[THE AMERICAN FUNDS GROUP(R)]
[photo: aspen trees]
ANNUAL REPORT FOR THE YEAR ENDED OCTOBER 31, 1998
AMERICAN MUTUAL FUND
ABOUT OUR COVER
Stately aspens shimmer in the sunlight on Idaho's Boulder Mountains.
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 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.
DIVIDENDS AND CAPITAL GAIN DISTRIBUTION PAID IN CALENDAR 1998
For tax purposes, here are the income dividends and the capital gain
distribution you received in calendar 1998.
INCOME DIVIDENDS PER SHARE:
$0.20 paid 3/30/98
$0.20 paid 6/29/98
$0.20 paid 9/28/98
$0.20 paid 12/11/98
CAPITAL GAIN DISTRIBUTION PER SHARE:
$2.93 paid 12/11/98
A Form 1099-DIV, which provides the information you will need to prepare your
federal income tax return for 1998, will be mailed to you with Your American
Funds Tax Guide in late January.
PREPARING FOR THE YEAR 2000
The fund's key service providers - Capital Research and Management Company, the
investment adviser, and American Funds Service Company, the transfer agent -
have updated all significant computer systems to process date-related
information properly following the turn of the century. Testing of these and
other systems with business partners, vendors and other service providers will
continue through much of 1999. We will continue to keep you up to date in our
regular publications. If you'd like more detailed information, call Shareholder
Services at 800/421-0180, ext. 21, or visit our Web site at
www.americanfunds.com.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS AND WERE COMPUTED WITHOUT A
SALES CHARGE UNLESS OTHERWISE INDICATED. SHARE PRICE AND RETURN WILL VARY, SO
YOU MAY LOSE MONEY. INVESTING FOR SHORT PERIODS MAKES LOSSES MORE LIKELY.
INVESTMENTS ARE NOT FDIC-INSURED, NOR ARE THEY DEPOSITS OF OR GUARANTEED BY A
BANK OR ANY OTHER ENTITY.
FELLOW INVESTORS:
We are pleased to report that American Mutual Fund closed its 1998 fiscal year
with another solid gain. During the 12 months ended October 31, the value of
your investment in the fund rose 15.1% if, like most shareholders, you
reinvested your dividends and capital gains. The fund's four quarterly
dividends totaled 80 cents a share, and a capital gain distribution of $2.48 a
share was paid in December 1997. If you took your dividends in cash, the value
of your investment increased 12.2%.
Over the same period, the unmanaged Standard & Poor's 500 Composite Index
gained 22.0% with dividends reinvested.
American Mutual Fund strives for the balanced accomplishment of three
objectives: current income, capital growth and conservation of principal. Let's
look at the fund's results in the context of each objective.
INCOME TO ENHANCE RETURN AND REDUCE RISK
American Mutual Fund attempts to provide income primarily through investments
in stocks that pay dividends, although its fixed-income investments also
generate income. Income offers two key advantages: It can help offset stock
price declines when they occur and, when reinvested, it can make a significant
contribution to your total return.
American Mutual Fund has consistently provided an income return far higher than
that of the market as a whole. Over the past 12 months, the fund generated an
income return of 2.9% with dividends reinvested- 61% higher than the S&P 500's
1.8% income return. American Mutual Fund's high income return has helped reduce
volatility and enabled it to give up less ground than the S&P 500 during market
declines.
[Begin Pull Quote]
American Mutual Fund has consistently provided an income return far higher than
that of the market as a whole.
[End Pull Quote]
[Begin bar chart]
A LONG HISTORY OF RISING INCOME
AMF's regular dividends
AMF's special dividends
<TABLE>
<CAPTION>
<S> <C> <C>
Year AMF's regular dividends AMF's special dividends
1973
1974 415 123
1975 437 67
1976 515
1977 535
1978 592
1979 637
1980 741
1981 832
1982 918 371
1983 995 181
1984 1,132
1985 1,221
1986 1,320
1987 1,464
1988 1,568 221
1989 1,695 341
1990 1,825 313
1991 1,923 282
1992 1,976
1993 1,992
1994 2,070
1995 2,165
1996 2,266
1997 2,313
1998 2,467
</TABLE>
Year ended October 31
Dividend income on a $10,000 investment, less the applicable sales charge,
assuming the dividends were taken in cash and capital gains reinvested
[End chart]
In the chart on page 1, you can see that American Mutual Fund has a long
history of rising income. That's a particularly attractive feature to
shareholders using the income to support their retirements. Most investors,
however, have chosen to reinvest their dividends in the fund in order to
enhance their total return. Reinvested dividends purchase more shares, which in
turn can earn additional dividends. Over time, reinvested dividends can make a
big difference in the value of an investment, as you can see in the chart on
pages 4 and 5 of this report. Over American Mutual Fund's lifetime, reinvested
dividends have provided a considerable portion of its total return.
GROWTH OF CAPITAL FOR FUTURE NEEDS
Growth of capital is another important objective of American Mutual Fund.
During its lifetime, the fund has generated an average annual compound return
of 13.3%, narrowly surpassing the S&P 500's return of 13.2%. However, in
periods of strong market appreciation, it is not unusual for the S&P 500 to
outpace American Mutual, as it did during the most recent fiscal year. That is
because American Mutual Fund is managed to protect the money you have invested
even as it seeks to provide growth of capital and income.
At the close of this reporting period, 73.3% of American Mutual Fund's assets
were invested in common stocks to help meet its growth objective. The fund's
largest holdings were in the banking and telecommunications industries - both
of which, in general, fared favorably over the period.
The banking sector continued to benefit from cost cutting and consolidation.
Firstar (+ 57.1%) and Crestar Financial (+39.2%) made the strongest showings of
the fund's banking stocks.
Strong earnings growth boosted the prices of the fund's telecommunications
stocks, all of which made double-digit gains over the 12-month period.
Ameritech (+66.0%) and AT&T (+27.2%), which are the fund's largest and
second-largest individual holdings, respectively, and together account for more
than 6% of the portfolio's net assets, made a substantial positive impact on
American Mutual Fund's results.
Pharmaceutical stocks were among the fund's other successful holdings for the
year. Schering-Plough (+83.5%), Pharmacia & Upjohn (+66.7%), Warner-Lambert
(+64.2%) and Merck (+51.5%) all benefited from a series of new and improved
products.
[Begin Pull Quote]
The fund strives to help investors keep what they've invested - their principal
- - as well as their long-term gains.
[End Pull Quote]
[Begin Sidebar]
HOW AMF FARED DURING MARKET DECLINES
<TABLE>
<CAPTION>
<S> <C> <C>
Total returns
Jan. 5, 1953 - Sept. 14, 1953
Korean War ends, recession begins
S&P 500 -14.8%
AMF -12.1%
Aug. 2, 1956 - Oct. 22, 1957
Egypt seizes Suez Canal
S&P 500 -21.6%
AMF -18.3%
Dec. 12, 1961 - June 26, 1962
Stocks hit postwar highs, Kennedy confronts
steel industry
S&P 500 -28.0%
AMF -25.9%
Feb. 9, 1966 - Oct. 7, 1966
Economy overheats, interest rates and taxes
rise
S&P 500 -22.2%
AMF -16.2%
Nov. 29, 1968 - May 26, 1970
Vietnam War sparks civil unrest, recession
S&P 500 -36.1%
AMF -35.7%
Jan. 11, 1973 - Oct. 3, 1974
OPEC oil embargo, Watergate scandal: Nixon
resigns
S&P 500-48.2%
AMF-36.7%
Sept. 21, 1976 - March 6, 1978
Carter warns of impending energy crisis
S&P 500-19.4%
AMF-4.7%
Nov. 28, 1980 - Aug. 12, 1982
Record-high interest rates provoke recession
S&P 500-27.1%
AMF-7.6%
Aug. 25, 1987 - Dec. 4, 1987
Overvalued stocks trigger market crash
S&P 500-33.5%
AMF-22.1%
July 16, 1990 - Oct. 11, 1990
Iraq invades Kuwait
S&P 500-19.9%
AMF-13.2%
July 17, 1998 - Aug. 31, 1998
"Asian Flu" spreads to Russia and causes
global economic fears
S&P 500-19.3%
AMF-12.1%
</TABLE>
Results calculated with dividends in cash and capital gains reinvested.
