The American Funds Group/r/
American Mutual Fund
Annual Report for the year ended October 31, 2000
[photograph of a lake]
AMERICAN MUTUAL FUND/r/
American Mutual Fund is one of the 29 American Funds, the nation's
third-largest mutual fund family. For nearly seven 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.
American Mutual 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.
DIVIDENDS AND CAPITAL GAIN DISTRIBUTION PAID IN CALENDAR 2000
For tax purposes, here are the income dividends and capital gain distribution
shareholders received in calendar 2000.
INCOME DIVIDENDS PER SHARE:
$0.185 paid 3/16/00
$0.185 paid 6/26/00
$0.185 paid 9/25/00
$0.185 paid 12/8/00
CAPITAL GAIN DISTRIBUTION PER SHARE:
$1.255 paid 12/8/00
A Form 1099-DIV, which provides the information you will need to prepare your
federal income tax return for 2000, will be mailed to you with Your American
Funds Tax Guide in late January.
Fund results in this report were calculated for Class A shares at net asset
value (without a sales charge) unless otherwise indicated. Here are returns on
a $1,000 investment with all distributions reinvested for periods ended
September 30, 2000 (the most recent calendar quarter):
<TABLE>
<CAPTION>
10 years 5 years 1 year
<S> <C> <C> <C>
CLASS A SHARES:
reflecting 5.75% maximum sales charge
Total return +242.61% +72.20% -4.47%
Average annual compound return +13.10 +11.48 -
CLASS B SHARES: from March 15, 2000,
when B shares first became available
Total return reflecting 5% maximum
contingent sales charge (CDSC)
(payable only if shares are sold) - - +5.28*
not reflecting CDSC - - +10.28*
</TABLE>
* Reflects total return for the period March 15, 2000, through September 30,
2000.
Please see the back cover for important information about Class A and B shares.
FIGURES SHOWN ARE 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.
About our cover: Sunrise in Tahquamenon Falls Park, Michigan.
FELLOW INVESTORS:
American Mutual Fund's 2000 fiscal year, which ended October 31, provided
dramatic evidence of what can happen when speculative excess takes over equity
markets. After running up sharply on the coattails of investor enthusiasm for
Internet and other technology stocks, markets generally fell as the Internet
bubble burst. Much as it has for five decades, American Mutual Fund avoided
following the crowd and produced a year the opposite of the broad market trends
- lagging during the speculative upswing and gaining as the markets dropped.
The experience illustrated once again the validity of the fund's three
objectives: current income, capital growth and conservation of principal.
Investors received steady income during the year, with quarterly dividends
totaling 74 cents a share. The fund also paid a $5.045 a share capital gain in
December 1999. The fund's shareholders earned a 2.9% income return, far
outpacing the 1.2% income return of Standard & Poor's 500 Stock Composite
Index, an unmanaged measure of the U.S. stock market heavily weighted by large
stocks. The fund paid a capital gain of $1.255 a share on December 8, 2000.
The total return for the fiscal year, measuring the change in value assuming
dividends were reinvested, was 1.2%. While that trailed the 6.1% total return
of the S&P 500 and was far below the fund's lifetime 13.0% average annual
compound return, the full-year result hardly tells the story of what happened
during the period.
A TALE OF TWO MARKETS
In March, the market reached a fundamental turning point, the magnitude of
which has been seen only a few times in the past 100 years. Indeed, the last
time we saw such a shift was in 1973. To appreciate the shift, a little
background is helpful. When the fund's fiscal year began, the major market
indexes, especially the S&P 500 and the Nasdaq, were continuing their
unprecedented gains. But the results in these tech-heavy indexes did not
represent what was happening in the broader market. In fact, from March 1998 to
March 2000, while the S&P 500 racked up 15%-plus annual gains, the majority of
the 3,000-plus stocks on the New York Stock Exchange lost value.
By the spring of this year, companies that paid no dividends accounted for 25%
of the S&P 500's capitalization, and the index was valued at 30 times earnings.
In other words, investors were paying $30 for every $1 in annual earnings.
Meanwhile, the S&P 500 was earning only 1.1% in dividend income. In such a
low-yield environment, the principal way investors earn money is if stock
prices rise. But by March, prices were so far out of line with economic
fundamentals that reason finally returned to the market. This was especially
true for many of the Internet-related and tech stocks that had no earnings and
little hope of producing any in the near future. At this point, the "dot-com"
bubble burst.
While the S&P 500 was making its record-breaking ascent, American Mutual Fund
continued to pursue its three objectives. Its portfolio, consisting primarily
of income-producing stocks, was earning more than three times the income of the
index, and the fund's equities were only half as richly valued in relation to
earnings. Not surprisingly, the results of American Mutual Fund's portfolio of
well-established, dividend-paying companies differed greatly from the results
of the tech-heavy S&P 500.
During the final speculative surge to the market peak (November 1, 1999 to
March 24, 2000), the S&P 500 gained 12.4%. In that same period, American Mutual
Fund lost 7.1%. But from that peak to the end of the fiscal year, the S&P 500
lost 5.6%, while American Mutual Fund gained 8.9%.
The downturn in the tech-dominated Nasdaq market was even more remarkable.
After gaining an incredible 70.2% from the beginning of the fiscal year to
March 10, the index lost a third of its value, recovered some, then sank to new
lows this fall. Indeed, in November, the Nasdaq lost an additional 22.9% while
American Mutual Fund lost only 1.1%.
MITIGATING VOLATILITY
Investors must expect stock prices to rise and fall. We believe, though, that
the volatility of the fund can be mitigated by careful selection guided by
sensible criteria. In fact, in American Mutual Fund's 50-year history, the S&P
500 has lost more than 14% on 11 occasions. Each time, the fund declined less
than the market. In the feature beginning on page 6, we take a closer look at
how the fund's disciplined approach to investing has helped it reach its three
goals and dampen volatility.
To achieve this, we strive to build a portfolio of long-term holdings that will
ride out market cycles, preserving shareholders' capital while giving them the
opportunity for growth and providing current income. We believe American Mutual
Fund's resilience during the recent market downturn has once again shown the
value of the three objectives.
We look forward to reporting to you again in six months.
Cordially,
James K. Dunton
Chairman of the Board
Robert G. O'Donnell
President
December 13, 2000
James W. Ratzlaff, who served as President of American Mutual Fund from 1986 to
1993 and as an officer and director of the fund from 1969 to 2000, has retired.
The Directors thank him for his many contributions to the fund's success.
THE VALUE OF A LONG-TERM PERSPECTIVE
RESULTS OF A $10,000 INVESTMENT IN AMERICAN MUTUAL FUND
For more than 50 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, 2000. The table
beneath the chart shows the fund's total return in each of the 50 full 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 $4,639,408.
Incidentally, over the fund's lifetime, $10,000 in a savings account, with all
interest compounded, would have grown to $119,474./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 1990.
At the time, the table indicates the value of the investment illustrated here
was $1,239,341. Since then, it has more than tripled to $4,639,408. Thus, in
the same period, the value of your 1990 investment - regardless of its size -
also has more than tripled.
[begin table]
AVERAGE ANNUAL COMPOUND RETURNS BASED ON THE MAXIMUM OFFERING PRICE*
For periods ended 10/31/00
<TABLE>
<CAPTION>
<S> <C>
Ten Years +13.44%
Five Years +12.07%
One Year -4.63%
</TABLE>
* Assumes reinvestment of all distributions and payment of the 5.75% sales
charge at the beginning of the stated periods. Sales charges are lower for
accounts of $25,000 or more.
