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, 2004
Date of reporting period: October 31, 2004
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
[photo of the eastern Lake Michigan shoreline from the sand dunes]
Annual report for the year ended October 31, 2004
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 American Mutual Fund manages risk 6
Summary investment portfolio 12
Financial statements 15
Fund Directors and officers 30
The American Funds family back cover
About the cover: American Mutual Fund has traditionally featured scenes of
natural beauty in the United States. This photograph shows the eastern Lake
Michigan shoreline from the sand dunes.
FIGURES SHOWN ARE PAST RESULTS FOR CLASS A SHARES AND ARE NOT PREDICTIVE OF
RESULTS IN FUTURE PERIODS. CURRENT AND FUTURE RESULTS MAY BE LOWER OR HIGHER
THAN THOSE SHOWN. SHARE PRICES AND RETURNS WILL VARY, SO INVESTORS MAY LOSE
MONEY. INVESTING FOR SHORT PERIODS MAKES LOSSES MORE LIKELY. INVESTMENTS ARE NOT
FDIC-INSURED, NOR ARE THEY DEPOSITS OF OR GUARANTEED BY A BANK OR ANY OTHER
ENTITY. FOR THE MOST CURRENT INFORMATION AND MONTH-END RESULTS, VISIT
AMERICANFUNDS.COM. FUND RESULTS SHOWN, UNLESS OTHERWISE INDICATED, ARE AT NET
ASSET VALUE. IF A SALES CHARGE (MAXIMUM 5.75%) HAD BEEN DEDUCTED, THE RESULTS
WOULD HAVE BEEN LOWER.
Here are the average annual total returns on a $1,000 investment with all
distributions reinvested for periods ended September 30, 2004 (the most recent
calendar quarter):
1 year 5 years 10 years
Class A shares
Reflecting 5.75% maximum sales charge +8.33% +4.09% +10.44%
The fund's investment adviser is waiving 5% of its management fee for the period
September 1, 2004, through August 31, 2005. Over this one-year period, the fee
waiver will amount to an approximate one to five basis point reduction in fund
expenses. Accordingly, without the waiver the returns and distribution rates of
the fund might have been lower by a similar order of magnitude.
THE FUND'S 30-DAY YIELD FOR CLASS A SHARES AS OF NOVEMBER 30, 2004, REFLECTING
THE 5.75% MAXIMUM SALES CHARGE AND CALCULATED IN ACCORDANCE WITH THE SECURITIES
AND EXCHANGE COMMISSION FORMULA, WAS 1.75%, WHICH REFLECTS A FEE WAIVER (1.73%
WITHOUT THE FEE WAIVER). THE FUND'S DISTRIBUTION RATE FOR CLASS A SHARES AS OF
THAT DATE WAS 1.66%. The SEC yield reflects the rate at which the fund is
earning income on its current portfolio of securities while the distribution
rate reflects the fund's past dividends paid to shareholders. Accordingly, the
fund's SEC yield and distribution rate may differ.
Other share class results and important information can be found on page 27.
[Begin Sidebar]
DIVIDENDS AND CAPITAL GAIN DISTRIBUTION PAID IN CALENDAR 2004
For tax purposes, here are the income dividends and capital gain distribution
Class A shareholders received in calendar 2004.
Income dividends per share:
$0.110 paid 3/19/04
$0.110 paid 6/21/04
$0.110 paid 9/27/04
$0.110 paid 12/3/04
Capital gain distribution per share:
$0.050 paid 12/3/04
A Form 1099-DIV, which provides the information you will need to prepare your
federal income tax return for 2004, will be mailed to you with your American
Funds Tax Guide in late January 2005.
[End Sidebar]
[photo of the eastern Lake Michigan shoreline from the sand dunes.
FELLOW SHAREHOLDERS:
During American Mutual Fund's 2004 fiscal year, the stock market produced a
positive return and traded in a narrow range. This was in sharp contrast to
recent years, when it proved quite volatile. For the 12 months ended October 31,
AMF posted a solid total return of 10.8%. Its benchmark, the unmanaged Standard
& Poor's 500 Composite Index, had a total return of 9.4%. AMF's return assumes
reinvestment of all income dividends and the capital gain distribution.
ECONOMIC REVIEW
One of the most important news developments of 2004 was the sharp rise in oil
prices, which began the fiscal year at almost $29 and ended at nearly $52.
Despite the high level of oil prices, the U.S. economy continued to grow. Retail
and auto sales were generally quite healthy throughout the year. The housing
market continued to benefit from low mortgage rates and steady demand. Corporate
earnings and profit margins were especially strong, fueled by tight cost
controls and the falling dollar. This led to a substantial increase in reported
earnings of U.S. multinationals when foreign currencies were translated into
dollars and made American exports more competitive. Corporate profits rose more
than 20% in fiscal 2004. Companies continued to initiate and raise dividends at
an accelerated pace.
The Federal Reserve Board reacted to the strengthening economy by raising the
federal funds rate from its extremely low level of 1.0%. Its first increase
occurred on June 30, and the rate was moved to 2.0% on November 10. It seems
likely that short-term rates will continue to rise as long as the economy
remains healthy. It was striking that long-term interest rates generally
declined in spite of the Fed's raising of short-term rates.
As always, there are concerns on the horizon. The large federal deficit combined
with the U.S. balance of trade gap may put further pressure on interest rates
and the dollar. With corporate profit margins at near record levels, it seems
likely that earnings growth will moderate as we move forward. Investors do not
seem unaware of these concerns, however, and common stocks seem valued well
within their typical range. On balance, we remain optimistic that long-term
commitments made to stocks will ultimately prove rewarding.
[photograph of a family walking along the shore]
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
achieve this by investing in established, well-managed companies that are
reasonably priced and have a history of growing revenues and profits. The fund
only invests in companies that pay dividends to shareholders.
Our largest industry holdings are concentrated in traditional industries like
oil and gas, diversified financials, industrials and pharmaceuticals. These
industries have broad exposure to the U.S. economy. While it was a relatively
benign year for the market as a whole, we experienced a wide disparity of
results among sectors and individual stocks in our portfolio as discussed below.
Oil, railroads, defense and some consumer stocks showed strong price increases.
Energy stocks, which comprise 8.8% of the portfolio, benefited from the sharp
rise in oil prices during the fiscal year. Railroads and some consumer stocks
rose because they were especially sensitive to the strong economy. Defense
stocks performed quite well, reflecting the tense international situation.
Pharmaceuticals, technology and insurance stocks detracted from results.
Technology stocks were weak, reflecting increasing inventory concerns as well as
the extraordinarily strong year they had in 2003. Many insurance stocks and
pharmaceutical stocks were negatively affected by company-specific issues.
The fund increased its exposure to common stocks to 85% of the portfolio from
80% a year ago. During the year, we used cash to purchase stocks that we believe
were attractively priced. (The remainder consists of short-term fixed-income
securities.)
We continue to recommend that you take a long-term approach to your mutual fund
investments, and we look forward to reporting to you 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, 2004
For current information about the fund, visit americanfunds.com.
THE VALUE OF A LONG-TERM PERSPECTIVE
RESULTS OF A $10,000 INVESTMENT IN AMERICAN MUTUAL FUND
Fund figures reflect deduction of the maximum sales charge of 5.75% on the
$10,000 investment.(1) Thus the net amount invested was $9,425.(2)
For more than 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, 2004. The
table beneath the chart shows the fund's total return in each of the 54 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 $5,825,570.(3)
You can use this table to estimate how the value of your own holding has grown
over the years. Let's say, for example, that you have been reinvesting all your
dividends and want to know how your investment has done since the end of 1994.
At the time, the table indicates the value of the investment illustrated here
was $2,039,874. Since then, it has more than doubled to $5,825,570. Thus, in the
same period, the value of your 1994 investment -- regardless of its size -- also
has more than doubled.
AVERAGE ANNUAL TOTAL RETURNS
(based on a $1,000 investment with all distributions reinvested)
For periods ended
October 31, 2004
CLASS A SHARES
Reflecting 5.75% maximum sales charge
1 year +4.45%
5 years +3.67%
10 years +10.41%
[mountain chart]
Value added by reinvestment of dividends
<s> <c> <c>
Date American Mutual Fund with American Mutual Fund with
dividends reinvested (3) dividends excluded (5)
2/21/50 $ 9,426 $ 9,426
7/13/50 9,004 8,918
10/7/50 10,274 10,075
10/31/50 10,018 9,708
10/31/51 12,234 11,334
7/16/52 13,421 12,181
10/31/52 13,164 11,710
3/19/53 14,577 12,882
9/14/53 13,004 11,256
10/31/53 14,076 12,009
10/31/54 19,261 15,876
9/23/55 26,727 21,627
10/31/55 25,050 20,087
8/2/55 31,861 25,028
10/31/56 29,652 23,142
12/31/56 30,831 24,062
10/22/57 26,773 20,267
10/31/57 28,050 21,241
1/2/58 27,933 20,944
9/30/58 34,818 25,718
10/31/58 36,140 26,511
8/3/59 43,480 31,294
10/31/59 41,489 29,668
12/31/59 43,319 30,977
9/28/60 40,277 27,959
10/31/60 40,865 28,371
10/31/61 54,348 36,806
12/12/61 57,113 38,678
6/25/62 42,687 28,545
10/31/62 46,572 30,677
10/31/63 61,289 39,309
10/31/64 71,355 44,625
6/28/65 70,430 43,509
10/31/65 79,919 48,769
12/17/65 82,334 50,242
10/7/66 71,747 42,538
10/31/66 77,646 46,067
1/4/67 79,886 47,052
9/25/67 98,623 57,321
10/31/67 92,836 53,558
3/25/68 89,187 51,057
10/31/68 109,586 61,257
11/29/68 115,011 64,290
10/9/69 98,399 53,023
10/31/69 103,216 55,651
5/26/70 78,408 41,363
10/31/70 93,358 48,100
4/29/71 120,955 61,139
10/31/71 112,886 55,961
11/23/71 106,468 52,779
8/23/72 128,118 61,708
10/31/72 125,226 59,737
12/11/72 136,043 64,897
8/22/73 112,151 51,865
10/31/73 124,800 57,130
3/14/74 126,331 57,130
10/3/74 91,007 38,810
10/31/74 105,122 44,985
12/6/74 96,877 41,457
7/15/75 138,200 56,926
10/31/75 132,196 53,330
12/5/75 130,346 52,584
9/21/76 174,044 67,986
10/31/76 167,379 64,276
12/31/76 182,661 70,144
10/31/77 176,434 64,554
1/26/78 175,846 63,480
9/12/78 229,322 80,818
10/31/78 198,947 69,119
10/5/79 257,885 86,418
10/31/79 232,805 76,959
10/15/80 315,866 100,651
10/31/80 303,585 95,432
6/23/81 350,366 107,612
9/25/81 317,838 96,442
10/31/81 334,117 99,943
8/10/82 334,437 93,802
10/22/82 434,703 120,458
10/31/82 426,438 118,168
1/3/83 444,289 120,550
10/10/83 562,833 149,553
10/31/83 544,917 143,286
11/29/83 564,778 148,509
7/24/84 507,745 128,657
10/31/84 577,161 144,417
1/4/85 583,499 144,219
7/17/85 704,992 170,303
10/31/85 701,836 167,598
9/4/86 936,477 216,971
10/31/86 913,072 209,413
8/25/87 1,136,870 253,230
10/19/87 886,283 195,646
10/31/87 960,889 212,116
12/4/87 893,638 197,270
6/22/88 1,071,388 229,884
10/31/88 1,081,202 227,085
1/3/89 1,071,656 220,598
10/31/89 1,299,788 259,386
12/13/89 1,346,639 268,736
10/31/90 1,239,346 235,204
1/9/91 1,280,467 238,543
8/28/91 1,533,066 279,429
10/31/91 1,544,414 278,500
12/10/91 1,500,849 267,729
8/3/92 1,715,846 299,703
10/31/92 1,690,017 292,156
12/4/92 1,720,976 294,489
10/15/93 2,018,685 335,881
10/31/93 2,004,864 333,581
11/1/93 2,003,137 333,294
4/4/94 1,902,057 313,572
10/31/94 2,039,874 326,417
12/8/94 1,968,379 311,824
10/19/95 2,505,170 386,113
10/31/95 2,473,446 381,224
1/10/96 2,579,741 394,322
10/21/96 2,965,119 442,248
10/31/96 2,940,742 438,613
12/16/96 2,977,645 440,717
10/7/97 3,809,732 552,257
10/31/97 3,652,205 529,422
1/9/98 3,718,525 535,657
4/17/98 4,289,166 613,976
10/31/98 4,205,471 594,159
11/23/98 4,395,647 621,027
12/14/99 4,240,060 595,287
10/31/99 4,584,199 631,823
11/16/99 4,643,616 640,013
3/7/00 3,918,147 536,579
10/31/00 4,639,429 620,069
5/21/01 5,217,427 686,711
9/21/01 4,560,805 591,103
10/31/01 4,811,535 623,599
3/19/02 5,400,265 694,828
10/9/02 3,957,009 500,364
10/31/02 4,406,372 557,186
3/11/03 4,149,192 521,398
10/31/03 5,257,312 648,807
11/18/03 5,200,587 641,807
10/06/04 5,895,199 713,980
10/31/04 5,825,570 705,547
<s> <c>
Date Standard & Poor's 500
Composite Index
with dividends
reinvested (4)
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 1,087,428
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
11/20/03 4,262,720
2/11/04 4,794,947
10/31/04 4,740,913
Date Consumer Price
Index (6)
2/28/50 $ 10,000
10/31/50 10,468
11/1/50 10,511
10/31/51 11,149
2/28/52 11,191
8/31/52 11,362
