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, 2003
Date of reporting period: October 31, 2003
Julie F. Williams
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(R)]
The right choice for the long term(R)
AMERICAN MUTUAL FUND
[front cover: Mt. Rainier National Park in Washington state with mountains in
background]
Annual report for the year ended October 31, 2003
AMERICAN MUTUAL FUND(R) 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 nation's third-largest mutual
fund family. 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
How the investment portfolio is built 6
About your fund 12
Investment portfolio 13
Financial statements 19
Fund Directors and officers 30
The American Funds family back cover
Fund results in this report were calculated for Class A shares at net asset
value (without a sales charge) unless otherwise indicated. Here are the average
annual total returns on a $1,000 investment with all distributions reinvested
for periods ended September 30, 2003 (the most recent calendar quarter):
1 year 5 years 10 years
CLASS A SHARES
Reflecting 5.75% maximum sales charge +12.48% +3.77% +9.06%
The fund's 30-day yield for Class A shares as of November 30, 2003, calculated
in accordance with the Securities and Exchange Commission formula, was 1.70%.
The fund's distribution rate for Class A shares as of that date was 2.08%. 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.
Results for other share classes can be found on page 29. For the most current
investment results, please refer to americanfunds.com. Please see the inside
back cover for important information about other share classes.
FIGURES SHOWN ARE PAST RESULTS AND ARE NOT PREDICTIVE OF FUTURE RESULTS. SHARE
PRICE AND RETURN WILL VARY, SO YOU MAY LOSE MONEY. INVESTING FOR SHORT PERIODS
MAKES LOSSES MORE LIKELY. INVESTMENTS ARE NOT FDIC-INSURED, NOR ARE THEY
DEPOSITS OF OR GUARANTEED BY A BANK OR ANY OTHER ENTITY.
[photograph: mountain background scene from front cover]
FELLOW SHAREHOLDERS:
American Mutual Fund's 2003 fiscal year paralleled a strong rebound for the
stock market. For the 12 months ending October 31, AMF posted a total return of
19.3%. Its benchmark, the unmanaged Standard & Poor's 500 Composite Index, had a
total return of 20.8%. AMF's return assumes reinvestment of quarterly dividends
totaling 52 cents a share and a capital gain of 31 cents a share, which was paid
in December 2002. The dividend payments amounted to an income return of 2.6%,
versus the S&P's 1.9%.
ECONOMIC REVIEW
After nearly two years of modest growth, the U.S. economy has been picking up
steam. Between July and September, for example, it expanded at an annualized
rate of 8.2%, its strongest quarter since 1984. Consumer spending -- fueled by
low interest rates and tax cuts -- helped, as did the falling dollar, which made
American exports more competitive abroad. Also significant was a sharp upturn in
business investment, which grew at its fastest rate since early 2000.
Going forward, the economy should continue to expand. Orders for durable and
capital goods are rising, inventories are shrinking, while freight shipping and
consumer confidence are rising. The housing market remains solid, despite an
uptick in mortgage rates from their June lows. At the same time, however, there
are reasons for caution. With the federal funds rate at 1% -- the lowest level
since 1958 -- and a mounting budget deficit, the federal government seems hard
pressed to inject more stimulus into the economy. At some point, in fact, both
the expanding economy and budget deficit will likely put upward pressure on
interest rates.
PORTFOLIO REVIEW
American Mutual Fund focuses on the balanced accomplishment of three objectives:
conservation of principal, current income and growth of capital. It seeks to
invest in established, well-managed companies that are reasonably priced and
have a history of growing revenues and profits. To be eligible for the
portfolio, they must also pay a dividend -- something we'll discuss in detail a
bit later.
[Begin Sidebar]
DIVIDENDS AND CAPITAL GAIN DISTRIBUTION PAID IN CALENDAR 2003
For tax purposes, here are the income dividends and capital gain distribution
Class A shareholders received in calendar 2003.
INCOME DIVIDENDS PER SHARE: CAPITAL GAIN DISTRIBUTION PER SHARE:
$0.130 paid 3/21/03 $0.090 paid 12/5/03
$0.130 paid 6/23/03
$0.130 paid 9/22/03
$0.130 paid 12/5/03
A Form 1099-DIV, which provides the information you will need to prepare your
federal income tax return for 2003, will be mailed to you with Your American
Funds Tax Guide in late January.
[End Sidebar]
Our largest industry holdings are concentrated in traditional industries like
oil and gas, diversified financials, pharmaceuticals, electric utilities and
telecommunications. These industries have broad exposure to the U.S. economy and
are benefiting from its recovery. In terms of individual companies, of the 110
held in our portfolio during the entire fiscal year, 90 rose in price and 20
fell.
Although most of the fund's assets (79.7% as of October 31) are invested in
stocks, we continue to maintain sizable positions in intermediate-term bonds and
cash. Bonds help us achieve our income objective. We have used our cash to buy
stocks when we think they are attractively priced, as they were a year ago and
in March of this year.
REDUCTION IN DIVIDEND TAXES
Previously, dividend income was taxed at rates as high as 38.6%. Most dividends
are now taxed at a maximum rate of 15%. This is a very favorable development.
Dividends reflect a company's stability, fiscal discipline and ability to
generate a steady stream of cash for its shareholders. They add to an investor's
total return when the stock market is rising -- and can ease their pain when it
is falling. Furthermore, over long periods of time, reinvested dividends have
accounted for a significant portion of an investment's overall return. From
January 1, 1926, to October 31, 2003, dividends accounted for 44% of the
annualized total return from common stocks, as measured by the S&P 500. In
short, it is difficult to overestimate the long-term importance of dividends.
EMPHASIS ON INVESTMENT RESEARCH
Since its inception in 1950, American Mutual Fund has had an average annual
total return of 12.5%, compared to the S&P 500's 12.0%. This long-term record is
based on solid, thorough and continuous investment research. In this year's
feature story, which begins on page 6, we'll tell you more about our research
process and how it has helped us achieve the balanced accomplishment of your
fund's three objectives.
American Mutual Fund continues to attract new investors, gaining nearly 100,000
new accounts and net sales, excluding reinvestment of distributions, of $905
million during the past year. We welcome our new shareholders and hope you will
be with us for many years to come.
We look forward to reporting to you again in six months.
Cordially,
/s/ James K. Dunton /s/ Robert G. O'Donnell
James K. Dunton Robert G. O'Donnell
Chairman of the Board President
December 15, 2003
[Begin Sidebar]
As reported in the press, instances of excessive short-term trading and illegal
"late trading" (trading after 4 p.m. Eastern time) have been discovered at a
number of different fund companies. In several of those cases, fund personnel
engaged in or permitted these activities in clear violation of regulatory
requirements and strict internal policies. This sort of conduct is unethical and
detrimental to long-term shareholders. We will not tolerate it at American
Funds. Although it is often difficult to detect and prevent abusive trading
practices, we are committed to taking action to combat this harmful activity
wherever we find it.
[End Sidebar]
THE VALUE OF A LONG-TERM PERSPECTIVE
Results of a $10,000 investment in American Mutual Fund
For more than 50 years, American Mutual Fund has been providing investors with
an opportunity to achieve their financial goals. A meaningful way to compare the
fund's results with the return on other investments is through its "total
return."
Total return is a combination of income return and capital results. This chart
illustrates an assumed $10,000 investment in American Mutual Fund from February
21, 1950 -- when the fund began operations -- through October 31, 2003. The
table beneath the chart shows the fund's total return in each of the 53 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 $5,257,312.1,2 Incidentally, over the
fund's lifetime, $10,000 would have grown to $78,7234 based on the Consumer
Price Index.
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 1993.
At the time, the table indicates the value of the investment illustrated here
was $2,004,864. Since then, it has more than doubled to $5,257,312. Thus, in the
same period, the value of your 1993 investment -- regardless of its size -- also
has more than doubled.
Average annual total returns
(based on a $1,000 investment with all distributions reinvested)
Class A shares (reflecting 5.75% maximum sales charge)*
For periods ended
10/31/03
1 year +12.46%
5 years + 3.34%
10 years + 9.47%
*Sales charges are lower for accounts (and aggregated investments) of $25,000 or
more.