[end table]
[begin mountain chart]
Value added by reinvestment of dividends
$5,549,190 S&P 500 with dividends reinvested
$4,639,408 /1/,/2/ American Mutual Fund with dividends reinvested
$620,070 /1/,/3/ American Mutual Fund with dividends excluded
$119,474 /4/ Average savings institution with interest compounded
$10,000 /1/ original investment
<TABLE>
<CAPTION>
<S> <C> <C>
Date American Mutual Fund American Mutual Fund
with dividends reinvested (000's) with dividends excluded
(000's)
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
11/23/98 4,395.6 621.0
12/14/99 4,240.0 595.3
10/31/99 4,584.2 631.8
11/16/00 4,643.6 640.0
3/7/00 3,918.1 536.6
10/31/00 4,639.4 620.1
</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 57,238
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
7/29/69 115,044
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
10/21/88 819,646
10/31/88 806,094
11/16/88 762,318
10/9/89 1,076,229
10/31/89 1,018,080
7/16/90 1,131,651
10/11/90 915,124
10/31/90 941,575
11/7/90 947,800
8/28/91 1,260,242
10/31/91 1,257,024
11/29/91 1,201,805
9/14/92 1,392,901
10/31/92 1,381,809
11/4/92 1,376,638
10/15/93 1,593,188
10/31/93 1,587,521
2/2/94 1,646,440
4/4/94 1,509,846
10/31/94 1,648,956
12/8/94 1,555,049
10/19/95 2,116,296
10/31/95 2,083,582
11/1/95 2,093,328
10/18/96 2,604,457
10/31/96 2,584,121
11/1/96 2,578,625
10/7/97 3,669,429
10/31/97 3,413,757
11/12/97 3,381,434
7/17/98 4,479,123
10/31/98 4,164,055
11/3/98 4,210,180
7/16/99 5,428,093
10/31/99 5,232,508
3/24/00 5,880,330
10/12/00 5,162,447
10/31/00 5,549,190
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Year ended October 31 1950/#/ 1951 1952 1953 1954 1955
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends reinvested/5/ $310 533 524 579 613 667
Value at year-end/1/ $10,018 12,234 13,163 14,076 19,261 25,050
Dividends excluded/6/ $307 507 480 508 515 545
Value at year-end/1/ $9,708 11,334 11,710 12,009 15,876 20,087
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return/1/ 3.1% 5.3 4.3 4.4 4.4 3.5
Capital results/1/ (2.9%) 16.8 3.3 2.5 32.4 26.6
AMF Total Return 0.2% 22.1 7.6 6.9 36.8 30.1
Year ended October 31 1956 1957 1958 1959 1960 1961
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends reinvested/5/ 789 911 1,010 1,050 1,210 1,257
Value at year-end/1/ 29,651 28,050 36,140 41,488 40,864 54,348
Dividends excluded/6/ 627 702 754 764 854 867
Value at year-end/1/ 23,142 21,241 26,511 29,668 28,371 36,806
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return/1/ 3.1 3.1 3.6 2.9 2.9 3.1
Capital results/1/ 15.3 (8.5) 25.2 11.9 (4.4) 29.9
AMF Total Return 18.4 (5.4) 28.8 14.8 (1.5) 33.0
Year ended October 31 1962 1963 1964 1965 1966 1967
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends reinvested/5/ 1,372 1,523 1,697 1,844 2,271 2,568
Value at year-end/1/ 46,572 61,289 71,355 79,919 77,646 92,836
Dividends excluded/6/ 921 993 1,079 1,143 1,372 1,507
Value at year-end/1/ 30,677 39,309 44,625 48,769 46,067 53,558
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return/1/ 2.5 3.3 2.8 2.6 2.8 3.3
Capital results/1/ (16.8) 28.3 13.6 9.4 (5.6) 16.3
AMF Total Return (14.3) 31.6 16.4 12.0 (2.8) 19.6
Year ended October 31 1968 1969 1970 1971 1972 1973
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends reinvested/5/ 3,154 3,762 4,168 4,424 4,711 5,069
Value at year-end/1/ 109,585 103,215 93,358 112,999 125,226 124,799
Dividends excluded/6/ 1,796 2,076 2,209 2,244 2,304 2,380
Value at year-end/1/ 61,257 55,651 48,100 56,017 59,737 57,130
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return/1/ 3.4 3.4 4.0 4.7 4.2 4.0
Capital results/1/ 14.6 (9.2) (13.6) 16.3 6.6 (4.3)
AMF Total Return 18.0 (5.8) (9.6) 21.0 10.8 (0.3)
Year ended October 31 1974 1975 1976 1977 1978 1979
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends reinvested/5/ 7,273 7,300 7,881 8,604 9,989 11,322
Value at year-end/1/ 105,121 132,196 167,378 176,433 198,946 232,804
Dividends excluded/6/ 3,258 3,055 3,123 3,244 3,583 3,860
Value at year-end/1/ 44,985 53,330 64,276 64,555 69,119 76,959
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return/1/ 5.8 6.9 6.0 5.1 5.7 5.7
Capital results/1/ (21.6) 18.9 20.6 0.3 7.1 11.3
AMF Total Return (15.8) 25.8 26.6 5.4 12.8 17.0
Year ended October 31 1980 1981 1982 1983 1984 1985
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends reinvested/5/ 13,854 16,351 26,841 26,227 26,606 30,124
Value at year-end/1/ 303,583 334,115 426,436 544,914 577,158 701,833
Dividends excluded/6/ 4,491 5,044 7,807 7,122 6,867 7,403
Value at year-end/1/ 95,432 99,944 118,168 143,286 144,418 167,598
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return/1/ 6.0 5.4 8.0 6.2 4.9 5.2
Capital results/1/ 24.4 4.7 19.6 21.6 1.0 16.4
AMF Total Return 30.4 10.1 27.6 27.8 5.9 21.6
Year ended October 31 1986 1987 1988 1989 1990 1991
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends reinvested/5/ 34,058 39,285 50,009 59,908 66,101 71,766
Value at year-end/1/ 913,068 960,885 1,081,197 1,299,783 1,239,341 1,544,407
Dividends excluded/6/ 8,006 8,876 10,831 12,336 12,953 13,356
Value at year-end/1/ 209,414 212,116 227,086 259,386 235,204 278,500
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return/1/ 4.9 4.3 5.2 5.5 5.1 5.8
Capital results/1/ 25.2 0.9 7.3 14.7 (9.8) 18.8
AMF Total Return 30.1 5.2 12.5 20.2 (4.7) 24.6
Year ended October 31 1992 1993 1994 1995 1996 1997
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends reinvested/5/ 67,509 70,887 76,471 83,156 90,173 95,004
Value at year-end/1/ 1,690,010 2,004,855 2,039,865 2,473,435 2,940,729 3,652,188
Dividends excluded/6/ 11,977 12,073 12,540 13,110 13,725 14,010
Value at year-end/1/ 292,156 333,582 326,418 381,224 438,613 529,422
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return/1/ 4.4 4.2 3.8 4.1 3.6 3.2
Capital results/1/ 5.0 14.4 (2.1) 17.2 15.3 21.0
AMF Total Return 9.4 18.6 1.7 21.3 18.9 24.2
Year ended October 31 1998 1999 2000
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends reinvested/5/ 104,111 110,493 132,206
Value at year-end/1/ 4,205,452 4,584,179 4,639,408
Dividends excluded/6/ 14,946 15,466 18,012
Value at year-end/1/ 594,159 631,824 620,070
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return/1/ 2.9 2.6 2.9
Capital results/1/ 12.2 6.4 (1.7)
AMF Total Return 15.1 9.0 1.2
</TABLE>
Average
annual
compound
return for
AMF's
Lifetime
4.16%
8.72
12.88%/1/
Past results are not predictive of future results.
The S&P 500 Index is unmanaged, and does not reflect sales charges, commissions
or expenses and cannot be invested in directly.
/#/ Fund began operations February 21, 1950.
/1/ These figures, unlike those shown earlier in this report, reflect payment
of the 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. Results shown do not take into account income or capital gain taxes.
/2/ Includes reinvested capital gain distributions totaling $2,512,617 in the
years 1950 - 2000 and reinvested dividends. The total "cost" of this
investment was $1,399,525 ($10,000 plus $1,389,525 in reinvested
dividends).
/3/ Includes reinvested capital gain distributions taken in shares totaling
$438,148 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.
The fund's 30-day yield as of November 30, 2000, calculated in accordance with
the Securities and Exchange Commission formula, was 2.91%.
[end mountain chart]
INVESTMENT DISCIPLINE -
A key to long-term success
Carl von Clausewitz, a 19th-century Prussian military strategist, once gave
some advice that is as relevant in today's stock market as it was on the
battlefield: "Beware the vividness of transient events."
While von Clausewitz's insight may not be taught in business school, it does
highlight a principle and challenge of long-term investment success - and one
of the main reasons American Mutual Fund has been able to meet its goal of
providing current income, capital growth and conservation of principal over its
lifetime. The fund's investment professionals know that long-term success
requires the discipline to concentrate on their objective and avoid getting
caught in the day-to-day tumult of the market.
In the next few pages, we'll look at how the factors that help the fund's
managers stay focused on its long-term objectives have benefited shareholders
over time.
- First, the fund's eligible list, approved by the board of directors, defines
the universe of choices available to the portfolio counselors and analysts.
- Secondly, the fund's objective of paying above-average dividends requires the
fund's analysts and portfolio counselors to focus on an investment's ability to
generate income.
