[THE AMERICAN FUNDS GROUP(R)]
SEMI-ANNUAL REPORT FOR THE SIX MONTHS ENDED APRIL 30, 1999
AMERICAN MUTUAL FUND
[photo: aspen trees]
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 29 funds in The American Funds Group,(r) the
nation's third-largest mutual fund family. For more than six decades, Capital
Research and Management Company, the American Funds adviser, has invested with
a long-term focus based on thorough research and attention to risk.
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.
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,
1999 (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: +265.01%, or +13.82% a year; 5
years: +115.88%, or +16.64% a year; 12 months: -1.28%. The fund's 30-day yield
as of May 31, 1999, calculated in accordance with the Securities and Exchange
Commission formula, was 2.35%.
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.
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:
The U.S. stock market continued its long rise during the first six months of
American Mutual Fund's 1999 fiscal year. The fund participated in the advance
and posted a substantial gain for the period.
During the six months ended April 30, the value of your holdings in the fund
rose 12.9% if you reinvested your quarterly dividends of 20 cents a share paid
in December and 18.5 cents a share paid in March, as well as the $2.93 capital
gain distribution paid in December.
Shareholders who reinvested this large capital gain distribution, as more than
nine out of 10 did, saw the number of shares they owned increase by 10.2%.
After the reduction in the quarterly per-share dividend, dividend income
received by shareholders rose 1.9% in the first quarter of 1999 from the prior
quarter's level because they owned more shares.
American Mutual Fund's fiscal year began shortly after the stock market hit its
low point last year, and the fund's returns reflect the strong rebound. Looking
back 12 months from April 30 to include both last summer's brief but sharp
slide in stock prices as well as the recovery offers a better perspective.
During that time, the fund had a total return of 12.6% (virtually the same
return as for the past six months but over twice as long a period). This return
was also slightly below the fund's lifetime average annual compound return of
13.5%.
Although American Mutual Fund's results were solid, they did not keep pace with
Standard & Poor's 500 Stock Composite Index, which rose 22.3%. The major market
indexes' continued uptrend has been impressive, but the strength is coming from
fewer and fewer stocks. Once again, a handful of large companies accounted for
the majority of the gain in the S&P 500.
A BALANCE OF OBJECTIVES
Unlike the unmanaged S&P 500, American Mutual Fund strives to balance capital
appreciation with current income and conservation of principal. To meet its
objective of providing above-average current income, all of American Mutual
Fund's stocks must pay dividends. Many S&P 500 stocks that had large gains
during the six-month period pay no dividends and thus cannot be owned by the
fund. The 10 S&P 500 stocks with the greatest gains during the period had a
combined yield of less than 0.5%. Over time, dividends do matter. During the
last 20 years, a period of low yields, reinvested dividends accounted for more
than half of the S&P 500's total return.
Mergers and acquisitions once again helped boost American Mutual Fund's return.
Several of the fund's holdings have merged or were in the process of being
acquired as of this writing. SBC Communications announced plans to buy
Ameritech, the fund's largest equity holding. Ameritech's stock rose 27% in the
period. The deal is awaiting regulatory approval. Amoco, the fund's
third-largest stock holding six months ago, was acquired by British Petroleum.
The combined firm of BP Amoco then announced its intention to acquire Atlantic
Richfield, whose stock rose 22% during the six months.
When major market indexes make extraordinary strides, as they have in recent
years, it is tempting to believe the good news will continue unabated. However,
as we saw during the brief downturn last year, the market moves in fits and
starts, not steadily upward. One of American Mutual Fund's goals is to help you
keep what you gain through the ups and downs of normal market cycles. A key
element of our strategy is holding a large cash position when stocks are highly
valued. Accordingly, the fund held 25% of its assets in bonds, notes, cash and
equivalents at midyear as a protection against a possible downturn, as a
reserve for future opportunities and to help meet its income objective.
