UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
Certified Shareholder Report of
Registered Management Investment Companies
Investment Company Act File Number: 811-572
American Mutual Fund, Inc.
(Exact Name of Registrant as specified in charter)
333 South Hope Street
Los Angeles, California 90071
(Address of principal executive offices)
Registrant's telephone number, including area code: (213) 486-9200
Date of fiscal year end: October 31
Date of reporting period: October 31, 2005
Vincent P. Corti
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071
(name and address of agent for service)
Copies to:
Eric A.S. Richards, Esq.
O’Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
(Counsel for the Registrant)
ITEM 1 - Reports to Stockholders
[logo - American Funds®]
The right choice for the long term®
American Mutual Fund
[photo of wildflowers on a California hillside]
Annual report for the year ended October 31, 2005
American Mutual Fund® strives for the balanced accomplishment of three objectives — current income, growth of capital and conservation of principal — through investments in companies that participate in the growth of the American economy.
This fund is one of the 29 American Funds. The organization ranks among the nation’s three largest mutual fund families. For more than seven decades, Capital Research and Management Company,SM the American Funds adviser, has invested with a long-term focus based on thorough research and attention to risk.
Contents | |
Letter to shareholders | 1 |
The value of a long-term perspective | 3 |
Why dividends are important | 6 |
Summary investment portfolio | 12 |
Financial statements | 15 |
Fund Directors and officers | 30 |
The American Funds family | back cover |
About the cover: American Mutual Fund has traditionally featured scenes of natural beauty in the United States. This photograph shows wildflowers on a California hillside.
Figures shown are past results for Class A shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors 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. For the most current information and month-end results, visit americanfunds.com. Fund results shown, unless otherwise indicated, are at net asset value. If a sales charge (maximum 5.75%) had been deducted, the results would have been lower.
Here are the average annual total returns on a $1,000 investment with all distributions reinvested for periods ended September 30, 2005 (the most recent calendar quarter):
1 year | 5 years | 10 years | |
Class A shares | |||
Reflecting 5.75% maximum sales charge | +3.72% | +5.82% | +9.26% |
The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased the waiver to 10% on April 1, 2005. Fund results shown reflect the waiver, without which they would have been lower. Please see the Financial Highlights table on page 23 for details.
The fund’s 30-day yield for Class A shares as of November 30, 2005, calculated in accordance with the Securities and Exchange Commission formula, was 2.12%, which reflects a fee waiver (2.10% without the fee waiver). The fund’s distribution rate for Class A shares as of that date was 1.65%. Both reflect the 5.75% maximum sales charge. The SEC yield reflects the rate at which the fund is earning income on its current portfolio of securities while the distribution rate reflects the fund’s past dividends paid to shareholders. Accordingly, the fund’s SEC yield and distribution rate may differ.
Other share class results and important information can be found on page 27.
[photo of wildflowers on a California hillside]
[Begin Sidebar]
Dividends paid in calendar 2005
For tax purposes, here are the income dividends Class A shareholders received in calendar 2005.
Income dividends per share:
$0.12 paid 3/21/05
$0.12 paid 6/20/05
$0.13 paid 9/26/05
$0.13 to be paid 12/22/05
A Form 1099-DIV, which provides the information you will need to prepare your federal income tax return for 2005, will be mailed to you with your American Funds Tax Guide in late January 2006.
[End Sidebar]
Fellow shareholders:
Despite a series of negative developments, the stock market recorded a positive return for American Mutual Fund’s 2005 fiscal year. For the 12 months ended October 31, AMF posted a total return of 7.8%. This return trailed the 8.7% total return of the unmanaged Standard & Poor’s 500 Composite Index, which doesn’t reflect any expenses. AMF’s return assumes reinvestment of all income dividends and the capital gain distribution. During the year, AMF paid regular income dividends totaling 48 cents a share, an increase of 4.3% over fiscal 2004’s payout.
Economic review
The impact of rising interest rates and energy prices and the late summer Gulf Coast hurricanes conspired to slow down economic growth somewhat in fiscal 2005, but the negative developments seemed to have had less impact on gross domestic product statistics than one might have expected. Gross domestic product grew at an annual rate of 4.3% in the third quarter, compared with 3.3% in the second quarter and 3.8% in the first quarter. Corporate profits continued strong. In the third quarter, operating earnings for companies in the S&P 500 were 12% higher than in the same period a year earlier, the 14th consecutive quarter of double-digit year-over-year growth. Many companies gained pricing power while holding down labor costs.
[photo of wildflowers on a California hillside]
The Federal Reserve Board raised the federal funds rate to 4.0% on November 1. It was the Fed’s 12th consecutive increase from its extremely low level of 1.0% in June 2004. The Fed warned that higher costs, especially for energy, might yet pass through into consumer prices, but said that it is satisfied that long-term inflation expectations remain “contained.” Core inflation, which doesn’t include energy and food prices, has continued to remain relatively low.
Portfolio review
American Mutual Fund focuses on the balanced pursuit of three objectives: current income, growth of capital and conservation of principal. It seeks to achieve this by investing in established, well managed companies that have a history of growing revenues and profits. The fund only invests in companies that pay dividends to shareholders. Our feature article beginning on page 6 explains why dividends are important to AMF shareholders.
Our largest industry holdings are concentrated in sectors such as energy, financials, industrials, consumer discretionary and health care. Energy, utilities and information technology were main contributors to the fund’s results during the past 12 months. Sectors that detracted from results included materials and consumer discretionary.
Among our largest holdings, Marathon Oil (+57.9%), Hewlett Packard (+50.3%) and Norfolk Southern (+18.4%) produced excellent results. Results for three of our other large holdings — Fannie Mae (-32.3%), IBM (-8.8%) and General Electric (-0.6%) — were disappointing.
The fund remains conservatively postured with common stocks accounting for 82% of the portfolio at fiscal year-end. We hold the remainder of the portfolio mainly in short-term fixed-income securities.
Over the past 12 months, the number of shareholder accounts has increased to more than 840,000 from 704,000 a year ago. We welcome our new shareholders and thank our long-term investors for their faith in American Mutual Fund.
Cordially,
/s/ James K. Dunton
James K. Dunton
Vice Chairman of the Board
/s/ J. Dale Harvey
J. Dale Harvey
President
President
December 7, 2005
[Begin Sidebar]
H. Frederick Christie, an independent Director of the fund since 1972, has been elected non-executive chairman of the Board. James K. Dunton, the previous chairman, has been elected vice chairman and will remain principal executive officer. As independent Board chair, Mr. Christie will chair Board meetings, including executive sessions of the independent Directors, and will be responsible for Board agendas, but will not have other executive or management responsibilities with the fund. He will remain unaffiliated with Capital Research and Management Company, the fund’s investment adviser, and any of its affiliates.
J. Dale Harvey, portfolio counselor for the fund, was elected president. He succeeds Robert G. O’Donnell, who has been a director of the fund since 1987. We thank Bob for his many years of service to the fund. He continues to be involved as a portfolio counselor and officer for other American Funds and as a senior vice president and director of Capital Research and Management Company.
[End Sidebar]
For current information about the fund, visit americanfunds.com.
The value of a long-term perspective
Results of a $10,000 investment in American Mutual Fund
Fund figures reflect deduction of the maximum sales charge of 5.75% on the $10,000 investment.1 Thus the net amount invested was $9,425.2
For more than 55 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, 2005. The table beneath the chart shows the fund’s total return in each of the 55 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 $6,279,702.3
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 1995. At the time, the table indicates the value of the investment illustrated here was about $2.5 million. Since then, it has more than doubled to nearly $6.3 million. Thus, in the same period, the value of your 1995 investment — regardless of its size — also has more than doubled.
[Begin Sidebar]
Average annual total returns based on a $1,000 investment
(for periods ended October 31, 2005)*
1 year | 5 years | 10 years | |
Class A shares | +1.60% | +4.99% | +9.12% |
*Assumes reinvestment of all distributions and payment of the maximum 5.75% sales charge.
The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased the waiver to 10% on April 1, 2005. Fund results shown reflect the waiver, without which they would have been lower. Please see the Financial Highlights table on page 23 for details.
[End Sidebar]
[begin mountain chart]
Date | American Mutual Fund with dividends reinvested (3) | American Mutual Fund with dividends excluded (5) |
02/21/50 | 9,426 | 9,426 |
07/13/50 | 9,004 | 8,918 |
10/07/50 | 10,274 | 10,075 |
10/31/50 | 10,018 | 9,708 |
10/31/51 | 12,234 | 11,334 |
07/16/52 | 13,421 | 12,181 |
10/31/52 | 13,164 | 11,710 |
03/19/53 | 14,577 | 12,882 |
09/14/53 | 13,004 | 11,256 |
10/31/53 | 14,076 | 12,009 |
10/31/54 | 19,261 | 15,876 |
09/23/55 | 26,727 | 21,627 |
10/31/55 | 25,050 | 20,087 |
08/02/56 | 31,861 | 25,028 |
10/31/56 | 29,652 | 23,142 |
12/31/56 | 30,831 | 24,062 |
10/22/57 | 26,773 | 20,267 |
10/31/57 | 28,050 | 21,241 |
01/02/58 | 27,933 | 20,944 |
09/30/58 | 34,818 | 25,718 |
10/31/58 | 36,140 | 26,511 |
08/03/59 | 43,480 | 31,294 |
10/31/59 | 41,489 | 29,668 |
12/31/59 | 43,319 | 30,977 |
09/28/60 | 40,277 | 27,959 |
10/31/60 | 40,865 | 28,371 |
10/31/61 | 54,348 | 36,806 |
12/12/61 | 57,113 | 38,678 |
06/25/62 | 42,687 | 28,545 |
10/31/62 | 46,572 | 30,677 |
10/31/63 | 61,289 | 39,309 |
10/31/64 | 71,355 | 44,625 |
06/28/65 | 70,430 | 43,509 |
10/31/65 | 79,919 | 48,769 |
12/17/65 | 82,334 | 50,242 |
10/07/66 | 71,747 | 42,538 |
10/31/66 | 77,646 | 46,067 |
01/04/67 | 79,886 | 47,052 |
09/25/67 | 98,623 | 57,321 |
10/31/67 | 92,836 | 53,558 |
03/25/68 | 89,187 | 51,057 |
10/31/68 | 109,586 | 61,257 |
11/29/68 | 115,011 | 64,289 |
10/09/69 | 98,399 | 53,023 |
10/31/69 | 103,216 | 55,651 |
05/26/70 | 78,408 | 41,363 |
10/31/70 | 93,358 | 48,100 |
04/29/71 | 120,955 | 61,139 |
10/31/71 | 112,886 | 55,961 |
11/23/71 | 106,468 | 52,779 |
08/23/72 | 128,118 | 61,708 |
10/31/72 | 125,226 | 59,737 |
12/11/72 | 136,043 | 64,897 |
08/22/73 | 112,151 | 51,865 |
10/31/73 | 124,800 | 57,130 |
03/14/74 | 126,331 | 57,130 |
10/03/74 | 91,007 | 38,810 |
10/31/74 | 105,122 | 44,985 |
12/06/74 | 96,877 | 41,457 |
07/15/75 | 138,200 | 56,926 |
10/31/75 | 132,196 | 53,330 |
12/05/75 | 130,346 | 52,584 |
09/21/76 | 174,044 | 67,986 |
10/31/76 | 167,379 | 64,276 |
12/31/76 | 182,661 | 70,144 |
10/31/77 | 176,434 | 64,554 |
01/26/78 | 175,846 | 63,480 |
09/12/78 | 229,322 | 80,818 |
10/31/78 | 198,947 | 69,119 |
10/05/79 | 257,885 | 86,418 |
10/31/79 | 232,805 | 76,959 |
10/15/80 | 315,866 | 100,651 |
10/31/80 | 303,585 | 95,432 |
06/23/81 | 350,366 | 107,612 |
09/25/81 | 317,838 | 96,442 |
10/31/81 | 334,117 | 99,943 |
08/10/82 | 334,437 | 93,802 |
10/22/82 | 434,703 | 120,458 |
10/31/82 | 426,438 | 118,168 |
01/03/83 | 444,289 | 120,550 |
10/10/83 | 562,833 | 149,553 |
10/31/83 | 544,917 | 143,286 |
11/29/83 | 564,778 | 148,509 |
07/24/84 | 507,745 | 128,657 |
10/31/84 | 577,161 | 144,417 |
01/04/85 | 583,499 | 144,219 |
07/17/85 | 704,992 | 170,303 |
10/31/85 | 701,836 | 167,598 |
09/04/86 | 936,477 | 216,971 |
10/31/86 | 913,072 | 209,413 |
08/25/87 | 1,136,870 | 253,230 |
10/19/87 | 886,283 | 195,646 |
10/31/87 | 960,889 | 212,116 |
12/04/87 | 893,638 | 197,270 |
06/22/88 | 1,071,388 | 229,884 |
10/31/88 | 1,081,202 | 227,085 |
01/03/89 | 1,071,656 | 220,598 |
10/31/89 | 1,299,788 | 259,386 |
12/13/89 | 1,346,639 | 268,736 |
10/31/90 | 1,239,346 | 235,204 |
01/09/91 | 1,280,467 | 238,543 |
08/28/91 | 1,533,066 | 279,429 |
10/31/91 | 1,544,414 | 278,500 |
12/10/91 | 1,500,849 | 267,729 |
08/03/92 | 1,715,846 | 299,703 |
10/31/92 | 1,690,017 | 292,156 |
12/04/92 | 1,720,976 | 294,489 |
10/15/93 | 2,018,685 | 335,881 |
10/31/93 | 2,004,864 | 333,581 |
11/01/93 | 2,003,137 | 333,294 |
04/04/94 | 1,902,057 | 313,572 |
10/31/94 | 2,039,874 | 326,417 |
12/08/94 | 1,968,379 | 311,824 |
10/19/95 | 2,505,170 | 386,113 |
10/31/95 | 2,473,446 | 381,224 |
01/10/96 | 2,579,741 | 394,322 |
10/21/96 | 2,965,119 | 442,248 |
10/31/96 | 2,940,742 | 438,613 |
12/16/96 | 2,977,645 | 440,717 |
10/07/97 | 3,809,732 | 552,257 |
10/31/97 | 3,652,205 | 529,422 |
01/09/98 | 3,718,525 | 535,657 |
04/17/98 | 4,289,166 | 613,976 |
10/31/98 | 4,205,471 | 594,159 |
11/23/98 | 4,395,647 | 621,027 |
12/14/98 | 4,240,060 | 595,287 |
10/31/99 | 4,584,199 | 631,823 |
11/16/99 | 4,643,616 | 640,013 |
03/07/00 | 3,918,147 | 536,579 |
10/31/00 | 4,639,429 | 620,069 |
05/21/01 | 5,217,427 | 686,711 |
09/21/01 | 4,560,805 | 591,103 |
10/31/01 | 4,811,535 | 623,599 |
03/19/02 | 5,400,265 | 694,828 |
10/09/02 | 3,957,009 | 500,364 |
10/31/02 | 4,406,372 | 557,186 |
03/11/03 | 4,149,192 | 521,398 |
10/31/03 | 5,257,312 | 648,807 |
11/18/03 | 5,200,587 | 641,807 |
10/06/04 | 5,895,199 | 713,980 |
10/31/04 | 5,825,570 | 705,547 |
11/02/04 | 5,823,249 | 705,266 |
08/03/05 | 6,444,871 | 770,270 |
10/31/05 | 6,279,702 | 746,895 |
Difference between American Mutual Fund with dividends reinvested and American Mutual Fund with dividends excludes equals value added by reinvestment of dividends.