- Third, the fund focuses only on companies that are leaders in their
industries. These companies have been, in most cases, good long-term
investments.
- Finally, there is the experience of the fund's managers. Three of the fund's
six portfolio counselors have more than 35 years of experience, one has 28
years of experience and the two newest have 15 years and 10 years of
experience. This level of experience, which for most counselors includes the
long bear market of 1973 - 74 and the crash in 1987, as well as bull markets,
fads and short-term bubbles, gives them a long-term perspective rarely found in
the investment business.
[Begin Sidebar]
9,000
[illustration of 11 trees]
Approximate
Number of Stocks
in the U.S. Market
300
[illustration of 3 trees]
Approximate
Number of Stocks
on American Mutual
Fund's Eligible List
125
[illustration of 1 tree]
Approximate
Number of Stocks
in American Mutual
Fund's Portfolio
[End Sidebar]
DEFINING THE FIELD
More than 9,000 stocks are listed on the major U.S. exchanges. Trying to
understand each company would be daunting for even the most seasoned investment
professional. That's one reason why American Mutual Fund can benefit from an
"eligible list" of high-quality stocks. The list, which is continually updated
with approval of the fund's directors, currently contains about 300 companies.
Only companies that pay dividends, are based in the United States or included
in Standard & Poor's 500 Stock Composite Index, and are considered major
factors in their industries are considered for eligibility.
"I think the eligible list helps you concentrate your efforts where they can be
the most productive for the fund," says James Dunton, the fund's chairman and a
portfolio counselor. "You could waste a lot of time studying all the initial
public offerings and searching through thousands of stocks in the market. With
an eligible list, you can concentrate your research on a few hundred of the
best companies."
[begin sidebar]
"Current Income"
[end sidebar]
THE DISCIPLINE OF DIVIDENDS
The first goal you read in American Mutual Fund's annual reports or in its
prospectus is providing current income. The fund has consistently met this goal
by investing only in stocks that pay dividends. While the fund's income has
been stable and grown steadily, the percentage return has fluctuated with
interest rates and the return of financial instruments over its 50-year
history. Still, it has earned a higher income return than the S&P 500 in 23 of
the past 25 fiscal years.
The stipulation that every holding pay a dividend helps the investment
professionals focus on seasoned companies with good records, says Dale Harvey,
one of the fund's recent portfolio counselor appointees.
"Companies that have the discipline of paying and increasing dividends every
year are typically well-managed. The process of paying meaningful dividends
requires management to pay more attention to the capital allocation process
than it might have without dividends."
Dividends also play a key role in a portfolio's growth. Over the past 50 years,
reinvested dividends have contributed 31% of the S&P 500's annualized total
return.
Of course, at times this focus on dividends means forgoing some promising
investments. In the past few years, many of the fastest growing U.S. companies
haven't paid dividends and thus didn't make the fund's eligible list. The
omission of a few rapidly growing stocks can mean the fund doesn't keep pace
during a bull market. But it's important to remember that rapidly rising stocks
are often the most volatile. They may not be well-suited for the fund because
American Mutual Fund is dedicated to conservation of principal as well as
providing income and growth.
During the many periods of dramatic market volatility over the fund's lifetime,
the benefit of its conservative investment approach has been apparent. The S&P
500 has fallen more than 14% on 11 occasions during the fund's lifetime. Each
time, American Mutual Fund declined less than the market (see chart on pages 10
and 11). The fund has held true to form in 2000. Between March 10, when the
Nasdaq reached its peak, and the end of the fund's fiscal year on October 31,
the Nasdaq, home to many of the fastest growing stocks in recent years, lost
33.3% while American Mutual Fund gained 16.7%.
[Begin Sidebar]
MEASURING THE MARKET
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Date S&P 500 AMF VALUE LINE
10/31/97 $10,000.00 $10,000.00 $10,000.00
11/30/97 $10,446.34 $10,374.92 $10,081.09
12/31/97 $10,610.68 $10,513.70 $10,177.18
1/31/98 $10,718.38 $10,502.90 $10,018.82
2/28/98 $11,473.48 $10,952.82 $10,746.35
3/31/98 $12,046.53 $11,420.74 $11,197.92
4/30/98 $12,155.87 $11,399.14 $11,221.44
5/31/98 $11,927.03 $11,251.57 $10,747.02
6/30/98 $12,397.41 $11,237.17 $10,677.58
7/31/98 $12,253.41 $11,157.99 $9,981.41
8/31/98 $10,466.90 $10,139.37 $8,215.21
9/30/98 $11,119.99 $10,524.50 $8,584.13
10/31/98 $12,012.86 $11,222.77 $9,147.48
11/30/98 $12,723.13 $11,525.12 $9,498.25
12/31/98 $13,440.40 $11,759.69 $9,791.91
1/31/99 $13,991.58 $11,656.57 $9,656.39
2/28/99 $13,539.90 $11,601.05 $9,099.99
3/31/99 $14,065.17 $11,660.54 $9,167.19
4/30/99 $14,598.86 $12,513.27 $9,978.27
5/31/99 $14,234.32 $12,477.57 $10,083.55
6/30/99 $15,009.21 $12,652.08 $10,432.76
7/31/99 $14,528.22 $12,307.03 $10,153.88
8/31/99 $14,437.36 $12,013.53 $9,700.52
9/30/99 $14,025.15 $11,616.91 $9,355.12
10/31/99 $14,902.28 $11,934.21 $9,287.70
11/30/99 $15,186.34 $11,724.00 $9,391.18
12/31/99 $16,064.78 $11,457.37 $9,655.05
1/31/00 $15,247.03 $11,010.23 $9,175.48
2/29/00 $14,940.44 $10,279.42 $9,007.71
3/31/00 $16,385.47 $11,140.04 $9,601.74
4/30/00 $15,880.87 $11,216.97 $9,402.16
5/31/00 $15,532.84 $11,558.34 $9,160.92
6/30/00 $15,904.60 $10,827.53 $9,135.61
7/31/00 $15,644.70 $11,000.61 $9,170.10
8/31/00 $16,594.31 $11,462.18 $9,752.49
9/30/00 $15,706.80 $11,418.91 $9,404.40
10/31/00 $15,629.06 $11,712.00 $9,191.16
Total Returns +56.3% +17.1% -8.1%
</TABLE>
S&P 500
$15,629
(+56.3%)
AMF
$11,712
(+17.1%)
VALUE LINE
$9,191
(-8.1%)
What the market is doing can be difficult to describe. The chart above, based
on a hypothetical $10,000 investment, shows that the S&P 500's recent gains
masked a decline in the broader market. Without including income, the S&P 500
gained 56.3% in the past three fiscal years. But at the same time, the Value
Line Index, an average of 1,650 equally weighted stocks, lost 8.1%. American
Mutual Fund made steady gains during that period, increasing 17.1% without
dividends and 27.0% with dividends reinvested. American Mutual Fund did not
participate in the S&P 500's full upswing but when the index lost 6.4% between
late March and October 31, 2000, the fund gained 7.2% without income
reinvested.
[End Sidebar]
The determination to invest only in dividend-paying stocks has contributed to
the fund's remarkable record by providing income that can offset a decline in
price. But there is another, less tangible element in this success -
maintaining the discipline to invest only in companies that are a major factor
in their industry.
[Begin Sidebar]
"Capital Growth"
[End Sidebar]
STICKING WITH THE LEADERS
"We're careful to focus on well-established companies," explains Alan Berro, a
portfolio counselor. "This is important because it helps us differentiate
between a stock that may be doing well at the moment and a company that's a
leader in its industry."
Even the best companies have ups and downs, but over long periods we believe
their stocks should appreciate, provide solid income and, in most cases, should
not decline as much as the broader market during slumps. "Stocks in American
Mutual Fund's portfolio are probably stocks that you would have owned 10 years
ago and could own 10 years from now," Berro says.
That's been true throughout the fund's lifetime. In the early 1950s, American
Mutual Fund invested in companies such as American Airlines, Merck and General
Motors. In the '60s and '70s, familiar names such as General Electric, Bank of
America and Chrysler appeared in the portfolio. In the 1980s, companies like
General Electric and Upjohn appeared. Additional familiar names came in the
1990s, including Boeing and Avon Products.
The fund's focus on companies that are leaders in their industries has helped
make it resilient and provided shareholders with a rewarding investment. In its
50-year history, with dividends reinvested, American Mutual Fund has lost value
over a fiscal year only nine times - and only once in the past 25 years.