We will continue to do our best to increase the value of your holdings without
assuming undue risk while providing above-average current income. 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 11, 1999
<TABLE>
American Mutual Fund, Inc.
Investment Portfolio, April 30, 1999 (Unaudited)
<S> <C> <C> <C>
Largest Industry Holdings
[begin pie chart]
Banking 11.3%
Telecommunications 8.29%
Utilities: Electric and Gas 5.92%
Energy Sources 4.55%
Chemicals 4.31%
Other Industries 40.76%
Bonds, Notes, Cash and
Equivalents 25.04%
[end chart]
Largest Individual Holdings
Percent of
Assets
Ameritech 2.60%
IBM 2.04
Bank of America 1.76
GTE 1.57
Household International 1.49
Sprint FON 1.48
J.C. Penney 1.47
Browning-Ferris Industries 1.27
First Union 1.18
Monsanto 1.16
Market Percent
Value Of Net
Equity Securitites (Common and Preferred Stocks) Shares (Millions) Assets
- -------------------------------------------- -------- -------- --------
Energy
Energy Sources - 4.55%
Ashland Inc. 1,850,000 $78.162 .71%
Atlantic Richfield Co. 645,000 54.140 .49
Kerr-McGee Corp. 1,100,000 46.612 .42
PennzEnergy Co. (formerly Pennzoil Co.) 82,800 1.071 .01
Phillips Petroleum Co. 2,300,000 116.437 1.05
Royal Dutch Petroleum Co. (New York 1,800,000 105.638 .95
Registered Shares)
Sunoco, Inc. 1,100,000 39.325 .36
Texaco Inc. 450,000 28.238 .25
Ultramar Diamond Shamrock Corp. 1,500,000 34.594 .31
Utilities: Electric & Gas - 5.92%
Ameren Corp. 300,000 11.606 .10
American Electric Power Co., Inc. 575,000 23.827 .21
Carolina Power & Light Co. 900,000 36.281 .33
Central and South West Corp. 4,275,000 106.073 .96
Consolidated Edison, Inc. 1,085,700 49.331 .45
Duke Energy Corp. 1,925,000 107.800 .97
FPL Group, Inc. 700,000 39.463 .36
GPU, Inc. 800,000 30.500 .28
New Century Energies, Inc. 2,700,000 94.500 .85
Southern Co. 4,200,000 113.663 1.03
TECO Energy, Inc. 2,000,000 42.625 .38
---------- ----------
1,159.886 10.47
---------- ----------
Materials
Chemicals - 4.31%
Air Products and Chemicals, Inc. 400,000 18.800 .17
E.I. du Pont de Nemours and Co. 1,650,000 116.531 1.05
International Flavors & Fragrances Inc. 900,000 35.550 .32
Mallinckrodt Inc. 1,800,000 63.112 .57
Monsanto Co. 2,842,700 128.632 1.16
PPG Industries, Inc. 570,900 37.073 .34
Praxair, Inc. 1,500,000 77.625 .70
Forest Products & Paper - 3.30%
Fort James Corp. 2,658,800 101.034 .91
Georgia-Pacific Corp., Georgia-Pacific Group 525,000 48.563
Georgia-Pacific Corp., Timber Group 725,000 18.669 .61
International Paper Co. 300,000 15.994 .14
Union Camp Corp. 500,000 39.688 .36
Westvaco Corp. 3,400,000 101.575 .92
Weyerhaeuser Co. 600,000 40.275 .36
Metals: Nonferrous - 0.34%
Alcoa Inc. (formerly Aluminum Co. of America) 600,000 37.350 .34
---------- ----------