<s> <c> <c>
Date American Mutual Fund American Mutual Fund
with dividends reinvested with dividends excluded
(000's) (1), (2) (000's) (1), (3)
2/21/50 $9.4 $9.4
7/13/50 9.0 8.9
10/7/50 10.3 10.1
10/31/50 10.0 9.7
10/31/51 12.2 11.3
7/16/52 13.4 12.2
10/31/52 13.2 11.7
3/19/53 14.6 12.9
9/14/53 13.0 11.3
10/31/53 14.1 12.0
10/31/54 19.3 15.9
9/23/55 26.7 21.6
10/31/55 25.1 20.1
8/2/55 31.9 25.0
10/31/56 29.7 23.1
12/31/56 30.8 24.1
10/22/57 26.8 20.3
10/31/57 28.1 21.2
1/2/58 27.9 20.9
9/30/58 34.8 25.7
10/31/58 36.1 26.5
8/3/59 43.5 31.3
10/31/59 41.5 29.7
12/31/59 43.3 31.0
9/28/60 40.3 28.0
10/31/60 40.9 28.4
10/31/61 54.3 36.8
12/12/61 57.1 38.7
6/25/62 42.7 28.5
10/31/62 46.6 30.7
10/31/63 61.3 39.3
10/31/64 71.4 44.6
6/28/65 70.4 43.5
10/31/65 79.9 48.8
12/17/65 82.3 50.2
10/7/66 71.7 42.5
10/31/66 77.6 46.1
1/4/67 79.9 47.1
9/25/67 98.6 57.3
10/31/67 92.8 53.6
3/25/68 89.2 51.1
10/31/68 109.6 61.3
11/29/68 115.0 64.3
10/9/69 98.4 53.0
10/31/69 103.2 55.7
5/26/70 78.4 41.4
10/31/70 93.3 48.1
4/29/71 121.0 61.1
10/31/71 113.0 56.0
11/23/71 106.4 52.8
8/23/72 128.1 61.7
10/31/72 125.2 59.7
12/11/72 136.0 64.9
8/22/73 112.2 51.9
10/31/73 124.8 57.1
3/14/74 126.3 57.1
10/3/74 91.0 38.8
10/31/74 105.1 45.0
12/6/74 96.9 41.5
7/15/75 138.2 56.9
10/31/75 132.2 53.3
12/5/75 130.3 52.6
9/21/76 174.0 68.0
10/31/76 167.4 64.3
12/31/76 182.7 70.1
10/31/77 176.4 64.6
1/26/78 175.8 63.5
9/12/78 229.3 80.8
10/31/78 198.9 69.1
10/5/79 257.9 86.4
10/31/79 232.8 77.0
10/15/80 315.9 100.7
10/31/80 303.6 95.4
6/23/81 350.4 107.6
9/25/81 317.8 96.4
10/31/81 334.1 99.9
8/10/82 334.4 93.8
10/22/82 434.7 120.5
10/31/82 426.4 118.2
1/3/83 444.3 120.5
10/10/83 562.8 149.6
10/31/83 544.9 143.3
11/29/83 564.8 148.5
7/24/84 507.7 128.7
10/31/84 577.2 144.4
1/4/85 583.5 144.2
7/17/85 705.0 170.3
10/31/85 701.8 167.6
9/4/86 936.5 217.0
10/31/86 913.1 209.4
8/25/87 1,136.9 253.2
10/19/87 886.3 195.6
10/31/87 960.9 212.1
12/4/87 893.6 197.3
6/22/88 1,071.4 229.9
10/31/88 1,081.2 227.1
1/3/89 1,071.7 220.6
10/31/89 1,299.8 259.4
12/13/89 1,346.6 268.7
10/31/90 1,239.3 235.2
1/9/91 1,280.5 238.5
8/28/91 1,533.1 279.4
10/31/91 1,544.4 278.5
12/10/91 1,500.8 267.7
8/3/92 1,715.8 299.7
10/31/92 1,690.0 292.2
12/4/92 1,721.0 294.5
10/15/93 2,018.7 335.9
10/31/93 2,004.9 333.6
11/1/93 2,003.1 333.3
4/4/94 1,902.0 313.6
10/31/94 2,039.9 326.4
12/8/94 1,968.4 311.8
10/19/95 2,505.2 386.1
10/31/95 2,473.4 381.2
1/10/96 2,579.7 394.3
10/21/96 2,965.1 442.2
10/31/96 2,940.7 438.6
12/16/96 2,977.6 440.7
10/7/97 3,809.7 552.3
10/31/97 3,652.2 529.4
1/9/98 3,718.5 535.7
4/17/98 4,289.2 614.0
10/31/98 4,205.5 594.2
11/23/98 4,395.6 621.0
12/14/99 4,240.0 595.3
10/31/99 4,584.2 631.8
11/16/00 4,643.6 640.0
3/7/00 3,918.1 536.6
10/31/00 4,639.4 620.1
5/21/01 5,217.4 686.7
9/21/01 4,560.8 591.1
10/31/01 4,811.5 623.6
3/19/02 5,400.3 694.8
10/9/02 3,957.0 500.4
10/31/02 4,406.4 557.2
3/11/03 4,149.2 521.4
10/31/03 5,257.3 648.8
<s> <c>
Date Standard & Poor's 500
Composite Index
with dividends
reinvested
2/21/50 $10,000
3/9/50 9,980
10/24/50 12,242
10/31/50 12,023
12/4/50 11,810
10/15/51 15,620
10/31/51 15,125
11/24/51 14,703
8/8/52 17,629
10/31/52 17,157
1/5/53 18,855
9/14/53 16,653
10/31/53 18,185
11/17/53 17,970
10/6/54 25,456
10/31/54 24,752
11/1/54 24,838
9/23/55 36,907
10/31/55 34,492
11/1/55 34,443
8/2/56 41,741
10/31/56 38,605
7/15/57 42,684
10/22/57 34,205
10/31/57 36,168
12/18/57 34,818
10/13/58 47,125
10/31/58 47,009
11/25/58 46,725
8/3/59 56,925
10/31/59 54,385
1/5/60 57,428
10/25/60 51,038
10/31/60 52,268
11/1/60 52,806
10/31/61 69,287
12/12/61 73,541
6/26/62 53,780
10/31/62 59,004
11/1/62 59,630
10/28/63 80,093
10/31/63 79,835
11/22/63 75,088
10/12/64 94,552
10/31/64 94,408
6/28/65 92,427
10/27/65 105,817
10/31/65 106,023
2/9/66 108,804
10/7/66 86,547
10/31/66 95,134
11/22/66 94,505
9/25/67 118,979
10/31/67 115,082
3/5/68 108,692
10/21/68 132,432
10/31/68 130,788
11/29/68 137,411
7/29/69 115,515
10/31/69 126,935
11/10/69 128,357
5/26/70 92,108
10/31/70 112,877
11/18/70 112,254
4/28/71 143,982
10/31/71 131,895
11/23/71 126,198
8/14/72 161,027
10/31/72 160,791
1/11/73 174,099
8/22/73 148,093
10/31/73 160,825
11/1/73 159,934
10/3/74 96,094
10/31/74 114,517
12/6/74 101,201
7/15/75 152,757
10/31/75 144,279
12/5/75 141,160
9/21/76 180,440
10/31/76 173,368
12/31/76 182,351
10/25/77 159,782
10/31/77 162,890
3/6/78 156,091
9/12/78 197,202
10/31/78 173,229
11/14/78 172,001
10/5/79 217,506
10/31/79 200,011
3/27/80 196,407
10/15/80 275,888
10/31/80 264,126
11/28/80 292,265
9/25/81 243,451
10/31/81 265,623
8/12/82 233,339
10/20/82 320,276
10/31/82 308,890
11/23/82 307,088
10/10/83 415,677
10/31/83 395,213
1/6/84 412,027
7/24/84 368,402
10/31/84 420,380
12/13/84 411,175
7/17/85 509,869
10/31/85 501,639
11/4/85 505,418
9/4/86 691,048
10/31/86 668,098
8/25/87 943,691
10/19/87 632,928
10/31/87 710,847
12/4/87 634,197
10/21/88 827,986
10/31/88 815,773
11/16/88 771,471
10/9/89 1,087,429
10/31/89 1,030,770
7/16/90 1,143,973
10/11/90 924,581
10/31/90 953,671
11/7/90 959,977
8/28/91 1,275,819
10/31/91 1,272,350
11/29/91 1,221,224
9/14/92 1,415,354
10/31/92 1,398,929
11/4/92 1,393,683
10/15/93 1,611,215
10/31/93 1,607,499
2/2/94 1,667,508
4/4/94 1,526,617
10/31/94 1,669,519
12/8/94 1,579,580
10/19/95 2,140,536
10/31/95 2,110,427
11/1/95 2,120,298
10/18/96 2,635,548
10/31/96 2,618,637
11/1/96 2,613,067
10/7/97 3,713,963
10/31/97 3,459.189
11/12/97 3,426,436
7/17/98 4,535,102
10/31/98 4,219,865
11/3/98 4,266,609
7/16/99 5,497,678
10/31/99 5,302,788
3/24/00 5,967,503
10/12/00 5,229,586
10/31/00 5,625,358
11/6/2000 5,636,338
9/21/01 3,842,757
10/31/01 4,225,243
1/4/02 4,686,796
10/9/02 3,141,633
10/31/02 3,587,381
3/11/03 3,264,697
10/31/03 4,333,074
$78,723 (4) Consumer Price Index
$10,000 Original investment
Year ended October 31 1950# 1951 1952 1953 1954 1955
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends reinvested (5) $310 532 524 580 613 667
Value at year-end (1) $10,018 12,234 13,164 14,076 19,261 25,050
Dividends excluded (6) $307 507 478 579 516 544
Value at year-end (1) $9,708 11,334 11,710 12,009 15,876 20,087
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return (1) 3.1% 5.3 4.3 4.4 4.4 3.5
Capital results (1) (2.9) 16.8 3.3 2.5 32.4 26.6
AMF total return 0.2 22.1 7.6 6.9 36.8 30.1
Year ended October 31 1956 1957 1958 1959 1960 1961
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends reinvested (5) 789 910 1,009 1,050 1,209 1,258
Value at year-end (1) 29,652 28,050 36,140 41,489 40,865 54,348
Dividends excluded (6) 626 703 754 763 855 865
Value at year-end (1) 23,142 21,241 26,511 29,668 28,371 36,806
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return (1) 3.2 3.1 3.6 2.9 2.9 3.1
Capital results (1) 15.2 (8.5) 25.2 11.9 (4.4) 29.9
AMF total return 18.4 (5.4) 28.8 14.8 (1.5) 33.0
Year ended October 31 1962 1963 1964 1965 1966 1967
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends reinvested (5) 1,372 1,523 1,697 1,845 2,271 2,568
Value at year-end (1) 46,572 61,289 71,355 79,919 77,646 92,836
Dividends excluded (6) 920 993 1,078 1,143 1,372 1,507
Value at year-end (1) 30,677 39,309 44,625 48,769 46,067 53,558
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return (1) 2.5 3.3 2.8 2.6 2.8 3.3
Capital results (1) (16.8) 28.3 13.6 9.4 (5.6) 16.3
AMF total return (14.3) 31.6 16.4 12.0 (2.8) 19.6
Year ended October 31 1968 1969 1970 1971 1972 1973
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends reinvested (5) 3,152 3,762 4,169 4,423 4,711 5,070
Value at year-end (1) 109,586 103,216 93,358 112,886 125,226 124,800
Dividends excluded (6) 1,796 2,076 2,210 2,246 2,302 2,382
Value at year-end (1) 61,257 55,651 48,100 55,961 59,737 57,130
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return (1) 3.4 3.4 4.0 4.7 4.2 4.0
Capital results (1) 14.6 (9.2) (13.6) 16.2 6.7 (4.3)
AMF total return 18.0 (5.8) (9.6) 20.9 10.9 (0.3)
Year ended October 31 1974 1975 1976 1977 1978 1979
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends reinvested (5) 7,273 7,299 7,881 8,603 9,989 11,322
Value at year-end (1) 105,122 132,196 167,379 176,434 198,947 232,805
Dividends excluded (6) 3,257 3,053 3,121 3,245 3,582 3,861
Value at year-end (1) 44,985 53,330 64,276 64,554 69,119 76,959
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return (1) 5.8 6.9 6.0 5.1 5.7 5.7
Capital results (1) (21.6) 18.9 20.6 0.3 7.1 11.3
AMF total return (15.8) 25.8 26.6 5.4 12.8 17.0
Year ended October 31 1980 1981 1982 1983 1984 1985
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends reinvested (5) 13,853 16,351 26,841 26,227 26,606 30,124
Value at year-end (1) 303,585 334,117 426,438 544,917 577,161 701,836
Dividends excluded (6) 4,491 5,045 7,806 7,123 6,868 7,402
Value at year-end (1) 95,432 99,943 118,168 143,286 144,417 167,598
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return (1) 6.0 5.4 8.0 6.2 4.9 5.2
Capital results (1) 24.4 4.7 19.6 21.6 1.0 16.4
AMF total return 30.4 10.1 27.6 27.8 5.9 21.6
Year ended October 31 1986 1987 1988 1989 1990 1991
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends reinvested (5) 34,058 39,286 50,009 59,908 66,101 71,768
Value at year-end (1) 913,072 960,889 1,081,202 1,299,788 1,239,346 1,544,414
Dividends excluded (6) 8,006 8,877 10,831 12,336 12,953 13,358
Value at year-end (1) 209,413 212,116 227,085 259,386 235,204 278,500
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return (1) 4.9 4.3 5.2 5.5 5.1 5.8
Capital results (1) 25.2 0.9 7.3 14.7 (9.8) 18.8
AMF total return 30.1 5.2 12.5 20.2 (4.7) 24.6
[begin sidebar]
Value added by
reinvestment of
dividends
[end sidebar]
Year ended October 31 1992 1993 1994 1995 1996 1997
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends reinvested (5) 67,509 70,887 76,470 83,157 90,174 95,003
Value at year-end (1) 1,690,017 2,004,864 2,039,874 2,473,446 2,940,742 3,652,205
Dividends excluded (6) 11,977 12,074 12,539 13,110 13,724 14,010
Value at year-end (1) 292,156 333,581 326,417 381,224 438,613 529,422
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return (1) 4.4 4.2 3.8 4.1 3.6 3.2
Capital results (1) 5.0 14.4 (2.1) 17.2 15.3 21.0
AMF total return 9.4 18.6 1.7 21.3 18.9 24.2
Year ended October 31 1998 1999 2000 2001 2002 2003
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends reinvested (5) 104,111 110,494 132,206 145,406 121,358 115,816
Value at year-end (1) 4,205,471 4,584,199 4,639,429 4,811,535 4,406,372 58,257,312
Dividends excluded (6) 14,947 15,465 18,012 19,211 15,592 14,507
Value at year-end (1) 594,159 631,823 620,069 623,599 557,186 648,807
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return (1) 2.9 2.6 2.9 3.1 2.5 2.6
Capital results (1) 12.2 6.4 (1.7) 0.6 (10.9) 16.7
AMF total return 15.1 9.0 1.2 3.7 (8.4) 19.3
AVERAGE ANNUAL TOTAL RETURN FOR AMF'S LIFETIME
Income return (1) 4.08%
Capital results (1) 8.30%
AMF total return 12.38% (1)
# Fund began operations February 21, 1950.
Past results are not predictive of future results. The results shown are before
taxes on fund distributions and sale of fund shares.