[Begin Sidebar]
HOW AMERICAN MUTUAL FUND HAS FARED DURING MARKET DECLINES
Total returns with dividends excluded and capital gains reinvested:
<TABLE>
<CAPTION>
<S> <C>
S&P 500 AMF
-14.8% -12.1%
Jan. 5, 1953 - Sept. 14, 1953
Korean War ends; recession begins
S&P 500 AMF
-21.6% -18.3%
Aug. 2, 1956 - Oct. 22, 1957
Egypt seizes Suez Canal
S&P 500 AMF
-28.0% -25.9%
Dec. 12, 1961 - June 26, 1962
Stocks hit postwar highs; Kennedy confronts steel industry
S&P 500 AMF
-22.2% -16.2%
Feb. 9, 1966 - Oct. 7, 1966
Economy overheats, interest rates and taxes rise
S&P 500 AMF
-36.1% -35.7%
Nov. 29, 1968 - May 26, 1970
Vietnam War sparks civil unrest, recession
S&P 500 AMF
-48.2% -36.7%
Jan. 11, 1973 - Oct. 3, 1974
OPEC oil embargo; Watergate scandal; Nixon resigns
S&P 500 AMF
-19.4% -4.7%
Sept. 21, 1976 - March 6, 1978
Carter warns of impending energy crisis
S&P 500 AMF
-27.1% -7.6%
Nov. 28, 1980 - Aug. 12, 1982
Record-high interest rates provoke recession
S&P 500 AMF
-33.5% -21.1%
Aug. 25, 1987 - Dec. 4, 1987
Overvalued stocks trigger market crash
S&P 500 AMF
-19.9% -13.2%
July 16, 1990 - Oct. 11, 1990
Iraq invades Kuwait
S&P 500 AMF
-19.3% -12.1%
July 17, 1998 - Aug. 31, 1998
"Asian flu" spreads to Russia, igniting global economic fears
</TABLE>
[End Sidebar]
CALCULATING THE INTANGIBLE
Increased volatility seems to have become an everyday feature in the equity
market. It's not unusual for the Dow Jones Industrial Average to lose 200
points, turn around and make up the lost ground before the closing bell. In
this environment, there is simply no substitute for experience. There is no
statistical way to measure the value of the experience among the fund's
portfolio counselors and analysts, but there's no doubt that experience is one
of the fund's greatest assets.
"One of the beauties of this fund is that we have people who have seen it all
before," says Bob O'Donnell, a portfolio counselor and fund president. "When
you've been following an industry or the market for 10, 20 or 30 years, you get
a perspective that others just don't have."
That experience helps differentiate between a stock that's "hot" today but may
soon fold and an investment that will stand the test of time. "It's the
difference between trading and investing."
That distinction - and the discipline to maintain it - is what sets American
Mutual Fund apart in the investment universe.
[Begin Sidebar]
WHAT MAKES THE AMERICAN FUNDS DIFFERENT?
As a shareholder in American Mutual Fund, you are also a member of the American
Funds, the nation's third-largest mutual fund family. You won't find us
advertised, yet thousands of financial advisers recommend the American Funds
for their clients' serious money - money set aside for education, a home,
retirement and other important dreams.
What the 29 funds in our group have in common is a commitment to your best
interests and the proven approach of our investment adviser, Capital Research
and Management Company. In business since 1931, Capital's calling cards
include:
A LONG-TERM, VALUE-ORIENTED APPROACH
Rather than follow short-term fads, we rely on our own intensive research to
find well-managed companies with reasonably priced securities and solid,
long-term potential. Despite our size, we offer relatively few funds compared
with many large fund families, allowing us to maintain a careful focus on our
objectives and enabling you to benefit from economies of scale.
A GLOBAL PERSPECTIVE
We opened our first overseas office in 1962, well before most mutual funds
began investing internationally. Today, the American Funds draw on one of the
industry's most globally integrated research networks. Capital Research spends
substantial resources getting to know companies and industries around the
world.
A MULTIPLE PORTFOLIO COUNSELOR SYSTEM
More than 40 years ago, we developed a unique strategy for managing investments
that blends teamwork with individual accountability. Every American Fund is
divided among a number of portfolio counselors, each of whom manages his or her
portion independently, within each fund's objectives; in most cases, research
analysts manage a portion as well. Over time, this method has contributed to
consistency of results and continuity of management.
EXPERIENCED INVESTMENT PROFESSIONALS
More than 75% of the portfolio counselors who serve the American Funds were in
the investment business before the sharp stock market decline of October 1987.
Long tenure and experience through a variety of market conditions mean we
aren't "practicing" with your money.
A COMMITMENT TO LOW OPERATING EXPENSES
You can't control market returns, but you can control what you invest in and
how much you pay to own it. American Funds provide exceptional value for
shareholders, with operating expenses that are among the lowest in the mutual
fund industry. Our portfolio turnover rates are low as well, keeping
transaction costs and tax consequences contained.
A PORTFOLIO FOR EVERY INVESTOR
Most financial advisers suggest that investors balance their portfolios by
investing across several types of investments. Which mix is right for you? That
depends on a number of things - including your risk tolerance, investment time
horizon and financial goals. The 29 American Funds offer an array of investment
objectives to help you and your financial adviser build a portfolio
specifically tailored to your needs.
GROWTH FUNDS
Emphasis on long-term growth through stocks
AMCAP Fund/r/
EuroPacific Growth Fund/r/
The Growth Fund of America/r/
The New Economy Fund/r/
New Perspective Fund/r/
New World Fund/sm/
SMALLCAP World Fund/r/
GROWTH-AND-INCOME FUNDS
Emphasis on long-term growth and dividends through stocks
American Mutual Fund/r/
Capital World Growth and Income Fund/sm/
Fundamental Investors/sm/
The Investment Company of America/r/
Washington Mutual Investors Fund/sm/
EQUITY-INCOME FUNDS
Emphasis on above-average income and growth through stocks and/or bonds
Capital Income Builder/r/
The Income Fund of America/r/
BALANCED FUND
Emphasis on long-term growth and current income through stocks and bonds
American Balanced Fund/r/
INCOME FUNDS
Emphasis on current income through bonds
American High-Income Trust/sm/
The Bond Fund of America/sm/
Capital World Bond Fund/r/
Intermediate Bond Fund of America/r/
U.S. Government Securities Fund/sm/
TAX-EXEMPT INCOME FUNDS
Emphasis on tax-free current income through municipal bonds
American High-Income Municipal Bond Fund/r/
Limited Term Tax-Exempt Bond Fund of America/sm/
The Tax-Exempt Bond Fund of America/r/
State-specific tax-exempt funds:
The Tax-Exempt Fund of California/r/
The Tax-Exempt Fund of Maryland/r/
The Tax-Exempt Fund of Virginia/r/
MONEY MARKET FUNDS
Seek stable monthly income through money market instruments
The Cash Management Trust of America/r/
The Tax-Exempt Money Fund of America/sm/
The U.S. Treasury Money Fund of America/sm/
We also offer a full line of retirement plans and variable annuities.
For more complete information about any of the American Funds, including
charges and expenses, please obtain a prospectus from your financial adviser,
download one from our Web site at www.americanfunds.com, or phone the funds'
transfer agent, American Funds Service Company, at 800/421-0180. Please read
the prospectus carefully before you invest or send money. For more information,
ask your financial adviser for a copy of our brochure A Portfolio for Every
Investor.
