N-30D 1 amf.txt [The American Funds Group(r)] AMERICAN MUTUAL FUND Semi-Annual Report for the six months ended April 30, 2001 [photograph of lake surrounded by trees with clouds in the sky, all reflected in lake] AMERICAN MUTUAL FUND(R) IS ONE OF THE 29 AMERICAN FUNDS, THE NATION'S THIRD-LARGEST MUTUAL FUND FAMILY. FOR SEVEN DECADES, CAPITAL RESEARCH AND MANAGEMENT COMPANY, THE AMERICAN FUNDS ADVISER, HAS INVESTED WITH A LONG-TERM FOCUS BASED ON THOROUGH RESEARCH AND ATTENTION TO RISK. AMERICAN MUTUAL FUND STRIVES FOR THE BALANCED ACCOMPLISHMENT OF THREE OBJECTIVES - CURRENT INCOME, CAPITAL GROWTH AND CONSERVATION OF PRINCIPAL - THROUGH INVESTMENTS IN COMPANIES THAT PARTICIPATE IN THE GROWTH OF THE AMERICAN ECONOMY. Fund results in this report were calculated for Class A shares at net asset value (without a sales charge) unless otherwise indicated. Here are returns on a $1,000 investment with all distributions reinvested for periods ended March 31, 2001 (the most recent calendar quarter): 1 Year 5 Years 10 Years CLASS A SHARES Reflecting 5.75% maximum sales charge Total return +4.69% +66.65% +216.18% Average annual compound return - +10.75% + 12.20% Results for other share classes can be found on page 21. The fund's 30-day yield as of May 31, 2001, calculated in accordance with the Securities and Exchange Commission formula, was 2.08%. Please see the back cover for important information about other share classes. FIGURES SHOWN ARE PAST RESULTS AND ARE NOT PREDICTIVE OF FUTURE RESULTS. SHARE PRICE AND RETURN WILL VARY, SO YOU MAY LOSE MONEY. INVESTING FOR SHORT PERIODS MAKES LOSSES MORE LIKELY. INVESTMENTS ARE NOT FDIC-INSURED, NOR ARE THEY DEPOSITS OF OR GUARANTEED BY A BANK OR ANY OTHER ENTITY. FELLOW INVESTORS: The first six months of our 2001 fiscal year was, by almost any measure, a very good period for American Mutual Fund shareholders. The fund's results were strong both on a relative and absolute basis. During the six months ended April 30, 2001, investors in American Mutual Fund who reinvested their dividends, as most shareholders do, earned a total return of 8.7%. At the same time, Standard & Poor's 500 Stock Composite Index, an unmanaged measure of the U.S. stock market, declined 12.0%. For the 12 months ended April 30, the difference is even more dramatic. American Mutual Fund gained 15.3%; the S&P 500 lost 12.9%. While few will be surprised by the S&P 500's results - the market's problems have been well documented - the stark difference between your fund's healthy returns and the losses in the broader market should be viewed in context. The numbers reflect fundamental differences between a fund of seasoned, dividend-paying companies that is managed with specific guidelines to reduce volatility and risk, and an index, which after restructuring in recent years, had its results significantly influenced by a handful of soaring, nondividend-paying stocks. For the final year of its spectacular rise through spring of 2000, the S&P 500's total return was accounted for by 5% of the stocks in the index, most of which were in the high technology or Internet fields. Many of those same stocks accounted for most of the index's decline that followed. In contrast, American Mutual Fund managed to meet each of its three objectives - current income, capital growth and conservation of principal - by investing in high-quality, dividend-paying stocks. DAMPENING VOLATILITY Sticking to its three fundamental objectives means that American Mutual Fund will at times lag popular market indexes. The market's sharp upward movement in calendar years 1998 and 1999 was just such a time, and the fund trailed the S&P 500 in both years. Yet, while the fund missed the highest returns in the market's best years, it also sidestepped the steep downturn that followed. In fact, during the three years ended April 30, a period that includes both the market's speculative peak and the aftermath of the bubble's bursting, American Mutual Fund's 6.2% annual compound return outpaced the 5.3% return produced by the S&P 500. This resilience probably doesn't surprise investors who have been with the fund for many years. During its 51-year lifetime, the market, as measured by the S&P 500 Index, lost more than 14% a dozen times. In each case, American Mutual Fund did better than the market. Our goal has always been to invest in sound, dividend-paying companies at reasonable prices. In the recent past, finding good companies wasn't difficult, but finding them at reasonable prices was. That changed in the six months ended April 30. The intensity and magnitude of the stock market downturn, combined with a change in investor sentiment, corrected the extraordinary overvaluations we saw in many stocks and made it easier to find good opportunities at reasonable prices. INCREASING EQUITY HOLDINGS In response to these opportunities, we began committing some of the fund's reserves. In the first six months of