At the fiscal
close, short-term securities made up 17.8% of the portfolio, bonds and notes
5.0% and equity-type securities 77.2%.
As you can see from the blue bars in the example to the left, if you reinvest
capital gain distributions, as 97% of shareholder accounts do to keep their
capital intact and working for them, the stream of income produced by an
investment in American Mutual Fund continued to increase in fiscal 1996.
As you can see from the orange bars, if you have added to your investment by
reinvesting dividends as well, as is done by 95% of shareholder accounts, the
total dollar amount of income you have received is higher still.
Over the long term, AMF's dividends have been an integral part of the fund's
return. We invite you to read more about the role that income dividends can
play in your investment in the article that begins on page 6.
GROWTH OF CAPITAL American Mutual Fund seeks capital growth primarily through
the purchase of the stocks of companies which the fund's investment adviser
expects will participate in the growth of the American economy. This year the
economy continued to expand at a moderate pace. Inflation remained low.
Corporate profits were again strong. Financial markets were also buoyed by a
favorable interest rate environment in the latter half of the year.
As you might expect in a year of this kind, there was broad strength throughout
the portfolio. Of the 112 stocks held over the course of the year, 93 rose in
price. Banks and insurance companies, energy and chemical firms, and
pharmaceutical issues tended to be areas of strength. A number of
telecommunications issues, including Ameritech and AT&T, had disappointing
results, largely due to competitive pressures specific to those companies. At
fiscal year-end, AMF's Bank holdings, at 13.3% of net assets, composed the
largest industry position, followed by Energy Sources at 8.6%,
Telecommunications at 7.7% and Health & Personal Care at 6.7% of net assets.
[photo: poppy flower]
One of the reasons for the longevity of the U.S. economic advance has to do
with its relatively modest pace. This has allowed businesses to plan ahead and
expand to meet rising demand for products and services without straining
available resources or creating the bottlenecks that typically lead to higher
inflation. Although the expansion has entered its sixth year (the average
post-World War II expansion has averaged slightly more than four years),
inflation remains remarkably in check.
This unusually favorable set of economic circumstances is reflected not only in
the growth of companies themselves but in the valuations that investors are
willing to put on them, particularly given the apparent lack of alternative
investments that offer attractive rates of return. During the year, there were
again record inflows into stocks and stock mutual funds. All the same,
investors should realize that these nearly ideal conditions for stocks will not
continue indefinitely.
CONSERVATION OF PRINCIPAL In addition to current income and capital growth, the
fund seeks to preserve principal. It does so by careful selection, supervision
and broad diversification primarily among stocks of large, established firms
with long histories of increasing earnings and dividends. In addition, the fund
holds short-term securities and bonds when stock prices and stock valuations
appear relatively high, as during recent years.
Over most extended periods, AMF has nearly kept pace - or outpaced - the broad,
unmanaged, fully invested indexes while exposing shareholders to less risk and
volatility. Over its lifetime, the fund has delivered 103% of the average
annual compound rate of return of the S&P 500 with only 86% of the volatility.+
This illustrates how a focus that includes conservation of principal among its
goals can provide superior investment returns, especially over periods that
encompass market declines. As many of you know, the fund has held up better -
often much better - than the S&P 500 in all ten of the major extended market
declines over its 46-year lifetime.
We make no pretense of knowing when the next market decline will occur. But we
do know that the most prudent time to emphasize preservation of capital is
often when it can seem most out of place - that is, when prices are rising
sharply and without interruption for an extended period and when confidence and
optimism about the outlook for the economy and the stock market is high.
We will continue to strive for the balanced accomplishment of current income,
capital growth and conservation of principal, and we look forward to reporting
to you again in three months.
Cordially,
[/s/ Jon B. Lovelace, Jr.]
Jon B. Lovelace, Jr.
Chairman of the Board
[/s/ James K. Dunton]
James K. Dunton
President
December 12, 1996
+Measured by standard deviation, a gauge of how far each year's return varies
from the mean.
[Pull Quote]
Over its lifetime, AMF has provided a higher return than the S&P 500 with less
volatility.
[End Pull Quote]
A LOOK AT THE FUND'S RECORD
RESULTS OF A $10,000 INVESTMENT IN AMERICAN MUTUAL FUND
For more than 46 years, American Mutual Fund has been providing investors with
an opportunity to achieve their financial goals. A meaningful way to compare
the fund's results with the return on other investments is through its "total
return."
Total return is a combination of income return and capital results. This chart
illustrates an assumed $10,000 investment in American Mutual Fund from February
21, 1950 - when the fund began operations - through October 31, 1996. The table
beneath the chart shows the fund's total return in each of the 46 fiscal years,
broken down into its income and capital components.
As you can see, during this period a $10,000 investment in the fund, with all
dividends reinvested, would have grown to $2,940,738 compared with $2,608,724
in the S&P 500 Index. Incidentally, over the same period, $10,000 in a savings
account, with all interest compounded, would have grown to $103,232./4/
You can use this table to estimate how the value of your own holdings has grown
over the years. Let's say, for example, that you have been reinvesting all your
dividends and want to know how your investment has done since the end of 1986.
At the time, the table indicates the value of the investment illustrated here
was $913,070. Since then, it has more than tripled to $2,940,738. Thus, in the
same period, the value of your 1986 investment -regardless of its size -also
has more than tripled.
AVERAGE ANNUAL COMPOUND RETURNS BASED ON THE MAXIMUM OFFERING PRICE+
for periods for periods
ended 9/30/96 ended 10/31/96
Ten Years +11.91% +11.74%
Five Years +12.21% +12.41%
One Year +9.44% +12.08%
+Assumes reinvestment of all distributions and payment of 5.75% sales charge at
the beginning of the stated periods.
The fund's 30-day yield as of November 30, 1996, calculated in accordance with
the Securities and Exchange Commission formula, was 2.71%. Sales charges are
lower for accounts of $50,000 or more.