Date | Standard & Poor's 500 Composite Index with dividends reinvested (4) |
02/21/50 | 10,000 |
3/9/1950 | 9,980 |
10/24/1950 | 12,242 |
10/31/1950 | 12,023 |
12/4/1950 | 11,810 |
10/15/1951 | 15,620 |
10/31/1951 | 15,125 |
11/24/1951 | 14,703 |
8/8/1952 | 17,629 |
10/31/1952 | 17,157 |
1/5/1953 | 18,855 |
9/14/1953 | 16,653 |
10/31/1953 | 18,185 |
11/17/1953 | 17,970 |
10/6/1954 | 25,456 |
10/31/1954 | 24,752 |
11/1/1954 | 24,838 |
9/23/1955 | 36,907 |
10/31/1955 | 34,492 |
11/1/1955 | 34,443 |
8/2/1956 | 41,741 |
10/31/1956 | 38,605 |
7/15/1957 | 42,684 |
10/22/1957 | 34,205 |
10/31/1957 | 36,167 |
12/18/1957 | 34,818 |
10/13/1958 | 47,125 |
10/31/1958 | 47,009 |
11/25/1958 | 46,725 |
8/3/1959 | 56,925 |
10/31/1959 | 54,385 |
1/5/1960 | 57,427 |
10/25/1960 | 51,038 |
10/31/1960 | 52,268 |
11/1/1960 | 52,806 |
10/31/1961 | 69,287 |
12/12/1961 | 73,541 |
6/26/1962 | 53,780 |
10/31/1962 | 59,004 |
11/1/1962 | 59,630 |
10/28/1963 | 80,093 |
10/31/1963 | 79,835 |
11/22/1963 | 75,088 |
10/12/1964 | 94,552 |
10/31/1964 | 94,408 |
6/28/1965 | 92,427 |
10/27/1965 | 105,817 |
10/31/1965 | 106,023 |
2/9/1966 | 108,804 |
10/7/1966 | 86,547 |
10/31/1966 | 95,134 |
11/22/1966 | 94,505 |
9/25/1967 | 118,979 |
10/31/1967 | 115,082 |
3/5/1968 | 108,692 |
10/21/1968 | 132,432 |
10/31/1968 | 130,788 |
11/29/1968 | 137,411 |
7/29/1969 | 115,515 |
10/31/1969 | 126,935 |
11/10/1969 | 128,357 |
5/26/1970 | 92,108 |
10/31/1970 | 112,877 |
11/18/1970 | 112,254 |
4/28/1971 | 143,982 |
10/31/1971 | 131,895 |
11/23/1971 | 126,198 |
8/14/1972 | 161,027 |
10/31/1972 | 160,791 |
1/11/1973 | 174,099 |
8/22/1973 | 148,093 |
10/31/1973 | 160,825 |
11/1/1973 | 159,934 |
10/3/1974 | 96,094 |
10/31/1974 | 114,517 |
12/6/1974 | 101,201 |
7/15/1975 | 152,757 |
10/31/1975 | 144,279 |
12/5/1975 | 141,160 |
9/21/1976 | 180,440 |
10/31/1976 | 173,368 |
12/31/1976 | 182,351 |
10/25/1977 | 159,782 |
10/31/1977 | 162,890 |
3/6/1978 | 156,091 |
9/12/1978 | 197,202 |
10/31/1978 | 173,229 |
11/14/1978 | 172,001 |
10/5/1979 | 217,506 |
10/31/1979 | 200,011 |
3/27/1980 | 196,407 |
10/15/1980 | 275,888 |
10/31/1980 | 264,126 |
11/28/1980 | 292,265 |
9/25/1981 | 243,451 |
10/31/1981 | 265,623 |
8/12/1982 | 233,339 |
10/20/1982 | 320,276 |
10/31/1982 | 308,890 |
11/23/1982 | 307,088 |
10/10/1983 | 415,677 |
10/31/1983 | 395,213 |
1/6/1984 | 412,027 |
7/24/1984 | 368,402 |
10/31/1984 | 420,380 |
12/13/1984 | 411,175 |
7/17/1985 | 509,869 |
10/31/1985 | 501,639 |
11/4/1985 | 505,418 |
9/4/1986 | 691,048 |
10/31/1986 | 668,098 |
8/25/1987 | 943,691 |
10/19/1987 | 632,928 |
10/31/1987 | 710,847 |
12/4/1987 | 634,197 |
10/21/1988 | 827,986 |
10/31/1988 | 815,773 |
11/16/1988 | 771,471 |
10/9/1989 | 1,087,429 |
10/31/1989 | 1,030,770 |
7/16/1990 | 1,143,973 |
10/11/1990 | 924,581 |
10/31/1990 | 953,671 |
11/7/1990 | 959,977 |
8/28/1991 | 1,275,819 |
10/31/1991 | 1,272,350 |
11/29/1991 | 1,221,224 |
9/14/1992 | 1,415,354 |
10/31/1992 | 1,398,929 |
11/4/1992 | 1,393,683 |
10/15/1993 | 1,611,215 |
10/31/1993 | 1,607,499 |
2/2/1994 | 1,667,508 |
4/4/1994 | 1,526,617 |
10/31/1994 | 1,669,519 |
12/8/1994 | 1,579,580 |
10/19/1995 | 2,140,536 |
10/31/1995 | 2,110,427 |
11/1/1995 | 2,120,298 |
10/18/1996 | 2,635,548 |
10/31/1996 | 2,618,637 |
11/1/1996 | 2,613,067 |
10/7/1997 | 3,713,963 |
10/31/1997 | 3,459,189 |
11/12/1997 | 3,426,436 |
7/17/1998 | 4,535,102 |
10/31/1998 | 4,219,865 |
11/3/1998 | 4,266,609 |
7/16/1999 | 5,497,678 |
10/31/1999 | 5,302,788 |
3/24/2000 | 5,967,503 |
10/12/2000 | 5,229,586 |
10/31/2000 | 5,625,358 |
11/6/2000 | 5,636,338 |
9/21/2001 | 3,842,757 |
10/31/2001 | 4,225,243 |
1/4/2002 | 4,686,796 |
10/9/2002 | 3,141,633 |
10/31/2002 | 3,587,381 |
03/11/03 | 3,264,697 |
10/31/03 | 4,333,074 |
11/20/2003 | 4,262,720 |
2/11/2004 | 4,794,947 |
10/31/2004 | 4,740,913 |
11/1/2004 | 4,742,213 |
8/3/2005 | 5,293,460 |
10/31/2005 | 5,154,100 |
Date | Consumer Price Index (6) |
2/28/50 | 10,000 |
10/31/50 | 10,468 |
11/1/50 | 10,511 |
10/31/51 | 11,149 |
2/28/52 | 11,191 |
8/31/52 | 11,362 |
10/31/52 | 11,362 |
2/28/53 | 11,277 |
10/31/53 | 11,489 |
1/31/54 | 11,447 |
4/30/54 | 11,404 |
10/31/54 | 11,404 |
12/1/54 | 11,362 |
9/30/55 | 11,447 |
10/31/55 | 11,447 |
12/1/55 | 11,404 |
10/31/56 | 11,702 |
11/1/56 | 11,702 |
7/31/57 | 12,043 |
10/31/57 | 12,043 |
11/1/57 | 12,085 |
7/31/58 | 12,340 |
10/31/58 | 12,298 |
12/1/58 | 12,298 |
10/31/59 | 12,511 |
1/31/60 | 12,468 |
10/31/60 | 12,681 |
11/1/60 | 12,681 |
7/31/61 | 12,766 |
10/31/61 | 12,766 |
11/1/61 | 12,766 |
9/30/62 | 12,936 |
10/31/62 | 12,936 |
11/1/62 | 12,936 |
10/31/63 | 13,106 |
11/1/63 | 13,106 |
7/31/64 | 13,234 |
10/31/64 | 13,234 |
11/1/64 | 13,277 |
10/31/65 | 13,489 |
11/1/65 | 13,489 |
10/31/66 | 14,000 |
11/1/66 | 14,000 |
10/31/67 | 14,340 |
11/1/67 | 14,383 |
10/31/68 | 15,021 |
11/1/68 | 15,064 |
10/31/69 | 15,872 |
11/1/69 | 15,957 |
10/31/70 | 16,766 |
11/1/70 | 16,851 |
10/31/71 | 17,404 |
11/1/71 | 17,404 |
10/31/72 | 18,000 |
11/1/72 | 18,043 |
10/31/73 | 19,404 |
11/1/73 | 19,532 |
10/31/74 | 21,745 |
11/1/74 | 21,915 |
10/31/75 | 23,362 |
11/1/75 | 23,532 |
10/31/76 | 24,638 |
11/1/76 | 24,681 |
10/31/77 | 26,213 |
11/1/77 | 26,340 |
10/31/78 | 28,553 |
11/1/78 | 28,681 |
10/31/79 | 32,000 |
11/1/79 | 32,298 |
10/31/80 | 36,085 |
11/1/80 | 36,383 |
10/31/81 | 39,745 |
11/1/81 | 39,872 |
10/31/82 | 41,787 |
12/1/82 | 41,532 |
10/31/83 | 42,979 |
11/1/83 | 43,064 |
10/31/84 | 44,809 |
11/1/84 | 44,809 |
10/31/85 | 46,255 |
1/4/86 | 46,213 |
10/31/86 | 46,936 |
11/1/86 | 46,979 |
10/31/87 | 49,064 |
11/1/87 | 49,106 |
10/31/88 | 51,149 |
11/1/88 | 51,191 |
10/31/89 | 53,447 |
11/1/89 | 53,574 |
10/31/90 | 56,809 |
11/1/90 | 56,936 |
10/31/91 | 58,468 |
11/1/91 | 58,638 |
10/31/92 | 60,340 |
12/1/92 | 60,383 |
10/31/93 | 62,000 |
11/1/93 | 62,043 |
10/31/94 | 63,617 |
11/1/94 | 63,702 |
10/31/95 | 65,404 |
12/1/95 | 65,319 |
10/31/96 | 67,362 |
11/1/96 | 67,489 |
10/31/97 | 68,766 |
12/1/97 | 68,638 |
10/31/98 | 69,787 |
12/1/98 | 69,745 |
10/31/99 | 71,574 |
11/1/99 | 71,617 |
10/31/00 | 74,043 |
12/1/00 | 74,043 |
9/1/01 | 75,872 |
10/31/01 | 75,617 |
12/1/01 | 75,192 |
10/31/02 | 77,149 |
12/1/02 | 76,979 |
9/1/03 | 78,809 |
10/31/03 | 78,723 |
12/16/03 | 78,426 |
10/31/04 | 81,234 |
12/16/04 | 80,979 |
10/31/05 | 84,766 |
[end mountain chart]
Year Ended October 31 | 1950 (7) | 1951 | 1952 | 1953 | 1954 | 1955 | 1956 | 1957 | |||||||||||||||||
Year-by-year summary of results (dollars in thousands) | |||||||||||||||||||||||||
Dividends reinvested (8) | 0.3 | 0.5 | 0.5 | 0.6 | 0.6 | 0.7 | 0.8 | 0.9 | |||||||||||||||||
Value of investment at year-end | 10.0 | 12.2 | 13.2 | 14.1 | 19.3 | 25.1 | 29.7 | 28.1 | |||||||||||||||||
Dividends excluded (9) | 0.3 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 | 0.6 | 0.7 | |||||||||||||||||
Value of investment at year-end | 9.7 | 11.3 | 11.7 | 12.0 | 15.9 | 20.1 | 23.1 | 21.2 | |||||||||||||||||
Annual percentage returns assuming reinvestment of dividends | |||||||||||||||||||||||||
Income Return | 3.1 | 5.3 | 4.3 | 4.4 | 4.4 | 3.5 | 3.2 | 3.1 | |||||||||||||||||
Capital Return | -2.9 | 16.8 | 3.3 | 2.5 | 32.4 | 26.6 | 15.2 | -8.5 | |||||||||||||||||
AMF Total Return | 0.2 | 22.1 | 7.6 | 6.9 | 36.8 | 30.1 | 18.4 | -5.4 |
Year Ended October 31 | 1958 | 1959 | 1960 | 1961 | 1962 | 1963 | 1964 | 1965 | |||||||||||||||||
Year-by-year summary of results (dollars in thousands) | |||||||||||||||||||||||||
Dividends reinvested (8) | 1.0 | 1.0 | 1.2 | 1.3 | 1.4 | 1.5 | 1.7 | 1.8 | |||||||||||||||||
Value of investment at year-end | 36.1 | 41.5 | 40.9 | 54.3 | 46.6 | 61.3 | 71.4 | 79.9 | |||||||||||||||||
Dividends excluded (9) | 0.8 | 0.8 | 0.9 | 0.9 | 0.9 | 1.0 | 1.1 | 1.1 | |||||||||||||||||
Value of investment at year-end | 26.5 | 29.7 | 28.4 | 36.8 | 30.7 | 39.3 | 44.6 | 48.8 | |||||||||||||||||
Annual percentage returns assuming reinvestment of dividends | |||||||||||||||||||||||||
Income Return | 3.6 | 2.9 | 2.9 | 3.1 | 2.5 | 3.3 | 2.8 | 2.6 | |||||||||||||||||
Capital Return | 25.2 | 11.9 | -4.4 | 29.9 | -16.8 | 28.3 | 13.6 | 9.4 | |||||||||||||||||
AMF Total Return | 28.8 | 14.8 | -1.5 | 33.0 | -14.3 | 31.6 | 16.4 | 12.0 |
Year Ended October 31 | 1966 | 1967 | 1968 | 1969 | 1970 | 1971 | 1972 | 1973 | |||||||||||||||||
Year-by-year summary of results (dollars in thousands) | |||||||||||||||||||||||||
Dividends reinvested (8) | 2.3 | 2.6 | 3.2 | 3.8 | 4.2 | 4.4 | 4.7 | 5.1 | |||||||||||||||||
Value of investment at year-end | 77.6 | 92.8 | 109.6 | 103.2 | 93.4 | 112.9 | 125.2 | 124.8 | |||||||||||||||||
Dividends excluded (9) | 1.4 | 1.5 | 1.8 | 2.1 | 2.2 | 2.2 | 2.3 | 2.4 | |||||||||||||||||
Value of investment at year-end | 46.1 | 53.6 | 61.3 | 55.7 | 48.1 | 56.0 | 59.7 | 57.1 | |||||||||||||||||
Annual percentage returns assuming reinvestment of dividends | |||||||||||||||||||||||||
Income Return | 2.8 | 3.3 | 3.4 | 3.4 | 4.0 | 4.7 | 4.2 | 4.0 | |||||||||||||||||
Capital Return | -5.6 | 16.3 | 14.6 | -9.2 | -13.6 | 16.2 | 6.7 | -4.3 | |||||||||||||||||
AMF Total Return | -2.8 | 19.6 | 18.0 | -5.8 | -9.6 | 20.9 | 10.9 | -0.3 |
Year Ended October 31 | 1974 | 1975 | 1976 | 1977 | 1978 | 1979 | 1980 | 1981 | |||||||||||||||||
Year-by-year summary of results (dollars in thousands) | |||||||||||||||||||||||||
Dividends reinvested (8) | 7.3 | 7.3 | 7.9 | 8.6 | 10.0 | 11.3 | 13.9 | 16.4 | |||||||||||||||||
Value of investment at year-end | 105.1 | 132.2 | 167.4 | 176.4 | 198.9 | 232.8 | 303.6 | 334.1 | |||||||||||||||||
Dividends excluded (9) | 3.3 | 3.1 | 3.1 | 3.2 | 3.6 | 3.9 | 4.5 | 5.0 | |||||||||||||||||
Value of investment at year-end | 45.0 | 53.3 | 64.3 | 64.6 | 69.1 | 77.0 | 95.4 | 99.9 | |||||||||||||||||
Annual percentage returns assuming reinvestment of dividends | |||||||||||||||||||||||||
Income Return | 5.8 | 6.9 | 6.0 | 5.1 | 5.7 | 5.7 | 6.0 | 5.4 | |||||||||||||||||
Capital Return | -21.6 | 18.9 | 20.6 | 0.3 | 7.1 | 11.3 | 24.4 | 4.7 | |||||||||||||||||
AMF Total Return | -15.8 | 25.8 | 26.6 | 5.4 | 12.8 | 17.0 | 30.4 | 10.1 |
Year Ended October 31 | 1982 | 1983 | 1984 | 1985 | 1986 | 1987 | 1988 | 1989 | |||||||||||||||||
Year-by-year summary of results (dollars in thousands) | |||||||||||||||||||||||||
Dividends reinvested (8) | 26.8 | 26.2 | 26.6 | 30.1 | 34.1 | 39.3 | 50.0 | 59.9 | |||||||||||||||||
Value of investment at year-end | 426.4 | 544.9 | 577.2 | 701.8 | 913.1 | 960.9 | 1,081.2 | 1,299.8 | |||||||||||||||||
Dividends excluded (9) | 7.8 | 7.1 | 6.9 | 7.4 | 8.0 | 8.9 | 10.8 | 12.3 | |||||||||||||||||
Value of investment at year-end | 118.2 | 143.3 | 144.4 | 167.6 | 209.4 | 212.1 | 227.1 | 259.4 | |||||||||||||||||
Annual percentage returns assuming reinvestment of dividends | |||||||||||||||||||||||||
Income Return | 8.0 | 6.2 | 4.9 | 5.2 | 4.9 | 4.3 | 5.2 | 5.5 | |||||||||||||||||
Capital Return | 19.6 | 21.6 | 1.0 | 16.4 | 25.2 | 0.9 | 7.3 | 14.7 | |||||||||||||||||
AMF Total Return | 27.6 | 27.8 | 5.9 | 21.6 | 30.1 | 5.2 | 12.5 | 20.2 |
Year Ended October 31 | 1990 | 1991 | 1992 | 1993 | 1994 | 1995 | 1996 | 1997 | |||||||||||||||||
Year-by-year summary of results (dollars in thousands) | |||||||||||||||||||||||||
Dividends reinvested (8) | 66.1 | 71.8 | 67.5 | 70.9 | 76.5 | 83.2 | 90.2 | 95.0 | |||||||||||||||||
Value of investment at year-end | 1,239.3 | 1,544.4 | 1,690.0 | 2,004.9 | 2,039.9 | 2,473.4 | 2,940.7 | 3,652.2 | |||||||||||||||||
Dividends excluded (9) | 13.0 | 13.4 | 12.0 | 12.1 | 12.5 | 13.1 | 13.7 | 14.0 | |||||||||||||||||
Value of investment at year-end | 235.2 | 278.5 | 292.2 | 333.6 | 326.4 | 381.2 | 438.6 | 529.4 | |||||||||||||||||
Annual percentage returns assuming reinvestment of dividends | |||||||||||||||||||||||||
Income Return | 5.1 | 5.8 | 4.4 | 4.2 | 3.8 | 4.1 | 3.6 | 3.2 | |||||||||||||||||
Capital Return | -9.8 | 18.8 | 5.0 | 14.4 | -2.1 | 17.2 | 15.3 | 21.0 | |||||||||||||||||
AMF Total Return | -4.7 | 24.6 | 9.4 | 18.6 | 1.7 | 21.3 | 18.9 | 24.2 |
Year Ended October 31 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | |||||||||||||||||
Year-by-year summary of results (dollars in thousands) | |||||||||||||||||||||||||
Dividends reinvested (8) | 104.1 | 110.5 | 132.2 | 145.4 | 121.4 | 115.8 | 105.4 | 112.3 | |||||||||||||||||
Value of investment at year-end | 4,205.5 | 4,584.2 | 4,639.4 | 4,811.5 | 4,406.4 | 5,257.3 | 5,825.6 | 6,279.7 | |||||||||||||||||
Dividends excluded (9) | 14.9 | 15.5 | 18.0 | 19.2 | 15.6 | 14.5 | 12.9 | 13.5 | |||||||||||||||||
Value of investment at year-end | 594.2 | 631.8 | 620.1 | 623.6 | 557.2 | 648.8 | 705.5 | 746.9 | |||||||||||||||||
Annual percentage returns assuming reinvestment of dividends | |||||||||||||||||||||||||
Income Return | 2.9 | 2.6 | 2.9 | 3.1 | 2.5 | 2.6 | 2.0 | 1.9 | |||||||||||||||||
Capital Return | 12.2 | 6.4 | -1.7 | 0.6 | -10.9 | 16.7 | 8.8 | 5.9 | |||||||||||||||||
AMF Total Return | 15.1 | 9.0 | 1.2 | 3.7 | -8.4 | 19.3 | 10.8 | 7.8 |
Average annual total return for AMF’s lifetime
Income Return 4.1%
Capital Returns 8.2%
AMF Total Return 12.3%
Past results are not predictive of results in future periods. The results shown are before taxes on fund distributions and sale of fund shares.