this fiscal year, we reduced our cash position, increasing our equity position to 80% of the fund's assets. To put that in context, on February 29, 2000, the month-end before the market hit its peak, the fund held 70% of its assets in equities. As we committed our reserves, we increased our holdings across a broad spectrum of industries, including technology, retailing and diversified financials. We have no illusions that we know how the market will fare in the short run. But we believe the past few years have once again shown the value of having a well-managed portfolio focused on the long term that avoids the siren call of a few rapidly rising stocks. We look forward to reporting to you again in six months. Cordially, /s/ James K. Dunton /s/ Robert D. O'Donnell James K. Dunton Robert G. O'Donnell Chairman of the Board President June 15, 2001 INVESTMENT PORTFOLIO UNAUDITED APRIL 30, 2001 [begin pie chart] Largest Industry Holdings Banks 9.18% Oil & Gas 7.81% Electric Utilities 7.14% Diversified Telecommunication Services 6.41% Insurance 4.38% Other Industries 45.07% Bonds, Notes, Cash & Equivalents 20.01% [end pie chart] [begin chart] Percent of Largest Individual Holdings Net Assets Bank of America 2.90% Royal Dutch Petroleum 1.91 AT&T 1.78 BANK ONE 1.72 Xcel Energy 1.71 Texaco 1.68 Household International 1.65 Verizon Communications 1.60 Allstate 1.58 IBM 1.52 [end chart] Market Percent Value of Net Equity Securities (Common Stock) Shares (Millions) Assets ENERGY Oil & Gas - 7.81% Ashland Inc. 650,000 $ 27.989 .32% Chevron Corp. 493,500 47.652 .54 Conoco Inc., Class B 567,053 17.250 .20 Kerr-McGee Corp. 465,000 33.317 .38 Pennzoil-Quaker State Co. 1,875,000 26.644 .30 Phillips Petroleum Co. 755,800 45.046 .51 Royal Dutch Petroleum Co. (New York registered) 2,815,000 167.577 1.91 Texaco Inc. 2,035,000 147.090 1.68 Ultramar Diamond Shamrock Corp. 708,200 31.947 .37 Unocal Corp. 1,830,400 69.848 .80 USX-Marathon Group 2,200,000 70.312 .80 684.672 7.81 MATERIALS Chemicals - 0.95% Air Products and Chemicals, Inc. 400,000 17.196 .20 Dow Chemical Co. 600,000 20.070 .23 Ferro Corp. 608,000 12.689 .14 Praxair, Inc. 700,000 33.131 .38 Containers & Packaging - 0.28% Crown Cork & Seal Co., Inc. 588,300 2.536 .03 Sonoco Products Co. 1,000,000 22.350 .25 Metals & Mining - 0.19% Alcoa Inc. 400,000 16.560 .19 Paper & Forest Products - 2.19% Georgia-Pacific Corp., Georgia-Pacific Group 884,400 28.752 Georgia-Pacific Corp., Timber Group 725,000 21.467 .57 International Paper Co. 1,000,000 39.180 .45 Mead Corp. 436,900 12.321 .14 Westvaco Corp. 3,400,000 89.692 1.03 315.944 3.61 CAPITAL GOODS Aerospace & Defense - 1.74% Boeing Co. 200,000 12.360 .14 Honeywell International Inc. 600,000 29.328 .33 Lockheed Martin Corp. 525,000 18.459 .21 Raytheon Co., Class A 405,000 11.927 Raytheon Co., Class B 1,675,000 49.463 .70 United Technologies Corp. 400,000 31.232 .36 Electrical Equipment - 0.23% Hubbell Inc., Class B 720,000 19.886 .23 Machinery - 1.81% Briggs & Stratton Corp. 629,100 25.479 .29 Caterpillar Inc. 900,000 45.180 .52 Deere & Co. 997,700 40.976 .47 Harsco Corp. 1,250,000 35.375 .40 Pall Corp. 500,000 11.735 .13 Trading Companies & Distributors - 0.32% Genuine Parts Co. 1,050,000 28.350 .32 359.750 4.10 COMMERCIAL SERVICES & SUPPLIES Commercial Services & Supplies - 2.82% Galileo International, Inc. 1,200,000 29.304 .34 Pitney Bowes Inc. 3,286,700 125.125 1.43 ServiceMaster Co. 5,559,400 60.764 .69 Waste Management, Inc. 1,300,000 31.733 .36 246.926 2.82 TRANSPORTATION Road & Rail - 2.84% Burlington Northern Santa Fe Corp. 337,800 9.931 .11 CSX Corp. 3,200,000 112.224 1.28 Norfolk Southern Corp. 4,990,000 98.503 1.12 Union Pacific Corp. 500,000 28.445 .33 249.103 2.84 AUTOMOBILES & COMPONENTS Auto Components - 1.50% Dana Corp. 700,000 13.741 .16 Delphi Automotive Systems Corp. 698,465 10.407 .12 Goodyear Tire & Rubber Co. 1,200,000 29.676 .34 TRW Inc. 2,020,000 77.689 .88 Automobiles - 0.41% General Motors Corp. 650,000 35.626 .41 167.139 1.91 CONSUMER DURABLES & APPAREL Household Durables - 1.22% Newell Rubbermaid Inc. 750,000 20.220 .23 Stanley Works 2,400,000 87.000 .99 Textiles & Apparel - 1.02% NIKE, Inc., Class B 1,016,100 42.483 .49 VF Corp. 1,150,000 46.679 .53 196.382 2.24 HOTELS, RESTAURANTS & LEISURE Hotels, Restaurants & Leisure - 1.19% McDonald's Corp. 3,800,000 104.500 1.19 104.500 1.19 MEDIA Media - 1.46% Interpublic Group of Companies, Inc. 1,675,000 56.866 .65 Knight-Ridder, Inc. 750,000 40.612 .46 Walt Disney Co. 1,000,000 30.250 .35 127.728 1.46 RETAILING Multiline Retail - 1.72% J.C. Penney Co., Inc. 3,100,000 62.806 .72 May Department Stores Co. 2,350,000 87.538 1.00 Specialty Retail - 1.93% Circuit City Stores, Inc. - Circuit City Group 5,200,000 78.260 .89 Gap, Inc. 800,000 22.168 .25 Lowe's Companies, Inc. 500,000 31.500 .36 TJX Companies, Inc. 1,200,000 37.596 .43 319.868 3.65 FOOD & DRUG RETAILING Food & Drug Retailing - 1.16% Albertson's, Inc. 