AMERICAN MUTUAL FUND
Semi-Annual Report for the six months ended April 30, 1998
[The American Funds Group(r)]
[cover: green field with daisies and mountains in the backdrop]
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.
American Mutual Fund is one of the 28 mutual funds in The American Funds
Group,(r) managed by Capital Research and Management Company. Since 1931,
Capital has invested with a long-term focus based on thorough research and
attention to risk.
Fund results in this report were computed without a sales charge unless
otherwise indicated. Here are the fund's total returns and average annual
compound returns with all distributions reinvested for periods ended March 31,
1998 (the most recent calendar quarter), assuming payment of the 5.75% maximum
sales charge at the beginning of the stated periods (sales charges are lower
for accounts of $50,000 or more) - 10 years: +296.00%, or +14.75% a year; five
years: +114.09%, or +16.44% a year; 12 months: +27.80%. The fund's 30-day yield
as of May 31, 1998, calculated in accordance with the Securities and Exchange
Commission formula, was 2.48%.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS AND ARE NOT PREDICTIVE OF
FUTURE 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.
FELLOW INVESTORS:
Now in its eighth year of expansion, the U.S. economy continues to show
remarkable strength. Over the past six months the pace of economic growth
accelerated, fueled in part by strong consumer spending and a pickup in
business investment. The stock market, helped by subdued inflation, mirrored
the economy's strength and posted a substantial return.
AMF MAKES AN EXCEPTIONAL GAIN
For the six months ended April 30, the value of your investment in American
Mutual Fund rose 15.4% if, like most shareholders, you reinvested the two
income dividends of 20 cents a share paid in December and March and the capital
gain distribution of $2.48 per share paid in December. Given that the average
annual return for stocks has been 11.1% since 1926 (as measured by the
unmanaged Standard & Poor's 500 Composite Index), AMF's six-month gain is truly
exceptional.
THE BALANCED ACCOMPLISHMENT OF THREE OBJECTIVES
As strong as AMF's return was, the S&P 500 did even better, gaining 22.5% over
the six months with dividends reinvested. Unlike the S&P 500, which represents
a fully invested position in stocks, AMF strives for the balanced
accomplishment of current income, capital growth and conservation of principal
through investments in stocks and, when appropriate, fixed-income securities.
With stock valuations at all-time highs and dividend yields at historic lows,
we believe it has been prudent to maintain a sizable cash reserve. AMF's cash
and equivalents - currently 20.5% of net assets - can help cushion the fund's
return in a market decline and provide income to support an attractive
quarterly dividend.
MERGER ACTIVITY PICKS UP PACE
Over the past few months, a flurry of merger activity propelled a number of
AMF's stock holdings into the headlines.* One of the most recent announcements
was the proposed merger of AMERITECH and SBC COMMUNICATIONS, two of AMF's
largest holdings. (See Largest Individual Holdings at the top of page 3.) The
merger is slated to occur next year, although it first must clear a number of
regulatory hurdles.
The proposed merger of CHRYSLER with Daimler-Benz met with much excitement in
the press and was praised as a smart strategic move that will enable the new
firm to compete on a global basis. Both companies saw an immediate run-up in
their stock prices, indicating that investors view the merger favorably. Other
companies in AMF's portfolio that have announced mergers during the past few
months include Bank One and First Chicago, which intend to merge with each
other, and BankAmerica, which plans to join forces with NationsBank. We will
continue to monitor and evaluate the long-term prospects of these stocks as
events unfold.
*Securities in AMF's portfolio are shown in bold.
A FOCUS ON THE LONG TERM
Throughout the years we've often reminded investors of the importance of taking
a long-term perspective toward investing. The stock market has made
extraordinary strides in recent years, but there have been times when its
journey has been more fitful. Investors should expect the market to generate
smaller gains - and experience setbacks from time to time - in the future.
Helping you keep what you earn has always been an important part of AMF's
approach. We will continue to do our utmost to preserve and increase the value
of your wealth and the income it produces over the long term.
We look forward to reporting to you again in six months.