880.471 7.95
---------- ----------
Capital Equipment
Aerospace & Military Technology - 1.76%
Boeing Co. 957,100 38.882 .35
Raytheon Co., Class A 140,600 9.728
Raytheon Co., Class B 1,675,000 117.669 1.15
United Technologies Corp. 200,000 28.975 .26
Data Processing & Reproduction - 3.34%
Hewlett-Packard Co. 550,000 43.381 .39
International Business Machines Corp. 1,080,000 225.922 2.04
Xerox Corp. 1,714,400 100.721 .91
Electrical & Electronic - 0.66%
Emerson Electric Co. 600,000 38.700 .35
Hubbell Inc., Class B 720,000 34.425 .31
Electronic Components - 0.96%
Motorola, Inc. 555,800 44.533 .40
Thomas & Betts Corp. 1,467,500 61.635 .56
Industrial Components - 1.87%
Dana Corp. 700,000 32.987 .30
Eaton Corp. 500,000 45.844 .41
Federal-Mogul Corp. 350,000 15.356
Federal-Mogul Corp. 7.00% convertible preferred 500,000 27.438 .39
Genuine Parts Co. 1,625,000 48.750 .44
Goodyear Tire & Rubber Co. 200,000 11.438 .10
TRW Inc. 600,000 25.163 .23
Machinery & Engineering - 1.11%
Briggs & Stratton Corp. 629,100 41.481 .37
Caterpillar Inc. 400,000 25.750 .23
Deere & Co. 1,300,000 55.900 .51
---------- ----------
1,074.678 9.70
---------- ----------
Consumer Goods
Automobiles - 0.96%
General Motors Corp. 1,200,000 106.725 .96
Beverages - 0.73%
PepsiCo, Inc. 2,200,000 81.263 .73
Food & Household Products - 1.43%
Bestfoods 370,000 18.569 .17
Colgate-Palmolive Co. 350,000 35.853 .32
ConAgra, Inc. 400,000 9.950 .09
General Mills, Inc. 900,000 65.813 .60
Sara Lee Corp. 1,250,000 27.812 .25
Health & Personal Care- 3.90%
Bristol-Myers Squibb Co. 2,000,000 127.125 1.15
Eli Lilly and Co. 800,000 58.900 .53
Johnson & Johnson 400,000 39.000 .35
Kimberly-Clark Corp. 400,000 24.525 .22
Merck & Co., Inc. 400,000 28.100 .25
Pfizer Inc 400,000 46.025 .42
Pharmacia & Upjohn, Inc. 647,500 36.260 .33
Schering-Plough Corp. 500,000 24.156 .22
Warner-Lambert Co. 700,000 47.556 .43
Recreation, Other Consumer Products - 0.74%
Pennzoil-Quaker State Co. 1,250,000 16.172 .15
Stanley Works 2,150,000 65.441 .59
Textiles & Apparel - 0.94%
NIKE, Inc., Class B 850,000 52.859 .48
VF Corp. 1,000,000 51.500 .46
---------- ----------
963.604 8.70
---------- ----------
Services
Broadcasting & Publishing - 0.46%
Gannett Co., Inc. 725,900 51.403 .46
Business & Public Services - 1.84%
Browning-Ferris Industries, Inc. 3,545,000 141.357 1.27
Electronic Data Systems Corp. 250,000 13.438 .12
Waste Management, Inc. 875,000 49.438 .45
Merchandising - 2.98%
Albertson's, Inc. 1,200,000 61.800 .56
American Stores Co. 440,000 13.888 .12
J.C. Penney Co., Inc. 3,579,100 163.296 1.47
May Department Stores Co. 1,723,650 68.623 .62
Wal-Mart Stores Inc. 500,000 23.000 .21
Telecommunications - 8.29%
Ameritech Corp. 4,215,800 288.519 2.60
AT&T Corp. 2,144,800 108.312 .98