The S&P 500 index is unmanaged; does not reflect sales charges, commissions or
expenses; cannot be invested in directly and reflects monthly dividends
reinvested.
(1) These figures, unlike those shown earlier in this report, reflect payment
of the 5.75% maximum sales charge on the $10,000 investment. Thus, the net
amount invested was $9,425. The maximum initial sales charge was 8.5% prior
to July 1, 1988. As outlined in the prospectus, the sales charge is reduced
for larger investments. There is no sales charge on dividends reinvested or
capital gain distributions taken in shares.
(2) Includes reinvested capital gain distributions totaling $2,953,959 in the
years 1950-2003 and reinvested dividends. The total "cost" of this
investment was $1,782,099 ($10,000 plus $1,772,099 in reinvested
dividends).
(3) Includes reinvested capital gain distributions taken in shares totaling
$496,101 but does not reflect income dividends taken in cash.
(4) Computed from data supplied by the U.S. Department of Labor, Bureau of
Labor Statistics.
(5) Includes special dividends of $1,691 in 1974, $989 in 1975, $7,524 in 1982,
$3,967 in 1983, $6,064 in 1988, $9,850 in 1989, $9,497 in 1990 and $8,996
in 1991.
(6) Includes special dividends of $746 in 1974, $407 in 1975, $2,251 in 1982,
$1,099 in 1983, $1,339 in 1988, $2,069 in 1989, $1,895 in 1990 and $1,707
in 1991.
[photograph: minature copy of front cover, Mt. Rainier National Park in
Washington state}
HOW THE INVESTMENT PORTFOLIO IS BUILT
"Our analysts are the backbone of our research process. It's impossible to
overestimate the value of their investment insight and how it benefits American
Mutual Fund."
- -- American Mutual Fund president
Robert G. O'Donnell
[Begin Sidebar]
[photograph: oil derrick in the ocean with a barge moored to it and a full moon
and clouds in the background]
[photograph: Cathy Kehr]
"The bottom line is if you know something that can help a colleague, you pass it
along. That benefits our shareholders, which is why we're here in the first
place."
- -- Research analyst Cathy Kehr
[End Sidebar]
[Begin Sidebar]
[photograph: metropolitan deco buildings]
[photgraph: Will Robbins]
"You know what the stock price is, but what does it imply about the company's
future prospects?"
- -- Research analyst Will Robbins
[End Sidebar]
Since its inception in 1950, American Mutual Fund has tried to achieve the
balanced accomplishment of three objectives --current income, growth of capital
and conservation of principal. It is a challenging and never-ending task.
For AMF -- indeed all 29 of the American Funds -- it begins with investment
research. We place such importance on research that it is found in the name of
the fund's investment adviser: Capital Research and Management Company.
In our feature this year, we'll take an in-depth look at our investment research
process and show you how it works. We'll introduce you to a few research
analysts -- the men and women who help identify the best stocks for the fund to
invest in. We'll explain how they interact with portfolio counselors and why
they directly manage a portion of AMF's investment portfolio.
AN INTENSIVE, CONTINUOUS PROCESS
"I think the most important thing about our investment research," says oil
analyst Cathy Kehr, "is that we try to see as far down the road as possible.
Where a company will be in six months or a year -- and what I think it will be
worth --is certainly important. But where it will be in, say, three or five
years is even more vital. That's where I try to focus."
Since no one knows whether a stock will go up or down today, how can an analyst
possibly try to determine where a company -- and its stock -- might be in, say,
2008? "It's obviously difficult," admits Will Robbins, a San Francisco-based
bank analyst and research director for Capital Research. "And that's why
investment research is so important."
Will says that in general there are four components to the research process.
"First and foremost is conducting fundamental analysis of a company. This is
typically done by studying publicly available information like financial reports
and documents the company is required to file with the government. Next is what
I like to call a `competitive analysis' of a company: What are its prospects and
how does it stack up against similar firms in its industry? For example, how
does Ford look compared with General Motors?"
The third part of investment research, Will says, is valuation analysis. "You
know what the stock price is, but what does it imply about the company's future
prospects? More important, understanding where our views differ from consensus
can allow us to conclude whether a stock is undervalued or overvalued."
Finally, Will tries to make a subjective judgment on the company's management.
"Looking at their capabilities and track record can teach you an awful lot about
how they're likely to do in the future."
"Getting to know the management is vitally important," agrees analyst Dave
Carpenter, who follows a wide variety of industries such as railroads, food
manufacturers and household product companies for AMF. "It's one of the most
important things an analyst can do. You learn how they think, how they respond
in certain situations. It's incredibly useful. I also develop a tremendous
amount of insight by talking with lower level employees, as well as competitors
and customers. Sometimes you can get a different perspective from a guy on a
factory floor that hasn't -- or won't -- bubble up to the CEO's desk. It's
impossible to overestimate the importance of getting to know people at all
levels of a company."
Dave also says that when it comes to investment research, the past is often
prologue.
"Take railroads, for example. The number of freight cars that are loaded with
various goods is often a good indicator of overall economic activity. In the
past, when that number has gone down, it's often meant a slowing economy. When
the number goes up, it's a sign that the economy may be rebounding."
But business and economic conditions can change rapidly. New technologies and
new competitors can quickly alter the playing field. Analysts must be plugged in
and inquisitive.
"The overall research process is thorough and never-ending," says Dave. "We
don't talk with management once; we don't look over their financials once; we
don't talk with their customers once. We're always talking with everyone. We're
always studying financial documents. And we're in the field as often as
possible." Cathy agrees. "You've got to keep your eyes and ears open," she says.
"What's happening? What are people doing and saying that can have an impact on
the companies I follow? I read five or six trade journals every day. Sometimes
I'll find a little tidbit at the bottom of an article that can help me better
evaluate a company. And you're always talking to people."
Given that the oil industry is a far-flung global business, that means heavy
travel. Cathy's passport, well-worn and stuffed with visas and entry stamps,
tells the tale. "In the past few months I've been to Russia, Azerbaijan,
Kazakhstan, Canada, Brazil, Argentina, all over Latin America, Europe, Nigeria
and Australia." And closer to home, countless trips to Houston and New York. All
told, the Los Angeles-based analyst spends about four months a year on the road.
"Airplane food isn't my favorite," she jokes, "but you get used to it."
MULTIPLE POINTS OF VIEW
Companies in AMF's portfolio must be domiciled in the United States or Canada
or, if not, included in Standard & Poor's 500 Composite Index. Many have
extensive global operations. Such companies, known as multinationals, are
exposed to all sorts of varying rules and regulations, which can complicate an
analyst's efforts. "It's really difficult, perhaps impossible, for one person to
stay on top of it all," admits Geneva-based analyst Jody Jonsson, who has
followed an eclectic batch of industries ranging from insurance to cruise lines.
And that, she says, is where research clusters come into play.
[photograph: train traveling through a rural area]
[photograph: Dave Carpenter]
[Begin Photo Caption]
"Getting to know the management is vitally important. You learn how they think,
how they respond in certain situations. I also develop a tremendous amount of
insight by talking with lower level employees, as well as competitors and
customers."
- -- Research analyst Dave Carpenter
[End Photo Caption]
[Begin Sidebar]
HIGHER YIELDS OVER TIME-- AMF VERSUS THE S&P 500
American Mutual Fund traditionally has had a higher dividend yield than the S&P
500. 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]
Year S&P 500 AMF
1984 4.47% 4.60
1985 4.14 4.28
1986 3.38 3.70
1987 3.46 3.92
1988 3.30 4.59
1989 3.21 4.67
1990 3.91 5.35
1991 3.09 4.77
1992 2.95 4.01
1993 2.68 3.52
1994 2.76 3.70
1995 2.35 3.35
1996 2.10 3.03
1997 1.68 2.55
1998 1.46 2.38
1999 1.22 2.29
2000 1.15 2.52
2001 1.49 2.96
2002 1.81 2.73
2003 1.61 2.21
Year ended October 31
Distribution rate (%) at net asset value
[end bar chart]
[End Sidebar]
"A research cluster is our term for a group of analysts and portfolio counselors
who get together to discuss investment ideas with one another," she says. "Since
we have research offices around the world, those discussions take place in
person, but more often through conference calls, voicemails and e-mails."
It sounds like information overload, but Jody says it's actually a pretty
efficient system. "Meetings are broken down by topic, by region, and by fund. A
daily in-house research newsletter is available on a worldwide database. And
information is sorted by analyst, by region and by company."
Cathy agrees. "I find it incredibly helpful to have several pairs of eyes
looking at the same thing. In the oil and gas cluster, for example, we have 10
people. Besides pure oil analysts like me, we have a fixed income analyst on the
team, an Asian specialist and so forth. We all bring different experience to the
table, approaching things from different angles."
And information flows not just among analysts and portfolio counselors in one
sector, but among people in industries that can overlap and affect each other.
For example, Cathy's take on the oil and gas industry may come in handy for
other analysts following companies in the chemical, utility, transportation and
auto sectors.
"Someone may have a bit of insight that you might not have; even one bit of
information can help you make a wiser investment decision," she says. "I think
that's the research cluster's real jewel in the crown -- the insight you gain
from others. In terms of analyzing an investment or potential investment, it
helps put the whole mosaic together. The bottom line is if you know something
that can help a colleague, you pass it along. That benefits our shareholders,
which is why we're here in the first place."
LONG-TERM RELATIONSHIPS
Capital Research's emphasis on investing for the long term is reflected in the
longevity of its analysts. Jody, for example, has been following insurance
companies for 13 years. She says that gives her a leg up on analysts at other
investment firms.
"I've been able to build up relationships with people over a period of many
years," she says. "I've watched many of them move up the ladder within a
company, or leave for another one. Over time you develop a combination of
breadth and depth that can help you make better investment decisions."
Of course, that doesn't mean Capital analysts avoid mistakes, Jody admits. "But
because of the knowledge and insight we've developed over the years, we're able
to keep our nerve, stay focused and respond to events in a measured and rational
way. This tends to help reduce the number of errors we make."
[photograph: view from the deck of an ocean liner with a second ocean liner in
background]
[photograph: Jody Jonsson]
[Begin Photo Caption]
"Over time you develop a combination of breadth and depth that can help you make
better investment decisions."
- -- Research analyst Jody Jonsson
[End Photo Caption]
HOLDING UP WELL DURING DIFFICULT TIMES
Making fewer mistakes helps conserve principal, which is one of the fund's
long-term goals. The stock market's decline from March 2000 to October 2002
provides a dramatic example of this. During those 31 months, the S&P 500's total
return was -47%; AMF's was -7%. Over a full market cycle -- from the low of
August 1998 to the low of October 2002 -- the S&P 500's total return was -14%;
AMF gained nearly 5%.
"Our investment analysts played an absolutely vital role in helping us through
the last few, tough years," notes Mike Shanahan, one of AMF's portfolio
counselors. "During the stock market's run up of the late 1990s, big technology
stocks were powering the market. But our analysts thought it was an
unsustainable trend; that those companies had no hope of living up to overblown
earnings expectations. They were right."