Cordially,
[/s/ James K. Dunton] [/s/ Robert G. O'Donnell]
James K. Dunton Robert G. O'Donnell
Chairman of the Board President
June 12, 1998
<TABLE>
<S> <C> <C> <C>
AMERICAN MUTUAL FUND
Investment Portfolio
[graphic: begin pie chardt]
LARGEST INDUSTRY HOLDINGS
Banking 12.93%
Telecommunications 8.23%
Energy Sources 7.13%
Health & Personal Care 5.73%
Chemicals 4.84%
Other Industries 35.33%
Bonds, Notes, Cash & Equivalents 25.81%
[graphic: end pie chart]
Unaudited
LARGEST INDIVIDUAL HOLDINGS April 30,
Ameritech 2.66%
AT&T 2.61
DuPont 1.91
Warner-Lambert 1.60
Amoco 1.53
SBC Communications 1.33
Schering-Plough 1.23
Dow Chemical 1.20
Norfolk Southern 1.14
IBM 1.10
Market Percent
EQUITY SECURITIES Value of Net
(COMMON AND PREFERRED STOCKS ) Shares (Millions Assets
------------------------------
Energy
Energy Sources- 7.13%
Amoco Corp. 3,650,000 $161.512 1.53%
Ashland Inc. 1,850,000 97.819 .93
Atlantic Richfield Co. 645,000 50.310 .48
Kerr-McGee Corp. 1,000,000 66.000 .63
Pennzoil Co. 638,600 40.910 .39
Phillips Petroleum Co. 2,000,000 99.125 .94
Royal Dutch Petroleum Co.
(New York Registered Shares) 2,000,000 113.125 1.07
Texaco Inc. 1,200,000 73.800 .70
Ultramar Diamond Shamrock Corp. 1,500,000 48.469 .46
Utilities: Electric & Gas- 4.21%
Ameren Corp. (formerly Union Electric Co.) 300,000 11.887 .11
American Electric Power Co., Inc. 200,000 9.550 .09
Carolina Power & Light Co. 200,000 8.613 .08
Central and South West Corp. 3,462,800 90.249 .86
Consolidated Edison, Inc. 1,500,000 67.875 .65
Dominion Resources, Inc. 150,000 5.934 .06
Duke Energy Corp. 800,000 46.300 .44
FPL Group, Inc. 700,000 43.444 .41
Houston Industries Inc. 750,000 21.797 .21
New Century Energies, Inc. 2,000,000 95.000 .90
Southern Co. 1,600,000 42.400 .40
--------- ------
1,194.119 11.34
--------- ------
Materials
Chemicals- 4.84%
Air Products and Chemicals, Inc. 200,000 17.388 .17
Dow Chemical Co. 1,304,500 126.129 1.20
E.I. du Pont de Nemours and Co. 2,766,200 201.414 1.91
Monsanto Co. 900,000 47.587 .45
PPG Industries, Inc. 922,400 65.202 .62
Praxair, Inc. 1,034,300 52.038 .49
Forest Products & Paper- 2.96%
Fort James Corp. 900,000 44.663 .42
Georgia-Pacific Corp., Georgia Pacific Group 725,000 55.961
Georgia-Pacific Corp., Timber Group 725,000 18.578 .71
International Paper Co. 1,300,000 67.844 .65
Rayonier Inc. 50,000 2.506 .02
Union Camp Corp. 900,000 54.338 .52
Westvaco Corp. 900,000 27.281 .26
Weyerhaeuser Co. 700,000 40.337 .38
Metals: Nonferrous- 0.40%
Aluminum Co. of America 550,000 42.625 .40
Metals: Steel- 0.14%
Worthington Industries, Inc. 800,000 14.375 .14
--------- ------
878.266 8.34
--------- ------
Capital Equipment
Aerospace & Military Technology- 1.40%
Boeing Co. 200,000 10.013 .10
Raytheon Co., Class A 140,600 7.759
Raytheon Co., Class B 1,023,100 57.997 .62
Sundstrand Corp. 382,600 26.423 .25
United Technologies Corp. 461,100 45.390 .43
Construction & Housing- 0.11%
Stone & Webster, Inc. 250,000 11.156 .11
Data Processing & Reproduction- 2.29%
Hewlett-Packard Co. 500,000 37.656 .36
International Business Machines Corp. 1,000,000 115.875 1.10
Xerox Corp. 774,300 87.883 .83
Electrical & Electronic- 0.98%
Emerson Electric Co. 577,700 36.756 .35
Hubbell Inc., Class B 720,000 35.505 .34
Lucent Technologies Inc. 400,000 30.450 .29
Electronic Components- 0.21%
Motorola, Inc. 400,000 22.250 .21
Industrial Components- 2.55%
Dana Corp. 700,000 41.387 .39
Federal-Mogul Corp. 350,000 22.641
Federal-Mogul Corp. 7.00% convertible preferred* 500,000 36.000 .56
Genuine Parts Co. 525,000 18.900 .18
Goodyear Tire & Rubber Co. 700,000 49.000 .47
TRW Inc. 1,900,000 100.344 .95
Machinery & Engineering- 2.03%
Briggs & Stratton Corp. 629,100 28.467 .27
Caterpillar Inc. 1,650,000 93.947 .89
Deere & Co. 1,564,200 91.408 .87
--------- ------
1,007.207 9.57
--------- ------
Consumer Goods