<TABLE>
<S> <C> <C> <C>
AMERICAN MUTUAL FUND
INVESTMENT PORTFOLIO, October 31, 2000
[begin pie chart]
LARGEST INDUSTRY HOLDINGS
Banks 9.45%
Diversified Telecommunication Services 8.46%
Oil & Gas 8.29%
Electric Utilities 5.96%
Insurance 5.47%
Other Industries 39.21%
Bonds, Notes, Cash & Equivalents 23.16%
[end pie chart]
LARGEST INDIVIDUAL HOLDINGS
Verizon Communications 2.31%
SBC Communications 1.97
Bank of America 1.91
Household International 1.84
BANK ONE 1.83
Allstate 1.80
CenturyTel 1.57
Royal Dutch Petroleum 1.50
Xcel Energy 1.47
Southern 1.44
Market Percent
Value of Net
Equity Securitites (Common and Preferred Shares (Millions) Assets
Stocks)
ENERGY
Oil & Gas - 8.29%
Ashland Inc. 1,400,000 $ 45.85 .55
Chevron Corp. 493,500 40.529 .49
Conoco Inc., Class B 1,817,053 49.401 .59
Kerr-McGee Corp. 465,000 30.370 .36
Pennzoil-Quaker State Co. 1,875,000 22.031 .26
Phillips Petroleum Co. 1,250,000 77.188 .93
Royal Dutch Petroleum Co. (New York 2,115,000 125.578 1.50
registered)
Sunoco, Inc. 1,100,000 32.931 .40
Texaco Inc. 2,035,000 120.192 1.44
Ultramar Diamond Shamrock Corp. 1,125,000 29.531 .35
Unocal Corp. 1,330,400 45.400 .54
USX-Marathon Group 2,700,000 73.406 .88
692.407 8.29
MATERIALS
Chemicals - 2.15%
Air Products and Chemicals, Inc. 400,000 14.925 .18
Dow Chemical Co. 2,025,000 62.016 .74
Ferro Corp. 1,700,000 34.850 .42
International Flavors & Fragrances Inc. 99,600 1.668 .02
PPG Industries, Inc. 700,000 31.237 .37
Praxair, Inc. 950,000 35.387 .42
Containers & Packaging - 0.46%
Crown Cork & Seal Co., Inc. 2,095,200 19.119 .23
Sonoco Products Co. 1,000,000 19.312 .23
Paper & Forest Products - 2.01%
Georgia-Pacific Corp., Georgia-Pacific Group 620,000 16.663
Georgia-Pacific Corp., Timber Group 725,000 20.527 .45
International Paper Co. 900,000 32.963 .40
Westvaco Corp. 3,400,000 96.900 1.16
385.567 4.62
CAPITAL GOODS
Aerospace & Defense - 3.00%
BFGoodrich Co. 1,217,100 49.825 .60
Boeing Co. 200,000 13.562 .16
Honeywell International Inc. 1,200,000 64.575 .77
Lockheed Martin Corp. 525,000 18.821 .23
Northrop Grumman Corp. 350,000 29.400 .35
Raytheon Co., Class A 405,000 12.960
Raytheon Co., Class B 575,000 19.658 .39
United Technologies Corp. 600,000 41.887 .50
Construction & Engineering - 0.18%
Fluor Corp. 427,100 14.948 .18
Electrical Equipment - 0.48%
Hubbell Inc., Class B 720,000 17.235 .21
Thomas & Betts Corp. 1,500,000 22.688 .27
Industrial Conglomerates - 0.24%
Textron Inc. 400,000 20.175 .24
Machinery - 1.86%
Briggs & Stratton Corp. 629,100 22.451 .27
Caterpillar Inc. 700,000 24.544 .29
Deere & Co. 997,700 36.728 .44
Eaton Corp. 300,000 20.419 .24
Harsco Corp. (1) 2,025,000 40.880 .49
Pall Corp. 500,000 10.781 .13
Trading Companies & Distributors - 0.27%
Genuine Parts Co. 1,050,000 22.378 .27
503.915 6.03
COMMERCIAL SERVICES & SUPPLIES
Commercial Services & Supplies - 2.17%
Pitney Bowes Inc. 3,286,700 97.574 1.17
ServiceMaster Co. 5,200,000 47.450 .57
Waste Management, Inc. 1,800,000 36.000 .43
181.024 2.17
TRANSPORTATION
Road & Rail - 2.30%
Burlington Northern Santa Fe Corp. 513,600 13.642 .16
CSX Corp. 3,350,000 84.797 1.02
Norfolk Southern Corp. 4,990,000 70.484 .84
Union Pacific Corp. 500,000 23.438 .28
192.361 2.30
AUTOMOBILES & COMPONENTS
Auto Components - 1.10%
Dana Corp. 700,000 15.531 .18
Delphi Automotive Systems Corp. 698,465 10.957 .13
Federal-Mogul Corp. 7.00% convertible 155,000 .775 .01
preferred
Goodyear Tire & Rubber Co. 1,200,000 22.200 .27
Johnson Controls, Inc. 280,000 16.695 .20
TRW Inc. 620,000 26.040 .31
92.198 1.10
CONSUMER DURABLES & APPAREL
Household Durables - 0.76%
Stanley Works 2,400,000 63.900 .76
Textiles & Apparel - 0.84%
NIKE, Inc., Class B 970,000 38.740 .46
VF Corp. 1,150,000 31.409 .38
134.049 1.60
MEDIA
Media - 1.13%
Interpublic Group of Companies, Inc. 1,325,000 56.892 .68
Knight-Ridder, Inc. 750,000 37.688 .45
94.580 1.13
RETAILING
Multiline Retail - 1.64%
J.C. Penney Co., Inc. 3,100,000 36.231 .44
May Department Stores Co. 3,821,000 100.301 1.20
Specialty Retail - 0.27%
Lowe's Companies, Inc. 500,000 22.844 .27
159.376 1.91
FOOD & DRUG RETAILING
Food & Drug Retailing - 0.95%
Albertson's, Inc. 2,402,200 56.902 .68
Walgreen Co. 500,000 22.813 .27
79.715 .95
FOOD, BEVERAGES & TOBACCO
Beverages - 0.46%
PepsiCo, Inc. 800,000 38.750 .46
Food Products - 1.71%
ConAgra Foods, Inc. (formerly ConAgra, Inc.) 800,000 17.100 .21
General Mills, Inc. 1,400,000 58.450 .70
H.J. Heinz Co. 1,200,000 50.325 .60
Ralston Purina Co. 250,000 6.063 .07
Sara Lee Corp. 500,000 10.781 .13
181.469 2.17
HOUSEHOLD & PERSONAL PRODUCTS
Household Products - 0.71%
Fort James Corp. 1,000,000 32.938 .39
Kimberly-Clark Corp. 400,000 26.400 .32
Personal Products - 0.29%
Avon Products, Inc. 500,000 24.250 .29
83.588 1.00
HEALTH CARE EQUIPMENT & SERVICES
Health Care Equipment & Supplies - 0.55%
Becton, Dickinson and Co. 1,370,000 45.895 .55
Health Care Providers & Services - 0.41%
Aetna Inc. 360,000 20.812 .25
CIGNA Corp. 110,000 13.415 .16
80.122 .96
PHARMACEUTICALS & BIOTECHNOLOGY
Pharmaceuticals - 3.86%
Abbott Laboratories 1,000,000 52.813 .63
Bristol-Myers Squibb Co. 1,050,000 63.984 .77
Johnson & Johnson 400,000 36.850 .44
Pfizer Inc (merged with Warner-Lambert Co.) 1,837,600 79.361 .95
Pharmacia Corp. 1,620,000 89.100 1.07
322.108 3.86
BANKS
Banks - 9.45%
AmSouth Bancorporation 2,000,000 27.875 .33
Bank of America Corp. 3,312,000 159.183 1.91
Bank of New York Co., Inc. 750,000 43.172 .52
BANK ONE CORP. 4,189,300 152.909 1.83
Chase Manhattan Corp. 1,200,000 54.600 .65
Comerica Inc. 300,000 18.094 .22
First Union Corp. 3,400,000 103.063 1.23
FleetBoston Financial Corp. 300,000 11.400 .14
Huntington Bancshares Inc. 1,650,000 23.719 .28
J.P. Morgan & Co. Inc. 100,000 16.550 .20
National City Corp. 1,750,000 37.406 .45
SunTrust Banks, Inc. 400,000 19.525 .23
Wachovia Corp. 500,000 27.000 .32
Washington Mutual, Inc. 275,000 12.100 .15
Wells Fargo & Co. 1,793,750 83.073 .99
789.669 9.45
DIVERSIFIED FINANCIALS
Diversified Financials - 2.90%
Associates First Capital Corp., Class A 621,000 23.055 .28
Fannie Mae 850,000 65.450 .78
Household International, Inc. 3,050,000 153.453 1.84
241.958 2.90
INSURANCE
Insurance - 5.47%
Allstate Corp. 3,725,000 149.931 1.80
American General Corp. 1,110,000 89.355 1.07
Aon Corp. 490,500 20.325 .24
Jefferson-Pilot Corp. 1,000,000 68.750 .82
Lincoln National Corp. 560,900 27.134 .32
SAFECO Corp. 1,900,000 45.956 .55
St. Paul Companies, Inc. 1,085,700 55.642 .67
457.093 5.47
REAL ESTATE
Real Estate - 0.51%
Equity Residential Properties Trust 900,000 42.356 .51
SOFTWARE & SERVICES
Internet Software & Services - 0.28%
Galileo International, Inc. 1,200,000 23.700 .28
TECHNOLOGY HARDWARE & EQUIPMENT
Communications Equipment - 0.42%
Harris Corp. 1,100,000 34.856 .42
Computers & Peripherals - 1.84%
Hewlett-Packard Co. 850,000 39.472 .47
International Business Machines Corp. 1,160,000 114.260 1.37
Office Electronics - 0.37%
Xerox Corp. 3,716,900 31.361 .37
Semiconductor Equipment & Products - 0.59%
Linear Technology Corp. 150,000 9.685 .12
Texas Instruments Inc. 800,000 39.250 .47
268.884 3.22
TELECOMMUNICATION SERVICES
Diversified Telecommunication Services - 8.46%
AT&T Corp. 4,080,000 94.605 1.13
CenturyTel, Inc. 3,401,650 130.964 1.57
Qwest Communications International Inc. 1,850,000 89.956 1.08
(merged with U S WEST, Inc.) (2)
SBC Communications Inc. 2,843,892 164.057 1.97
Sprint FON Group 1,315,000 33.533 .40
Verizon Communications (formed by the 3,342,000 193.209 2.31
merger of GTE Corp. and Bell Atlantic)
706.324 8.46
UTILITIES
Electric Utilities - 5.96%
Ameren Corp. 300,000 11.925 .14
American Electric Power Co., Inc. (merged 2,466,800 102.372 1.22
with Central and South West Corp.)