[End Sidebar]
Some machinery and industrial components stocks did poorly during the fiscal
year. Their weakness was due in large part to the growing concern about a
possible economic slowdown. Deere & Co. (-32.8%), Goodyear Tire & Rubber
(-14.0%) and Caterpillar (-12.2%) were among those hardest hit.
CONSERVATION OF PRINCIPAL
The fund strives to help investors keep what they've invested-their principal -
as well as their long-term gains. During times of dramatic market volatility,
the benefits of American Mutual Fund's conservative investment approach have
become apparent. From the stock market's previous high on July 17 to its low on
August 31, Standard & Poor's 500 Composite Index lost 19.3% of its value. By
comparison, American Mutual Fund declined 12.1%. In the event of further
setbacks in stock prices, the fund's current investments in bonds and cash
equivalents should help us hold on to the gains we've achieved in the portfolio
and provide a reserve to take advantage of opportunities that may emerge. On
October 31, 26.7% of the fund's assets were held in bonds and cash equivalents.
AN INVESTMENT FOR THE LONG TERM
As the events of this past summer revealed, the market - and your fund - will
experience setbacks from time to time. However, we encourage you to maintain a
long-term perspective toward your investment in American Mutual Fund. We
believe that over the long term, the companies in your fund's portfolio will
continue to grow and prosper.
As always, our objective will be to continue to manage your fund to achieve the
balanced accomplishment of current income, growth of capital and conservation
of principal. 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
December 15, 1998
American Mutual Fund
A LOOK AT THE FUND'S RECORD
RESULTS OF A $10,000 INVESTMENT IN AMERICAN MUTUAL FUND
For more than 48 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, 1998. The table
beneath the chart shows the fund's total return in each of the 48 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 $4,205,452. Incidentally, over the
same period, $10,000 in a savings account, with all interest compounded, would
have grown to $111,365./4/
You can use this table to estimate how the value of your own holding 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 1988.
At the time, the table indicates the value of the investment illustrated here
was $1,081,197. Since then, it has nearly quadrupled to $4,205,452. Thus, in
the same period, the value of your 1988 investment - regardless of its size -
also has nearly quadrupled.
The fund's 30-day yield as of November 30, 1998, calculated in accordance with
the Securities and Exchange Commission formula, was 2.28%.
Average annual compound returns based on the maximum offering price/+/
<TABLE>
<CAPTION>
<S> <C> <C>
For periods ended
9/30/98 10/31/98
Ten Years +13.31% +13.87%
Five Years +13.27% +14.60%
One Year - 0.04% 0.0853
</TABLE>
/+/Assumes reinvestment of all distributions and payment of 5.75% sales charge
at the beginning of the stated periods. Sales charges are lower for accounts of
$50,000 or more.
[begin mountain chart]
Year ended October 31
<TABLE>
<CAPTION>
Date American Mutual Fund American Mutual Fund
with dividends reinvested with dividends excluded
(000's) (000's)
<S> <C> <C>
2/21/50 $9.4 $9.4
7/13/50 9.0 8.9
10/7/50 10.3 10.1
10/31/50 10.0 9.7
10/31/51 12.2 11.3
7/16/52 13.4 12.2
10/31/52 13.2 11.7
3/19/53 14.6 12.9
9/14/53 13.0 11.3
10/31/53 14.1 12.0
10/31/54 19.3 15.9
9/23/55 26.7 21.6
10/31/55 25.1 20.1
8/2/55 31.9 25.0
10/31/56 29.7 23.1
12/31/56 30.8 24.1
10/22/57 26.8 20.3
10/31/57 28.1 21.2
1/2/58 27.9 20.9
9/30/58 34.8 25.7
10/31/58 36.1 26.5
8/3/59 43.5 31.3
10/31/59 41.5 29.7
12/31/59 43.3 31.0
9/28/60 40.3 28.0
10/31/60 40.9 28.4
10/31/61 54.3 36.8
12/12/61 57.1 38.7
6/25/62 42.7 28.5
10/31/62 46.6 30.7
10/31/63 61.3 39.3
10/31/64 71.4 44.6
6/28/65 70.4 43.5
10/31/65 79.9 48.8
12/17/65 82.3 50.2
10/7/66 71.7 42.5
10/31/66 77.6 46.1
1/4/67 79.9 47.1
9/25/67 98.6 57.3
10/31/67 92.8 53.6
3/25/68 89.2 51.1
10/31/68 109.6 61.3
11/29/68 115.0 64.3
10/9/69 98.4 53.0
10/31/69 103.2 55.7
5/26/70 78.4 41.4
10/31/70 93.3 48.1
4/29/71 121.0 61.1
10/31/71 113.0 56.0
11/23/71 106.4 52.8
8/23/72 128.1 61.7
10/31/72 125.2 59.7
12/11/72 136.0 64.9
8/22/73 112.2 51.9
10/31/73 124.8 57.1
3/14/74 126.3 57.1
10/3/74 91.0 38.8
10/31/74 105.1 45.0
12/6/74 96.9 41.5
7/15/75 138.2 56.9
10/31/75 132.2 53.3
12/5/75 130.3 52.6
9/21/76 174.0 68.0
10/31/76 167.4 64.3
12/31/76 182.7 70.1
10/31/77 176.4 64.6
1/26/78 175.8 63.5
9/12/78 229.3 80.8
10/31/78 198.8 69.1
10/5/79 257.9 86.4
10/31/79 232.8 77.0
10/15/80 315.9 100.7
10/31/80 303.6 95.4
6/23/81 350.4 107.6
9/25/81 317.8 96.4
10/31/81 334.1 99.9
8/10/82 334.4 93.8
10/22/82 434.7 120.5
10/31/82 426.4 118.2
1/3/83 444.3 120.5
10/10/83 562.8 149.6
10/31/83 544.9 143.3
11/29/83 564.8 148.5
7/24/84 507.7 128.7
10/31/84 577.2 144.4
1/4/85 583.5 144.2
7/17/85 705.0 170.3
10/31/85 701.8 167.6
9/4/86 936.5 217.0
10/31/86 913.1 209.4
8/25/87 1,136.9 253.2
10/19/87 886.3 195.6
10/31/87 960.9 212.1
12/4/87 893.6 197.3
6/22/88 1,071.4 229.9
10/31/88 1,081.2 227.1
1/3/89 1,071.7 220.6
10/31/89 1,299.8 259.4
12/13/89 1,346.6 268.7
10/31/90 1,239.3 235.2
1/9/91 1,280.5 238.5
8/28/91 1,533.1 279.4
10/31/91 1,544.4 278.5
12/10/91 1,500.8 267.7
8/3/92 1,715.8 299.7
10/31/92 1,690.0 292.2
12/4/92 1,721.0 294.5
10/15/93 2,018.7 335.9
10/31/93 2,004.9 333.6
11/1/93 2,003.1 333.3
4/4/94 1,902.0 313.6
10/31/94 2,039.9 326.4
12/8/94 1,968.4 311.8
10/19/95 2,505.2 386.1
10/31/95 2,473.4 381.2
1/10/96 2,579.7 394.3
10/21/96 2,965.1 442.2
10/31/96 2,940.7 438.6
12/16/96 2,977.6 440.7
10/7/97 3,809.7 552.3
10/31/97 3,652.2 529.4
1/9/98 3,718.5 535.7
4/17/98 4,289.1 614.0
10/31/98 4,205.5 594.2
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Date S&P with Dividends
reinvested
2/21/50 $10,000
10/24/50 9,942
10/31/50 11,945
12/4/50 12,654
10/15/51 15,658
10/31/51 15,060
11/24/51 14,640
8/8/52 17,572
10/31/52 17,076
1/5/53 18,860
9/14/53 16,520
10/31/53 18,088
11/17/53 17,875
10/6/54 25,447
10/31/54 24,608