10/31/52 11,362
2/28/53 11,277
10/31/53 11,489
1/31/54 11,447
4/30/54 11,404
10/31/54 11,404
12/1/54 11,362
9/30/55 11,447
10/31/55 11,447
12/1/55 11,404
10/31/56 11,702
11/1/56 11,702
7/31/57 12,043
10/31/57 12,043
11/1/57 12,085
7/31/58 12,340
10/31/58 12,298
12/1/58 12,298
10/31/59 12,511
1/31/60 12,468
10/31/60 12,681
11/1/60 12,681
7/31/61 12,766
10/31/61 12,766
11/1/61 12,766
9/30/62 12,936
10/31/62 12,936
11/1/62 12,936
10/31/63 13,106
11/1/63 13,106
7/31/64 13,234
10/31/64 13,234
11/1/64 13,277
10/31/65 13,489
11/1/65 13,489
10/31/66 14,000
11/1/66 14,000
10/31/67 14,340
11/1/67 14,383
10/31/68 15,021
11/1/68 15,064
10/31/69 15,872
11/1/69 15,957
10/31/70 16,766
11/1/70 16,851
10/31/71 17,404
11/1/71 17,404
10/31/72 18,000
11/1/72 18,043
10/31/73 19,404
11/1/73 19,532
10/31/74 21,745
11/1/74 21,915
10/31/75 23,362
11/1/75 23,532
10/31/76 24,638
11/1/76 24,681
10/31/77 26,213
11/1/77 26,340
10/31/78 28,553
11/1/78 28,681
10/31/79 32,000
11/1/79 32,298
10/31/80 36,085
11/1/80 36,383
10/31/81 39,745
11/1/81 39,872
10/31/82 41,787
12/1/82 41,532
10/31/83 42,979
11/1/83 43,064
10/31/84 44,809
11/1/84 44,809
10/31/85 46,255
10/31/86 46,936
11/1/86 46,979
10/31/87 49,064
11/1/87 49,106
10/31/88 51,149
11/1/88 51,191
10/31/89 53,447
11/1/89 53,574
10/31/90 56,809
11/1/90 56,936
10/31/91 58,468
11/1/91 58,638
10/31/92 60,340
12/1/92 60,383
10/31/93 62,000
11/1/93 62,043
10/31/94 63,617
11/1/94 63,702
10/31/95 65,404
12/1/95 65,319
10/31/96 67,362
11/1/96 67,489
10/31/97 68,766
12/1/97 68,638
10/31/98 69,787
12/1/98 69,745
10/31/99 71,574
11/1/99 71,617
10/31/00 74,043
12/1/00 74,043
9/1/01 75,872
10/31/01 75,617
12/1/01 75,192
10/31/02 77,149
12/1/02 76,979
9/01/03 78,809
10/31/03 78,723
12/16/04 78,426
10/31/04 81,234
Year ended October 31 1950# 1951 1952 1953 1954 1955
YEAR-BY-YEAR
SUMMARY OF RESULTS
Dividends reinvested(7) $ 310 532 524 580 613 667
Value at year-end $ 10,018 12,234 13,164 14,076 19,261 25,050
Dividends excluded(8) $ 307 507 478 508 516 544
Value at year-end $ 9,708 11,334 11,710 12,009 15,876 20,087
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return 3.1% 5.3 4.3 4.4 4.4 3.5
Capital results (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(7) 789 910 1,009 1,050 1,209 1,258
Value at year-end 29,652 28,050 36,140 41,489 40,865 54,348
Dividends excluded(8) 626 703 754 763 855 865
Value at year-end 23,142 21,241 26,511 29,668 28,371 36,806
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return 3.2 3.1 3.6 2.9 2.9 3.1
Capital results 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(7) 1,372 1,523 1,697 1,845 2,271 2,568
Value at year-end 46,572 61,289 71,355 79,919 77,646 92,836
Dividends excluded(8) 920 993 1,078 1,143 1,372 1,507
Value at year-end 30,677 39,309 44,625 48,769 46,067 53,558
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return 2.5 3.3 2.8 2.6 2.8 3.3
Capital results (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(7) 3,152 3,762 4,169 4,423 4,711 5,070
Value at year-end 109,586 103,216 93,358 112,886 125,226 124,800
Dividends excluded(8) 1,796 2,076 2,210 2,246 2,302 2,382
Value at year-end 61,257 55,651 48,100 55,961 59,737 57,130
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return 3.4 3.4 4.0 4.7 4.2 4.0
Capital results 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(7) 7,273 7,299 7,881 8,603 9,989 11,322
Value at year-end 105,122 132,196 167,379 176,434 198,947 232,805
Dividends excluded(8) 3,257 3,053 3,121 3,245 3,582 3,861
Value at year-end 44,985 53,330 64,276 64,554 69,119 76,959
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return 5.8 6.9 6.0 5.1 5.7 5.7
Capital results (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(7) 13,853 16,351 26,841 26,227 26,606 30,124
Value at year-end 303,585 334,117 426,438 544,917 577,161 701,836
Dividends excluded(8) 4,491 5,045 7,806 7,123 6,868 7,402
Value at year-end 95,432 99,943 118,168 143,286 144,417 167,598
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return 6.0 5.4 8.0 6.2 4.9 5.2
Capital results 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(7) 34,058 39,286 50,009 59,908 66,101 71,768
Value at year-end 913,072 960,889 1,081,202 1,299,788 1,239,346 1,544,414
Dividends excluded(8) 8,006 8,877 10,831 12,336 12,953 13,358
Value at year-end 209,413 212,116 227,085 259,386 235,204 278,500
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return 4.9 4.3 5.2 5.5 5.1 5.8
Capital results 25.2 0.9 7.3 14.7 (9.8) 18.8
AMF total return 30.1 5.2 12.5 20.2 (4.7) 24.6
Year ended October 31 1992 1993 1994 1995 1996 1997
YEAR-BY-YEAR
SUMMARY OF RESULTS
Dividends reinvested(7) 67,509 70,887 76,470 83,157 90,174 95,003
Value at year-end 1,690,017 2,004,864 2,039,874 2,473,446 2,940,742 3,652,205
Dividends excluded(8) 11,977 12,074 12,539 13,110 13,724 14,010
Value at year-end 292,156 333,581 326,417 381,224 438,613 529,422
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return 4.4 4.2 3.8 4.1 3.6 3.2
Capital results 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(7) 104,111 110,494 132,206 145,406 121,358 115,816
Value at year-end 4,205,471 4,584,199 4,639,429 4,811,535 4,406,372 5,257,312
Dividends excluded(8) 14,947 15,465 18,012 19,211 15,592 14,507
Value at year-end 594,159 631,823 620,069 623,599 557,186 648,807
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return 2.9 2.6 2.9 3.1 2.5 2.6
Capital results 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
Year ended October 31 2004
YEAR-BY-YEAR
SUMMARY OF RESULTS
Dividends reinvested(7) 105,415
Value at year-end 5,825,570
Dividends excluded(8) 12,916
Value at year-end 705,547
ANNUAL PERCENTAGE RETURNS ASSUMING REINVESTMENT OF DIVIDENDS
Income return 2.0
Capital results 8.8
AMF total return 10.8
AVERAGE ANNUAL TOTAL RETURN FOR AMF'S LIFETIME
Income return 4.04%
Capital results 8.31%
AMF total return 12.35%
# For the period February 21, 1950 (when the fund began operations) through
October 31, 1950.
Past results are not predictive of future results. The results shown are before
taxes on fund distributions and sale of fund shares.
(1) As outlined in the prospectus, the sales charge is reduced for accounts
(and aggregated investments) of $25,000 or more and is eliminated for
purchases of $1 million or more.
(2) The maximum initial sales charge was 8.5% prior to July 1, 1988. There is
no sales charge on dividends or capital gain distributions that are
reinvested in additional shares.
(3) Includes reinvested capital gain distributions totaling $2,974,380 in the
years 1950-2004 and reinvested dividends. The total "cost" of this
investment was $1,887,514 ($10,000 plus $1,877,514 in reinvested dividends).
(4) The S&P 500 is unmanaged, does not reflect sales charges, commissions or
expenses and cannot be invested in directly.
(5) Includes reinvested capital gain distributions taken in shares totaling
$498,621 but does not reflect income dividends taken in cash.
(6) Computed from data supplied by the U.S. Department of Labor, Bureau of Labor
Statistics. It would take $81,234 to buy today what $10,000 bought when the
fund began.
(7) 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.
(8) 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.
HOW AMERICAN MUTUAL FUND MANAGES RISK
[photo of the eastern Lake Michigan shoreline from the sand dunes]
[photo of two pairs of legs walking on the beach]
We thought it was a good time to examine in depth AMF's risk management strategy
and how it has impacted shareholders. The fund's objective is achieving the
balanced accomplishment of three objectives: current income, growth of capital
and conservation of principal.
Figures shown are past results for Class A shares and are not predictive of
results in future periods. Current and future results may be lower or higher
than those shown. Share prices and returns will vary, so investors may lose
money. For the most current information and month-end results, visit
americanfunds.com. Fund results shown, unless otherwise indicated, are at net
asset value. If a sales charge (maximum 5.75%) had been deducted, the results
would have been lower.
Over its lifetime of more than 54 years, American Mutual Fund has produced an
enviable record of above-average total returns with relatively low fluctuations.
The fund has posted an average annual total return of 12.5% compared with 11.9%
for its benchmark, the unmanaged Standard & Poor's 500 Composite Index. And the
fund was able to achieve this return with lower volatility, as measured by
standard deviation, than the market as a whole.
EVER WONDER HOW THAT HAPPENED?
A program of careful risk management has been important to the fund's long-term
investment track record, says Jim Dunton, chairman of American Mutual Fund
(AMF). It has been designed to reduce the level of shareholder anxiety that
often accompanies tumultuous times in the stock market. "We try to make as much
money for our shareholders as we can without moving too far out on the risk
spectrum," Jim says. "Our goal has been to manage a portfolio that doesn't scare
the daylights out of investors during sharp stock market fluctuations. We try to
avoid having our shareholders panic because if they do, they might get out of
the market at the wrong time and then miss the subsequent upside."
The extraordinarily sharp stock market decline from March 2000 to October 2002
provides a clear example of how the fund's risk management approach can benefit
shareholders. 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%. It is
not likely that this unusually strong relative performance will recur during any
future declines of this magnitude. However, AMF has held up better than the S&P
500 in all 12 stock market declines of 14% or more since the fund's inception in
1950. Of course, there have been periods when the fund has lagged the S&P 500
Index, particularly in strong markets.
The fund generates income by investing in securities that pay interest or a
dividend. To reach its goal of capital growth, AMF invests the majority of its
portfolio in stocks. To help preserve principal, the fund may reduce its equity
position when stock prices appear too high.
[photo of father and son walking wading in the beach]
[Begin Sidebar]
ABOVE-AVERAGE RETURNS WITH LESS VOLATILITY
American Mutual Fund has met its objectives. If we look back 10 years, as shown
at right, the fund has provided slightly higher returns than the S&P 500, the
Lipper Multi-Cap Value Funds Index and the Lipper Growth & Income Funds Index,
three benchmarks the fund uses to measure its performance. It accomplished this
while showing lower volatility than the three benchmarks. It is worth
remembering, however, that figures shown are past results and are not predictive
of future results. Future results may be lower or higher than those shown.
FOR THE 10-YEAR PERIOD ENDED OCTOBER 31, 2004
Average annual
total return Volatility
AMF 11.06 11.18
S&P 500 11.00 15.59
Lipper
Growth & Income
Funds Index 9.62 13.51
Lipper
Multi-Cap Value
Funds Index 10.93 14.40
Volatility was calculated using standard deviation, a measure of how returns
over time have varied from the mean; a lower number signifies lower volatility.
Standard & Poor's 500 Composite Index is an unmanaged index of 500 large-company
stocks generally representative of the stock market. The Lipper Multi-Cap Value
Funds Index is an equally weighted index of the 30 largest mutual funds
following a value approach to investing. The Lipper Growth & Income Funds Index
is an equally weighted index of the 30 largest mutual funds that combine a
growth of earnings orientation and an income requirement for dividends.
Sources: Stocks -- Standard & Poor's Corporation, Lipper.
[End Sidebar]
INVESTING IN A SELECT LIST OF HIGH-QUALITY STOCKS
AMF focuses on a select list of seasoned, high-quality dividend-paying stocks --
and that has been a key part of its strategy to deliver good results. How
selective is the fund? Consider that more than 7,400 stocks are listed on the
major U.S. stock exchanges. They range from fledgling companies with no earnings
and small sales to mature firms that have strong balance sheets, growing
earnings and pay dividends. AMF's investment professionals invest only in a
small eligible list of high-quality stocks. The list, which is approved by the
fund's board of directors, currently includes about 290 companies. Only
companies that pay dividends, are based in the United States and Canada or
included in Standard & Poor's 500 Composite Index, and are leaders in their
industries are considered for eligibility. The AMF portfolio itself currently
reflects holdings in 130 companies.