1 | As outlined in the prospectus, the sales charge is reduced for accounts (and aggregated investments) of $25,000 or more and is eliminated for purchases of $1 million or more. There is no sales charge on dividends or capital gain distributions that are reinvested in additional shares. |
2 | The maximum initial sales charge was 8.5% prior to July 1, 1988. |
3 | Includes reinvested capital gain distributions totaling $2,985,985 in the years 1950-2005 and reinvested dividends. The total “cost” of this investment was $1,999,851 ($10,000 plus $1,989,851 in reinvested dividends). |
4 | The S&P 500 is unmanaged, does not reflect sales charges, commissions or expenses and cannot be invested in directly. |
5 | Includes reinvested capital gain distributions taken in shares totaling $500,027 but does not reflect income dividends taken in cash. |
6 | Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics. It would take $84,766 to buy today what $10,000 bought when the fund began. |
7 | For the period February 21, 1950 (when the fund began operations), through October 31, 1950. |
8 | 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. |
9 | 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. |
[photo - purple wild flower]
Why dividends are important for AMF shareholders
[photo - girl holding bouquet of flowers skipping down a dirt road]
Lately, more investors and companies are recognizing the value of dividends. In the past two-and-a-half years, a growing number of companies have either increased their dividends or initiated dividends. Contrast that with the 1990s, when many companies refrained from paying dividends in a roaring bull market and average stock market yields plunged to new lows. With these developments in mind, it seems a propitious time to take a closer look at the importance of dividends to American Mutual Fund (AMF) shareholders.
Figures shown are past results for Class A shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For the most current information and month-end results, visit americanfunds.com. Fund results shown, unless otherwise indicated, are at net asset value. If a sales charge (maximum 5.75%) had been deducted, the results would have been lower.
For more than 55 years, American Mutual Fund has focused on the balanced pursuit of current income, growth of capital and conservation of principal. Dividends are an important part of meeting this objective. Choosing dividend-paying companies has given AMF many long-term benefits.
• | When the stock market was declining, dividend payments cushioned the blow for AMF investors, reducing the volatility of the portfolio. |
• | Dividends have been an important component of investors’ total return because they can be reinvested while a stock’s unrealized appreciation cannot. |
• | The payment of regular and/or growing dividends is also the clearest signal an investor can receive on the financial health of a company and the discipline of its management. |
AMF’s income return
For decades, AMF has earned a higher income return than the unmanaged Standard & Poor’s 500 Composite Index. Measured from its inception on February 21, 1950, AMF has provided a yearly income return averaging 4.1% after expenses compared with 3.9% for the S&P 500 through October 31, 2005. As the chart on page 9 shows, in some years the difference was even greater.
In the fiscal year just ended, AMF had increased the dividend twice. In March, it was increased from 11 cents to 12 cents and in September, from 12 cents to 13 cents. Increases in dividend income (with dividends taken in cash and capital gains reinvested, but excluding special dividends) have occurred in 50 of the 54 fiscal years during AMF’s lifetime. AMF offers investors an opportunity to receive regular income while at the same time experiencing the possibility of gains in the underlying stocks.
A brief history of dividends in the stock market
“Even though the popularity of dividends has fallen in and out of fashion depending on market conditions, dividend income has always been an important part of the total return of the stock market over the long term,” says Jim Dunton, vice chairman of AMF. From the 1920s through the early 1980s, many people invested in stocks because of dividends. For the past 70 years, for example, reinvested dividends accounted for about 38% of the average annual total return of the stock market.
[Begin Sidebar]
Above-average returns with less volatility
American Mutual Fund has met its objectives. If we look back 10 years, as shown at right, the fund has provided slightly higher returns than the S&P 500 and the Lipper Growth & Income Funds Index, two of the three benchmarks the fund uses to measure its results. It accomplished this while showing lower volatility than the three benchmarks. It is worth remembering, however, that figures shown are past results and are not predictive of results in future periods. Future results may be lower or higher than those shown.
For the 10-year period ended October 31, 2005
[begin scatter graph]
Average annual total return | Volatility | ||||||
AMF | 9.76 | % | 11.19 | ||||
Lipper Growth & Income Funds Index | 8.65 | % | 13.51 | ||||
Lipper Multi-Cap Value Funds Index | 10.07 | % | 14.46 | ||||
S&P 500 | 9.34 | % | 15.58 |
[end scatter graph]
Volatility is calculated at net asset value by Lipper using annualized standard deviation (based on monthly returns), a measure of how returns over time have varied from the mean; a lower number signifies lower volatility. Standard & Poor’s 500 Composite Index is an unmanaged index of 500 large-company stocks selected to represent the stock market. The Lipper Multi-Cap Value Funds Index is an equally weighted index of the 30 largest mutual funds following a value approach to investing in companies of various sizes. The Lipper Growth & Income Funds Index is an equally weighted index of the 30 largest mutual funds that combine a growth of earnings orientation and an income requirement for dividends.
Sources: Stocks — Standard & Poor’s Corporation, Lipper.
[End Sidebar]
Dividend popularity faded during the 1980s and 1990s in the explosive bull market of those two decades, which favored rapidly growing technology companies, most of which paid no dividends. “The stock market’s total return averaged nearly 18% annually for those two decades,” Jim says. “In that kind of environment, almost any kind of dividend yield was of secondary importance to rising stock prices.” The strategy worked until 2000, when stocks suffered a sharp two-and-a-half year decline.
“After suffering large losses, many investors rediscovered the prudence of investing in solid companies that paid dividends,” says portfolio counselor Dale Harvey, recently elected president of AMF. Microsoft began paying dividends in 2003 and paid a huge one-time dividend of $32 billion in December 2004, the largest dividend payout in Wall Street history. “Microsoft’s decision changed the dividend discussion in board rooms in corporate America,” Dale says. A number of other well-known technology companies, including Applied Materials and QUALCOMM, also began paying dividends. But this trend extends beyond technology to companies in many other industries.
Favorable legislation helped
The Jobs & Growth Tax Relief Reconciliation Act of 2003 gave dividends added appeal by lowering the federal tax rate for qualified stock dividends to 15% from a then prevailing federal maximum tax of 38.6%. As a result, instead of keeping less than two-thirds of dividend income, investors in the highest federal tax bracket now retain 85% of their qualified dividends. For 2005, 100% of AMF’s dividends to shareholders were expected to be classified as qualified dividends for the 15% tax rate. In addition, equalizing the tax rates on dividends and capital gains removed the tax incentive for company managements to favor share repurchases over dividend payments.
Bringing stability to an investment portfolio
“The long-term growth in dividends is the best indicator of the long-term growth rate of a company,” says Joyce Gordon, who recently joined American Mutual Fund as a portfolio counselor. Joyce has 26 years of experience as an investment professional with Capital Research and Management Company, the investment adviser for the American Funds. “While earnings are subject to revisions and accounting changes, dividends are cash. The boards of directors at companies plan the dividend policy very carefully. They want to make sure that the dividend level can be supported. The dividend is what we can count on from our investments. Stock prices will fluctuate according to perceptions in the marketplace. Dividends provide a cushion to investors.”
[photo - hillside with wild flowers]
An important indicator of a company’s health
When a company consistently has enough cash left over to pass on to investors as dividends, it is a likely indicator of healthy cash flows and good management. In 2004, a study of the 500 companies in the S&P 500 found that stock prices of companies that paid dividends gained an average of 18%, outpacing the non-dividend-paying companies, whose stock prices rose only 14%. A recent study by Ned Davis Research found that a portfolio of companies that initiated or increased dividends outpaced all others over a 30-year period ending December 31, 2004. But this, of course, is not the case for all years.
Helping AMF during market declines
When the stock market has fallen, dividend payments have cushioned the blow for investors. “When solid companies pay dividends that offer above-average yields, their downside risk is often muted,” says Jim Dunton. “When the market starts going down, a dividend-paying stock’s yield starts rising. Very often the stock price of a solid company stops declining because the stock’s dividend yield alone has become sufficiently attractive to investors compared with alternative investments. When you put together a whole portfolio of solid, dividend-paying stocks, the entire portfolio can be similarly insulated.” As the chart on pages 10 and 11 shows, AMF has fallen less than the stock market in all 12 stock market declines of 15%* or more since the fund began operations in 1950. Of course, there have been periods when the fund has lagged the S&P 500, particularly in strong markets.
*Major stock market declines are defined as a decline in price of 15% or more without dividends reinvested.
[Begin Sidebar]
Higher yields over time — AMF versus the S&P 500
American Mutual Fund has had a higher dividend yield than the S&P 500 over the past 20 years. One reason for this: Many companies in the S&P 500 don’t pay dividends, while AMF only invests in those that do.
[begin bar chart]
Distribution rate (%) at net asset value | ||
AMF | S&P 500 | |
10/31/1986 | 3.70% | 3.38% |
10/31/1987 | 3.92% | 3.46% |
10/31/1988 | 4.59% | 3.30% |
10/31/1989 | 4.67% | 3.21% |
10/31/1990 | 5.35% | 3.91% |
10/31/1991 | 4.77% | 3.09% |
10/31/1992 | 4.01% | 2.95% |
10/31/1993 | 3.52% | 2.68% |
10/31/1994 | 3.70% | 2.76% |
10/31/1995 | 3.35% | 2.35% |
10/31/1996 | 3.03% | 2.10% |
10/31/1997 | 2.55% | 1.68% |
10/31/1998 | 2.38% | 1.46% |
10/31/1999 | 2.29% | 1.22% |
10/31/2000 | 2.52% | 1.15% |
10/31/2001 | 2.96% | 1.49% |
10/31/2002 | 2.73% | 1.81% |
10/31/2003 | 2.21% | 1.61% |
10/31/2004 | 1.83% | 1.68% |
10/31/2005 | 1.81% | 1.77% |
[end bar chart]
[End Sidebar]
[Begin Sidebar]
American Mutual Fund’s
portfolio counselors
American Mutual Fund’s five portfolio counselors have an average 29 years of investment experience.* The knowledge and wisdom they have accumulated over the years have helped them manage your fund through many stock market cycles.
Years of | |
investment | |
Portfolio counselor | experience* |
James K. Dunton | 43 |
R. Michael Shanahan | 41 |
Joyce E. Gordon | 26 |
Alan N. Berro | 20 |
J. Dale Harvey | 16 |
*As of January 2006.
[photo - Joyce E. Gordon]
[Begin Photo Caption]
Joyce E. Gordon
AMF Portfolio Counselor
“The long-term growth in dividends is the best indicator of the long-term growth rate of a company ...”
[End Photo Caption]
[photo - J. Dale Harvey]
[Begin Photo Caption]
J. Dale Harvey
AMF President
“After suffering large losses, many investors rediscovered the prudence of investing in solid companies that paid dividends ...”
[End Photo Caption]
[End Sidebar]
“The discipline of dividends makes management more sensible,” Jim says. “It acts like a brake on management excess. Having to set aside money every year to pay dividends helps managements stay focused and avoid pursuing marginal, less profitable projects simply because they have the money available.”
Especially useful for retirees’ income
“If you are retired and living on your income, your main financial danger is that you start eating into your principal for living expenses too soon and run out of money,” Dale says. “So the more you get an adequate stream of income up front — like dividend payments — the less you have to worry about eroding your principal.” Also, AMF’s strategy of investing in higher quality, less volatile companies often reduces a loss of principal during market declines. So it’s the dividend income and the lower volatility that are helpful to retirees.”
Growing dividends are important. When you look at the S&P 500 stocks, dividends over the past 70 years have grown about 6% annually while inflation has risen by about 4%, says Jim. “If AMF continues to match the dividend growth on the S&P 500, investors’ returns should continue to exceed inflation by a comfortable margin,” Jim says. “This can be a good deal for retirees. Their standard of living has the opportunity to go up as they live on the income.”
[Begin Sidebar]
How American Mutual Fund has fared during market declines*
Total returns for AMF and S&P 500. (S&P 500 assumes monthly reinvestment of dividends.)
[begin bar chart/time line]
Total returns (%) | |||||
AMF | S&P 500 | ||||
Jan. 5, 1953 | - | Sept. 14, 1953 | Korean War ends; recession begins | (9.7) | (11.7) |
Aug. 2, 1956 | - | Oct. 22, 1957 | Egypt seizes Suez Canal | (16.0) | (18.1) |
Dec. 12, 1961 | - | June 26, 1962 | Stocks hit postwar highs; Kennedy confronts steel industry | (25.0) | (26.9) |
Feb. 9, 1966 | - | Oct. 7, 1966 | Economy overheats, interest rates and taxes rise | (15.1) | (20.5) |
Nov. 29, 1968 | - | May 26, 1970 | Vietnam War sparks civil unrest, recession | (31.8) | (33.0) |
Jan. 11, 1973 | - | Oct. 3, 1974 | OPEC oil embargo; Watergate scandal; Nixon resigns | (32.2) | (44.8) |
Sept. 21, 1976 | - | March 6, 1978 | Carter warns of impending energy crisis | 3.1 | (13.5) |
Nov. 28, 1980 | - | Aug. 12, 1982 | Record-high interest rates provoke recession | 3.5 | (20.2) |
Aug. 25, 1987 | - | Dec. 4, 1987 | Overvalued stocks trigger market crash | (21.4) | (32.8) |
July 16, 1990 | - | Oct. 11, 1990 | Iraq invades Kuwait | (12.1) | (19.2) |
July 17, 1998 | - | Aug. 31, 1998 | “Asian flu” spreads to Russia, igniting global economic fears | (12.1) | (19.1) |
March 24, 2000 | - | Oct. 9, 2002 | Internet bubble bursts; terrorist strike on U.S. | (7.1) | (47.4) |
[end bar chart/time line]
*Major stock market declines are defined as a decline in price of 15% or more without dividends reinvested.
There have been periods in which the fund has lagged the S&P 500, particularly in strong markets.
[End Sidebar]
The importance of research in finding quality, dividend-paying stocks
It’s not enough, however, simply to invest in companies with an impressive dividend yield. “It’s important to understand how sustainable a company’s dividend is,” Joyce Gordon says. “And that takes intense, on-the-ground research, a hallmark of Capital Research, the fund’s adviser. Understanding a company’s fundamentals and management philosophy is crucial. Research analysts, for instance, not only talk to the company’s management team, but also interview competitors, suppliers and customers. It’s necessary to come to a conclusion on whether a company’s management can deliver on their plans for earnings growth and what that might mean for the dividend.”
American Mutual Fund has delivered solid returns and lower volatility throughout its 55-year lifetime by investing in a select list of high-quality stocks, focusing on industry leaders and choosing only companies that pay dividends. Mike Shanahan, a veteran portfolio counselor for the fund who has seen many market swings, says dividends are also attractive considering the uncertain times in which we live. “Dividends can’t be faked. They are reliable. They are not dependent on what someone else wants to pay for your stock.”
Summary investment portfolio October 31, 2005
The following summary investment portfolio is designed to streamline the report and help investors better focus on a fund’s principal holdings. For details on how to obtain a complete schedule of portfolio holdings, please see the inside back cover.