GTE Corp. 2,590,000 173.368 1.57
SBC Communications Inc. 1,250,000 70.000 .63
Sprint FON Group 1,601,300 164.233 1.48
U S WEST, Inc. 2,180,100 114.046 1.03
Transportation: Rail & Road - 1.15%
Norfolk Southern Corp. 3,890,000 127.154 1.15
---------- ----------
1,631.875 14.72
---------- ----------
Finance
Banking - 11.13%
AmSouth Bancorporation 1,972,000 93.793 .85
Bankers Trust Corp. 645,000 58.090 .52
Bank of America Corp. 2,700,000 194.400 1.76
Bank of New York Co., Inc. 750,000 30.000 .27
BANK ONE CORP. 1,570,000 92.630 .84
Chase Manhattan Corp. 1,000,000 82.750 .75
Comerica Inc. 600,000 39.037 .35
First Security Corp. 2,750,000 52.250 .47
First Union Corp. 2,367,000 131.073 1.18
Fleet Financial Group, Inc. 500,000 21.531 .19
Huntington Bancshares Inc. 2,000,000 70.875 .64
J.P. Morgan & Co. Inc. 250,000 33.688 .31
KeyCorp 1,800,000 55.687 .50
SunTrust Banks, Inc. 1,168,000 83.512 .75
U.S. Bancorp 1,000,000 37.063 .34
Wachovia Corp. 1,000,000 87.875 .79
Wells Fargo & Co. 1,600,000 69.100 .62
Financial Services - 2.39%
Associates First Capital Corp., Class A 393,336 17.430 .16
Fannie Mae 50,000 3.547 .03
Household International, Inc. 3,300,000 166.031 1.49
Transamerica Corp. 1,100,000 78.375 .71
Insurance - 3.55%
Allstate Corp. 1,600,000 58.200 .53
American General Corp. 1,010,000 74.740 .67
Aon Corp. 827,000 56.650 .51
Jefferson-Pilot Corp. 800,000 53.900 .49
Lincoln National Corp. 550,000 52.834 .48
SAFECO Corp. 900,000 35.775 .32
St. Paul Companies, Inc. 2,122,100 60.878 .55
Real Estate - 0.31%
Equity Residential Properties Trust 750,000 34.687 .31
---------- ----------
1,926.401 17.38
---------- ----------
Multi-Industry & Miscellaneous
Multi-Industry - 1.87%
AlliedSignal Inc. 1,300,000 76.375 .69
Harsco Corp. 2,025,000 66.445 .60
Textron Inc. 700,000 64.488 .58
Miscellaneous - 4.17%
Other equity securities in 462.393 4.17
initial period of acquisition
---------- ----------
669.701 6.04
---------- ----------
TOTAL EQUITY SECURITES 8,306.616 74.96
(cost $5,335.181 million)
---------- ----------
Principal
Bonds & Notes Amount
- -------------------------------------------- -------- -------- --------
Corporate - 0.11%
J.C. Penney Co., Inc. 9.05% 2001 $12,000,000 12.601 .11
Federal Agency - 0.90%
SLM Holding Corp. 4.705%-4.947% 1999 100,000,000 99.990 .90
U.S. Treasury Obligations - 5.31%
3.875% January 2009 (2) 100,000,000 100.270 .91
12.375% May 2004 50,000,000 65.289 .59
7.75% February 2001 56,000,000 58.502 .53
5.625% November 2000 90,000,000 90.745 .82
6.25% August 2000 90,000,000 91.378 .82
6.375% May 2000 90,000,000 91.265 .82
5.625% November 1999 90,000,000 90.408 .82
---------- ----------
TOTAL BONDS & NOTES (cost: $702.604 million) 700.448 6.32
---------- ----------
