AMF 497 filing

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AMERICAN MUTUAL FUND, INC.

Part B
Statement of Additional Information

January 1, 2006

(as supplemented April 1, 2006)

This document is not a prospectus but should be read in conjunction with the
current prospectus or retirement plan prospectus of American Mutual Fund, Inc.
(the "fund" or "AMF") dated January 1, 2006. You may obtain a prospectus from
your financial adviser or by writing to the fund at the following address:

American Mutual Fund, Inc.
Attention: Secretary
333 South Hope Street
Los Angeles, California 90071
213/486-9200

Shareholders who purchase shares at net asset value through eligible retirement
plans should note that not all of the services or features described below may
be available to them. They should contact their employers for details.

TABLE OF CONTENTS

Item Page no.
---- --------

Certain investment limitations and guidelines . . . . . . . . . . . 2
Description of certain securities and investment techniques . . . . 2
Fundamental policies and investment restrictions. . . . . . . . . . 5
Management of the fund . . . . . . . . . . . . . . . . . . . . . . 8
Execution of portfolio transactions . . . . . . . . . . . . . . . . 26
Disclosure of portfolio holdings. . . . . . . . . . . . . . . . . . 27
Price of shares . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Taxes and distributions . . . . . . . . . . . . . . . . . . . . . . 30
Purchase and exchange of shares . . . . . . . . . . . . . . . . . . 35
Sales charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Sales charge reductions and waivers . . . . . . . . . . . . . . . . 40
Selling shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Shareholder account services and privileges . . . . . . . . . . . . 44
General information . . . . . . . . . . . . . . . . . . . . . . . . 47
Financial statements

American Mutual Fund -- Page 1
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CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES

The following limitations and guidelines are considered at the time of purchase,
under normal circumstances, and are based on a percentage of the fund's net
assets unless otherwise noted. This summary is not intended to reflect all of
the fund's investment limitations.

GENERAL GUIDELINE

. The fund's equity investments are limited to securities included on its
eligible list, which consists of securities deemed suitable by the fund's
investment adviser in light of the fund's investment objectives and
policies. Securities are added to, or deleted from, the eligible list by
the fund's board of directors after reviewing and acting upon the
recommendations of the fund's investment adviser.

EQUITY SECURITIES

. The fund will invest principally in equity-type securities such as common
stocks and securities that are convertible into common stock.

. The fund may invest up to 5% of its assets in companies that do not pay a
dividend.

DEBT SECURITIES

. The fund's investments in nonconvertible securities will be rated A or
better by Moody's Investors Service ("Moody's") or Standard & Poor's
Corporation ("S&P") or unrated but determined to be of equivalent quality.

NON-U.S. SECURITIES

. The fund may invest up to 5% of its assets in securities of issuers
domiciled outside the United States and Canada and are not included in the
S&P 500 Stock Composite Index.

* * * * * *

The fund may experience difficulty liquidating certain portfolio securities
during significant market declines or periods of heavy redemptions.

DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES

The descriptions below are intended to supplement the material in the prospectus
under "Investment objective, strategies and risks."

EQUITY SECURITIES -- Equity securities represent an ownership position in a
company. Equity securities held by the fund typically consist of common stocks
and may also include securities with equity or purchase rights. The prices of
equity securities fluctuate based on, among other things, events specific to
their issuers and market, economic and other conditions.

There may be little trading in the secondary market for particular equity
securities, which may adversely affect the fund's ability to value accurately or
dispose of such equity securities. Adverse

American Mutual Fund -- Page 2
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publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the value and/or liquidity of equity securities.

DEBT SECURITIES -- Debt securities are used by issuers to borrow money.
Generally, issuers pay investors periodic interest and repay the amount borrowed
either periodically during the life of the security and/or at maturity. Some
debt securities, such as zero coupon bonds, do not pay current interest, but are
purchased at a discount from their face values and accrue interest at the
applicable coupon rate over a specified time period. The market prices of debt
securities fluctuate depending on such factors as interest rates, credit quality
and maturity. In general, market prices of debt securities decline when interest
rates rise and increase when interest rates fall.

SECURITIES WITH EQUITY AND DEBT CHARACTERISTICS -- The fund may invest in
securities that have a combination of equity and debt characteristics. These
securities may at times behave more like equity than debt and vice versa. Some
types of convertible bonds or preferred stocks automatically convert into common
stocks. The prices and yields of nonconvertible preferred stocks generally move
with changes in interest rates and the issuer's credit quality, similar to the
factors affecting debt securities. Certain of these securities will be treated
as debt for fund investment limit purposes.

Convertible bonds, convertible preferred stocks and other securities may
sometimes be converted, or may automatically convert, into common stocks or
other securities at a stated conversion ratio. These securities, prior to
conversion, may pay a fixed rate of interest or a dividend. Because convertible
securities have both debt and equity characteristics, their value varies in
response to many factors, including the value of the underlying assets, general
market and economic conditions, and convertible market valuations, as well as
changes in interest rates, credit spreads and the credit quality of the issuer.

INVESTING IN VARIOUS COUNTRIES -- Investing outside the United States may
involve additional risks caused by, among other things, currency controls and
fluctuating currency values; different accounting, auditing, financial reporting
and legal standards and practices in some countries; changing local, regional
and global economic, political and social conditions; expropriation; changes in
tax policy; greater market volatility; differing securities market structures;
higher transaction costs; and various administrative difficulties, such as
delays in clearing and settling portfolio transactions or in receiving payment
of dividends.

Additional costs could be incurred in connection with the fund's investment
activities outside the United States. Brokerage commissions may be higher
outside the United States, and the fund will bear certain expenses in connection
with its currency transactions. Furthermore, increased custodian costs may be
associated with maintaining assets in certain jurisdictions.

REAL ESTATE INVESTMENT TRUSTS -- The fund may invest in securities issued by
real estate investment trusts (REITs), which primarily invest in real estate or
real estate-related loans. Equity REITs own real estate properties, while
mortgage REITs hold construction, development and/or long-term mortgage loans.
The values of REITs may be affected by changes in the value of the underlying
property of the trusts, the creditworthiness of the issuer, property taxes,
interest rates and tax and regulatory requirements, such as those relating to
the environment. Both types of REITs are dependent upon management skill and the
cash flows generated by their holdings, the real estate market in general and
the possibility of failing to qualify for any applicable pass--

American Mutual Fund -- Page 3
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through tax treatment or failing to maintain any applicable exemptive status
afforded under relevant laws.

U.S. GOVERNMENT OBLIGATIONS -- U.S. government obligations are securities backed
by the full faith and credit of the U.S. government. U.S. government obligations
include the following types of securities:

U.S. TREASURY SECURITIES -- U.S. Treasury securities include direct
obligations of the U.S. Treasury, such as Treasury bills, notes and bonds.
For these securities, the payment of principal and interest is
unconditionally guaranteed by the U.S. government, and thus they are of the
highest possible credit quality. Such securities are subject to variations
in market value due to fluctuations in interest rates, but, if held to
maturity, will be paid in full.

FEDERAL AGENCY SECURITIES BACKED BY "FULL FAITH AND CREDIT" -- The
securities of certain U.S. government agencies and government-sponsored
entities are guaranteed as to the timely payment of principal and interest
by the full faith and credit of the U.S. government. Such agencies and
entities include the Government National Mortgage Association (Ginnie Mae),
the Veterans Administration (VA), the Federal Housing Administration (FHA),
the Export-Import Bank (Exim Bank), the Overseas Private Investment
Corporation (OPIC), the Commodity Credit Corporation (CCC) and the Small
Business Administration (SBA).

OTHER FEDERAL AGENCY OBLIGATIONS -- Additional federal agency securities are
neither direct obligations of, nor guaranteed by, the U.S. government. These
obligations include securities issued by certain U.S. government agencies and
government-sponsored entities. However, they generally involve some form of
federal sponsorship: some operate under a government charter, some are backed by
specific types of collateral; some are supported by the issuer's right to borrow
from the Treasury; and others are supported only by the credit of the issuing
government agency or entity. These agencies and entities include, but are not
limited to: Federal Home Loan Bank, Federal Home Loan Mortgage Corporation
(Freddie Mac), Federal National Mortgage Association (Fannie Mae), Tennessee
Valley Authority and Federal Farm Credit Bank System.

CASH AND CASH EQUIVALENTS -- These include (a) commercial paper (for example,
short-term notes with maturities typically up to 12 months in length issued by
corporations, governmental bodies or bank/corporation sponsored conduits
(asset-backed commercial paper)) (b) short-term bank obligations (for example,
certificates of deposit, bankers' acceptances (time drafts on a commercial bank
where the bank accepts an irrevocable obligation to pay at maturity)) or bank
notes, (c) savings association and savings bank obligations (for example, bank
notes and certificates of deposit issued by savings banks or savings
associations), (d) securities of the U.S. government, its agencies or
instrumentalities that mature, or may be redeemed, in one year or less, and (e)
corporate bonds and notes that mature, or that may be redeemed, in one year or
less.

4(2) COMMERCIAL PAPER -- The fund may purchase commercial paper issued pursuant
to Section 4(2) of the Securities Act of 1933 (the "1933 Act"). 4(2) commercial
paper has substantially the same price and liquidity characteristics as
commercial paper generally, except that the resale of 4(2) commercial paper is
limited to the institutional investor marketplace. Such a restriction on resale
makes 4(2) commercial paper technically a restricted security under the 1933
Act. In practice, however, 4(2) commercial paper can be resold as easily as any
other

American Mutual Fund -- Page 4
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unrestricted security held by the fund. Accordingly, 4(2) commercial paper has
been determined to be liquid under procedures adopted by the fund's board of
directors.

* * * * * *

PORTFOLIO TURNOVER -- A fund's portfolio turnover rate would equal 100% if each
security in the fund's portfolio were replaced once per year. The fund's
portfolio turnover rates for the fiscal years ended 2005 and 2004 were 22% and
17%, respectively, and the average of the last five years was 28%. See
"Financial highlights" in the prospectus for the fund's annual portfolio
turnover for each of the last five fiscal years.

With the fund's focus on long term investing, the fund does not engage in high
portfolio turnover (100% or more). High turnover generates greater transaction
costs in the form of dealer spreads or brokerage commissions, and may result in
the realization of excessive short-term capital gains, which are taxable at the
highest rate when distributed to shareholders. Short-term trading profits are
not the fund's objective, and changes in its investments are generally
accomplished gradually, though short-term transactions may occasionally be made.

FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS

FUNDAMENTAL POLICIES -- The fund has adopted the following fundamental policies
and investment restrictions, which may not be changed without approval by
holders of a majority of its outstanding shares. Such majority is defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), as the vote of the
lesser of (a) 67% or more of the outstanding voting securities present at a
meeting, if the holders of more than 50% of the outstanding voting securities
are present in person or by proxy, or (b) more than 50% of the outstanding
voting securities. All percentage limitations are considered at the time
securities are purchased and are based on the fund's net assets unless otherwise
indicated. None of the following investment restrictions involving a maximum
percentage of assets will be considered violated unless the excess occurs
immediately after, and is caused by, an acquisition by the fund.

These restrictions provide that the fund shall make no investment:

1. Which involves promotion or business management by the fund;

2. In any security about which information is not available with respect to
the history, management, assets, earnings, and income of the issuer;

3. If the investment would cause more than 5% of the value of the assets of
the fund, as they exist at the time of investment, to be invested in the
securities of any one issuer;

4. If the investment would cause more than 20% of the value of the assets of
the fund to be invested in securities of companies in any one industry;

5. If the investment would cause the fund to own more than 10% of any class of
securities of any one issuer or more than 10% of the outstanding voting
securities of any one issuer;

6. In any security which has not been placed on the fund's "Eligible List"
(See Prospectus).

American Mutual Fund -- Page 5
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The foregoing restrictions do not apply to the purchase of securities issued or
fully guaranteed by the U.S. government. Such restrictions also do not apply to
the acquisition of securities or property in satisfaction of claims or as
distributions on securities owned, or to the exercise of rights distributed on
securities owned; but if any securities or property so acquired would not be
permitted as an investment under the foregoing restrictions, they must be
converted into a permissible investment as soon as reasonably practicable.

The fund is not permitted to:

7. Invest in real estate;

8. Make any investment which would subject it to unlimited liability;

9. Buy securities on margin;

10. Sell securities short; or

11. Borrow money.

The fund does not concentrate investments in one industry or a group of
industries, invest in commodities, or make loans except in the very occasional
instance where interest returns on a loan are particularly favorable, the loan
is secured by at least 150% of marketable securities, the total loans
outstanding would not exceed 20% of the current market value of the assets of
the fund, and total loans to any one borrower would not exceed 5% of the value
of such assets. No loans have ever been made to any person under the foregoing
authority. Loans may not be made to persons affiliated with the fund. The fund
does not invest to control other companies. While the fundamental policies of
the fund permit it to act as underwriter of securities issued by others, it is
not the practice of the fund to do so. The fundamental policies set forth in
this paragraph also may not be changed without shareholder approval.