[begin pie chart]
Industry sector diversification (percent of net assets) | |||
Financials | 16.53 | % | |
Industrials | 11.57 | ||
Consumer discretionary | 9.92 | ||
Health care | 7.43 | ||
Energy | 7.11 | ||
Other industries | 29.22 | ||
Convertible securities | 0.48 | ||
Bonds & notes | 1.24 | ||
Short-term securities & other assets less liabilities | 16.50 |
[end pie chart]
Market | Percent | |||||||||
value | of net | |||||||||
Common stocks - 81.78% | Shares | (000 | ) | assets | ||||||
Energy - 7.11% | ||||||||||
Chevron Corp. | 3,371,177 | $ | 192,393 | 1.18 | % | |||||
ConocoPhillips | 2,633,178 | 172,157 | 1.05 | |||||||
Devon Energy Corp. | 2,000,000 | 120,760 | .74 | |||||||
Exxon Mobil Corp. | 3,335,000 | 187,227 | 1.15 | |||||||
Marathon Oil Corp. | 4,000,000 | 240,640 | 1.47 | |||||||
Other securities | 247,927 | 1.52 | ||||||||
1,161,104 | 7.11 | |||||||||
Materials - 4.75% | ||||||||||
Other securities | 774,738 | 4.75 | ||||||||
Industrials - 11.57% | ||||||||||
Avery Dennison Corp. | 2,275,000 | 128,879 | .79 | |||||||
General Electric Co. | 9,950,000 | 337,405 | 2.07 | |||||||
Norfolk Southern Corp. | 5,882,000 | 236,456 | 1.45 | |||||||
Tyco International Ltd. | 6,031,200 | 159,163 | .97 | |||||||
United Technologies Corp. | 3,400,000 | 174,352 | 1.07 | |||||||
Other securities | 851,859 | 5.22 | ||||||||
1,888,114 | 11.57 | |||||||||
Consumer discretionary - 9.92% | ||||||||||
Clear Channel Communications, Inc. | 4,500,000 | 136,890 | .84 | |||||||
Johnson Controls, Inc. | 3,145,600 | 214,058 | 1.31 | |||||||
Magna International Inc., Class A | 1,780,000 | 124,102 | .76 | |||||||
TJX Companies, Inc. | 6,850,000 | 147,480 | .91 | |||||||
Other securities | 996,047 | 6.10 | ||||||||
1,618,577 | 9.92 | |||||||||
Consumer staples - 4.67% | ||||||||||
Coca-Cola Co. | 3,050,000 | 130,479 | .80 | |||||||
Wal-Mart Stores, Inc. | 1,550,000 | 73,331 | .45 | |||||||
Other securities | 557,813 | 3.42 | ||||||||
761,623 | 4.67 | |||||||||
Health care - 7.43% | ||||||||||
Abbott Laboratories | 5,800,000 | 249,690 | 1.53 | |||||||
Bristol-Myers Squibb Co. | 7,907,200 | 167,395 | 1.03 | |||||||
Eli Lilly and Co. | 4,330,000 | 215,591 | 1.32 | |||||||
Merck & Co., Inc. | 4,750,000 | 134,045 | .82 | |||||||
Wyeth | 3,598,000 | 160,327 | .98 | |||||||
Other securities | 286,077 | 1.75 | ||||||||
1,213,125 | 7.43 | |||||||||
Financials - 16.53% | ||||||||||
American International Group, Inc. | 2,829,000 | 183,319 | 1.12 | |||||||
Bank of America Corp. | 4,832,812 | 211,387 | 1.30 | |||||||
Citigroup Inc. | 7,910,000 | 362,120 | 2.22 | |||||||
Fannie Mae | 4,935,000 | 234,511 | 1.44 | |||||||
Freddie Mac | 3,150,000 | 193,252 | 1.18 | |||||||
J.P. Morgan Chase & Co. | 5,446,000 | 199,433 | 1.22 | |||||||
St. Paul Travelers Companies, Inc. | 3,650,000 | 164,359 | 1.01 | |||||||
State Street Corp. | 1,000,000 | 55,230 | .34 | |||||||
UnumProvident Corp. | 8,400,000 | 170,436 | 1.04 | |||||||
Washington Mutual, Inc. | 3,550,000 | 140,580 | .86 | |||||||
Wells Fargo & Co. | 1,668,750 | 100,459 | .62 | |||||||
Other securities | 681,735 | 4.18 | ||||||||
2,696,821 | 16.53 | |||||||||
Information technology - 6.92% | ||||||||||
Hewlett-Packard Co. | 10,200,000 | 286,008 | 1.75 | |||||||
International Business Machines Corp. | 3,635,000 | 297,634 | 1.83 | |||||||
Microchip Technology Inc. | 4,445,900 | 134,133 | .82 | |||||||
Microsoft Corp. | 7,000,000 | 179,900 | 1.10 | |||||||
Other securities | 231,575 | 1.42 | ||||||||
1,129,250 | 6.92 | |||||||||
Telecommunication services - 5.30% | ||||||||||
AT&T Corp. | 7,434,600 | 147,056 | .90 | |||||||
BellSouth Corp. | 10,000,000 | 260,200 | 1.59 | |||||||
SBC Communications Inc. | 6,100,000 | 145,485 | .89 | |||||||
Sprint Nextel Corp. | 6,700,000 | 156,177 | .96 | |||||||
Other securities | 156,390 | .96 | ||||||||
865,308 | 5.30 | |||||||||
Utilities - 6.48% | ||||||||||
Duke Energy Corp. | 4,800,000 | 127,104 | .78 | |||||||
Exelon Corp. | 2,548,400 | 132,593 | .81 | |||||||
Other securities | 797,439 | 4.89 | ||||||||
1,057,136 | 6.48 | |||||||||
Miscellaneous - 1.10% | ||||||||||
Other common stocks in initial period of acquisition | 180,105 | 1.10 | ||||||||
Total common stocks (cost: $11,074,210,000) | 13,345,901 | 81.78 | ||||||||
Principal amount | ||||||||||
Convertible securities - 0.48% | (000 | ) | ||||||||
Industrials - 0.08% | ||||||||||
Tyco International Group SA, Series B, 3.125% convertible debentures 2023 | $ | 10,000 | 12,838 | .08 | ||||||
Consumer discretionary - 0.15% | ||||||||||
Other securities | 24,123 | .15 | ||||||||
Health care - 0.08% | ||||||||||
Other securities | 13,542 | .08 | ||||||||
Financials - 0.17% | ||||||||||
Other securities | 28,519 | .17 | ||||||||
Total convertible securities (cost: $97,333,000) | 79,022 | .48 | ||||||||
Bonds & notes - 1.24% | ||||||||||
Utilities - 0.06% | ||||||||||
Other securities | 10,020 | .06 | ||||||||
Mortgage-backed obligations - 0.04% | ||||||||||
Fannie Mae 6.00% 2017 (1) | 6,729 | 6,886 | .04 | |||||||
Government & government agency bonds & notes - 1.14% | ||||||||||
Fannie Mae 6.00% 2005 | 160,000 | 160,337 | ||||||||
Fannie Mae 5.00% 2007 | 25,000 | 25,114 | 1.14 | |||||||
185,451 | 1.14 | |||||||||
Total bonds & notes (cost: $201,925,000) | 202,357 | 1.24 | ||||||||
Short-term securities - 16.32% | ||||||||||
Abbott Laboratories Inc. 3.80% due 11/8/2005 (2) | 18,300 | 18,285 | .11 | |||||||
American General Finance Corp. 3.93%-3.94% due 12/5-12/6/2005 | 49,600 | 49,407 | ||||||||
International Lease Finance Corp. 3.66%-4.05% due 11/9/2005-1/6/2006 | 90,000 | 89,592 | .85 | |||||||
Bank of America Corp. 3.68%-3.96% due 11/3-12/13/2005 | 130,000 | 129,488 | ||||||||
Ranger Funding Co. LLC 3.95% due 11/29/2005 (2) | 40,000 | 39,873 | 1.04 | |||||||
BellSouth Corp. 3.86% due 11/18/2005 (2) | 37,200 | 37,128 | .23 | |||||||
CAFCO, LLC 3.86%-4.13% due 11/23/2005-1/11/2006 (2) | 140,800 | 139,985 | .86 | |||||||
Clipper Receivables Co., LLC 3.65%-3.98% due 11/10-11/30/2005 (2) | 167,500 | 167,162 | 1.02 | |||||||
Edison Asset Securitization LLC 3.74%-4.00% due 11/4-12/22/2005 (2) | 123,000 | 122,600 | .75 | |||||||
Federal Home Loan Bank 3.82%-3.94% due 12/16-12/28/2005 | 198,200 | 197,012 | 1.21 | |||||||
Freddie Mac 3.81%-3.99% due 12/22/2005-1/10/2006 | 119,800 | 119,029 | .73 | |||||||
Park Avenue Receivables Co., LLC 3.85%-3.91% due 11/17-12/2/2005 (2) | 90,700 | 90,468 | ||||||||
Preferred Receivables Funding Corp. 3.94% due 12/13/2005 (2) | 45,600 | 45,385 | .83 | |||||||
Procter & Gamble Co. 3.63%-3.79% due 11/7-12/15/2005 (2) | 190,000 | 189,338 | 1.16 | |||||||
SBC Communications Inc. 3.75% due 11/8/2005 (2) | 22,400 | 22,381 | .14 | |||||||
Tennessee Valley Authority 3.63%-3.895% due 11/17-12/22/2005 | 149,100 | 148,468 | .91 | |||||||
Wal-Mart Stores Inc. 3.63%-3.89% due 11/8-12/13/2005 (2) | 186,400 | 185,874 | 1.14 | |||||||
Wells Fargo & Co. 3.73% due 11/2/2005 | 75,000 | 75,000 | .46 | |||||||
Other securities | 796,026 | 4.88 | ||||||||
Total short-term securities (cost: $2,662,583,000) | 2,662,501 | 16.32 | ||||||||
Total investment securities (cost: $14,036,051,000) | 16,289,781 | 99.82 | ||||||||
Other assets less liabilities | 30,047 | .18 | ||||||||
Net assets | $ | 16,319,828 | 100.00 | % |
"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed. |
"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio. | |||
(1) Pass-through security backed by a pool of mortgages or other loans on which principal payments are periodically made. Therefore, the effective maturity is shorter than the stated maturity. | |||
(2) Restricted security that can be resold only to institutional investors. In practice, this security is typically as liquid as unrestricted securities in the portfolio. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $1,561,314,000, which represented 9.57% of the net assets of the fund. | |||
See Notes to Financial Statements |
Financial statements
Statement of assets and liabilities at October 31, 2005 (dollars and shares in thousands, except per-share amounts) | |||||||
Assets: | |||||||
Investment securities at market (cost: $14,036,051) | $ | 16,289,781 | |||||
Cash | 180 | ||||||
Receivables for: | |||||||
Sales of investments | $ | 16,774 | |||||
Sales of fund's shares | 22,179 | ||||||
Dividends and interest | 26,627 | 65,580 | |||||
16,355,541 | |||||||
Liabilities: | |||||||
Payables for: | |||||||
Purchases of investments | 9,504 | ||||||
Repurchases of fund's shares | 13,964 | ||||||
Investment advisory services | 3,200 | ||||||
Services provided by affiliates | 7,260 | ||||||
Deferred Directors' compensation | 1,758 | ||||||
Other fees and expenses | 27 | 35,713 | |||||
Net assets at October 31, 2005 | $ | 16,319,828 | |||||
Net assets consist of: | |||||||
Capital paid in on shares of capital stock | $ | 13,441,449 | |||||
Undistributed net investment income | 70,363 | ||||||
Undistributed net realized gain | 554,286 | ||||||
Net unrealized appreciation | 2,253,730 | ||||||
Net assets at October 31, 2005 | $ | 16,319,828 |
Total authorized capital stock - 750,000 shares, $0.001 par value (615,745 total shares outstanding) | ||||||||||
Net assets | Shares outstanding | Net asset value per share (1) | ||||||||
Class A | $ | 13,850,397 | 522,187 | $ | 26.52 | |||||
Class B | 594,541 | 22,558 | 26.36 | |||||||
Class C | 666,320 | 25,323 | 26.31 | |||||||
Class F | 434,048 | 16,401 | 26.46 | |||||||
Class 529-A | 150,726 | 5,689 | 26.50 | |||||||
Class 529-B | 31,843 | 1,205 | 26.42 | |||||||
Class 529-C | 47,498 | 1,798 | 26.42 | |||||||
Class 529-E | 8,225 | 311 | 26.44 | |||||||
Class 529-F | 2,888 | 109 | 26.52 | |||||||
Class R-1 | 11,855 | 449 | 26.38 | |||||||
Class R-2 | 99,241 | 3,765 | 26.36 | |||||||
Class R-3 | 180,954 | 6,851 | 26.41 | |||||||
Class R-4 | 43,085 | 1,627 | 26.48 | |||||||
Class R-5 | 198,207 | 7,472 | 26.53 |
(1) Maximum offering price and redemption price per share were equal to the net asset value per share for all share classes, except for classes A and 529-A, for which the maximum offering prices per share were $28.14 and $28.12, respectively. | |||||
See Notes to Financial Statements |
Statement of operationsfor the year ended October 31, 2005 | (dollars in thousands) | ||||||
Investment income: | |||||||
Income: | |||||||
Dividends (net of non-U.S. withholding tax of $406) | $ | 332,446 | |||||
Interest | 72,492 | $ | 404,938 | ||||
Fees and expenses:(1) | |||||||
Investment advisory services | 40,923 | ||||||
Distribution services | 44,661 | ||||||
Transfer agent services | 10,570 | ||||||
Administrative services | 3,049 | ||||||
Reports to shareholders | 471 | ||||||
Registration statement and prospectus | 681 | ||||||
Postage, stationery and supplies | 1,221 | ||||||
Directors' compensation | 478 | ||||||
Auditing and legal | 173 | ||||||
Custodian | 98 | ||||||
State and local taxes | 133 | ||||||
Other | 119 | ||||||
Total fees and expenses before reimbursements/waivers | 102,577 | ||||||
Less reimbursement/waiver of fees and expenses: | |||||||
Investment advisory services | 3,269 | ||||||
Administrative services | 177 | ||||||
Total fees and expenses after reimbursements/waivers | 99,131 | ||||||
Net investment income | 305,807 | ||||||
Net realized gain and change in unrealized appreciation on investments: | |||||||
Net realized gain on investments | 590,061 | ||||||
Net change in unrealized appreciation on investments | 200,291 | ||||||
Net realized gain and change in unrealized appreciation on investments | 790,352 | ||||||
Net increase in net assets resulting from operations | $ | 1,096,159 |
(1) Additional information related to class-specific fees and expenses is included in the Notes to Financial Statements. |
See Notes to Financial Statements |
Statements of changes in net assets | (dollars in thousands) | ||||||
Year ended October 31 | |||||||
2005 | 2004 | ||||||
Operations: | |||||||
Net investment income | $ | 305,807 | $ | 236,159 | |||
Net realized gain on investments | 590,061 | 782 | |||||
Net change in unrealized appreciation on investments | 200,291 | 971,758 | |||||
Net increase in net assets resulting from operations | 1,096,159 | 1,208,699 | |||||
Dividends and distributions paid to shareholders: | |||||||
Dividends from net investment income | (269,575 | ) | (224,102 | ) | |||
Distributions from net realized gain on investments | (27,858 | ) | (42,043 | ) | |||
Total dividends and distributions paid to shareholders | (297,433 | ) | (266,145 | ) | |||
Capital share transactions | 1,708,978 | 2,178,397 | |||||
Total increase in net assets | 2,507,704 | 3,120,951 | |||||
Net assets: | |||||||
Beginning of year | 13,812,124 | 10,691,173 | |||||
End of year (including undistributed net investment income: | |||||||
$70,363 and $34,159, respectively) | $ | 16,319,828 | $ | 13,812,124 | |||
See Notes to Financial Statements |
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, growth of capital and conservation of principal - through investments in companies that participate in the growth of the American economy.
The fund offers 14 share classes consisting of four retail share classes, five CollegeAmericaÒ savings plan share classes and five retirement plan share classes. The CollegeAmerica savings plan share classes (529-A, 529-B, 529-C, 529-E and 529-F) can be utilized to save for college education. The five retirement plan share classes (R-1, R-2, R-3, R-4 and R-5) are sold without any sales charges and do not carry any conversion rights. The fund’s share classes are described below:
Share class | Initial sales charge | Contingent deferred sales charge upon redemption | Conversion feature | ||
Classes A and 529-A | Up to 5.75% | None (except 1% for certain redemptions within one year of purchase without an initial sales charge) | None | ||
Classes B and 529-B | None | Declines from 5% to 0% for redemptions within six years of purchase | Classes B and 529-B convert to classes A and 529-A, respectively, after eight years | ||
Class C | None | 1% for redemptions within one year of purchase | Class C converts to Class F after 10 years | ||
Class 529-C | None | 1% for redemptions within one year of purchase | None | ||
Class 529-E | None | None | None | ||
Classes F and 529-F | None | None | None | ||
Classes R-1, R-2, R-3, R-4 and R-5 | None | None | None |
Holders of all share classes have equal pro rata rights to assets, dividends and liquidation proceeds. Each share class has identical voting rights, except for the exclusive right to vote on matters affecting only its class. Share classes have different fees and expenses ("class-specific fees and expenses"), primarily due to different arrangements for distribution, administrative and shareholder services. Differences in class-specific fees and expenses will result in differences in net investment income and, therefore, the payment of different per-share dividends by each class.
Significant accounting policies - The financial statements have been prepared to comply with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the fund:
Security valuation - Equity securities are valued at the official closing price of, or 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. Prices for each security are taken from the principal exchange or market in which the security trades. Fixed-income securities, including short-term securities purchased with more than 60 days left to maturity, are valued at prices obtained from an independent pricing service when such prices are available. However, where the investment adviser deems it appropriate, such securities will be valued at the mean quoted bid and asked prices (or bid prices, if asked prices are not available) or at prices for securities of comparable maturity, quality and type. Securities with both fixed-income and equity characteristics, or equity securities traded principally among fixed-income dealers, are valued in the manner described above for either equity or fixed-income securities, depending on which method is deemed most appropriate by the investment adviser. Short-term securities purchased within 60 days to maturity are valued at amortized cost, which approximates market value. The value of short-term securities originally purchased with maturities greater than 60 days is determined based on an amortized value to par when they reach 60 days or less remaining to maturity. The ability of the issuers of the debt securities held by the fund to meet their obligations may be affected by economic developments in a specific industry, state or region. Securities and other assets for which representative market quotations are not readily available are fair valued as determined in good faith under procedures adopted by authority of the fund's Board of Directors. Various factors may be reviewed in order to make a good faith determination of a security’s fair value. These factors include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; significant events occurring after the close of trading in the security; and changes in overall market conditions.
Security transactions and related investment income - Security transactions are recorded by the fund as of the date the trades are executed with brokers. Realized gains and losses from security transactions are determined based on the specific identified cost of the securities. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Market discounts, premiums and original issue discounts on fixed-income securities are amortized daily over the expected life of the security.
Class allocations - Income, fees and expenses (other than class-specific fees and expenses) and realized and unrealized gains and losses are allocated daily among the various share classes based on their relative net assets. Class-specific fees and expenses, such as distribution, administrative and shareholder services, are charged directly to the respective share class.