[chart]
Year ended October 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Year-by-year summary of results
1950# 1951 1952 1953 1954
Dividends reinvested/5/ $247 523 513 550 579
Value at year-end/1/ $10,018 12,234 13,164 14,076 19,261
Dividends in cash/6/ $244 502 470 486 491
Value at year-end/1/ $9,769 11,414 11,803 12,131 16,066
Annual percentage returns assuming reinvestment of dividends
Income return/1/ 2.5% 5.2 4.2 4.2 4.1
Capital results/1/ (2.3)% 16.9 3.4 2.7 32.7
AMF Total Return 0.2% 22.1 7.6 6.9 36.8
Fund expenses/7/ 0.56% 0.76 0.75 0.74 0.76
Year-by-year summary of results
1955 1956 1957 1958 1959
Dividends reinvested/5/ 647 789 911 1,010 1,050
Value at year-end/1/ 25,050 29,651 28,050 36,140 41,489
Dividends in cash/6/ 536 635 711 766 772
Value at year-end/1/ 20,345 23,439 21,514 26,851 30,049
Annual percentage returns assuming reinvestment of dividends
Income return/1/ 3.4 3.1 3.1 3.6 2.9
Capital results/1/ 26.7 15.3 (8.5) 25.2 11.9
AMF Total Return 30.1 18.4 (5.4) 28.8 14.8
Fund expenses/7/ 0.80 0.79 0.81 0.76 0.71
Year-by-year summary of results
1960 1961 1962 1963 1964
Dividends reinvested/5/ 1,210 1,257 1,372 1,523 1,697
Value at year-end/1/ 40,865 54,348 46,572 61,289 71,355
Dividends in cash/6/ 866 876 933 1,006 1,093
Value at year-end/1/ 28,735 37,279 31,071 39,814 45,198
Annual percentage returns assuming reinvestment of dividends
Income return/1/ 2.9 3.1 2.5 3.3 2.8
Capital results/1/ (4.4) 29.9 (16.8) 28.3 13.6
AMF Total Return (1.5) 33.0 (14.3) 31.6 16.4
Fund expenses/7/ 0.72 0.68 0.67 0.65 0.64
Year-by-year summary of results
1965 1966 1967 1968 1969
Dividends reinvested/5/ 1,845 2,271 2,568 3,154 3,762
Value at year-end/1/ 79,919 77,646 92,836 109,586 103,216
Dividends in cash/6/ 1,156 1,389 1,527 1,820 2,103
Value at year-end/1/ 49,395 46,659 54,246 62,044 56,365
Annual percentage returns assuming reinvestment of dividends
Income return/1/ 2.6 2.8 3.3 3.4 3.4
Capital results/1/ 9.4 (5.6) 16.3 14.6 (9.2)
AMF Total Return 12.0 (2.8) 19.6 18.0 (5.8)
Fund expenses/7/ 0.62 0.61 0.59 0.58 0.58
Year-by-year summary of results
1970 1971 1972 1973 1974
Dividends reinvested/5/ 4,168 4,424 4,711 5,069 7,273
Value at year-end/1/ 93,358 112,999 125,226 124,799 105,122
Dividends in cash/6/ 2,239 2,276 2,332 2,412 3,297
Value at year-end/1/ 48,718 56,737 60,504 57,864 45,562
Annual percentage returns assuming reinvestment of dividends
Income return/1/ 4.0 4.7 4.2 4.0 5.8
Capital results/1/ (13.6) 16.3 6.6 (4.3) (21.6)
AMF Total Return (9.6) 21.0 10.8 (0.3) (15.8)
Fund expenses/7/ 0.66 0.63 0.61 0.60 0.62
Year-by-year summary of results
1975 1976 1977 1978 1979
Dividends reinvested/5/ 7,300 7,881 8,604 9,989 11,322
Value at year-end/1/ 132,196 167,379 176,434 198,947 232,805
Dividends in cash/6/ 3,092 3,161 3,286 3,629 3,911
Value at year-end/1/ 54,015 65,101 65,383 70,007 77,947
Annual percentage returns assuming reinvestment of dividends
Income return/1/ 6.9 6.0 5.1 5.7 5.7
Capital results/1/ 18.9 20.6 0.3 7.1 11.3
AMF Total Return 25.8 26.6 5.4 12.8 17.0
Fund expenses/7/ 0.62 0.58 0.60 0.60 0.58
Year-by-year summary of results
1980 1981 1982 1983 1984
Dividends reinvested/5/ 13,854 16,351 26,841 26,227 26,606
Value at year-end/1/ 303,584 334,116 426,438 544,916 577,160
Dividends in cash/6/ 4,548 5,109 7,906 7,215 6,956
Value at year-end/1/ 96,658 101,227 119,685 145,126 146,272
Annual percentage returns assuming reinvestment of dividends
Income return/1/ 6.0 5.4 8.0 6.2 4.9
Capital results/1/ 24.4 4.7 19.6 21.6 1.0
AMF Total Return 30.4 10.1 27.6 27.8 5.9
Fund expenses/7/ 0.56 0.53 0.53 0.49 0.49r
Year-by-year summary of results
1985 1986 1987 1988 1989
Dividends reinvested/5/ 30,124 34,058 39,285 50,009 59,908
Value at year-end/1/ 701,835 913,070 960,888 1,081,200 1,299,786
Dividends in cash/6/ 7,498 8,110 8,992 10,970 12,494
Value at year-end/1/ 169,750 212,102 214,839 230,001 262,717
Annual percentage returns assuming reinvestment of dividends
Income return/1/ 5.2 4.9 4.3 5.2 5.5
Capital results/1/ 16.4 25.2 0.9 7.3 14.7
AMF Total Return 21.6 30.1 5.2 12.5 20.2
Fund expenses/7/ 0.46 0.45 0.47 0.54 0.59
Year-by-year summary of results
1990 1991 1992 1993 1994
Dividends reinvested/5/ 66,101 71,767 67,509 70,887 76,471
Value at year-end/1/ 1,239,345 1,544,411 1,690,015 2,004,861 2,039,871
Dividends in cash/6/ 13,119 13,529 12,132 12,229 12,699
Value at year-end/1/ 238,224 282,076 295,907 337,865 330,609
Annual percentage returns assuming reinvestment of dividends
Income return/1/ 5.1 5.8 4.4 4.2 3.8
Capital results/1/ (9.8) 18.8 5.0 14.4 (2.1)
AMF Total Return (4.7) 24.6 9.4 18.6 1.7
Fund expenses/7/ 0.60 0.63 0.60 0.59 0.60
Year-by-year summary of results
1995 1996
Dividends reinvested/5/ 83,156 90,173
Value at year-end/1/ 2,473,442 2,940,738
Dividends in cash/6/ 13,279 13,900
Value at year-end/1/ 386,119 444,245
Annual percentage returns assuming reinvestment of dividends
Income return/1/ 4.1 3.6
Capital results/1/ 17.2 15.3
AMF Total Return 21.3 18.9
Fund expenses/7/ 0.59 0.59
</TABLE>
$2,940,738/1/ /2/
American Mutual Fund with dividends reinvested
$2,608,724
S&P 500 with dividends reinvested
$444,245/1/ /3/
American Mutual Fund with dividends taken in cash
$103,232/4/
Average savings institution with interest compounded
$10,000/1/
original investment
AVERAGE ANNUAL COMPOUND RETURN FOR AMF'S LIFETIME
4.24%
8.70
- -----
12.94%/1/
Past results are not predictive of future results.
The S&P 500 Index is unmanaged and does not reflect sales charges, commissions
or expenses.
#Fund commenced operations February 21, 1950.
/1/These figures, unlike those shown earlier in this report, reflect payment of
5.75% sales charge on the $10,000 investment. Thus, the net amount invested was
$9,425. The maximum sales charge was 8.5% prior to July 1, 1988. There is no
sales charge on dividends reinvested or capital gain distributions taken in
shares. Results shown do not take into account income or capital gain taxes.