TOTAL INVESTMENT SECURITIES 9,007.064 81.28
(cost: $6,037.785 million)
---------- ----------
Principal Market Percent
Amount Value Of Net
Short-Term Securities (Millions) Assets
- -------------------------------------------- -------- -------- --------
Corporate Short-Term Notes - 14.80%
A.I. Credit Corp. 4.76%-4.81% $75,000,000 $74.764 .67
due 5/6-6/22/1999
American Express Credit Corp. 4.78% 80,000,000 79.184 .71
due 7/14-7/20/1999
American Home Products Corp. 74,400,000 74.176 .67
4.78%-4.86% due 5/4-7/6/1999 (3)
Archer Daniels Midland Co. 76,200,000 75.830 .68
4.77%-4.83% due 5/20-7/21/1999
Associates First Capital Corp. 76,900,000 76.157 .69
4.77%-4.81% due 5/24-7/20/1999
Atlantic Richfield Co. 4.82%-4.84% 52,200,000 51.988 .47
due 5/7-6/25/1999 (3)
AT&T Corp. 4.81% due 5/14-5/19/1999 75,000,000 74.825 .68
Coca-Cola Co. 4.76%-4.82% 76,900,000 76.510 .69
due 6/4-6/14/1999
Commercial Credit Co. 4.81%4.84% 77,000,000 76.924 .69
due 5/3-5/10/1999
Eastman Kodak Co. 4.78%-4.82% 69,000,000 68.689 .62
due 5/11-7/19/1999
E.I. du Pont de Nemours and Co. 57,100,000 56.982 .51
4.78%-4.80% due 5/11-6/2/1999
Emerson Electric Co. 4.75%-4.81% 65,500,000 65.347 .59
due 5/6-5/28/1999
Ford Motor Credit Co. 4.80%-4.83% 75,000,000 74.684 .67
due 5/13-7/8/1999
Gannett Co., Inc. 4.78%-4.80% 61,300,000 61.167 .55
due 5/12-5/24/1999 (3)
Halliburton Co. 4.80%-4.85% 60,460,000 60.201 .54
due 5/7-7/6/1999
Household Finance Corp. 4.77%-4.83% 75,000,000 74.712 .67
due 5/24-6/7/1999
IBM Credit Corp. 4.77%-4.82% 63,500,000 63.352 .57
due 5/3-5/27/1999
Johnson & Johnson 4.72%-4.82% 80,900,000 80.737 .73
due 5/7-5/20/1999 (3)
Lucent Technologies Inc. 4.80% 65,600,000 65.307 .59
due 6/2-6/4/1999
Motorola, Inc. 4.80% due 5/28-7/1/1999 61,800,000 61.447 .56
Procter & Gamble Co. 4.75%-4.82% 78,400,000 78.157 .71
due 5/5-6/10/1999
Sara Lee Corp. 4.75%-4.81% 65,000,000 64.910 .59
due 5/4-5/21/1999
Texaco Inc. 4.77%-4.79% due 5/25-6/1/1999 49,400,000 49.222 .45
Warner-Lambert Co. 4.78%-4.81% 55,500,000 55.252 .50
due 5/17-6/10/1999 (3)
Federal Agency Discount Notes - 4.20%
Fannie Mae 4.70%-4.785% due 5/4-7/13/1999 131,000,000 130.373 1.18
Federal Home Loan Banks 4.67%-4.74% 165,860,000 165.149 1.49
due 5/5-6/18/1999
Freddie Mac 4.70%-4.785% due 5/4-9/3/1999 171,806,000 170.126 1.53
---------- ----------
TOTAL SHORT-TERM SECURITIES 2,106.172 19.00
(cost $2,106.185 million)
Excess of payables over cash and receivables 31.531 0.28
---------- ----------
TOTAL SHORT-TERM SECURITIES, CASH
AND RECEIVABLES, NET OF PAYABLES 2,074.641 18.72
---------- ----------
NET ASSETS 11,081.705 100.00%
========== ==========
(1) Coupon rate may change periodically.
(2) Index-linked bond whose principal
amount moves with a government retail
price index.