NONFUNDAMENTAL POLICIES -- Further investment policies of the fund, which may be
changed by action of the Board of Directors, without shareholder approval, state
that the fund will not:

1. Purchase or retain the securities of any issuer if those officers and
directors of the fund or the Investment Adviser who own beneficially more than
1/2 of 1% of such issuer together own more than 5% of the securities of such
issuer;

2. Invest in the securities of other investment companies (except in
connection with the administration of a deferred compensation plan adopted by
Directors and to the extent such investments are allowed by an exemptive order
granted by the Securities and Exchange Commission);

3. Invest in securities of companies which, with their predecessors, have a
record of less than three years' continuous operations;

4. Ordinarily purchase securities which are non-income-producing at the time
of purchase if, as a result, more than 5% of the fund's portfolio is invested in
such securities;

5. Invest in puts, calls, straddles, spreads or any combination thereof;

American Mutual Fund -- Page 6
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6. Purchase partnership interests in oil, gas, or mineral exploration,
drilling or mining ventures;

7. Invest more than 5% of the value of the fund's net assets in warrants,
valued at the lower of cost or market, with no more than 2% being unlisted on
the New York or American Stock Exchanges (warrants acquired by the fund in units
or attached to securities may be deemed to be without value);

8. Invest more than 15% of the value of its total assets in securities which
are not readily marketable (including repurchase agreements maturing in more
than seven days or securities for which there is no active and substantial
market); and

9. Issue senior securities, except as permitted by the 1940 Act.

American Mutual Fund -- Page 7
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MANAGEMENT OF THE FUND

BOARD OF DIRECTORS AND OFFICERS

YEAR FIRST NUMBER OF PORTFOLIOS
POSITION ELECTED WITHIN THE FUND
WITH THE A DIRECTOR PRINCIPAL OCCUPATION(S) DURING COMPLEX/2/ OVERSEEN
NAME AND AGE FUND OF THE FUND/1/ PAST FIVE YEARS BY DIRECTOR
--------------------------------------------------------------------------------------------------------------------
"NON-INTERESTED" DIRECTORS/4/
--------------------------------------------------------------------------------------------------------------------

H. Frederick Chairman of 1972 Private investor; former President 19
Christie the Board and CEO, The Mission Group
Age: 72 (Independent (non-utility holding company,
and subsidiary of Southern California
Non-Executive) Edison Company)
--------------------------------------------------------------------------------------------------------------------
Mary Anne Dolan Director 1993 Founder and President, M.A.D., 3
Age: 58 Inc. (communications company);
former Editor-in-Chief, The Los
-------
Angeles Herald Examiner
-----------------------
--------------------------------------------------------------------------------------------------------------------
Martin Fenton Director 1981 Chairman of the Board, Senior 16
Age: 70 Resource Group LLC (development
and management of senior living
communities)
--------------------------------------------------------------------------------------------------------------------
Mary Myers Kauppila Director 1991 Private investor; Chairman of the 5
Age: 51 Board and CEO, Ladera Management
Company (venture capital and
agriculture); former owner and
President, Energy Investment, Inc.
--------------------------------------------------------------------------------------------------------------------
William H. Kling Director 2006 President, American Public Media 8
Age: 64 Group
--------------------------------------------------------------------------------------------------------------------
Bailey Morris-Eck Director 1999 Director and Programming Chair, 3
Age: 61 WYPR Baltimore/Washington (public
radio station); Senior Adviser,
Financial News (London); Senior
-----------------------
Fellow, Institute for
International Economics
--------------------------------------------------------------------------------------------------------------------
Kirk P. Pendleton Director 1998 Chairman of the Board and CEO, 6
Age: 66 Cairnwood, Inc. (venture capital
investment)
--------------------------------------------------------------------------------------------------------------------
Olin C. Robison Director 1991 President Emeritus of the Salzburg 3
Age: 69 Seminar; President Emeritus,
Middlebury College
--------------------------------------------------------------------------------------------------------------------
Steven B. Sample Director 1999 President, University of Southern 2
Age: 65 California
--------------------------------------------------------------------------------------------------------------------

OTHER DIRECTORSHIPS/3/ HELD
NAME AND AGE BY DIRECTOR
------------------------------------------------------
"NON-INTERESTED" DIRECTORS/4/
------------------------------------------------------

H. Frederick Ducommun Incorporated;
Christie IHOP Corporation;
Age: 72 Southwest Water Company
------------------------------------------------------
Mary Anne Dolan None
Age: 58
------------------------------------------------------
Martin Fenton None
Age: 70
------------------------------------------------------
Mary Myers Kauppila None
Age: 51
------------------------------------------------------
William H. Kling Irwin Financial Corporation
Age: 64
------------------------------------------------------
Bailey Morris-Eck The Nevis Fund, Inc.
Age: 61
------------------------------------------------------
Kirk P. Pendleton None
Age: 66
------------------------------------------------------
Olin C. Robison American Shared Hospital
Age: 69 Services
------------------------------------------------------
Steven B. Sample UNOVA, Inc.;
Age: 65 William Wrigley Jr. Company
------------------------------------------------------

American Mutual Fund -- Page 8

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PRINCIPAL OCCUPATION(S) DURING
YEAR FIRST PAST FIVE YEARS AND
ELECTED POSITIONS HELD NUMBER OF PORTFOLIOS
POSITION A DIRECTOR WITH AFFILIATED ENTITIES WITHIN THE FUND
WITH THE AND/OR OFFICER OR THE PRINCIPAL UNDERWRITER COMPLEX/2/ OVERSEEN
NAME AND AGE FUND OF THE FUND/1/ OF THE FUND BY DIRECTOR
-----------------------------------------------------------------------------------------------------------------
"INTERESTED" DIRECTORS/5,6/
-----------------------------------------------------------------------------------------------------------------

James K. Dunton Vice Chairman 1984 Senior Vice President and 2
Age: 67 of the Board Director, Capital Research and
Management Company
-----------------------------------------------------------------------------------------------------------------
J. Dale Harvey President and 2000 Vice President, Capital Research 1
Age: 40 Director and Management Company;
Director, American Funds Service
Company*
-----------------------------------------------------------------------------------------------------------------

OTHER DIRECTORSHIPS/3/ HELD
NAME AND AGE BY DIRECTOR
---------------------------------------------------
"INTERESTED" DIRECTORS/5,6/
---------------------------------------------------

James K. Dunton None
Age: 67
---------------------------------------------------
J. Dale Harvey None
Age: 40
---------------------------------------------------

American Mutual Fund -- Page 9

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PRINCIPAL OCCUPATION(S) DURING
PAST FIVE YEARS AND POSITIONS HELD
YEAR FIRST ELECTED WITH AFFILIATED ENTITIES
POSITION AN OFFICER OR THE PRINCIPAL UNDERWRITER
NAME AND AGE WITH THE FUND OF THE FUND/1/ OF THE FUND
-----------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS/6/
-----------------------------------------------------------------------------------------------------------------------------------

Timothy D. Armour Senior Vice 1994 Executive Vice President and Director, Capital Research and
Age: 45 President Management Company; Director, The Capital Group Companies,
Inc.*
-----------------------------------------------------------------------------------------------------------------------------------
Joyce E. Gordon Senior Vice 2005 Senior Vice President and Director, Capital Research and
Age: 49 President Management Company
-----------------------------------------------------------------------------------------------------------------------------------
Joanna F. Jonsson Senior Vice 1997 Senior Vice President, Capital Research Company*; Director, The
Age: 42 President Capital Group Companies, Inc.*
-----------------------------------------------------------------------------------------------------------------------------------
Alan N. Berro Vice President 2000 Vice President, Capital Research and Management Company; Senior
Age: 45 Vice President, Capital Research Company*
-----------------------------------------------------------------------------------------------------------------------------------
William L. Robbins Vice President 2004 Executive Vice President and Director, Capital Research
Age: 37 Company*
-----------------------------------------------------------------------------------------------------------------------------------
Vincent P. Corti Secretary 1994 Vice President - Fund Business Management Group, Capital
Age: 49 Research and Management Company
-----------------------------------------------------------------------------------------------------------------------------------
Karl C. Grauman Treasurer 2006 Vice President - Fund Business Management Group, Capital
Age: 38 Research and Management Company
-----------------------------------------------------------------------------------------------------------------------------------
Jeffrey P. Regal Assistant Treasurer 2003 Vice President - Fund Business Management Group, Capital
Age: 34 Research and Management Company
-----------------------------------------------------------------------------------------------------------------------------------

* Company affiliated with Capital Research and Management Company.
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 of the American Funds) that
are held by each Director as a director of a public company or a registered
investment company.
4 A "Non-Interested" Director refers to a Director who is not an "interested
person" within the meaning of the 1940 Act, on the basis of his or her
affiliation with the fund's investment adviser, Capital Research and Management
Company, or affiliated entities (including the fund's principal underwriter).
5 "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).
6 All of the officers listed are officers and/or Directors/Trustees of one or
more of the other funds for which Capital Research and Management Company
serves as investment adviser.

THE ADDRESS FOR ALL DIRECTORS AND OFFICERS OF THE FUND IS 333 SOUTH HOPE STREET,
55TH FLOOR, LOS ANGELES, CALIFORNIA 90071, ATTENTION: FUND SECRETARY.

American Mutual Fund -- Page 10

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FUND SHARES OWNED BY DIRECTORS AS OF DECEMBER 31, 2004

AGGREGATE DOLLAR RANGE/1/
OF SHARES
OWNED IN ALL FUNDS
IN THE AMERICAN FUNDS
DOLLAR RANGE/1/ OF FUND FAMILY OVERSEEN
NAME SHARES OWNED BY DIRECTOR
-------------------------------------------------------------------------------

"NON-INTERESTED" DIRECTORS
-------------------------------------------------------------------------------
H. Frederick Christie Over $100,000 Over $100,000
-------------------------------------------------------------------------------
Mary Anne Dolan Over $100,000 Over $100,000
-------------------------------------------------------------------------------
Martin Fenton $10,001 - $50,000 Over $100,000
-------------------------------------------------------------------------------
Mary Myers Kauppila Over $100,000 Over $100,000
-------------------------------------------------------------------------------
William H. Kling None/3/ Over $100,000
-------------------------------------------------------------------------------
Bailey Morris-Eck $10,001 - $50,000 Over $100,000
-------------------------------------------------------------------------------
Kirk P. Pendleton $10,001 - $50,000 Over $100,000
-------------------------------------------------------------------------------
Olin C. Robison $1 - $10,000 Over $100,000
-------------------------------------------------------------------------------
Steven B. Sample $10,001 - $50,000 Over $100,000
-------------------------------------------------------------------------------
"INTERESTED" DIRECTORS
-------------------------------------------------------------------------------
James K. Dunton Over $100,000 Over $100,000
-------------------------------------------------------------------------------
J. Dale Harvey/2/ Over $100,000 Over $100,000
-------------------------------------------------------------------------------

1 Ownership disclosure is made using the following ranges: None; $1 - $10,000;
$10,001 - $50,000; $50,001 - $100,000; and Over $100,000. The amounts listed
for "interested" Directors include shares owned through The Capital Group
Companies, Inc. retirement plan and 401(k) plan.
2 J. Dale Harvey was elected President and Director on September 21, 2005. The
dollar range of shares owned on that day was "Over $100,000".
3 Mr. Kling was elected Director on March 15, 2006. The dollar range of shares
owned on March 20, 2006 was $10,001 - $50,000.

DIRECTOR COMPENSATION -- No compensation is paid by the fund to any officer or
Director who is a director, officer or employee of the investment adviser or its
affiliates. The fund typically pays each Non-Interested Director an annual fee
of $17,000. If the aggregate annual fees paid to a Non-Interested Director by
all funds advised by the investment adviser is less than $50,000, that
Non-Interested Director would be eligible for a $50,000 alternative fee. This
alternative fee is paid by those funds for which the Non-Interested Director
serves as a director on a pro rata basis according to each fund's relative share
of the annual fees that it would typically pay. The alternative fee reflects the
significant time and labor commitment required for a Director to oversee even
one fund. A Non-Interested Director who is Chairman of the Board (an
"independent chair") also receives an additional annual fee of $25,000, paid in
equal portions by the fund and the funds whose Boards and Committees typically
meet jointly with those of the fund. The fund pays to its independent chair an
attendance fee (as described below) for each meeting of a committee of the board
of directors attended as a non voting ex-officio member.

American Mutual Fund -- Page 11
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In addition, the fund generally pays to Non-Interested Directors fees of (a)
$2,500 for each Board of Directors meeting attended and (b) $1,500 for each
meeting attended as a member of a committee of the Board of Directors.

Non-Interested Directors also receive attendance fees of (a) $2,500 for each
director seminar or information session organized by the investment adviser, (b)
$1,500 for each joint Audit Committee meeting with all other audit committees of
funds advised by the investment adviser and (c) $500 for each meeting of the
Board or Committee Chairs of other funds advised by the investment adviser. The
fund and the other funds served by each Non-Interested Director each pay an
equal portion of these attendance fees.

No pension or retirement benefits are accrued as part of fund expenses.
Non-Interested Directors may elect, on a voluntary basis, to defer all or a
portion of their fees through a deferred compensation plan in effect for the
fund. The fund also reimburses certain expenses of the Non-Interested Directors.

DIRECTOR COMPENSATION PAID DURING THE FISCAL YEAR ENDED OCTOBER 31, 2005

TOTAL COMPENSATION (INCLUDING
AGGREGATE COMPENSATION VOLUNTARILY DEFERRED
(INCLUDING VOLUNTARILY COMPENSATION/1/)
DEFERRED COMPENSATION/1/) FROM ALL FUNDS MANAGED BY
NAME FROM THE FUND CAPITAL RESEARCH AND MANAGEMENT
--------------------------------------------------------------------------------------------------- COMPANY OR ITS AFFILIATES/2/
---------------------------------

H. Frederick Christie/3/ $29,236 $317,180
------------------------------------------------------------------------------------------------------------------------------------
Mary Anne Dolan 30,750 127,000
------------------------------------------------------------------------------------------------------------------------------------
Martin Fenton, Jr./3/ 30,482 262,670
------------------------------------------------------------------------------------------------------------------------------------
Mary Myers Kauppila/3/ 31,400 186,500
------------------------------------------------------------------------------------------------------------------------------------
William H. Kling None/4/ 154,000
------------------------------------------------------------------------------------------------------------------------------------
Bailey Morris-Eck/3/ 32,167 130,500
------------------------------------------------------------------------------------------------------------------------------------
Kirk P. Pendleton/3/ 31,150 216,500
------------------------------------------------------------------------------------------------------------------------------------
Olin C. Robison/3/ 32,167 134,000
------------------------------------------------------------------------------------------------------------------------------------
Steven B. Sample 40,650 76,500
------------------------------------------------------------------------------------------------------------------------------------

1 Amounts may be deferred by eligible Directors under a nonqualified deferred
compensation plan adopted by the fund in 1993. Deferred amounts accumulate at
an earnings rate determined by the total return of one or more American Funds
as designated by the Directors. Compensation shown in this table for the fiscal
year ended October 31, 2005 does not include earnings on amounts deferred in
previous fiscal years. See footnote 3 to this table for more information.
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 Since the deferred compensation plan's adoption, the total amount of deferred
compensation accrued by the fund (plus earnings thereon) through the 2005
fiscal year for participating Directors is as follows: H. Frederick Christie
($266,099), Martin Fenton, Jr. ($232,268), Mary Myers Kauppila ($485,224),
Bailey Morris-Eck ($200,329), Kirk P. Pendleton ($227,083) and Olin C. Robison
($189,972). Amounts deferred and accumulated earnings thereon are not funded
and are general unsecured liabilities of the fund until paid to the Directors.
4 Mr. Kling was elected Director on March 15, 2006.