The eligible list helps focus the efforts of the fund's portfolio counselors and
investment analysts, says Jim. "Trying to keep up with initial public offerings
and searching through the stocks of smaller companies spreads research too thin.
With an eligible list, you concentrate your research on a few hundred of the
better companies."
FOCUSING ON INDUSTRY LEADERS
Focusing on industry leaders helps mitigate individual company risk, says Bob
O'Donnell, president of the fund. "We are not dealing with start-ups, untested
companies or companies with dubious balance sheets. These are companies that are
well positioned, have good market share and pay dividends. They have less
inherent risk and lower volatility than the overall market." Examples from AMF's
current portfolio include IBM, Bank of America, Eli Lilly, J.P Morgan Chase,
BellSouth and General Electric.
The fund's concentration on companies that are leaders in their industries has
helped maintain the quality and integrity of the portfolio. With dividends
reinvested, AMF has lost value in a fiscal year only two times in the past 30
years.
CHOOSING COMPANIES THAT PAY DIVIDENDS
The fund has a big advantage in reducing risk by investing only in companies
that pay dividends. When the stock market is falling, dividend payments cushion
the blow for investors, lessening the risk of holding equities. AMF's lifetime
annual return of 12.5% is as much a result of holding its own during downturns
as recording steady gains when stock prices are rising. "Dividends add so much
to total return because they can be reinvested, and a stock's unrealized
appreciation cannot," says Mike Shanahan, a veteran portfolio counselor for the
fund. Dividends are also attractive considering the uncertain times in which we
live, says Mike. "Dividends can't be faked. They are reliable. They're not
dependent on what someone else wants to pay for your stock."
Regular dividends are also the clearest signal you can get on the stability of a
company, says Jim. "Companies should distribute a significant portion of company
earnings to shareholders in the form of dividends. The discipline of paying
regular dividends encourages company executives to make better decisions about
allocating their resources. Without the fiscal discipline of paying dividends,
all too often companies take on marginal, less profitable projects simply
because they have the money available."
AMF has earned a higher income return than the S&P 500. Since its inception in
1950, AMF has provided an average income return of 4.2% annually compared with
3.9% for the S&P 500. Over the fund's lifetime, dividends have accounted for 41%
of the fund's annualized total return.
BUILDING UP CASH RESERVES WHEN STOCK PRICES SEEM OVERVALUED
The fund's portfolio counselors use cash equivalents to protect investors'
principal during times when they believe stock prices are overvalued. "Anytime
we feel that the stock market is overpriced, we tend to increase the fund's
buying reserve," Jim says. "We do this when we feel that there is enthusiasm
about the stock market or certain sectors of the market that isn't justified by
fundamentals. When returns from cash instruments are too low -- as they have
been recently -- we move up the fixed-income spectrum, buying one-, two- and
three-year fixed-income securities."
[Begin Sidebar]
HIGHER YIELDS OVER TIME -- AMF VERSUS THE S&P 500
American Mutual Fund has had a higher dividend yield than the S&P 500. One
reason for this: Many companies in the S&P 500 don't pay dividends, while AMF
only invests in those that do.
[begin bar chart]
DISTRIBUTION RATE (%) AT NET ASSET VALUE
S&P 500 AMF
10/31/1985 4.14 4.28
10/31/1986 3.38 3.70
10/31/1987 3.46 3.92
10/31/1988 3.30 4.59
10/31/1989 3.21 4.67
10/31/1990 3.91 5.35
10/31/1991 3.09 4.77
10/31/1992 2.95 4.01
10/31/1993 2.68 3.52
10/31/1994 2.76 3.70
10/31/1995 2.35 3.35
10/31/1996 2.10 3.03
10/31/1997 1.68 2.55
10/31/1998 1.46 2.38
10/31/1999 1.22 2.29
10/31/2000 1.15 2.52
10/31/2001 1.49 2.96
10/31/2002 1.81 2.73
10/31/2003 1.61 2.21
10/31/2004 1.56 1.83
[end bar chart]
[End Sidebar]
SEEKING DIVERSIFICATION AND LOWER RISK THROUGH A MULTIPLE MANAGER SYSTEM
Continuity of management, a consistent investment style and diversification have
been important elements in AMF's long-term investment results and have lowered
its risk profile. All three result from the fund's long-time approach to
investment management known as the multiple portfolio counselor system. Blending
the best attributes of individualism and teamwork, the system, developed by the
fund's investment adviser, Capital Research and Management Company, provides
stability, flexibility and continuity. Under this system, the majority of AMF's
portfolio is divided among five portfolio counselors who manage their portions
of the assets as if they were managing an independent portfolio. A sixth portion
- -- about 25% of the fund's assets --is managed by 15 financial analysts who are
industry specialists.
The multiple portfolio counselor system allows portfolio counselors to
concentrate on their "highest conviction" ideas, and the fund benefits from the
sum of the good ideas. With five portfolio counselors and a group of investment
analysts making investment decisions, no one person's investment decisions can
dominate the fund's portfolio strategy. Over the years, this has led to a more
stable and consistent investment approach.
"It has also had the effect of reducing the volatility of the fund," says Jim.
"We diversify the fund by selecting different types of stocks and also by
selecting portfolio counselors who have different investing styles, backgrounds
and locations. Not all counselors are producing strong results at the same time.
When one counselor may be running into a rough patch, another may be providing
excellent returns. Some do well in bull markets, and others do well in down
markets. These different styles spread out the risk."
[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 -11.7%
AMF -9.7%
[end bar chart]
Jan. 5, 1953 -
Sept. 14, 1953
Korean War ends;
recession begins
[begin bar chart]
S&P 500 -18.1%
AMF -16.0%
[end bar chart]
Aug. 2, 1956 -
Oct. 22, 1957
Egypt seizes
Suez Canal
[begin bar chart]
S&P 500 -26.9%
AMF -25.0%
[end bar chart]
Dec. 12, 1961 -
June 26, 1962
Stocks hit postwar
highs; Kennedy
confronts steel
industry
[begin bar chart]
S&P 500 -20.5%
AMF -15.1%
[end bar chart]
Feb. 9, 1966 -
Oct. 7, 1966
Economy overheats,
interest rates and
taxes rise
[begin bar chart]
S&P 500 -33.0%
AMF -31.8%
[end bar chart]
Nov. 29, 1968 -
May 26, 1970
Vietnam War
sparks civil
unrest, recession
[begin bar chart]
S&P 500 -44.8%
AMF -32.2%
[end bar chart]
Jan. 11, 1973 -
Oct. 3, 1974
OPEC oil embargo;
Watergate scandal;
Nixon resigns
[begin bar chart]
S&P 500 -13.5%
AMF +3.1%
[end bar chart]
Sept. 21, 1976 -
March 6, 1978
Carter warns
of impending
energy crisis
[begin bar chart]
S&P 500 -20.2%
AMF +3.5%
[end bar chart]
Nov. 28, 1980 -
Aug. 12, 1982
Record-high
interest rates
provoke recession
[begin bar chart]
S&P 500 -32.8%
AMF -21.4%
[end bar chart]
Aug. 25, 1987 -
Dec. 4, 1987
Overvalued
stocks trigger
market crash
[begin bar chart]
S&P 500 -19.2%
AMF -12.1%
[end bar chart]
July 16, 1990 -
Oct. 11, 1990
Iraq invades
Kuwait
[begin bar chart]
S&P 500 -19.1%
AMF -12.1%
[end bar chart]
July 17, 1998 -
Aug. 31, 1998
"Asian flu" spreads to
Russia, igniting global
economic fears
[begin bar chart]
S&P 500 -47.4%
AMF -7.1%
[end bar chart]
March 24, 2000 -
Oct. 9, 2002
Internet bubble bursts;
terrorist strike on U.S.
[End Sidebar]
THE VALUE OF EXPERIENCE
A key ingredient in AMF's success is the depth of experience of the fund's
portfolio counselors and analysts. The fund's investment professionals have
managed investments during wars, recessions, sharp market declines and exuberant
bull markets. "One of the great things about this fund is that we have people
who have seen it all before," says Bob. "When you have been following an
industry or the market for 10, 20, 30 or 40 years, you have a perspective that
others just don't have. You are not likely to panic at the bottom of a market
cycle or the top."
AMF's five portfolio counselors have a combined total investment experience of
149 years. Individual counselors average 30 years of investment experience.* The
15 investment analysts who contribute to the fund's research portfolio also have
lengthy experience in covering their industries.
As we have seen, AMF's long-term record has been built by investing in companies
that pay dividends and are industry leaders. The fund's strategy of increasing
cash reserves when stock prices seem overvalued has helped protect shareholders
during difficult markets. The multiple portfolio counselor system of fund
management has brought continuity, flexibility, diversification and stability.
And the long-term experience of AMF's investment professionals has served the
fund well in good times and bad. This cautious, risk-averse approach has worked
for more than 54 years and should be a good foundation for the next five decades
as well.
[Begin Sidebar]
AMERICAN MUTUAL FUND'S
PORTFOLIO COUNSELORS
American Mutual Fund's five portfolio counselors have
an average 30 years of investment experience.* The
knowledge and wisdom they have accumulated over
the years have helped them manage your fund through
many stock market cycles.
Years of
investment
Portfolio counselor experience*
James K. Dunton 42
R. Michael Shanahan 40
Robert G. O'Donnell 33
Alan N. Berro 19
J. Dale Harvey 15
*All years of experience as of January 2005.
[End Sidebar]
SUMMARY INVESTMENT PORTFOLIO, October 31, 2004
Beginning with this report, a summary portfolio, approved under rules adopted by
the Securities and Exchange Commission this year, will replace the complete
listing of portfolio holdings used in previous shareholder reports. This summary
portfolio is designed to streamline the report and help investors better focus
on a fund's principal holdings. The schedule includes each of the fund's 50
largest holdings and investments of any issuer for which the total value of all
holdings in that issuer exceeds 1% of the fund's net assets. A complete schedule
of portfolio holdings is available upon request, free of charge, by calling
American Funds Service Company at 800/421-0180 or accessing the U.S. Securities
and Exchange Commission website at www.sec.gov.