2,402,200 80.233 .92 Walgreen Co. 500,000 21.390 .24 101.623 1.16 FOOD, BEVERAGES & TOBACCO Food Products - 1.53% ConAgra Foods, Inc. 2,200,000 45.782 .52 General Mills, Inc. 500,000 19.705 .23 H.J. Heinz Co. 1,500,000 58.725 .67 Sara Lee Corp. 500,000 9.955 .11 134.167 1.53 HOUSEHOLD & PERSONAL PRODUCTS Household Products - 0.41% Kimberly-Clark Corp. 603,100 35.824 .41 Personal Products - 0.59% Avon Products, Inc. 1,212,500 51.313 .59 87.137 1.00 HEALTH CARE EQUIPMENT & SERVICES Health Care Equipment & Supplies - 0.44% Becton, Dickinson and Co. 1,200,000 38.820 .44 Health Care Providers & Services - 0.54% Aetna Inc. 700,000 19.733 .22 CIGNA Corp. 260,000 27.742 .32 86.295 .98 PHARMACEUTICALS & BIOTECHNOLOGY Pharmaceuticals - 4.32% Abbott Laboratories 800,000 37.104 .42 Bristol-Myers Squibb Co. 2,032,200 113.803 1.30 Johnson & Johnson 400,000 38.592 .44 Merck & Co., Inc. 180,400 13.705 .16 Pfizer Inc 1,680,100 72.748 .83 Pharmacia Corp. 520,000 27.175 .31 Schering-Plough Corp. 1,950,000 75.153 .86 378.280 4.32 BANKS Banks - 9.18% AmSouth Bancorporation 1,500,000 25.725 .29 Bank of America Corp. 4,537,000 254.072 2.90 Bank of New York Co., Inc. 500,000 25.100 .29 BANK ONE CORP. 3,989,300 150.676 1.72 Comerica Inc. 836,311 43.011 .49 First Union Corp. 2,191,100 65.667 .75 Huntington Bancshares Inc. 1,650,000 24.866 .28 National City Corp. 1,750,000 47.618 .54 SunTrust Banks, Inc. 400,000 25.400 .29 Wachovia Corp. 1,325,000 80.560 .92 Wells Fargo & Co. 1,318,750 61.942 .71 804.637 9.18 DIVERSIFIED FINANCIALS Diversified Financials - 3.98% Citigroup Inc. (acquired Associates First 455,441 22.385 .26 Capital Corp.) Fannie Mae 850,000 68.221 .78 Household International, Inc. 2,265,000 145.005 1.65 J.P. Morgan Chase & Co. (formed by the merger 2,350,000 112.753 1.29 of Chase Manhattan Corp. and J.P. Morgan & Co. Inc.) 348.364 3.98 INSURANCE Insurance - 4.38% Allstate Corp. 3,325,000 138.819 1.58 American General Corp. 1,400,000 61.054 .70 Aon Corp. 370,500 12.315 .14 Jefferson-Pilot Corp. 1,500,000 69.990 .80 Lincoln National Corp. 500,900 23.122 .26 SAFECO Corp. 900,000 24.030 .28 St. Paul Companies, Inc. 1,200,000 54.120 .62 383.450 4.38 REAL ESTATE Real Estate - 0.54% Equity Residential Properties Trust 900,000 47.241 .54 47.241 .54 TECHNOLOGY HARDWARE & EQUIPMENT Communications Equipment - 0.93% Harris Corp. 1,100,000 31.625 .36 Motorola, Inc. 3,200,000 49.760 .57 Computers & Peripherals - 3.61% Compaq Computer Corp. 3,450,000 60.375 .69 Hewlett-Packard Co. 4,300,000 122.249 1.40 International Business Machines Corp. 1,160,000 133.562 1.52 Office Electronics - 0.38% Xerox Corp. 3,716,900 33.601 .38 Semiconductor Equipment & Products - 0.82% Linear Technology Corp. 300,000 14.412 .16 Texas Instruments Inc. 1,500,000 58.050 .66 503.634 5.74 TELECOMMUNICATION SERVICES Diversified Telecommunication Services - 6.41% ALLTEL Corp. 1,030,000 56.248 .64 AT&T Corp. 7,000,000 155.960 1.78 CenturyTel, Inc. 4,230,000 114.971 1.31 Qwest Communications International Inc. 1,090,000 44.581 .51 SBC Communications Inc. 800,000 33.000 .38 Sprint FON Group 800,000 17.104 .19 Verizon Communications Inc. 2,547,000 140.263 1.60 562.127 6.41 UTILITIES Electric Utilities - 7.14% Ameren Corp. 300,000 12.591 .14 American Electric Power Co., Inc. 1,258,400 62.089 .71 Consolidated Edison, Inc. 2,100,000 78.561 .90 Duke Energy Corp. 2,100,000 98.196 1.12 GPU, Inc. 1,125,000 37.474 .43 Progress Energy, Inc. (formed by the merger 600,000 26.544 .30 of CP&L Energy, Inc. and Florida Progress Corp.) Southern Co. 3,100,000 72.509 .83 TECO Energy, Inc. 1,600,000 51.184 .58 TXU Corp. 850,000 37.366 .42 Xcel Energy Inc. 4,795,000 149.604 1.71 626.118 7.14 MISCELLANEOUS Miscellaneous - 2.00% Other equity securities in initial period 174.582 2.00 of acquisition TOTAL EQUITY SECURITIES: 7,009.667 79.99 (cost: $5,727.519 million) Principal Bonds & Notes Amount Corporate - 0.53% Aetna Inc. 7.875% 2011 $24,700,000 24.011 .27% Motorola, Inc. 7.625% 2010 24,100,000 22.584 .26 U.S. Treasury Obligations - 2.55% 3.875% January 2009 /1/ /2/ 107,439,000 111.602 1.27 3.625% July 2002 /1/ /2/ 110,019,000 111.880 1.28 TOTAL BONDS & NOTES: 270.077 3.08 (cost: $246.755 million) TOTAL INVESTMENT SECURITIES: 7,279.744 83.07 (cost: $5,974.274 million) Principal Short-Term Securities Amount Corporate Short-Term Notes - 10.27% Alcoa Inc. 4.24%-4.90% due 5/18-6/19/01 $65,500,000 65.236 .74% American Express Credit Corp. 4.48%-5.00% 50,000,000 49.906 .57 due 5/14/01 Bank of America Corp. 4.58%-5.22% due 50,000,000 49.685 .57 5/8-7/13/01 BellSouth Corp. 4.75%-4.80% due 5/7-5/30/01 /3/ 75,400,000 75.203 .86 Citicorp 4.38%-5.03% due 5/9-6/7/01 50,000,000 49.853 .57 Colgate-Palmolive Co. 4.91% due 5/14/01 /3/ 50,000,000 49.904 .57 E.I. du Pont de Nemours and Co. 4.42%-5.00% 50,000,000 49.822 .57 due 5/3-6/26/01 Ford Motor Credit Co. 4.74%-5.06% due 68,200,000 68.063 .77 5/7-5/18/01 General Dynamics Corp. 4.68%-5.24% due 50,000,000 