Dividends and distributions to shareholders - Dividends and distributions paid to shareholders are recorded on the ex-dividend date.
Taxation - Dividend income is recorded net of non-U.S. taxes paid.
2. Federal income taxation and distributions
The fund complies with the requirements under Subchapter M of the Internal Revenue Code applicable to mutual funds and intends to distribute substantially all of its net taxable income and net capital gains each year. The fund is not subject to income taxes to the extent such distributions are made.
Distributions - Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences are due primarily to differing treatment for items such as short-term capital gains and losses; capital losses related to sales of certain securities within 30 days of purchase; deferred expenses; cost of investments sold; and paydowns on investments. 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 for financial reporting purposes. As of October 31, 2005, the cost of investment securities for federal income tax purposes was $14,042,760,000.
During the year ended October 31, 2005, the fund reclassified $31,000 from undistributed net investment income to capital paid in on shares of capital stock and $3,000 from undistributed net realized gains to undistributed net investment income to align financial reporting with tax reporting.
As of October 31, 2005, the components of distributable earnings on a tax basis were as follows (dollars in thousands):
Undistributed net investment income | $ | 72,121 | ||
Undistributed long-term capital gains | 561,741 | |||
Gross unrealized appreciation on investment securities | 2,721,377 | |||
Gross unrealized depreciation on investment securities | (474,356 | ) | ||
Net unrealized appreciation on investment securities | 2,247,021 |
During the year ended October 31, 2005, the fund realized, on a tax basis, a net capital gain of $589,599,000.
The tax character of distributions paid to shareholders was as follows (dollars in thousands):
Year ended October 31, 2005 | Year ended October 31, 2004 | ||||||||||||||||||
Share class | Ordinary income | Long-term capital gains | Total distributions paid | Ordinary income | Long-term capital gains | Total distributions paid | |||||||||||||
Class A | $ | 241,884 | $ | 24,216 | $ | 266,100 | $ | 206,064 | $ | 38,064 | $ | 244,128 | |||||||
Class B | 5,905 | 1,015 | 6,920 | 4,617 | 1,279 | 5,896 | |||||||||||||
Class C | 5,998 | 1,035 | 7,033 | 4,073 | 1,110 | 5,183 | |||||||||||||
Class F | 6,839 | 672 | 7,511 | 4,386 | 683 | 5,069 | |||||||||||||
Class 529-A | 2,192 | 204 | 2,396 | 1,349 | 212 | 1,561 | |||||||||||||
Class 529-B | 253 | 50 | 303 | 180 | 57 | 237 | |||||||||||||
Class 529-C | 368 | 68 | 436 | 234 | 69 | 303 | |||||||||||||
Class 529-E | 97 | 11 | 108 | 62 | 12 | 74 | |||||||||||||
Class 529-F | 41 | 4 | 45 | 20 | 3 | 23 | |||||||||||||
Class R-1 | 110 | 21 | 131 | 53 | 16 | 69 | |||||||||||||
Class R-2 | 853 | 133 | 986 | 517 | 133 | 650 | |||||||||||||
Class R-3 | 2,193 | 230 | 2,423 | 952 | 142 | 1,094 | |||||||||||||
Class R-4 | 686 | 75 | 761 | 391 | 63 | 454 | |||||||||||||
Class R-5 | 2,156 | 124 | 2,280 | 1,204 | 200 | 1,404 | |||||||||||||
Total | $ | 269,575 | $ | 27,858 | $ | 297,433 | $ | 224,102 | $ | 42,043 | $ | 266,145 | |||||||
3. Fees and transactions with related parties
Capital Research and Management Company ("CRMC"), the fund’s investment adviser, is the parent company of American Funds Service Company ("AFS"), the fund’s transfer agent, and American Funds Distributors, Inc. ("AFD"), the principal underwriter of the fund’s shares.
Investment advisory services - The Investment Advisory and Service Agreement with CRMC provides for monthly fees accrued daily. These fees are based on a declining series of annual rates beginning with 0.384% on the first $1 billion of month-end net assets and decreasing to 0.225% on such assets in excess of $21 billion. CRMC is currently waiving a portion of investment advisory services fees. At the beginning of the period, CRMC waived 5% of these fees and increased the waiver to 10% on April 1, 2005. During the year ended October 31, 2005, total investment advisory services fees waived by CRMC were $3,269,000. As a result, the fee shown on the accompanying financial statements of $40,923,000, which was equivalent to an annualized rate of 0.265%, was reduced to $37,654,000, or 0.244% of average daily net assets.
Class-specific fees and expenses - Expenses that are specific to individual share classes are accrued directly to the respective share class. The principal class-specific fees and expenses are described below:
Distribution services - The fund has adopted plans of distribution for all share classes, except Class R-5. Under the plans, the Board of Directors approves certain categories of expenses that are used to finance activities primarily intended to sell fund shares and service existing accounts. The plans provide for payments, based on an annualized percentage of average daily net assets, ranging from 0.25% to 1.00% as noted on the following page. In some cases, the Board of Directors has limited the amounts that may be paid to less than the maximum allowed by the plans. All share classes may use up to 0.25% of average daily net assets to pay service fees, or to compensate AFD for paying service fees, to firms that have entered into agreements with AFD for providing certain shareholder services. The remaining amounts available to be paid under each plan are paid to selling dealers to compensate them for their selling activities.
For classes A and 529-A, the Board of Directors has also approved the reimbursement of dealer and wholesaler commissions paid by AFD for certain shares sold without a sales charge. These classes reimburse AFD for amounts billed within the prior 15 months but only to the extent that the overall annual expense limit of 0.25% is not exceeded. As of October 31, 2005, there were no unreimbursed expenses subject to reimbursement for classes A or 529-A.
Share class | Currently approved limits | Plan limits |
Class A | 0.25% | 0.25% |
Class 529-A | 0.25 | 0.50 |
Classes B and 529-B | 1.00 | 1.00 |
Classes C, 529-C and R-1 | 1.00 | 1.00 |
Class R-2 | 0.75 | 1.00 |
Classes 529-E and R-3 | 0.50 | 0.75 |
Classes F, 529-F and R-4 | 0.25 | 0.50 |
Transfer agent services - The fund has a transfer agent agreement with AFS for classes A and B. Under this agreement, these share classes compensate AFS for transfer agent services including shareholder recordkeeping, communications and transaction processing. AFS is also compensated for certain transfer agent services provided to all other share classes from the administrative services fees paid to CRMC described below.
Administrative services - The fund has an administrative services agreement with CRMC to provide transfer agent and other related shareholder services for all share classes other than classes A and B. Each relevant share class pays CRMC annual fees up to 0.15% (0.10% for Class R-5) based on its respective average daily net assets. Each relevant share class also pays AFS additional amounts for certain transfer agent services. CRMC and AFS may use these fees to compensate third parties for performing these services. CRMC has agreed to pay AFS on the fund's behalf for a portion of the transfer agent services fees for some of the retirement plan share classes. For the year ended October 31, 2005, the total administrative services fees paid by CRMC were $305 and $177,000 for classes R-1 and R-2, respectively. Administrative services fees are presented gross of any payments made by CRMC. Each 529 share class is subject to an additional annual administrative services fee of 0.10% of its respective average daily net assets; this fee is payable to the Commonwealth of Virginia for the maintenance of the CollegeAmerica plan. Although these amounts are included with administrative services fees on the accompanying financial statements, the Commonwealth of Virginia is not considered a related party.
Expenses under the agreements described above for the year ended October 31, 2005, were as follows (dollars in thousands):
Share class | Distribution services | Transfer agent services | Administrative services | ||
CRMC administrative services | Transfer agent services | Commonwealth of Virginia administrative services | |||
Class A | $29,430 | $10,053 | Not applicable | Not applicable | Not applicable |
Class B | 5,630 | 517 | Not applicable | Not applicable | Not applicable |
Class C | 6,026 | Included in administrative services | $859 | $124 | Not applicable |
Class F | 987 | 492 | 45 | Not applicable | |
Class 529-A | 230 | 158 | 16 | $129 | |
Class 529-B | 292 | 36 | 12 | 29 | |
Class 529-C | 415 | 51 | 14 | 42 | |
Class 529-E | 35 | 9 | 1 | 7 | |
Class 529-F | 3 | 3 | -* | 2 | |
Class R-1 | 116 | 17 | 6 | Not applicable | |
Class R-2 | 639 | 127 | 405 | Not applicable | |
Class R-3 | 759 | 228 | 73 | Not applicable | |
Class R-4 | 99 | 60 | 5 | Not applicable | |
Class R-5 | Not applicable | 97 | 2 | Not applicable | |
Total | $44,661 | $10,570 | $2,137 | $703 | $209 |
Deferred Directors’ compensation - Since the adoption of the deferred compensation plan in 1993, Directors who are unaffiliated with CRMC may elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Directors’ compensation of $478,000, shown on the accompanying financial statements, includes $265,000 in current fees (either paid in cash or deferred) and a net increase of $213,000 in the value of the deferred amounts.
Affiliated officers and Directors - Officers and certain Directors of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated officers or Directors received any compensation directly from the fund.
4. Capital share transactions
Capital share transactions in the fund were as follows (dollars and shares in thousands):
Share class | Sales(1) | Reinvestments of dividends and distributions | Repurchases(1) | Net increase | |||||
Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | ||
Year ended October 31, 2005 | |||||||||
Class A | $ 2,171,256 | 82,538 | $ 244,730 | 9,271 | $ (1,304,528) | (49,512) | $ 1,111,458 | 42,297 | |
Class B | 113,209 | 4,336 | 6,605 | 252 | (51,515) | (1,966) | 68,299 | 2,622 | |
Class C | 219,038 | 8,394 | 6,527 | 249 | (88,866) | (3,401) | 136,699 | 5,242 | |
Class F | 166,663 | 6,353 | 6,693 | 254 | (82,826) | (3,149) | 90,530 | 3,458 | |
Class 529-A | 51,703 | 1,967 | 2,396 | 91 | (8,069) | (307) | 46,030 | 1,751 | |
Class 529-B | 6,724 | 256 | 303 | 11 | (1,164) | (44) | 5,863 | 223 | |
Class 529-C | 15,290 | 583 | 436 | 17 | (3,281) | (125) | 12,445 | 475 | |
Class 529-E | 2,615 | 99 | 108 | 4 | (382) | (14) | 2,341 | 89 | |
Class 529-F | 1,215 | 46 | 45 | 2 | (278) | (10) | 982 | 38 | |
Class R-1 | 6,070 | 233 | 131 | 5 | (4,993) | (193) | 1,208 | 45 | |
Class R-2 | 51,778 | 1,980 | 986 | 38 | (21,790) | (832) | 30,974 | 1,186 | |
Class R-3 | 81,912 | 3,129 | 2,404 | 91 | (22,970) | (872) | 61,346 | 2,348 | |
Class R-4 | 36,035 | 1,373 | 761 | 29 | (30,094) | (1,154) | 6,702 | 248 | |
Class R-5 | 152,875 | 5,718 | 1,637 | 61 | (20,411) | (768) | 134,101 | 5,011 | |
Total net increase (decrease) | $ 3,076,383 | 117,005 | $ 273,762 | 10,375 | $ (1,641,167) | (62,347) | $ 1,708,978 | 65,033 | |
Year ended October 31, 2004 | |||||||||
Class A | $ 2,249,778 | 91,778 | $ 223,459 | 9,214 | $ (991,735) | (40,523) | $ 1,481,502 | 60,469 | |
Class B | 179,897 | 7,391 | 5,661 | 236 | (33,058) | (1,357) | 152,500 | 6,270 | |
Class C | 245,538 | 10,093 | 4,919 | 204 | (44,390) | (1,822) | 206,067 | 8,475 | |
Class F | 184,317 | 7,536 | 4,602 | 189 | (54,526) | (2,245) | 134,393 | 5,480 | |
Class 529-A | 44,044 | 1,801 | 1,561 | 64 | (3,580) | (146) | 42,025 | 1,719 | |
Class 529-B | 9,686 | 398 | 237 | 10 | (680) | (28) | 9,243 | 380 | |
Class 529-C | 16,215 | 664 | 303 | 13 | (1,648) | (67) | 14,870 | 610 | |
Class 529-E | 2,434 | 100 | 75 | 3 | (280) | (12) | 2,229 | 91 | |
Class 529-F | 1,058 | 43 | 23 | 1 | (55) | (2) | 1,026 | 42 | |
Class R-1 | 7,582 | 307 | 69 | 3 | (1,822) | (75) | 5,829 | 235 | |
Class R-2 | 35,768 | 1,465 | 649 | 27 | (7,664) | (314) | 28,753 | 1,178 | |
Class R-3 | 87,583 | 3,572 | 1,080 | 44 | (11,818) | (484) | 76,845 | 3,132 | |
Class R-4 | 21,888 | 891 | 453 | 19 | (4,981) | (203) | 17,360 | 707 | |
Class R-5 | 14,855 | 606 | 786 | 32 | (9,886) | (407) | 5,755 | 231 | |
Total net increase (decrease) | $ 3,100,643 | 126,645 | $ 243,877 | 10,059 | $ (1,166,123) | (47,685) | $ 2,178,397 | 89,019 | |
(1) Includes exchanges between share classes of the fund. |
5. Investment transactions
The fund made purchases and sales of investment securities, excluding short-term securities, of $3,748,737,000 and $2,960,644,000, respectively, during the year ended October 31, 2005.