That cautious, risk-averse approach helps explain why AMF lagged the broader
market when it was soaring. But it also helped the fund hold up quite well
during the severe bear market that followed.
"And one big reason for that," Mike says, "is because we have so many talented
analysts who know their companies extremely well."
[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]
S&P 500 AMF
-11.7% -9.7% Jan. 5, 1953 - Sept. 14, 1953
Korean War ends;
recession begins
S&P 500 AMF
-18.1% -16.0% Aug. 2, 1956 - Oct. 22, 1957
Egypt seizes Suez Canal
S&P 500 AMF
-26.9% -25.0% Dec. 12, 1961 - June 26, 1962
Stocks hit postwar highs;
Kennedy confronts steel industry
S&P 500 AMF
-20.5% -15.1% Feb. 9, 1966 - Oct. 7, 1966
Economy overheats, interest
rates and taxes rise
S&P 500 AMF
-33.0% -31.8% Nov. 29, 1968 - May 26, 1970
Vietnam War sparks civil
unrest, recession
S&P 500 AMF
-44.8% -32.2% Jan. 11, 1973 - Oct. 3, 1974
OPEC oil embargo;
Watergate scandal; Nixon resigns
S&P 500 AMF
-13.5% +3.1% Sept. 21, 1976 - March 6, 1978
Carter warns of impending
energy crisis
S&P 500 AMF
-20.2% +3.5% Nov. 28, 1980 - Aug. 12, 1982
Record-high interest rates
provoke recession
S&P 500 AMF
-32.8% -21.4% Aug. 25, 1987 - Dec. 4, 1987
Overvalued stocks trigger
market crash
S&P 500 AMF
-19.2% -12.1% July 16, 1990 - Oct. 11, 1990
Iraq invades Kuwait
S&P 500 AMF
-19.1% -12.1% July 17, 1998 - Aug. 31, 1998
"Asian flu" spreads to Russia,
igniting global economic fears
S&P 500 AMF
-47.4% -7.1% March 24, 2000 - Oct. 9, 2002
Internet bubble bursts;
terrorist strike on U.S.
[end bar chart]
[End Sidebar]
But holding up well during a difficult stock market environment is hardly new to
American Mutual Fund. As the table below shows, since its inception in 1950, the
fund has done better than the S&P 500 in every significant downturn. Over that
period -- more than 53 years -- the fund's annual total return has averaged
12.5%. The S&P 500 has averaged 12.0%.
PORTFOLIO MANAGEMENT
American Mutual Fund has five portfolio counselors. But the fund's assets are
actually divided into six segments, with that last piece managed by the research
analysts. In other words, analysts act as portfolio counselors themselves,
managing a portion -- currently about 25% -- of the fund's assets.
"It stands to reason that since our analysts have spent years following their
companies and industries, they know them extremely well," says American Mutual
Fund's chairman of the board and portfolio counselor Jim Dunton. "So they should
be given an opportunity to act on that investment insight."
Jody says that being given a portion of the fund's portfolio is both a privilege
and a responsibility. "It gives the analysts a direct stake in the fund. We're
allowed to act on our highest investment convictions. And when those investments
do well, it means the fund's shareholders are making money. That's a great
feeling."
At Capital Research, this overall division of a fund's assets is referred to as
the "multiple portfolio counselor system." Blending the best attributes of
individualism and teamwork, it provides stability, flexibility and continuity,
not to mention different kinds of experience and ways of thinking.
"Including our research analysts in the multiple portfolio counselor system is
one of Capital's not-so-secret strengths," says Jim. "I've been in this business
for more than four decades. But I'm still learning new things every day. And a
great deal of what I learn comes from them. They're a smart bunch of people.
They're dedicated, experienced and they work hard to make sure that our
shareholders do well over the long run."
"Our analysts are the backbone of our investment process," agrees Bob O'Donnell,
the fund's president and one of its portfolio counselors. "I rely heavily on
their experience and insight. It's impossible to overestimate the value of that
insight and how it benefits American Mutual Fund."
ABOUT YOUR FUND
Launched in 1950, American Mutual Fund seeks the balanced accomplishment of
three objectives: current income, growth of capital and conservation of
principal. The fund is managed conservatively to reduce volatility and risk. The
fund does not own securities of companies that derive the majority of their
revenues from tobacco and/or alcohol. AMF invests primarily in common stocks,
U.S. government securities, bonds rated A or better and cash. Companies owned
must be based in the United States or Canada or included in Standard & Poor's
500 Composite Index. The fund will not invest in non-dividend-paying stocks.
[Begin Sidebar]
AMERICAN MUTUAL FUND
FACTS AND FIGURES*
o Shareholders: 537,136
o Assets under management: $10.7 billion
o Portfolio counselors: five
o Average amount of investment experience: 28 years
*As of October 31, 2003.
[End Sidebar]
A TOTAL COMMITMENT TO HONESTY AND INTEGRITY
A key objective of our investment research process is determining, to the best
of our ability, that companies we invest in adhere to the highest standards of
ethics and openness. Companies that do so tend to act in the best interests of
their shareholders. We apply these standards to ourselves as well. A board of
directors that is comprised largely of independent outsiders provides oversight
of American Mutual Fund. Our audit committee is completely independent.
OUR LONG-TERM FOCUS HELPS LOWER EXPENSES
Because we invest for the long run, we tend to hold stocks for long periods of
time. That means we incur fewer trading expenses. Over time, holding costs down
helps the total return on your investment.
AMERICAN MUTUAL FUND COMPARED WITH ITS BENCHMARK
Average annual total returns at net asset value ending October 31, 2003 (1)
Standard & Poor's 500
American Mutual Fund Composite Index
1 year 19.31% 20.79%
3 years 4.26% -8.33%
5 years 4.57% 0.53%
10 years 10.12% 10.42%
Lifetime (2) 12.50% 11.97%
(1) With distributions reinvested.
(2) Fund began operations February 21, 1950.
AMERICAN MUTUAL FUND'S PORTFOLIO COUNSELORS
American Mutual Fund's five portfolio counselors have an average 28 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.
[Begin Photo Caption]
Years of
investment
experience
James K. Dunton 41
[photograph: James K. Dunton]
Mike Shanahan 38
[photograph: Mike Shanahan]
Robert G. O'Donnell 31
[photograph: Robert G. O'Donnell]
Alan Berro 17
[photograph: Alan Berro]
J. Dale Harvey 14
[photograph: J. Dale Harvey]
[End Photo Caption]
INVESTMENT PORTFOLIO, October 31, 2003
[pie chart]
Percent
of net
Industry diversification assets
Oil & gas 6.55 %
Pharmaceuticals 5.45
Electric utilities 5.44
Diversified telecommunication services 5.33
Commercial banks 5.20
Other industries 58.64
Cash & equivalents 13.39
[end pie chart]
Percent
of net
Largest equity holdings assets
J.P. Morgan Chase 2.83 %
IBM 2.08
General Motors 1.88
General Electric 1.63
Eli Lilly 1.61
Sprint - FON Group 1.56
FleetBoston Financial 1.45
Norfolk Southern 1.34
Magna International 1.29
Fannie Mae 1.24
Market
value
Equity securities (common and convertible preferred stocks) - 79.75% Shares (000)
ENERGY
ENERGY EQUIPMENT & SERVICES - 0.24%
Schlumberger Ltd. 550,000 $ 25,833
OIL & GAS - 6.55%
Ashland Inc. 1,700,000 63,308
ChevronTexaco Corp. 1,669,950 124,077
ConocoPhillips 2,016,589 115,248
Devon Energy Corp. 2,000,000 97,000
Exxon Mobil Corp. 1,150,000 42,067
Marathon Oil Corp. 3,950,000 116,801
Sunoco, Inc. 1,370,000 59,951
Unocal Corp. 2,580,400 81,747
726,032
MATERIALS
CHEMICALS - 1.81%
Air Products and Chemicals, Inc. 1,350,000 61,303
Dow Chemical Co. 1,600,000 60,304
PPG Industries, Inc. 400,000 23,060
Praxair, Inc. 700,000 48,706
CONTAINERS & PACKAGING - 0.30%
Sonoco Products Co. 1,500,000 31,905
PAPER & FOREST PRODUCTS - 2.44%
Georgia-Pacific Corp., Georgia-Pacific Group 1,900,000 49,932
International Paper Co. 2,250,000 88,537
MeadWestvaco Corp. 4,729,000 122,576
486,323
CAPITAL GOODS
AEROSPACE & DEFENSE - 2.41%
Boeing Co. 650,000 25,018
General Dynamics Corp. 450,000 37,665
Honeywell International Inc. 1,500,000 45,915
Northrop Grumman Corp. 850,000 75,990
Raytheon Co. 1,150,000 30,452
United Technologies Corp. 500,000 42,345
CONSTRUCTION & ENGINEERING - 0.57%
Fluor Corp. 1,650,000 61,182
ELECTRICAL EQUIPMENT - 0.61%
Emerson Electric Co. 1,150,000 65,262
INDUSTRIAL CONGLOMERATES - 2.08%
General Electric Co. 6,000,000 174,060
Tyco International Ltd. 2,300,000 48,024
MACHINERY - 0.17%
Caterpillar Inc. 250,000 18,320
624,233
COMMERCIAL SERVICES & SUPPLIES
COMMERCIAL SERVICES & SUPPLIES - 1.25%
Pitney Bowes Inc. 1,700,000 69,870
ServiceMaster Co. 5,600,000 64,232
134,102
TRANSPORTATION
ROAD & RAIL - 1.87%
Burlington Northern Santa Fe Corp. 1,200,000 34,728
Norfolk Southern Corp. 7,131,600 143,702
Union Pacific Corp. 350,000 21,910
200,340
AUTOMOBILES & COMPONENTS
AUTO COMPONENTS - 2.07%
Delphi Corp. 9,400,000 83,660
Magna International Inc., Class A 1,720,000 137,996
AUTOMOBILES - 1.88%
General Motors Corp. 4,714,800 201,181
422,837
CONSUMER DURABLES & APPAREL
HOUSEHOLD DURABLES - 0.46%
Leggett & Platt, Inc. 2,350,000 49,091
TEXTILES, APPAREL & LUXURY GOODS - 0.70%
NIKE, Inc., Class B 400,000 25,560
VF Corp. 1,150,000 48,817
123,468
HOTELS, RESTAURANTS & LEISURE
HOTELS, RESTAURANTS & LEISURE - 1.07%