American Mutual Fund -- Page 12
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As of December 1, 2005, the officers and Directors of the fund and their
families, as a group, owned beneficially or of record less than 1% of the
outstanding shares of the fund.

FUND ORGANIZATION AND THE BOARD OF DIRECTORS -- The fund, an open-end,
diversified management investment company, was organized as a Delaware
corporation on September 6, 1949 and reincorporated in Maryland on December 20,
1983. Although the Board of Directors has delegated day-to-day oversight to the
investment adviser, all fund operations are supervised by the fund's Board,
which meets periodically and performs duties required by applicable state and
federal laws.

Under Maryland law, the business affairs of a fund are managed under the
direction of the Board of Directors, and all powers of the fund are exercised by
or under the authority of the Board except as reserved to the shareholders by
law or the fund's charter or by-laws. Maryland law requires each Director to
perform his/her duties as a Director, including his/her duties as a member of
any Board committee on which he/she serves, in good faith, in a manner he/she
reasonably believes to be in the best interest of the fund, and with the care
that an ordinarily prudent person in a like position would use under similar
circumstances.

Members of the Board who are not employed by the investment adviser or its
affiliates are paid certain fees for services rendered to the fund as described
above. They may elect to defer all or a portion of these fees through a deferred
compensation plan in effect for the fund.

The fund has several different classes of shares, including Class A, B, C, F,
529-A, 529-B, 529-C, 529-E, 529-F, R-1, R-2, R-3, R-4 and R-5 shares. The 529
share classes are available only through CollegeAmerica/(R)/ to investors
establishing qualified higher education savings accounts. The R share classes
are generally available only to employer-sponsored retirement plans. Class R-5
shares are also available to clients of the Personal Investment Management group
of Capital Guardian Trust Company who do not have an intermediary associated
with their accounts and without regard to the $1 million purchase minimum.

Shares of each class represent an interest in the same investment portfolio.
Each class has pro rata rights as to voting, redemption, dividends and
liquidation, except that each class bears different distribution expenses and
may bear different transfer agent fees and other expenses properly attributable
to the particular class as approved by the Board of Directors and set forth in
the fund's rule 18f-3 Plan. Each class' shareholders have exclusive voting
rights with respect to the respective class' rule 12b-1 plans adopted in
connection with the distribution of shares and on other matters in which the
interests of one class are different from interests in another class. Shares of
all classes of the fund vote together on matters that affect all classes in
substantially the same manner. Each class votes as a class on matters that
affect that class alone. Note that CollegeAmerica account owners are not
shareholders of the fund and, accordingly, do not have the rights of a
shareholder, such as the right to vote proxies relating to fund shares. As the
legal owner of the fund's shares, the Virginia College Savings Plan/SM/ will
vote any proxies relating to fund shares.

The fund does not hold annual meetings of shareholders. However, significant
matters that require shareholder approval, such as certain elections of Board
members or a change in a fundamental investment policy, will be presented to
shareholders at a meeting called for such purpose. Shareholders have one vote
per share owned. At the request of the holders of at least 10% of the shares,
the fund will hold a meeting at which any member of the Board could be removed
by a majority vote.

American Mutual Fund -- Page 13
<PAGE>

The fund's Articles of Incorporation and by-laws as well as separate
indemnification agreements that the fund has entered into with Non-Interested
Directors provide in effect that, subject to certain conditions, the fund will
indemnify its officers and Directors against liabilities or expenses actually
and reasonably incurred by them relating to their service to the fund. However,
Directors are not protected from liability by reason of their willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of their office.

REMOVAL OF DIRECTORS BY SHAREHOLDERS -- At any meeting of shareholders, duly
called and at which a quorum is present, shareholders may, by the affirmative
vote of the holders of a majority of the votes entitled to be cast, remove any
Director from office and may elect a successor or successors to fill any
resulting vacancies for the unexpired terms of removed Directors. The fund has
agreed, at the request of the staff of the Securities and Exchange Commission,
to apply the provisions of section 16(c) of the 1940 Act with respect to the
removal of Directors, as though the fund were a common-law trust. Accordingly,
the Directors of the fund will promptly call a meeting of shareholders for the
purpose of voting upon the removal of any Directors when requested in writing to
do so by the record holders of at least 10% of the outstanding shares.

COMMITTEES OF THE BOARD OF DIRECTORS -- The fund has an Audit Committee
comprised of H. Frederick Christie, Martin Fenton, Bailey Morris-Eck, Kirk P.
Pendleton and Olin C. Robison, none of whom is an "interested person" of the
fund within the meaning of the 1940 Act. The Committee provides oversight
regarding the fund's accounting and financial reporting policies and practices,
its internal controls and the internal controls of the fund's principal service
providers. The Committee acts as a liaison between the fund's independent
registered public accounting firm and the full Board of Directors. Four Audit
Committee meetings were held during the 2005 fiscal year.

The fund has a Contracts Committee comprised of H. Frederick Christie, Mary Anne
Dolan, Martin Fenton, Mary Myers Kauppila, William H. Kling, Bailey Morris-Eck,
Kirk P. Pendleton, Olin C. Robison and Steven B. Sample, none of whom is an
"interested person" of the fund within the meaning of the 1940 Act. The
Committee's principal function is to request, review and consider the
information deemed necessary to evaluate the terms of certain agreements between
the fund and its investment adviser or the investment adviser's affiliates, such
as the Investment Advisory and Service Agreement, Principal Underwriting
Agreement, Administrative Services Agreement and Plans of Distribution adopted
pursuant to rule 12b-1 under the 1940 Act, that the fund may enter into, renew
or continue, and to make its recommendations to the full Board of Directors on
these matters. One Contracts Committee meeting was held during the 2005 fiscal
year.

The fund has a Nominating Committee comprised of Mary Anne Dolan, Mary Myers
Kauppila and Steven B. Sample, none of whom is an "interested person" of the
fund within the meaning of the 1940 Act. 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. The Committee also evaluates, selects and nominates
Non-Interested Director candidates to the full Board of Directors. While the
Committee normally is able to identify from its own and other 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 fund,
addressed to the fund'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 Committee. Three Nominating Committee meetings were held during the 2005
fiscal year.

American Mutual Fund -- Page 14
<PAGE>

PROXY VOTING PROCEDURES AND GUIDELINES -- The fund and its investment adviser
have adopted Proxy Voting Guidelines (the "Guidelines") with respect to voting
proxies of securities held by the fund, other American Funds, Endowments and
American Funds Insurance Series. Certain American Funds have established
separate proxy committees that vote proxies or delegate to a voting officer the
authority to vote on behalf of those funds. Proxies for all other funds are
voted by a committee of the investment adviser under authority delegated by
those funds' Boards. Therefore, if more than one fund invests in the same
company, they may vote differently on the same proposal.

All U.S. proxies are voted. Non-U.S. proxies also are voted, provided there is
sufficient time and information available. After a proxy is received, the
investment adviser prepares a summary of the proposals in the proxy. A
discussion of any potential conflicts of interest is also included in the
summary. After reviewing the summary, one or more research analysts familiar
with the company and industry make a voting recommendation on the proxy
proposals. A second recommendation is made by a proxy coordinator (a senior
investment professional) based on the individual's knowledge of the Guidelines
and familiarity with proxy-related issues. The proxy summary and voting
recommendations are then sent to the appropriate proxy voting committee for the
final voting decision.

The analyst and proxy coordinator making voting recommendations are responsible
for noting any potential material conflicts of interest. One example might be
where a director of one or more American Funds is also a director of a company
whose proxy is being voted. In such instances, proxy committee members are
alerted to the potential conflict. The proxy committee may then elect to vote
the proxy or seek a third-party recommendation or vote of an ad hoc group of
committee members.

The Guidelines, which have been in effect in substantially their current form
for many years, provide an important framework for analysis and decision-making
by all funds. However, they are not exhaustive and do not address all potential
issues. The Guidelines provide a certain amount of flexibility so that all
relevant facts and circumstances can be considered in connection with every
vote. As a result, each proxy received is voted on a case-by-case basis
considering the specific circumstances of each proposal. The voting process
reflects the funds' understanding of the company's business, its management and
its relationship with shareholders over time.

Information regarding how the fund voted proxies relating to portfolio
securities during the 12-month period ended June 30 of each year will be
available on or about September 1 of each year (a) without charge, upon request
by calling American Funds Service Company at 800/421-0180 and (b) on the SEC's
website at www.sec.gov.

The following summary sets forth the general positions of the American Funds,
Endowments, American Funds Insurance Series and the investment adviser on
various proposals. A copy of the full Guidelines is available upon request, free
of charge, by calling American Funds Service Company at 800/421-0180 or visiting
the American Funds website.

DIRECTOR MATTERS -- The election of a company's slate of nominees for
director is generally supported. Votes may be withheld for some or all of
the nominees if this is determined to be in the best interest of
shareholders. Separation of the chairman and CEO positions may also be
supported. Typically, proposals to declassify the board (elect all
directors annually) are supported based on the belief that this increases
the directors' sense of accountability to shareholders.

American Mutual Fund -- Page 15
<PAGE>

SHAREHOLDER RIGHTS -- Proposals to repeal an existing poison pill, to
provide for confidential voting and to provide for cumulative voting are
usually supported. Proposals to eliminate the right of shareholders to act
by written consent or to take away a shareholder's right to call a special
meeting are not typically supported.

COMPENSATION AND BENEFIT PLANS -- Option plans are complicated, and many
factors are considered in evaluating a plan. Each plan is evaluated based
on protecting shareholder interests and a knowledge of the company and its
management. Considerations include the pricing (or repricing) of options
awarded under the plan and the impact of dilution on existing shareholders
from past and future equity awards. Compensation packages should be
structured to attract, motivate and retain existing employees and qualified
directors; however, they should not be excessive.

ROUTINE MATTERS -- The ratification of auditors, procedural matters
relating to the annual meeting and changes to company name are examples of
items considered routine. Such items are generally voted in favor of
management's recommendations unless circumstances indicate otherwise.

PRINCIPAL FUND SHAREHOLDERS -- The following table identifies those investors
who own of record or are known by the fund to own beneficially 5% or more of any
class of its shares as of the opening of business on December 1, 2005. Unless
otherwise indicated, the ownership percentages below represent ownership of
record rather than beneficial ownership.

NAME AND ADDRESS OWNERSHIP PERCENTAGE
----------------------------------------------------------------------------

Edward D. Jones & Co. Class A 24.52%
201 Progress Parkway Class B 13.00
Maryland Heights, MO 63043-3009
----------------------------------------------------------------------------
MLPF&S Class C 12.07
4800 Deer Lake Drive East, Floor 2 Class R-4 5.87
Jacksonville, FL 32246-6484
----------------------------------------------------------------------------
Citigroup Global Markets, Inc. Class C 10.01
333 W. 34th Street
New York, NY 10001-2402
----------------------------------------------------------------------------
T. Rowe Price Services, Inc. Class F 12.01
100 E. Pratt Street, Floor 7
Baltimore, MD 21202-1009
----------------------------------------------------------------------------
AST Trust Co. Class R-1 37.85
P.O. Box 52129
Phoenix, AX 85072-2129
----------------------------------------------------------------------------
Oncology Hemotology Associates of S W Indiana Class R-1 5.89
3801 Bellemeade Avenue, Suite 110
Evansville, IN 47714-0111
----------------------------------------------------------------------------
Hartford Life Insurance Co. Class R-3 36.95
P.O. Box 2999
Hartford, CT 06104-2999
----------------------------------------------------------------------------
AIG Federal Savings Bank Class R-3 5.58
2929 Allen Parkway, Suite L3-00
Houston, TX 77019-7104
----------------------------------------------------------------------------
Charles Schwab & Co., Inc. Class R-4 7.53
101 Montgomery Street
San Francisco, CA 94104-4122
----------------------------------------------------------------------------
Wells Fargo Bank, NA Class R-4 6.09
P.O. Box 1533
Minneapolis, MN 55480-1533
----------------------------------------------------------------------------
Fidelity Investments Institutional Operations Co. Class R-5 52.74
100 Magellan Way KWIC
Covington, KY 41015
----------------------------------------------------------------------------
CGTC Class R-5 9.61
333 S. Hope Street, Floor 49
Los Angeles, CA 90071
----------------------------------------------------------------------------
Saxon & Co. Class R-5 5.71
P.O. Box 7780-1888
Philadelphia, PA 19182-0001
----------------------------------------------------------------------------

American Mutual Fund -- Page 16
<PAGE>

INVESTMENT ADVISER -- Capital Research and Management Company, the investment
adviser, founded in 1931, maintains research facilities in the United States and
abroad (Los Angeles, San Francisco, New York, Washington, DC, London, Geneva,
Hong Kong, Singapore and Tokyo). These facilities are staffed with experienced
investment professionals. The investment adviser is located at 333 South Hope
Street, Los Angeles, CA 90071 and 135 South State College Boulevard, Brea, CA
92821. It is a wholly owned subsidiary of The Capital Group Companies, Inc., a
holding company for several investment management subsidiaries. The investment
adviser manages equity assets for the American Funds through two divisions.
These divisions generally function separately from each other with respect to
investment research activities and they make investment decisions for the funds
on a separate basis.

POTENTIAL CONFLICTS OF INTEREST -- The investment adviser has adopted policies
and procedures that address conflicts of interest that may arise between a
portfolio counselor's management of the fund and his or her management of other
funds and accounts. Potential areas of conflict could involve allocation of
investment opportunities and trades among funds and accounts, use of information
regarding the timing of fund trades, personal investing activities, portfolio
counselor compensation and proxy voting of portfolio securities. The investment
adviser has adopted policies and procedures that it believes are reasonably
designed to address these conflicts. However, there is no guarantee that such
policies and procedures will be effective or that the investment adviser will
anticipate all potential conflicts of interest.