/2/Includes reinvested capital gain distributions totaling $870,092 in the
years 1950-1996 and reinvested dividends. The total "cost" of this investment
($10,000 plus $947,546 in reinvested dividends) was $957,546.
/3/Includes reinvested capital gain distributions taken in shares totaling
$208,997 but does not reflect income dividends taken in cash.
/4/Reflects all kinds of savings deposits, including longer term certificates.
Unlike investments in the fund, such deposits are insured and, if held to
maturity, offer a guaranteed return of principal and a fixed rate of interest,
but no opportunity for capital growth. Maximum allowable interest rates were
imposed by law until 1983. Results based on figures supplied by the U.S. League
of Savings Institutions and the Federal Reserve Board.
/5/Includes special dividends of $1,691 in 1974, $989 in 1975, $7,524 in 1982,
$3,967 in 1983, $6,064 in 1988, $9,850 in 1989, $9,497 in 1990 and $8,996 in
1991.
/6/Includes special dividends of $756 in 1974, $412 in 1975, $2,280 in 1982,
$1,113 in 1983, $1,356 in 1988, $2,095 in 1989, $1,920 in 1990 and $1,729 in
1991.
/7/Fund expense percentages are provided as additional information. They should
not be subtracted from any other figure in the table because the income return
figures already reflect their effect.
[end chart]
THE BENEFITS OF REINVESTING DIVIDENDS
[photo: poppy flower]
Last year, the feature in American Mutual Fund's annual report focused on the
role that income dividends have played in the fund's investment returns. We saw
how shareholders who took their dividends in cash have had a rising income
stream that has helped them outpace inflation.
This year, we'll take a look at the role reinvested dividends have played in
the fund's investment returns. We'll see that reinvesting dividends can be a
powerful force in creating a nest egg which, when it comes time to draw on your
investments, can help provide the income you'll need.
The vast majority of the fund's shareholders reinvest dividends. The bars on
these two pages show the income produced each year by a $10,000 investment in
AMF since its inception in 1950. The blue bars show the amount of income
produced each year with all dividends in cash. The orange bars show the amount
of income produced each year by the fund if all dividends were reinvested.
This chart and those that follow assume shareholders kept their capital intact
and working for them by reinvesting capital gain distributions - as, indeed,
virtually all shareholders do. It is worth noting that by reinvesting capital
gain distributions, all shareholders - whether or not they reinvest dividends -
can see an increase in the total dollar amount of dividend income they receive
even if there's a modest decrease in the quarterly per share dividend, as was
the case in April 1993.
[chart]
YEARLY INCOME FROM AMF:
A LIFETIME PERSPECTIVE
Initial investments of $10,000 in 2/21/50
<TABLE>
<CAPTION>
American Mutual Fund with American Mutual Fund with
dividends reinvested dividends in cash
Date Special dividends Regular dividends Special dividends Regular dividends
<S> <C> <C> <C> <C>
2/21/50 $247 $244
10/31/50 523 502
10/31/52 513 470
10/31/53 550 486
10/31/54 579 491
10/31/55 647 536
10/31/56 789 635
10/31/57 911 711
10/31/58 1,010 766
10/31/59 1,050 772
10/31/60 1,210 866
10/31/61 1,257 876
10/31/62 1,372 933
10/31/63 1,523 1,006
10/31/64 1,697 1,093
10/31/65 1,845 1,156
10/31/66 2,271 1,389
10/31/67 2,568 1,527
10/31/68 3,154 1,820
10/31/69 3,762 2,103
10/31/70 4,168 2,239
10/31/71 4,424 2,276
10/31/72 4,711 2,332
10/31/73 5,069 2,412
10/31/74 1,691 5,582 756 2,541
10/31/75 989 6,311 412 2,680
10/31/76 7,881 3,161
10/31/77 8,604 3,286
10/31/78 9,989 3,629
10/31/79 11,322 3,911
10/31/80 13,854 4,548
10/31/81 16,351 5,109
10/31/82 7,524 19,317 2,280 5,626
10/31/83 3,967 22,260 1,113 6,102
10/31/84 26,606 6,956
10/31/85 30,124 7,498
10/31/86 34,058 8,110
10/31/87 39,285 8,992
10/31/88 6,064 43,945 1,356 9,614
10/31/89 9,850 50,058 2,095 10,399
10/31/90 9,497 56,604 1,920 11,199
10/31/91 8,996 62,771 1,729 11,800
10/31/92 67,509 12,132
10/31/93 70,887 12,229
12/31/94 76,471 12,699
10/31/95 83,156 13,279
10/31/96 90,173 13,900
</TABLE>
On a number of occasions, AMF paid "special dividends" from income attributable
to unusually large holdings of high-yielding cash equivalents. Because these
dividends were something out of the ordinary, they are indicated in the bars by
their lighter color:
For exact dollar amounts, see the year-by-year summary of resutls shown beneath
the chart on pages 4 and 5. AMF results in this feature reflect payment of the
maximum sales charge of 5.75%.
[end chart]
WHAT ACCOUNTS FOR THE DIFFERENCE that reinvesting dividends can make to an
investor's long-term investment results? Like reinvested capital gain
distributions, reinvested dividends purchase more shares. Those reinvested
dividends become additional capital. That capital can grow and produce
additional income. The effect of compounding income can be likened to a plant
that grows and produces seeds, which in turn grow and give off seeds of their
own. Ultimately, one flower becomes a field of flowers. In much the same way,
the nature of compounding income in AMF makes it particularly important for
shareholders to look at the number of shares they have working for them - and
not just the share price or the per share dividend - in tracking the progress
of their investment or their income from that investment.
Based on a $10,000 investment at the fund's inception, here is what adding to
an investment by reinvesting dividends has meant in dollar terms:
<TABLE>
<CAPTION>
With dividends With dividends
reinvested in cash
<S> <C> <C>
Income from AMF in 12 months ended $523 $502
10/31/51
Income from AMF in 12 months ended 90,173 13,900
10/31/96
Total income from AMF in 46 years $947,546 $218,702
ended 10/31/96
Value of original $10,000 2,940,738 444,245
investment on 10/31/96
</TABLE>
Of course, few investors have a 46-year time horizon until they'll need to
begin taking income from AMF. On the following pages, we'll look at the
difference reinvesting has made over the past 20 years, assuming an investment
on October 31, 1976.
[photo: poppy flower]
THE AMOUNT OF INCOME PRODUCED by a $10,000 investment on October 31, 1976 is
shown in the chart at left. Again, the blue bars denote the amount of yearly
income with dividends in cash. The orange bars denote the amount of income
assuming dividends were reinvested. As you can see, even over 10 or 20 years,
the impact of reinvesting the income from an investment in AMF can be
significant.
The bars here, as in the previous example, illustrate two other aspects of an
investment in the fund. The first is that although AMF's share price has
fluctuated widely at times, the dividends paid by the fund have maintained a
relatively stable upward slope. The second point is this: Given AMF's history
of generous dividends and the effects of compounding, income is likely to play
a larger and larger role in an investor's total return over the long haul.