[begin pie chart]
Percent
of net
INDUSTRY SECTOR DIVERSIFICATION assets
Financials 17.77 %
Industrials 9.70
Consumer discretionary 9.68
Health care 8.95
Energy 8.80
Bonds & notes 1.54
Convertible securities 1.03
Other industries 30.06
Cash & equivalents 12.47
[end pie chart]
Shares Market Percent
value of net
COMMON STOCKS - 84.96% (000) assets
ENERGY - 8.80%
ChevronTexaco Corp. 3,188,900 $169,203 1.23%
ConocoPhillips 1,916,589 161,588 1.17
Devon Energy Corp. 2,000,000 147,940 1.07
Exxon Mobil Corp. 3,485,000 171,532 1.24
Marathon Oil Corp. 4,400,000 167,684 1.21
Sunoco, Inc. 1,606,200 119,437 .87
Unocal Corp. 2,580,400 107,732 .78
Other securities 170,108 1.23
1,215,224 8.80
MATERIALS - 4.82%
MeadWestvaco Corp. 4,588,000 144,660 1.05
Other securities 520,811 3.77
665,471 4.82
INDUSTRIALS - 9.70%
General Electric Co. 7,650,000 261,018 1.89
Norfolk Southern Corp. 6,406,500 217,501 1.58
Northrop Grumman Corp. 2,400,000 124,200 .90
Tyco International Ltd. 3,700,000 115,255 .83
Other securities 621,592 4.50
1,339,566 9.70
CONSUMER DISCRETIONARY - 9.68%
Carnival Corp., units 2,325,000 117,552 .85
General Motors Corp. 4,814,800 185,611 1.34
Magna International Inc., Class A 1,780,000 129,851 .94
TJX Companies, Inc. 5,850,000 140,283 1.02
Other securities 763,209 5.53
1,336,506 9.68
CONSUMER STAPLES - 5.45%
H.J. Heinz Co. 3,500,000 127,225 .92
Procter & Gamble Co. 800,000 40,944 .30
Wal-Mart Stores, Inc. 1,200,000 64,704 .47
Other securities 519,408 3.76
752,281 5.45
HEALTH CARE - 8.95%
Abbott Laboratories 5,100,000 217,413 1.58
Bristol-Myers Squibb Co. 7,507,200 175,894 1.27
Eli Lilly and Co. 3,330,000 182,850 1.32
Johnson & Johnson 1,750,000 102,165 .74
Pfizer Inc 3,358,100 97,217 .70
Wyeth 4,198,000 166,451 1.21
Other securities 294,783 2.13
1,236,773 8.95
FINANCIALS - 17.77%
American International Group, Inc. 2,329,000 141,394 1.02
Bank of America Corp. 5,126,132 229,599 1.66
Citigroup Inc. 2,165,441 96,081 .69
Fannie Mae 4,035,000 283,055 2.05
Freddie Mac 2,900,000 193,140 1.40
J.P. Morgan Chase & Co. 5,446,000 210,216 1.52
Jefferson-Pilot Corp. 2,150,000 103,823 .75
St. Paul Travelers Companies, Inc. 4,950,000 168,102 1.22
SunTrust Banks, Inc. 1,475,000 103,810 .75
UnumProvident Corp. 8,150,000 111,329 .81
Washington Mutual, Inc. 3,200,000 123,872 .90
Wells Fargo & Co. 1,668,750 99,658 .72
Other securities 590,562 4.28
2,454,641 17.77
INFORMATION TECHNOLOGY - 7.65%
Automatic Data Processing, Inc. 2,400,000 104,136 .75
Hewlett-Packard Co. 10,300,000 192,198 1.39
International Business Machines Corp. 3,210,000 288,097 2.09
Microchip Technology Inc. 3,500,000 105,875 .77
Other securities 366,207 2.65
1,056,513 7.65
TELECOMMUNICATION SERVICES - 6.51%
AT&T Corp. 8,834,600 151,160 1.09
BellSouth Corp. 8,900,000 237,363 1.72
SBC Communications Inc. 5,700,000 143,982 1.04
Sprint Corp. - FON Group 10,507,000 220,122 1.59
Other securities 146,815 1.07
899,442 6.51
UTILITIES - 5.63%
American Electric Power Co., Inc. 3,700,000 121,841 .88
Duke Energy Corp. 4,800,000 117,744 .85
Other securities 538,526 3.90
778,111 5.63
TOTAL COMMON STOCKS (cost: $9,689,383,000) 11,734,528 84.96
Market Percent
value of net
CONVERTIBLE SECURITIES - 1.03% (000) assets
TOTAL CONVERTIBLE SECURITIES (cost: $139,604,000) $142,082 1.03%
Principal Market Percent
amount value of net
BONDS AND NOTES - 1.54% (000) (000) assets
MORTGAGE-BACKED OBLIGATIONS - 0.07%
Fannie Mae 6.00% 2017 (1) $9,077 9,542 .07
GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 1.39%
Fannie Mae 6.00% 2005 160,000 166,421
Fannie Mae 5.00% 2007 25,000 26,135 1.39
192,556 1.39
OTHER - 0.08% 10,426 .08
TOTAL BONDS AND NOTES (cost: $206,656,000) 212,524 1.54
Principal Market Percent
amount value of net
SHORT-TERM SECURITIES - 12.24% (000) (000) assets
Abbott Laboratories Inc. 1.75%-1.86% due 11/18-12/7/2004 (2) 48,700 48,637 .35
AIG Funding, Inc. 1.79% due 11/29/2004 22,000 21,968 .16
Bank of America Corp. 1.62% due 11/1/2004 21,100 21,099 .15
BellSouth Corp. 1.82% due 11/9/2004 (2) 50,000 49,977 .36
Citicorp 2.00%-2.05% due 12/14/2004-1/4/2005 80,000 79,758 .58
DuPont (E.I.) de Nemours & Co. 1.72%-1.84% due 11/10-12/8/2004 147,800 147,626 1.07
Eli Lilly and Co. 1.69% due 11/8/2004 (2) 12,500 12,495 .09
Federal Home Loan Bank 1.60%-1.98% due 11/9/2004-1/21/2005 141,500 141,131 1.02
Freddie Mac 1.80%-1.84% due 12/1-12/7/2004 104,700 104,526 .76
IBM Capital Inc. 1.955% due 1/7/2005 (2) 48,000 47,812 .35
New Center Asset Trust Plus 1.64% due 11/2/2004 25,000 24,998 .18
Pfizer Inc 1.66%-1.84% due 11/3-12/27/2004 (2) 108,400 108,258 .78
Procter & Gamble Co. 1.60%-1.97% due 11/4/2004-1/21/2005 (2) 139,500 139,272 1.01
Wal-Mart Stores Inc. 1.74%-1.91% due 11/9-12/7/2004 (2) 103,800 103,682 .75
Wells Fargo & Co. 1.87%-1.91% due 12/3-12/6/2004 116,400 116,286 .84
Other securities 522,853 3.79
TOTAL SHORT-TERM SECURITIES (cost: $1,690,430,000) 1,690,378 12.24
TOTAL INVESTMENT SECURITIES (cost: $11,726,073,000) 13,779,512 99.77
Other assets less liabilities 32,612 .23
NET ASSETS $13,812,124 100.00%
"Other securities" includes all issues that are not required to be disclosed in
the summary investment portfolio.
(1) Pass-through security backed by a pool of mortgages or other loans on which
principal payments are periodically made. Therefore, the effective
maturity is shorter than the stated maturity.
(2) Restricted security that can be resold only to institutional investors.
In practice, these securities are typically as liquid as unrestricted
securities in the portfolio. The total value of all such restricted
securities, including those included in "Other securities" in the summary
investment portfolio, was $693,948,000, which represented 5.02% of
the net assets of the fund.
See Notes to Financial Statements
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
at October 31, 2004 (dollars and shares in thousands,
except per-share amounts)
ASSETS:
Investment securities at market (cost: $11,726,073) $13,779,512
Cash 404
Receivables for:
Sales of investments $1,802
Sales of fund's shares 29,293
Dividends and interest 32,192 63,287
13,843,203
LIABILITIES:
Payables for:
Purchases of investments 11,268
Repurchases of fund's shares 9,645
Investment advisory services 2,922
Services provided by affiliates 5,798
Deferred Directors' compensation 1,419
Other fees and expenses 27 31,079
NET ASSETS AT OCTOBER 31, 2004 $13,812,124
NET ASSETS CONSIST OF:
Capital paid in on shares of capital stock $11,732,440
Undistributed net investment income 34,159
Accumulated net realized loss (7,914)
Net unrealized appreciation 2,053,439
NET ASSETS AT OCTOBER 31, 2004 $13,812,124
Total authorized capital stock - 750,000 shares, $0.001 par value (550,712 total
shares outstanding)
Net asset value
Net assets Shares outstanding per share (1)
Class A $12,043,641 479,890 $25.10
Class B 497,285 19,936 24.94
Class C 500,118 20,081 24.90
Class F 324,085 12,943 25.04
Class 529-A 98,718 3,938 25.07
Class 529-B 24,536 982 25.00
Class 529-C 33,076 1,323 25.00
Class 529-E 5,553 222 25.02
Class 529-F 1,793 71 25.08
Class R-1 10,087 404 24.97
Class R-2 64,352 2,579 24.95
Class R-3 112,560 4,503 25.00
Class R-4 34,551 1,379 25.06
Class R-5 61,769 2,461 25.10
(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 $26.63 and
$26.60, respectively.
See Notes to Financial Statements
STATEMENT OF OPERATIONS
for the year ended October 31, 2004 (dollars in thousands)
INVESTMENT INCOME:
Income:
Dividends (net of non-U.S. withholding tax of $372) $272,105
Interest 46,487 $318,592
Fees and expenses:
Investment advisory services 33,954
Distribution services 35,198
Transfer agent services 8,949
Administrative services 2,046
Reports to shareholders 416
Registration statement and prospectus 561
Postage, stationery and supplies 942
Directors' compensation 387
Auditing and legal 159
Custodian 103
State and local taxes 96
Other 79
Total expenses before reimbursement/waiver 82,890
Reimbursement/waiver of expenses 457 82,433
Net investment income 236,159
NET REALIZED GAIN AND UNREALIZED
APPRECIATION ON INVESTMENTS
Net realized gain on investments 782
Net unrealized appreciation on investments 971,758
Net realized gain and unrealized appreciation on investments 972,540
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,208,699
See Notes to Financial Statements
STATEMENT OF CHANGES IN NET ASSETS (dollars in thousands)
Year ended October 31
2004 2003
OPERATIONS:
Net investment income $236,159 $207,510
Net realized gain on investments 782 58,818
Net unrealized appreciation on investments 971,758 1,374,180
Net increase in net assets resulting from operations 1,208,699 1,640,508
DIVIDENDS AND DISTRIBUTIONS PAID TO SHAREHOLDERS:
Dividends from net investment income (224,102) (219,640)
Distributions from net realized gain on investments (42,043) (126,094)
Total dividends and distributions paid to shareholders (266,145) (345,734)
CAPITAL SHARE TRANSACTIONS 2,178,397 1,221,104
TOTAL INCREASE IN NET ASSETS 3,120,951 2,515,878
NET ASSETS:
Beginning of year 10,691,173 8,175,295
End of year (including undistributed
net investment income: $34,159 and $22,508, respectively) $13,812,124 $10,691,173
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(R) 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:
- ---------------------------------------------------------------------------------------------------------
Share class Initial sales charge Contingent deferred sales Conversion feature
charge upon redemption
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes A and 529-A Up to 5.75% None (except 1% for None
certain redemptions
within one year of
purchase without an
initial sales charge)
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes B and 529-B None Declines from 5% to zero Classes B and 529-B convert to
for redemptions within classes A and 529-A,
six years of purchase respectively, after eight years
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Class C None 1% for redemptions within Class C converts to Class F
one year of purchase 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 proceeds. Each share class has identical voting rights, except for
the exclusive right to vote on matters affecting only its class. Share classes
have different fees and expenses ("class-specific fees and expenses"), primarily
due to different arrangements for distribution, administrative and shareholder
services. Differences in class-specific fees and expenses will result in
differences in net investment income and, therefore, the payment of different
per-share dividends by each class.
SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared to
comply with accounting principles generally accepted in the United States of
America. These principles require management to make estimates and assumptions
that affect reported amounts and disclosures. Actual results could differ from
those estimates. The following is a summary of the significant accounting
policies followed by the fund:
SECURITY VALUATION - Equity securities are valued at the official
closing price of, or the last reported sale price on, the exchange or
market on which such securities are traded, as of the close of
business on the day the securities are being valued or, lacking any
sales, at the last available bid price. Prices for each security are
taken from the principal exchange or market in which the security
trades. Fixed-income securities are valued at prices obtained from an
independent pricing service, when such prices are available. However,
where the investment adviser deems it appropriate, such securities
will be valued at the mean quoted bid and asked prices (or bid prices,
if asked prices are not available) or at prices for securities of
comparable maturity, quality and type. Securities with both
fixed-income and equity characteristics, or equity securities traded
principally among fixed-income dealers, are valued in the manner
described above for either equity or fixed-income securities,
depending on which method is deemed most appropriate by the investment
adviser. Short-term securities purchased within 60 days to maturity
are valued at amortized cost, which approximates market value. The
value of short-term securities purchased with greater than 60 days to
maturity with 60 days or less remaining to maturity is determined
based on the market value on the 61st day. The ability of the issuers
of the debt securities held by the fund to meet their obligations may
be affected by economic developments in a specific industry, state or
region. Securities and other assets for which representative market
quotations are not readily available are fair valued as determined in
good faith under procedures adopted by authority of the fund's Board
of Directors. Various factors may be reviewed in order to make a good
faith determination of a security's fair value. These factors include,
but are not limited to, the type and cost of the security; contractual
or legal restrictions on resale of the security; relevant financial or
business developments of the issuer; actively traded similar or
related securities; conversion or exchange rights on the security;
related corporate actions; significant events occurring after the
close of trading in the security; and changes in overall market
conditions.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security
transactions are recorded by the fund as of the date the trades are
executed with brokers. Realized gains and losses from security
transactions are determined based on the specific identified cost of
the securities. Dividend income is recognized on the ex-dividend date
and interest income is recognized on an accrual basis. Market
discounts, premiums and original issue discounts on fixed-income
securities are amortized daily over the expected life of the security.
CLASS ALLOCATIONS - Income, fees and expenses (other than
class-specific fees and expenses) and realized and unrealized gains
and losses are allocated daily among the various share classes based
on their relative net assets. Class-specific fees and expenses, such
as distribution, administrative and shareholder services, are charged
directly to the respective share class.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and
distributions paid to shareholders are recorded on the ex-dividend
date.
TAXATION - Dividend income is recorded net of non-U.S. taxes paid.
2. FEDERAL INCOME TAXATION AND DISTRIBUTIONS
The fund complies with the requirements under Subchapter M of the Internal
Revenue Code applicable to mutual funds and intends to distribute substantially
all of its net taxable income and net capital gains each year. The fund is not
subject to income taxes to the extent such distributions are made.
DISTRIBUTIONS - Distributions paid to shareholders are based on net investment
income and net realized gains determined on a tax basis, which may differ from
net investment income and net realized gains for financial reporting purposes.
These differences are due primarily to differing treatment for items such as
short-term capital gains and losses; capital losses related to sales of certain
securities within 30 days of purchase; deferred expenses; cost of investments
sold; and paydowns on investments. The fiscal year in which amounts are
distributed may differ from the year in which the net investment income and net
realized gains are recorded by the fund. As of October 31, 2004, the cost of
investment securities for federal income tax purposes was $11,733,241,000.
During the year ended October 31, 2004, the fund reclassified $70,000 from
undistributed net investment income to additional paid-in capital and $336,000
from undistributed net investment income to undistributed capital gains to align
financial reporting with tax reporting.
As of October 31, 2004, the components of distributable earnings on a tax basis
were as follows (dollars in thousands):
Undistributed net investment income
$35,579
Gross unrealized appreciation on investment securities 2,417,222
Gross unrealized depreciation on investment securities (370,951)
Net unrealized appreciation on investment securities 2,046,271
During the year ended October 31, 2004, the fund realized, on a tax basis, a net
capital gain of $562,000.