COMPENSATION OF INVESTMENT PROFESSIONALS -- As described in the prospectus, the
investment adviser uses a system of multiple portfolio counselors in managing
fund assets. In addition, Capital Research and Management Company's investment
analysts may make investment decisions with respect to a portion of a fund's
portfolio within their research coverage. Portfolio counselors and investment
analysts may also manage assets in other mutual funds advised by Capital
Research and Management Company.

Portfolio counselors and investment analysts are paid competitive salaries by
Capital Research and Management Company. In addition, they may receive bonuses
based on their individual portfolio results. Investment professionals also may
participate in profit-sharing plans. The relative mix of compensation
represented by bonuses, salary and profit-sharing will vary depending on the
individual's portfolio results, contributions to the organization and other
factors.

American Mutual Fund -- Page 17
<PAGE>

In order to encourage a long-term focus, bonuses based on investment results are
calculated by comparing pretax total returns to relevant benchmarks over both
the most recent year and a four-year rolling average, with the greater weight
placed on the four-year rolling average. For portfolio counselors, benchmarks
may include measures of the marketplaces in which the relevant fund invests and
measures of the results of comparable mutual funds. For investment analysts,
benchmarks may include relevant market measures and appropriate industry or
sector indexes reflecting their areas of expertise. Capital Research and
Management Company also separately compensates analysts for the quality of their
research efforts. The benchmarks against which American Mutual Fund portfolio
counselors are measured include: Lipper Growth and Income Funds Index.

PORTFOLIO COUNSELOR FUND HOLDINGS AND OTHER MANAGED ACCOUNTS -- As described
below, portfolio counselors may personally own shares of the fund. In addition,
portfolio counselors may manage a portion of other mutual funds or accounts
advised by Capital Research and Management Company or its affiliates.

THE FOLLOWING TABLE REFLECTS INFORMATION AS OF OCTOBER 31, 2005:

NUMBER NUMBER
OF OTHER OF OTHER NUMBER
REGISTERED POOLED OF OTHER
INVESTMENT INVESTMENT ACCOUNTS
COMPANIES (RICS) VEHICLES (PIVS) THAT
THAT THAT PORTFOLIO
PORTFOLIO PORTFOLIO COUNSELOR
DOLLAR RANGE COUNSELOR COUNSELOR MANAGES
OF FUND MANAGES MANAGES (ASSETS OF
PORTFOLIO SHARES (ASSETS OF RICS (ASSETS OF PIVS OTHER ACCOUNTS
COUNSELOR OWNED/1/ IN BILLIONS)/2/ IN BILLIONS)/3/ IN BILLIONS)/4/
-------------------------------------------------------------------------------------------

James K. Dunton Over 2 $139.8 None None
$1,000,000
--------------------------------------------------------------------------------------------
Alan N. Berro $50,001 - 2 $139.8 None None
$100,000
--------------------------------------------------------------------------------------------
J. Dale Harvey Over 3 $153.9 None None
$1,000,000
--------------------------------------------------------------------------------------------
Joyce E. Gordon $100,001 - 2 $132.2 None None
$500,000
--------------------------------------------------------------------------------------------
R. Michael $100,001 - 3 $214.4 None None
Shanahan $500,000
--------------------------------------------------------------------------------------------

1 Ownership disclosure is made using the following ranges: None; $1 - $10,000;
$10,001 - $50,000; $50,001 - $100,000; $100,001 - $500,000; $500,001 -
$1,000,000; and Over $1,000,000. The amounts listed include shares owned
through The Capital Group Companies, Inc. retirement plan and 401(k) plan.
2 Indicates fund(s) where the portfolio counselor also has significant
responsibilities for the day to day management of the fund(s). Assets noted are
the total net assets of the registered investment companies and are not
indicative of the total assets managed by the individual, which is a
substantially lower amount.
3 Represents funds advised or sub-advised by Capital Research and Management
Company and sold outside the United States. Assets noted are the total net
assets of the fund and are not indicative of the total assets managed by the
individual, which is a substantially lower amount.
4 Reflects other professionally managed accounts held at companies affiliated
with Capital Research and Management Company. Personal brokerage accounts of
portfolio counselors and their families are not reflected.

American Mutual Fund -- Page 18
<PAGE>

INVESTMENT ADVISORY AND SERVICE AGREEMENT -- The Investment Advisory and Service
Agreement (the "Agreement") between the fund and the investment adviser will
continue in effect until March 31, 2007, unless sooner terminated, and may be
renewed from year to year thereafter, provided that any such renewal has been
specifically approved at least annually by (a) the Board of Directors, or by the
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the fund, and (b) the vote of a majority of Directors who are not
parties to the Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The Agreement provides that the investment adviser has no
liability to the fund for its acts or omissions in the performance of its
obligations to the fund not involving willful misconduct, bad faith, gross
negligence or reckless disregard of its obligations under the Agreement. The
Agreement also provides that either party has the right to terminate it, without
penalty, upon 60 days' written notice to the other party, and that the Agreement
automatically terminates in the event of its assignment (as defined in the 1940
Act).

In considering the renewal of the Agreement each year, the Contracts Committee
of the Board of Directors evaluates information provided by the investment
adviser in accordance with Section 15(c) of the 1940 Act and presents its
recommendations to the full Board of Directors.

In addition to providing investment advisory services, the investment adviser
furnishes the services and pays the compensation and travel expenses of persons
to perform the fund's executive, administrative, clerical and bookkeeping
functions, and provides suitable office space, necessary small office equipment
and utilities, general purpose accounting forms, supplies and postage used at
the fund's offices. The fund pays all expenses not assumed by the investment
adviser, including, but not limited to, custodian, stock transfer and dividend
disbursing fees and expenses; shareholder recordkeeping and administrative
expenses; costs of the designing, printing and mailing of reports, prospectuses,
proxy statements and notices to its shareholders; taxes; expenses of the
issuance and redemption of fund shares (including stock certificates,
registration and qualification fees and expenses); expenses pursuant to the
fund's plans of distribution (described below); legal and auditing expenses;
compensation, fees and expenses paid to Non-Interested Directors; association
dues; costs of stationery and forms prepared exclusively for the fund; and costs
of assembling and storing shareholder account data.

As compensation for its services, the investment adviser receives a monthly fee
that is based on prior month-end net assets, calculated at the following
annualized rates:

Net asset level

RATE IN EXCESS OF UP TO
------------------------------------------------------------------------------

0.384% $ 0 $ 1,000,000,000
------------------------------------------------------------------------------
0.330 1,000,000,000 2,000,000,000
------------------------------------------------------------------------------
0.294 2,000,000,000 3,000,000,000
------------------------------------------------------------------------------
0.270 3,000,000,000 5,000,000,000
------------------------------------------------------------------------------
0.252 5,000,000,000 8,000,000,000
------------------------------------------------------------------------------
0.240 8,000,000,000 13,000,000,000
------------------------------------------------------------------------------
0.230 13,000,000,000 21,000,000,000
------------------------------------------------------------------------------
0.225 21,000,000,000
------------------------------------------------------------------------------

American Mutual Fund -- Page 19
<PAGE>

Under the Agreement, a different rate schedule would apply if it resulted in a
lower overall advisory fee. This could happen if the fund's net assets fell
below $3 billion. In addition, the Agreement provides that the investment
adviser shall pay the fund the amount by which total expenses of the fund's
Class A shares, with the exception of taxes and such expenses, if any, as may be
incurred in connection with any merger, reorganization, or recapitalization,
exceed the sum of 1% of the first $25 million of the monthly average of total
assets of the fund for the year and 3/4 of 1% of such average in excess of $25
million.

Expenses which are not subject to these limitations are interest, taxes and
extraordinary expenses. Expenditures, including costs incurred in connection
with the purchase or sale of portfolio securities, which are capitalized in
accordance with generally accepted accounting principles applicable to
investment companies, are accounted for as capital items and not as expenses. To
the extent the fund's management fee must be waived due to Class A share expense
ratios exceeding the expense limitations described above, management fees will
be reduced similarly for all classes of shares of the fund, or other Class A
fees will be waived in lieu of management fees.

For the fiscal years ended October 31, 2005 and 2004, the investment adviser was
entitled to receive from the fund management fees of $40,923,000 and
$33,954,000, respectively. After giving effect to the management fee
waivers/expense reimbursements described below, the fund paid the investment
adviser management fees of $37,654,000 (a reduction of $3,269,000) and
$33,649,000 (a reduction of $305,000) for the fiscal years ended October 31,
2005 and 2004, respectively. For the fiscal year ended October 31, 2003, the
fund paid the investment adviser management fees of $25,924,000.

For the period from September 1, 2004 through March 31, 2005, the investment
adviser agreed to waive 5% of the management fees that it was otherwise entitled
to receive under the Agreement. Beginning April 1, 2005, this waiver increased
to 10% of the management fees that the investment adviser is otherwise entitled
to receive and is expected to continue at this level until further review. As a
result of this waiver, management fees will be reduced similarly for all classes
of shares of the fund.

ADMINISTRATIVE SERVICES AGREEMENT -- The Administrative Services Agreement (the
"Administrative Agreement") between the fund and the investment adviser relating
to the fund's Class C, F, R and 529 shares will continue in effect until March
31, 2007, unless sooner terminated, and may be renewed from year to year
thereafter, provided that any such renewal has been specifically approved at
least annually by the vote of a majority of Directors who are not parties to the
Administrative Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The fund may terminate the Administrative Agreement at any time
by vote of a majority of Non-Interested Directors. The investment adviser has
the right to terminate the Administrative Agreement upon 60 days' written notice
to the fund. The Administrative Agreement automatically terminates in the event
of its assignment (as defined in the 1940 Act).

Under the Administrative Agreement, the investment adviser provides certain
transfer agent and administrative services for shareholders of the fund's Class
C and F shares, and all Class R and 529 shares. The investment adviser contracts
with third parties, including American Funds Service Company, the fund's
Transfer Agent, to provide these services. Services include, but are not limited
to, shareholder account maintenance, transaction processing, tax information
reporting and shareholder and fund communications. In addition, the investment
adviser

American Mutual Fund -- Page 20
<PAGE>

monitors, coordinates and oversees the activities performed by third parties
providing such services. For Class R-1 and R-2 shares, the investment adviser
has agreed to pay a portion of the fees payable under the Administrative
Agreement that would otherwise have been paid by the fund. For the year ended
October 31, 2005, the total fees paid by the investment adviser were $177,000.

As compensation for its services, the investment adviser receives transfer agent
fees for transfer agent services provided to the fund's Class C, F, R and 529
shares. Transfer agent fees are paid monthly according to a fee schedule
contained in a Shareholder Services Agreement between the fund and American
Funds Service Company. The investment adviser also receives an administrative
services fee at the annual rate of up to 0.15% of the average daily net assets
for each applicable share class (excluding Class R-5 shares) for administrative
services provided to these share classes. Administrative services fees are paid
monthly and accrued daily. The investment adviser uses a portion of this fee to
compensate third parties for administrative services provided to the fund. Of
the remainder, the investment adviser will not retain more than 0.05% of the
average daily net assets for each applicable share class. For Class R-5 shares,
the administrative services fee is calculated at the annual rate of up to 0.10%
of the average daily net assets. This fee is subject to the same uses and
limitations described above.

During the 2005 fiscal year, administrative services fees, gross of any payments
made by the investment adviser, were:

ADMINISTRATIVE SERVICES FEE
------------------------------------------------------------------------------

CLASS C $983,000
------------------------------------------------------------------------------
CLASS F 537,000
------------------------------------------------------------------------------
CLASS 529-A 174,000
------------------------------------------------------------------------------
CLASS 529-B 48,000
------------------------------------------------------------------------------
CLASS 529-C 65,000
------------------------------------------------------------------------------
CLASS 529-E 10,000
------------------------------------------------------------------------------
CLASS 529-F 3,000
------------------------------------------------------------------------------
CLASS R-1 23,000
------------------------------------------------------------------------------
CLASS R-2 532,000
------------------------------------------------------------------------------
CLASS R-3 301,000
------------------------------------------------------------------------------
CLASS R-4 65,000
------------------------------------------------------------------------------
CLASS R-5 99,000
------------------------------------------------------------------------------

PRINCIPAL UNDERWRITER AND PLANS OF DISTRIBUTION -- American Funds Distributors,
Inc. (the "Principal Underwriter") is the principal underwriter of the fund's
shares. The Principal Underwriter is located at 333 South Hope Street, Los
Angeles, CA 90071; 135 South State College Boulevard, Brea, CA 92821; 3500
Wiseman Boulevard, San Antonio, TX 78251; 8332 Woodfield Crossing Boulevard,
Indianapolis, IN 46240; and 5300 Robin Hood Road, Norfolk, VA 23513.

American Mutual Fund -- Page 21
<PAGE>

The Principal Underwriter receives revenues from sales of the fund's shares. For
Class A and 529-A shares, the Principal Underwriter receives commission revenue
consisting of that portion of the Class A and 529-A sales charge remaining after
the allowances by the Principal Underwriter to investment dealers. For Class B
and 529-B shares, the Principal Underwriter sells the rights to the 12b-1 fees
paid by the fund for distribution expenses to a third party and receives the
revenue remaining after compensating investment dealers for sales of Class B and
529-B shares. The fund also pays the Principal Underwriter for advancing the
immediate service fees paid to qualified dealers of Class B and 529-B shares.
For Class C and 529-C shares, the Principal Underwriter receives any contingent
deferred sales charges that apply during the first year after purchase. The fund
pays the Principal Underwriter for advancing the immediate service fees and
commissions paid to qualified dealers of Class C and 529-C shares. For Class
529-E shares, the fund pays the Principal Underwriter for advancing the
immediate service fees and commissions paid to qualified dealers. For Class F
and 529-F shares, the fund pays the Principal Underwriter for advancing the
immediate service fees paid to qualified dealers and advisers who sell Class F
and 529-F shares. For Class R-1, R-2, R-3 and R-4 shares, the fund pays the
Principal Underwriter for advancing the immediate service fees paid to qualified
dealers and advisers who sell Class R-1, R-2, R-3 and R-4 shares.