Consolidated Edison, Inc. 1,335,700 47.000 .56
CP&L Energy, Inc. (formerly Carolina Power & 800,000 32.250 .39
Light Co.)
Duke Energy Corp. 1,275,000 110.208 1.32
GPU, Inc. 800,000 26.450 .32
Southern Co. 4,100,000 120.437 1.44
TECO Energy, Inc. 1,700,000 47.388 .57
Multi-Utilities - 1.47%
Xcel Energy Inc. (formerly New Century 4,795,000 122.572 1.47
Energies, Inc.)
620.602 7.43
MISCELLANEOUS
Miscellaneous - 1.03%
Other equity securities in initial period of 85.631 1.03
acquisition
TOTAL EQUITY SECURITIES 6,418.696 76.84
(cost:$5,367.334 million)
Principal
Bonds & Notes Amount
Corporate - 0.14%
J.C. Penney Co., Inc. 9.05% 2001 $ 12,000,000 11.753 .14
U.S. Treasury Obligations - 3.63%
4.046% January 2009 (3) 100,000,000 105.336 1.26
3.876% July 2002 (3) 100,000,000 108.050 1.29
5.625% November 2000 90,000,000 89.943 1.08
TOTAL BONDS & NOTES (cost: $306.189 million) 315.082 3.77
TOTAL INVESTMENT SECURITIES 6,733.778 80.61
(cost: $5,673.523 million)
Short-Term Securities
Corporate Short-Term Notes - 16.04%
A.I. Credit Corp. 6.46%-6.47% $50,000,000 49.748 .60
due 11/8-12/18/00
Alcoa Inc. 6.46%-6.52% due 11/2/00-1/9/01 65,000,000 64.348 .77
American Express Credit Corp. 6.48% 59,450,000 59.230 .71
due 11/20-11/21/00
AT&T Corp. 6.52% due 1/5-1/10/01 47,000,000 46.396 .56
BellSouth Telecommunications, Inc. 66,000,000 65.566 .78
6.45%-6.46% due 12/4-12/11/00
Campbell Soup Co. 6.51% due 11/6/00 39,000,000 38.958 .47
CIT Group, Inc. 6.49% due 11/17-11/20/00 50,000,000 49.833 .60
Coca-Cola Co. 6.45%-6.49% due 11/14/00-1/19/01 80,000,000 79.288 .95
Corporate Asset Funding Co. Inc. 6.47%-6.49% 53,000,000 52.864 .63
due 11/1-12/6/00 (4)
Eastman Kodak Co. 6.45%-6.50% 45,000,000 44.528 .53
due 12/21/00-1/11/01
E.I. du Pont de Nemours & Co. 6.46%-6.49% 75,000,000 74.719 .89
due 11/7/00-1/10/01
Ford Motor Credit Co. 6.47%-6.51% 60,000,000 59.546 .71
due 11/15/00-1/18/01
Gannett Co., Inc. 6.47% due 11/3/00 (4) 30,000,000 29.984 .36
General Electric Capital Corp. 6.45%-6.54% 77,500,000 76.198 .91
due 1/11-3/9/01
General Motors Acceptance Corp. 6.50%-6.53% 75,000,000 73.936 .89
due 1/16/01
Gillette Co. 6.49% due 1/8/01 (4) 50,000,000 49.376 .59
John Hancock Capital Corp. 6.50% 20,000,000 19.978 .24
due 11/6/00 (4)
Merck & Co., Inc. 6.47% due 11/27-11/28/00 75,000,000 74.631 .89
Motorola, Inc. 6.46%-6.47% due 11/1-11/15/00 47,300,000 47.235 .57
Park Avenue Receivables Corp. 6.51%-6.57% 65,000,000 64.659 .77
due 11/10/00-1/30/01 (4)
Preferred Receivables Funding Corp. 6.49% 50,000,000 49.919 .60
due 11/9/00 (4)
Procter & Gamble Co. 6.46%-6.47% 75,000,000 74.502 .89
due 11/29-12/11/00
SBC Communications Inc. 6.47% due 11/16/00 (4) 50,000,000 49.856 .60
Verizon Network Funding Corp. 6.46%-6.50% 44,700,000 44.534 .53
due 11/7-12/11/00
Federal Agency Discount Notes - 3.23%
Fannie Mae 6.40%-6.42% due 11/2/00-1/12/01 125,600,000 124.984 1.50
Federal Home Loan Banks 6.38%-6.44% 38,088,000 37.899 .45
due 11/3-12/13/00
Freddie Mac 6.38%-6.39% due 11/14-12/14/00 107,550,000 106.779 1.28
TOTAL SHORT-TERM SECURITIES 1,609.494 19.27
(cost: $1,609.550 million)
Excess of cash and receivables over payables 9.874 .12
TOTAL SHORT-TERM SECURITIES, CASH AND 1,619.368 19.39
RECEIVABLES
NET ASSETS $8,353.146 100.00
(1)The fund owns 5.07% of the outstanding
voting securities of Harsco,
and thus is considered an affiliate as
defined in the Investment Company
Act of 1940.
(2)Non-income-producing security.
(3)Index-linked bond whose principal
amount moves with a government retail
price index.
(4)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 APRIL 30, 2000
Aetna
CIGNA
Crown Cork & Seal
Dow Chemical
Fluor
Linear Technology
Lockheed Martin
Sonoco Products
Texas Instruments
Washington Mutual
EQUITY SECURITIES ELIMINATED FROM THE PORTFOLIO SINCE APRIL 30, 2000
Coca-Cola
Colgate-Palmolive
Eli Lilly
Emerson Electric
First Security
FPL Group
General Motors
Hercules
KeyCorp
Mallinckrodt
<TABLE>
<S> <C> <C>
AMERICAN MUTUAL FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
at October 31, 2000 (dollars in millions)
Assets:
Investment securities at market
(cost: $5,673.523) $6,733.778
Short-term securities
(cost: $1,609.550) 1,609.494
Cash .724
Receivables for--
Sales of investments $6.490
Sales of fund's shares 6.183
Dividends and accrued interest 14.302 26.975
8,370.971
Liabilities:
Payables for--
Purchases of investments 2.575
Repurchases of fund's shares 9.133
Forward currency contracts - net .000
Management services 1.971
Other expenses 4.146 17.825
Net Assets at October 31, 2000 $8,353.146
Total authorized capital stock--
500,000,000 shares
Class A shares, $0.001 par value
Net assets $8,343.326
Shares outstanding 342,454,600
Net asset value per share $24.36
Class B shares, $0.001 par value
Net assets $9.820
Shares outstanding 404,070
Net asset value per share $24.30
STATEMENT OF OPERATIONS
for the year ended October 31, 2000 (dollars in millions)
Investment Income:
Income:
Dividends $197.645
Interest 144.395 $342.040
Expenses:
Management services fee 24.702
Distribution expenses - Class A 18.636
Distribution expenses - Class B .034
Transfer agent fee - Class A 5.866
Transfer agent fee- Class B .003
Reports to shareholders .326
Registration statement and prospectus .369
Postage, stationery and supplies 1.345
Directors' fees .152
Auditing and legal fees .075
Custodian fee .154
Taxes other than federal income tax .111
Other expenses .095 51.868
Net investment income 290.172
Realized Gain and Unrealized
Depreciation on Investments:
Net realized gain 465.571
Net unrealized depreciation on
investments (771.397)
Net realized gain and
unrealized depreciation
on investments (305.826)
Net Decrease in Net Assets Resulting from
Operations $(15.654)
STATEMENT OF CHANGES IN NET ASSETS (dollars in millions)
Year Ended October 31
2000 1999
Operations:
Net investment income $ 290.172 $ 283.463
Net realized gain on investments 465.571 1,844.287
Net unrealized depreciation
on investments (771.397) (1,216.205)
Net (decrease) increase in net assets
resulting from operations (15.654) 911.545
Dividends and distributions paid to
Shareholders:
Dividends from net investment income:
Class A (263.546) (259.303)
Class B .089 0.000
Distributions from net realized
gain on investments:
Class A (1,723.068) (957.004)
Class B 0.000 0.000
Total dividends and distributions (1,986.703) (1,216.307)
Capital Share Transactions:
Proceeds from shares sold 484.684 766.619
Proceeds from shares issued in reinvestment
of net investment income dividends and
distributions of net realized gain on
investments 1,811.515 1,105.758
Cost of shares repurchased (2,361.923) (1,361.752)
Net (decrease) increase in net assets
resulting from capital share transactions (65.724) 510.625
Total (Decrease) Increase in Net Assets (2,068.081) 205.863
Net Assets:
Beginning of year 10,421.227 10,215.364
End of year (including
undistributed net investment
income: $85.820 and $92.283,
respectively) $8,353.146 $10,421.227
See Notes to Financial Statements
</TABLE>
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.