The tax character of distributions paid to shareholders was as follows (dollars
in thousands):
Year ended October 31, 2004
Ordinary income Long-term capital gains Total distributions paid
Share class
Class A $ 206,064 $ 38,064 $ 244,128
Class B 4,617 1,279 5,896
Class C 4,073 1,110 5,183
Class F 4,386 683 5,069
Class 529-A 1,349 212 1,561
Class 529-B 180 57 237
Class 529-C 234 69 303
Class 529-E 62 12 74
Class 529-F 20 3 23
Class R-1 53 16 69
Class R-2 517 133 650
Class R-3 952 142 1,094
Class R-4 391 63 454
Class R-5 1,204 200 1,404
Total $ 224,102 $ 42,043 $ 266,145
Year ended October 31, 2003
Ordinary income Long-term capital gains Total distributions paid
Share class
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
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. At the beginning of the year,
these fees were 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. The Board of Directors approved an
amended agreement effective April 1, 2004, continuing the series of rates to
include an additional annual rate of 0.230% on month-end net assets in excess of
$13 billion. During the year ended October 31, 2004, CRMC reduced investment
advisory services fees by $305,000. As a result, the fee shown on the
accompanying financial statements of $33,954,000, which was equivalent to an
annualized rate of 0.274%, was reduced to $33,649,000, or 0.271% of average
daily net assets.
CLASS-SPECIFIC FEES AND EXPENSES - Expenses that are specific to individual
share classes are accrued directly to the respective share class. The principal
class-specific fees and expenses are described below:
DISTRIBUTION SERVICES - The fund has adopted plans of distribution for
all share classes, except Class R-5. Under the plans, the Board of
Directors approves certain categories of expenses that are used to
finance activities primarily intended to sell fund shares. The plans
provide for annual expenses, based on a percentage of average daily
net assets, ranging from 0.25% to 1.00% as noted on the following
page. In some cases, the Board of Directors has approved expense
amounts lower than plan limits. 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, 2004, there were no unreimbursed expenses subject to
reimbursement for classes A or 529-A.
------------------------------------------------ ----------------------------- -----------------------------
Share class Currently approved limits Plan limits
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Class A 0.25% 0.25%
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Class 529-A 0.25 0.50
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes B and 529-B 1.00 1.00
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes C, 529-C and R-1 1.00 1.00
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Class R-2 0.75 1.00
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes 529-E and R-3 0.50 0.75
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes F, 529-F and R-4 0.25 0.50
------------------------------------------------ ----------------------------- -----------------------------
TRANSFER AGENT SERVICES - The fund has a transfer agent agreement with
AFS for classes A and B. Under this agreement, these share classes
compensate AFS for transfer agent services including shareholder
recordkeeping, communications and transaction processing. AFS is also
compensated for certain transfer agent services provided to all other
share classes from the administrative services fees paid to CRMC
described below.
ADMINISTRATIVE SERVICES - The fund has an administrative services
agreement with CRMC to provide transfer agent and other related
shareholder services for all 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 year ended October
31, 2004, CRMC agreed to pay a portion of these fees for classes R-1,
R-2 and R-3. 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, 2004, were as follows (dollars in thousands):
--------------------------------------------------------------------------------------------------------------
Share class Distribution Transfer agent Administrative services
services services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
CRMC Transfer agent Commonwealth of
administrative services Virginia
services administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class A $25,167 $8,564 Not applicable Not applicable Not applicable
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class B 4,124 385 Not applicable Not applicable Not applicable
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class C 3,885 Included $583 $85 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class F 622 Included 373 28 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-A 116 Included 115 10 $76
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-B 198 Included 30 9 20
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-C 255 Included 38 9 26
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-E 22 Included 7 1 5
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-F 3 Included 2 -* 1
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-1 55 Included 8 4 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-2 367 Included 73 281 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-3 328 Included 98 70 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-4 56 Included 33 2 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-5 Not applicable Included 58 1 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Total $35,198 $8,949 $1,418 $500 $128
--------------------------------------------------------------------------------------------------------------
* 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 $238,000 in current fees (either paid in cash or deferred) and a net
increase of $149,000 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
Share class Sales(1) dividends and distributions
Amount Shares Amount Shares
Year ended October 31, 2004
Class A $ 2,249,778 91,778 $ 223,459 9,214
Class B 179,897 7,391 5,661 236
Class C 245,538 10,093 4,919 204
Class F 184,317 7,536 4,602 189
Class 529-A 44,044 1,801 1,561 64
Class 529-B 9,686 398 237 10
Class 529-C 16,215 664 303 13
Class 529-E 2,434 100 75 3
Class 529-F 1,058 43 23 1
Class R-1 7,582 307 69 3
Class R-2 35,768 1,465 649 27
Class R-3 87,583 3,572 1,080 44
Class R-4 21,888 891 453 19
Class R-5 14,855 606 786 32
Total net increase
(decrease) $ 3,100,643 126,645 $ 243,877 10,059
Year ended October 31, 2003
Class A $ 1,409,403 66,442 $ 299,136 14,284
Class B 144,921 6,868 6,063 290
Class C 156,020 7,345 4,306 205
Class F 128,330 6,048 3,041 143
Class 529-A 27,278 1,286 1,137 54
Class 529-B 7,597 360 220 10
Class 529-C 9,213 435 255 12
Class 529-E 1,967 94 52 2
Class 529-F 611 28 7 -*
Class R-1 4,054 187 28 1
Class R-2 30,736 1,453 299 14
Class R-3 31,866 1,504 334 15
Class R-4 15,321 700 105 5
Class R-5 6,922 329 955 46
Total net increase
(decrease) $ 1,974,239 93,079 $ 315,938 15,081
Share class Repurchases(1) Net increase
Amount Shares Amount Shares
Year ended October 31, 2004
Class A $ (991,735) (40,523) $ 1,481,502 60,469
Class B (33,058) (1,357) 152,500 6,270
Class C (44,390) (1,822) 206,067 8,475
Class F (54,526) (2,245) 134,393 5,480
Class 529-A (3,580) (146) 42,025 1,719
Class 529-B (680) (28) 9,243 380
Class 529-C (1,648) (67) 14,870 610
Class 529-E (280) (12) 2,229 91
Class 529-F (55) (2) 1,026 42
Class R-1 (1,822) (75) 5,829 235
Class R-2 (7,664) (314) 28,753 1,178
Class R-3 (11,818) (484) 76,845 3,132
Class R-4 (4,981) (203) 17,360 707
Class R-5 (9,886) (407) 5,755 231
Total net increase
(decrease) $ (1,166,123) (47,685) $ 2,178,397 89,019
Year ended October 31, 2003
Class A $ (970,485) (46,474) $ 738,054 34,252
Class B (25,604) (1,231) 125,380 5,927
Class C (26,105) (1,253) 134,221 6,297
Class F (30,043) (1,418) 101,328 4,773
Class 529-A (1,654) (78) 26,761 1,262
Class 529-B (296) (14) 7,521 356
Class 529-C (453) (22) 9,015 425
Class 529-E (98) (4) 1,921 92
Class 529-F (4) -* 614 28
Class R-1 (575) (25) 3,507 163
Class R-2 (4,041) (191) 26,994 1,276
Class R-3 (4,763) (223) 27,437 1,296
Class R-4 (955) (44) 14,471 661
Class R-5 (3,997) (190) 3,880 185
Total net increase
(decrease) $ (1,069,073) (51,167) $ 1,221,104 56,993
* Amount less than one thousand.
(1) Includes exchanges between share classes of the fund.
5. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding short-term
securities, of $3,638,267,000 and $1,778,088,000, respectively, during the year
ended October 31, 2004.
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, 2004, the custodian fee of $103,000 included $7,000 that
was offset by this reduction, rather than paid in cash.
FINANCIAL HIGHLIGHTS (1)
Income (loss) from investment operations(2)
Net
Net asset gains (losses)
value, Net on securities Total from
beginning investment (both realized investment
of period income and unrealized) operations
Class A:
Year ended 10/31/2004 $23.17 $.48 $2.00 $2.48
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
Class B:
Year ended 10/31/2004 23.04 .29 1.98 2.27
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 10/31/2004 23.01 .27 1.97 2.24
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 10/31/2004 23.12 .45 2.00 2.45
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 10/31/2004 23.15 .45 2.00 2.45
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 10/31/2004 23.09 .24 1.99 2.23
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 10/31/2004 23.09 .24 1.99 2.23
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 10/31/2004 23.10 .37 1.99 2.36
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 10/31/2004 23.16 .43 2.00 2.43
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)
Financial highlights (1) (continued)
Income (loss) from investment operations(2)
Net
Net asset gains(losses)
value, Net on securities Total from
beginning investment (both realized investment
of period income and unrealized) operations
Class R-1:
Year ended 10/31/2004 $23.06 $.26 $1.99 $2.25
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 10/31/2004 23.05 .27 1.99 2.26
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 10/31/2004 23.09 .37 1.99 2.36
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 10/31/2004 23.14 .46 1.99 2.45
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 10/31/2004 23.17 .53 2.00 2.53
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)
FINANCIAL HIGHLIGHTS (1)
Dividends and distributions
Dividends
(from net Distributions Total Net asset
investment (from capital dividends and value, end
income) gains) distributions of period
Class A:
Year ended 10/31/2004 $(.46) $(.09) $(.55) $25.10
Year ended 10/31/2003 (.52) (.31) (.83) 23.17
Year ended 10/31/2002 (.57) (.65) (1.22) 20.20
Year ended 10/31/2001 (.72) (1.26) (1.98) 23.22
Year ended 10/31/2000 (.74) (5.05) (5.79) 24.36
Class B:
Year ended 10/31/2004 (.28) (.09) (.37) 24.94
Year ended 10/31/2003 (.36) (.31) (.67) 23.04
Year ended 10/31/2002 (.41) (.65) (1.06) 20.11
Year ended 10/31/2001 (.56) (1.26) (1.82) 23.13
Period from 3/15/2000 to 10/31/2000 (.31) - (.31) 24.30
Class C:
Year ended 10/31/2004 (.26) (.09) (.35) 24.90
Year ended 10/31/2003 (.35) (.31) (.66) 23.01
Year ended 10/31/2002 (.40) (.65) (1.05) 20.09
Period from 3/15/2001 to 10/31/2001 (.25) - (.25) 23.12
Class F:
Year ended 10/31/2004 (.44) (.09) (.53) 25.04
Year ended 10/31/2003 (.50) (.31) (.81) 23.12
Year ended 10/31/2002 (.55) (.65) (1.20) 20.17
Period from 3/15/2001 to 10/31/2001 (.33) - (.33) 23.20
Class 529-A:
Year ended 10/31/2004 (.44) (.09) (.53) 25.07
Year ended 10/31/2003 (.52) (.31) (.83) 23.15
Period from 2/19/2002 to 10/31/2002 (.38) - (.38) 20.20
Class 529-B:
Year ended 10/31/2004 (.23) (.09) (.32) 25.00
Year ended 10/31/2003 (.33) (.31) (.64) 23.09
Period from 2/19/2002 to 10/31/2002 (.29) - (.29) 20.16
Class 529-C:
Year ended 10/31/2004 (.23) (.09) (.32) 25.00
Year ended 10/31/2003 (.33) (.31) (.64) 23.09
Period from 2/20/2002 to 10/31/2002 (.29) - (.29) 20.16
Class 529-E:
Year ended 10/31/2004 (.35) (.09) (.44) 25.02
Year ended 10/31/2003 (.43) (.31) (.74) 23.10
Period from 3/7/2002 to 10/31/2002 (.37) - (.37) 20.16
Class 529-F:
Year ended 10/31/2004 (.42) (.09) (.51) 25.08
Year ended 10/31/2003 (.50) (.31) (.81) 23.16
Period from 9/17/2002 to 10/31/2002 (.12) - (.12) 20.22
Financial highlights (1) (continued)
Dividends and distributions
Dividends
(from net Distributions Total Net asset
investment (from capital dividends and value, end
income) gains) distributions of period
Class R-1:
Year ended 10/31/2004 $(.25) $(.09) $(.34) $24.97
Year ended 10/31/2003 (.39) (.31) (.70) 23.06
Period from 6/11/2002 to 10/31/2002 (.22) - (.22) 20.17
Class R-2:
Year ended 10/31/2004 (.27) (.09) (.36) 24.95
Year ended 10/31/2003 (.38) (.31) (.69) 23.05
Period from 5/31/2002 to 10/31/2002 (.22) - (.22) 20.17
Class R-3:
Year ended 10/31/2004 (.36) (.09) (.45) 25.00
Year ended 10/31/2003 (.45) (.31) (.76) 23.09
Period from 6/6/2002 to 10/31/2002 (.25) - (.25) 20.18
Class R-4:
Year ended 10/31/2004 (.44) (.09) (.53) 25.06
Year ended 10/31/2003 (.50) (.31) (.81) 23.14
Period from 6/27/2002 to 10/31/2002 (.14) - (.14) 20.19
Class R-5:
Year ended 10/31/2004 (.51) (.09) (.60) 25.10
Year ended 10/31/2003 (.56) (.31) (.87) 23.17
Period from 5/15/2002 to 10/31/2002 (.28) - (.28) 20.21
FINANCIAL HIGHLIGHTS (1)
Ratio of expenses to Ratio of expenses to Ratio of
Net assets, average net assets average net assets net income
Total end of period before reimbursement after reimbursement to average
return (3) (in millions) waiver /waiver (4) net assets
Class A:
Year ended 10/31/2004 10.81% $12,044 .60% .60% 1.97%
Year ended 10/31/2003 19.31 9,716 .62 .62 2.32
Year ended 10/31/2002 (8.42) 7,782 .60 .60 2.15
Year ended 10/31/2001 3.71 8,399 .59 .59 2.68
Year ended 10/31/2000 1.21 8,343 .59 .59 3.29
Class B:
Year ended 10/31/2004 9.92 497 1.39 1.39 1.18