Appliances & Household Durables- 0.07%
Rubbermaid Inc. 264,500 7.571 .07
Automobiles- 1.07%
Chrysler Corp. 1,500,000 60.281 .57
Ford Motor Co. 1,150,000 52.684 .50
Beverages- 0.38%
PepsiCo, Inc. 1,000,000 39.688 .38
Food & Household Products- 0.93%
Bestfoods (formerly CPC International Inc.) 370,000 20.304 .19
Colgate-Palmolive Co. 146,400 13.130 .13
ConAgra, Inc. 400,000 11.675 .11
General Mills, Inc. 750,000 50.672 .48
Kellogg Co. 60,300 2.487 .02
Health & Personal Care- 5.73%
Avon Products, Inc. 450,000 36.984 .35
Bristol-Myers Squibb Co. 400,000 42.350 .40
Johnson & Johnson 400,000 28.550 .27
Kimberly-Clark Corp. 400,000 20.300 .19
Eli Lilly and Co. 800,000 55.650 .53
Merck & Co., Inc. 357,900 43.127 .41
Pfizer Inc 450,000 51.216 .49
Pharmacia & Upjohn, Inc. 647,500 27.236 .26
Schering-Plough Corp. 1,610,000 129.001 1.23
Warner-Lambert Co. 891,300 168.623 1.60
Recreation, Other Consumer Products- 0.58%
Stanley Works 1,200,000 61.425 .58
Textiles & Apparel- 0.50%
VF Corp. 1,000,000 52.000 .50
--------- ------
974.954 9.26
--------- ------
Services
Broadcasting & Publishing- 0.42%
Gannett Co., Inc. 600,000 40.763 .39
Reader's Digest Assn., Inc., Class A 112,000 3.010 .03
Business & Public Services- 1.39%
Browning-Ferris Industries, Inc. 2,946,900 100.563 .95
Electronic Data Systems Corp. 750,000 32.250 .31
Waste Management, Inc. 400,000 13.400 .13
Leisure & Tourism- 0.25%
McDonald's Corp. 424,200 26.247 .25
Merchandising- 3.11%
Albertson's, Inc. 800,000 40.000 .38
May Department Stores Co. 1,150,000 70.941 .67
J.C. Penney Co., Inc. 1,629,100 115.768 1.10
Wal-Mart Stores, Inc. 2,000,000 101.125 .96
Telecommunications- 8.23%
Ameritech Corp. 6,572,800 279.755 2.66
AT&T Corp. 4,575,000 274.786 2.61
Bell Atlantic Corp. 200,000 18.712 .18
SBC Communications Inc. 3,394,350 140.653 1.33
Sprint Corp. 1,000,000 68.313 .65
U S WEST Communications Group 1,600,000 84.400 .80
Transportation: Rail & Road- 1.90%
Norfolk Southern Corp. 3,600,000 120.375 1.14
Union Pacific Corp. 1,450,000 79.387 .76
--------- ------
1,610.448 15.30
--------- ------
Finance
Banking- 12.93%
AmSouth Bancorporation 1,250,000 77.969 .74
Banc One Corp. 1,584,000 93.159 .89
BankAmerica Corp. 300,000 25.500 .24
Bankers Trust New York Corp. 400,000 51.650 .49
Chase Manhattan Corp. 700,000 96.994 .92
Comerica Inc. 1,500,000 100.406 .95
Crestar Financial Corp. 800,000 47.850 .45
Firstar Corp. 2,000,000 74.625 .71
First Chicago NBD Corp. 300,000 27.863 .26
First Security Corp. 3,206,250 78.553 .75
First Union Corp. 1,767,000 106.683 1.01
Fleet Financial Group, Inc. 1,100,000 95.013 .90
Huntington Bancshares Inc. 1,200,000 42.675 .41
KeyCorp 1,800,000 71.437 .68
J.P. Morgan & Co. Inc. 680,000 89.250 .85
PNC Bank Corp. 1,300,000 78.569 .75
U.S. Bancorp 400,000 50.800 .48
Wachovia Corp. 1,100,000 93.431 .89
Wells Fargo & Co. 160,000 58.960 .56
Financial Services- 1.72%
Associates First Capital Corp., Class A 301,398 22.530 .21
Beneficial Corp. 255,700 33.337 .32
Fannie Mae 1,180,000 70.652 .67
Household International, Inc. 419,100 55.085 .52
Insurance- 3.60%
Allstate Corp. 800,000 77.000 .73
American General Corp. 1,010,000 67.291 .64
Jefferson-Pilot Corp. 738,750 43.355 .41
Lincoln National Corp. 600,000 53.288 .51
Marsh & McLennan Companies, Inc. 500,000 45.562 .43
SAFECO Corp. 800,000 39.950 .38
St. Paul Companies, Inc. 620,000 52.545 .50
--------- ------
1,921.982 18.25
--------- ------
Multi-Industry & Miscellaneous
Multi-Industry- 0.97%
AlliedSignal Inc. 800,000 35.050 .33
Harsco Corp. 100,000 4.600 .04
Textron Inc. 800,000 62.600 .60
Miscellaneous- 1.16%
Other equity securities in initial period of acquisition 121.820 1.16
--------- ------
224.070 2.13
--------- ------
TOTAL EQUITY SECURITIES (cost: $3,995.931 million) 7,811.046 74.19
--------- ------
BONDS & NOTES Principal
Amount
Corporate- 0.12% -----------