Indeed, AMF can perhaps best be viewed as an investment whose share price has
fluctuated as it produced a steady - and growing - stream of income.
Here is a look at the difference reinvesting dividends has meant over the past
20 years, assuming a $10,000 investment on October 31, 1976:
<TABLE>
<CAPTION>
With dividends With dividends in
reinvested cash
<S> <C> <C>
Income from AMF in 12 $485 $475
months ended 10/31/77
Income from AMF in 12 5,077 2,013
months ended 10/31/96
Total income from AMF 49,502 26,273
in 20 years ended
10/31/96
Value of original 165,557 64,302
$10,000 investment on
10/31/96
</TABLE>
[chart]
YEARLY INCOME FROM AMF:
A 20-YEAR PERSPECTIVE
Initial investment of $10,000 on 10/31/76
<TABLE>
<CAPTION>
American Mutual Fund with dividends American Mutual Fund with dividends
reinvested in cash
Date Special Dividends Regular Dividends Special Dividends Regular Dividends
<S> <C> <C> <C> <C>
10/31/77 485 475
10/31/78 562 525
10/31/79 637 565
10/31/80 780 659
10/31/81 921 739
10/31/82 424 1,087 330 814
10/31/83 223 1,254 161 884
10/31/84 1,498 1,008
10/31/85 1,695 1,087
10/31/86 1,918 1,174
10/31/87 2,212 1,300
10/31/88 341 2,475 196 1,392
10/31/89 555 2,817 303 1,505
10/31/90 535 3,186 278 1,621
10/31/91 506 3,535 250 1,708
10/31/92 3,801 1,757
10/31/93 3,991 1,769
10/31/94 4,306 1,837
10/31/95 4,681 1,923
10/31/96 5,077 2,013
</TABLE>
Income from "special dividends" is indicated in the bars by their lighter
color.
[end chart]
WHEN INVESTING IN STOCKS, people typically think of growth of capital. And when
they think of a government-guaranteed bank savings account or a bank
certificate of deposit,* they typically think of compounding income. But that's
only part of the story.
The chart to the left compares the yearly income produced by AMF and the income
produced by the average savings account. The comparison assumes a $10,000
investment on October 31, 1976 and that dividends and interest were reinvested.
Early on, the savings account produced higher income. Yet the comparison
highlights the potential benefits of investing long term in companies whose
stock prices and dividends can themselves grow over time - and in reinvesting
dividends from those companies. Ultimately, what is important is not just that
the investor reinvest income but the rate of return he or she receives on those
reinvestments.
Of course, it is important to emphasize again that the capital value of an
investment in AMF has fluctuated widely at times. Yet for those willing to
tolerate such fluctuations, the potential benefits to an investor's financial
well-being can be significant.
Here is what that difference has meant in dollar terms:
<TABLE>
<CAPTION>
From AMF with From the average
dividends reinvested savings accounts with
interest reinvested*
<S> <C> <C>
Income in the 12 $485 $612
months ended 10/31/77
Income in the 12 5,077 1,508
months ended 10/31/96
Total income over the 49,502 27,629
20 years ended
10/31/96
Value of original 165,557 37,633
$10,000 investment on
10/31/96
</TABLE>
*Unlike any mutual fund, bank savings accounts and certificates of deposit
carry U.S. government guarantees as to the return of principal and interest.
Figures for savings accounts are based on information 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. Maximum
allowable interest rates were imposed by law until 1983.
[chart]
YEARLY INCOME FROM AMF VERSUS A BANK SAVINGS ACCOUNT:
A 20-YEAR PERSPECTIVE
Initial investment of $10,000 on 10/31/76
<TABLE>
<CAPTION>
American Mutual Fund with dividends Average bank savings account with
reinvested interest reinvested
Date Special dividends Regular dividends Special dividends Regular dividends
<S> <C> <C> <C> <C>
10/31/77 485 612
10/31/78 562 673
10/31/79 637 810
10/31/80 780 1,033
10/31/81 921 1,373
10/31/82 424 1,087 1,579
10/31/83 223 1,254 1,543
10/31/84 1,498 1,669
10/31/85 1,695 1,634
10/31/86 1,918 1,516
10/31/87 2,212 1,431
10/31/88 341 2,475 1,550
10/31/89 555 2,817 1,853
10/31/90 535 3,186 1,985
10/31/91 506 3,535 1,866
10/31/92 3,801 1,444
10/31/93 3,991 1,113
10/31/94 4,306 1,072
10/31/95 4,681 1,365
10/31/96 5,077 1,508
</TABLE>
Income from "special dividends is indicated in the bars by their lighter color.
[end chart]
THE INCOME PRODUCED BY AN INVESTMENT in AMF has also outpaced the income from a
hypothetical investment in the unmanaged Standard & Poor's 500 Composite Index.
The comparison at left assumes a $10,000 investment on October 31, 1976 and
that dividends were reinvested.
[photo: poppy flowers]
Part of AMF's advantage over the S&P 500 is due to professional management and
part of it is due to the fund's emphasis on current income and preservation of
capital in addition to capital growth. Like the savings account example, the
figures underscore the impact investment decisions can have on an individual's
standard of living.
Ideally, many investors would like to see their investments compound and grow
and, when it comes time to begin drawing on those investments, provide the
income they'll need without having to deplete capital. As a practical matter,
an individual who invested in American Mutual Fund 20 years ago, reinvested
distributions, and then in fiscal 1996 began taking all dividends in cash would
have received 64% more income than he or she would have from a hypothetical
investment in the S&P 500.
Here is what that difference has meant in dollar terms:
<TABLE>
<CAPTION>
From AMF with From the S&P 500 with
dividends reinvested dividends reinvested
<S> <C> <C>
Income int he 12 $485 $445
months ended 10/31/77
Income in the 12 5,077 3,091
months ended 10/31/96
Total income over the 49,502 30,717
20 years ended
10/31/96
Value of original 165,557 150,814
$10,000 investment on
10/31/96
</TABLE>
[chart]
YEARLY INCOME FROM AMF VERSUS THE S&P 500:
A 20-YEAR PERSPECTIVE
Initial investment of $10,000 on 10/31/76
<TABLE>
<CAPTION>
American Mutual Fund with dividends S&P 500 with dividends reinvested
reinvested
Date Special dividends Regular dividends Special dividends Regular dividends
<S> <C> <C> <C> <C>
10/31/77 485 445
10/31/78 562 521
10/31/79 637 603
10/31/80 780 702
10/31/81 921 793
10/31/82 424 1,087 878
10/31/83 223 1,254 947
10/31/84 1,498 1,044
10/31/85 1,695 1,161
10/31/86 1,918 1,270
10/31/87 2,212 1,382
10/31/88 341 2,475 1,559
10/31/89 555 2,817 1,824
10/31/90 535 3,186 2,092
10/31/91 506 3,535 2,247
10/31/92 3,801 2,341
10/31/93 3,991 2,436
10/31/94 4,306 2,587
10/31/95 4,681 2,794
10/31/96 5,077 3,091
</TABLE>
Income from "special dividends" is indicated in the bars by their lighter
color.