Carnival Corp., units 2,050,000 71,565
McDonald's Corp. 1,700,000 42,517
114,082
MEDIA
MEDIA - 0.46%
Dow Jones & Co., Inc. 250,000 12,992
Knight-Ridder, Inc. 500,000 36,660
49,652
RETAILING
DISTRIBUTORS - 0.45%
Genuine Parts Co. 1,500,000 47,730
MULTILINE RETAIL - 1.91%
J.C. Penney Co., Inc. 2,150,000 50,847
May Department Stores Co. 2,500,000 69,900
Target Corp. 2,100,000 83,454
SPECIALTY RETAIL - 1.43%
Gap, Inc. 800,000 15,264
Lowe's Companies, Inc. 810,000 47,733
TJX Companies, Inc. 4,300,000 90,257
405,185
FOOD & STAPLES RETAILING
FOOD & STAPLES RETAILING - 1.27%
Albertson's, Inc. 3,600,000 73,044
Walgreen Co. 1,800,000 62,676
135,720
FOOD & BEVERAGE
BEVERAGES - 0.41%
Coca-Cola Co. 950,000 44,080
FOOD PRODUCTS - 2.20%
ConAgra Foods, Inc. 2,150,000 51,256
General Mills, Inc. 1,345,000 60,323
H.J. Heinz Co. 3,500,000 123,655
279,314
HOUSEHOLD & PERSONAL PRODUCTS
HOUSEHOLD PRODUCTS - 0.87%
Kimberly-Clark Corp. 1,110,000 58,619
Procter & Gamble Co. 350,000 34,401
PERSONAL PRODUCTS - 0.74%
Avon Products, Inc. 1,167,500 79,343
172,363
HEALTH CARE EQUIPMENT & SERVICES
HEALTH CARE EQUIPMENT & SUPPLIES - 0.66%
Applera Corp. - Applied Biosystems Group 1,176,700 27,158
Becton, Dickinson and Co. 1,200,000 43,872
HEALTH CARE PROVIDERS & SERVICES - 0.60%
Aetna Inc. 195,000 11,195
CIGNA Corp. 925,000 52,771
134,996
PHARMACEUTICALS & BIOTECHNOLOGY
PHARMACEUTICALS - 5.45%
Abbott Laboratories 975,000 41,554
Bristol-Myers Squibb Co. 5,007,200 127,033
Eli Lilly and Co. 2,580,000 171,880
Johnson & Johnson 1,625,000 81,786
Merck & Co., Inc. 1,050,000 46,462
Pfizer Inc 2,878,100 90,948
Schering-Plough Corp. 1,471,700 22,473
582,136
BANKS
COMMERCIAL BANKS - 5.20%
Bank of America Corp. 850,000 64,371
BANK ONE CORP. 200,000 8,490
Comerica Inc. 1,400,000 72,072
FleetBoston Financial Corp. 3,830,000 154,694
National City Corp. 1,050,000 34,293
PNC Financial Services Group, Inc. 1,650,000 88,391
SunTrust Banks, Inc. 200,000 13,414
Wachovia Corp. 813,600 37,320
Wells Fargo & Co. 1,468,750 82,720
THRIFTS & MORTGAGE FINANCE - 2.88%
Fannie Mae 1,850,000 132,627
Freddie Mac 2,135,000 119,838
Washington Mutual, Inc. 1,275,000 55,781
864,011
DIVERSIFIED FINANCIALS
CAPITAL MARKETS - 3.21%
Bank of New York Co., Inc. 1,300,000 40,547
J.P. Morgan Chase & Co. 8,430,000 302,637
CONSUMER FINANCE - 0.37%
American Express Co. 850,000 39,891
DIVERSIFIED FINANCIAL SERVICES - 0.65%
Citigroup Inc. 1,455,441 68,988
452,063
INSURANCE
INSURANCE - 4.61%
Allstate Corp. 1,400,000 55,300
American International Group, Inc. 1,710,600 104,056
Aon Corp. 2,250,000 49,275
Chubb Corp. 7.00% convertible preferred 2005 400,000 units 11,100
Jefferson-Pilot Corp. 2,150,000 102,641
Lincoln National Corp. 1,167,900 46,634
UnumProvident Corp. 7,550,000 123,594
492,600
REAL ESTATE
REAL ESTATE - 0.48%
Equity Office Properties Trust 900,000 25,209
Equity Residential 900,000 26,325
51,534
SOFTWARE & SERVICES
IT SERVICES - 1.31%
Automatic Data Processing, Inc. 800,000 30,192
Electronic Data Systems Corp. 4,106,000 88,074
Electronic Data Systems Corp. 7.625% FELINE PRIDES 2004 1,030,000 units 21,270
SOFTWARE - 0.27%
Microsoft Corp. 1,100,000 28,765
168,301
TECHNOLOGY HARDWARE & EQUIPMENT
COMMUNICATIONS EQUIPMENT - 0.13%
Motorola, Inc. 1,000,000 13,530
COMPUTERS & PERIPHERALS - 3.30%
Hewlett-Packard Co. 5,850,000 130,514
International Business Machines Corp. 2,485,000 222,358
366,402
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 2.29%
Intel Corp. 900,000 29,745
Linear Technology Corp. 750,000 31,958
Microchip Technology Inc. 3,600,000 117,756
Texas Instruments Inc. 2,250,000 65,070
244,529
TELECOMMUNICATION SERVICES
DIVERSIFIED TELECOMMUNICATION SERVICES - 4.86%
ALLTEL Corp. 1,609,600 76,086
ALLTEL Corp. 7.75% 2005 500,000 units 24,500
AT&T Corp. 6,184,600 114,972
BellSouth Corp. 1,450,000 38,150
SBC Communications Inc. 1,700,000 40,766
Sprint Corp. - FON Group 10,407,000 166,512
Verizon Communications Inc. 1,750,000 58,800
519,786
UTILITIES
ELECTRIC UTILITIES - 5.34%
Ameren Corp. 300,000 13,395
Ameren Corp. 9.75% ACES convertible preferred 2005 1,200,000 units 34,440
American Electric Power Co., Inc. 3,700,000 104,303
Dominion Resources, Inc. 650,000 40,040
Exelon Corp. 500,000 31,725
FPL Group, Inc. 500,000 31,870
Progress Energy, Inc. 1,650,000 71,115
Southern Co. 2,200,000 65,560
TECO Energy, Inc. 5,500,000 72,215
TXU Corp. 1,100,000 25,102
Xcel Energy Inc. 4,945,000 81,098
MULTI-UTILITIES & UNREGULATED POWER - 1.26%
Duke Energy Corp. 4,800,000 87,120
Questar Corp. 1,500,000 47,625
705,608
MISCELLANEOUS
MISCELLANEOUS - 0.66%
Other equity securities in initial period of acquisition 70,245
TOTAL EQUITY SECURITIES (cost: $7,480,993,000) 8,525,862
Principal Market
amount value
Bonds and notes - 6.86% (000) (000)
TECHNOLOGY HARDWARE & EQUIPMENT - 0.25%
Motorola, Inc. 6.75% 2006 $25,000 $ 26,942
TELECOMMUNICATION SERVICES - 0.47%
AT&T Corp. 7.00% 2006 (1) 45,000 49,875
UTILITIES - 0.10%
Virginia Electric and Power Co., Series 2002-A, 5.375% 2007 9,960 10,641
AGENCY PASS THROUGH SECURITIES - 0.14%
Fannie Mae 6.00% 2017 (2) 14,011 14,609
U.S. TREASURY NOTES & BONDS - 1.19%
3.875% January 2009 (3) 112,547 127,350
U.S. AGENCY SECURITIES, NON PASS-THROUGH - 4.71%
Fannie Mae:
4.75% 2004 300,000 304,128
6.00% 2005 160,000 172,629
5.00% 2007 25,000 26,657
503,414
TOTAL BONDS AND NOTES (cost: $696,038,000) 732,831
Principal Market
amount value
Short-term securities - 12.88% (000) (000)
CORPORATE SHORT-TERM NOTES - 9.38%
American Express Credit Corp. 1.03% - 1.05% due 12/3/2003-1/21/2004 $50,000 $ 49,916
Bank of America Corp. 1.04% due 11/19/2003 23,000 22,987
BellSouth Corp. 1.00% due 11/12/2003 (4) 40,000 39,987
Citicorp 1.03% - 1.06% due 11/4-12/8/2003 100,000 99,945
Clorox Co. 1.01% due 12/9/2003 25,000 24,973
Coca-Cola Co. 1.03% due 1/20/2004 26,400 26,339
E.I. DuPont de Nemours & Co. 1.03% - 1.05% due 11/7/2003-1/20/2004 100,000 99,900
Eli Lilly and Co. 0.98% due 11/12/2003 25,000 24,992
Household Finance Corp. 1.06% due 11/24/2003 50,000 49,964
Johnson & Johnson 1.00% - 1.02% due 11/14/2003-1/12/2004 (4) 35,000 34,950
Merck & Co. Inc. 1.01% - 1.03% due 11/17-12/31/2003 100,000 99,897
Minnesota Mining and Manufacturing Co. 1.00% due 11/26/2003 25,000 24,982
Pfizer Inc 1.02% due 11/18-12/23/2003 (4) 101,500 101,397
Procter & Gamble Co. 1.00% - 1.03% due 11/14-12/12/2003 (4) 119,500 119,417
Target Corp. 1.00% - 1.01% due 11/10-11/24/2003 30,000 29,987
United Parcel Service Inc. 0.89% due 12/10/2003 48,600 48,552
Wal-Mart Stores Inc. 1.00% - 1.01% due 11/3-12/5/2003 (4) 105,000 104,924
U.S. TREASURIES - 2.98%
U.S. Treasury Bills 0.85% - 1.00% due 11/6/2003-4/15/2004 319,400 318,972
FEDERAL AGENCY DISCOUNT NOTES - 0.52%
Federal Farm Credit Banks 0.99% due 12/30/2003-1/26/2004 55,500 55,381
TOTAL SHORT-TERM SECURITIES (cost: $1,377,443,000) 1,377,462
TOTAL INVESTMENT SECURITIES (cost: $9,554,474,000) 10,636,155
Other assets less liabilities 55,018
NET ASSETS $10,691,173
(1) Coupon rate may change periodically.
(2) 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.
(3) Index-linked bond whose principal amount moves with a government retail
price index.
(4) Restricted security that can be resold only to institutional investors. In
practice, this security is as liquid as unrestricted securities in the
portfolio.
See Notes to Financial Statements
Equity securities appearing in the portfolio since April 30, 2003
BellSouth
Carnival
Delphi
FPL Group
Freddie Mac
General Dynamics
Magna International
Microchip Technology
PNC Financial Services Group
PPG Industries
Procter & Gamble
UnumProvident
Equity securities eliminated from the portfolio since April 30, 2003
CSX
Dana
Goodyear Tire & Rubber
Harris
HSBC Holdings
Interpublic Group of Companies
Kerr-McGee
Lockheed Martin
FINANCIAL STATEMENTS
Statement of assets and liabilities
at October 31, 2003
(dollars and shares in thousands, except per-share amounts)
Assets:
Investment securities at market
(cost: $9,554,474) $10,636,155
Cash 68
Receivables for:
Sales of investments $33,549
Sales of fund's shares 26,730
Dividends and interest 25,655 85,934
10,722,157
Liabilities:
Payables for:
Purchases of investments 16,483
Repurchases of fund's shares 6,828
Investment advisory services 2,458
Services provided by affiliates 4,057
Deferred Directors' compensation 1,138
Other fees and expenses 20 30,984
Net assets at October 31, 2003 $10,691,173
Net assets consist of:
Capital paid in on shares of capital stock $9,553,973
Undistributed net investment income 22,508
Undistributed net realized gain 33,011
Net unrealized appreciation 1,081,681
Net assets at October 31, 2003 $10,691,173
Total authorized capital stock - 750,000 shares, $0.001 par value
Shares Net asset
Net assets outstanding value per share (1)
Class A $9,716,257 419,421 $23.17
Class B 314,845 13,666 23.04
Class C 267,009 11,606 23.01
Class F 172,545 7,463 23.12
Class 529-A 51,371 2,219 23.15
Class 529-B 13,900 602 23.09
Class 529-C 16,476 713 23.09
Class 529-E 3,017 131 23.10
Class 529-F 684 29 23.16
Class R-1 3,896 169 23.06
Class R-2 32,295 1,401 23.05
Class R-3 31,665 1,371 23.09
Class R-4 15,550 672 23.14
Class R-5 51,663 2,230 23.17
(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 $24.58 and
$24.56, respectively.