49.762 .57 5/9-6/22/01 /3/ General Motors Acceptance Corp. 4.26% 50,000,000 49.704 .57 due 6/19/01 Household Finance Corp. 4.68% due 6/14/01 30,000,000 29.824 .34 Marsh USA Inc. 4.67% due 6/20/01 /3/ 43,800,000 43.536 .50 Merck & Co., Inc. 4.32%-4.92% due 5/1-5/29/01 50,700,000 50.593 .58 Minnesota Mining & Manufacturing Co. 50,000,000 49.623 .56 4.22%-4.33% due 5/24-7/20/01 Pitney Bowes Credit Corp. 4.22%-5.00% 45,000,000 44.784 .51 due 5/8-7/19/01 Target Corp. 4.91%-4.97% due 5/1-5/22/01 50,000,000 49.871 .57 Texaco Inc. 4.73% due 5/29/01 25,000,000 24.903 .28 Verizon Network Funding Corp. 4.88% due 5/23/01 50,000,000 49.844 .57 Federal Agency Discount Notes - 6.22% Fannie Mae 4.24%-6.24% due 5/2-8/24/01 243,800,000 242.670 2.77 Federal Home Loan Banks 4.73%-5.23% due 121,995,000 121.648 1.39 5/11-6/13/01 Freddie Mac 4.13%-5.22% due 5/10-7/26/01 181,400,000 180.435 2.06 TOTAL SHORT-TERM SECURITIES: 1,444.869 16.49 (cost: $1,444.654 million) Excess of cash and receivables over payables 38.436 .44 TOTAL SHORT-TERM SECURITIES, CASH 1,483.305 16.93 AND RECEIVABLES NET ASSETS $8,763.049 100.00% /1/ Coupon rate may change periodically. /2/ Index-linked bond whose principal amount moves with a government retail price index. /3/ Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. See Notes to Financial Statements
Equity securities appearing in the portfolio since October 31, 2000 Alcoa ALLTEL Circuit City Stores Compaq Computer Walt Disney Gap General Motors McDonald's Mead Merck Motorola Newell Rubbermaid Schering-Plough TJX Companies TXU Equity securities eliminated from the portfolio since October 31, 2000 BFGoodrich Eaton Federal-Mogul FleetBoston Financial Fluor Fort James International Flavors & Fragrances Johnson Controls Northrop Grumman PepsiCo. PPG Industries Ralston Purina Sunoco Textron Thomas & Betts Washington Mutual FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES Unaudited at April 30, 2001 (dollars in millions) Assets: Investment securities at market (cost: $5,974.274) $7,279.744 Short-term securities (cost: $1,444.654) 1,444.869 Cash .244 Receivables for - Sales of investments 63.256 Sales of fund's shares 7.379 Dividends and interest 10.763 81.398 8,806.255 Liabilities: Payables for - Purchases of investments 32.477 Repurchases of fund's shares 4.358 Management services 2.079 Other expenses 4.292 43.206 Net Assets at April 30, 2001 $8,763.049 Total authorized capital stock - 500,000,000 shares Class A shares, $0.001 par value: Net assets $8,733.546 Shares outstanding 353,363,130 Net asset value per share $24.72 Class B shares, $0.001 par value: Net assets $25.173 Shares outstanding 1,021,750 Net asset value per share $24.64 Class C shares, $0.001 par value: Net assets $3.115 Shares outstanding 126,470 Net asset value per share $24.63 Class F shares, $0.001 par value: Net assets $1.215 Shares outstanding 49,210 Net asset value per share $24.70 See Notes to Financial Statements STATEMENT OF OPERATIONS Unaudited for the six months ended April 30, 2001 (dollars in millions) Investment Income: Income: Dividends $82.266 Interest 57.224 $139.490 Expenses: Management services fee 12.146 Distribution expenses - Class A 9.236 Distribution expenses - Class B .079 Distribution expenses - Class C .002 Transfer agent fees - Class A 2.475 Transfer agent fees - Class B .006 Administrative service fees - Class C .002 Administrative service fees - Class F .001 Reports to shareholders .217 Registration statement and prospectus .157 Postage, stationery and supplies .373 Directors' fees .127 Auditing and legal fees .048 Custodian fee .053 Taxes other than federal income tax .097 Other expenses .031 25.050 Net investment income 114.440 Realized Gain and Unrealized Appreciation on Investments: Net realized gain 344.940 Net unrealized appreciation on investments 245.486 Net realized gain and unrealized appreciation on investments 590.426 Net Increase in Net Assets Resulting from Operations $704.866 STATEMENT OF CHANGES IN NET ASSETS (dollars in millions) Six Months Year Ended Ended April 30, October 31, 2001* 2000 Operations: Net investment income $ 114.440 $ 290.172 Net realized gain on investments 344.940 465.571 Net unrealized appreciation (depreciation) on investments 245.486 (771.397) Net increase (decrease) in net assets resulting from operations 704.866 (15.654) Dividends and Distributions Paid to Shareholders: Dividends from net investment income: Class A (126.032) (263.546) Class B (.182) (.089) Distributions from net realized gain on investments: Class A (424.267) (1,723.068) Class B (.575) - Total dividends and distributions (551.056) (1,986.703) Capital Share Transactions: Proceeds from shares sold 317.289 484.684 Proceeds from shares issued in reinvestment of net investment income dividends and distributions of net realized gain on investments 499.398 1,811.515 Cost of shares repurchased (560.594) (2,361.923) Net increase (decrease) in net assets resulting from capital share transactions 256.093 (65.724) Total Increase (Decrease) in Net Assets 409.903 (2,068.081) Net Assets: Beginning of period 8,353.146 10,421.227 End of period (including undistributed net investment income: $74.046 and $85.820, respectively) $8,763.049 $8,353.146 *Unaudited. See Notes to Financial Statements