[end chart]
[pie chart]
<TABLE>
AMERICAN MUTUAL FUND
October 31, 1996
- ---------------------------- ---------------
Percent of
Largest Industry Holdings* Net Assets
- ---------------------------- ---------------
<S> <C>
Banking 13.30%
Energy Sources 8.61
Telecommunications 7.65
Health & Personal Care 6.69
Utilities: Electric & Gas 3.61
Other Industries 37.33
Bonds, Notes, Cash and Equivalents 22.81
*Percentages above do not include certain
stocks in initial period of acquisition.
[end pie chart]
- ---------------------------- ---------------
Percent of
Largest Individual Holdings Net Assets
- ---------------------------- ---------------
DuPont 2.53%
Amoco 2.44
Ameritech 2.15
AT&T 2.06
Royal Dutch Petroleum 1.44
Merck 1.43
American Home Products 1.26
Phillips Petroleum 1.22
Comerica 1.16
Banc One 1.15
</TABLE>
<TABLE>
AMERICAN MUTUAL FUND Investment Portfolio
October 31, 1996
Market Percent
EQUITY-TYPE SECURITIES Value of Net
(common and preferred stocks) Shares (Millions) Assets
----------- ----------- -----------
<S> <C> <C> <C>
Energy
Energy Sources- 6.17%
Amoco Corp. 2,500,000 $189.375 2.44%
Ashland Inc. 519,100 22.062 .28
Atlantic Richfield Co. 600,000 79.500 1.02
Chevron Corp. 235,000 15.451 .20
Exxon Corp. 825,000 73.116 .94
Pennzoil Co. 609,700 31.095 .40
Phillips Petroleum Co. 2,300,000 94.300 1.22
Royal Dutch Petroleum Co.
(New York Registered Shares) 675,000 111.628 1.44
Texaco Inc. 100,000 10.163 .13
Union Pacific Resources Group, Inc. 804,598 22.126 .29
Unocal Capital Trust. $3.125 convertible preferred 368,280 19.703 .25
Utilities: Electric & Gas- 3.61%
American Electric Power Co., Inc. 200,000 8.300 .11
Carolina Power & Light Co. 200,000 7.225 .09
Central and South West Corp. 2,300,000 60.950 .79
Consolidated Edison Co. of New York, Inc. 1,900,000 55.575 .72
Dominion Resources, Inc. 150,000 5.662 .07
Duke Power Co. 500,000 24.438 .31
Entergy Corp. 1,350,000 37.800 .49
Houston Industries Inc. 1,100,000 25.162 .32
Pacific Gas and Electric Co. 1,600,000 37.600 .49
Unicom Corp. 200,000 5.200 .07
Union Electric Co. 300,000 11.587 .15
----------- ------
948.018 9.78
----------- ------
Materials
Chemicals- 3.34%
Dow Chemical Co. 350,000 27.212 .35
E.I. du Pont de Nemours and Co. 2,112,500 195.934 2.53
Monsanto Co. 900,000 35.663 .46
Forest Products & Paper- 2.21%
Georgia-Pacific Corp. 450,000 33.750 .43
International Paper Co. 1,000,000 42.750 .55
Rayonier Inc. 50,000 1.981 .03
Union Camp Corp. 850,000 41.437 .53
Westvaco Corp. 850,000 24.225 .32
Weyerhaeuser Co. 600,000 27.525 .35
Metals: Nonferrous- 0.38%
Aluminum Co. of America 500,000 29.313 .38
Metals: Steel- 0.28%
Worthington Industries, Inc. 1,050,000 21.788 .28
Miscellaneous Materials & Commodities- 0.17%
TRINOVA Corp. 400,000 13.150 .17
----------- ------
494.728 6.38
----------- ------
Capital Equipment
Aerospace & Military Technology- 1.29%
Boeing Co. 350,000 33.381 .43
General Motors Corp., Class H 250,000 13.344 .17
Raytheon Co. 225,000 11.081 .14
Sundstrand Corp. 750,000 30.188 .39
United Technologies Corp. 100,000 12.875 .16
Construction & Housing- 0.14%
Stone & Webster, Inc. 325,000 10.725 .14
Data Processing & Reproduction- 1.28%
International Business Machines Corp. 500,000 64.500 .83
Xerox Corp. 750,000 34.781 .45
Electrical & Electronic- 1.69%
Emerson Electric Co. 250,000 22.250 .29
General Electric Co. 200,000 19.350 .25
Hubbell Inc., Class B 720,000 29.430 .38
Lucent Technologies Inc. 1,278,511 60.090 .77
Electronic Components- 0.36%
Motorola, Inc. 600,000 27.600 .36
Industrial Components- 1.69%
Dana Corp. 700,000 20.738 .27
Goodyear Tire & Rubber Co. 700,000 32.112 .41
Johnson Controls, Inc. 200,000 14.600 .19
TRW Inc. 700,000 63.350 .82
Machinery & Engineering- 2.13%
Briggs & Stratton Corp. 629,100 25.164 .32
Caterpillar Inc. 1,094,000 75.076 .97
Deere & Co. 1,564,200 65.305 .84
----------- ------
665.940 8.58
----------- ------
Consumer Goods
Automobiles- 1.12%
Ford Motor Co., Class A 2,779,620 86.863 1.12
Beverages- 0.70%
PepsiCo, Inc. 1,832,000 54.273 .70
Food & Household Products- 2.04%
Colgate-Palmolive Co. 325,000 29.900 .39
ConAgra, Inc. 600,000 29.925 .39
CPC International Inc. 185,000 14.592 .19
General Mills, Inc. 750,000 42.844 .55
Procter & Gamble Co. 300,000 29.700 .38
Unilever NV 70,000 10.701 .14
Health & Personal Care- 6.69%
Abbott Laboratories 550,000 27.844 .36
American Home Products Corp. 1,600,000 98.000 1.26
Bristol-Myers Squibb Co. 275,000 29.081 .37
Johnson & Johnson 700,000 34.475 .44
Kimberly-Clark Corp. 330,000 30.772 .40
Eli Lilly and Co. 400,000 28.200 .36
Merck & Co., Inc. 1,500,000 111.188 1.43
Pharmacia & Upjohn, Inc. 747,500 26.910 .35
Schering-Plough Corp. 1,285,000 82.240 1.06
Warner-Lambert Co. 800,000 50.900 .66
Textiles & Apparel- 0.42%
VF Corp. 500,000 32.688 .42
----------- ------
851.096 10.97
----------- ------
Services
Broadcasting & Publishing- 1.07%
Gannett Co., Inc. 550,000 41.731 .54
Tribune Co. 500,000 40.875 .53
Business & Public Services- 3.58%
Browning-Ferris Industries, Inc. 2,100,000 55.125 .71
Dun & Bradstreet Corp. 1,100,000 63.663 .82
Electronic Data Systems Corp. 410,000 18.450 .24
Moore Corp. Ltd. 3,325,000 67.331 .87
Pitney Bowes Inc. 1,000,000 55.875 .72
WMX Technologies, Inc. 500,000 17.187 .22
Leisure & Tourism- 0.59%
Marriott International, Inc. 800,000 45.500 .59