11/1/54 24,693
9/23/55 36,622
10/31/55 34,277
11/1/55 34,228
8/2/56 41,502
10/31/56 38,383
7/15/57 42,558
10/22/57 34,124
10/31/57 35,945
12/18/57 34,474
10/13/58 46,989
10/31/58 46,725
11/25/58 46,443
8/3/59 56,587
10/31/59 54,057
1/5/60 54,238
10/25/60 50,873
10/31/60 51,934
11/1/60 52,469
10/31/61 68,836
12/12/61 72,869
6/26/62 53,283
10/3162 58,613
11/1/62 59,235
10/28/63 79,804
10/31/63 79,300
11/22/63 74,586
10/12/64 94,164
10/31/64 93,745
6/28/65 91,596
10/27/65 105,390
10/31/65 105,287
2/9/66 108,094
10/7/66 86,244
10/31/66 94,491
11/22/66 93,866
9/25/67 117,941
10/31/67 114,315
3/5/68 107,666
10/21/68 131,854
10/31/68 129,870
11/29/68 136,099
7/29/69 136,099
10/31/69 126,055
11/10/69 127,468
5/26/70 91,431
10/31/70 112,074
11/18/70 111,454
4/28/71 143,317
10/31/71 130,925
11/23/71 125,270
8/14/72 159,816
10/31/72 159,556
1/11/73 173,164
8/22/73 146,938
10/31/73 159,492
11/1/73 158,609
10/3/74 95,773
10/31/74 113,642
12/6/74 99,971
7/15/75 152,167
10/31/75 143,265
12/5/75 139,693
9/21/76 178,535
10/31/76 172,008
12/31/76 181,519
10/25/77 159,037
10/31/77 161,378
3/6/78 153,947
9/12/78 194,618
10/31/78 171,525
11/14/78 170,309
10/5/79 216,142
10/31/79 197,786
3/27/80 193,426
10/15/80 274,076
10/31/80 261,305
11/28/80 288,057
9/25/81 239,589
10/31/81 262,733
8/12/82 230,795
10/20/82 318,251
10/31/82 305,634
11/23/82 303,851
10/10/83 412,607
10/31/83 390,859
7/24/84 365,687
9/17/84 417,762
10/31/84 415,486
12/13/84 404,779
7/17/85 505,646
10/31/85 495,859
11/4/85 499,595
9/4/86 680,720
10/31/86 660,216
11/18/86 640,733
8/25/87 932,590
10/31/87 702,093
12/4/87 624,380
10/21/88 819,796
10/31/88 806,242
11/16/88 762,457
10/9/89 1,076,196
10/31/89 1,018,049
7/16/90 1,131,616
10/11/90 915,096
10/31/90 941,546
11/7/90 947,771
8/28/91 1,260,203
10/31/91 1,256,985
11/29/91 1,201,768
9/14/92 1,392,857
10/31/92 1,381,777
11/4/92 137,659
10/15/93 1,593,139
10/31/93 1,587,473
2/2/94 1,646,390
4/4/94 1,509,801
10/31/94 1,648,906
12/8/94 1,555,002
10/19/95 2,116,233
10/31/95 2,083,520
11/1/95 2,093,266
10/18/96 2,604,378
10/31/96 2,584,044
11/1/96 2,578,548
10/7/97 3,669,316
10/31/97 3,413,653
11/12/97 3,381,331
7/17/98 4,478,987
10/31/98 4,163,927
</TABLE>
$4,205,452/1,2/
American
Mutual Fund
with dividends
reinvested
$4,163,927
S&P 500
with dividends
reinvested
$594,159/1,3/
American
Mutual Fund
with dividends
excluded
$111,365/4/
Average
savings
institution
with interest
compounded
$10,000/1/
original
investment
[end mountain chart]
Average annual compound
return for AMF's lifetime
Income return/1/ 4.21%
Capital results/1/ 9.00
AMF Total Return 13.21%/1/
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/ $310 533 524 579 613
Value at year-end/1/ $10,018 12,234 13,163 14,076 19,261
Dividends excluded/6/ $307 507 480 508 515
Value at year-end/1/ $9,708 11,334 11,710 12,009 15,876
Annual percentage returns assuming reinvestment of dividends
Income return/1/ 3.1% 5.3 4.3 4.4 4.4
Capital results/1/ (2.9)% 16.8 3.3 2.7 32.4
AMF Total Return 0.2% 22.1 7.6 6.9 36.8
Year-by-year summary of results
1955 1956 1957 1958 1959
Dividends reinvested/5/ 667 789 911 1,010 1,050
Value at year-end/1/ 25,050 29,651 28,050 36,140 41,488
Dividends excluded/6/ 545 627 702 754 764
Value at year-end/1/ 20,087 23,142 21,241 26,511 29,668
Annual percentage returns assuming reinvestment of dividends
Income return/1/ 3.5 3.1 3.1 3.6 2.9
Capital results/1/ 26.6 15.3 (8.5) 25.2 11.9
AMF Total Return 30.1 18.4 (5.4) 28.8 14.8
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/ 40,864 54,348 46,572 61,289 71,355
Dividends excluded/6/ 854 867 921 993 1,079
Value at year-end/1/ 28,371 36,806 30,677 39,309 44,625
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
Year-by-year summary of results
1965 1966 1967 1968 1969
Dividends reinvested/5/ 1,844 2,271 2,568 3,154 3,762
Value at year-end/1/ 79,919 77,646 92,836 109,586 103,215
Dividends excluded/6/ 1,143 1,372 1,507 1,796 2,076
Value at year-end/1/ 48,769 46,067 53,558 61,257 55,651
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)
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/ 93,358 112,999 125,226 124,799 105,121
Dividends excluded/6/ 2,209 2,244 2,304 2,380 3,258
Value at year-end/1/ 48,100 56,017 56,737 57,130 44,985
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)
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/ 132,196 167,378 176,433 198,946 232,804
Dividends excluded/6/ 3,055 3,123 3,244 3,583 3,860
Value at year-end/1/ 53,330 64,276 64,555 69,119 76,959
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
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/ 303,583 334,115 426,436 544,914 577,158
Dividends excluded/6/ 4,491 5,044 7,807 7,122 6,867
Value at year-end/1/ 95,432 99,944 118,168 143,286 144,418
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
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/ 701,833 913,068 960,885 1,081,197 1,299,783
Dividends excluded/6/ 7,403 8,006 8,876 10,831 12,336
Value at year-end/1/ 167,598 209,414 212,116 227,086 259,386
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
Year-by-year summary of results
1990 1991 1992 1993 1994
Dividends reinvested/5/ 66,101 71,766 67,509 70,887 76,471
Value at year-end/1/ 1,239,341 1,544,407 1,690,010 2,004,855 2,039,865
Dividends excluded/6/ 12,953 13,356 11,977 12,073 12,540
Value at year-end/1/ 235,204 278,500 292,156 333,582 326,418
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
Year-by-year summary of results
1995 1996 1997 1998
Dividends reinvested/5/ 83,156 90,173 95,004 104,111
Value at year-end/1/ 2,473,435 2,940,729 3,652,188 4,205,452
Dividends excluded/6/ 13,110 13,725 14,010 14,946
Value at year-end/1/ 381,224 438,613 529,422 594,159
Annual percentage returns assuming reinvestment of dividends
Income return/1/ 4.1 3.6 3.2 2.9
Capital results/1/ 17.2 15.3 21.0 12.2
AMF Total Return 21.3 18.9 24.2 15.1
</TABLE>
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 $1,348,830 in the
years 1950-1998 and reinvested dividends. The total "cost" of this investment
($10,000 plus $1,146,826 in reinvested dividends) was $1,156,826.