Year ended 10/31/2003 18.32 315 1.41 1.41 1.49
Year ended 10/31/2002 (9.11) 156 1.40 1.40 1.40
Year ended 10/31/2001 2.88 59 1.38 1.38 1.80
Period from 3/15/2000 to 10/31/2000 13.07 10 1.38 (5) 1.38 (5) 2.33 (5)
Class C:
Year ended 10/31/2004 9.82 500 1.47 1.46 1.09
Year ended 10/31/2003 18.23 267 1.49 1.49 1.39
Year ended 10/31/2002 (9.20) 107 1.48 1.48 1.34
Period from 3/15/2001 to 10/31/2001 (.48) 28 1.48 (5) 1.48 (5) 1.64 (5)
Class F:
Year ended 10/31/2004 10.70 324 .70 .70 1.86
Year ended 10/31/2003 19.14 172 .72 .72 2.14
Year ended 10/31/2002 (8.57) 54 .75 .75 2.08
Period from 3/15/2001 to 10/31/2001 (.05) 12 .76 (5) .76 (5) 2.30 (5)
Class 529-A:
Year ended 10/31/2004 10.70 99 .71 .71 1.85
Year ended 10/31/2003 19.19 51 .67 .67 2.22
Period from 2/19/2002 to 10/31/2002 (11.88) 19 .70 (5) .70 (5) 2.25 (5)
Class 529-B:
Year ended 10/31/2004 9.72 24 1.59 1.59 .97
Year ended 10/31/2003 18.07 14 1.61 1.61 1.27
Period from 2/19/2002 to 10/31/2002 (12.40) 5 1.60 (5) 1.60 (5) 1.36 (5)
Class 529-C:
Year ended 10/31/2004 9.74 33 1.58 1.58 .98
Year ended 10/31/2003 18.09 16 1.60 1.60 1.28
Period from 2/20/2002 to 10/31/2002 (13.25) 6 1.59 (5) 1.59 (5) 1.38 (5)
Class 529-E:
Year ended 10/31/2004 10.32 6 1.06 1.06 1.50
Year ended 10/31/2003 18.72 3 1.07 1.07 1.80
Period from 3/7/2002 to 10/31/2002 (17.78) 1 1.05 (5) 1.05 (5) 1.95 (5)
Class 529-F:
Year ended 10/31/2004 10.58 2 .81 .80 1.75
Year ended 10/31/2003 19.03 1 .82 .82 1.99
Period from 9/17/2002 to 10/31/2002 (1.42) - (6) .09 .09 .26
Financial highlights (1) (continued)
Ratio of expenses to Ratio of expenses to Ratio of
Net assets, average net assets average net assets net income
Total end of period before reimbursement after reimbursement to average
return (in millions) /waiver /waiver (4) net assets
Class R-1:
Year ended 10/31/2004 9.83% $10 1.51% 1.49% 1.07%
Year ended 10/31/2003 18.19 4 1.65 1.50 1.18
Period from 6/11/2002 to 10/31/2002 (13.50) - (6) 1.24 .58 .60
Class R-2:
Year ended 10/31/2004 9.86 64 1.76 1.45 1.10
Year ended 10/31/2003 18.10 32 1.86 1.47 1.35
Period from 5/31/2002 to 10/31/2002 (16.31) 3 .75 .61 .67
Class R-3:
Year ended 10/31/2004 10.32 113 1.05 1.04 1.49
Year ended 10/31/2003 18.64 32 1.14 1.08 1.72
Period from 6/6/2002 to 10/31/2002 (13.87) 2 .53 .43 .83
Class R-4:
Year ended 10/31/2004 10.69 34 .70 .70 1.86
Year ended 10/31/2003 19.14 16 .73 .72 2.03
Period from 6/27/2002 to 10/31/2002 (11.43) - (6) .53 .25 .84
Class R-5:
Year ended 10/31/2004 11.04 62 .39 .39 2.18
Year ended 10/31/2003 19.50 52 .41 .41 2.53
Period from 5/15/2002 to 10/31/2002 (16.98) 41 .18 .18 1.22
Year ended October 31
2004 2003 2002 2001 2000
Portfolio turnover rate for all classes of shares 17% 24% 31% 45% 29%
(1) Based on operations for the period shown (unless otherwise noted) and,
accordingly, may not be representative of a full year.
(2) Based on average shares outstanding.
(3) Total returns exclude all sales charges, including contingent
deferred sales charges.
(4) The ratios in this column reflect the impact, if any, of certain
reimbursements/waivers from CRMC. During the year ended 10/31/2004,
CRMC reduced fees for investment advisory services for all share
classes. In addition, during the start-up period for the retirement
plan share classes (except Class R-5), CRMC agreed to pay a portion
of the fees related to transfer agent services.
(5) Annualized.
(6) Amount less than 1 million.
See Notes to Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE 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 summary investment portfolio, as
of October 31, 2004, 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 standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. 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, 2004, 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, 2004, 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.
/s/ Deloitte & Touche LLP
Costa Mesa, California
December 3, 2004
TAX INFORMATION (unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of certain distributions received by
shareholders during such fiscal year. The information below is provided for the
fund's fiscal year ending October 31, 2004.
During the fiscal year ended, the fund paid a long-term capital gain
distribution of $42,043,000.
Individual shareholders are eligible for reduced tax rates on qualified dividend
income. For purposes of computing the dividends eligible for reduced tax rates,
all of the dividends paid by the fund from ordinary income earned during the
fiscal year are considered qualified dividend income.
Corporate shareholders may exclude up to 70% of qualifying dividends. For
purposes of computing this exclusion, all of the dividends paid by the fund from
ordinary income earned during the fiscal year represent qualifying dividends.
Certain states may exempt from income taxation that portion of dividends paid by
the fund from ordinary income that was derived from direct U.S. government
obligations. For purposes of computing this exclusion, $6,751,000 of the
dividends paid by the fund from ordinary income earned during the fiscal year
was 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 2005 TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR 2004 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT
THEIR TAX ADVISERS.
OTHER SHARE CLASS RESULTS (unaudited)
Class B, Class C, Class F and Class 529
Figures shown are past results and are not predictive of results in future
periods. Current and future results may be lower or higher than those shown.
Share prices and returns will vary, so investors may lose money. For the most
current information and month-end results, visit americanfunds.com.
Returns for periods ended September 30, 2004 (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 +9.01% +6.77%(1)
Not reflecting CDSC +14.01% +7.12%(1)
CLASS C SHARES
Reflecting CDSC, maximum of 1%, payable only if shares
are sold within one year of purchase +12.96% +4.45%(2)
Not reflecting CDSC +13.96% +4.45%(2)
CLASS F SHARES(3)
Not reflecting annual asset-based fee charged by sponsoring firm +14.77% +5.20%(2)
CLASS 529-A SHARES
Reflecting 5.75% maximum sales charge +8.22% +3.30%(4)
Not reflecting maximum sales charge +14.81% +5.67%(4)
CLASS 529-B SHARES
Reflecting applicable CDSC, maximum of 5%, payable
only if shares are sold within six years of purchase +8.80% +3.28%(4)
Not reflecting CDSC +13.80% +4.72%(4)
CLASS 529-C SHARES
Reflecting CDSC, maximum of 1%, payable only if shares
are sold within one year of purchase +12.82% +4.35%(5)
Not reflecting CDSC +13.82% +4.35%(5)
CLASS 529-E SHARES(3) +14.42% +2.67%(6)
CLASS 529-F SHARES(3)
Not reflecting annual asset-based fee charged by sponsoring firm +14.67% +13.29%(7)
The fund's investment adviser is waiving 5% of its management fee for the period
September 1, 2004, through August 31, 2005. Over this one-year period, the fee
waiver will amount to an approximate one to five basis point reduction in fund
expenses. Accordingly, without the waiver the returns and distribution rates of
the fund might have been lower by a similar order of magnitude.
(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.
There are several ways to invest in American Mutual Fund. Class A shares are
subject to a 5.75% maximum up-front sales charge that declines for accounts (and
aggregated investments) of $25,000 or more and is eliminated for purchases of $1
million or more. Other share classes, which are generally not available for
certain employer-sponsored retirement plans, have no up-front sales charges but
are subject to additional annual expenses and fees. Annual expenses for Class B
shares were 0.79 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 0.86 percentage points higher than those for Class A
shares and a 1% CDSC if redeemed within the first year after purchase. Class C
shares convert to Class F shares after 10 years. Class F shares, which are
available only through certain fee-based programs offered by broker-dealer firms
and registered investment advisers, had higher annual expenses (by 0.10
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.
EXPENSE EXAMPLE (unaudited)
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs such as initial sales charges on purchase payments and contingent deferred
sales charges on redemptions (loads); and (2) ongoing costs, including
management fees; distribution and service (12b-1) fees; and other expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the fund so you can compare these costs with the ongoing costs of
investing in other mutual funds. The example is based on an investment of $1,000
invested at the beginning of the period and held for the entire period (May 1,
2004 through October 31, 2004).
ACTUAL EXPENSES:
The first line of each share class in the table on the next page provides
information about actual account values and actual expenses. You may use the
information in this line, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first line under the heading entitled
"Expenses paid during period" to estimate the expenses you paid on your account
during this period. There are some account fees that are charged to certain
types of accounts, such as Individual Retirement Accounts and CollegeAmerica
accounts (generally, a $10 fee is charged to set up the account and an
additional $10 fee is charged to the account annually) that would increase the
amount of expenses paid on your account. In addition, retirement plan
participants may be subject to certain fees charged by the plan sponsor, and
Class F and Class 529-F shareholders may be subject to fees charged by financial
intermediaries, typically ranging from 0.50% to 3.00% of assets annually
depending on services offered. You may use the information in the table on the
next page to estimate the impact of these fees by adding the amount of the fees
to the number in the first line for your share class under the heading entitled
"Expenses paid during period," and subtracting the amount of the fees from the
number in the first line under the heading entitled "Ending account value."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES:
The second line of each share class in the table on the next page provides
information about hypothetical account values and hypothetical expenses based on
the actual expense ratio for the share class and an assumed rate of return of
5.00% per year before expenses, which is not the actual return of the share
class. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in the fund and
other funds. To do so, compare this 5.00% hypothetical example with the 5.00%
hypothetical examples that appear in the shareholder reports of the other funds.
There are some account fees that are charged to certain shareholders, such as
Individual Retirement Accounts and CollegeAmerica accounts (generally, a $10 fee
is charged to set up the account and an additional $10 fee is charged to the
account annually) that would increase the amount of expenses paid on your
account. In addition, retirement plan participants may be subject to certain
fees charged by the plan sponsor, and Class F and Class 529-F shareholders may
be subject to fees charged by financial intermediaries, typically ranging from
0.50% to 3.00% of assets annually depending on services offered. You may use the
information in the table on the next page to estimate the impact of these fees
by adding the amount of the fees to the number in the second line for your share
class under the heading entitled "Expenses paid during period," and subtracting
the amount of the fees from the number in the second line under the heading
entitled "Ending account value."
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of each share class in the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these
transactional costs were included, your costs would have been higher.
Beginning account Ending account Expenses paid Annualized
value 5/1/2004 value 10/31/2004 during period(1) expense ratio
Class A -- actual return $ 1,000.00 $1,038.21 $2.97 .58%
Class A -- assumed 5% return 1,000.00 1,022.22 2.95 .58
Class B -- actual return 1,000.00 1,033.91 7.06 1.38
Class B -- assumed 5% return 1,000.00 1,018.20 7.00 1.38
Class C -- actual return 1,000.00 1,033.60 7.41 1.45
Class C -- assumed 5% return 1,000.00 1,017.85 7.35 1.45
Class F -- actual return 1,000.00 1,037.56 3.53 .69
Class F -- assumed 5% return 1,000.00 1,021.67 3.51 .69
Class 529-A -- actual return 1,000.00 1,037.50 3.59 .70
Class 529-A -- assumed 5% return 1,000.00 1,021.62 3.56 .70
Class 529-B -- actual return 1,000.00 1,033.15 8.07 1.58
Class 529-B -- assumed 5% return 1,000.00 1,017.19 8.01 1.58
Class 529-C -- actual return 1,000.00 1,033.28 8.02 1.57
Class 529-C -- assumed 5% return 1,000.00 1,017.24 7.96 1.57
Class 529-E -- actual return 1,000.00 1,036.15 5.37 1.05
Class 529-E -- assumed 5% return 1,000.00 1,019.86 5.33 1.05
Class 529-F -- actual return 1,000.00 1,036.98 4.10 .80
Class 529-F -- assumed 5% return 1,000.00 1,021.11 4.06 .80
Class R-1 -- actual return 1,000.00 1,033.66 7.57 1.48
Class R-1 -- assumed 5% return 1,000.00 1,017.70 7.51 1.48
Class R-2 -- actual return 1,000.00 1,033.55 7.41 1.45
Class R-2 -- assumed 5% return 1,000.00 1,017.85 7.35 1.45
Class R-3 -- actual return 1,000.00 1,036.00 5.22 1.02
Class R-3 -- assumed 5% return 1,000.00 1,020.01 5.18 1.02
Class R-4 -- actual return 1,000.00 1,037.53 3.53 .69
Class R-4 -- assumed 5% return 1,000.00 1,021.67 3.51 .69
Class R-5 -- actual return 1,000.00 1,039.32 1.95 .38
Class R-5 -- assumed 5% return 1,000.00 1,023.23 1.93 .38
(1) Expenses are equal to the annualized expense ratio, multiplied by the
average account value over the period, multiplied by the number of days in
the period (184), and divided by 366 (to reflect the one-half year period).