(3) 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>
EQUITY SECURITIES APPEARING
IN THE PORTFOLIO since October 31, 1998
Eaton
Eli Lilly
Equity Residential Properties Trust
GPU
International Flavors & Fragrances
Pennzoil-State
SAFECO
Sara Lee
Sunoco
TECO Energy
Thomas & Betts
EQUITY SECURITIES ELIMINATED
FROM THE PORTFOLIO since October 31, 1998
Amoco
Chrysler
Dow Chemical
Firstar
Ford Motor
Lucent Technologies
Marsh & McLennan
McDonald's
Morton International
PNC Bank
Schlumberger
Sundstrand
Union Pacific
<TABLE>
American Mutual Fund Financial Statements
- -----------------------------------------------------------------------------------------
Statement of Assets and Liabilities (dollars in
at April 30, 1999 (unaudited) millions)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investment securities at market
(cost: $6,037.785) $9,007.064
Short-term securities
(cost: $2,106.185) 2,106.172
Cash .115
Receivables for-
Sales of investments $49.167
Sales of fund's shares 6.389
Dividends and interest 26.920 82.476
---------------------------------
11,195.827
Liabilities:
Payables for-
Purchases of investments 74.499
Repurchases of fund's shares 32.757
Management services 2.542
Other expenses 4.324 114.122
---------------------------------
Net Assets at April 30, 1999
Equivalent to $31.55 per share on
351,284,183 shares of $1 par value
capital stock outstanding (authorized
capital stock--500,000,000 shares) $11,081.705
=================
- -----------------------------------------------------------------------------------------
Statement of Operations (dollars in
for the six months ended April 30, 1999 millions)
- -----------------------------------------------------------------------------------------
Investment Income:
Income:
Dividends $ 92.029
Interest 71.616 $163.645
-----------------
Expenses:
Management services fee 14.626
Distribution expenses 11.643
Transfer agent fee 2.492
Reports to shareholders .047
Registration statement and
prospectus .308
Postage, stationery and supplies .578
Directors' fees .107
Auditing and legal fees .049
Custodian fee .084
Taxes other than federal income tax .097
Other expenses .162 30.193
-------------------------------
Net investment income 133.452
-----------------
Realized Gain and Unrealized
Depreciation on Investments:
Net realized gain 1,232.626
Net change in unrealized appreciation on
investments:
Beginning of period 3,047.801
End of period 2,969.266 (78.535)
-------------------------------
Net realized gain and unrealized
depreciation on investments 1,154.091
---------------
Net Increase in Net Assets Resulting
from Operations $1,287.543
================
- ---------------------------------------------------------------------------------------
Statement of Changes in Net Assets (dollars in
millions)
- -----------------------------------------------------------------------------------------
Six Months Year ended
ended April 30, October 31,
1999* 1998
-------------------------------
Operations:
Net investment income $ 133.452 $ 275.053
Net realized gain on investments 1,232.626 1,003.521
Net increase (decrease) in unrealized appreciation
on investments (78.535) 115.593
--------------------------------
Net increase in net assets
resulting from operations 1,287.543 1,394.167
-------------------------------
Dividends and Distributions
Paid to Shareholders:
Dividends from net investment income (130.629) (260.046)
Distributions from net realized
gain on investments (957.004) (769.233)
--------------------------------
Total dividends and distributions (1,087.633) (1,029.279)
--------------------------------
Capital Share Transactions:
Proceeds from shares sold:
14,721,426 and 28,085,473
shares, respectively 441.586 855.659
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions of
net realized gain on investments:
34,478,646 and 31,459,296
shares, respectively 992.577 928.317
Cost of shares repurchased:
25,526,758 and 42,580,163
shares, respectively (767.732) (1,295.650)
-------------------------------
Net increase in net assets
resulting from capital share
transactions 666.431 488.326
---------------------------------
Total Increase in Net Assets 866.341 853.214
Net Assets:
Beginning of period 10,215.364 9,362.150
--------------------------------
End of period (including undistributed
net investment income: $70.946
and $68.123, respectively) $11,081.705 $10,215.364
================================
*Unaudited
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 financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates. 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. Short-term securities
maturing within 60 days are valued at amortized cost, which approximates market
value. 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 - Security
transactions are accounted for as of the trade date. Realized gains and losses
from securities transactions are determined based on a specific identified
cost. Dividend income is recognized on the ex-dividend date, and interest
income is recognized on an accrual basis. Market discounts on securities
purchased are amortized daily over the expected life of the security. 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
The fund complies with the requirements of the Internal Revenue Code
applicable to regulated investment companies and intends to distribute all of
its net taxable income and net capital gains for the fiscal year. As a
regulated investment company, the fund is not subject to income taxes if such
distributions are made. Required distributions are determined on a tax basis
and may differ from net investment income and net realized gains for financial
reporting purposes. In addition, the fiscal year in which amounts are
distributed may differ from the year in which the net investment income and net
realized gains are recorded by the fund.