Commissions, revenue or service fees retained by the Principal Underwriter after
allowances or compensation to dealers were:

COMMISSIONS, ALLOWANCE OR
REVENUE COMPENSATION
FISCAL YEAR/PERIOD OR FEES RETAINED TO DEALERS
-----------------------------------------------------------------------------------------------------

CLASS A 2005 $9,354,000 $40,772,000
2004 9,699,000 42,758,000
2003 4,990,000 22,581,000
-----------------------------------------------------------------------------------------------------
CLASS B 2005 596,000 3,975,000
2004 825,000 6,442,000
2003 722,000 4,826,000
-----------------------------------------------------------------------------------------------------
CLASS C 2005 $243,000 $2,029,000
2004 -- 2,259,000
2003 -- 1,377,000
-----------------------------------------------------------------------------------------------------
CLASS 529-A 2005 304,000 1,395,000
2004 265,000 1,265,000
2003 163,000 801,000
-----------------------------------------------------------------------------------------------------
CLASS 529-B 2005 40,000 240,000
2004 63,000 363,000
2003 50,000 297,000
-----------------------------------------------------------------------------------------------------
CLASS 529-C 2005 9,000 139,000
2004 -- 154,000
2003 -- 89,000
-----------------------------------------------------------------------------------------------------

American Mutual Fund -- Page 22
<PAGE>

The fund has adopted plans of distribution (the "Plans") pursuant to rule 12b-1
under the 1940 Act. The Principal Underwriter receives amounts payable pursuant
to the Plans (see below). As required by rule 12b-1 and the 1940 Act, the Plans
(together with the Principal Underwriting Agreement) have been approved by the
full Board of Directors and separately by a majority of the Directors who are
not "interested persons" of the fund and who have no direct or indirect
financial interest in the operation of the Plans or the Principal Underwriting
Agreement. Potential benefits of the Plans to the fund include quality
shareholder services; savings to the fund in transfer agency costs; and benefits
to the investment process from growth or stability of assets. The selection and
nomination of Directors who are not "interested persons" of the fund are
committed to the discretion of the Directors who are not "interested persons"
during the existence of the Plans. The Plans may not be amended to increase
materially the amount spent for distribution without shareholder approval. Plan
expenses are reviewed quarterly and the Plans must be renewed annually by the
Board of Directors.

Under the Plans, the fund may annually expend the following amounts to finance
any activity primarily intended to result in the sale of fund shares, provided
the fund's Board of Directors has approved the category of expenses for which
payment is being made: (a) for Class A shares, up to 0.25% of the average daily
net assets attributable to Class A shares; (b) for Class 529-A shares, up to
0.50% of the average daily net assets attributable to Class 529-A shares; (c)
for Class B and 529-B shares, up to 1.00% of the average daily net assets
attributable to Class B and 529-B shares, respectively; (d) for Class C and
529-C shares, up to 1.00% of the average daily net assets attributable to Class
C and 529-C shares, respectively; (e) for Class 529-E shares, up to 0.75% of the
average daily net assets attributable to Class 529-E shares; (f) for Class F and
529-F shares, up to 0.50% of the average daily net assets attributable to Class
F and 529-F shares; (g) for Class R-1 shares, up to 1.00% of the average daily
net assets attributable to Class R-1 shares; (h) for Class R-2 shares, up to
1.00% of the average daily net assets attributable to Class R-2 shares; (i) for
Class R-3 shares, up to 0.75% of the average daily net assets attributable to
Class R-3 shares; and (j) for Class R-4 shares, up to 0.50% of the average daily
net assets attributable to Class R-4 shares. The fund has not adopted a Plan for
Class R-5 shares; accordingly, no 12b-1 fees are paid from Class R-5 share
assets.

For Class A and 529-A shares: (a) up to 0.25% is reimbursed to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to

American Mutual Fund -- Page 23
<PAGE>

the amount allowable under the fund's Class A and 529-A 12b-1 limit is
reimbursed to the Principal Underwriter for paying distribution-related
expenses, including for Class A and 529-A shares dealer commissions and
wholesaler compensation paid on sales of shares of $1 million or more purchased
without a sales charge (including purchases by employer-sponsored defined
contribution-type retirement plans investing $1 million or more or with 100 or
more eligible employees, and retirement plans, endowments and foundations with
$50 million or more in assets -- "no load purchases"). Commissions on no load
purchases of Class A and 529-A shares, in excess of the Class A and 529-A plan
limitations not reimbursed to the Principal Underwriter during the most recent
fiscal quarter are recoverable for five quarters, provided that such commissions
do not exceed the annual expense limit. After five quarters, these commissions
are not recoverable.

For Class B and 529-B shares: (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) 0.75% is paid to the Principal Underwriter for
distribution-related expenses, including the financing of commissions paid to
qualified dealers.

For Class C and 529-C shares: (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to 0.75% is paid to the Principal Underwriter
for paying distribution-related expenses, including commissions paid to
qualified dealers.

For Class 529-E shares: currently (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to 0.25% is paid to the Principal Underwriter
for paying distribution-related expenses, including commissions paid to
qualified dealers.

For Class F and 529-F shares: currently up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers or advisers.

For Class R-1 shares: (a) up to 0.25% is paid to the Principal Underwriter for
paying service-related expenses, including paying service fees to qualified
dealers, and (b) up to 0.75% is paid to the Principal Underwriter for
distribution-related expenses, including commissions paid to qualified dealers.

For Class R-2 shares: currently (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to 0.50% is paid to the Principal Underwriter
for paying distribution-related expenses, including commissions paid to
qualified dealers.

For Class R-3 shares: currently (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to 0.25% is paid to the Principal Underwriter
for paying distribution-related expenses, including commissions paid to
qualified dealers.

For Class R-4 shares: currently up to 0.25% is paid to the Principal Underwriter
for paying service-related expenses, including paying service fees to qualified
dealers or advisers.

American Mutual Fund -- Page 24
<PAGE>

As of the end of the 2005 fiscal year, total 12b-1 expenses, and the portion of
the expense that remained unpaid, were:

12B-1 UNPAID LIABILITY
12B-1 EXPENSES OUTSTANDING
-------------------------------------------------------------------------------------------

CLASS A $29,430,000 $4,119,000
-------------------------------------------------------------------------------------------
CLASS B 5,630,000 585,000
-------------------------------------------------------------------------------------------
CLASS C 6,026,000 912,000
-------------------------------------------------------------------------------------------
CLASS F 987,000 163,000
-------------------------------------------------------------------------------------------
CLASS 529-A 230,000 38,000
-------------------------------------------------------------------------------------------
CLASS 529-B 292,000 31,000
-------------------------------------------------------------------------------------------
CLASS 529-C 415,000 66,000
-------------------------------------------------------------------------------------------
CLASS 529-E 35,000 6,000
-------------------------------------------------------------------------------------------
CLASS 529-F 3,000 0
-------------------------------------------------------------------------------------------
CLASS R-1 116,000 19,000
-------------------------------------------------------------------------------------------
CLASS R-2 639,000 119,000
-------------------------------------------------------------------------------------------
CLASS R-3 759,000 142,000
-------------------------------------------------------------------------------------------
CLASS R-4 99,000 16,000
-------------------------------------------------------------------------------------------

American Mutual Fund -- Page 25
<PAGE>

OTHER COMPENSATION TO DEALERS -- As of January 2006, the top dealers that
American Funds Distributors anticipates will receive additional compensation
(as described in the prospectus) include:

A. G. Edwards & Sons, Inc.
AIG Advisors Group
American General Securities Inc.
Ameritas Investment Corp.
AXA Advisors, LLC
Cadaret, Grant & Co., Inc.
Cambridge Investment Research, Inc.
Capital Analysts, Inc.
Commonwealth Financial Network
Cuna Brokerage Services, Inc.
Deutsche Bank Securities Inc.
Edward Jones
Ferris, Baker Watts, Inc.
Genworth Financial Securities Corp.
Hefren-Tillotson, Inc.
Hornor, Townsend & Kent, Inc.
ING Advisors Network Inc.
InterSecurities, Inc./Transamerica Financial Advisors, Inc.
Investacorp, Inc.
Janney Montgomery Scott LLC
Jefferson Pilot Securities Corporation
JJB Hilliard, WL Lyons, Inc./PNC Bank
Legg Mason Wood Walker, Inc.
Lincoln Financial Advisors Corporation
McDonald Investments Inc./Society National Bank
Merrill Lynch, Pierce, Fenner & Smith Inc.
Metlife Enterprises
MML Investors Services, Inc.
Morgan Keegan & Company, Inc.
Morgan Stanley DW
NatCity Investment, Inc.
National Planning Holdings Inc.
NFP Securities, Inc.
Northwestern Mutual Investment Services, LLC.
Pacific Select Distributors Inc.
Park Avenue Securities LLC
Piper Jaffray & Co.
Princor Financial Services
ProEquities, Inc.
Raymond James Financial Services/Raymond James & Associates
RBC Dain Rauscher Inc.
Robert W. Baird & Co. Inc.
Securian Financial Services/C.R.I. Securities Inc.
Securities Service Network Inc.
Signator Investors, Inc.
Smith Barney
Stifel, Nicolaus & Company, Inc.
The O.N. Equity Sales Company
UBS Financial Services Inc.
US Bancorp Investments, Inc.
Wachovia Securities

EXECUTION OF PORTFOLIO TRANSACTIONS

As described in the prospectus, the investment adviser places orders with
broker-dealers for the fund's portfolio transactions. Portfolio transactions for
the fund may be executed as part of concurrent authorizations to purchase or
sell the same security for other funds served by the investment adviser, or for
trusts or other accounts served by affiliated companies of the investment
adviser. When such concurrent authorizations occur, the objective is to allocate
the executions in an equitable manner.

Brokerage commissions paid on portfolio transactions, including investment
dealer concessions on underwritings, if applicable, for the fiscal years ended
October 31, 2005, 2004 and 2003 amounted to $5,738,000, $5,193,000 and
$7,158,000, respectively. With respect to fixed-income securities, brokerage
commissions include explicit investment dealer concessions and may exclude other
transaction costs which may be reflected in the spread between the bid and asked

American Mutual Fund -- Page 26
<PAGE>

price. The decrease in brokerage commissions paid from 2003 to 2004 was largely
due to decreases in commission rates charged by brokers.

The fund is required to disclose information regarding investments in the
securities of its "regular" broker-dealers (or parent companies of its regular
broker-dealers) that derive more than 15% of their revenue from broker-dealer,
underwriter or investment adviser activities. A regular broker-dealer is (a) one
of the 10 broker-dealers that received from the fund the largest amount of
brokerage commissions by participating, directly or indirectly, in the fund's
portfolio transactions during the fund's most recent fiscal year; (b) one of the
10 broker-dealers that engaged as principal in the largest dollar amount of
portfolio transactions of the fund during the fund's most recent fiscal year; or
(c) one of the 10 broker-dealers that sold the largest amount of securities of
the fund during the fund's most recent fiscal year.

At the end of the fund's most recent fiscal year, the fund's regular
broker-dealers included J.P. Morgan Securities, Banc of America Securities, LLC
and Citigroup Global Markets Inc. As of the fund's most recent fiscal year-end,
the fund held equity securities of J.P. Morgan Chase & Co. in the amount of
$199,433,000, Bank of America Corp. in the amount of $211,387,000 and Citigroup
Inc. in the amount of $362,120,000. The fund held debt securities of Bank of
America Corp. in the amount of $129,488,000.

DISCLOSURE OF PORTFOLIO HOLDINGS

The fund's investment adviser, on behalf of the fund, has adopted policies and
procedures with respect to the disclosure of information about fund portfolio
securities. These policies and procedures have been reviewed by the fund's Board
of Directors and compliance will be periodically assessed by the Board in
connection with reporting from the fund's Chief Compliance Officer.

Under these policies and procedures, the fund's complete list of portfolio
holdings available for public disclosure, dated as of the end of each calendar
quarter, is permitted to be posted on the American Funds website no earlier than
the tenth day after such calendar quarter. In practice, the public portfolio
typically is posted on the website approximately 45 days after the end of the
calendar quarter. In addition, the fund's list of top 10 equity portfolio
holdings measured by percentage of net assets invested, dated as of the end of
each calendar month, is permitted to be posted on the American Funds website no
earlier than the tenth day after such month. Such portfolio holdings information
may then be disclosed to any person pursuant to an ongoing arrangement to
disclose portfolio holdings information to such person no earlier than one day
after the day on which the information is posted on the American Funds website.
Affiliates of the fund (including the fund's Board members and officers, and
certain personnel of the fund's investment adviser and its affiliates) and
certain service providers (such as the fund's custodian and outside counsel) who
require portfolio holdings information for legitimate business and fund
oversight purposes may receive the information earlier.

Affiliated persons of the fund as described above who receive portfolio holdings
information are subject to restrictions and limitations on the use and handling
of such information pursuant to applicable codes of ethics, including
requirements to maintain the confidentiality of such information, preclear
securities trades and report securities transactions activity, as applicable.
Third party service providers of the fund receiving such information are subject
to confidentiality obligations. When portfolio holdings information is disclosed
other than through the American Funds website to persons not affiliated with the
fund (which, as described above, would typically

American Mutual Fund -- Page 27
<PAGE>

occur no earlier than one day after the day on which the information is posted
on the American Funds website), such persons may be bound by agreements
(including confidentiality agreements) that restrict and limit their use of the
information to legitimate business uses only. Neither the fund nor its
investment adviser or any affiliate thereof receives compensation or other
consideration in connection with the disclosure of information about portfolio
securities.

Subject to Board policies, the authority to disclose a fund's portfolio
holdings, and to establish policies with respect to such disclosure, resides
with the Investment Committee of the fund's investment adviser. In exercising
its authority, the Investment Committee determines whether disclosure of
information about the fund's portfolio securities is appropriate and in the best
interest of fund shareholders. The investment adviser has implemented policies
and procedures to address conflicts of interest that may arise from the
disclosure of fund holdings. For example, the investment adviser's code of
ethics specifically requires, among other things, the safeguarding of
information about fund holdings and contains prohibitions designed to prevent
the personal use of confidential, proprietary investment information in a way
that would conflict with fund transactions. In addition, the investment adviser
believes that its current policy of not selling portfolio holdings information
and not disclosing such information to unaffiliated third parties until such
holdings have been made public on the American Funds website (other than to
certain fund service providers for legitimate business and fund oversight
purposes) helps reduce potential conflicts of interest between fund shareholders
and the investment adviser and its affiliates.