Merchandising- 2.14%
J. C. Penney Co., Inc. 950,000 49.875 .64
Wal-Mart Stores, Inc. 3,250,000 86.531 1.11
Walgreen Co. 800,000 30.200 .39
Telecommunications- 7.65%
Ameritech Corp. 3,050,000 166.988 2.15
AT&T Corp. 4,595,000 160.251 2.06
Bell Atlantic Corp. 200,000 12.050 .16
GTE Corp. 1,500,000 63.187 .81
Pacific Telesis Group 2,250,000 76.500 .99
SBC Communications Inc. 700,000 34.038 .44
Sprint Corp. 700,000 27.475 .35
U S WEST Communications Group 1,750,000 53.156 .69
Transportation: Rail & Road- 2.70%
Conrail, Inc. 750,000 71.344 .92
Norfolk Southern Corp. 955,000 85.114 1.10
Union Pacific Corp. 950,000 53.319 .68
----------- ------
1,375.765 17.73
----------- ------
Finance
Banking- 13.30%
AmSouth Bancorporation 1,000,000 46.375 .60
Banc One Corp. 2,100,000 88.988 1.15
BankAmerica Corp. 250,000 22.875 .29
Bankers Trust New York Corp. 400,000 33.800 .43
Boatmen's Bancshares, Inc. 365,000 22.174 .29
The Chase Manhattan Corp. 700,000 60.025 .77
Comerica Inc. 1,700,000 90.312 1.16
CoreStates Financial Corp. 1,200,000 58.350 .75
First Chicago NBD Corp. 1,200,000 61.200 .79
First Security Corp. 1,425,000 41.859 .54
First Union Corp. 550,000 40.013 .51
Firstar Corp. 800,000 39.200 .51
Fleet Financial Group, Inc. 1,693,000 84.438 1.09
Huntington Bancshares Inc. 1,155,000 27.720 .36
KeyCorp 400,000 18.650 .24
J.P. Morgan & Co. Inc. 450,000 38.869 .50
PNC Bank Corp. 2,300,000 83.375 1.07
U. S. Bancorp 650,000 26.000 .34
Wachovia Corp. 1,600,000 86.000 1.11
Wells Fargo & Co. 233,333 62.329 .80
Financial Services- 1.46%
Beneficial Corp. 350,000 20.475 .26
Federal National Mortgage Assn. 1,580,000 61.818 .80
Household International, Inc. 350,000 30.975 .40
Insurance- 2.91%
Allstate Corp. 800,000 44.900 .58
American General Corp. 1,610,000 59.972 .77
Lincoln National Corp. 600,000 29.100 .38
Marsh & McLennan Companies, Inc. 250,000 26.031 .34
SAFECO Corp. 1,000,000 37.750 .49
St. Paul Companies, Inc. 500,000 27.188 .35
----------- ------
1,370.761 17.67
----------- ------
Multi-Industry & Miscellaneous
Multi-Industry- 2.35%
AlliedSignal Inc. 400,000 26.200 .34
Harsco Corp. 50,000 3.194 .04
Minnesota Mining and Manufacturing Co. 825,000 63.215 .81
Tenneco Inc. 1,100,000 54.450 .70
Textron Inc. 400,000 35.500 .46
----------- ------
182.559 2.35
----------- ------
Miscellaneous- 1.29%
Stocks in initial period of acquisition 100.049 1.29
----------- ------
TOTAL EQUITY-TYPE SECURITIES (cost:
$3,871.499 million) 5,988.916 74.75
----------- ------
BONDS AND NOTES Principal
Amount
Corporate- 0.17% -----------
J.C. Penney Co., Inc. 9.05% 2001 $12,000,000 13.122 .17
----------- ------
U.S. Treasury Obligations- 4.80%
12.375% May 2004 50,000,000 68.031 .88
11.75% February 2001 50,000,000 60.554 .78
8.25% July 1998 60,000,000 62.437 .80
5.125% April 1998 60,000,000 59.550 .77
8.125% February 1998 60,000,000 61.810 .79
6.00% November 1997 60,000,000 60.262 .78
----------- ------
372.644 4.80
----------- ------
TOTAL BONDS AND NOTES (cost: $403.898 million) 385.766 4.97
----------- ------
TOTAL INVESTMENT SECURITIES (cost: $4,275.397
million) 6,374.682 79.72
----------- ------
SHORT-TERM SECURITIES
Corporate Short-Term Notes- 13.91%
Ameritech Corp. 5.24%-5.33% due 11/22/96-1/30/97 97,000,000 96.329 1.24
AT&T Corp. 5.27% due 11/5/96 30,000,000 29.978 .39
Baltimore Gas & Electric Co. 5.24%-5.28% due 11/14-12/6/96 35,085,000 34.930 .45
BellSouth Telecommunications, Inc. 5.22%-5.27%
due 11/4-12/4/96 39,700,000 39.579 .51
Beneficial Corp. 5.24%-5.26% due 12/10/96 64,900,000 64.518 .83
E.I. du Pont de Nemours and Co. 5.26%-5.35%
due 11/19/96-1/8/97* 57,867,000 57.581 .74
Ford Motor Credit Co. 5.25%-5.36%
due 11/8/96-1/9/97 100,900,000 100.448 1.29
General Electric Capital Corp. 5.31%-5.34%
due 11/14/96-1/14/97 43,200,000 42.965 .55
H.J.Heinz Co. 5.23%-5.41%
due 11/6-12/11/96 69,500,000 69.260 .89
Hewlett-Packard Co. 5.20%-5.26%
due 11/6-12/20/96 60,000,000 59.895 .77
Lucent Technologies Inc. 5.23%-5.30%
due 11/7/96-1/9/97 82,500,000 82.007 1.06
J.C. Penney Funding Corp. 5.25%-5.31%
due 12/4/96-1/23/97 75,500,000 74.917 .97
Procter & Gamble Co. 5.27%-5.40%
due 11/6/96-1/13/97 68,800,000 68.341 .88
Southwestern Bell Telephone Co.5.22%-5.27%
due 11/4-12/20/96 65,000,000 64.721 .83
U S WEST Communications, Inc.5.27%-5.30%
due 11/12-12/13/96 62,500,000 62.275 .80
Warner-Lambert Co.5.27%-5.30%
due 11/1/96-1/6/97 58,600,000 58.265 .75
Weyerhaeuser Co.5.24%-5.34%
due 11/8-12/19/96 75,000,000 74.667 .96
Federal Agency Short-Term Obligations- 3.52%
Federal Home Loan Bank 5.24%-5.36% due 11/20-12/19/96 81,200,000 80.756 1.04
Federal Home Loan Mortgage Corp. 5.20%-5.40%
due 11/13-12/31/96 99,490,000 98.924 1.28
Federal National Mortgage Assn. 5.33%-5.44%
due 12/6-12/19/96 93,600,000 93.067 1.20
U.S. Treasury Short-Term Securities - 0.35%
6.375%-7.25% due 11/15/96-6/30/97 26,000,000 26.080 .35
----------- ------
TOTAL SHORT-TERM SECURITIES (cost: $1,379.533
million) 1,379.503 17.78
Excess of cash and receivables over payables 4.891 .06
----------- ------
TOTAL SHORT-TERM SECURITIES,
CASH AND RECEIVABLES, NET OF PAYABLES 1,384.394 17.84
----------- ------
NET ASSETS $7,759.076 97.56%
=========== ======
*Purchased in a private placement transaction, resale to
the public may require registration or sale only to
qualified institutional buyers.