Notes to Financial Statements (Unaudited) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION - American Mutual Fund, Inc. (the "fund") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. The fund strives for the balanced accomplishment of three objectives - current income, capital growth and conservation of principal - through investments in companies that participate in the growth of the American economy. The fund offers four classes of shares as described below: Class A shares are sold with an initial sales charge of up to 5.75%. Class B shares are sold without an initial sales charge but are subject to a contingent deferred sales charge ("CDSC") paid upon redemption. This charge declines from 5% to zero over a period of six years. Class B shares automatically convert to Class A shares after eight years. Class C shares are sold without an initial sales charge but are subject to a CDSC of 1% for redemptions within one year of purchase. Class C shares automatically convert to Class F shares after ten years. Class F shares, which are sold exclusively through fee-based programs, are sold without an initial sales charge or CDSC. Holders of all classes of shares have equal pro rata rights to assets, dividends, liquidation and other rights. Each class has identical voting rights, except for exclusive rights to vote on matters affecting only its class. Each class of shares may have different distribution, administrative services and transfer agent fees and expenses. Differences in class-specific expenses will result in the payment of different per share dividends by each class. SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of the significant accounting policies consistently followed by the fund in the preparation of its financial statements: SECURITY VALUATION - Equity securities, including depositary receipts, are valued at the last reported sale price on the exchange or market on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. In cases where equity securities are traded on more than one exchange, the securities are valued on the exchange or market determined by the investment adviser to be the broadest and most representative market, which may be either a securities exchange or the over-the-counter market. Fixed-income securities are valued at prices obtained from a pricing service, when such prices are available; however, in circumstances where the investment adviser deems it appropriate to do so, such securities will be valued at the mean quoted bid and asked prices or at prices for securities of comparable maturity, quality and type. Short-term securities maturing within 60 days are valued at amortized cost, which approximates market value. 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 assets for which representative market quotations are not readily available are valued at fair value as determined in good faith by a committee appointed by the fund's Board of Directors. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions are accounted for as of the trade date. Realized gains and losses from securities transactions are determined based on specific identified cost. 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. On November 1, 2000, the fund began amortizing premium on fixed-income securities to conform with a recent change in generally accepted accounting principles for mutual funds. Adopting this change did not impact the fund's net asset value and resulted in only immaterial changes to the classification of certain amounts between interest income and realized and unrealized gain in the Statement of Operations. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions paid to shareholders are recorded on the ex-dividend date. Class Allocations - Income, expenses (other than class-specific expenses) and realized and unrealized gains and losses are allocated daily among the various share classes based on their relative net asset values. Distribution expenses, administrative services fees, certain transfer agent fees and other applicable class-specific expenses are accrued daily and charged to the respective share class. 