/3/Includes reinvested capital gain distributions taken in shares totaling
$276,381 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 $746 in 1974, $407 in 1975, $2,251 in 1982,
$1,099 in 1983, $1,339 in 1988, $2,069 in 1989, $1,895 in 1990 and $1,707 in
1991.
American Mutual Fund
AN INVESTMENT FOR ALL SEASONS
Investors approach financial markets with different goals and expectations. For
some, stocks offer a way to prepare for the future by allowing investors to
participate in the growth of companies. Some see stocks and bonds as a source
of income, while others view them as long-term harbors where asset growth has
historically outpaced inflation.
American Mutual Fund strives for the balanced accomplishment of all three
goals: growth, current income and preservation of principal. Stocks provide
most of the fund's growth and a good portion of the income. The fund invests in
the stocks of large, well-known companies that have a history of paying
dividends. Another healthy part of the fund's assets - 26.7% at the end of the
year - may be invested in bonds and cash equivalents, which provide a steady
stream of interest income and act as a buying reserve and to help preserve
investors' capital.
The ability to shift its emphasis among dividend-paying stocks, bonds and cash
has helped American Mutual Fund meet its goals in a variety of conditions, from
the bull market that has lasted almost two decades to the volatility that has
characterized the market recently. In fact, a 1997 Morgan Stanley Dean Witter
study on the risk-adjusted performance of mutual funds showed that American
Mutual Fund produced better risk-adjusted returns than most of its peers over
the period of the study, from January 1988 through December 1997. This study
used the Modigliani-Modigliani (M/2/) measure of risk-adjusted performance
developed by Nobel Prize-winning economist Franco Modigliani and his
granddaughter, economist Leah Modigliani. The study (updated through September
30, 1998, by Capital Research, the fund's adviser, using data provided by
Lipper Analytical Services and the M/2/ methodology), ranked all 702 equity
funds for the past 10 years and concluded that 662 funds took more risk for the
returns they earned than did American Mutual Fund, putting the fund in the top
6% in risk-adjusted return. Over a five-year period, the fund ranked 125th out
of 1,634, or the top 8%, and for one year it ranked 770th of 4,802, or in the
top 17%.
In February, American Mutual Fund celebrated its 48th year. For almost half a
century, the fund has managed shareholders' money with the same goals in mind.
In the next few pages we'll introduce you to some current shareholders who use
American Mutual Fund for all three reasons: growth, income and capital
preservation.
[Begin Pull Quote]
Brad and Carrie's goal is to use their American Mutual Fund
investments for retirement.
[End Pull Quote]
[Begin Photo Caption]
BRAD REUTER / CARRIE REUTER
Home State
Wisconsin
Occupations
Farmer / Homemaker
Hobbies
Bike Riding, Camping
[End Photo Caption]
[photo: cow]
SEEKING LONG-TERM GROWTH
In the rolling hills of west-central Wisconsin, not far from the Mississippi
River, Brad and Carrie Reuter are continuing a tradition that stretches back
more than 100 years - maintaining their family farm.
Brad proudly shows a visitor the framed document signed by President Ulysses S.
Grant giving Michael Reuter, Brad's great-great-grandfather, the right to
homestead the land that is the Reuter family farm. Like his father, Brad was
raised on the farm. One day his son Philip, who's shown an interest in farming,
may become the sixth-generation Reuter to operate the 400-acre farm.
With a family history in the area that stretches back almost to the Civil War,
it's not surprising that Brad, 41, takes the long view on many issues,
including investing. He invested in American Mutual Fund in 1984, endured the
1987 crash, and smiles when he talks about the recent volatility. "It bothers
me a bit, but I was there in 1987 and I rode that out. It's no big deal,
really. I figure that 10 years from today the Dow has a better chance of being
at 20,000 than at 5,000."
The Reuters' goal is to use their American Mutual Fund investment for
retirement, but right now they're busy raising 140 head of cattle along with
harvesting soybeans and corn. It's a lot of work, but Brad says it's what he
always wanted to do: "I started out young helping my dad, and I never really
thought of doing anything else."
Carrie, though, didn't even consider farming until she met Brad at a
roller-skating rink. "I never even saw a cow close-up until after Brad and I
met," she says with a laugh. Now, she has her hands full raising two sons,
Philip, 12, and Paul, 7, and a daughter, Melody, 10. Carrie also serves on the
board of the children's school.
Like many small farmers, Brad and Carrie take a cautious approach to many
things. "I come from a somewhat conservative background," Brad says. His
conservative outlook was one reason Brad chose to invest in American Mutual
Fund after meeting with his financial adviser.
"We were just starting to invest and my adviser thought mutual funds were the
way to go. I thought American Mutual Fund was really exciting. You could hold a
whole bunch of good companies in one fund," Brad says.
While Brad and Carrie are taking the long view on many things, they recently
decided to focus on the present in one important way. They sold the dairy
cattle Brad was milking every day so he would have more time to spend with the
family.
"I've got three lovely children growing up and everything was going by me,"
Brad says. Now he has more time for family bike rides and campfires on the
farm.
In a way, Brad and Carrie are a lot like American Mutual Fund itself: They're
balancing their long-term goals with what's important today.
EMPHASIZING CONSERVATION OF PRINCIPAL
Like the Reuters, Randy and Janet Chavez prefer the country. They live on a
10-acre ranch outside Flagstaff, Arizona, where they keep three horses. Janet
also raises flowers and vegetables in her garden at the ranch.
Riding their horses through the hills surrounding their ranch gives Randy and
Janet a chance to relax and enjoy the country after a day at work. Janet is an
account executive specializing in mortgages for a national bank and works from
a home office. Randy owns Randy's Downtown Garage, an auto repair shop in
downtown Flagstaff. He also serves on the county zoning commission.
Banking and auto repair weren't what Randy and Janet had in mind when they came
to Flagstaff to attend the University of Northern Arizona more than 20 years
ago. Janet studied psychology and Randy was a trumpet player who majored in
music. To earn a little money, Randy got a job at a gas station.
"I didn't even know how to change oil when I started," he says with a laugh.
Today he has seven employees working for him.
[Begin Pull Quote]
"My parents had the fund the whole time I was growing up. I think my
grandfather also had it."