See Notes to Financial Statements
- ---------------------------- ---------------
Equity-type securities Equity-type securities
appearing in the portfolio eliminated from the portfolio
since April 30, 1996 since April 30, 1996
- ---------------------------- ---------------
AlliedSignal Aetna Life and Casualty
Aluminum Co. of America Bausch & Lomb
American Electric Power
Bankers Trust New York
Briggs & Stratton
Browning-Ferries
CoreStates Financial
Electronic Data Systems
Emerson Electric
KeyCorp
Marsh & McLennan
Pennzoil
Procter & Gamble
Raytheon
U. S. Bancorp
Unilever
Union Electric
Unocal Capital Trust
</TABLE>
<TABLE>
American Mutual Fund Financial Statements
- ----------------------------------------- ----------- -----------
Statement of Assets and Liabilities (dollars in
October 31, 1996 millions)
- ------------------------------------------------ ----------- ----------
<S> <C> <C>
Investment securities at market
(cost: $4,275.397) $6,374.682
Short-term securities
(cost: $1,379.533) 1,379.503
Cash .139
Receivables for-
Sales of investments $.000
Sales of fund's shares $ 9.202
Dividends and accrued interest 22.540 31.742
----------- ----------
7,786.066
Liabilities:
Payables for-
Purchases of investments 18.058
Repurchases of fund's shares 4.513
Management services 1.869
Accrued expenses 2.550 26.990
----------- ----------
Net Assets at October 31, 1996-
Equivalent to $26.54 per share on
292,312,818 shares of $1 par value
capital stock outstanding (authorized
capital stock--500,000,000 shares) $7,759.076
=========
- -----------------------------------------------------------------------------------
Statement of Operations (dollars in
for the year ended October 31, 1996 millions)
- -------------------------------------------------- ---------- -----------
Investment Income:
Income:
Dividends $ 171.438
Interest 112.277 $283.715
----------
Expenses:
Management services fee 21.154
Distribution expenses 14.098
Transfer agent fee 4.473
Reports to shareholders .517
Registration statement and
prospectus .429
Postage, stationery and supplies .957
Directors' fees .169
Auditing and legal fees .072
Custodian fee .164
Taxes other than federal income tax .074
Other expenses .107 42.214
----------- ----------
Net investment income 241.501
----------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 477.701
Net increase in unrealized appreciation on
investments:
Beginning of year 1,583.521
End of year 2,099.255 515.734
----------- ----------
Net realized gain and increase in unrealized
appreciation on investments 993.435
----------
Net Increase in Net Assets Resulting
from Operations $1,234.936
==========
- -------------------------------------------------- ----------- ----------
Statement of Changes in Net Assets (dollars in
millions)
- ------------------------------------------------- ----------- ----------
Year ended October 31
1996 1995
----------- ----------
Operations:
Net investment income $ 241.501 $ 230.323
Net realized gain on investments 477.701 305.112
Net increase in unrealized appreciation
on investments 515.734 612.873
----------- ----------
Net increase in net assets
resulting from operations 1,234.936 1,148.308
----------- ----------
Dividends and Distributions
Paid to Shareholders:
Dividends from net investment income (238.662) (220.251)
Distributions from net realized
gain on investments (311.944) (217.473)
----------- ----------
Total dividends and distributions (550.606) (437.724)
----------- ----------
Capital Share Transactions:
Proceeds from shares sold:
34,457,011 and 31,087,225
shares, respectively 865.021 689.376
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions of
net realized gain on investments:
20,031,287 and 18,568,126
shares, respectively 491.254 388.017
Cost of shares repurchased:
33,206,353 and 28,510,164
shares, respectively (833.613) (633.334)
----------- ----------
Net increase in net assets
resulting from capital share
transactions 522.662 444.059
----------- ----------
Total Increase in Net Assets 1,206.992 1,154.643
Net Assets:
Beginning of year 6,552.084 5,397.441
----------- ----------
End of year (including undistributed
net investment income: $44.738
and $41.899, respectively) $7,759.076 $6,552.084
=========== ==========
See Notes to Financial Statements
</TABLE>
Notes to Financial Statements
1. American Mutual Fund, Inc. (the "fund") is registered under the Investment
Company Act of 1940 as an open-end, diversified management investment company.
The fund strives for the balanced accomplishment of three objectives-current
income, capital growth and conservation of principal-through investments in
companies that participate in the growth of the American economy. The following
paragraphs summarize the significant accounting policies consistently followed
by the fund in the preparation of its financial statements:
Equity-type securities traded on a national securities exchange (or
reported on the NASDAQ national market) and securities traded in the
over-the-counter market are stated at the last reported sales price on the day
of valuation; other securities, and securities for which no sale was reported
on that date, are stated at the last quoted bid price. Bonds and notes are
valued at prices obtained from a bond-pricing service provided by a major
dealer in bonds, when such prices are available; however, in circumstances
where the investment adviser deems it appropriate to do so, such securities
will be valued at the mean of their representative quoted bid and asked prices
or, if such prices are not available, at prices for securities of comparable
maturity, quality and type. Short-term securities with original or remaining
maturities in excess of 60 days are valued at the mean of their quoted bid and
asked prices. Where pricing service or market quotations are not readily
available, securities will be valued at fair value by the Board of Directors or
a committee thereof. Short-term securities 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. Discounts
on securities purchased are amortized over the life of the respective
securities. The fund does not amortize premiums on securities purchased.
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 $164,000 includes $29,000 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 October 31, 1996, net unrealized appreciation on investments for
federal income tax purposes aggregated $2,100,611,000, of which $2,146,898,000
related to appreciated securities and $46,287,000 related to depreciated
securities. There was no difference between book and tax realized gains on
securities transactions for the year ended October 31, 1996. The cost of
portfolio securities for federal income tax purposes was $5,653,574,000 at
October 31,1996.
3. The fee of $21,154,000 for management services was paid 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 0.384% of the first $1 billion of average net assets;
0.33% of such assets in excess of $1 billion but not exceeding $2 billion;
0.294% of such assets in excess of $2 billion but not exceeding $3 billion;
0.27% of such assets in excess of $3 billion but not exceeding $5 billion;
0.252% of such assets in excess of $5 billion but not exceeding $8 billion; and
0.24% of such assets in excess of $8 billion.