2. FEDERAL INCOME TAXATION The fund complies with the requirements of the Internal Revenue Code applicable to regulated investment companies and intends to distribute all of its net taxable income and net capital gains for the fiscal year. As a regulated investment company, the fund is not subject to income taxes if such distributions are made. Required distributions are determined on a tax basis and may differ from net investment income and net realized gains for financial reporting purposes. In addition, the fiscal year in which amounts are distributed may differ from the year in which the net investment income is earned and the net gains are realized by the fund. As of April 30, 2001, the cost of investment securities for federal income tax reporting purposes was $7,428,896,000. Net unrealized appreciation on investments aggregated $1,295,717,000; $1,625,735,000 related to appreciated securities and $330,018,000 related to depreciated securities. There was no difference between book and tax realized gains on securities transactions for the six months ended April 30, 2001. 3. FEES AND TRANSACTIONS WITH RELATED PARTIES INVESTMENT ADVISORY FEE - The fee of $12,146,000 for management services was incurred pursuant to an agreement with Capital Research and Management Company ("CRMC") with which certain officers and Directors of the fund are affiliated. The Investment Advisory and Service Agreement provides for monthly fees accrued daily, based on a series of rates beginning with 0.384% per annum of the first $1 billion of net assets decreasing to 0.240% of such assets in excess of $8 billion. For the six months ended April 30, 2001, the management services fee was equivalent to an annualized rate of 0.291% of average net assets. DISTRIBUTION EXPENSES - The fund has adopted plans of distribution under which it may finance activities primarily intended to sell fund shares, provided the categories of expenses are approved in advance by the fund's Board of Directors. The plans provide for annual expenses, based on average daily net assets, of up to 0.25% for Class A shares, 1.00% for Class B and Class C shares, and up to 0.50% for Class F shares. All share classes may use up to 0.25% of these expenses to pay service fees, or to compensate American Funds Distributors, Inc. ("AFD"), the principal underwriter of the fund's shares, for paying service fees to firms that have entered into agreements with AFD for providing certain shareholder services. The balance may be used for approved distribution expenses as follows: CLASS A SHARES - Approved categories of expense include reimbursements to AFD for commissions paid to dealers and wholesalers in respect of certain shares sold without a sales charge. Those reimbursements are permitted for amounts billed to the fund within the prior 15 months but only to the extent that the overall 0.25% annual expense limit for Class A shares is not exceeded. For the six months ended April 30, 2001, aggregate distribution expenses were $9,236,000, or 0.22% of average daily net assets attributable to Class A shares. CLASS B SHARES - In addition to service fees of 0.25%, approved categories of expense include fees of 0.75% per annum of average daily net assets attributable to Class B shares payable to AFD. AFD sells the rights to receive such payments (as well as any contingent deferred sales charges payable in respect of shares sold during the period) in order to finance the payment of dealer commissions. For the six months ended April 30, 2001, aggregate distribution expenses were $79,000, or 1.00% of average daily net assets attributable to Class B shares. CLASS C SHARES - In addition to service fees of 0.25%, the Board of Directors has approved the payment of 0.75% per annum of average daily net assets attributable to Class C shares to AFD to compensate firms selling Class C shares of the fund. For the six months ended April 30, 2001, aggregate distribution expenses were $2,000, or 1.00% of average daily net assets attributable to Class C shares. CLASS F SHARES - The plan has an expense limit of 0.50%. However, the Board of Directors has presently approved expenses under the plan of 0.25% per annum of average daily net assets attributable to Class F shares. For the six months ended April 30, 2001, aggregate distribution expenses were $161, or 0.25% of average daily net assets attributable to Class F shares. As of April 30, 2001, aggregate distribution expenses payable to AFD for all share classes were $2,942,000. AFD received $752,000 (after allowances to dealers) as its portion of the sales charges paid by purchasers of the fund's Class A shares for the six months ended April 30, 2001. Such sales charges are not an expense of the fund and, hence, are not reflected in the accompanying Statement of Operations. TRANSFER AGENT FEE - A fee of $2,481,000 was incurred during the six months ended April 30, 2001, pursuant to an agreement with American Funds Service Company (AFS), the transfer agent for the fund. As of April 30, 2001, aggregate transfer agent fees payable to AFS for Class A and Class B shares were $468,000. ADMINISTRATIVE SERVICES FEES - The fund has an administrative services agreement with CRMC for Class C and Class F shares. Pursuant to this agreement, CRMC provides transfer agency and other related shareholder services. CRMC may contract with third parties to perform these services. Under the