BOARD OF DIRECTORS AND OFFICERS
"NON-INTERESTED" DIRECTORS
YEAR FIRST
ELECTED
A DIRECTOR
NAME AND AGE OF THE FUND(1) PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
H. Frederick Christie, 71 1972 Private investor; former President and CEO, The Mission Group
(non-utility holding company, subsidiary of Southern California Edison
Company)
Mary Anne Dolan, 57 1993 Founder and President, M.A.D., Inc. (communications company); former
Editor-in-Chief, The Los Angeles Herald Examiner
Martin Fenton, 69 1981 Chairman of the Board and CEO, Senior Resource Group LLC (development
and management of senior living communities)
Mary Myers Kauppila, 50 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, 60 1999 Director and Programming Chair, WYPR Baltimore/Washington (public
radio station); Senior Adviser (London), Financial News; Senior
Fellow, Institute for International Economics
Kirk P. Pendleton, 65 1998 Chairman of the Board and CEO, Cairnwood, Inc. (venture capital
investment)
Olin C. Robison, Ph.D., 68 1991 President of the Salzburg Seminar; President Emeritus, Middlebury
College
Steven B. Sample, Ph.D., 64 1999 President, University of Southern California
"NON-INTERESTED" DIRECTORS
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX(2)
OVERSEEN BY
NAME AND AGE DIRECTOR OTHER DIRECTORSHIPS(3) HELD BY DIRECTOR
H. Frederick Christie, 71 19 Ducommun Incorporated; IHOP Corporation; Southwest Water Company;
Valero L.P.
Mary Anne Dolan, 57 3 None
Martin Fenton, 69 16 None
Mary Myers Kauppila, 50 5 None
Bailey Morris-Eck, 60 3 The Nevis Fund, Inc.
Kirk P. Pendleton, 65 6 None
Olin C. Robison, Ph.D., 68 3 None
Steven B. Sample, Ph.D., 64 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, 66 1984 Senior Vice President and Director, Capital
Chairman of the Board Research and Management Company
Robert G. O'Donnell, 60 1987 Senior Vice President and Director, Capital
President Research and Management Company
"INTERESTED" DIRECTORS(4)
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX(2)
NAME, AGE AND OVERSEEN BY
POSITION WITH FUND DIRECTOR OTHER DIRECTORSHIPS(3) HELD BY DIRECTOR
James K. Dunton, 66 2 None
Chairman of the Board
Robert G. O'Donnell, 60 3 None
President
Chairman Emeritus
Jon B. Lovelace, Jr., 77 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) which serves as the underlying
investment vehicle for certain variable insurance contracts, and Endowments,
whose shareholders are limited to certain nonprofit organizations.
(3) This includes all directorships (other than those in the American Funds)
that are held by each Director as a director of a public company or a
registered investment company.
(4) "Interested persons" within the meaning of the 1940 Act, on the basis of
their affiliation with the fund's investment adviser, Capital Research and
Management Company, or affiliated entities (including the fund's principal
underwriter).
(5) Company affiliated with Capital Research and Management Company.
OTHER OFFICERS
YEAR FIRST
ELECTED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
NAME, AGE AND AN OFFICER AND POSITIONS HELD WITH AFFILIATED ENTITIES OR
POSITION WITH FUND OF THE FUND(1) THE PRINCIPAL UNDERWRITER OF THE FUND
Timothy D. Armour, 44 1994 Executive Vice President and Director, Capital
Senior Vice President Research and Management Company; Director, The Capital Group
Companies, Inc.(5)
Joanna F. Jonsson, 41 1997 Senior Vice President, Capital Research Company;(5)
Senior Vice President Director, The Capital Group Companies, Inc.(5)
Alan N. Berro, 44 2000 Senior Vice President, Capital Research Company(5)
Vice President
J. Dale Harvey, 39 2000 Vice President, Capital Research and Management
Vice President Company; Director, American Funds Service Company(5)
William L. Robbins, 36 2004 Vice President and Director, Capital Research
Vice President Company(5)
Stuart R. Strachan, 48 2000 Vice President and Senior Counsel -- Fund
Vice President Business Management Group, Capital Research and Management Company
Julie F. Williams, 56 1984 Vice President -- Fund Business Management
Secretary Group, Capital Research and Management Company
Jeffrey P. Regal, 33 2003 Vice President -- Fund Business Management
Treasurer Group, Capital Research and Management Company
Sheryl F. Johnson, 36 1998 Vice President -- Fund Business Management
Assistant Treasurer Group, Capital Research and Management Company
OFFICES OF THE FUND AND OF
THE INVESTMENT ADVISER
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1406
135 South State College Boulevard
Brea, CA 92821-5823
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 25065
Santa Ana, CA 92799-5065
P.O. Box 659522
San Antonio, TX 78265-9522
P.O. Box 6007
Indianapolis, IN 46206-6007
P.O. Box 2280
Norfolk, VA 23501-2280
CUSTODIAN OF ASSETS
JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017-2070
COUNSEL
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, CA 90071-2899
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
Suite 1200
695 Town Center Drive
Costa Mesa, CA 92626-1979
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406
INVESTORS SHOULD CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES
AND EXPENSES OF THE AMERICAN FUNDS AND COLLEGEAMERICA. THIS AND OTHER IMPORTANT
INFORMATION IS CONTAINED IN THE FUND'S PROSPECTUS AND THE COLLEGEAMERICA PROGRAM
DESCRIPTION, WHICH CAN BE OBTAINED FROM YOUR FINANCIAL ADVISER AND SHOULD BE
READ CAREFULLY BEFORE INVESTING. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE
COMPANY (AFS) AT 800/421-0180 OR VISIT THE AMERICAN FUNDS WEBSITE AT
AMERICANFUNDS.COM.
"AMERICAN FUNDS PROXY VOTING GUIDELINES" -- WHICH DESCRIBES HOW WE VOTE PROXIES
RELATING TO PORTFOLIO SECURITIES -- IS AVAILABLE FREE OF CHARGE ON THE U.S.
SECURITIES AND EXCHANGE COMMISSION (SEC) WEBSITE AT WWW.SEC.GOV, ON THE AMERICAN
FUNDS WEBSITE OR UPON REQUEST BY CALLING AFS. THE FUND'S PROXY VOTING RECORD FOR
THE 12 MONTHS ENDED JUNE 30, 2004, IS ALSO AVAILABLE ON THE SEC AND AMERICAN
FUNDS WEBSITES.
A complete portfolio of American Mutual Fund's investments is available free of
charge on the SEC website or upon request by calling AFS.
American Mutual Fund files a complete list of its portfolio holdings with the
SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q
are available free of charge on the SEC website or upon request by calling AFS.
You may also review or, for a fee, copy the forms at the SEC's Public Reference
Room in Washington, D.C. (800/SEC-0330).
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, 2004, 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 25 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. More than half 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 Fund(SM)
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 Fund(SM)
Fundamental Investors(SM)
The Investment Company of America(R)
Washington Mutual Investors Fund(SM)
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 Trust(SM)
The Bond Fund of America(SM)
Capital World Bond Fund(R)
Intermediate Bond Fund of America(R)
U.S. Government Securities Fund(SM)
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 America(SM)
The Tax-Exempt Bond Fund of America(R)
STATE-SPECIFIC TAX-EXEMPT FUNDS
The Tax-Exempt Fund of California(R)
The Tax-Exempt Fund of Maryland(R)
The Tax-Exempt Fund of Virginia(R)
o MONEY MARKET FUNDS
The Cash Management Trust of America(R)
The Tax-Exempt Money Fund of America(SM)
The U.S. Treasury Money Fund of America(SM)
THE CAPITAL GROUP COMPANIES
American Funds
Capital Research and Management
Capital International
Capital Guardian
Capital Bank and Trust
Lit. No. MFGEAR-903-1204P
Litho in USA AGD/AL/8052-S1904
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
Fees billed by the Registrant's auditors for each of the last two fiscal years,
including fees for non-audit services billed to the adviser and affiliates for
engagements that relate directly to the operations and financial reporting of
the Registrant, and a description of the nature of the services comprising the
fees, are listed below:
Registrant:
a) Audit Fees:
2003 $55,000
2004 $55,000
b) Audit- Related Fees:
2003 none
2004 $8,000
The audit-related fees consist of assurance
and related services relating to the
examination of the Registrant's investment
adviser conducted in accordance with
Statement on Auditing Standards Number 70
issued by the American Institute of
Certified Public Accountants.
c) Tax Fees:
2003 $5,000
2004 $6,000
The tax fees consist of professional
services relating to the preparation of the
Registrant's tax returns including returns
relating to the registrant's investments in
non-U.S. jurisdictions.
d)
All Other Fees:
2003 none
2004 none
Adviser and affiliates (includes only fees for non-audit
services billed to the adviser and affiliates for engagements
that relate directly to the operations and financial reporting
of the Registrant and were subject to the pre-approval
policies described below):
b) Audit- Related Fees:
2003 $365,000
2004 $323,000
The audit-related fees consist of assurance
and related services relating to the
examination of the Registrant's transfer
agency and investment adviser conducted in
accordance with Statement on Auditing
Standards Number 70 issued by the American
Institute of Certified Public Accountants.
c) Tax Fees:
2003 none
2004 none
d) All Other Fees:
2003 none
2004 none
The Registrant's Audit Committee will pre-approve all audit and permissible
non-audit services that the Committee considers compatible with maintaining the
auditors' independence. The pre-approval requirement will extend to all
non-audit services provided to the Registrant, the investment adviser, and any
entity controlling, controlled by, or under common control with the investment
adviser that provides ongoing services to the Registrant, if the engagement
relates directly to the operations and financial reporting of the registrant.
The Committee will not delegate its responsibility to pre-approve these services
to the investment adviser. The Committee may delegate to one or more Committee
members the authority to review and pre-approve audit and permissible non-audit
services. Actions taken under any such delegation will be reported to the full
Committee at its next meeting. The pre-approval requirement is waived with
respect to non-audit services if certain conditions are met. The pre-approval
requirement was not waived for any of the services listed above under paragraphs
b, c and d.
Aggregate non-audit fees paid to the Registrant's auditors, including fees for
all services billed to the Registrant and the adviser and affiliates that
provide ongoing services to the Registrant were $380,000 for fiscal year 2003
and $979,000 for fiscal year 2004. The non-audit services represented by these
amounts were brought to the attention of the Committee and considered to be
compatible with maintaining the auditors' independence.
ITEM 5 - Audit Committee of Listed Registrants
Not applicable.