See Notes to Financial Statements
Statement of operations
for the year ended October 31, 2003 (dollars in thousands)
Investment income:
Income:
Dividends (net of non-U.S. withholding
tax of $331) $220,169
Interest 47,397 $267,566
Fees and expenses:
Investment advisory services 25,924
Distribution services 23,832
Transfer agent services 7,208
Administrative services 859
Reports to shareholders 283
Registration statement and prospectus 380
Postage, stationery and supplies 863
Directors' compensation 381
Auditing and legal 93
Custodian 143
State and local taxes 90
Other 68
Total expenses before reimbursement 60,124
Reimbursement of expenses 68 60,056
Net investment income 207,510
Net realized gain and unrealized
appreciation on investments:
Net realized gain on investments 58,818
Net unrealized appreciation on investments 1,374,180
Net realized gain and
unrealized appreciation
on investments 1,432,998
Net increase in net assets resulting
from operations $1,640,508
See Notes to Financial Statements
Statement of changes in net assets (dollars in thousands)
Year ended October 31
2003 2002
Operations:
Net investment income $207,510 $191,688
Net realized gain on investments 58,818 141,613
Net unrealized appreciation (depreciation)
on investments 1,374,180 (1,129,159)
Net increase (decrease) in net assets
resulting from operations 1,640,508 (795,858)
Dividends and distributions paid to
shareholders:
Dividends from net investment income (219,640) (219,240)
Distributions from net realized gain
on investments (126,094) (238,166)
Total dividends and distributions paid
to shareholders (345,734) (457,406)
Capital share transactions 1,221,104 931,720
Total increase (decrease) in net assets 2,515,878 (321,544)
Net assets:
Beginning of year 8,175,295 8,496,839
End of year (including undistributed
net investment income: $22,508 and $34,615,
respectively) $10,691,173 $8,175,295
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
CollegeAmerica 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) are sponsored by the Commonwealth of Virginia and 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:
- ---------------------------------------------------------------------------------------------------------
Initial Contingent deferred sales
Share class sales charge charge upon redemption Conversion feature
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes A and 529-A Up to 5.75% None (except 1% for certain None
redemptions within one year of
purchase without an initial
sales charge)
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes B and 529-B None Declines from 5% to zero for Classes B and 529-B
redemptions within six years convert to classes A
of purchase and 529-A, respectively,
after eight years
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Class C None 1% for redemptions within Class C converts to
one year of purchase Class F after 10 years
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Class 529-C None 1% for redemptions within None
one year of purchase
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Class 529-E None None None
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes F and 529-F None None None
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes R-1, R-2, R-3, None None None
R-4 and R-5
- ---------------------------------------------------------------------------------------------------------
Holders of all share classes have equal pro rata rights to assets, dividends and
liquidation. 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
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 at prices for securities of comparable maturity, quality
and type. Short-term securities maturing within 60 days are valued at
amortized cost, which approximates market value. 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 valued at fair value as determined in good faith
by authority of the fund's Board of Directors.
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
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. The fund may also designate a portion
of the amount paid to redeeming shareholders as a distribution for tax purposes.
As of October 31, 2003, the cost of investment securities for federal income tax
purposes was $9,561,853,000.
During the year ended October 31, 2003, the fund reclassified $1,190,000 from
undistributed net realized gains to additional paid-in capital and $23,000 from
undistributed net investment income to undistributed net realized gains to align
financial reporting with tax reporting.
As of October 31, 2003, the components of distributable earnings on a tax basis
were as follows:
(dollars in thousands)
Undistributed net investment income $23,647
Undistributed long-term capital gains 41,135
Gross unrealized appreciation on investment securities 1,504,592
Gross unrealized depreciation on investment securities (430,290)
The tax character of distributions paid to shareholders was as follows (dollars
in thousands):
[begin table]
Total
Long-term distributions
Share class Ordinary income capital gains paid
YEAR ENDED
OCTOBER 31, 2003
Class A $ 207,630 $ 119,662 $ 327,292
Class B 3,782 2,525 6,307
Class C 2,785 1,735 4,520
Class F 2,439 914 3,353
Class 529-A 808 329 1,137
Class 529-B 136 84 220
Class 529-C 158 96 254
Class 529-E 38 14 52
Class 529-F 7 1 8
Class R-1 25 3 28
Class R-2 247 52 299
Class R-3 293 43 336
Class R-4 101 4 105
Class R-5 1,191 632 1,823
Total $ 219,640 $ 126,094 $ 345,734
Total
Long-term distributions
Share class (1) Ordinary income capital gains paid
YEAR ENDED
OCTOBER 31, 2002
Class A $ 214,554 $ 234,944 $ 449,498
Class B 2,023 1,867 3,890
Class C 1,216 949 2,165
Class F 786 406 1,192
Class 529-A 190 - 190
Class 529-B 33 - 33
Class 529-C 40 - 40
Class 529-E 6 - 6
Class 529-F -* - -*
Class R-1 -* - -*
Class R-2 6 - 6
Class R-3 6 - 6
Class R-4 -* - -*
Class R-5 380 - 380
Total $ 219,240 $ 238,166 $ 457,406
[end table
* Amount less than one thousand.
(1) Class 529-A, 529-B, 529-C, 529-E and 529-F shares were offered beginning
February 15, 2002. Class R-1, R-2, R-3, R-4 and R-5 shares were offered
beginning May 15, 2002.
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 0.240% on such assets in excess of $8
billion. For periods subsequent to October 31, 2003, a new rate of 0.230% will
be added to the series on such assets in excess of $13 billion. For the year
ended October 31, 2003, the investment advisory services fee was $25,924,000,
which was equivalent to an annualized rate of 0.284% of average month-end 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. The plans provide for annual
expenses, based on a percentage of average daily net assets, ranging from
0.25% to 1.00% as noted below. In some cases, the Board of Directors has
approved expense amounts lower than plan limits.
-----------------------------------------------------------------------
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
-----------------------------------------------------------------------
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. Expenses in excess of these amounts, up to approved limits, may
be used to compensate dealers and wholesalers for shares sold.
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. Each class reimburses 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, 2003,
there were no unreimbursed expenses subject to reimbursement for classes A
or 529-A.
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 classes of shares other than classes A and B. Each relevant class
pays CRMC annual fees of 0.15% (0.10% for Class R-5) based on its
respective average daily net assets. Each relevant 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.
During the start-up period for classes R-1, R-2, R-3 and R-4, CRMC has
voluntarily agreed to pay a portion of these fees. 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 in
the accompanying financial statements, the Commonwealth of Virginia is not
considered a related party. Administrative services fees are presented
gross of any payments made by CRMC.
Expenses under the agreements described above for the year ended October
31, 2003, were as follows (dollars in thousands):
- ---------------------------------------------------------------------------------------------------------------
Administrative services
-------------------------------------------------------------
Commonwealth of
CRMC Virginia
Share class Distribution Transfer agent administrative Transfer agent administrative
services services services services services
- ---------------------------------------------------------------------------------------------------------------
Class A $19,215 $6,978 Not applicable Not applicable Not applicable
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class B 2,229 230 Not applicable Not applicable Not applicable
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class C 1,686 $253 $50 Not applicable
Included
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class F 261 Included 157 21 Not applicable
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class 529-A 32 Included 50 4 $34
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class 529-B 90 Included 13 5 9
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class 529-C 104 Included 16 5 10
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class 529-E 9 Included 3 -* 2
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class 529-F 1 Included -* -* -*
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class R-1 14 Included 2 3 Not applicable
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class R-2 109 Included 22 97 Not applicable
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class R-3 69 Included 21 26 Not applicable
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class R-4 13 Included 8 2 Not applicable
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class R-5 Not applicable Included 45 1 Not applicable
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Total $23,832 $7,208 $590 $214 $55
- ----------------===============================================================================================
* Amount less than one thousand.
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 in the accompanying financial statements
includes $183,000 in current fees (either paid in cash or deferred) and a net
increase of $198,000 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):
Reinvestments
of dividends
Sales(1) and distributions Repurchases(1) Net increase
Share class Amount Shares Amount Shares Amount Shares Amount Shares
Year ended October 31, 2003
Class A $1,409,403 66,442 $ 299,136 14,284 $ (970,485) (46,474) $ 738,054 34,252
Class B 144,921 6,868 6,063 290 (25,604) (1,231) 125,380 5,927
Class C 156,020 7,345 4,306 205 (26,105) (1,253) 134,221 6,297
Class F 128,330 6,048 3,041 143 (30,043) (1,418) 101,328 4,773
Class 529-A 27,278 1,286 1,137 54 (1,654) (78) 26,761 1,262
Class 529-B 7,597 360 220 10 (296) (14) 7,521 356
Class 529-C 9,213 435 255 12 (453) (22) 9,015 425
Class 529-E 1,967 94 52 2 (98) (4) 1,921 92
Class 529-F 611 28 7 -* (4) -* 614 28
Class R-1 4,054 187 28 1 (575) (25) 3,507 163
Class R-2 30,736 1,453 299 14 (4,041) (191) 26,994 1,276
Class R-3 31,866 1,504 334 15 (4,763) (223) 27,437 1,296
Class R-4 15,321 700 105 5 (955) (44) 14,471 661
Class R-5 6,922 329 955 46 (3,997) (190) 3,880 185
Total net increase
(decrease) $1,974,239 93,079 $ 315,938 15,081 $ (1,069,073) (51,167) $1,221,104 56,993
Year ended October 31, 2002(2)
Class A $1,319,714 57,361 $ 407,040 17,365 $ (1,147,364) (51,276) $ 579,390 23,450
Class B 138,423 6,009 3,709 161 (20,602) (961) 121,530 5,209
Class C 110,530 4,824 2,023 89 (17,033) (794) 95,520 4,119
Class F 59,909 2,642 1,070 47 (11,511) (526) 49,468 2,163
Class 529-A 22,249 966 190 9 (372) (18) 22,067 957
Class 529-B 5,709 251 33 2 (141) (7) 5,601 246
Class 529-C 6,709 292 40 2 (127) (6) 6,622 288
Class 529-E 871 40 6 -* (18) (1) 859 39
Class 529-F 11 1 -* -* - - 11 1
Class R-1 176 9 -* -* (50) (3) 126 6
Class R-2 2,574 129 6 -* (81) (4) 2,499 125
Class R-3 1,755 86 5 -* (209) (11) 1,551 75
Class R-4 386 21 -* -* (178) (10) 208 11
Class R-5 48,038 2,127 204 10 (1,974) (92) 46,268 2,045
Total net increase
(decrease) $1,717,054 74,758 $ 414,326 17,685 $ (1,199,660) (53,709) $ 931,720 38,734
* Amount less than one thousand.
(1) Includes exchanges between share classes of the fund.
(2) Class 529-A, 529-B, 529-C, 529-E and 529-F shares were offered beginning
February 15, 2002. Class R-1, R-2, R-3, R-4 and R-5 shares were offered
beginning May 15, 2002.
5. RESTRICTED SECURITIES
The fund has invested in certain securities for which resale may be limited to
qualified buyers or which are otherwise restricted. These securities are
identified in the investment portfolio. As of October 31, 2003, the total value
of restricted securities was $400,675,000, which represented 3.75% of the net
assets of the fund.
6. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding short-term
securities, of $2,491,831,000 and $1,889,653,000, respectively, during the year
ended October 31, 2003.