agreement, the fund pays CRMC a fee equal to 0.15% per annum of average daily net assets of Class C and Class F shares, plus amounts payable for certain transfer agency services according to a specified schedule. For the six months ended April 30, 2001, total fees under the agreement were $3,000. As of April 30, 2001, aggregate administrative services fees payable to CRMC for Class C and Class F shares were $1,000. DEFERRED DIRECTORS' FEES - Directors who are unaffiliated with CRMC may elect to defer the receipt of part or all of their compensation. Deferred compensation amounts, which remain in 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. As of April 30, 2001, the cumulative amount of these liabilities was $901,000. Directors' fees during the six months ended April 30, 2001, were $127,000, comprised of $125,000 in current fees (either paid in cash or deferred), and $2,000, representing the net increase in the value of deferred compensation. AFFILIATED DIRECTORS AND OFFICERS - CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both wholly owned subsidiaries of CRMC. Officers of the fund and certain Directors are or may be considered to be affiliated with CRMC, AFS and AFD. No such persons received any remuneration directly from the fund. 4. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES The fund made purchases and sales of investment securities, excluding short-term securities, of $1,782,209,000 and $1,711,026,000, respectively, during the six months ended April 30, 2001. Pursuant to the custodian agreement, the fund receives credits against its custodian fee for imputed interest on certain balances with the custodian bank. For the six months ended April 30, 2001, the custodian fee of $53,000 includes $9,000 that was paid by these credits rather than in cash. As of April 30, 2001, net assets consisted of the following: Capital paid in on shares of capital stock 7,106,290,000 Undistributed net investment income 74,046,000 Accumulated net realized gain 277,028,000 Net unrealized appreciation 1,305,685,000 Net assets $8,763,049,000
Capital share transactions in the fund were as follows: Six months Six months April 30, April 30, 2001 2001 Amount (millions) Shares Class A Shares: Sold $ 297.935 12,539,464 Reinvestment of dividends and distributions 498.671 21,818,174 Repurchased (559.373) (23,449,108) Net increase (decrease) in Class A 237.233 10,908,530 Class B Shares: /1/ Sold 15.151 635,193 Reinvestment of dividends and distributions .727 31,835 Repurchased (1.171) (49,348) Net increase in Class B 14.707 617,680 Class C Shares: /2/ Sold 3.030 128,549 Reinvestment of dividends and distributions - - Repurchased (.050) (2,079) Net increase in Class C 2.980 126,470 Class F Shares: /2/ Sold 1.173 49,210 Reinvestment of dividends and distributions - - Repurchased - - Net increase in Class F 1.173 49,210 Total net increase (decrease) in fund $ 256.093 11,701,890 Year ended Year ended October 31, October 31, 2000 2000 Amount (millions) Shares Class A Shares: Sold $ 475.157 19,829,689 Reinvestment of dividends and distributions 1,811.432 76,568,221 Repurchased (2,361.775) (100,234,580) Net increase (decrease) in Class A (75.186) (3,836,670) Class B Shares: /1/ Sold 9.527 406,808 Reinvestment of dividends and distributions .083 3,599 Repurchased (.148) (6,337) Net increase in Class B 9.462 404,070 Class C Shares: /2/ Sold - - Reinvestment of dividends and distributions - - Repurchased - - Net increase in Class C - - Class F Shares: /2/ Sold - - Reinvestment of dividends and distributions - - Repurchased - - Net increase in Class F - - Total net increase (decrease) in fund $ (65.724) (3,432,600) /1/ Class B shares were not offered before March 15, 2000. /2/ Class C and Class F shares were not offered before March 15, 2001.
Per-Share Data and Ratios Class A Class A Class A Six months Year Year ended ended ended April 30, October 31, October 31, 2001 /1/,/2/ 2000 1999 Net Asset Value, Beginning of Period $24.36 $30.09 $31.18 Income from Investment Operations : Net investment income .32 /3/ .80 /3/ .82 Net gains (losses) on securities (both 1.66 /3/ (.74)/3/ 1.78 realized and unrealized) Total from investment operations 1.98 .06 2.60 Less Distributions : Dividends (from net investment income) (.37) (.74) (.76) Distributions (from capital gains) (1.25) (5.05) (2.93) Total distributions (1.62) (5.79) (3.69) Net Asset Value, End of Period $24.72 $24.36 $30.09 Total Return /4/ 8.72% 1.20% 9.01% Ratios/Supplemental Data: Net assets, end of period (in millions) $8,734 $8,343 $10,421 Ratio of expenses to average net assets .60% /5/ .59% .57% Ratio of net income to average net assets 2.74% /5/ 3.29% 2.67% Class A Class A Class A Year Year Year ended ended ended October 31, October 31, October 31, 1998 1997 1996 Net Asset Value, Beginning of Period $30.14 $26.54 $24.17 Income from Investment Operations : Net investment income .84 .83 .84 Net gains (losses) on securities (both 3.48 5.19 3.52 realized and unrealized) Total from investment operations 4.32 6.02 4.36 Less Distributions : Dividends (from net investment income) (.80) (.81) (.84) Distributions (from capital gains) (2.48) (1.61) (1.15) Total distributions (3.28) (2.42) (1.99) Net Asset Value, End of Period $31.18 $30.14 $26.54 Total Return /4/ 15.15% 24.19% 18.89% Ratios/Supplemental Data: Net assets, end of period (in millions) $10,215 $9,362 $7,759 Ratio of expenses to average net assets .56% .58% .59% Ratio of net income to average net assets 2.75% 2.95% 3.36% Class B Class B Class C Class F Six months ended March 15 to March 15 to March 15 to April 30, October 31, April 30, April 30, 2001 /1/,/2/ 2000 /1/ 2001 /1/,/2/ 2001 /1/,/2/ Net Asset Value, Beginning of Period $24.30 $21.78 $23.48 $23.54 Income from Investment Operations : Net investment income /3/ .22 .37 .00 .01 Net gains on securities (both realized and 1.66 2.46 1.15 1.15 unrealized) /3/ Total from investment operations 1.88 2.83 1.15 1.16 Less Distributions : Dividends (from net investment income) (.29) (.31) - - Distributions (from capital gains) (1.25) - - - Total distributions (1.54) (.31) - - Net Asset Value, End of Period $24.64 $24.30 $24.63 $24.70 Total Return /4/ 8.29% 13.07% 4.90% 4.93% Ratios/Supplemental Data: Net assets, end of period (in millions) $25 $10 $3 $1 Ratio of expenses to average net assets 1.40%/5/ 1.38%/5/ .26% .22% Ratio of net income to average net assets 1.77%/5/ 2.33%/5/ .01% .04% Supplemental Data - All Classes Six months ended Year ended Year ended April 30, October 31, October 31, 2001 /1/,/2/ 2000 1999 Portfolio turnover rate 25.42% 29.35% 41.53% Year ended Year ended Year ended October 31, October 31, October 31, 1998 1997 1996 Portfolio turnover rate 28.97% 19.16% 24.21% /1/ Based on operations for the period shown and, accordingly, not representative of a full year. /2/ Unaudited. /3/ Based on average shares outstanding. /4/ Total returns exclude all sales charges, including contingent deferred sales charges. /5/ Annualized.
SHARE RESULTS: CLASS B, CLASS C AND CLASS F Returns for periods ended March 31, 2001 (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 Total return + 5.19% +13.17% Average annual compound return - +12.59 Not reflecting CDSC Total return +10.19 +17.17 Average annual compound return - +16.40 CLASS C AND CLASS F SHARES Results for these shares are not shown because of the brief time between their introduction on March 15, 2001, and the end of the period. *From March 15, 2000, when B shares first became available. [The American Funds Group(r)] AMERICAN MUTUAL FUND OFFICES OF THE FUND AND OF THE INVESTMENT ADVISER, CAPITAL RESEARCH AND MANAGEMENT COMPANY 333 South Hope Street Los Angeles, California 90071-1443 135 South State College Boulevard Brea, California 92821-5823 TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS American Funds Service Company (Please write to the address nearest you.) P.O. Box 2205 Brea, California 92822-2205 P.O. Box 659522 San Antonio, Texas 78265-9522 P.O. Box 6007 Indianapolis, Indiana 46206-6007 P.O. Box 2280 Norfolk, Virginia 23501-2280 CUSTODIAN OF ASSETS The Chase Manhattan Bank One Chase Manhattan Plaza New York, New York 10081-0001 COUNSEL O'Melveny & Myers LLP 400 South Hope Street Los Angeles, California 90071-2899 PRINCIPAL UNDERWRITER American Funds Distributors, Inc. 333 South Hope Street Los Angeles, California 90071-1462 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 of $25,000 or more. Other share classes, which are generally not available for certain employer-sponsored retirement plans, have no up-front sales charges but are subject to additional annual expenses and fees. Annual expenses for Class B shares were 0.80% 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 are subject to annual expenses about 0.82% 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, have higher expenses (about 0.06% a year) than do Class A shares, and an annual asset-based fee charged by the sponsoring firm. Because expenses are first deducted from income, dividends from each class will vary. For information about your account or any of the fund's services, or for a prospectus for any of the American Funds, please contact your financial adviser. You may also call American Funds Service Company, toll-free, at 800/421-0180 or visit us at americanfunds.com on the World Wide Web. Please read the prospectus carefully before you invest or send money. This report is for the information of shareholders of American Mutual Fund, but it may also be used as sales literature when preceded or accompanied by the current prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. If used as sales material after June 30, 2001, this report must be accompanied by an American Funds Group Statistical Update for the most recently completed calendar quarter. Printed on recycled paper Litho in USA CD/AL/5093 Lit. No. AMF-013-0601