PRICE OF SHARES

Shares are purchased at the offering price or sold at the net asset value price
next determined after the purchase or sell order is received and accepted by the
fund or the Transfer Agent; the offering or net asset value price is effective
for orders received prior to the time of determination of the net asset value
and, in the case of orders placed with dealers or their authorized designees,
accepted by the Principal Underwriter, the Transfer Agent, a dealer or any of
their designees. In the case of orders sent directly to the fund or the Transfer
Agent, an investment dealer MUST be indicated. The dealer is responsible for
promptly transmitting purchase and sell orders to the Principal Underwriter.

Orders received by the investment dealer or authorized designee, the Transfer
Agent or the fund after the time of the determination of the net asset value
will be entered at the next calculated offering price. Note that investment
dealers or other intermediaries may have their own rules about share
transactions and may have earlier cut-off times than those of the fund. For more
information about how to purchase through your intermediary, contact your
intermediary directly.

Prices that appear in the newspaper do not always indicate prices at which you
will be purchasing and redeeming shares of the fund, since such prices generally
reflect the previous day's closing price, while purchases and redemptions are
made at the next calculated price. The price you pay for shares, the offering
price, is based on the net asset value per share, which is calculated once daily
as of approximately 4:00 p.m. New York time, which is the normal close of
trading on the New York Stock Exchange, each day the Exchange is open. If, for
example, the Exchange closes at 1:00 p.m., the fund's share price would still be
determined as of 4:00 p.m. New York time. The New York Stock Exchange is
currently closed on weekends and on the following holidays: New Year's Day;
Martin Luther King, Jr. Day; Presidents' Day; Good Friday; Memorial Day;
Independence Day; Labor Day; Thanksgiving; and Christmas Day. Each share class
of the fund has a separately calculated net asset value (and share price).

American Mutual Fund -- Page 28
<PAGE>

All portfolio securities of funds managed by Capital Research and Management
Company (other than money market funds) are valued, and the net asset values per
share for each share class are determined, as follows:

1. Equity securities, including depositary receipts, 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, 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 bid prices, if asked prices are not available) or at prices for
securities of comparable maturity, quality and type. The pricing services base
bond prices on, among other things, an evaluation of the yield curve as of
approximately 3:00 p.m. New York time. The fund's investment adviser performs
certain checks on these prices prior to the fund's net asset value being
calculated.

Securities with both fixed-income and equity characteristics (e.g., convertible
bonds, preferred stocks, units comprised of more than one type of security,
etc.), 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.

Securities with original maturities of one year or less having 60 days or less
to maturity are amortized to maturity based on their cost if acquired within 60
days of maturity, or if already held on the 60th day, based on the value
determined on the 61st day. Forward currency contracts are valued at the mean of
representative quoted bid and asked prices.

Assets or liabilities initially expressed in terms of non-U.S. currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.

Securities and assets for which market quotations are not readily available or
are considered unreliable are valued at fair value as determined in good faith
under policies approved by the fund's Board. Subject to Board oversight, the
fund's Board has delegated the obligation to make fair valuation determinations
to a Valuation Committee established by the fund's investment adviser. The Board
receives regular reports describing fair-valued securities and the valuation
methods used.

The Valuation Committee has adopted guidelines and procedures (consistent with
SEC rules and guidance) to ensure that certain basic principles and factors are
considered when making all fair value determinations. As a general principle,
securities lacking readily available market quotations, or that have quotations
that are considered unreliable, are valued in good faith by the Valuation
Committee based upon what the fund might reasonably expect to receive upon their
current sale. The Valuation Committee considers all indications of value
available to it in determining the fair value to be assigned to a particular
security, including, without limitation, 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.

American Mutual Fund -- Page 29
<PAGE>

2. Each class of shares represents interests in the same portfolio of
investments and is identical in all respects to each other class, except for
differences relating to distribution, service and other charges and expenses,
certain voting rights, differences relating to eligible investors, the
designation of each class of shares, conversion features and exchange
privileges. Expenses attributable to the fund, but not to a particular class of
shares, are borne by each class pro rata based on relative aggregate net assets
of the classes. Expenses directly attributable to a class of shares are borne by
that class of shares. Liabilities, including accruals of taxes and other expense
items attributable to particular share classes, are deducted from total assets
attributable to such share classes.

3. Net assets so obtained for each share class are then divided by the total
number of shares outstanding of that share class, and the result, rounded to the
nearer cent, is the net asset value per share for that share class.

TAXES AND DISTRIBUTIONS

FUND TAXATION -- The fund has elected to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code (the "Code"). A
regulated investment company qualifying under Subchapter M of the Code is
required to distribute to its shareholders at least 90% of its investment
company taxable income (including the excess of net short-term capital gain over
net long-term capital losses) and generally is not subject to federal income tax
to the extent that it distributes annually 100% of its investment company
taxable income and net realized capital gains in the manner required under the
Code. The fund intends to distribute annually all of its investment company
taxable income and net realized capital gains and therefore does not expect to
pay federal income tax, although in certain circumstances, the fund may
determine that it is in the interest of shareholders to distribute less than
that amount.

To be treated as a regulated investment company under Subchapter M of the Code,
the fund must also (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, net income from certain
publicly traded partnerships and gains from the sale or other disposition of
securities or foreign currencies, or other income (including, but not limited
to, gains from options, futures or forward contracts) derived with respect to
the business of investing in such securities or currencies, and (b) diversify
its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the
market value of the fund's assets is represented by cash, U.S. government
securities and securities of other regulated investment companies, and other
securities (for purposes of this calculation, generally limited in respect of
any one issuer, to an amount not greater than 5% of the market value of the
fund's assets and 10% of the outstanding voting securities of such issuer) and
(ii) not more than 25% of the value of its assets is invested in the securities
of (other than U.S. government securities or the securities of other regulated
investment companies) any one issuer; two or more issuers which the fund
controls and which are determined to be engaged in the same or similar trades or
businesses; or the securities of certain publicly traded partnerships.

Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (a) 98% of ordinary income (generally net investment income)
for the calendar year, (b) 98% of capital gain (both long-term and short-term)
for the one-year period ending on October 31 (as though the one-year period
ending on October 31 were the regulated investment company's taxable year) and
(c) the sum of any untaxed,

American Mutual Fund -- Page 30
<PAGE>

undistributed net investment income and net capital gains of the regulated
investment company for prior periods. The term "distributed amount" generally
means the sum of (a) amounts actually distributed by the fund from its current
year's ordinary income and capital gain net income and (b) any amount on which
the fund pays income tax during the periods described above. Although the fund
intends to distribute its net investment income and net capital gains so as to
avoid excise tax liability, the fund may determine that it is in the interest of
shareholders to distribute a lesser amount.

The following information may not apply to you if you hold fund shares in a
tax-deferred account, such as a retirement plan or education savings account.
Please see your tax adviser for more information.

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS -- Dividends and capital gain
distributions on fund shares will be reinvested in shares of the fund of the
same class, unless shareholders indicate in writing that they wish to receive
them in cash or in shares of the same class of other American Funds, as provided
in the prospectus. Dividends and capital gain distributions by 529 share classes
will be automatically reinvested.

Distributions of investment company taxable income and net realized capital
gains to individual shareholders will be taxable whether received in shares or
in cash, unless such shareholders are exempt from taxation. Shareholders
electing to receive distributions in the form of additional shares will have a
cost basis for federal income tax purposes in each share so received equal to
the net asset value of that share on the reinvestment date. Dividends and
capital gain distributions by the fund to a tax-deferred retirement plan account
are not taxable currently.

DIVIDENDS -- The fund intends to follow the practice of distributing
substantially all of its investment company taxable income, which includes
any excess of net realized short-term gains over net realized long-term
capital losses. Investment company taxable income generally includes
dividends, interest, net short-term capital gains in excess of net
long-term capital losses, and certain foreign currency gains, if any, less
expenses and certain foreign currency losses. To the extent the fund
invests in stock of domestic and certain foreign corporations and meets the
applicable holding period requirement, it may receive "qualified
dividends". The fund will designate the amount of "qualified dividends" to
its shareholders in a notice sent within 60 days of the close of its fiscal
year and will report "qualified dividends" to shareholders on Form
1099-DIV.

Under the Code, gains or losses attributable to fluctuations in exchange
rates that occur between the time the fund accrues receivables or
liabilities denominated in a foreign currency and the time the fund
actually collects such receivables, or pays such liabilities, generally are
treated as ordinary income or ordinary loss. Similarly, on disposition of
debt securities denominated in a foreign currency and on disposition of
certain futures contracts, forward contracts and options, gains or losses
attributable to fluctuations in the value of foreign currency between the
date of acquisition of the security or contract and the date of disposition
are also treated as ordinary gain or loss. These gains or losses, referred
to under the Code as Section 988 gains or losses, may increase or decrease
the amount of the fund's investment company taxable income to be
distributed to its shareholders as ordinary income.

If the fund invests in stock of certain passive foreign investment
companies, the fund may be subject to U.S. federal income taxation on a
portion of any "excess distribution" with

American Mutual Fund -- Page 31
<PAGE>

respect to, or gain from the disposition of, such stock. The tax would be
determined by allocating such distribution or gain ratably to each day of
the fund's holding period for the stock. The distribution or gain so
allocated to any taxable year of the fund, other than the taxable year of
the excess distribution or disposition, would be taxed to the fund at the
highest ordinary income rate in effect for such year, and the tax would be
further increased by an interest charge to reflect the value of the tax
deferral deemed to have resulted from the ownership of the foreign
company's stock. Any amount of distribution or gain allocated to the
taxable year of the distribution or disposition would be included in the
fund's investment company taxable income and, accordingly, would not be
taxable to the fund to the extent distributed by the fund as a dividend to
its shareholders.

To avoid such tax and interest, the fund intends to elect to treat these
securities as sold on the last day of its fiscal year and recognize any
gains for tax purposes at that time. Under this election, deductions for
losses are allowable only to the extent of any prior recognized gains, and
both gains and losses will be treated as ordinary income or loss. The fund
will be required to distribute any resulting income, even though it has not
sold the security and received cash to pay such distributions. Upon
disposition of these securities, any gain recognized is treated as ordinary
income and loss is treated as ordinary loss to the extent of any prior
recognized gain.

Dividends from domestic corporations are expected to comprise some portion
of the fund's gross income. To the extent that such dividends constitute
any of the fund's gross income, a portion of the income distributions of
the fund may be eligible for the deduction for dividends received by
corporations. Corporate shareholders will be informed of the portion of
dividends that so qualifies. The dividends-received deduction is reduced to
the extent that either the fund shares, or the underlying shares of stock
held by the fund, with respect to which dividends are received, are treated
as debt-financed under federal income tax law, and is eliminated if the
shares are deemed to have been held by the shareholder or the fund, as the
case may be, for less than 46 days during the 90-day period beginning on
the date that is 45 days before the date on which the shares become
ex-dividend. Capital gain distributions are not eligible for the
dividends-received deduction.

A portion of the difference between the issue price of zero coupon
securities and their face value (original issue discount) is considered to
be income to the fund each year, even though the fund will not receive cash
interest payments from these securities. This original issue discount
(imputed income) will comprise a part of the investment company taxable
income of the fund that must be distributed to shareholders in order to
maintain the qualification of the fund as a regulated investment company
and to avoid federal income taxation at the level of the fund.

In addition, some of the bonds may be purchased by the fund at a discount
that exceeds the original issue discount on such bonds, if any. This
additional discount represents market discount for federal income tax
purposes. The gain realized on the disposition of any bond having a market
discount may be treated as taxable ordinary income to the extent it does
not exceed the accrued market discount on such bond or a fund may elect to
include the market discount in income in tax years to which it is
attributable. Generally, accrued market discount may be figured under
either the ratable accrual method or constant interest method. If the fund
has paid a premium over the face amount of a bond, the fund has the option
of either amortizing the premium until bond maturity and reducing

American Mutual Fund -- Page 32
<PAGE>

the fund's basis in the bond by the amortized amount, or not amortizing and
treating the premium as part of the bond's basis. In the case of any debt
security having a fixed maturity date of not more than one year from its
date of issue, the gain realized on disposition generally will be treated
as a short-term capital gain. In general, any gain realized on disposition
of a security held less than one year is treated as a short-term capital
gain.

Dividend and interest income received by the fund from sources outside the
United States may be subject to withholding and other taxes imposed by such
foreign jurisdictions. Tax conventions between certain countries and the
United States, however, may reduce or eliminate these foreign taxes. Most
foreign countries do not impose taxes on capital gains with respect to
investments by foreign investors.

CAPITAL GAIN DISTRIBUTIONS -- The fund also intends to follow the practice
of distributing the entire excess of net realized long-term capital gains
over net realized short-term capital losses. Net capital gains for a fiscal
year are computed by taking into account any capital loss carry forward of
the fund.

If any net long-term capital gains in excess of net short-term capital
losses are retained by the fund for reinvestment, requiring federal income
taxes to be paid thereon by the fund, the fund intends to elect to treat
such capital gains as having been distributed to shareholders. As a result,
each shareholder will report such capital gains as long-term capital gains
taxable to individual shareholders at a maximum 15% capital gains rate,
will be able to claim a pro rata share of federal income taxes paid by the
fund on such gains as a credit against personal federal income tax
liability, and will be entitled to increase the adjusted tax basis on fund
shares by the difference between a pro rata share of the retained gains and
such shareholder's related tax credit.

SHAREHOLDER TAXATION -- In January of each year, individual shareholders holding
fund shares in taxable accounts will receive a statement of the federal income
tax status of all distributions. Shareholders of the fund also may be subject to
state and local taxes on distributions received from the fund.

DIVIDENDS -- Fund dividends are taxable to shareholders as ordinary income.
Under the 2003 Tax Act, all or a portion of a fund's dividend distribution
may be a "qualified dividend." If the fund meets the applicable holding
period requirement, it will distribute dividends derived from qualified
corporation dividends to shareholders as qualified dividends. Interest
income from bonds and money market instruments and nonqualified foreign
dividends will be distributed to shareholders as nonqualified fund
dividends. The fund will report on Form 1099-DIV the amount of each
shareholder's dividend that may be treated as a qualified dividend. If a
shareholder meets the requisite holding period requirement, qualified
dividends are taxable at a maximum rate of 15%.