[End Pull Quote]
[Begin Photo Caption]
RANDY CHAVEZ / JANET CHAVEZ
Home State
Arizona
Occupations
Auto Shop Owner / Account Executive
Hobbies
Horseback Riding, Trumpet Playing, Gardening
[End Photo Caption]
[photo: cowboy hat]
Janet entered the world of finance when a friend offered her a job after she
graduated. Later, her experience in banking helped when she began managing her
parents' finances as they got older. That was when she was introduced to
American Mutual Fund.
"My parents had it the whole time I was growing up. I think my grandfather also
had it," Janet says. When it passed to Janet and Randy, they knew they'd keep
it for the long run.
The fund's ability to preserve her parents' principal made a lasting
impression, she says.
"I wasn't worried that the money wouldn't be there. The fund was something that
was always very stable."
Janet and Randy plan to retire in about 10 years and perhaps buy a house on the
beach in Mexico. When they retire, Randy says, they'll begin taking income from
American Mutual Fund. But in the meantime, he doesn't pay a lot of attention to
the fund's fluctuations. With a son in college and a daughter in her last year
of high school, Randy says the college bills are a more immediate concern than
the money he's put aside for retirement. He recently canceled his subscription
to The Wall Street Journal, and during the recent market turbulence he didn't
even check the fund's status.
In addition to American Mutual Fund, Randy and Janet invest in a few blue chip
stocks. But when retirement gets closer, they plan to sell their individual
stocks. "We're going to put it all in mutual funds and let the professionals
take care of it," he says.
A HISTORY OF A STEADY STREAM OF INCOME
Like the Chavez and Reuter families, Carolyn Smith enjoys animals. A retired
widow, Carolyn lives in Palmetto, Florida, with four birds, five cats and
Roger, a greyhound she adopted when a broken leg ended his racing days.
Although Carolyn and her late husband, Oscar, raised hunting dogs, she says she
never considered adopting a racing dog until her daughter, Nancy, who owns a
greyhound, suggested it. At first, Carolyn told her daughter, "I'm an old lady;
I can't do this." But the day Roger hobbled up the steps with a cast on his
leg, she knew keeping him was the right decision. "He walked in, looked around,
and you just knew he was home," she says.
Born in nearby Bradenton, Carolyn has spent her whole life within a few miles
of Palmetto. Her two sons, daughter and granddaughter all live nearby. And she
still meets regularly with friends from her high school days. "Our graduating
class had its 50th reunion in 1997," she notes.
One high school friend is a financial adviser in Bradenton. When Carolyn was
ready to invest, she turned to him for advice. She wanted a steady stream of
income to supplement her Social Security benefits and dividends from some stock
holdings. Her adviser suggested American Mutual Fund and established an
automatic withdrawal program. Every quarter, the accumulated dividends are
transferred from her mutual fund into her local brokerage account.
"I've been able to take withdrawals without losing very much capital, which has
worked out very well," Carolyn says.
While her other income pays for the basics, the income from American Mutual
Fund helps Carolyn do things she might not consider otherwise - such as
renovating the 85-year-old house she's lived in since 1954. One of the biggest
improvements, she says, was installing air conditioning a year ago. Before
that, she got by with ceiling fans. "I never had air conditioning before, so I
didn't miss it," she says.
[Begin Pull Quote]
"I've been able to take withdrawals without losing very much capital."
[End Pull Quote]
[Begin Photo Caption]
CAROLYN SMITH
Home State
Florida
Occupation
Retired
Hobbies
Reading, Travel, Aerobics, Collecting
[End Photo Caption]
[photo: books]
When she's not beating the heat and humidity in south Florida, Carolyn enjoys
trips to New York with friends to see the plays on Broadway. She's also taken
sightseeing trips in recent years to San Francisco and Hawaii.
Most of the time, though, she's in Palmetto where she spends a lot of time
reading. "I buy more books than I ever get around to reading," she says. She
also goes to aerobics classes each week and collects models of lighthouses. The
models fill the shelves and tabletops of her home. "This isn't clutter - it's
collectibles," she jokes.
And, of course, she takes care of Roger. "I try to walk him 30 minutes a day,
and that satisfies him. Greyhounds are sprinters; they run a half-a-mile and
they're done. Most of the time he's a couch potato," she says with a laugh.
Roger, hearing his name mentioned, looks up, watches one of the five cats walk
by, then lies down again at Carolyn's feet. After all, he's home, and he knows
it.
<TABLE>
AMERICAN MUTUAL FUND Investment Portfolio
October 31, 1998
Largest Industry Holdings*
Banking 12.68%
Telecommunications 9.33%
Energy Sources 6.56%
Chemicals 4.51%
Health & Personal Care 3.91%
Other Industries 36.30%
Bonds, Notes, Cash & Equivalents 26.71%
*Percentages do not include certain stocks in initial
period of acquisition.
Largest Individual Holdings
Ameritech 3.26%
AT&T 2.79
Amoco 1.84
IBM 1.57
BANK ONE 1.40
Norfolk Southern 1.25
TRW 1.23
Firstar 1.22
Warner-Lambert 1.20
First Union 1.17
Market Percent
Value of Net
Equity Securities (Common and Preferred Stocks) Shares (Millions) Assets
----------- ----------- -----------
<S> <C> <C> <C>
Energy
Energy Sources- 6.56%
Amoco Corp. 3,350,000 $188.019 1.84%
Ashland Inc. 1,850,000 89.031 .87
Atlantic Richfield Co. 645,000 44.424 .43
Kerr-McGee Corp. 1,100,000 43.863 .43
Pennzoil Co. 700,000 25.113 .25
Phillips Petroleum Co. 2,300,000 99.475 .97
Royal Dutch Petroleum Co. (New York Registered Shares) 2,000,000 98.500 .96
Texaco Inc. 699,200 41.471 .41
Ultramar Diamond Shamrock Corp. 1,500,000 40.406 .40
Utilities: Electric & Gas- 3.80%
Ameren Corp. 300,000 11.981 .12
American Electric Power Co., Inc. 200,000 9.788 .10
Carolina Power & Light Co. 200,000 9.175 .09
Central and South West Corp. 3,687,800 102.567 1.00
Consolidated Edison, Inc. 1,085,700 54.421 .53
Duke Energy Corp. 600,000 38.812 .38
FPL Group, Inc. 500,000 31.281 .31
New Century Energies, Inc. 2,000,000 96.625 .94
Southern Co. 1,200,000 33.825 .33
---------- ---------
1,058.777 10.36
---------- ---------
Materials
Chemicals- 4.51%
Air Products and Chemicals, Inc. 400,000 15.100 .15
Dow Chemical Co. 300,000 28.087 .27
E.I. du Pont de Nemours and Co. 1,925,000 110.687 1.08