The fund offers Class A and Class B shares. Class A shares are sold with an
initial sales charge of up to 5.75%. Class B shares are sold without an
initial sales charge but are subject to a contingent deferred sales charge paid
upon redemption. This charge declines from 5% to zero over a period of six
years. Class B shares have higher distribution expenses and transfer agent fees
than Class A shares. Class B shares are automatically converted to Class A
shares eight years after the date of purchase. Holders of both classes of
shares have equal pro rata rights to assets and identical voting, dividend,
liquidation and other rights, except that each class bears different
distribution and transfer agent expenses, and each class shall have exclusive
rights to vote on matters affecting only their class.
SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared
in conformity with accounting principles generally accepted in the United
States 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, including depositary receipts, are
valued at the last reported sale price on the exchange or market on which such
securities are traded, as of the close of business on the day the securities
are being valued or, lacking any sales, at the last available bid price. In
cases where equity securities are traded on more than one exchange, the
securities are valued on the exchange or market determined by the investment
adviser to be the broadest and most representative market, which may be either
a securities exchange or the over-the-counter market. Fixed-income securities
are valued at prices obtained from a pricing service, when such prices are
available; however, in circumstances where the investment adviser deems it
appropriate to do so, such securities will be valued at the mean quoted bid and
asked prices or at prices for securities of comparable maturity, quality and
type. 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. The ability of the issuers of the fixed-income securities held by
the fund to meet their obligations may be affected by economic developments in
a specific industry, state or region.
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 specific identified cost. Dividend income
is recognized on the ex-dividend date, and interest income is recognized on an
accrual basis. Market discounts and original issue discounts on fixed-income
securities are amortized daily over the expected life of the security. The fund
does not amortize premiums on fixed-income securities.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions paid
to shareholders are recorded on the ex-dividend date.
ALLOCATIONS - Income, expenses (other than class-specific expenses) and
realized and unrealized gains and losses are allocated daily between Class A
and Class B based on their relative net asset values. Distribution expenses,
transfer agent fees and any other class-specific expenses are accrued daily and
charged to the applicable share class.
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 October 31, 2000, net unrealized appreciation on investments for federal
income tax purposes aggregated $1,060,954,000; $1,748,276,000 related to
appreciated securities and $687,322,000 related to depreciated securities.
During the year ended October 31, 2000, the fund realized, on a tax basis, a
net capital gain of $476,297,000 on securities transactions. The cost of
portfolio securities for federal income tax purposes was $7,282,318,000 at
October 31, 2000.
3. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEE - The fee of $24,702,000 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 the following rates and net asset levels:
<TABLE>
<CAPTION>
<S> <C> <C>
Net Asset Level (in billions)
Rate In Excess of Up to
0.384% $0 $1
0.330 1 2
0.294 2 3
0.270 3 5
0.252 5 8
0.240 8
</TABLE>
DISTRIBUTION EXPENSES - American Funds Distributors, Inc. ("AFD"), the
principal underwriter of the fund's shares, received $1,428,000 (after
allowances to dealers) as its portion of the sales charges paid by purchasers
of the fund's Class A shares during the year ended October 31, 2000. Such sales
charges are not an expense of the fund and, hence, are not reflected in the
accompanying Statement of Operations.
The fund has adopted plans of distribution under which it may finance
activities primarily intended to sell fund shares, provided the categories of
expense are approved in advance by the fund's Board of Directors. The plans
provide for aggregate annual expense limits of 0.25% of net assets for Class A
shares, and 1.00% of net assets for Class B shares.
For Class A shares, approved categories of expense include dealer service fees
of up to 0.25% of net assets. Also included are monthly reimbursements to AFD
for commissions paid during the prior 15-month period to dealers and
wholesalers in respect of certain shares sold without a sales charge. These
reimbursements are permitted only to the extent that the fund's overall 0.25%
annual expense limit is not exceeded. For the year ended October 31, 2000,
aggregate distribution expenses were $18,636,000, or 0.21% of net assets
attributable to Class A shares.
For Class B shares, approved categories of expense include fees of 0.75% per
annum payable to AFD. AFD sells the rights to receive such payments (as well as
any contingent deferred sales charges payable in respect of shares sold during
the period) in order to finance the payment of dealer commissions. Also
included are service fees of 0.25% per annum. These fees are paid to AFD to
compensate AFD for paying service fees to qualified dealers. For the period
ended October 31, 2000, aggregate distribution expenses were $34,000, or 1.00%
of net assets attributable to Class B shares.
As of October 31, 2000, accrued and unpaid distribution expenses payable to AFD
for Class A and Class B shares were
$2,840,000 and $8,000, respectively.
TRANSFER AGENT FEE - A fee of $5,869,000 was incurred during the year ended
October 31, 2000, pursuant to an agreement with American Funds Service Company
("AFS"), the transfer agent for the fund.
DEFERRED DIRECTORS'FEES <UNDEF> 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, 2000, aggregate deferred amounts and earnings
thereon since the deferred compensation plan's adoption (1993), net of any
payments to Directors, were $808,000.
AFFILIATED DIRECTORS' AND OFFICERS - CRMC is owned by The Capital Group
Companies, Inc. AFS and AFD are both wholly owned subsidiaries of CRMC.
Officers of the fund and certain Directors 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 $2,048,530,000 and $3,053,856,000, respectively,
during the year ended October 31, 2000.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
During the year ended October 31, 2000, the custodian fee of $154,000 includes
$34,000 that was paid by these credits rather than in cash.
The fund reclassified $33,000,000 from undistributed net investment income and
$68,600,000 from undistributed net realized gains to additional paid-in capital
for the year ended October 31, 2000, as a result of permanent differences
between book and tax.
As of October 31, 2000, net assets consisted of the following:
<TABLE>
<CAPTION>
2000
<S> <C>
Capital paid in on shares of capital stock $6,850,197,000
Undistributed net investment income 85,820,000
Accumulated net realized gain 356,930,000
Net unrealized appreciation 1,060,199,000
Net assets $8,353,146,000
</TABLE>
Capital share transactions in the fund were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Year ended October 31,
2000 1999
Class A Shares: Amount ('000) Shares Amount ('000) Shares
Sold $475,157 19,829,689 $766,619 25,199,667
Reinvestment of dividends 1,811,432 76,568,221 1,105,758 38,225,805
and Distributions
Repurchased (2,361,775) (100,234,580) (1,361,752) (44,745,071)
Net (decrease)increase in (75,186) (3,836,670) 510,625 18,680,401
Class A
Class B Shares:*
Sold 9,527 406,808 - -
Reinvestment of dividends 83 3,599 - -
and Distributions
Repurchased (148) (6,337) - -
Net increase in Class B 9,462 404,070 - -
Total net (decrease) $(65,724) (3,432,600) $510,625 18,680,401
increase in fund
</TABLE>
* Class B shares were not offered before March 15, 2000.