CollegeAmerica is a registered trademark of and sponsored by the Virginia College Savings Plan.SM
Financial highlights (1) | ||||||||||||||||||
Income (loss) from investment operations (2) | Dividends and distributions | |||||||||||||||||
Net asset value, beginning of period | Net investment income | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends (from net investment income) | Distributions (from capital gains) | Total dividends and distributions | Net asset value, end of period | Total return (3) | Net assets, end of period (in millions) | Ratio of expenses to average net assets before reimbursements/ waivers | Ratio of expenses to average net assets after reimbursements/ waivers (4) | Ratio of net income to average net assets | ||||||
Class A: | ||||||||||||||||||
Year ended 10/31/2005 | $25.10 | $.54 | $1.41 | $1.95 | $(.48) | $(.05) | $(.53) | $26.52 | 7.80% | $13,850 | .58% | .56% | 2.06% | |||||
Year ended 10/31/2004 | 23.17 | .48 | 2.00 | 2.48 | (.46) | (.09) | (.55) | 25.10 | 10.81 | 12,044 | .60 | .60 | 1.97 | |||||
Year ended 10/31/2003 | 20.20 | .49 | 3.31 | 3.80 | (.52) | (.31) | (.83) | 23.17 | 19.31 | 9,716 | .62 | .62 | 2.32 | |||||
Year ended 10/31/2002 | 23.22 | .49 | (2.29) | (1.80) | (.57) | (.65) | (1.22) | 20.20 | (8.42) | 7,782 | .60 | .60 | 2.15 | |||||
Year ended 10/31/2001 | 24.36 | .65 | .19 | .84 | (.72) | (1.26) | (1.98) | 23.22 | 3.71 | 8,399 | .59 | .59 | 2.68 | |||||
Class B: | ||||||||||||||||||
Year ended 10/31/2005 | 24.94 | .33 | 1.41 | 1.74 | (.27) | (.05) | (.32) | 26.36 | 7.00 | 595 | 1.38 | 1.36 | 1.26 | |||||
Year ended 10/31/2004 | 23.04 | .29 | 1.98 | 2.27 | (.28) | (.09) | (.37) | 24.94 | 9.92 | 497 | 1.39 | 1.39 | 1.18 | |||||
Year ended 10/31/2003 | 20.11 | .32 | 3.28 | 3.60 | (.36) | (.31) | (.67) | 23.04 | 18.32 | 315 | 1.41 | 1.41 | 1.49 | |||||
Year ended 10/31/2002 | 23.13 | .32 | (2.28) | (1.96) | (.41) | (.65) | (1.06) | 20.11 | (9.11) | 156 | 1.40 | 1.40 | 1.40 | |||||
Year ended 10/31/2001 | 24.30 | .44 | .21 | .65 | (.56) | (1.26) | (1.82) | 23.13 | 2.88 | 59 | 1.38 | 1.38 | 1.80 | |||||
Class C: | ||||||||||||||||||
Year ended 10/31/2005 | 24.90 | .31 | 1.41 | 1.72 | (.26) | (.05) | (.31) | 26.31 | 6.91 | 666 | 1.44 | 1.42 | 1.19 | |||||
Year ended 10/31/2004 | 23.01 | .27 | 1.97 | 2.24 | (.26) | (.09) | (.35) | 24.90 | 9.82 | 500 | 1.47 | 1.46 | 1.09 | |||||
Year ended 10/31/2003 | 20.09 | .30 | 3.28 | 3.58 | (.35) | (.31) | (.66) | 23.01 | 18.23 | 267 | 1.49 | 1.49 | 1.39 | |||||
Year ended 10/31/2002 | 23.12 | .30 | (2.28) | (1.98) | (.40) | (.65) | (1.05) | 20.09 | (9.20) | 107 | 1.48 | 1.48 | 1.34 | |||||
Period from 3/15/2001 to 10/31/2001 | 23.48 | .24 | (.35) | (.11) | (.25) | - | (.25) | 23.12 | (.48) | 28 | 1.48 | (5) | 1.48 | (5) | 1.64 | (5) | ||
Class F: | ||||||||||||||||||
Year ended 10/31/2005 | 25.04 | .52 | 1.41 | 1.93 | (.46) | (.05) | (.51) | 26.46 | 7.71 | 434 | .67 | .65 | 1.97 | |||||
Year ended 10/31/2004 | 23.12 | .45 | 2.00 | 2.45 | (.44) | (.09) | (.53) | 25.04 | 10.70 | 324 | .70 | .70 | 1.86 | |||||
Year ended 10/31/2003 | 20.17 | .46 | 3.30 | 3.76 | (.50) | (.31) | (.81) | 23.12 | 19.14 | 172 | .72 | .72 | 2.14 | |||||
Year ended 10/31/2002 | 23.20 | .47 | (2.30) | (1.83) | (.55) | (.65) | (1.20) | 20.17 | (8.57) | 54 | .75 | .75 | 2.08 | |||||
Period from 3/15/2001 to 10/31/2001 | 23.54 | .34 | (.35) | (.01) | (.33) | - | (.33) | 23.20 | (.05) | 12 | .76 | (5) | .76 | (5) | 2.30 | (5) | ||
Class 529-A: | ||||||||||||||||||
Year ended 10/31/2005 | 25.07 | .51 | 1.42 | 1.93 | (.45) | (.05) | (.50) | 26.50 | 7.71 | 151 | .70 | .68 | 1.93 | |||||
Year ended 10/31/2004 | 23.15 | .45 | 2.00 | 2.45 | (.44) | (.09) | (.53) | 25.07 | 10.70 | 99 | .71 | .71 | 1.85 | |||||
Year ended 10/31/2003 | 20.20 | .47 | 3.31 | 3.78 | (.52) | (.31) | (.83) | 23.15 | 19.19 | 51 | .67 | .67 | 2.22 | |||||
Period from 2/19/2002 to 10/31/2002 | 23.31 | .34 | (3.07) | (2.73) | (.38) | - | (.38) | 20.20 | (11.88) | 19 | .70 | (5) | .70 | (5) | 2.25 | (5) | ||
Class 529-B: | ||||||||||||||||||
Year ended 10/31/2005 | 25.00 | .29 | 1.41 | 1.70 | (.23) | (.05) | (.28) | 26.42 | 6.79 | 32 | 1.55 | 1.53 | 1.09 | |||||
Year ended 10/31/2004 | 23.09 | .24 | 1.99 | 2.23 | (.23) | (.09) | (.32) | 25.00 | 9.72 | 24 | 1.59 | 1.59 | .97 | |||||
Year ended 10/31/2003 | 20.16 | .27 | 3.30 | 3.57 | (.33) | (.31) | (.64) | 23.09 | 18.07 | 14 | 1.61 | 1.61 | 1.27 | |||||
Period from 2/19/2002 to 10/31/2002 | 23.31 | .20 | (3.06) | (2.86) | (.29) | - | (.29) | 20.16 | (12.40) | 5 | 1.60 | (5) | 1.60 | (5) | 1.36 | (5) | ||
Class 529-C: | ||||||||||||||||||
Year ended 10/31/2005 | 25.00 | .29 | 1.41 | 1.70 | (.23) | (.05) | (.28) | 26.42 | 6.82 | 48 | 1.54 | 1.52 | 1.10 | |||||
Year ended 10/31/2004 | 23.09 | .24 | 1.99 | 2.23 | (.23) | (.09) | (.32) | 25.00 | 9.74 | 33 | 1.58 | 1.58 | .98 | |||||
Year ended 10/31/2003 | 20.16 | .27 | 3.30 | 3.57 | (.33) | (.31) | (.64) | 23.09 | 18.09 | 16 | 1.60 | 1.60 | 1.28 | |||||
Period from 2/20/2002 to 10/31/2002 | 23.54 | .21 | (3.30) | (3.09) | (.29) | - | (.29) | 20.16 | (13.25) | 6 | 1.59 | (5) | 1.59 | (5) | 1.38 | (5) | ||
Class 529-E: | ||||||||||||||||||
Year ended 10/31/2005 | 25.02 | .42 | 1.41 | 1.83 | (.36) | (.05) | (.41) | 26.44 | 7.35 | 8 | 1.02 | 1.00 | 1.61 | |||||
Year ended 10/31/2004 | 23.10 | .37 | 1.99 | 2.36 | (.35) | (.09) | (.44) | 25.02 | 10.32 | 6 | 1.06 | 1.06 | 1.50 | |||||
Year ended 10/31/2003 | 20.16 | .38 | 3.30 | 3.68 | (.43) | (.31) | (.74) | 23.10 | 18.72 | 3 | 1.07 | 1.07 | 1.80 | |||||
Period from 3/7/2002 to 10/31/2002 | 24.93 | .27 | (4.67) | (4.40) | (.37) | - | (.37) | 20.16 | (17.78) | 1 | 1.05 | (5) | 1.05 | (5) | 1.95 | (5) | ||
Class 529-F: | ||||||||||||||||||
Year ended 10/31/2005 | 25.08 | .52 | 1.42 | 1.94 | (.45) | (.05) | (.50) | 26.52 | 7.77 | 3 | .64 | .62 | 1.99 | |||||
Year ended 10/31/2004 | 23.16 | .43 | 2.00 | 2.43 | (.42) | (.09) | (.51) | 25.08 | 10.58 | 2 | .81 | .80 | 1.75 | |||||
Year ended 10/31/2003 | 20.22 | .43 | 3.32 | 3.75 | (.50) | (.31) | (.81) | 23.16 | 19.03 | 1 | .82 | .82 | 1.99 | |||||
Period from 9/17/2002 to 10/31/2002 | 20.63 | .05 | (.34) | (.29) | (.12) | - | (.12) | 20.22 | (1.42) | - | (6) | .09 | .09 | .26 | ||||
Class R-1: | ||||||||||||||||||
Year ended 10/31/2005 | $24.97 | $.31 | $1.40 | $1.71 | $(.25) | $(.05) | $(.30) | $26.38 | 6.86% | $12 | 1.48% | 1.45% | 1.17% | |||||
Year ended 10/31/2004 | 23.06 | .26 | 1.99 | 2.25 | (.25) | (.09) | (.34) | 24.97 | 9.83 | 10 | 1.51 | 1.49 | 1.07 | |||||
Year ended 10/31/2003 | 20.17 | .26 | 3.33 | 3.59 | (.39) | (.31) | (.70) | 23.06 | 18.19 | 4 | 1.65 | 1.50 | 1.18 | |||||
Period from 6/11/2002 to 10/31/2002 | 23.56 | .12 | (3.29) | (3.17) | (.22) | - | (.22) | 20.17 | (13.50) | - | (6) | 1.24 | .58 | .60 | ||||
Class R-2: | ||||||||||||||||||
Year ended 10/31/2005 | 24.95 | .31 | 1.41 | 1.72 | (.26) | (.05) | (.31) | 26.36 | 6.90 | 99 | 1.65 | 1.42 | 1.19 | |||||
Year ended 10/31/2004 | 23.05 | .27 | 1.99 | 2.26 | (.27) | (.09) | (.36) | 24.95 | 9.86 | 64 | 1.76 | 1.45 | 1.10 | |||||
Year ended 10/31/2003 | 20.17 | .29 | 3.28 | 3.57 | (.38) | (.31) | (.69) | 23.05 | 18.10 | 32 | 1.86 | 1.47 | 1.35 | |||||
Period from 5/31/2002 to 10/31/2002 | 24.35 | .14 | (4.10) | (3.96) | (.22) | - | (.22) | 20.17 | (16.31) | 3 | .75 | .61 | .67 | |||||
Class R-3: | ||||||||||||||||||
Year ended 10/31/2005 | 25.00 | .44 | 1.40 | 1.84 | (.38) | (.05) | (.43) | 26.41 | 7.37 | 181 | .98 | .96 | 1.65 | |||||
Year ended 10/31/2004 | 23.09 | .37 | 1.99 | 2.36 | (.36) | (.09) | (.45) | 25.00 | 10.32 | 113 | 1.05 | 1.04 | 1.49 | |||||
Year ended 10/31/2003 | 20.18 | .37 | 3.30 | 3.67 | (.45) | (.31) | (.76) | 23.09 | 18.64 | 32 | 1.14 | 1.08 | 1.72 | |||||
Period from 6/6/2002 to 10/31/2002 | 23.70 | .17 | (3.44) | (3.27) | (.25) | - | (.25) | 20.18 | (13.87) | 2 | .53 | .43 | .83 | |||||
Class R-4: | ||||||||||||||||||
Year ended 10/31/2005 | 25.06 | .51 | 1.41 | 1.92 | (.45) | (.05) | (.50) | 26.48 | 7.69 | 43 | .69 | .67 | 1.94 | |||||
Year ended 10/31/2004 | 23.14 | .46 | 1.99 | 2.45 | (.44) | (.09) | (.53) | 25.06 | 10.69 | 34 | .70 | .70 | 1.86 | |||||
Year ended 10/31/2003 | 20.19 | .44 | 3.32 | 3.76 | (.50) | (.31) | (.81) | 23.14 | 19.14 | 16 | .73 | .72 | 2.03 | |||||
Period from 6/27/2002 to 10/31/2002 | 22.95 | .17 | (2.79) | (2.62) | (.14) | - | (.14) | 20.19 | (11.43) | - | (6) | .53 | .25 | .84 | ||||
Class R-5: | ||||||||||||||||||
Year ended 10/31/2005 | 25.10 | .58 | 1.43 | 2.01 | (.53) | (.05) | (.58) | 26.53 | 8.05 | 198 | .39 | .36 | 2.22 | |||||
Year ended 10/31/2004 | 23.17 | .53 | 2.00 | 2.53 | (.51) | (.09) | (.60) | 25.10 | 11.04 | 62 | .39 | .39 | 2.18 | |||||
Year ended 10/31/2003 | 20.21 | .54 | 3.29 | 3.83 | (.56) | (.31) | (.87) | 23.17 | 19.50 | 52 | .41 | .41 | 2.53 | |||||
Period from 5/15/2002 to 10/31/2002 | 24.66 | .26 | (4.43) | (4.17) | (.28) | - | (.28) | 20.21 | (16.98) | 41 | .18 | .18 | 1.22 |
Year ended October 31 | ||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||
Portfolio turnover rate for all classes of shares | 22 | % | 17 | % | 24 | % | 31 | % | 45 | % | ||||||
(1) Based on operations for the period shown (unless otherwise noted) and, accordingly, may not be representative of a full year. | |||||||||
(2) Based on average shares outstanding. | |||||||||
(3) Total returns exclude all sales charges, including contingent deferred sales charges. | |||||||||
(4) The ratios in this column reflect the impact, if any, of certain reimbursements/waivers from CRMC. During some of the periods shown, CRMC reduced fees for investment advisory services for all share classes. In addition, during the start-up period for the retirement plan share classes (except Class R-5), CRMC agreed to pay a portion of the fees related to transfer agent services. | |||||||||
(5) Annualized. | |||||||||
(6) Amount less than $1 million. | |||||||||
See Notes to Financial Statements |
Report of independent registered public accounting firm
To the Shareholders and Board of Directors of American Mutual Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of American Mutual Fund, Inc. (the “Fund”), including the summary investment portfolio, as of October 31, 2005, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2005, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of American Mutual Fund, Inc. as of October 31, 2005, 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 financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Costa Mesa, California
December 8, 2005
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 certain distributions received by shareholders during such fiscal year. The information below is provided for the fund’s fiscal year ended October 31, 2005.
During the fiscal year ended, the fund paid a long-term capital gain distribution of $27,858,000.
Individual shareholders are eligible for reduced tax rates on qualified dividend income. The fund designates 100% of the dividends received as qualified dividend income.
Corporate shareholders may exclude up to 70% of qualifying dividends. The fund designates 100% of dividends received as qualified dividend income.
For state tax purposes, certain states may exempt from income taxation that portion of the income dividends paid by the fund that were derived from direct U.S. government obligations. The fund designates $5,829,000 as interest derived on direct U.S. government obligations.
Individual shareholders should refer to their Form 1099-DIV or other tax information, which will be mailed in January 2006, to determine the calendar year amounts to be included on their 2005 tax returns. Shareholders should consult their tax advisers.
Other share class results unaudited
Class B, Class C, Class F and Class 529
Figures shown are past results and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For the most current information and month-end results, visit americanfunds.com.
Average annual total returns for periods ended September 30, 2005 (the most recent calendar quarter):
1 year | 5 years | Life of class | |
Class B shares — first sold 3/15/00 | |||
Reflecting applicable contingent deferred sales charge (CDSC), maximum of 5%, payable only if shares are sold within six years of purchase | +4.21% | +5.93% | +7.36% |
Not reflecting CDSC | +9.21% | +6.24% | +7.49% |
Class C shares — first sold 3/15/01 | |||
Reflecting CDSC, maximum of 1%, payable only if shares are sold within one year of purchase | +8.11% | — | +5.45% |
Not reflecting CDSC | +9.11% | — | +5.45% |
Class F shares1— first sold 3/15/01 | |||
Not reflecting annual asset-based fee charged by sponsoring firm | +10.01% | — | +6.24% |
Class 529-A shares2— first sold 2/19/02 | |||
Reflecting 5.75% maximum sales charge | +3.64% | — | +5.10% |
Not reflecting maximum sales charge | +9.96% | — | +6.84% |
Class 529-B shares2— first sold 2/19/02 | |||
Reflecting applicable CDSC, maximum of 5%, payable only if shares are sold within six years of purchase | +4.03% | — | +5.17% |
Not reflecting CDSC | +9.03% | — | +5.90% |
Class 529-C shares2— first sold 2/20/02 | |||
Reflecting CDSC, maximum of 1%, payable only if shares are sold within one year of purchase | +8.00% | — | +5.62% |
Not reflecting CDSC | +9.00% | — | +5.62% |
Class 529-E shares1,2— first sold 3/7/02 | +9.55% | — | +4.55% |
Class 529-F shares1,2— first sold 9/17/02 | |||
Not reflecting annual asset-based fee charged by sponsoring firm | +9.98% | — | +12.19% |
The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased the waiver to 10% on April 1, 2005. Fund results shown reflect the waiver, without which they would have been lower. Please see the Financial Highlights table on page 23 for details.
1 | These shares are sold without any initial or contingent deferred sales charge. |
2 | Results shown do not reflect the $10 initial account setup fee and an annual $10 account maintenance fee. |
There are several ways to invest in American Mutual Fund. Class A shares are subject to a 5.75% maximum up-front sales charge that declines for accounts (and aggregated investments) of $25,000 or more and is eliminated for purchases of $1 million or more. Other share classes, which are generally not available for certain employer-sponsored retirement plans, have no up-front sales charges but are subject to additional annual expenses and fees. Annual expenses for Class B shares were 0.80 percentage points higher than for Class A shares; Class B shares convert to Class A shares after eight years of ownership. If redeemed within six years, Class B shares may also be subject to a contingent deferred sales charge (“CDSC”) of up to 5% that declines over time. Class C shares were subject to annual expenses 0.86 percentage points higher than those for Class A shares and a 1% CDSC if redeemed within the first year after purchase. Class C shares convert to Class F shares after 10 years. Class F shares, which are available only through certain fee-based programs offered by broker-dealer firms and registered investment advisers, had higher annual expenses (by 0.09 percentage points) than did Class A shares, and an annual asset-based fee charged by the sponsoring firm. Expenses are deducted from income earned by the fund. As a result, dividends and investment results will differ for each share class.
Expense example unaudited
As a shareholder of the fund, you incur two types of costs: (1) transaction costs such as initial sales charges on purchase payments and contingent deferred sales charges on redemptions (loads); and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2005, through October 31, 2005).
Actual expenses:
The first line of each share class in the table on the next page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period. There are some account fees that are charged to certain types of accounts, such as Individual Retirement Accounts and CollegeAmerica accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually) that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F and Class 529-F shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would also be lower by the amount of these fees.