As of April 30, 1999, net unrealized appreciation on investments for federal
income tax purposes aggregated $2,970,015,000, of which $3,086,073,000 related
to appreciated securities and $116,058,000 related to depreciated securities.
There was no difference between book and tax realized gains on securities
transactions for the six months ended April 30, 1999. The cost of portfolio
securities for federal income tax purposes was $8,143,221,000 at April 30,
1999.
3. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEE - The fee of $14,626,000 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 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 six months
ended April 30, 1999, distribution expenses under the Plan were $11,643,000.
As of April 30, 1999, accrued and unpaid distribution expenses were $3,710,000.
American Funds Distributors, Inc. (AFD), the principal underwriter of the
fund's shares, received $1,577,000 (after allowances to dealers) as its portion
of the sales charges paid by purchasers of the fund's shares. Such sales
charges are not an expense of the fund and, hence, are not reflected in the
accompanying statement of operations.
TRANSFER AGENT FEE - American Funds Service Company (AFS), the transfer
agent for the fund, was paid a fee of $2,492,000.
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 April 30, 1999, aggregate amounts deferred and earnings thereon
since the deferred compensation plan's adoption (1993), net of any payments to
Directors, were $639,000.
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 $2,237,088,000 and $2,452,874,000 respectively,
during the six months ended April 30, 1999.
As of April 30, 1999, accumulated undistributed net realized gain on
investments was $1,204,624,000 and additional paid-in capital was
$6,485,585,000.
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 $84,000 includes $6,000 that was paid by these credits
rather than in cash.
<TABLE>
American Mutual Fund
<S> <C> <C> <C> <C> <C> <C>
Per-Share Data and Ratios Six months Year ended October 31
ended
April 30, ------- ------- ------- ------- -------
1999 (1) 1998 1997 1996 1995 1994
------- ------- ------- ------- ------- -------
Net Asset Value, Beginning of
Period $31.18 $30.14 $26.54 24.17 $21.60 $23.21
------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income .38 .84 .83 .84 .87 .88
Net gains or losses on securities
(both realized and unrealized) 3.31 3.48 5.19 3.52 3.41 (.54)
------- ------- ------- ------- ------- -------
Total from investment operations 3.69 4.32 6.02 4.36 4.28 .34
------- ------- ------- ------- ------- -------
Less Distributions:
Dividends (from net investment in (.39) (.80) (.81) (.84) (.84) (.84)
Distributions (from capital gains (2.93) (2.48) (1.61) (1.15) (.87) (1.11)
------- ------- ------- ------- ------- -------
Total distributions (3.32) (3.28) (2.42) (1.99) (1.71) (1.95)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $31.55 $31.18 $30.14 $26.54 $24.17 $21.60
======= ======= ======= ======= ======= =======
Total Return (2) 12.91% 15.15% 24.19% 18.89% 21.25% 1.75%
Ratios/Supplemental Data:
Net assets, end of period (in
millions) $11,082 $10,215 $9,362 $7,759 $6,552 $5,397
Ratio of expenses to average
net assets .29% (3) .56% .58% .59% .59% .60%
Ratio of net income to average
net assets 1.27% (3) 2.75% 2.95% 3.36% 3.92% 4.07%
Portfolio turnover rate 26.63% (3) 28.97% 19.16% 24.21% 23.31% 18.46%
(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.
</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 92821-5823
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
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, 1999, 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/GRS/3976
Lit. No. AMF-013-0699