The fund receives a reduction in its custodian fee equal to the amount of
interest calculated on certain cash balances held at the custodian bank. For the
year ended October 31, 2003, the custodian fee of $143,000 included $11,000 that
was offset by this reduction, rather than paid in cash.
FINANCIAL HIGHLIGHTS (1)
Income (loss) from investment operations(2)
Net asset Net gains(losses)
value, Net on securities Total from
beginning investment (both realized investment
of period income and unrealized) operations
CLASS A:
Year ended 10/31/2003 $20.20 $.49 $3.31 $3.80
Year ended 10/31/2002 23.22 .49 (2.29) (1.80)
Year ended 10/31/2001 24.36 .65 .19 .84
Year ended 10/31/2000 30.09 .80 (.74) .06
Year ended 10/31/1999 31.18 .82 1.78 2.60
CLASS B:
Year ended 10/31/2003 20.11 .32 3.28 3.60
Year ended 10/31/2002 23.13 .32 (2.28) (1.96)
Year ended 10/31/2001 24.30 .44 .21 .65
Period from 3/15/2000 to 10/31/2000 21.78 .37 2.46 2.83
CLASS C:
Year ended 10/31/2003 20.09 .30 3.28 3.58
Year ended 10/31/2002 23.12 .30 (2.28) (1.98)
Period from 3/15/2001 to 10/31/2001 23.48 .24 (.35) (.11)
CLASS F:
Year ended 10/31/2003 20.17 .46 3.30 3.76
Year ended 10/31/2002 23.20 .47 (2.30) (1.83)
Period from 3/15/2001 to 10/31/2001 23.54 .34 (.35) (.01)
CLASS 529-A:
Year ended 10/31/2003 20.20 .47 3.31 3.78
Period from 2/19/2002 to 10/31/2002 23.31 .34 (3.07) (2.73)
CLASS 529-B:
Year ended 10/31/2003 20.16 .27 3.30 3.57
Period from 2/19/2002 to 10/31/2002 23.31 .20 (3.06) (2.86)
CLASS 529-C:
Year ended 10/31/2003 20.16 .27 3.30 3.57
Period from 2/20/2002 to 10/31/2002 23.54 .21 (3.30) (3.09)
CLASS 529-E:
Year ended 10/31/2003 20.16 .38 3.30 3.68
Period from 3/7/2002 to 10/31/2002 24.93 .27 (4.67) (4.40)
CLASS 529-F:
Year ended 10/31/2003 20.22 .43 3.32 3.75
Period from 9/17/2002 to 10/31/2002 20.63 .05 (.34) (.29)
CLASS R-1:
Year ended 10/31/2003 20.17 .26 3.33 3.59
Period from 6/11/2002 to 10/31/2002 23.56 .12 (3.29) (3.17)
CLASS R-2:
Year ended 10/31/2003 20.17 .29 3.28 3.57
Period from 5/31/2002 to 10/31/2002 24.35 .14 (4.10) (3.96)
CLASS R-3:
Year ended 10/31/2003 20.18 .37 3.30 3.67
Period from 6/6/2002 to 10/31/2002 23.70 .17 (3.44) (3.27)
CLASS R-4:
Year ended 10/31/2003 20.19 .44 3.32 3.76
Period from 6/27/2002 to 10/31/2002 22.95 .17 (2.79) (2.62)
CLASS R-5:
Year ended 10/31/2003 20.21 .54 3.29 3.83
Period from 5/15/2002 to 10/31/2002 24.66 .26 (4.43) (4.17)
Dividends and distributions
Dividends
(from net Distributions Total Net asset
investment (from capital dividends and value, end Total
income) gains) distributions of period return(3)
CLASS A:
Year ended 10/31/2003 $(.52) $(.31) $(.83) $23.17 19.31%
Year ended 10/31/2002 (.57) (.65) (1.22) 20.20 (8.42)
Year ended 10/31/2001 (.72) (1.26) (1.98) 23.22 3.71
Year ended 10/31/2000 (.74) (5.05) (5.79) 24.36 1.21
Year ended 10/31/1999 (.76) (2.93) (3.69) 30.09 9.00
CLASS B:
Year ended 10/31/2003 (.36) (.31) (.67) 23.04 18.32
Year ended 10/31/2002 (.41) (.65) (1.06) 20.11 (9.11)
Year ended 10/31/2001 (.56) (1.26) (1.82) 23.13 2.88
Period from 3/15/2000 to 10/31/2000 (.31) - (.31) 24.30 13.07
CLASS C:
Year ended 10/31/2003 (.35) (.31) (.66) 23.01 18.23
Year ended 10/31/2002 (.40) (.65) (1.05) 20.09 (9.20)
Period from 3/15/2001 to 10/31/2001 (.25) - (.25) 23.12 (.48)
CLASS F:
Year ended 10/31/2003 (.50) (.31) (.81) 23.12 19.14
Year ended 10/31/2002 (.55) (.65) (1.20) 20.17 (8.57)
Period from 3/15/2001 to 10/31/2001 (.33) - (.33) 23.20 (.05)
CLASS 529-A:
Year ended 10/31/2003 (.52) (.31) (.83) 23.15 19.19
Period from 2/19/2002 to 10/31/2002 (.38) - (.38) 20.20 (11.88)
CLASS 529-B:
Year ended 10/31/2003 (.33) (.31) (.64) 23.09 18.07
Period from 2/19/2002 to 10/31/2002 (.29) - (.29) 20.16 (12.40)
CLASS 529-C:
Year ended 10/31/2003 (.33) (.31) (.64) 23.09 18.09
Period from 2/20/2002 to 10/31/2002 (.29) - (.29) 20.16 (13.25)
CLASS 529-E:
Year ended 10/31/2003 (.43) (.31) (.74) 23.10 18.72
Period from 3/7/2002 to 10/31/2002 (.37) - (.37) 20.16 (17.78)
CLASS 529-F:
Year ended 10/31/2003 (.50) (.31) (.81) 23.16 19.03
Period from 9/17/2002 to 10/31/2002 (.12) - (.12) 20.22 (1.42)
CLASS R-1:
Year ended 10/31/2003 (.39) (.31) (.70) 23.06 18.19
Period from 6/11/2002 to 10/31/2002 (.22) - (.22) 20.17 (13.50)
CLASS R-2:
Year ended 10/31/2003 (.38) (.31) (.69) 23.05 18.10
Period from 5/31/2002 to 10/31/2002 (.22) - (.22) 20.17 (16.31)
CLASS R-3:
Year ended 10/31/2003 (.45) (.31) (.76) 23.09 18.64
Period from 6/6/2002 to 10/31/2002 (.25) - (.25) 20.18 (13.87)
CLASS R-4:
Year ended 10/31/2003 (.50) (.31) (.81) 23.14 19.14
Period from 6/27/2002 to 10/31/2002 (.14) - (.14) 20.19 (11.43)
CLASS R-5:
Year ended 10/31/2003 (.56) (.31) (.87) 23.17 19.50
Period from 5/15/2002 to 10/31/2002 (.28) - (.28) 20.21 (16.98)
Ratio of Ratio of
Net assets, expenses net income
end of period to average to average
(in millions) net assets net assets
CLASS A:
Year ended 10/31/2003 $9,716 .62% 2.32%
Year ended 10/31/2002 7,782 .60 2.15
Year ended 10/31/2001 8,399 .59 2.68
Year ended 10/31/2000 8,343 .59 3.29
Year ended 10/31/1999 10,421 .57 2.67
CLASS B:
Year ended 10/31/2003 315 1.41 1.49
Year ended 10/31/2002 156 1.40 1.40
Year ended 10/31/2001 59 1.38 1.80
Period from 3/15/2000 to 10/31/2000 10 1.38 (5) 2.33 (5)
CLASS C:
Year ended 10/31/2003 267 1.49 1.39
Year ended 10/31/2002 107 1.48 1.34
Period from 3/15/2001 to 10/31/2001 28 1.48 (5) 1.64 (5)
CLASS F:
Year ended 10/31/2003 172 .72 2.14
Year ended 10/31/2002 54 .75 2.08
Period from 3/15/2001 to 10/31/2001 12 .76 (5) 2.30 (5)
CLASS 529-A:
Year ended 10/31/2003 51 .67 2.22
Period from 2/19/2002 to 10/31/2002 19 .70 (5) 2.25 (5)
CLASS 529-B:
Year ended 10/31/2003 14 1.61 1.27
Period from 2/19/2002 to 10/31/2002 5 1.60 (5) 1.36 (5)
CLASS 529-C:
Year ended 10/31/2003 16 1.60 1.28
Period from 2/20/2002 to 10/31/2002 6 1.59 (5) 1.38 (5)
CLASS 529-E:
Year ended 10/31/2003 3 1.07 1.80
Period from 3/7/2002 to 10/31/2002 1 1.05 (5) 1.95 (5)
CLASS 529-F:
Year ended 10/31/2003 1 .82 1.99
Period from 9/17/2002 to 10/31/2002 - (4) .09 .26
CLASS R-1:
Year ended 10/31/2003 4 1.50 (6) 1.18
Period from 6/11/2002 to 10/31/2002 - (4) .58 (6) .60
CLASS R-2:
Year ended 10/31/2003 32 1.47 (6) 1.35
Period from 5/31/2002 to 10/31/2002 3 .61 (6) .67
CLASS R-3:
Year ended 10/31/2003 32 1.08 (6) 1.72
Period from 6/6/2002 to 10/31/2002 2 .43 (6) .83
CLASS R-4:
Year ended 10/31/2003 16 .72 (6) 2.03
Period from 6/27/2002 to 10/31/2002 - (4) .25 (6) .84
CLASS R-5:
Year ended 10/31/2003 52 .41 2.53
Period from 5/15/2002 to 10/31/2002 41 .18 1.22
Year ended October 31
2003 2002 2001 2000 1999
Portfolio turnover rate
for all classes of shares 24% 31% 45% 29% 42%
(1) Based on operations for the period shown (unless otherwise noted) and,
accordingly, may not be representative of a full year.
(2) Year ended 1999 is based on shares outstanding on the last day of the year;
all other periods are based on average shares outstanding.
(3) Total returns exclude all sales charges, including contingent deferred
sales charges.
(4) Amount less than 1 million.
(5) Annualized.
(6) During the start-up period for this class, CRMC voluntarily agreed to pay a
portion of the fees relating to transfer agent services. Had CRMC not paid
such fees, expense ratios would have been 1.65%, 1.86%, 1.14% and .73% for
classes R-1, R-2, R-3 and R-4, respectively, during the year ended October
31, 2003, and 1.24%, .75%, .53% and .53% for classes R-1, R-2, R-3 and R-4,
respectively, during the period ended October 31, 2002.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of American Mutual Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of American
Mutual Fund, Inc. (the "Fund"), including the investment portfolio, as of
October 31, 2003, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. 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 the auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2003, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American Mutual Fund, Inc. as of October 31, 2003, 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 five
years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America.
Deloitte & Touche LLP
Los Angeles, California
December 11, 2003
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.
During the fiscal year ended October 31, 2003, the fund paid a long-term capital
gain distribution of $126,094,000. The fund also designated as a capital gain
distribution a portion of earnings and profits paid to shareholders in
redemption of their shares.
As a result of recent tax legislation, individual shareholders are now eligible
for reduced tax rates on qualified dividend income received during 2003. For
purposes of computing the dividends eligible for reduced tax rates, 90% of the
dividends paid by the fund from net investment income from January 1 through the
end of the fund's fiscal year are considered qualified dividend income.
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, all of the dividends
paid by the fund from net investment income represent qualifying dividends.