CAPITAL GAINS -- Distributions of the excess of net long-term capital gains
over net short-term capital losses that the fund properly designates as
"capital gain dividends" generally will be taxable as long-term capital
gain. Regardless of the length of time the shares of the fund have been
held by a shareholder, a capital gain distribution by the fund is subject
to a maximum tax rate of 15%. Any loss realized upon the redemption of
shares held at the time of redemption for six months or less from the date
of their purchase will be

American Mutual Fund -- Page 33
<PAGE>

treated as a long-term capital loss to the extent of any amounts treated as
distributions of long-term capital gains during such six-month period.

Distributions by the fund result in a reduction in the net asset value of the
fund's shares. Investors should consider the tax implications of buying shares
just prior to a distribution. The price of shares purchased at that time
includes the amount of the forthcoming distribution. Those purchasing just prior
to a distribution will subsequently receive a partial return of their investment
capital upon payment of the distribution, which will be taxable to them.

Redemptions of shares, including exchanges for shares of other American Funds,
may result in federal, state and local tax consequences (gain or loss) to the
shareholder. However, conversion from one class to another class in the same
fund should not be a taxable event.

If a shareholder exchanges or otherwise disposes of shares of the fund within 90
days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously incurred
in acquiring the fund's shares will not be taken into account (to the extent
such previous sales charges do not exceed the reduction in sales charges) for
the purposes of determining the amount of gain or loss on the exchange, but will
be treated as having been incurred in the acquisition of such other fund(s).

Any loss realized on a redemption or exchange of shares of the fund will be
disallowed to the extent substantially identical shares are reacquired within
the 61-day period beginning 30 days before and ending 30 days after the shares
are disposed of. Any loss disallowed under this rule will be added to the
shareholder's tax basis in the new shares purchased.

The fund will be required to report to the IRS all distributions of investment
company taxable income and capital gains as well as gross proceeds from the
redemption or exchange of fund shares, except in the case of certain exempt
shareholders. Under the backup withholding provisions of Section 3406 of the
Code, distributions of investment company taxable income and capital gains and
proceeds from the redemption or exchange of a regulated investment company may
be subject to backup withholding of federal income tax in the case of non-exempt
U.S. shareholders who fail to furnish the investment company with their taxpayer
identification numbers and with required certifications regarding their status
under the federal income tax law. Withholding may also be required if the fund
is notified by the IRS or a broker that the taxpayer identification number
furnished by the shareholder is incorrect or that the shareholder has previously
failed to report interest or dividend income. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in additional shares, will be reduced by the amounts required to be
withheld.

The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. persons (i.e., U.S. citizens and residents and
U.S. corporations, partnerships, trusts and estates). Each shareholder who is
not a U.S. person should consider the U.S. and foreign tax consequences of
ownership of shares of the fund, including the possibility that such a
shareholder may be subject to a U.S. withholding tax at a rate of 30% (or a
lower rate under an applicable income tax treaty) on dividend income received by
the shareholder.

Shareholders should consult their tax advisers about the application of federal,
state and local tax law in light of their particular situation.

American Mutual Fund -- Page 34
<PAGE>

UNLESS OTHERWISE NOTED, ALL REFERENCES IN THE FOLLOWING PAGES TO CLASS A, B, C
OR F SHARES ALSO REFER TO THE CORRESPONDING CLASS 529-A, 529-B, 529-C OR 529-F
SHARES. CLASS 529 SHAREHOLDERS SHOULD ALSO REFER TO THE COLLEGEAMERICA PROGRAM
DESCRIPTION FOR INFORMATION ON POLICIES AND SERVICES SPECIFICALLY RELATING TO
COLLEGEAMERICA ACCOUNTS. SHAREHOLDERS HOLDING SHARES THROUGH AN ELIGIBLE
RETIREMENT PLAN SHOULD CONTACT THEIR PLAN'S ADMINISTRATOR OR RECORDKEEPER FOR
INFORMATION REGARDING PURCHASES, SALES AND EXCHANGES.

PURCHASE AND EXCHANGE OF SHARES

PURCHASES BY INDIVIDUALS -- As described in the prospectus, you may generally
open an account and purchase fund shares by contacting a financial adviser or
investment dealer authorized to sell the fund's shares. You may make investments
by any of the following means:

CONTACTING YOUR FINANCIAL ADVISER -- Deliver or mail a check to your
financial adviser.

BY MAIL -- for initial investments, you may mail a check, made payable to
the fund, directly to the address indicated on the account application.
Please indicate an investment dealer on the account application. You may
make additional investments by filling out the "Account Additions" form at
the bottom of a recent account statement and mailing the form, along with a
check made payable to the fund, using the envelope provided with your
account statement.

BY TELEPHONE -- using the American FundsLine. Please see the "Shareholder
account services and privileges" section of this document for more
information regarding this service.

BY INTERNET -- using americanfunds.com. Please see the "Shareholder account
services and privileges" section of this document for more information
regarding this service.

BY WIRE -- If you are making a wire transfer, instruct your bank to wire
funds to:

Wells Fargo Bank
ABA Routing No. 121000248
Account No. 4600-076178

Your bank should include the following information when wiring funds:

For credit to the account of:
American Funds Service Company
(fund's name)

For further credit to:
(shareholder's fund account number)
(shareholder's name)

You may contact American Funds Service Company at 800/421-0180 if you have
questions about making wire transfers.

The Principal Underwriter will not knowingly sell shares of the fund directly or
indirectly to any person or entity, where, after the sale, such person or entity
would own beneficially directly or

American Mutual Fund -- Page 35
<PAGE>

indirectly more than 3.0% of the outstanding shares of the fund without the
consent of a majority of the fund's Board.

Class 529 shares may be purchased only through CollegeAmerica by investors
establishing qualified higher education savings accounts. Class 529-E shares may
be purchased only by investors participating in CollegeAmerica through an
eligible employer plan. The R share classes are generally available only to
employer-sponsored retirement plans. Class R-5 shares are also available to
clients of the Personal Investment Management group of Capital Guardian Trust
Company who do not have an intermediary associated with their accounts and
without regard to the $1 million purchase minimum. In addition, the American
Funds state tax-exempt funds are qualified for sale only in certain
jurisdictions, and tax-exempt funds in general should not serve as retirement
plan investments. The fund and the Principal Underwriter reserve the right to
reject any purchase order.

PURCHASE MINIMUMS AND MAXIMUMS -- All investments are subject to the purchase
minimums and maximums described in the prospectus. Purchase minimums may be
waived or reduced in certain cases. For accounts established with an automatic
investment plan, the initial purchase minimum of $250 may be waived if the
purchases (including purchases through exchanges from another fund) made under
the plan are sufficient to reach $250 within five months of account
establishment.

The initial purchase minimum of $25 may be waived for the following account types:

. Payroll deduction retirement plan accounts (such as, but not limited
to, 403(b), 401(k), SIMPLE IRA, SARSEP and deferred compensation plan
accounts); and

. Employer-sponsored CollegeAmerica accounts.

The following account types may be established without meeting the initial
purchase minimum:

. Retirement accounts that are funded with employer contributions; and

. Accounts that are funded with monies set by court decree.

The following account types may be established without meeting the initial
purchase minimum, but shareholders wishing to invest in two or more funds must
meet the normal initial purchase minimum of each fund:

. Accounts that are funded with (a) transfers of assets, (b) rollovers
from retirement plans, (c) rollovers from 529 college savings plans or
(d) required minimum distribution automatic exchanges; and

. American Funds money market fund accounts registered in the name of
clients of Capital Guardian Trust Company's Personal Investment
Management group.

EXCHANGES -- You may only exchange shares into other American Funds within the
same share class. However, exchanges from Class A shares of The Cash Management
Trust of America may be made to Class B or C shares of other American Funds for
dollar cost averaging purposes. Exchange purchases are subject to the minimum
investment requirements of the fund purchased and no sales charge generally
applies. However, exchanges of shares from American Funds money market funds are
subject to applicable sales charges on the fund being purchased, unless the
money market fund shares were acquired by an exchange from a fund having a sales
charge,

American Mutual Fund -- Page 36
<PAGE>

or by reinvestment or cross-reinvestment of dividends or capital gain
distributions. Exchanges of Class F shares generally may only be made through
fee-based programs of investment firms that have special agreements with the
fund's distributor and certain registered investment advisers.

You may exchange shares of other classes by contacting the Transfer Agent, by
contacting your investment dealer or financial adviser, by using American
FundsLine or americanfunds.com, or by telephoning 800/421-0180 toll-free, or
faxing (see "American Funds Service Company service areas" in the prospectus for
the appropriate fax numbers) the Transfer Agent. For more information, see
"Shareholder account services and privileges" below. THESE TRANSACTIONS HAVE THE
SAME TAX CONSEQUENCES AS ORDINARY SALES AND PURCHASES.

Shares held in employer-sponsored retirement plans may be exchanged into other
American Funds by contacting your plan administrator or recordkeeper. Exchange
redemptions and purchases are processed simultaneously at the share prices next
determined after the exchange order is received (see "Price of shares" above).

FREQUENT TRADING OF FUND SHARES -- As noted in the prospectus, certain
redemptions may trigger a purchase block lasting 30 calendar days under the
fund's "purchase blocking policy." Under this policy, systematic redemptions
will not trigger a purchase block and systematic purchases will not be
prevented. For purposes of this policy, systematic redemptions include, for
example, regular periodic automatic redemptions and statement of intention
escrow share redemptions. Systematic purchases include, for example, regular
periodic automatic purchases and automatic reinvestments of dividends and
capital gain distributions.

OTHER POTENTIALLY ABUSIVE ACTIVITY -- In addition to implementing purchase
blocks, American Funds Service Company will monitor for other types of activity
that could potentially be harmful to the American Funds - for example,
short-term trading activity in multiple funds. When identified, American Funds
Service Company will request that the shareholder discontinue the activity. If
the activity continues, American Funds Service Company will freeze the
shareholder account to prevent all activity other than redemptions of fund
shares.

MOVING BETWEEN SHARE CLASSES

AUTOMATIC CONVERSIONS -- As described more fully in the prospectus, Class
B, 529-B and C shares automatically convert to Class A, 529-A and F shares,
respectively, after a certain period from the purchase date.

MOVING FROM CLASS B TO CLASS A SHARES -- Under the right of reinvestment
policy as described in the prospectus, if you redeem Class B shares during
the contingent deferred sales charge period, you may reinvest the proceeds
in Class A shares without paying a Class A sales charge if you notify
American Funds Service Company and the reinvestment occurs within 90 days
after the date of redemption. If you redeem your Class B shares after the
contingent deferred sales charge period and with the redemption proceeds
you purchase Class A shares, you are still responsible for paying any
applicable Class A sales charges.

MOVING FROM CLASS C TO CLASS A SHARES -- If you redeem Class C shares and
with the redemption proceeds purchase Class A shares, you are still
responsible for paying any Class C contingent deferred sales charges and
applicable Class A sales charges.

American Mutual Fund -- Page 37
<PAGE>

MOVING FROM CLASS F TO CLASS A SHARES -- You can redeem Class F shares held
in a qualified fee-based program and with the redemption proceeds purchase
Class A shares without paying an initial Class A sales charge if all of the
following are met: (a) you are leaving or have left the fee-based program,
(b) you have held the Class F shares in the program for at least one year,
and (c) you notify American Funds Service Company and purchase the Class A
shares within 90 days after redeeming the Class F shares.

MOVING FROM CLASS A TO CLASS F SHARES -- If you are part of a qualified
fee-based program and you wish to redeem your Class A shares and with the
redemption proceeds purchase Class F shares for the program, any Class A
sales charges (including contingent deferred sales charges) that you paid
or are payable will not be credited back to your account.

SALES CHARGES

CLASS A PURCHASES

PURCHASES BY CERTAIN 403(B) PLANS

Individual 403(b) plans may be treated similarly to employer-sponsored
plans for Class A sales charge purposes (i.e., individual participant
accounts are eligible to be aggregated together) if: (a) the American Funds
are principal investment options; (b) the employer facilitates the
enrollment process by, for example, allowing for onsite group enrollment
meetings held during working hours; and (c) there is only one dealer firm
assigned to the plans.

OTHER PURCHASES

Pursuant to a determination of eligibility by a vice president or more
senior officer of the Capital Research and Management Company Fund
Administration Unit, or by his or her designee, Class A shares of the
American Funds stock, stock/bond and bond funds may be sold at net asset
value to:

(1) current or retired directors, trustees, officers and advisory board
members of, and certain lawyers who provide services to, the funds
managed by Capital Research and Management Company, current or retired
employees of Washington Management Corporation, current or retired
employees and partners of The Capital Group Companies, Inc. and its
affiliated companies, certain family members and employees of the
above persons, and trusts or plans primarily for such persons;

(2) currently registered representatives and assistants directly employed
by such representatives, retired registered representatives with
respect to accounts established while active, or full-time employees
(collectively, "Eligible Persons") (and their (a) spouses or
equivalents if recognized under local law, (b) parents and children,
including parents and children in step and adoptive relationships,
sons-in-law and daughters-in-law, and (c) parents-in-law, if the
Eligible Persons or the spouses, children or parents of the Eligible
Persons are listed in the account registration with the
parents-in-law) of dealers who have sales agreements with the
Principal Underwriter (or who clear transactions through such
dealers), plans

American Mutual Fund -- Page 38
<PAGE>

for the dealers, and plans that include as participants only the
Eligible Persons, their spouses, parents and/or children;

(3) currently registered investment advisers ("RIAs") and assistants
directly employed by such RIAs, retired RIAs with respect to accounts
established while active, or full-time employees (collectively,
"Eligible Persons") (and their (a) spouses or equivalents if
recognized under local law, (b) parents and children, including
parents and children in step and adoptive relationships, sons-in-law
and daughters-in-law and (c) parents-in-law, if the Eligible Persons
or the spouses, children or parents of the Eligible Persons are listed
in the account registration with the parents-in-law) of RIA firms that
are authorized to sell shares of the funds, plans for the RIA firms,
and plans that include as participants only the Eligible Persons,
their spouses, parents and/or children;

(4) companies exchanging securities with the fund through a merger,
acquisition or exchange offer;

(5) insurance company separate accounts;

(6) accounts managed by subsidiaries of The Capital Group Companies, Inc.;

(7) The Capital Group Companies, Inc., its affiliated companies and
Washington Management Corporation;

(8) an individual or entity with a substantial business relationship with
The Capital Group Companies, Inc. or its affiliates, or an individual
or entity related or relating to such individual or entity;

(9) wholesalers and full-time employees directly supporting wholesalers
involved in the distribution of insurance company separate accounts
whose underlying investments are managed by any affiliate of The
Capital Group Companies, Inc.; and

(10) full-time employees of banks that have sales agreements with the
Principal Underwriter, who are solely dedicated to directly supporting
the sale of mutual funds.