J.C. Penney Co., Inc. 9.05% 2001 $12,000,00 12.885 .12
--------- ------
U.S. Treasury Obligations- 5.21%
12.375% May 2004 50,000,000 66.727 .63
7.75% February 2001 56,000,000 59.027 .56
5.625% November 2000 90,000,000 90.014 .85
6.25% August 2000 90,000,000 91.210 .87
6.375% May 2000 90,000,000 91.308 .87
5.625% November 1999 90,000,000 90.042 .86
8.25% July 1998 60,000,000 60.375 .57
--------- ------
TOTAL BONDS & NOTES (cost: $570.236 million) 561.588 5.33
--------- ------
TOTAL INVESTMENT SECURITIES (cost: $4,566.167
million) 8,372.634 79.52
--------- ------
SHORT-TERM SECURITIES
Corporate Short-Term Notes- 13.53%
American Express Credit Corp. 5.45%-5.50% due
6/1-7/27/98 81,500,000 80.876 .77
Ameritech Corp. 5.41% due 5/18/98 30,000,000 29.918 .28
Amoco Co. 5.42%-5.45% due 6/1-8/4/98 92,600,000 91.609 .87
Atlantic Richfield Co. 5.43%-5.50% due 5/8-5/22/9874,000,000 73.832 .70
BellSouth Telecommunications, Inc. 5.45%-5.49% due
5/4-6/17/98 83,700,000 83.397 .79
Coca-Cola Co. 5.44%-5.50% due 5/11-6/24/98 124,800,00 124.259 1.18
Colgate-Palmolive Co. 5.47%-5.49% due 6/1-6/29/98*55,000,000 54.560 .52
Duke Energy Corp. 5.43%-5.49% due 5/7-7/14/98 74,600,000 74.195 .71
E.I. du Pont de Nemours and Co. 5.41%-5.49% due
6/3-6/24/98 105,500,00 104.680 .99
Emerson Electric Co. 5.47%-5.48% due 5/21-6/5/98 67,450,000 67.185 .64
General Electric Capital Corp. 5.46% due 7/6/98 58,000,000 57.400 .55
H.J. Heinz Co. 5.47%-5.52% due 5/11-5/21/98 62,500,000 62.312 .59
Hershey Foods Corp. 5.40%-5.47% due 5/22-7/8/98 36,000,000 35.727 .34
Merck & Co., Inc. 5.45%-5.47% due 5/7-6/19/98 59,900,000 59.622 .57
Minnesota Mining and Manufacturing Co. 5.40%-5.45%
due 5/12-7/22/98 71,000,000 70.264 .67
Monsanto Co. 5.46%-5.48% due 6/15-8/18/98 59,000,000 58.304 .55
Motorola, Inc. 5.46%-5.50% due 5/21-6/25/98 42,800,000 42.455 .40
Procter & Gamble Co. 5.37%-5.48% due 6/2-6/12/98 109,200,00 108.592 1.03
SBC Communications Inc. 5.44%-5.465% due 5/21-6/22/98*
65,000,000 64.645 .61
Xerox Corp. 5.45%-5.49% due 5/20-6/11/98 81,600,000 81.161 .77
Federal Agency Discount Notes- 6.79%
Fannie Mae 5.35%-5.43% due 5/1-7/30/98 364,300,00 362.248 3.44
Federal Home Loan Banks 5.35%-5.43% due 5/6-6/3/98147,300,00 146.781 1.40
Freddie Mac 5.35%-5.43% due 5/6-7/15/98 207368000 205.484 1.95
--------- ------
TOTAL SHORT-TERM SECURITIES (cost: $2,139.572
million) 2,139.506 20.32
Excess of cash and receivables over payables 16.701 .16
--------- ------
TOTAL SHORT-TERM SECURITIES, CASH AND
RECEIVABLES, NET OF PAYABLES 2,156.207 20.48
--------- ------
NET ASSETS $10,528.8 100.00%
========= ======
*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 Securities
appearing in the portfolio
since October 31, 1997
- ----------------------------
Hewlett-Packard
Jefferson-Pilot
May Department Stores
New Century Energies
Pfizer
PPG Industries
Praxair
Rubbermaid
Stanley Works
- ------------------------------
Equity Securities
eliminated from the portfolio
since October 31, 1997
- ------------------------------
American Home Products
Chevron
Cognizant
CoreStates Financial
Corning
Dun & Bradstreet
Exxon
General Motors, Class H
GTE
Mallinckrodt
Marriott International
Moore
Procter & Gamble
Tenneco
</TABLE>
<TABLE>
<S> <C> <C>
American Mutual Fund
Financial Statements Unaudited
- -------------------------------------------------- ----------------- -----------------
Statement of Assets and Liabilities (dollars in
at April 30, 1998 millions)
- -------------------------------------------------- ----------------- ------------------
Assets:
Investment securities at market (cost: $4,566.167) $8,372.634
Short-term securities (cost: $2,139.572) 2,139.506
Cash .143
Receivables for-
Sales of investments $ 3.990
Sales of fund's shares 7.131
Dividends and interest 26.942 38.063
----------------- ------------------
10,550.346
Liabilities:
Payables for-