ITEM 6 - Schedule of Investments
[logo - American Funds (r)]
AMERICAN MUTUAL FUND
Investment portfolio
October 31, 2004
Market value
COMMON STOCKS -- 84.96% Shares (000)
ENERGY -- 8.48%
Ashland Inc. 1,700,000 $ 97,954
ChevronTexaco Corp. 3,188,900 169,203
ConocoPhillips 1,916,589 161,588
Devon Energy Corp. 2,000,000 147,940
Exxon Mobil Corp. 3,485,000 171,532
Marathon Oil Corp. 4,400,000 167,684
Schlumberger Ltd. 440,200 27,706
Sunoco, Inc. 1,606,200 119,437
Unocal Corp. 2,580,400 107,732
1,170,776
MATERIALS -- 4.56%
Air Products and Chemicals, Inc. 1,466,200 77,973
Dow Chemical Co. 1,703,000 76,533
Georgia-Pacific Corp., Georgia-Pacific Group 1,900,000 65,721
International Paper Co. 2,250,000 86,647
MeadWestvaco Corp. 4,588,000 144,660
PPG Industries, Inc. 750,000 47,812
Praxair, Inc. 1,400,000 59,080
Sonoco Products Co. 1,500,000 39,975
Weyerhaeuser Co. 500,000 31,320
629,721
INDUSTRIALS -- 9.45%
Boeing Co. 750,000 37,425
Burlington Northern Santa Fe Corp. 1,200,000 50,172
Caterpillar Inc. 350,000 28,189
Emerson Electric Co. 1,200,000 76,860
General Dynamics Corp. 185,000 18,892
General Electric Co. 7,650,000 261,018
Lockheed Martin Corp. 1,500,000 82,635
Norfolk Southern Corp. 6,406,500 217,501
Northrop Grumman Corp. 2,400,000 124,200
Pitney Bowes Inc. 1,600,000 70,000
Raytheon Co. 1,000,000 36,480
ServiceMaster Co. 5,600,000 71,904
Tyco International Ltd. 3,700,000 115,255
Union Pacific Corp. 350,000 22,039
United Technologies Corp. 1,000,000 92,820
1,305,390
CONSUMER DISCRETIONARY -- 9.55%
Carnival Corp., units 2,325,000 $ 117,552
Dana Corp. 2,170,000 32,355
Delphi Corp. 11,383,300 95,734
Dow Jones & Co., Inc. 96,800 4,283
Federated Department Stores, Inc. 1,000,000 50,450
Gap, Inc. 800,000 15,984
General Motors Corp. 4,814,800 185,611
Genuine Parts Co. 1,800,000 71,802
J.C. Penney Co., Inc. 1,543,000 53,372
Knight-Ridder, Inc. 500,000 34,265
Leggett & Platt, Inc. 2,750,000 77,357
Lowe's Companies, Inc. 810,000 45,587
Magna International Inc., Class A 1,780,000 129,851
May Department Stores Co. 1,350,000 35,181
McDonald's Corp. 1,000,000 29,150
Newell Rubbermaid Inc. 500,000 10,780
NIKE, Inc., Class B 150,000 12,197
Target Corp. 1,700,000 85,034
TJX Companies, Inc. 5,850,000 140,283
VF Corp. 1,150,000 61,904
Walt Disney Co. 1,200,000 30,264
1,318,996
CONSUMER STAPLES -- 5.45%
Albertson's, Inc. 2,700,000 61,587
Avon Products, Inc. 2,335,000 92,349
Coca-Cola Co. 2,108,300 85,723
General Mills, Inc. 1,345,000 59,516
H.J. Heinz Co. 3,500,000 127,225
Kimberly-Clark Corp. 1,110,000 66,234
Kraft Foods Inc., Class A 700,000 23,317
PepsiCo, Inc. 650,000 32,227
Procter & Gamble Co. 800,000 40,944
Sara Lee Corp. 1,300,000 30,264
Walgreen Co. 1,900,000 68,191
Wal-Mart Stores, Inc. 1,200,000 64,704
752,281
HEALTH CARE -- 8.95%
Abbott Laboratories 5,100,000 217,413
Aetna Inc. 295,000 28,025
Applera Corp. - Applied Biosystems Group 1,176,700 22,451
Becton, Dickinson and Co. 1,200,000 63,000
Bristol-Myers Squibb Co. 7,507,200 175,894
CIGNA Corp. 400,000 25,384
Eli Lilly and Co. 3,330,000 182,850
Johnson & Johnson 1,750,000 102,165
McKesson Corp. 2,500,000 66,650
Merck & Co., Inc. 2,000,000 62,620
Pfizer Inc 3,358,100 97,217
Schering-Plough Corp. 1,471,700 26,653
Wyeth 4,198,000 166,451
1,236,773
FINANCIALS -- 17.77%
Allstate Corp. 1,200,000 $ 57,708
American Express Co. 750,000 39,802
American International Group, Inc. 2,329,000 141,394
Aon Corp. 2,250,000 45,922
Bank of America Corp. 5,126,132 229,599
Bank of New York Co., Inc. 2,450,000 79,527
Citigroup Inc. 2,165,441 96,081
Fannie Mae 4,035,000 283,055
Freddie Mac 2,900,000 193,140
J.P. Morgan Chase & Co. 5,446,000 210,216
Jefferson-Pilot Corp. 2,150,000 103,823
Lincoln National Corp. 1,167,900 51,154
Marsh & McLennan Companies, Inc. 1,567,300 43,352
National City Corp. 1,050,000 40,918
PNC Financial Services Group, Inc. 715,000 37,395
Regions Financial Corp. 2,250,000 78,930
St. Paul Travelers Companies, Inc. 4,950,000 168,102
SunTrust Banks, Inc. 1,475,000 103,810
U.S. Bancorp 2,650,000 75,817
UnumProvident Corp. 8,150,000 111,329
Wachovia Corp. 813,600 40,037
Washington Mutual, Inc. 3,200,000 123,872
Wells Fargo & Co. 1,668,750 99,658
2,454,641
INFORMATION TECHNOLOGY -- 7.50%
Automatic Data Processing, Inc. 2,400,000 104,136
Electronic Data Systems Corp. 4,481,000 95,311
Hewlett-Packard Co. 10,300,000 192,198
Intel Corp. 1,800,000 40,068
International Business Machines Corp. 3,210,000 288,097
Linear Technology Corp. 1,050,000 39,774
Microchip Technology Inc. 3,500,000 105,875
Microsoft Corp. 2,900,000 81,171
Texas Instruments Inc. 3,650,000 89,243
1,035,873
TELECOMMUNICATION SERVICES -- 6.51%
ALLTEL Corp. 1,000,000 54,930
AT&T Corp. 8,834,600 151,160
BellSouth Corp. 8,900,000 237,363
SBC Communications Inc. 5,700,000 143,982
Sprint Corp. - FON Group 10,507,000 220,122
Verizon Communications Inc. 2,350,000 91,885
899,442
UTILITIES -- 5.63%
Ameren Corp. 300,000 14,400
American Electric Power Co., Inc. 3,700,000 121,841
Dominion Resources, Inc. 850,000 54,672
Duke Energy Corp. 4,800,000 117,744
Exelon Corp. 1,623,400 64,319
FirstEnergy Corp. 910,000 37,610
FPL Group, Inc. 450,000 31,005
Progress Energy, Inc. 1,550,000 64,015
Public Service Enterprise Group Inc. 800,000 34,072
Questar Corp. 1,500,000 72,000
Southern Co. 2,700,000 85,293
Xcel Energy Inc. 4,745,000 81,140
778,111
MISCELLANEOUS -- 1.11%
Other common stocks in initial period of acquisition 152,524
TOTAL COMMON STOCKS (cost: $9,689,383,000) 11,734,528
Shares or principal
CONVERTIBLE SECURITIES -- 1.03% amount
INDUSTRIALS -- 0.11%
Tyco International Group SA, Series B, 3.125% convertible debentures 2023 $10,000,000 15,062
FINANCIALS -- 0.08%
Chubb Corp. 7.00% convertible preferred 2005 400,000 units 11,176
TELECOMMUNICATION SERVICES -- 0.17%
ALLTEL Corp. 7.75% convertible preferred 2005 465,900 units 23,621
UTILITIES -- 0.25%
Ameren Corp. 9.75% ACES convertible preferred 2005 1,200,000 units 34,680
MISCELLANEOUS -- 0.42%
Other convertible securities in initial period of acquisition 57,543
TOTAL CONVERTIBLE SECURITIES (cost: $139,604,000) 142,082
Principal amount
BONDS AND NOTES -- 1.54% (000)
UTILITIES -- 0.08%
Virginia Electric and Power Co., Series 2002-A, 5.375% 2007 $9,960 10,426
MORTGAGE-BACKED OBLIGATIONS -- 0.07%
Fannie Mae 6.00% 2017(1) 9,077 9,542
GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS -- 1.39%
Fannie Mae 6.00% 2005 160,000 166,421
Fannie Mae 5.00% 2007 25,000 26,135
192,556
TOTAL BONDS AND NOTES (cost: $206,656,000) 212,524
SHORT-TERM SECURITIES -- 12.24%
Abbott Laboratories Inc. 1.75%-1.86% due 11/18-12/7/2004(2) 48,700 48,637
AIG Funding, Inc. 1.79% due 11/29/2004 22,000 21,968
American Express Credit Corp. 1.75% due 11/23/2004 34,300 34,262
Bank of America Corp. 1.62% due 11/1/2004 21,100 21,099
BellSouth Corp. 1.82% due 11/9/2004(2) 50,000 49,977
Citicorp 2.00%-2.05% due 12/14/2004-1/4/2005 80,000 79,758
Coca-Cola Co. 1.72%-1.86% due 11/5-12/20/2004 41,400 41,329
DuPont (E.I.) de Nemours & Co. 1.72%-1.84% due 11/10-12/8/2004 147,800 147,626
Eli Lilly and Co. 1.69% due 11/8/2004(2) 12,500 12,495
Federal Farm Credit Banks 1.81%-1.94% due 12/2/2004-1/20/2005 48,500 48,356
Federal Home Loan Bank 1.60%-1.98% due 11/9/2004-1/21/2005 141,500 141,131
Freddie Mac 1.80%-1.84% due 12/1-12/7/2004 104,700 104,526
Gannett Co. 1.74% due 11/19/2004(2) 40,700 40,663
Harvard University 1.83% due 12/13/2004 20,000 19,956
IBM Capital Inc. 1.955% due 1/7/2005(2) 48,000 47,812
International Bank for Reconstruction and Development 1.88% due 12/27/2004 40,000 39,881
Minnesota Mining and Manufacturing Co. 1.72% due 11/3-11/5/2004 35,000 34,993
New Center Asset Trust Plus 1.64% due 11/2/2004 25,000 24,998
PepsiCo Inc. 1.74% due 11/8/2004(2) 25,000 24,990
Pfizer Inc 1.66%-1.84% due 11/3-12/27/2004(2) 108,400 108,258
Procter & Gamble Co. 1.60%-1.97% due 11/4/2004-1/21/2005(2) 139,500 139,272
State Street Bank & Trust 1.96% due 12/28/2004 40,000 39,999
Tenessee Valley Authority 1.77% due 12/16/2004 25,000 24,939
Triple-A One Funding Corp. 2.03% due 1/24/2005(2) 29,900 29,749
U.S. Treasury Bills 1.545%-1.785% due 11/26/2004-1/20/2005 30,400 30,337
United Parcel Service Inc. 1.70% due 11/12/2004 25,000 24,986
Variable Funding Capital Corp. 1.71%-1.82% due 11/9-11/23/2004(2) 88,500 88,413
Wal-Mart Stores Inc. 1.74%-1.91% due 11/9-12/7/2004(2) 103,800 103,682
Wells Fargo & Co. 1.87%-1.91% due 12/3-12/6/2004 116,400 116,286
TOTAL SHORT-TERM SECURITIES (cost: $1,690,430,000) 1,690,378
TOTAL INVESTMENT SECURITIES (cost: $11,726,073,000) 13,779,512
Other assets less liabilities 32,612
NET ASSETS $13,812,124
Miscellaneous securities include holdings in their initial periods of
acquisition that have not previously been publicly disclosed.
(1) Pass-through security backed by a pool of mortgages or other loans on which
principal payments are periodically made. Therefore, the effective
maturity is shorter than the stated maturity.
(2) Restricted security that can be resold only to institutional investors. In
practice, these securities are typically as liquid as unrestricted
securities in the portfolio. The total value of all restricted securities
was $693,948,000, which represented 5.02% of the net assets of the fund.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON DETAILED SCHEDULE OF
INVESTMENTS
To the Shareholders and
Board of Directors of
American Mutual Fund, Inc.:
We have audited, in accordance with standards of the Public Company Accounting
Oversight Board (United States), the financial statements of American Mutual
Fund, Inc. (the "Fund") as of October 31, 2004, and for the year then ended and
have issued our report thereon dated December 3, 2004, which report and
financial statements are included in Item 1 of this Certified Shareholder Report
on Form N-CSR. Our audit also included the Fund's investment portfolio (the
"Schedule") as of October 31, 2004 appearing in Item 6 of this Form N-CSR. This
Schedule is the responsibility of the Fund's management. Our responsibility is
to express an opinion based on our audit. In our opinion, the Schedule referred
to above, when considered in relation to the basic financial statements taken as
a whole of the Fund referred to above, presents fairly, in all material
respects, the information set forth therein.
DELOITTE & TOUCHE LLP
December 3, 2004
Costa Mesa, California
ITEM 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end
management investment company.
ITEM 8 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers Not applicable to this Registrant, insofar as
the Registrant is not a closed-end management investment company.
ITEM 9 - Submission of Matters to a Vote of Security Holders
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Registrant's Board of Directors since the Registrant
last submitted a proxy statement to its shareholders. The procedures are as
follows. The Registrant has a nominating committee comprised solely of persons
who are not considered "interested persons" of the Registrant within the meaning
of the Investment Company Act of 1940, as amended. The committee periodically
reviews such issues as the Board's composition, responsibilities, committees,
compensation and other relevant issues, and recommends any appropriate changes
to the full Board of Directors. While the committee normally is able to identify
from its own resources an ample number of qualified candidates, it will consider
shareholder suggestions of persons to be considered as nominees to fill future
vacancies on the Board. Such suggestions must be sent in writing to the
nominating committee of the Registrant, c/o the Registrant's Secretary, and must
be accompanied by complete biographical and occupational data on the prospective
nominee, along with a written consent of the prospective nominee for
consideration of his or her name by the nominating committee.
ITEM 10 - Controls and Procedures
(a) The Registrant's Principal Executive Officer and Principal Financial
Officer have concluded, based on their evaluation of the Registrant's
disclosure controls and procedures (as such term is defined in Rule 30a-3
under the Investment Company Act of 1940), that such controls and
procedures are adequate and reasonably designed to achieve the purposes
described in paragraph (c) of such rule.
(b) There were no changes in the Registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of
1940) that occurred during the Registrant's second fiscal quarter of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the Registrant's internal control
over financial reporting.
ITEM 11 - 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, Chairman and PEO
Date: January 7, 2005
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, Chairman and PEO
Date: January 7, 2005
By
/s/ Jeffrey P. Regal
- --------------------------------------------------
Jeffrey P. Regal, Treasurer and PFO
Date: January 7, 2005