Hypothetical example for comparison purposes:
The second line of each share class in the table on the next page provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio for the share class and an assumed rate of return of 5.00% per year before expenses, which is not the actual return of the share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5.00% hypothetical example with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds. There are some account fees that are charged to certain types of accounts, such as Individual Retirement Accounts and CollegeAmerica accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually) that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F and Class 529-F shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would also be lower by the amount of these fees.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of each share class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning account value 5/1/2005 | Ending account value 10/31/2005 | Expenses paid during period (1) | Annualized expense ratio | ||||||||||
Class A -- actual return | $ | 1,000.00 | $ | 1,041.57 | $ | 2.83 | .55 | % | |||||
Class A -- assumed 5% return | 1,000.00 | 1,022.43 | 2.80 | .55 | |||||||||
Class B -- actual return | 1,000.00 | 1,037.37 | 6.88 | 1.34 | |||||||||
Class B -- assumed 5% return | 1,000.00 | 1,018.45 | 6.82 | 1.34 | |||||||||
Class C -- actual return | 1,000.00 | 1,037.14 | 7.19 | 1.40 | |||||||||
Class C -- assumed 5% return | 1,000.00 | 1,018.15 | 7.12 | 1.40 | |||||||||
Class F -- actual return | 1,000.00 | 1,041.25 | 3.14 | .61 | |||||||||
Class F -- assumed 5% return | 1,000.00 | 1,022.13 | 3.11 | .61 | |||||||||
Class 529-A -- actual return | 1,000.00 | 1,041.42 | 3.29 | .64 | |||||||||
Class 529-A -- assumed 5% return | 1,000.00 | 1,021.98 | 3.26 | .64 | |||||||||
Class 529-B -- actual return | 1,000.00 | 1,036.83 | 7.65 | 1.49 | |||||||||
Class 529-B -- assumed 5% return | 1,000.00 | 1,017.69 | 7.58 | 1.49 | |||||||||
Class 529-C -- actual return | 1,000.00 | 1,036.91 | 7.60 | 1.48 | |||||||||
Class 529-C -- assumed 5% return | 1,000.00 | 1,017.74 | 7.53 | 1.48 | |||||||||
Class 529-E -- actual return | 1,000.00 | 1,039.49 | 4.94 | .96 | |||||||||
Class 529-E -- assumed 5% return | 1,000.00 | 1,020.37 | 4.89 | .96 | |||||||||
Class 529-F -- actual return | 1,000.00 | 1,042.08 | 2.47 | .48 | |||||||||
Class 529-F -- assumed 5% return | 1,000.00 | 1,022.79 | 2.45 | .48 | |||||||||
Class R-1 -- actual return | 1,000.00 | 1,036.76 | 7.39 | 1.44 | |||||||||
Class R-1 -- assumed 5% return | 1,000.00 | 1,017.95 | 7.32 | 1.44 | |||||||||
Class R-2 -- actual return | 1,000.00 | 1,037.48 | 7.24 | 1.41 | |||||||||
Class R-2 -- assumed 5% return | 1,000.00 | 1,018.10 | 7.17 | 1.41 | |||||||||
Class R-3 -- actual return | 1,000.00 | 1,039.37 | 4.93 | .96 | |||||||||
Class R-3 -- assumed 5% return | 1,000.00 | 1,020.37 | 4.89 | .96 | |||||||||
Class R-4 -- actual return | 1,000.00 | 1,040.96 | 3.34 | .65 | |||||||||
Class R-4 -- assumed 5% return | 1,000.00 | 1,021.93 | 3.31 | .65 | |||||||||
Class R-5 -- actual return | 1,000.00 | 1,042.58 | 1.80 | .35 | |||||||||
Class R-5 -- assumed 5% return | 1,000.00 | 1,023.44 | 1.79 | .35 | |||||||||
(1) Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the period (184), and divided by 365 (to reflect the one-half year period). | |||||||||||||
Board of Directors and officers
“Non-interested” Directors
Name and age | Year first elected a Director of the fund1 | Principal occupation(s) during past five years |
H. Frederick Christie, 72 Chairman of the Board (Independent and Non-Executive) | 1972 | Private investor; former President and CEO, The Mission Group (non-utility holding company, subsidiary of Southern California Edison Company) |
Mary Anne Dolan, 58 | 1993 | Founder and President, M.A.D., Inc. (communications company); former Editor-in-Chief, The Los Angeles Herald Examiner |
Martin Fenton, 70 | 1981 | Chairman of the Board and CEO, Senior Resource Group LLC (development and management of senior living communities) |
Mary Myers Kauppila, 51 | 1991 | Private investor; Chairman of the Board and CEO, Ladera Management Company (venture capital and agriculture); former owner and President, Energy Investment, Inc. |
Bailey Morris-Eck, 61 | 1999 | Director and Programming Chair, WYPR Baltimore/Washington (public radio station); Senior Adviser, Financial News (London); Senior Fellow, Institute for International Economics |
Kirk P. Pendleton, 66 | 1998 | Chairman of the Board and CEO, Cairnwood, Inc. (venture capital investment) |
Olin C. Robison, Ph.D., 69 | 1991 | President of the Salzburg Seminar; President Emeritus, Middlebury College |
Steven B. Sample, Ph.D., 65 | 1999 | President, University of Southern California |
Name and age | Number of Portfolios in fund complex2 overseen by Director | Other directorships3 held by Director |
H. Frederick Christie, 72 Chairman of the Board (Independent and Non-Executive) | 19 | Ducommun Incorporated; IHOP Corporation; |
Mary Anne Dolan, 58 | 3 | None |
Martin Fenton, 70 | 16 | None |
Mary Myers Kauppila, 51 | 5 | None |
Bailey Morris Eck, 61 | 3 | The Nevis Fund, Inc |
Kirk P. Pendleton, 66 | 6 | None |
Olin C. Robison, Ph.D., 69 | 3 | American Shared Hospital Services |
Steven B. Sample, Ph.D., 65 | 2 | UNOVA, Inc.; William Wrigley Jr. Company |
“Interested” Directors4
Name, age and position with fund | Year first elected a Director or officer of the fund1 | Principal occupation(s) during past five years and positions held with affiliated entities or the principal underwriter of the fund |
James K. Dunton, 67 Vice Chairman of the Board | 1984 | Senior Vice President and Director, Capital Research and Management Company |
J. Dale Harvey, 40 President | 2000 | Vice President, Capital Research and Management Company; Director, American Funds Service Company5 |
“Interested” Directors4
Name, age and position with fund | Number of Portfolios in fund complex2 overseen by Director | Other directorships3 held by Director |
James K. Dunton, 67 Vice Chairman of the Board | 2 | None |
J. Dale Harvey, 40 President | 1 | None |
Chairman Emeritus | |
Jon B. Lovelace, Jr., 78 | Chairman Emeritus, Capital Research and Management Company |
The statement of additional information includes additional information about fund Directors and is available without charge upon request by calling American Funds Service Company at 800/421-0180. The address for all Directors and officers of the fund is 333 South Hope Street, Los Angeles, CA 90071, Attention: Fund Secretary.
1 | Directors and officers of the fund serve until their resignation, removal or retirement. |
2 | Capital Research and Management Company manages the American Funds, consisting of 29 funds. Capital Research and Management Company also manages American Funds Insurance Series,® which serves as the underlying investment vehicle for certain variable insurance contracts, and Endowments, whose shareholders are limited to certain nonprofit organizations. |
3 | This includes all directorships (other than those in the American Funds) that are held by each Director as a director of a public company or a registered investment company. |
4 | “Interested persons” within the meaning of the 1940 Act, on the basis of their affiliation with the fund’s investment adviser, Capital Research and Management Company, or affiliated entities (including the fund’s principal underwriter). |
5 | Company affiliated with Capital Research and Management Company. |
Other officers
Name, age and position with fund | Year first Elected an officer of the fund1 | Principal occupation(s) during past five years and positions held with affiliated entities or the principal underwriter of the fund |
Timothy D. Armour, 45 Senior Vice President | 1994 | Executive Vice President and Director, Capital Research and Management Company; Director, The Capital Group Companies, Inc.5 |
Joyce E. Gordon, 49 Senior Vice President | 2005 | Senior Vice President and Director, Capital Research and Management Company |
Joanna F. Jonsson, 42 Senior Vice President | 1997 | Senior Vice President, Capital Research Company;5 Director, The Capital Group Companies, Inc.5 |
Alan N. Berro, 45 Vice President | 2000 | Vice President, Capital Research and Management Company; Senior Vice President, Capital Research Company5 |
William L. Robbins, 37 Vice President | 2004 | Executive Vice President and Director, Capital Research Company5 |
Vincent P. Corti, 49 Secretary | 1994 | Vice President — Fund Business Management Group, Capital Research and Management Company |
Jeffrey P. Regal, 34 Treasurer | 2003 | Vice President — Fund Business Management Group, Capital Research and Management Company |
Sheryl F. Johnson, 37 Assistant Treasurer | 1998 | Vice President — Fund Business Management Group, Capital Research and Management Company |
Offices of the fund and of
the investment adviser
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1406
135 South State College Boulevard
Brea, CA 92821-5823
Transfer agent for shareholder accounts
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 25065
Santa Ana, CA 92799-5065
P.O. Box 659522
San Antonio, TX 78265-9522
P.O. Box 6007
Indianapolis, IN 46206-6007
P.O. Box 2280
Norfolk, VA 23501-2280
Custodian of assets
JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017-2070
Counsel
O’Melveny & Myers LLP
400 South Hope Street
Los Angeles, CA 90071-2899
Independent registered public accounting firm
Deloitte & Touche LLP
695 Town Center Drive
Suite 1200
Costa Mesa, CA 92626-7188
Principal underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406
Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds and CollegeAmerica. This and other important information is contained in the fund’s prospectus and the CollegeAmerica program description, which can be obtained from your financial adviser and should be read carefully before investing. You may also call American Funds Service Company (AFS) at 800/421-0180 or visit the American Funds website at americanfunds.com. If you reside in a state other than Virginia, there may be an in-state plan that provides tax and other benefits not available through CollegeAmerica. Talk to your tax adviser. CollegeAmerica is distributed by American Funds Distributors and sold through unaffiliated intermediaries.
“American Funds Proxy Voting Guidelines” — which describes how we vote proxies relating to portfolio securities — is available free of charge on the U.S. Securities and Exchange Commission (SEC) website at www.sec.gov, on the American Funds website or upon request by calling AFS. The fund files its proxy voting record with the SEC for the 12 months ended June 30 by August 31. The report also is available on the SEC and American Funds websites.
A complete October 31, 2005, portfolio of American Mutual Fund’s investments is available free of charge by calling AFS or visiting the SEC website (where it is part of Form N-CSR).
American Mutual Fund files a complete list of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. This filing is available free of charge on the SEC website. You may also review or, for a fee, copy this filing at the SEC’s Public Reference Room in Washington, D.C. (800/SEC-0330). Additionally, the list of portfolio holdings also is available by calling AFS.
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, 2005, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter.
[logo - American Funds®]
CollegeAmerica is sponsored by
Virginia College Savings PlanSM
What makes American Funds different?
For more than 70 years, we have followed a consistent philosophy that we firmly believe is in our investors’ best interests. The range of opportunities offered by our family of just 29 carefully conceived, broadly diversified funds has attracted over 30 million shareholder accounts.
Our unique combination of strengths includes these five factors:
• | A long-term, value-oriented approach |
Rather than follow fads, we pursue a consistent strategy, focusing on each investment’s long-term potential. |
• | An unparalleled global research effort |
American Funds draws on one of the industry’s most globally integrated research networks. |
• | The multiple portfolio counselor system |
Every American Fund is divided among a number of portfolio counselors. Each takes responsibility for a portion independently, within each fund’s objectives; in most cases, research analysts manage a portion as well. Over time this method has contributed to a consistency of results and continuity of management. |
• | Experienced investment professionals |
The recent market decline was not the first for most of the portfolio counselors who serve the American Funds. More than half of them were in the investment business before the sharp market decline of 1987. |
• | A commitment to low operating expenses |
American Funds’ operating expenses are among the lowest in the mutual fund industry. Our portfolio turnover rates are low as well, keeping transaction costs and tax consequences contained. |
29 mutual funds, consistent philosophy, consistent results
• | Growth funds |
Emphasis on long-term growth through stocks | |
AMCAP Fund® | |
EuroPacific Growth Fund® | |
The Growth Fund of America® | |
The New Economy Fund® | |
New Perspective Fund® | |
New World FundSM | |
SMALLCAP World Fund® |
• | Growth-and-income funds |
Emphasis on long-term growth and dividends through stocks | |
> | American Mutual Fund® |
Capital World Growth and Income FundSM | |
Fundamental InvestorsSM | |
The Investment Company of America® | |
Washington Mutual Investors FundSM |
• | Equity-income funds |
Emphasis on above-average income and growth through stocks and/or bonds | |
Capital Income Builder® | |
The Income Fund of America® |
• | Balanced fund |
Emphasis on long-term growth and current income through stocks and bonds | |
American Balanced Fund® |
• | Bond funds |
Emphasis on current income through bonds | |
American High-Income TrustSM | |
The Bond Fund of AmericaSM | |
Capital World Bond Fund® | |
Intermediate Bond Fund of America® | |
U.S. Government Securities FundSM |
• | Tax exempt bond funds |
Emphasis on tax free current income through municipal bonds | |
American High Income Municipal Bond Fund® | |
Limited Term Tax Exempt Bond Fund of AmericaSM | |
The Tax Exempt Bond Fund of America® |
State-specific tax-exempt funds | |
The Tax-Exempt Fund of California® | |
The Tax-Exempt Fund of Maryland® | |
The Tax-Exempt Fund of Virginia® |
• | Money market funds |
The Cash Management Trust of America® | |
The Tax-Exempt Money Fund of AmericaSM | |
The U.S. Treasury Money Fund of AmericaSM |
The Capital Group Companies
American Funds Capital Research and Management Capital International Capital Guardian Capital Bank and Trust
Lit. No. MFGEAR-903-1205P
Litho in USA BC/L/8052-S4699
Printed on recycled paper
ITEM 2 - Code of Ethics
The Registrant has adopted a Code of Ethics that applies to its Principal Executive Officer and Principal Financial Officer. The Registrant undertakes to provide to any person without charge, upon request, a copy of the Code of Ethics. Such request can be made to American Funds Service Company at 800/421-0180 or to the Secretary of the Registrant, 333 South Hope Street, Los Angeles, California 90071.
ITEM 3 - Audit Committee Financial Expert
The Registrant’s Board has determined that Martin Fenton, a member of the Registrant’s Audit Committee, is an “audit committee financial expert” and "independent," as such terms are defined in this Item. This designation will not increase the designee’s duties, obligations or liability as compared to his or her duties, obligations and liability as a member of the Audit Committee and of the Board; nor will it reduce the responsibility of the other Audit Committee members. There may be other individuals who, through education or experience, would qualify as "audit committee financial experts" if the Board had designated them as such. Most importantly, the Board believes each member of the Audit Committee contributes significantly to the effective oversight of the Registrant’s financial statements and condition.
ITEM 4 - Principal Accountant Fees and Services
Registrant: | ||||
a) Audit Fees: | ||||
2004 | $55,000 | |||
2005 | $64,000 | |||
b) Audit-Related Fees: | ||||
2004 | $8,000 | |||
2005 | $5,000 | |||
The audit-related fees consist of assurance and related services relating to the examination of the Registrant’s investment adviser conducted in accordance with Statement on Auditing Standards Number 70 issued by the American Institute of Certified Public Accountants. | ||||
c) Tax Fees: | ||||
2004 | $6,000 | |||
2005 | $6,000 | |||
The tax fees consist of professional services relating to the preparation of the Registrant’s tax returns. | ||||
d) All Other Fees: | ||||
2004 | none | |||
2005 | none | |||
Adviser and affiliates (includes only fees for non-audit services billed to the adviser and affiliates for engagements that relate directly to the operations and financial reporting of the Registrant and were subject to the pre-approval policies described below): | ||||
a) Not Applicable | ||||
b) Audit-Related Fees: | ||||
2004 | $323,000 | |||
2005 | $355,000 | |||
The audit-related fees consist of assurance and related services relating to the examination of the Registrant’s transfer agency and investment adviser conducted in accordance with Statement on Auditing Standards Number 70 issued by the American Institute of Certified Public Accountants. | ||||
c) Tax Fees: | ||||
2004 | none | |||
2005 | none | |||
d) All Other Fees: | ||||
2004 | none | |||
2005 | $210,000 | |||
The other fees consist of consulting services related to the registrant’s compliance program. |
The Registrant’s Audit Committee will pre-approve all audit and permissible non-audit services that the Committee considers compatible with maintaining the auditors’ independence. The pre-approval requirement will extend to all non-audit services provided to the Registrant, the investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant, if the engagement relates directly to the operations and financial reporting of the Registrant. The Committee will not delegate its responsibility to pre-approve these services to the investment adviser. The Committee may delegate to one or more Committee members the authority to review and pre-approve audit and permissible non-audit services. Actions taken under any such delegation will be reported to the full Committee at its next meeting. The pre-approval requirement is waived with respect to non-audit services if certain conditions are met. The pre-approval requirement was not waived for any of the non-audit services listed above provided to the Registrant, adviser, and affiliates.
Aggregate non-audit fees paid to the Registrant’s auditors, including fees for all services billed to the Registrant and the adviser and affiliates that provide ongoing services to the Registrant were $979,000 for fiscal year 2004 and $960,000 for fiscal year 2005. The non-audit services represented by these amounts were brought to the attention of the Committee and considered to be compatible with maintaining the auditors’ independence.
ITEM 5 - Audit Committee of Listed Registrants
Not applicable to this Registrant, insofar as the Registrant is not a listed issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934.