Mallinckrodt Inc. 1,300,000 37.050 .36
Monsanto Co. 2,350,000 95.469 .93
Morton International, Inc. 3,200,000 79.600 .78
PPG Industries, Inc. 772,400 44.172 .43
Praxair, Inc. 1,258,200 50.643 .51
Forest Products & Paper- 2.62%
Fort James Corp. 1,500,000 60.469 .59
Georgia-Pacific Corp., Georgia-Pacific Group 725,000 37.519
Georgia-Pacific Corp., Timber Group 725,000 16.086 .53
International Paper Co. 1,100,000 51.081 .50
Union Camp Corp. 1,000,000 43.000 .42
Westvaco Corp. 1,100,000 27.087 .27
Weyerhaeuser Co. 700,000 32.769 .31
Metals: Nonferrous- 0.43%
Aluminum Co. of America 550,000 43.587 .43
---------- ---------
772.406 7.56
---------- ---------
Capital Equipment
Aerospace & Military Technology- 1.82%
Boeing Co. 957,100 35.891 .35
Raytheon Co., Class A 140,600 7.874
Raytheon Co., Class B 1,023,100 59.404 .66
Sundstrand Corp. 382,600 17.958 .18
United Technologies Corp. 683,100 65.065 .63
Data Processing & Reproduction- 2.85%
Hewlett-Packard Co. 880,000 52.965 .52
International Business Machines Corp. 1,080,000 160.312 1.57
Xerox Corp. 800,000 77.500 .76
Electrical & Electronic- 0.97%
Emerson Electric Co. 577,700 38.128 .37
Hubbell Inc., Class B 720,000 28.710 .28
Lucent Technologies Inc. 400,000 32.075 .32
Electronic Components- 0.25%
Motorola, Inc. 484,900 25.215 .25
Energy Equipment- 0.33%
Schlumberger Ltd. (Netherlands Antilles) 650,000 34.125 .33
Industrial Components- 2.54%
Dana Corp. 700,000 29.269 .29
Federal-Mogul Corp. 350,000 18.966
Federal-Mogul Corp. 7.00% convertible preferred (1) 500,000 30.375 .49
Genuine Parts Co. 525,000 16.537 .16
Goodyear Tire & Rubber Co. 700,000 37.712 .37
TRW Inc. 2,228,900 126.908 1.23
Machinery & Engineering- 1.69%
Briggs & Stratton Corp. 629,100 29.568 .29
Caterpillar Inc. 1,050,000 47.250 .46
Deere & Co. 2,714,200 96.015 .94
---------- ---------
1,067.822 10.45
---------- ---------
Consumer Goods
Automobiles- 1.12%
Chrysler Corp. 350,000 16.844 .16
Ford Motor Co. 750,000 40.688 .40
General Motors Corp. 900,000 56.756 .56
Beverages- 0.73%
PepsiCo, Inc. 2,200,000 74.250 .73
Food & Household Products- 1.18%
Bestfoods 370,000 20.165 .20
Colgate-Palmolive Co. 250,000 22.094 .22
ConAgra, Inc. 400,000 12.175 .12
General Mills, Inc. 900,000 66.150 .64
Health & Personal Care- 3.91%
Bristol-Myers Squibb Co. 400,000 44.225 .43
Johnson & Johnson 400,000 32.600 .32
Kimberly-Clark Corp. 400,000 19.300 .19
Merck & Co., Inc. 300,000 40.575 .40
Pfizer Inc 300,000 32.194 .32
Pharmacia & Upjohn, Inc. 647,500 34.277 .34
Schering-Plough Corp. 710,000 73.041 .71
Warner-Lambert Co. 1,573,900 123.354 1.20
Recreation, Other Consumer Products- 0.51%
Stanley Works 1,750,000 52.500 .51
Textiles & Apparel- 0.70%
NIKE, Inc., Class B 679,600 29.690 .29
VF Corp. 1,000,000 41.812 .41
---------- ---------
832.690 8.15
---------- ---------
Services
Broadcasting & Publishing- 0.44%
Gannett Co., Inc. 725,900 44.915 .44
Business & Public Services- 1.79%
Browning-Ferris Industries, Inc. 2,946,900 104.431 1.02
Electronic Data Systems Corp. 1,050,000 42.722 .42
Waste Management, Inc. 800,000 36.100 .35
Leisure & Tourism- 0.21%
McDonald's Corp. 324,200 21.681 .21
Merchandising- 3.06%
Albertson's, Inc. 800,000 44.450 .44
American Stores Co. 434,500 14.148 .14
May Department Stores Co. 1,149,100 70.095 .68
J.C. Penney Co., Inc. 2,429,100 115.382 1.13
Wal-Mart Stores, Inc. 1,000,000 69.000 .67
Telecommunications- 9.33%
Ameritech Corp. 6,172,800 332.945 3.26
AT&T Corp. 4,575,000 284.794 2.79
GTE Corp. 1,177,500 69.104 .68
SBC Communications Inc. 2,200,000 101.888 1.00
Sprint Corp. 1,225,000 94.019 .92
U S WEST, Inc. 1,200,000 68.850 .68
Transportation: Rail & Road- 1.63%
Norfolk Southern Corp. 3,890,000 128.127 1.25
Union Pacific Corp. 800,000 38.100 .38
---------- ---------
1,680.751 16.46
---------- ---------
Finance
Banking- 12.68%
AmSouth Bancorporation 1,972,000 79.003 .77
BankAmerica Corp. 1,338,000 76.851 .75
Bankers Trust Corp. (formerly Bankers Trust New York Corp.) 645,000 40.514 .40
Bank of New York Co., Inc. 750,000 23.672 .23
Bank One Corp. (formerly Banc One Corp.) 2,920,000 142.715 1.40
Chase Manhattan Corp. 1,218,900 69.249 .68
Comerica Inc. 1,500,000 96.750 .95
Crestar Financial Corp. 800,000 52.700 .52
Firstar Corp. 2,200,000 124.850 1.22
First Security Corp. 3,206,250 65.528 .64
First Union Corp. 2,067,000 119.886 1.17
Fleet Financial Group, Inc. 1,600,000 63.900 .63
Huntington Bancshares Inc. 1,320,000 37.950 .37
KeyCorp 1,800,000 54.563 .53
J.P. Morgan & Co. Inc. 250,000 23.563 .23
PNC Bank Corp. 400,000 20.000 .20
U.S. Bancorp 1,200,000 43.800 .43
Wachovia Corp. 1,100,000 99.962 .98
Wells Fargo & Co. 160,000 59.200 .58
Financial Services- 2.43%
Associates First Capital Corp., Class A 196,668 13.865 .14
Fannie Mae 1,180,000 83.559 .82
Household International, Inc. 2,424,800 88.657 .87
Transamerica Corp. 600,000 62.400 .60
Insurance- 3.47%
Allstate Corp. 1,500,000 64.594 .63
American General Corp. 1,010,000 69.185 .68
Aon Corp. 427,000 26.474 .26
Jefferson-Pilot Corp. 800,000 48.600 .48
Lincoln National Corp. 600,000 45.525 .45
Marsh & McLennan Companies, Inc. 400,000 22.200 .22
St. Paul Companies, Inc. 2,340,000 77.512 .75
---------- ---------
1,897.227 18.58
---------- ---------
Multi-Industry & Miscellaneous
Multi-Industry- 0.98%
AlliedSignal Inc. 800,000 31.150 .30
Harsco Corp. 299,900 9.822 .10
Textron Inc. 800,000 59.500 .58
Miscellaneous- 0.75%
Other equity securities in initial period of acquisition 77.101 .75
---------- ---------
177.573 1.73
---------- ---------
TOTAL EQUITY SECURITIES (cost $4,448.251 million) 7,487.246 73.29
---------- ---------
Principal
Bonds & Notes Amount
- ----------------------------------------------------------------- --------- --------- ---------
Corporate- 0.13%
J.C. Penney Co., Inc. 9.05% 2001 $12,000,000 12.909 .13
Federal Agency- 0.69%
Federal Farm Credit Government Agency 4.85%-5.32% 1999 70,000,000 69.985 .69
U.S. Treasury Obligations- 4.87%
12.375% May 2004 50,000,000 69.023 .68
7.75% February 2001 56,000,000 60.113 .59
5.625% November 2000 90,000,000 92.306 .90
6.25% August 2000 90,000,000 92.995 .91
6.375% May 2000 90,000,000 92.686 .91
5.625% November 1999 90,000,000 91.139 .88
---------- ---------
TOTAL BONDS & NOTES (cost: $572.575 million) 581.156 5.69
---------- ---------
TOTAL INVESTMENT SECURITIES (cost: $5,020.826 million) 8,068.402 78.98
---------- ---------
Short-Term Securities
Corporate Short-Term Notes- 13.33%
American Express Credit Corp. 5.02% - 5.05% due 12/17/98-1/6/99 70,600,000 69.990 .69
BellSouth Telecommunications, Inc. 4.95%-5.32% due 12/3-12/9/98 68,400,000 68.059 .67