Purchases of investments 8.017
Repurchases of fund's shares 6.948
Management services 2.426
Accrued expenses 4.114 21.505
----------------- ------------------
Net Assets at April 30, 1998-
Equivalent to $31.67 per share on
332,408,285 shares of $1 par value
capital stock outstanding (authorized
capital stock--500,000,000 shares) $10,528.841
=================
Unaudited
- -------------------------------------------------- ----------------- ------------------
Statement of Operations (dollars in
for the six months ended April 30, 1998 millions)
- -------------------------------------------------- ----------------- ------------------
Investment Income:
Income:
Dividends $ 88.326
Interest 75.775 $164.101
-----------------
Expenses:
Management services fee 14.029
Distribution expenses 10.801
Transfer agent fee 2.175
Reports to shareholders .165
Registration statement and
prospectus .286
Postage, stationery and supplies .586
Directors' fees .153
Auditing and legal fees .056
Custodian fee .053
Taxes other than federal income tax .091
Other expenses .087 28.482
----------------- ----------------
Net investment income 135.619
-----------------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 418.991
Net increase in unrealized appreciation on
investments:
Beginning of period 2,932.208
End of period 3,806.401 874.193
----------------- ----------------
Net realized gain and unrealized
appreciation on investments 1,293.184
---------------
Net Increase in Net Assets Resulting
From Operations $1,428.803
================
See Notes to Financial Statements
- -------------------------------------------------- ----------------- ----------------
Statement of Changes in Net Assets (dollars in
millions)
- -------------------------------------------------- ----------------- ------------------
Six months Year ended
ended April 30, October 31,
1998* 1997
----------------- ----------------
Operations:
Net investment income $ 135.619 $ 254.684
Net realized gain on investments 418.991 758.879
Net increase in unrealized appreciation
on investments 874.193 832.953
----------------- -----------------
Net increase in net assets
resulting from operations 1,428.803 1,846.516
----------------- ----------------
Dividends and Distributions
Paid to Shareholders:
Dividends from net investment income (128.369) (246.337)
Distributions from net realized
gain on investments (769.237) (468.836)
----------------- -----------------
Total dividends and distributions (897.606) (715.173)
----------------- -----------------
Capital Share Transactions:
Proceeds from shares sold:
15,104,234 and 29,819,522
shares, respectively 458.016 828.652
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions of
net realized gain on investments:
27,734,740 and 24,433,383
shares, respectively 814.933 643.000
Cost of shares repurchased:
21,076,952 and 35,919,460
shares, respectively (637.455) (999.921)
----------------- ----------------
Net increase in net assets
resulting from capital share
transactions 635.494 471.731
----------------- ------------------
Total Increase in Net Assets 1,166.691 1,603.074
Net Assets:
Beginning of period 9,362.150 7,759.076
----------------- -----------------
End of period (including undistributed
net investment income: $60.335
and $53.085, respectively) $10,528.841 $9,362.150
================= =================
*Unaudited
See Notes to Financial Statements
</TABLE>
Notes to Financial Statements
________________________________________________________Unaudited
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 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. Fixed-income securities are valued at prices
obtained from a pricing service, 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 quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type. 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.