Certain states may exempt from income taxation that portion of the dividends
paid from net investment income that was derived from direct U.S. government
obligations. For purposes of computing this exclusion, 3% of the dividends paid
by the fund from net investment income were derived from interest on direct U.S.
government obligations.
Dividends and distributions received by retirement plans such as IRAs,
Keogh-type plans and 403(b) plans need not be reported as taxable income.
However, many retirement plan trusts may need this information for their annual
information reporting.
SINCE THE INFORMATION ABOVE IS REPORTED FOR THE FUND'S FISCAL YEAR AND NOT THE
CALENDAR YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX
INFORMATION WHICH WILL BE MAILED IN JANUARY 2004 TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR 2003 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT
THEIR TAX ADVISERS.
OTHER SHARE CLASS RESULTS (unaudited)
Class B, Class C, Class F and Class 529
Returns for periods ended September 30, 2003 (the most recent calendar quarter):
1 year Life of class
CLASS B SHARES
Reflecting applicable contingent deferred sales charge (CDSC), maximum of
5%, payable only if shares are sold within six years of purchase +13.39% +4.50% (1)
Not reflecting CDSC +18.39% +5.25% (1)
CLASS C SHARES
Reflecting CDSC, maximum of 1%, payable only if shares are sold within
one year of purchase +17.30% +0.93% (2)
Not reflecting CDSC +18.30% +0.93% (2)
CLASS F SHARES (3)
Not reflecting annual asset-based fee charged by sponsoring firm +19.22% +1.67% (2)
CLASS 529-A SHARES
Reflecting 5.75% maximum sales charge +12.42% -3.25% (4)
Not reflecting maximum sales charge +19.29% +0.36% (4)
CLASS 529-B SHARES
Reflecting applicable CDSC, maximum of 5%, payable only if shares are
sold within six years of purchase +13.15% -2.93% (4)
Not reflecting CDSC +18.15% -0.54% (4)
CLASS 529-C SHARES
Reflecting CDSC, maximum of 1%, payable only if shares are sold within
one year of purchase +17.16% -1.13% (5)
Not reflecting CDSC +18.16% -1.13% (5)
CLASS 529-E SHARES (3) +18.74% -4.19% (6)
CLASS 529-F SHARES (3)
Not reflecting annual asset-based fee charged by sponsoring firm +19.11% +11.97% (7)
(1) Average annual total return from March 15, 2000, when Class B shares were
first sold.
(2) Average annual total return from March 15, 2001, when Class C and Class F
shares were first sold.
(3) These shares are sold without any initial or contingent deferred sales
charge.
(4) Average annual total return from February 19, 2002, when Class 529-A and
Class 529-B shares were first sold.
(5) Average annual total return from February 20, 2002, when Class 529-C shares
were first sold.
(6) Average annual total return from March 7, 2002, when Class 529-E shares
were first sold.
(7) Average annual total return from September 17, 2002, when Class 529-F
shares were first sold.
BOARD OF DIRECTORS AND OFFICERS
"Non-interested" Directors
YEAR FIRST
ELECTED A
DIRECTOR OF
NAME AND AGE THE FUND (1) PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
H. Frederick Christie, 70 1972 Private investor; former President and CEO, The Mission Group
(non-utility holding company, subsidiary of Southern California
Edison Company)
Mary Anne Dolan, 56 1993 Founder and President, M.A.D., Inc. (communications company);
former Editor-in-Chief, The Los Angeles Herald Examiner
Martin Fenton, 68 1981 Chairman of the Board and CEO, Senior Resource Group LLC
(development and management of senior living communities)
Mary Myers Kauppila, 49 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, 59 1999 Director and Programming Chair, WYPR Baltimore/Washington
(public radio station); Senior Associate, Financial News
(London); Senior Associate, Reuters Foundation; Senior Fellow,
Institute for International Economics; Consultant,
The Independent of London
Kirk P. Pendleton, 64 1998 Chairman of the Board and CEO, Cairnwood, Inc.
(venture capital investment)
Olin C. Robison, Ph.D., 67 1991 President of the Salzburg Seminar; President Emeritus,
Middlebury College
Stephen B. Sample, Ph.D., 63 1999 President, University of Southern California
"Non-interested" Directors
NUMBER OF
BOARDS WITHIN
THE FUND
COMPLEX (2)
ON WHICH
NAME AND AGE DIRECTOR SERVES OTHER DIRECTORSHIPS (3) HELD BY DIRECTOR
H. Frederick Christie, 70 19 Ducommun Incorporated; IHOP Corporation;
Southwest Water Company; Valero L.P.
Mary Anne Dolan, 56 3 None
Martin Fenton, 68 16 None
Mary Myers Kauppila, 49 5 None
Bailey Morris-Eck, 59 3 The Nevis Fund, Inc.
Kirk P. Pendleton, 64 6 None
Olin C. Robison, Ph.D., 67 3 None
Stephen B. Sample, Ph.D., 63 2 UNOVA, Inc.; William Wrigley Jr. Company
"Interested" Directors (4)
YEAR FIRST
ELECTED A
DIRECTOR OR PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
NAME, AGE AND OFFICER AND POSITIONS HELD WITH AFFILIATED ENTITIES OR THE
POSITION WITH FUND OF THE FUND (1) PRINCIPAL UNDERWRITER OF THE FUND
James K. Dunton, 65 1984 Senior Vice President and Director,
Chairman of the Board Capital Research and Management Company
Robert G. O'Donnell, 59 1987 Senior Vice President and Director,
President Capital Research and Management Company
"Interested" Directors (4)
NUMBER OF
BOARDS WITHIN
THE FUND
COMPLEX (2)
NAME, AGE AND ON WHICH
POSITION WITH FUND DIRECTOR SERVES OTHER DIRECTORSHIPS (3) HELD BY DIRECTOR
James K. Dunton, 65 2 None
Chairman of the Board
Robert G. O'Donnell, 59 3 None
President
Chairman Emeritus
Jon B. Lovelace, Jr., 76 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(R) and Anchor Pathway Fund, which
serve as the underlying investment vehicles 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
YEAR FIRST
ELECTED AN PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
Name, age and OFFICER OF AND POSITIONS HELD WITH AFFILIATED ENTITIES OR THE
position with fund THE FUND (1) PRINCIPAL UNDERWRITER OF THE FUND
Timothy D. Armour, 43 1994 Executive Vice President and Director,
Senior Vice President Capital Research and Management Company;
Director, The Capital Group Companies, Inc. (5)
Joanna F. Jonsson, 40 1997 Senior Vice President, Capital Research Company (5)
Senior Vice President
Alan N. Berro, 43 2000 Senior Vice President, Capital Research Company (5)
Vice President
J. Dale Harvey, 38 2000 Vice President, Capital Research and Management Company
Vice President
Stuart R. Strachan, 47 2000 Vice President and Senior Counsel-- Fund Business Management Group,
Vice President Capital Research and Management Company
Julie F. Williams, 55 1984 Vice President-- Fund Business Management Group,
Secretary Capital Research and Management Company
Jeffrey P. Regal, 32 2003 Vice President-- Fund Business Management Group,
Treasurer Capital Research and Management Company
Robert P. Simmer, 42 1998 Vice President-- Fund Business Management Group,
Assistant Treassurer 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 AUDITORS
Deloitte & Touche LLP
Two California Plaza
350 South Grand Avenue
Los Angeles, CA 90071-3462
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406
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. 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 0.79 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 0.87 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 0.10 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.
FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, OR FOR A
PROSPECTUS FOR ANY OF THE AMERICAN FUNDS, PLEASE CONTACT YOUR FINANCIAL ADVISER.
YOU MAY ALSO CALL AMERICAN FUNDS SERVICE COMPANY AT 800/421-0180 OR VISIT US AT
AMERICANFUNDS.COM. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR
SEND MONEY.
THE AMERICAN FUNDS PROXY VOTING GUIDELINES -- USED TO DETERMINE HOW TO VOTE
PROXIES RELATING TO PORTFOLIO SECURITIES -- ARE AVAILABLE UPON REQUEST, FREE OF
CHARGE, BY CALLING AMERICAN FUNDS SERVICE COMPANY, VISITING THE AMERICAN FUNDS
WEBSITE OR ACCESSING THE U.S. SECURITIES AND EXCHANGE COMMISSION WEBSITE AT
WWW.SEC.GOV.
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, 2003, this report must be accompanied by an American Funds
statistical update for the most recently completed calendar quarter.
[LOGO - American Funds(R)]
The right choice for the long term(R)
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 20 million shareholder accounts.
Our unique combination of strengths includes these five factors:
o A LONG-TERM, VALUE-ORIENTED APPROACH
Rather than follow fads, we pursue a consistent strategy, focusing on each
investment's long-term potential.
o AN UNPARALLELED GLOBAL RESEARCH EFFORT
American Funds draws on one of the industry's most globally integrated
research networks.
o 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.
o EXPERIENCED INVESTMENT PROFESSIONALS
The recent market decline was not the first for most of the portfolio
counselors who serve the American Funds. Nearly 70% of them were in the
investment business before the sharp market decline of 1987.
o 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
o GROWTH FUNDS
Emphasis on long-term growth through stocks
AMCAP Fund(R)
EuroPacific Growth Fund(R)
The Growth Fund of America(R)
The New Economy Fund(R)
New Perspective Fund(R)
New World FundSM
SMALLCAP World Fund(R)
o GROWTH-AND-INCOME FUNDS
Emphasis on long-term growth and dividends through stocks
> American Mutual Fund(R)
Capital World Growth and Income FundSM
Fundamental InvestorsSM
The Investment Company of America(R)
Washington Mutual Investors FundSM
o EQUITY-INCOME FUNDS
Emphasis on above-average income and growth through stocks and/or bonds
Capital Income Builder(R)
The Income Fund of America(R)
o BALANCED FUND
Emphasis on long-term growth and current income through stocks and bonds
American Balanced Fund(R)
o BOND FUNDS
Emphasis on current income through bonds
American High-Income TrustSM
The Bond Fund of AmericaSM
Capital World Bond Fund(R)
Intermediate Bond Fund of America(R)
U.S. Government Securities FundSM
o TAX-EXEMPT BOND FUNDS
Emphasis on tax-free current income through municipal bonds
American High-Income Municipal Bond Fund(R)
Limited Term Tax-Exempt Bond Fund of AmericaSM
The Tax-Exempt Bond Fund of America(R)
STATE-SPECIFIC TAX-EXEMPT FUNDS
The Tax-Exempt Fund of California(R)
The Tax-Exempt Fund of Maryland(R)
The Tax-Exempt Fund of Virginia(R)
o MONEY MARKET FUNDS
The Cash Management Trust of America(R)
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-903-1203
Litho in USA KBD/L/8052
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
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
Form N-CSR disclosure requirement not yet effective with respect to Registrant.
ITEM 5 - Audit Committee of Listed Registrants
Not applicable.
ITEM 6 - Reserved
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 - Reserved
ITEM 9 - Controls and Procedures
The officers providing the certifications in this report in accordance with
rule 30a-2 under the Investment Company Act of 1940 have concluded, based
on their evaluation of the Registrant's disclosure controls and procedures
(as such term is defined in such rule), 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 last fiscal half-year (the
Registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 10 - Exhibits
(a) The Code of Ethics that is the subject of the disclosure required by Item 2
is attached as an exhibit hereto.
(b) 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, President and PEO
Date: January 9, 2004
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, President and PEO
Date: January 9, 2004
By /s/ Jeffrey P. Regal
-----------------------------------
Jeffrey P. Regal, Treasurer
Date: January 9, 2004