Coca-Cola Co. 5.11%-5.12% due 11/25-12/22/98 77,400,000 76.962 .75
E.I. du Pont de Nemours and Co. 5.05%-5.40% due 11/24-12/2/98 83,290,000 82.958 .81
Eli Lilly and Co. 5.37% due 12/11/98 20,000,000 19.884 .19
Ford Motor Credit Co. 5.00%-5.05% due 12/14/98-1/7/99 70,800,000 70.288 .69
Gannett Co., Inc. 5.02% due 11/9/98 37,400,000 37.353 .37
General Electric Capital Corp. 5.50%-5.72% due 11/2-11/23/98 57,100,000 56.955 .56
Gillette Co. 4.98%-5.48% due 11/2/98-1/5/99 (1) 89,800,000 89.336 .87
H.J. Heinz Co. 5.17%-5.40% due 11/16-11/20/98 65,100,000 64.920 .64
IBM Credit Corp. 5.49% due 11/2/98 50,000,000 49.985 .49
Johnson & Johnson 4.90% due 1/22/99 (1) 50,000,000 49.420 .48
Lucent Technologies Inc. 5.00%-5.21% due 11/18-11/30/98 98,300,000 97.990 .96
Minnesota Mining and Manufacturing Co. 5.05%-5.47% due 11/16/98-1/21/99 98,296,000 97.721 .96
Monsanto Co. 5.51% due 11/6/98 25,000,000 24.977 .24
Motorola, Inc. 5.10%-5.15% due 12/1-12/28/98 65,000,000 64.621 .63
Procter & Gamble Co. 5.00%-5.47% due 11/4-12/1/98 81,900,000 81.685 .80
Sara Lee Corp. 4.93% due 12/21/98 77,600,000 77.058 .75
Shell Oil Co. 5.13% due 12/7/98 50,000,000 49.736 .49
U S WEST Communications, Inc. 5.49% due 11/17/98 25,000,000 24.937 .24
Xerox Corp. 4.95%-5.45% due 11/5/98-1/11/99 106,600,000 106.023 1.05
Federal Agency Discount Notes- 7.96%
Fannie Mae 5.06%-5.41% due 11/25/98-3/18/99 211,200,000 208.745 2.04
Federal Home Loan Banks 5.02%-5.40% due 11/12-12/16/98 192,000,000 191.152 1.87
Freddie Mac 4.98%-5.42% due 11/3/98-2/25/99 416,403,000 413.596 4.05
---------- ---------
TOTAL SHORT-TERM SECURITIES (cost:$2,174.126 million) 2,174.351 21.29
Excess of payables over cash and receivables 27.389 .27
---------- ---------
TOTAL SHORT-TERM SECURITIES, CASH AND RECEIVABLES, NET OF PAYABLES 2,146.962 21.02
---------- ---------
NET ASSETS 10,215.364 100.00
---------- ---------
(1)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
</TABLE>
<TABLE>
American Mutual Fund Financial Statements
- -------------------------------------------------- ----------- -----------
Statement of Assets and Liabilities (dollars in
at October 31, 1998 millions)
- -------------------------------------------------- ----------- -----------
<S> <C> <C>
Assets:
Investment securities at market
(cost: $5,020.826) $8,068.402
Short-term securities
(cost: $2,174.126) 2,174.351
Cash .813
Receivables for-
Sales of investments $17.445
Sales of fund's shares 5.501
Dividends and interest 24.957 47.903
----------- -----------
10,291.469
Liabilities:
Payables for-
Purchases of investments 63.766
Repurchases of fund's shares 6.105
Management services 2.363
Other expenses 3.871 76.105
----------- -----------
Net Assets at October 31, 1998-
Equivalent to $31.18 per share on
327,610,869 shares of $1 par value
capital stock outstanding (authorized
capital stock--500,000,000 shares) $10,215.364
===========
- -------------------------------------------------- ----------- -----------
Statement of Operations (dollars in
for the year ended October 31, 1998 millions)
- -------------------------------------------------- ----------- -----------
Investment Income:
Income:
Dividends $ 175.475
Interest 155.195 $330.670
-----------
Expenses:
Management services fee 27.972
Distribution expenses 21.106
Transfer agent fee 4.441
Reports to shareholders .238
Registration statement and
prospectus .358
Postage, stationery and supplies .977
Directors' fees .173
Auditing and legal fees .062
Custodian fee .134
Taxes other than federal income tax .091
Other expenses .065 55.617
----------- -----------
Net investment income 275.053
-----------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 1,003.521
Net increase in unrealized appreciation on
investments:
Beginning of year 2,932.208
End of year 3,047.801 115.593
----------- -----------
Net realized gain and unrealized
appreciation on investments 1,119.114
-----------
Net Increase in Net Assets Resulting
from Operations $1,394.167
==========
- -------------------------------------------------- ----------- -----------
Statement of Changes in Net Assets (dollars in
millions)
- -------------------------------------------------- ----------- -----------
Year ended 10/31
1998 1997
----------- -----------
Operations:
Net investment income $ 275.053 $ 254.684
Net realized gain on investments 1,003.521 758.879
Net increase in unrealized appreciation
on investments 115.593 832.953
----------- -----------
Net increase in net assets
resulting from operations 1,394.167 1,846.516
----------- -----------
Dividends and Distributions
Paid to Shareholders:
Dividends from net investment income (260.046) (246.337)
Distributions from net realized
gain on investments (769.233) (468.836)
----------- -----------
Total dividends and distributions (1,029.279) (715.173)
----------- -----------
Capital Share Transactions:
Proceeds from shares sold:
28,085,473 and 29,819,522
shares, respectively 855.659 828.652
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions of
net realized gain on investments:
31,459,296 and 24,433,383
shares, respectively 928.317 643.000
Cost of shares repurchased:
42,580,163 and 35,919,460
shares, respectively (1,295.650) (999.921)
----------- -----------
Net increase in net assets
resulting from capital share
transactions 488.326 471.731
----------- -----------
Total Increase in Net Assets 853.214 1,603.074
Net Assets:
Beginning of year 9,362.150 7,759.076
----------- -----------
End of year (including undistributed
net investment income: $68.123
and $53.085, respectively) $10,215.364 $9,362.150
========== ==========
See Notes to Financial Statements
</TABLE>
American Mutual Fund
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - 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.
SIGNIFICANT ACCOUNTING POLICIES - The following is a summary of the
significant accounting policies consistently followed by the fund in the
preparation of its financial statements:
SECURITY VALUATION - Equity securities 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.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - As is customary in the
mutual fund industry, securities transactions are accounted for on the date the
securities are purchased or sold. Realized gains and losses from securities
transactions are reported on an identified cost basis. Dividend and interest
income is reported on the accrual basis. Discounts on securities purchased are
amortized. The fund does not amortize premiums on securities purchased.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions paid
to shareholders are recorded on the ex-dividend date.