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. The fund does not amortize premiums on
securities purchased. Dividends and distributions paid to shareholders are
recorded on the ex-dividend date.
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
As of April 30, 1998, net unrealized appreciation on investments for federal
income tax purposes aggregated $3,807,757,000, of which $3,821,398,000 related
to appreciated securities and $13,641,000 related to depreciated securities.
There was no difference between book and tax realized gains on securities
transactions for the six months ended April 30, 1998. The cost of portfolio
securities for federal income tax purposes was $6,704,383,000 at April 30,
1998.
3. The fee of $14,029,000 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 0.384% 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 six months ended April 30,
1998, distribution expenses under the Plan were $10,801,000. As of April 30,
1998, accrued and unpaid distribution expenses were $3,613,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $2,175,000. American Funds
Distributors, Inc. (AFD), the principal underwriter of the fund's shares,
received $1,742,000 (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 April 30, 1998,
aggregate amounts deferred and earnings thereon were $449,000.
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 April 30, 1998, accumulated undistributed net realized gain on
investments was $396,278,000 and additional paid-in capital was $5,933,419,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $1,033,483,000 and $1,308,254,000, respectively,
during the six months ended
April 30, 1998.
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 $53,000 includes $18,000 that was paid by these credits
rather than in cash.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Per-Share Data and Ratios Six months
ended Year ended October 31
April 30, ------- ------- ------- ------- -------
1998 (1) 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- -------
Net Asset Value, Beginning of
Period $30.14 $26.54 24.17 $21.60 $23.21 $21.29
------- ------- ------- ------- ------- -------
Income from Investment
Operations:
Net investment income .41 .83 .84 .87 .88 .85
Net realized and unrealized
gain (loss) on investments 4.00 5.19 3.52 3.41 (.54) 2.89
------- ------- ------- ------- ------- -------
Total income from
investment operations 4.41 6.02 4.36 4.28 .34 3.74
------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment
income (.40) (.81) (.84) (.84) (.84) (.85)
Distributions from net
realized gains (2.48) (1.61) (1.15) (.87) (1.11) (.97)
------- ------- ------- ------- ------- -------
Total distributions (2.88) (2.42) (1.99) (1.71) (1.95) (1.82)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $31.67 $30.14 $26.54 $24.17 $21.60 $23.21
======= ======= ======= ======= ======= =======
Total Return (2) 15.44%(3) 24.19% 18.89% 21.25% 1.75% 18.63%
Ratios/Supplemental Data:
Net assets, end of period (in
millions) $10,529 $9,362 $7,759 $6,552 $5,397 $5,283
Ratio of expenses to average
net assets .29%(3) .58% .59% .59% .60% .59%
Ratio of net income to average
net assets 1.36%(3) 2.95% 3.36% 3.92% 4.07% 3.83%
Average commissions paid
per share (4) 4.76c 5.06c 5.88c 6.27c 6.54c 7.31c
Portfolio turnover rate 13.03%(3) 19.16% 24.21% 23.31% 18.46% 22.48%
(1) Unaudited
(2) Excludes maximum sales charge of
5.75%.
(3) Based on operations for the
period shown and, accordingly, not
representative of a full year.
(4) Brokerage commissions paid on
portfolio transactions increase
the cost of securities purchased
or reduce the proceeds of
securities sold, and are not
separately reflected in the
fund's statement of operations.
Shares traded on a principal
basis (without commissions),
such as most over-the-counter
and fixed-income transactions,
are excluded.
</TABLE>
[The American Funds Group(r)]
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
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. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE
COMPANY, TOLL-FREE, AT 800/421-0180 OR VISIT WWW.AMERICANFUNDS.COM ON THE WORLD
WIDE WEB.
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
June 30, 1998, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
Printed on recycled paper
Litho in USA SM/AL/3801
Lit. No. AMF-013-0698