ITEM 6 - Schedule of Investments
[logo - American Funds ®]
American Mutual Fund®
Investment portfolio
October 31, 2005 | |||||||
Market value | |||||||
Common stocks — 81.78% | Shares | (000 | ) | ||||
ENERGY — 7.11% | |||||||
BJ Services Co. | 1,800,000 | $ | 62,550 | ||||
Chevron Corp. | 3,371,177 | 192,393 | |||||
ConocoPhillips | 2,633,178 | 172,157 | |||||
Devon Energy Corp. | 2,000,000 | 120,760 | |||||
Exxon Mobil Corp. | 3,335,000 | 187,227 | |||||
Halliburton Co. | 1,200,000 | 70,920 | |||||
Marathon Oil Corp. | 4,000,000 | 240,640 | |||||
Schlumberger Ltd. | 440,200 | 39,957 | |||||
Sunoco, Inc. | 1,000,000 | 74,500 | |||||
1,161,104 | |||||||
MATERIALS — 4.75% | |||||||
Air Products and Chemicals, Inc. | 1,200,000 | 68,688 | |||||
Alcoa Inc. | 3,250,000 | 78,943 | |||||
Ashland Inc. | 900,000 | 48,159 | |||||
Dow Chemical Co. | 977,250 | 44,817 | |||||
E.I. du Pont de Nemours and Co. | 1,700,000 | 70,873 | |||||
Georgia-Pacific Corp. | 1,900,000 | 61,807 | |||||
International Paper Co. | 2,350,000 | 68,573 | |||||
MeadWestvaco Corp. | 4,588,000 | 120,297 | |||||
PPG Industries, Inc. | 750,000 | 44,977 | |||||
Praxair, Inc. | 1,400,000 | 69,174 | |||||
Sonoco Products Co. | 2,359,000 | 66,760 | |||||
Weyerhaeuser Co. | 500,000 | 31,670 | |||||
774,738 | |||||||
INDUSTRIALS — 11.57% | |||||||
3M Co. | 700,000 | 53,186 | |||||
Avery Dennison Corp. | 2,275,000 | 128,879 | |||||
Boeing Co. | 750,000 | 48,480 | |||||
Caterpillar Inc. | 700,000 | 36,813 | |||||
Emerson Electric Co. | 1,350,000 | 93,892 | |||||
General Dynamics Corp. | 185,000 | 21,516 | |||||
General Electric Co. | 9,950,000 | 337,405 | |||||
Lockheed Martin Corp. | 1,200,000 | 72,672 | |||||
Manpower Inc. | 2,250,000 | 101,880 | |||||
Norfolk Southern Corp. | 5,882,000 | 236,456 | |||||
Northrop Grumman Corp. | 1,550,000 | 83,158 | |||||
Pitney Bowes Inc. | 1,850,000 | 77,848 | |||||
R.R. Donnelley & Sons Co. | 2,265,000 | 79,320 | |||||
Tyco International Ltd. | 6,031,200 | 159,163 | |||||
Union Pacific Corp. | 350,000 | $ | 24,213 | ||||
United Parcel Service, Inc., Class B | 1,450,000 | 105,763 | |||||
United Technologies Corp. | 3,400,000 | 174,352 | |||||
Waste Management, Inc. | 1,800,000 | 53,118 | |||||
1,888,114 | |||||||
CONSUMER DISCRETIONARY — 9.92% | |||||||
Carnival Corp., units | 875,000 | 43,461 | |||||
Clear Channel Communications, Inc. | 4,500,000 | 136,890 | |||||
Dana Corp. | 4,170,000 | 31,317 | |||||
Dollar General Corp. | 5,000,000 | 97,200 | |||||
E.W. Scripps Co., Class A | 800,000 | 36,640 | |||||
Gannett Co., Inc. | 500,000 | 31,330 | |||||
Gap, Inc. | 1,500,000 | 25,920 | |||||
General Motors Corp. | 3,165,000 | 86,721 | |||||
Genuine Parts Co. | 600,000 | 26,622 | |||||
Harley-Davidson Motor Co. | 1,200,000 | 59,436 | |||||
Johnson Controls, Inc. | 3,145,600 | 214,058 | |||||
Knight-Ridder, Inc. | 500,000 | 26,690 | |||||
Leggett & Platt, Inc. | 5,945,000 | 119,138 | |||||
Lowe's Companies, Inc. | 810,000 | 49,224 | |||||
Magna International Inc., Class A | 1,780,000 | 124,102 | |||||
Mattel, Inc. | 6,000,000 | 88,500 | |||||
NIKE, Inc., Class B | 300,000 | 25,215 | |||||
ServiceMaster Co. | 4,750,000 | 59,755 | |||||
Target Corp. | 1,700,000 | 94,673 | |||||
TJX Companies, Inc. | 6,850,000 | 147,480 | |||||
VF Corp. | 1,150,000 | 60,087 | |||||
Walt Disney Co. | 1,400,000 | 34,118 | |||||
1,618,577 | |||||||
CONSUMER STAPLES — 4.67% | |||||||
Albertson’s, Inc. | 3,000,000 | 75,330 | |||||
Avon Products, Inc. | 1,800,000 | 48,582 | |||||
Coca-Cola Co. | 3,050,000 | 130,479 | |||||
General Mills, Inc. | 600,000 | 28,956 | |||||
H.J. Heinz Co. | 3,350,000 | 118,925 | |||||
Kimberly-Clark Corp. | 1,110,000 | 63,092 | |||||
Kraft Foods Inc., Class A | 700,000 | 19,810 | |||||
PepsiCo, Inc. | 1,370,000 | 80,940 | |||||
Sara Lee Corp. | 1,500,000 | 26,775 | |||||
Walgreen Co. | 2,100,000 | 95,403 | |||||
Wal-Mart Stores, Inc. | 1,550,000 | 73,331 | |||||
761,623 | |||||||
HEALTH CARE — 7.43% | |||||||
Abbott Laboratories | 5,800,000 | 249,690 | |||||
Becton, Dickinson and Co. | 600,000 | 30,450 | |||||
Bristol-Myers Squibb Co. | 7,907,200 | 167,395 | |||||
Eli Lilly and Co. | 4,330,000 | 215,591 | |||||
Johnson & Johnson | 600,000 | 37,572 | |||||
McKesson Corp. | 1,350,000 | 61,331 | |||||
Medtronic, Inc. | 1,250,000 | 70,825 | |||||
Merck & Co., Inc. | 4,750,000 | 134,045 | |||||
Pfizer Inc | 700,000 | $ | 15,218 | ||||
Schering-Plough Corp. | 3,475,000 | 70,681 | |||||
Wyeth | 3,598,000 | 160,327 | |||||
1,213,125 | |||||||
FINANCIALS — 16.53% | |||||||
Allstate Corp. | 1,200,000 | 63,348 | |||||
American International Group, Inc. | 2,829,000 | 183,319 | |||||
Aon Corp. | 3,300,000 | 111,705 | |||||
Bank of America Corp. | 4,832,812 | 211,387 | |||||
Bank of New York Co., Inc. | 3,250,000 | 101,693 | |||||
Citigroup Inc. | 7,910,000 | 362,120 | |||||
Fannie Mae | 4,935,000 | 234,511 | |||||
Freddie Mac | 3,150,000 | 193,252 | |||||
J.P. Morgan Chase & Co. | 5,446,000 | 199,433 | |||||
Jefferson-Pilot Corp. | 1,471,100 | 80,734 | |||||
Lincoln National Corp. | 1,167,900 | 59,107 | |||||
Marsh & McLennan Companies, Inc. | 1,600,300 | 46,649 | |||||
St. Paul Travelers Companies, Inc. | 3,650,000 | 164,359 | |||||
State Street Corp. | 1,000,000 | 55,230 | |||||
SunTrust Banks, Inc. | 1,525,000 | 110,532 | |||||
U.S. Bancorp | 3,650,000 | 107,967 | |||||
UnumProvident Corp. | 8,400,000 | 170,436 | |||||
Washington Mutual, Inc. | 3,550,000 | 140,580 | |||||
Wells Fargo & Co. | 1,668,750 | 100,459 | |||||
2,696,821 | |||||||
INFORMATION TECHNOLOGY — 6.92% | |||||||
Automatic Data Processing, Inc. | 750,000 | 34,995 | |||||
First Data Corp. | 1,200,000 | 48,540 | |||||
Hewlett-Packard Co. | 10,200,000 | 286,008 | |||||
Intel Corp. | 1,900,000 | 44,650 | |||||
International Business Machines Corp. | 3,635,000 | 297,634 | |||||
Linear Technology Corp. | 1,050,000 | 34,870 | |||||
Microchip Technology Inc. | 4,445,900 | 134,133 | |||||
Microsoft Corp. | 7,000,000 | 179,900 | |||||
Texas Instruments Inc. | 2,400,000 | 68,520 | |||||
1,129,250 | |||||||
TELECOMMUNICATION SERVICES — 5.30% | |||||||
ALLTEL Corp. | 1,000,000 | 61,860 | |||||
AT&T Corp. | 7,434,600 | 147,056 | |||||
BellSouth Corp. | 10,000,000 | 260,200 | |||||
SBC Communications Inc. | 6,100,000 | 145,485 | |||||
Sprint Nextel Corp. | 6,700,000 | 156,177 | |||||
Verizon Communications Inc. | 3,000,000 | 94,530 | |||||
865,308 | |||||||
UTILITIES — 6.48% | |||||||
Ameren Corp. | 1,883,680 | 99,082 | |||||
American Electric Power Co., Inc. | 2,935,000 | 111,413 | |||||
Dominion Resources, Inc. | 850,000 | 64,668 | |||||
Duke Energy Corp. | 4,800,000 | 127,104 | |||||
Exelon Corp. | 2,548,400 | 132,593 | |||||
FirstEnergy Corp. | 1,620,000 | 76,950 | |||||
PPL Corp. | 1,724,000 | 54,030 | |||||
Progress Energy, Inc. | 950,000 | $ | 41,410 | ||||
Public Service Enterprise Group Inc. | 800,000 | 50,312 | |||||
Questar Corp. | 1,500,000 | 118,125 | |||||
Southern Co. | 2,700,000 | 94,473 | |||||
Xcel Energy Inc. | 4,745,000 | 86,976 | |||||
1,057,136 | |||||||
MISCELLANEOUS — 1.10% | |||||||
Other common stocks in initial period of acquisition | 180,105 | ||||||
Total common stocks (cost: $11,074,210,000) | 13,345,901 | ||||||
Convertible securities — 0.48% | Shares or principal amount | ||||||
INDUSTRIALS — 0.08% | |||||||
Tyco International Group SA, Series B, 3.125% convertible debentures 2023 | $ | 10,000,000 | 12,838 | ||||
CONSUMER DISCRETIONARY — 0.15% | |||||||
Ford Motor Co. Capital Trust II 6.50% cumulative convertible trust preferred 2032 | 756,430 | 24,123 | |||||
HEALTH CARE — 0.08% | |||||||
Baxter International Inc. 7.00% convertible preferred 2006 | 250,000 units | 13,542 | |||||
FINANCIALS — 0.17% | |||||||
Chubb Corp. 7.00% convertible preferred 2005 | 400,000 units | 13,476 | |||||
XL Capital Ltd. 6.50% ACES convertible preferred 2007 | 700,000 units | 15,043 | |||||
28,519 | |||||||
Total convertible securities (cost: $97,333,000) | 79,022 | ||||||
Bonds & notes — 1.24% | Principal amount (000 | ) | |||||
UTILITIES — 0.06% | |||||||
Virginia Electric and Power Co., Series 2002-A, 5.375% 2007 | $ | 9,960 | 10,020 | ||||
MORTGAGE-BACKED OBLIGATIONS — 0.04% | |||||||
Fannie Mae 6.00% 20171 | 6,729 | 6,886 | |||||
GOVERNMENT & GOVERNMENT AGENCY BONDS & NOTES — 1.14% | |||||||
Fannie Mae 6.00% 2005 | 160,000 | 160,337 | |||||
Fannie Mae 5.00% 2007 | 25,000 | 25,114 | |||||
185,451 | |||||||
Total bonds & notes (cost: $201,925,000) | 202,357 | ||||||
Principal amount | Market value | ||||||
Short-term securities — 16.32% | (000 | ) | (000 | ) | |||
3M Co. 3.82% due 11/14/2005 | $ | 45,000 | $ | 44,933 | |||
Abbott Laboratories Inc. 3.80% due 11/8/20052 | 18,300 | 18,285 | |||||
American General Finance Corp. 3.93%-3.94% due 12/5-12/6/2005 | 49,600 | 49,407 | |||||
International Lease Finance Corp. 3.66%-4.05% due 11/9/2005-1/6/2006 | 90,000 | 89,592 | |||||
Avon Capital Corp. 3.95% due 11/23/2005v | 25,000 | 24,937 | |||||
Bank of America Corp. 3.68%-3.96% due 11/3-12/13/2005 | 130,000 | 129,488 | |||||
Ranger Funding Co. LLC 3.95% due 11/29/20052 | 40,000 | 39,873 | |||||
BellSouth Corp. 3.86% due 11/18/20052 | 37,200 | 37,128 | |||||
CAFCO, LLC 3.86%-4.13% due 11/23/2005-1/11/20062 | 140,800 | 139,985 | |||||
Clipper Receivables Co., LLC 3.65%-3.98% due 11/10-11/30/20052 | 167,500 | 167,162 | |||||
Coca-Cola Co. 4.00% due 1/9/2006 | 29,800 | 29,565 | |||||
DuPont (E.I.) de Nemours & Co. 3.71%-3.84% due 11/4-11/30/2005 | 62,150 | 62,030 | |||||
Edison Asset Securitization LLC 3.74%-4.00% due 11/4-12/22/20052 | 123,000 | 122,600 | |||||
Federal Home Loan Bank 3.82%-3.94% due 12/16-12/28/2005 | 198,200 | 197,012 | |||||
Freddie Mac 3.81%-3.99% due 12/22/2005-1/10/2006 | 119,800 | 119,029 | |||||
Gannett Co. 3.74%-3.87% due 11/3-12/1/20052 | 106,600 | 106,397 | |||||
Illinois Tool Works Inc. 3.92% due 11/21/2005 | 50,000 | 49,886 | |||||
International Bank for Reconstruction and Development 3.61%-3.65% due 11/8-12/19/2005 | 100,000 | 99,703 | |||||
Kimberly-Clark Worldwide Inc. 3.78%-3.85% due 11/14-11/18/20052 | 62,100 | 61,992 | |||||
Medtronic Inc. 3.73% due 11/1/20052 | 11,300 | 11,299 | |||||
NetJets Inc. 3.70% due 11/7/20052 | 20,000 | 19,986 | |||||
Park Avenue Receivables Co., LLC 3.85%-3.91% due 11/17-12/2/20052 | 90,700 | 90,468 | |||||
Preferred Receivables Funding Corp. 3.94% due 12/13/20052 | 45,600 | 45,385 | |||||
PepsiCo Inc. 3.71% due 11/4/20052 | 15,300 | 15,294 | |||||
Pfizer Inc 3.94%-3.955% due 12/5/20052 | 109,500 | 109,080 | |||||
Procter & Gamble Co. 3.63%-3.79% due 11/7-12/15/20052 | 190,000 | 189,338 | |||||
SBC Communications Inc. 3.75% due 11/8/20052 | 22,400 | 22,381 | |||||
Scripps (E.W.) Co. 3.84%-3.87% due 11/30-12/14/20052 | 25,000 | 24,898 | |||||
Tennessee Valley Authority 3.63%-3.895% due 11/17-12/22/2005 | 149,100 | 148,468 | |||||
Triple-A One Funding Corp. 3.80%-3.99% due 11/2-11/22/20052 | 54,361 | 54,292 | |||||
U.S. Treasury Bills 3.349%-3.415% due 12/1-12/22/2005 | 7,100 | 7,074 | |||||
Variable Funding Capital Corp. 3.80%-3.94% due 12/7-12/16/20052 | 75,000 | 74,660 | |||||
Wal-Mart Stores Inc. 3.63%-3.89% due 11/8-12/13/20052 | 186,400 | 185,874 | |||||
Wells Fargo & Co. 3.73% due 11/2/2005 | 75,000 | 75,000 | |||||
Total short-term securities (cost: $2,662,583,000) | 2,662,501 | ||||||
Total investment securities (cost: $14,036,051,000) | 16,289,781 | ||||||
Other assets less liabilities | 30,047 | ||||||
Net assets | $ | 16,319,828 |
“Miscellaneous” securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.
1Pass-through security backed by a pool of mortgages or other loans on which principal payments are periodically made. Therefore, the effective maturity
is shorter than the stated maturity.
2Restricted security that can be resold only to institutional investors. In practice, this security is typically as liquid as unrestricted securities
in the portfolio. The total value of all restricted securities was $1,561,314,000, which represented 9.57% of the net assets of the fund.
MFGEFP-903-1205-S4501
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INVESTMENT PORTFOLIO
To the Shareholders and Board of Directors of
American Mutual Fund, Inc.:
We have audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the financial statements of American Mutual Fund, Inc. (the “Fund”) as of October 31, 2005, and for the year then ended and have issued our report thereon dated December 8, 2005, which report and financial statements are included in Item 1 of this Certified Shareholder Report on Form N-CSR. Our audit also included the Fund’s investment portfolio (the “Schedule”) as of October 31, 2005 appearing in Item 6 of this Form N-CSR. This Schedule is the responsibility of the Fund’s management. Our responsibility is to express an opinion based on our audit. In our opinion, the Schedule referred to above, when considered in relation to the basic financial statements taken as a whole of the Fund referred to above, presents fairly, in all material respects, the information set forth therein.
DELOITTE & TOUCHE LLP
December 8, 2005
Costa Mesa, California
ITEM 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 8 - Portfolio Managers of Closed-End Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 9 - Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 10 - Submission of Matters to a Vote of Security Holders
There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Directors since the Registrant last submitted a proxy statement to its shareholders. The procedures are as follows. The Registrant has a Nominating Committee comprised solely of persons who are not considered ‘‘interested persons’’ of the Registrant within the meaning of the Investment Company Act of 1940, as amended. The committee periodically reviews such issues as the Board’s composition, responsibilities, committees, compensation and other relevant issues, and recommends any appropriate changes to the full Board of Directors. While the committee normally is able to identify from its own resources an ample number of qualified candidates, it will consider shareholder suggestions of persons to be considered as nominees to fill future vacancies on the Board. Such suggestions must be sent in writing to the Nominating Committee of the Registrant, c/o the Registrant’s Secretary, and must be accompanied by complete biographical and occupational data on the prospective nominee, along with a written consent of the prospective nominee for consideration of his or her name by the Nominating Committee.
ITEM 11 - Controls and Procedures
(a) | The Registrant’s Principal Executive Officer and Principal Financial Officer have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures (as such term is defined in Rule 30a-3 under the Investment Company Act of 1940), that such controls and procedures are adequate and reasonably designed to achieve the purposes described in paragraph (c) of such rule. |
(b) | There were no changes in the Registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
ITEM 12 - Exhibits
(a)(1) | The Code of Ethics that is the subject of the disclosure required by Item 2 is attached as an exhibit hereto. |
(a)(2) | The certifications required by Rule 30a-2 of the Investment Company Act of 1940, as amended, and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached as exhibits hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AMERICAN MUTUAL FUND, INC. | |
By /s/ James K. Dunton | |
James K. Dunton, Vice Chairman and PEO | |
Date: January 6, 2006 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By /s/ James K. Dunton |
James K. Dunton, Vice Chairman and PEO |
Date: January 6, 2006 |
By /s/ Jeffrey P. Regal |
Jeffrey P. Regal, Treasurer and PFO |
Date: January 6, 2006 |