2. FEDERAL INCOME TAXATION
It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision
is required.
As of October 31, 1998, net unrealized appreciation on investments for
federal income tax purposes aggregated $3,048,550,000, of which $3,140,108,000
related to appreciated securities and $91,558,000 related to depreciated
securities. During the year ended October 31, 1998, the fund realized, on a tax
basis, a net capital gain of $1,004,129,000 on securities transactions. The
cost of portfolio securities for federal income tax purposes was $7,194,203,000
at October 31, 1998.
3. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEE - The fee of $27,972,000 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.
DISTRIBUTION EXPENSES - Pursuant to a Plan of Distribution, the fund may
expend up to 0.25% of its average net assets annually for any activities
primarily intended to result in sales of fund shares, provided the categories
of expenses for which reimbursement is made are approved by the fund's Board of
Directors. Fund expenses under the Plan include payments to dealers to
compensate them for their selling and servicing efforts. During the year ended
October 31, 1998, distribution expenses under the Plan were $21,106,000. As of
October 31, 1998, accrued and unpaid distribution expenses were $3,397,000.
American Funds Distributors, Inc. (AFD), the principal underwriter of the
fund's shares, received $3,200,000 (after allowances to dealers) as its portion
of the sales charges paid by purchasers of the fund's shares. Such sales
charges are not an expense of the fund and, hence, are not reflected in the
accompanying statement of operations.
TRANSFER AGENT FEE - American Funds Service Company (AFS), the transfer agent
for the fund, was paid a fee of $4,441,000.
DEFERRED DIRECTORS' FEES - Directors who are unaffiliated with CRMC may
elect to defer part or all of the fees earned for services as members of the
Board. Amounts deferred are not funded and are general unsecured liabilities of
the fund. As of October 31, 1998, aggregate amounts deferred and earnings
thereon were $502,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Directors and officers of the fund
are or may be considered to be affiliated with CRMC, AFS and AFD. No such
persons received any remuneration directly from the fund.
4. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding
short-term securities, of $2,277,778,000 and $2,682,549,000 respectively,
during the year ended October 31, 1998.
As of October 31, 1998, accumulated undistributed net realized gain on
investments was $929,002,000 and additional paid-in capital was $5,842,827,000.
The fund reclassified $31,000 to undistributed net investment income from
additional paid-in capital and $51,810,000 from undistributed net realized
gains to additional paid-in capital for the year ended October 31, 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 $134,000 includes $31,000 that was paid by these credits
rather than in cash.
<TABLE>
American Mutual Fund
Per-Share Data and Ratios Year ended October 31
------- ------- ------- ------- -------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year $30.14 $26.54 24.17 $21.60 $23.21
------- ------- ------- ------- -------
Income from Investment
Operations:
Net investment income .84 .83 .84 .87 .88
Net realized and unrealized
gain (loss) on investments 3.48 5.19 3.52 3.41 (.54)
------- ------- ------- ------- -------
Total income from
investment operations 4.32 6.02 4.36 4.28 .34
------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment
income (.80) (.81) (.84) (.84) (.84)
Distributions from net
realized gains (2.48) (1.61) (1.15) (.87) (1.11)
------- ------- ------- ------- -------
Total distributions (3.28) (2.42) (1.99) (1.71) (1.95)
------- ------- ------- ------- -------
Net Asset Value, End of Year $31.18 $30.14 $26.54 $24.17 $21.60
======= ======= ======= ======= =======
Total Return/1/ 15.15% 24.19% 18.89% 21.25% 1.75%
Ratios/Supplemental Data:
Net assets, end of year (in
millions) $10,215 $9,362 $7,759 $6,552 $5,397
Ratio of expenses to average
net assets .56% .58% .59% .59% .60%
Ratio of net income to average
net assets 2.75% 2.95% 3.36% 3.92% 4.07%
Portfolio turnover rate 28.97% 19.16% 24.21% 23.31% 18.46%
/1/Excludes maximum sales charge of 5.75%.
</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 investments portfolio,
as of October 31, 1998,and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended, and the per-share data and ratios for each of the five
years in the period then ended. These financial statements and per-share data
and ratios are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and per-share data and
ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
per-share data and ratios are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of October 31, 1998 by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and per-share data and ratios
referred to above present fairly, in all material respects, the financial
position of American Mutual Fund, Inc. as of October 31, 1998, 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 30, 1998
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- Long-
Term term
Gains Gains
<S> <C> <C> <C> <C>
December 5,1997 December 8,1997 $.20 $.056 $2.424
March 27,1998 March 30,1998 .20 - -
June 26,1998 June 29,1998 .20 - -
September 25,1998 September 28,1998 .20 - -
</TABLE>
The funds also designates as a capital gain distribution a portion of earnings
and profits paid to shareholders in redemption of their shares.
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 63% 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, 12% 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 1999 TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR RESPECTIVE 1998 TAX RETURNS. SHAREHOLDERS
SHOULD CONSULT THEIR TAX ADVISERS.
<PAGE>
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.
San Clemente, 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.
(communications company);
former editor, The Los Angeles Herald Examiner
JAMES K. DUNTON
Los Angeles, California
Chairman of the Board 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
Private investor; former owner and President,
Energy Investment, Inc.
JON B. LOVELACE, JR.
Los Angeles, California
Chairman Emeritus,
Capital Research and Management Company
ROBERT G. O'DONNELL
San Francisco, California
President of the fund
Senior Vice President and Director,
Capital Research and Management Company
KIRK P. PENDLETON
Southampton, Pennsylvania
Chairman of the Board and Chief Executive Officer,
Cairnwood, Inc. (venture capital investment)
JAMES W. RATZLAFF
San Francisco, California
Vice Chairman of the Board of the fund
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
TIMOTHY D. ARMOUR
Los Angeles, California
Senior Vice President of the fund
Chairman and Chief Executive Officer,
Capital Research Company; Director,
Capital Research and Management Company
JOYCE E. GORDON
Los Angeles, California
Vice President of the fund
Senior Vice President and Director,
Capital Research Company
JOANNA F. JONSSON
San Francisco, California
Vice President of the fund
Vice President and Director,
Capital Research Company
VINCENT P. CORTI
Los Angeles, California
Secretary of the fund
Vice President - Fund Business
Management Group,
Capital Research and Management Company
SHERYL F. JOHNSON
Norfolk, Virginia
Treasurer of the fund
Vice President - Fund Business
Management Group,
Capital Research and Management Company
ROBERT P. SIMMER
Norfolk, Virginia
Assistant Treasurer of the fund
Vice President - Fund Business
Management Group, Capital Research
and Management Company
OFFICES OF THE FUND AND OF THE
INVESTMENT ADVISER, CAPITAL RESEARCH
AND MANAGEMENT COMPANY
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92821-5823
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 2205
Brea, California 92822-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071-2899
INDEPENDENT AUDITORS
Deloitte & Touche LLP
1000 Wilshire Boulevard
Los Angeles, California 90017-2472
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
This report is for the information of shareholders of 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, 1998, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
For information about your account or any of the fund's services, please
contact your financial adviser. You may also call American Funds Service
Company, toll-free, at 800/421-0180 or visit www.americanfunds.com on the World
Wide Web.
Printed on recycled paper
Litho in USA SM/GRS/3913
Lit. No. AMF-011-1298