<TABLE>
<S> <C> <C> <C> <C>
PER-SHARE DATA AND RATIOS /1/
Net
Net asset gains/(losses)
value, Net on securities Total from
beginning investment (both realized investment
Year ended of year income and unrealized) operations
Class A:
2000 $30.09 0.8 /2/ $(.74) /2/ $ .06
1999 31.18 .82 1.78 2.60
1998 30.14 .84 3.48 4.32
1997 26.54 .83 5.19 6.02
1996 24.17 .84 3.52 4.36
Class B:
2000 21.78 0.37 /2/ 2.46 /2/ 2.83
Dividends
(from net Distributions Net asset
investment (from capital Total value, end
Year ended income) gains) distributions of year
Class A:
2000 $(.74) $(5.05) $(5.79) $24.36
1999 (.76) (2.93) (3.69) 30.09
1998 (.80) (2.48) (3.28) 31.18
1997 (.81) (1.61) (2.42) 30.14
1996 (.84) (1.15) (1.99) 26.54
Class B:
2000 (.31) - (.31) 24.30
Ratio of Ratio of
Net assets, expenses net income
Total end of year to average to average
Year ended return (in millions) net assets net assets
Class A:
2000 1.20% $8,343 .59% 3.29%
1999 9.01 10,421 .57 2.67
1998 15.15 10,215 .56 2.75
1997 24.19 9,362 .58 2.95
1996 18.89 7,759 .59 3.36
Class B:
2000 13.07 10 1.38 /3/ 2.33 /3/
Portfolio
turnover
Year ended rate
Class A:
2000 29.35% /4/
1999 41.53
1998 28.97
1997 19.16
1996 24.21
Class B:
2000 29.35 /4/
</TABLE>
/1/ The periods 1996 through 2000 represent, for Class A shares, fiscal years
ended October 31. The period ended 2000 represents, for Class B shares,
the 230-day period ended October 31, 2000. Class B shares were not
offered before March 15, 2000. Total return for Class B is based on
activity during the period and thus is not representative of a full year.
Total returns exclude all sales charges, including contingent deferred
sales charges.
/2/ Based on average shares outstanding.
/3/ Annualized.
/4/ Represents portfolio turnover rate (equivalent for all share classes) for
the year ended October 31, 2000.
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 investment portfolio, as
of October 31, 2000, 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 for Class A shares and the period March 15, 2000
through October 31, 2000, for Class B shares. 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 auditing standards generally
accepted in the United States of America. 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 at October 31, 2000, 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. at October 31, 2000, 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 for Class A shares and the period March
15, 2000 through October 31, 2000, for Class B shares, in conformity with
accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Los Angeles, California
December 1, 2000
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. During the fiscal year ended October 31, 2000, the
fund paid a long-term capital gain distribution of $1,723,068,000 to Class A
shareholders.
The fund also designates as a net investment income distribution and 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, 67% of the dividends
paid by the fund from net investment income represent 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, 9% 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 retirement plan 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 2001 TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR TAX RETURNS. SHAREHOLDERS SHOULD CONSULT THEIR
TAX ADVISERS.
SHAREHOLDER SERVICES
[illustration of a telephone handset]
American FundsLine/r/
Use our 24-hour automated phone system for fund information and transactions.
[illustration of a computer]
FundsLine OnLine/r/
Visit our Web site when you want to access your account, download a prospectus,
or find fund information.
[illustration of coins]
Reduced sales charge
Larger purchases may qualify for a reduced sales charge. To help reach a
breakpoint, you may -
* Add your present purchase to the value of all eligible household accounts
and/or
* Add your present purchase to purchases you intend to make over 13 months
Assets in money market funds generally do not apply when determining sales
charges.
[illustration of road signs using financial terms]
Retirement plans
A wide range of fund choices for individual and company-sponsored retirement
plans.
[illustration of a building]
American FundsLink/sm/
Link your fund account to your bank account for direct transfers between the
two and to purchase shares using American FundsLine or FundsLine OnLine.
[illustration of a desk calendar]
Automatic transactions
Use this service when you want to buy, sell and exchange shares on a regular
basis.
[illustration of a man and money flowing from one box to another]
Flexible dividend options
Use your dividend and capital gain distributions to meet your changing needs.
You may -
* Invest dividends and capital gain distributions back into the fund
* Diversify by investing dividends and capital gain distributions into another
American Fund
* Take dividends in cash
* Have dividends paid directly to someone else
Because certain transactions have restrictions or tax consequences, please
consult your financial adviser before requesting changes.
WOULD YOU LIKE MORE INFORMATION?
Your financial adviser will be happy to explain these services in greater
detail, or you may contact American Funds Service Company.
TO CONTACT AMERICAN FUNDS SERVICE COMPANY:
Shareholder Services Representative - 8 a.m. to 8 p.m. Eastern time, Mon.-Fri.
- 800/421-0180
American FundsLine - 24-hour automated telephone system - 800/325-3590
FundsLine OnLine - Web site - www.americanfunds.com
By mail - Write to the service center nearest you.
(If you live outside the United States, please write to the Western service
center.)
WESTERN
American Funds
Service Company
P.O. Box 2205
Brea, CA 92822-2205
WEST CENTRAL
American Funds
Service Company
P.O. Box 659522
San Antonio, TX 78265-9522
EAST CENTRAL
American Funds
Service Company
P.O. Box 6007
Indianapolis, IN 46206-6007
EASTERN
American Funds
Service Company
P.O. Box 2280
Norfolk, VA 23501-2280
PLEASE OBTAIN THE APPLICABLE PROSPECTUSES FROM YOUR FINANCIAL ADVISER OR OUR
WEB SITE AND READ THEM CAREFULLY BEFORE INVESTING OR SENDING MONEY.
AMERICAN FUNDS RESERVES THE RIGHT TO TERMINATE OR MODIFY THESE SERVICES.
American Mutual Fund
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
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
San Diego, California
Managing Director, Senior Resource
Group, LLC (development and management
of senior living communities)
Mary Myers Kauppila
Boston, Massachusetts
Private investor; former owner and
President, Energy Investment, Inc.
Baily Morris-Eck
Washington, D.C.
Senior Associate, Reuters Foundation;
Senior Fellow, Institute for International
Economics; consultant, The Independent
(London); former Vice President,
Brookings Institution
Robert G. O'Donnell
San Francisco, California
President of the fund
Senior Vice President and Director,
Capital Research and Management Company
Kirk P. Pendleton
Huntingdon Valley, Pennsylvania
Chairman of the Board and Chief
Executive Officer, Cairnwood, Inc.
(venture capital investment)
Olin C. Robison, Ph.D.
Middlebury, Vermont
President of the Salzburg Seminar;
President Emeritus, Middlebury College
Steven B. Sample, Ph.D.
Los Angeles, California
President, University of Southern California;
Chairman of the Board, Association of
Pacific Rim Universities; former
Chairman of the Board,
Association of American Universities
CHAIRMAN EMERITUS
Jon B. Lovelace, Jr.
Los Angeles, California
Chairman Emeritus, Capital Research
and Management Company
OTHER OFFICERS
Timothy D. Armour
Los Angeles, California
Senior Vice President of the fund
Director, Capital Research and
Management Company
Joanna F. Jonsson
San Francisco, California
Senior Vice President of the fund
Executive Vice President and Research
Director, Capital Research Company
Alan N. Berro
Los Angeles, California
Vice President of the fund
Senior Vice President,
Capital Research Company
Joyce E. Gordon
Los Angeles, California
Vice President of the fund
Senior Vice President,
Capital Research Company
J. Dale Harvey
Los Angeles, California
Vice President of the fund
Vice President and Director,
Capital Research Company
Stuart R. Strachan
Los Angeles, California
Vice President of the fund
Senior Counsel - Fund Business
Management Group, Capital Research
and Management Company
Julie F. Williams
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
The American Funds Group/r/
American Mutual Fund
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
Two California Plaza
350 South Grand Avenue
Los Angeles, California 90071-3462
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
There are two ways to invest in American Mutual Fund. Class A shares are a
subject to a 5.75% maximum up-front sales charge that declines for accounts of
$25,000 or more. Class B shares, which are not available for certain
employer-sponsored retirement plans, have no up-front charge. They are,
however, subject to additional expenses of approximately 0.75% a year over the
first eight years of ownership. If redeemed within six years, they may also be
subject to a contingent deferred sales charge (5% maximum) that declines over
time. Because expenses are first deducted from income, dividends for Class B
share accounts will be lower.
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, 2000, 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, or for a
prospectus for any of the American Funds, 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. Please read
the prospectus carefully before you invest or send money.
Printed on recycled paper
Litho in USA CD/AL/4887
Lit. No. AMF-011-1200