Pursuant to a Plan of Distribution, the fund may expend up to 0.25% of its
average net assets annually for any activities primarily intended to result in
sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the fund's Board of Directors. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the year ended October 31, 1996,
distribution expenses under the Plan were $14,098,000. As of October 31, 1996,
accrued and unpaid distribution expenses were $2,317,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $4,473,000. American Funds
Distributors, Inc. (AFD), the principal underwriter of the fund's shares,
received $3,378,000 (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 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 October 31,
1996, aggregate amounts deferred and earnings thereon were $210,000.
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. As of October 31, 1996, accumulated undistributed net realized gain on
investments was $456,481,000 and paid-in capital was $4,866,289,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $1,444,661,000 and $1,404,889,000, respectively,
during the year ended October 31, 1996.
<TABLE>
Per-Share Data and Ratios Year ended October 31
------- ------- ------- ------- -------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $24.17 $21.60 $23.21 $21.29 $20.98
------- ------- ------- ------- -------
Income from Investment
Operations:
Net investment income .84 .87 .88 .85 .87
Net realized and unrealized
gain (loss) on investments 3.52 3.41 (.54) 2.89 .98
------- ------- ------- ------- -------
Total income from
investment operations 4.36 4.28 .34 3.74 1.85
------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment
income (.84) (.84) (.84) (.85) (.88)
Distributions from net
realized gains (1.15) (.87) (1.11) (.97) (.66)
------- ------- ------- ------- -------
Total distributions (1.99) (1.71) (1.95) (1.82) (1.54)
------- ------- ------- ------- -------
Net Asset Value, End of Year $26.54 $24.17 $21.60 $23.21 $21.29
======= ======= ======= ======= =======
Total Return /1/ 18.89% 21.25% 1.75% 18.63% 9.43%
Ratios/Supplemental Data:
Net assets, end of year (in
millions) $7,759 $6,552 $5,397 $5,283 $4,565
Ratio of expenses to average
net assets .59% .59% .60% .59% .60%
Ratio of net income to average
net assets 3.36% 3.92% 4.07% 3.83% 4.15%
Average commissions paid
per share /2/ 5.88 cents 6.27 cents 6.54 cents 7.31 cents 7.56 cents
Portfolio turnover rate 24.21% 23.31% 18.46% 22.48% 37.35%
/1/This was calculated without deducting a sales charge. The maximum sales
charge is 5.75% of the funds's offering price.
/2/Brokerage commissions paid on portfolio transactions increase
the cost of securities purchased or reduce the proceeds of
securities sold, and are not reflected in the fund's
statement of operations. Shares traded on a principal
basis, such as most over-the-counter and fixed-income
transactions, are excluded.
</TABLE>
Independent Auditors' Report
To the Board of Directors and Shareholders of American Mutual Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of
American Mutual Fund, Inc., (the "Fund"),including the schedule of portfolio
investments, as of October 31, 1996,and the related statements 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 included confirmation of securities owned as of
October 31, 1996 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other 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
American Mutual Fund, Inc. as of October 31, 1996, 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
November 22, 1996
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:
Dividends and Distributions per Share
<TABLE>
<CAPTION>
To Shareholders Payment Date From Net From Net From Net
of Record Investment Realized Realized
Income Short-Term Gains Long-Term Gains
<S> <C> <C> <C> <C>
December 8, 1995 December 11, 1995 $.21 $.03 $1.12
April 4, 1996 April 8, 1996 .21 - -
July 5, 1996 July 8, 1996 .21 - -
October 4, 1996 October 7, 1996 .21 - -
</TABLE>
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 64% of the dividends
paid by the fund from net investment income represents qualifying dividends.
Certain states may exempt from income taxation that portion of the dividends
paid from net investment income that was derived from direct U.S. Treasury
obligations. For purposes of computing this exclusion, 14% of the dividends
paid by the fund from net investment income were derived from interest on
direct U.S. Treasury obligations.
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.
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 WILL BE MAILED IN JANUARY 1997 TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR RESPECTIVE 1996 TAX RETURNS. SHAREHOLDERS
SHOULD CONSULT THEIR TAX ADVISERS.
Board of Directors
H. FREDERICK CHRISTIE
Rolling Hills Estates, California
Private investor; former President and Chief Executive
Officer, The Mission Group; former President, Southern California Edison
Company
E.H. CLARK, JR.
Newport Beach, California
Chairman of the Board and Chief Executive Officer,
The Friendship Group (an investment partnership);
former Chairman of the Board, Baker Hughes Inc.
MARY ANNE DOLAN
Los Angeles, California
Founder and President, M.A.D., Inc.
(TV and film productions);
former editor, The Los Angeles Herald Examiner
JAMES K. DUNTON
Los Angeles, California
President of the fund
Senior Vice President and Director,
Capital Research and Management Company
MARTIN FENTON, JR.
San Diego, California
Chairman of the Board, Senior Resource Group, Inc.
(senior living centers management)
E. ERIC JOHNSON
Los Angeles, California
Chairman of the Board, TBG Financial Services
MARY MYERS KAUPPILA
Boston, Massachusetts
Founder and President, Energy Investment, Inc.
JON B. LOVELACE, JR.
Los Angeles, California
Chairman of the Board of the fund
Vice Chairman of the Board and Chairman of the
Executive Committee,
Capital Research and Management Company
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
Other Officers
ROBERT G. O'DONNELL
San Francisco, California
Executive Vice President of the fund
Senior Vice President and Director,
Capital Research and Management Company
TIMOTHY D. ARMOUR
Los Angeles, California
Vice President of the fund
Senior Vice President,
Capital Research Company
JOYCE E. GORDON
Los Angeles, California
Vice President of the fund
Senior Vice President,
Capital Research Company
VINCENT P. CORTI
Los Angeles, California
Secretary of the fund
Vice President - Fund Business Management Group,
Capital Research and Management Company
STEVEN N. KEARSLEY
Brea, California
Treasurer of the fund
Vice President and Treasurer,
Capital Research and Management Company
R. MARCIA GOULD
Brea, California
Assistant Treasurer of the fund
Vice President - Fund Business Management Group,
Capital Research and Management Company
MARY C. HALL
Brea, California
Assistant Treasurer of the fund
Senior 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 92821-5804
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
For information about your account or any of the fund's services, please
contact your financial adviser or call American Funds Service Company,
toll-free, at 800/421-0180.
THIS REPORT IS FOR THE INFORMATION OF SHAREHOLDERS OF AMERICAN MUTUAL 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
DECEMBER 31, 1996, THIS REPORT MUST BE ACCOMPANIED BY AN AMERICAN FUNDS GROUP
STATISTICAL UPDATE FOR THE MOST RECENTLY COMPLETED CALENDAR QUARTER.
Litho in USA SG/AL/3141
Lit. No. AMF-011-1296
Printed on recycled paper
[The American Funds Group(r)]