Shares are offered at net asset value to these persons and organizations
due to anticipated economies in sales effort and expense. Once an account
is established under this net asset value privilege, additional investments
can be made at net asset value for the life of the account.

DEALER COMMISSIONS AND COMPENSATION -- Commissions (up to 1.00%) are paid to
dealers who initiate and are responsible for certain Class A share purchases not
subject to sales charges. These purchases consist of purchases of $1 million or
more, purchases by employer-sponsored defined contribution-type retirement plans
investing $1 million or more or with 100 or more eligible employees, and
purchases made at net asset value by certain retirement plans, endowments and
foundations with assets of $50 million or more. Commissions on such investments
(other than IRA rollover assets that roll over at no sales charge under the
fund's IRA rollover policy as described in the prospectus) are paid to dealers
at the following rates: 1.00% on amounts to $4 million, 0.50% on amounts over $4
million to $10 million and 0.25% on amounts over $10 million. Commissions are
based on cumulative investments and are not annually reset.

American Mutual Fund -- Page 39
<PAGE>

A dealer concession of up to 1% may be paid by the fund under its Class A plan
of distribution to reimburse the Principal Underwriter in connection with dealer
and wholesaler compensation paid by it with respect to investments made with no
initial sales charge.

SALES CHARGE REDUCTIONS AND WAIVERS

REDUCING YOUR CLASS A SALES CHARGE -- As described in the prospectus, there are
various ways to reduce your sales charge when purchasing Class A shares.
Additional information about Class A sales charge reductions is provided below.

STATEMENT OF INTENTION -- By establishing a statement of intention (the
"Statement"), you enter into a nonbinding commitment to purchase shares of
American Funds non-money market funds over a 13-month period and receive
the same sales charge as if all shares had been purchased at once.

When a shareholder elects to use a Statement, shares equal to 5% of the
dollar amount specified in the Statement will be held in escrow in the
shareholder's account out of the initial purchase (or subsequent purchases,
if necessary) by the Transfer Agent. All dividends and any capital gain
distributions on shares held in escrow will be credited to the
shareholder's account in shares (or paid in cash, if requested). If the
intended investment is not completed within the specified Statement period,
the purchaser will remit to the Principal Underwriter the difference
between the sales charge actually paid and the sales charge which would
have been paid if the total of such purchases had been made at a single
time. The dealer assigned to an account at the time of each purchase made
during the Statement period will receive an appropriate commission
adjustment. If the difference is not paid by the close of the Statement
period, the appropriate number of shares held in escrow will be redeemed to
pay such difference. If the proceeds from this redemption are inadequate,
the purchaser will be liable to the Principal Underwriter for the balance
still outstanding.

The Statement may be revised upward at any time during the Statement
period, and such a revision will be treated as a new Statement, except that
the Statement period during which the purchase must be made will remain
unchanged. Accordingly, upon your request, the sales charge paid on
investments made 90 days prior to the Statement revision will be adjusted
to reflect the revised Statement.

The market value of your existing holdings eligible to be aggregated (see
below) as of the day immediately before the start of the Statement period,
may be credited toward satisfying the Statement.

The Statement will be considered completed if the shareholder dies within
the Statement period. Commissions to dealers will not be adjusted or paid
on the difference between the Statement amount and the amount actually
invested before the shareholder's death.

When the trustees of certain retirement plans purchase shares by payroll
deduction, the sales charge for the investments made during the Statement
period will be handled as follows: the total monthly investment will be
multiplied by 13 and then multiplied by 1.5. The market value of existing
American Funds investments (other than shares representing direct purchases
of money market funds) as of the day immediately before the start of the
Statement period, and any rollovers or transfers reasonably anticipated to
be

American Mutual Fund -- Page 40
<PAGE>

invested in non-money market American Funds during the Statement period,
are added to the figure determined above. The sum is the Statement amount
and applicable breakpoint level. On the first investment and all other
investments made pursuant to the Statement, a sales charge will be assessed
according to the sales charge breakpoint thus determined. There will be no
retroactive adjustments in sales charges on investments made during the
Statement period.

Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms and those in the prospectus with
their first purchase.

AGGREGATION -- Qualifying investments for aggregation include those made by
you and your "immediate family" as defined in the prospectus, if all
parties are purchasing shares for their own accounts and/or:

. individual-type employee benefit plan(s), such as an IRA, individual
403(b) plan (see exception in "Purchases by certain 403(b) plans"
under "Sales charges") or single-participant Keogh-type plan;

. business accounts solely controlled by you or your immediate family
(for example, you own the entire business);
. trust accounts established by you or your immediate family (For trusts
with only one primary beneficiary, upon the trustor's death the trust
account may be aggregated with such beneficiary's own accounts; for
trusts with multiple primary beneficiaries, upon the trustor's death
the trustees of the trust may instruct American Funds Service Company
to establish separate trust accounts for each primary beneficiary;
each primary beneficiary's separate trust account may then be
aggregated with such beneficiary's own accounts);

. endowments or foundations established and controlled by you or your
immediate family; or

. CollegeAmerica accounts, which will be aggregated at the account owner
level (Class 529-E accounts may only be aggregated with an eligible
employer plan).

Individual purchases by a trustee(s) or other fiduciary(ies) may also be
aggregated if the investments are:

. for a single trust estate or fiduciary account, including employee
benefit plans other than the individual-type employee benefit plans
described above;

. made for two or more employee benefit plans of a single employer or of
affiliated employers as defined in the 1940 Act, excluding the
individual-type employee benefit plans described above;

. for a diversified common trust fund or other diversified pooled
account not specifically formed for the purpose of accumulating fund
shares;

. for nonprofit, charitable or educational organizations, or any
endowments or foundations established and controlled by such
organizations, or any employer-sponsored retirement plans established
for the benefit of the employees of such organizations, their
endowments, or their foundations; or

. for individually established participant accounts of a 403(b) plan
that is treated similarly to an employer-sponsored plan for sales
charge purposes (see

American Mutual Fund -- Page 41
<PAGE>

"Purchases by certain 403(b) plans" under "Sales charges" above), or
made for two or more such 403(b) plans that are treated similarly to
employer-sponsored plans for sales charge purposes of a single
employer or affiliated employers as defined in the 1940 Act.

Purchases made for nominee or street name accounts (securities held in the
name of an investment dealer or another nominee such as a bank trust
department instead of the customer) may not be aggregated with those made
for other accounts and may not be aggregated with other nominee or street
name accounts unless otherwise qualified as described above.

CONCURRENT PURCHASES -- As described in the prospectus, you may reduce your
Class A sales charge by combining purchases of all classes of shares in the
American Funds, as well as individual holdings in Endowments, American
Legacy variable annuity contracts and variable life insurance policies.
Shares of money market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge also qualify. However,
direct purchases of American Funds money market funds are excluded.

RIGHTS OF ACCUMULATION -- Subject to the limitations described in the
aggregation policy, you may take into account your accumulated holdings in
all share classes of the American Funds, as well as your holdings in
Endowments, to determine your sales charge on investments in accounts
eligible to be aggregated. Subject to your investment dealer's or
recordkeeper's capabilities, your accumulated holdings will be calculated
as the higher of (a) the current value of your existing holdings (the
"market value") or (b) the amount you invested (including reinvested
dividends and capital gains, but excluding capital appreciation) less any
withdrawals (the "cost value"). Depending on the entity on whose books your
account is held, the value of your holdings in that account may not be
eligible for calculation at cost value. For example, the value of accounts
held in nominee or street name are not eligible for calculation at cost
value and instead will be calculated at market value for purposes of rights
of accumulation.

The value of all of your holdings in accounts established in calendar year
2005 or earlier will be assigned an initial cost value equal to the market
value of those holdings as of the last business day of 2005. Thereafter,
the cost value of such accounts will increase or decrease according to
actual investments or withdrawals. You must contact your financial adviser
or American Funds Service Company if you have additional information that
is relevant to the calculation of the value of your holdings.

When determining your American Funds Class A sales charge, if you are not
an employer-sponsored retirement plan, you may also take into account the
market value (as of the end of the week prior to your American Funds
investment) of your individual holdings in various American Legacy variable
annuity contracts and variable life insurance policies. An
employer-sponsored retirement plan may also take into account the market
value of its investments in American Legacy Retirement Investment Plans.
Direct purchases of American Funds money market funds are excluded. If you
make a gift of American Funds Class A shares, upon your request, you may
purchase the shares at the sales charge discount allowed under rights of
accumulation of all of your American Funds and American Legacy accounts.

American Mutual Fund -- Page 42
<PAGE>

CDSC WAIVERS FOR CLASS A, B AND C SHARES -- As noted in the prospectus, a
contingent deferred sales charge ("CDSC") may be waived for redemptions due to
death or postpurchase disability of a shareholder (this generally excludes
accounts registered in the names of trusts and other entities). In the case of
joint tenant accounts, if one joint tenant dies, a surviving joint tenant, at
the time he or she notifies the Transfer Agent of the other joint tenant's death
and removes the decedent's name from the account, may redeem shares from the
account without incurring a CDSC. Redemptions made after the Transfer Agent is
notified of the death of a joint tenant will be subject to a CDSC.

In addition, a CDSC may be waived for the following types of transactions, if
together they do not exceed 12% of the value of an "account" (defined below)
annually (the "12% limit"):

. Required minimum distributions taken from retirement accounts upon the
shareholder's attainment of age 70-1/2 (required minimum distributions
that continue to be taken by the beneficiary(ies) after the account
owner is deceased also qualify for a waiver).

. Redemptions through a systematic withdrawal plan (SWP) (see "Automatic
withdrawals" under "Shareholder account services and privileges"
below). For each SWP payment, assets that are not subject to a CDSC,
such as appreciation on shares and shares acquired through
reinvestment of dividends and/or capital gain distributions, will be
redeemed first and will count toward the 12% limit. If there is an
insufficient amount of assets not subject to a CDSC to cover a
particular SWP payment, shares subject to the lowest CDSC will be
redeemed next until the 12% limit is reached. Any dividends and/or
capital gain distributions taken in cash by a shareholder who receives
payments through a SWP will also count toward the 12% limit. In the
case of a SWP, the 12% limit is calculated at the time a systematic
redemption is first made, and is recalculated at the time each
additional systematic redemption is made. Shareholders who establish a
SWP should be aware that the amount of a payment not subject to a CDSC
may vary over time depending on fluctuations in the value of their
accounts. This privilege may be revised or terminated at any time.

For purposes of this paragraph, "account" means:

. in the case of Class A shares, your investment in Class A shares of
all American Funds (investments representing direct purchases of
American Funds money market funds are excluded);

. in the case of Class B shares, your investment in Class B shares of
the particular fund from which you are making the redemption; and

. in the case of Class C shares, your investment in Class C shares of
the particular fund from which you are making the redemption.

CDSC waivers are allowed only in the cases listed here and in the prospectus.
For example, CDSC waivers will not be allowed on redemptions of Class 529-B and
529-C shares due to termination of CollegeAmerica; a determination by the
Internal Revenue Service that CollegeAmerica does not qualify as a qualified
tuition program under the Code; proposal or enactment of law that eliminates or
limits the tax-favored status of CollegeAmerica; or the Virginia College Savings
Plan eliminating the fund as an option for additional investment within
CollegeAmerica.

American Mutual Fund -- Page 43
<PAGE>

SELLING SHARES

The methods for selling (redeeming) shares are described more fully in the
prospectus. If you wish to sell your shares by contacting American Funds Service
Company directly, any such request must be signed by the registered
shareholders.

A signature guarantee may be required for certain redemptions. In such an event,
your signature may be guaranteed by a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association or credit
union that is an eligible guarantor institution. The Transfer Agent reserves the
right to require a signature guarantee on any redemptions.

Additional documentation may be required for sales of shares held in corporate,
partnership or fiduciary accounts. You must include with your written request
any shares you wish to sell that are in certificate form.

If you sell Class A, B or C shares and request a specific dollar amount to be
sold, we will sell sufficient shares so that the sale proceeds, after deducting
any applicable CDSC, equals the dollar amount requested.

Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the 1940 Act), sale proceeds will be paid on or before the
seventh day following receipt and acceptance of an order. Interest will not
accrue or be paid on amounts that represent uncashed distribution or redemption
checks.

You may request that redemption proceeds of $1,000 or more from money market
funds be wired to your bank by writing American Funds Service Company. A
signature guarantee is required on all requests to wire funds.

SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

The following services and privileges are generally available to all
shareholders. However, certain services and privileges may not be available for
Class 529 shareholders or if your account is held with an investment dealer or
through an employer-sponsored retirement plan.

AUTOMATIC INVESTMENT PLAN -- An automatic investment plan enables you to make
monthly or quarterly investments in the American Funds through automatic debits
from your bank account. To set up a plan, you must fill out an account
application and specify the amount that you would like to invest ($50 minimum)
and the date on which you would like your investments to occur. The plan will
begin within 30 days after your account application is received. Your bank
account will be debited on the day or a few days before your investment is made,
depending on the bank's capabilities. The Transfer Agent will then invest your
money into the fund you specified on or around the date you specified. If the
date you specified falls on a weekend or holiday, your money will be invested on
the following business day. However, if the following business day falls in the
next month, your money will be invested on the business day immediately
preceding the weekend or holiday. If your bank account cannot be debited due to
insufficient funds, a stop-payment or the closing of the account, the plan may
be terminated and the related

American Mutual Fund -- Page 44
<PAGE>

investment reversed. You may change the amount of the investment or discontinue
the plan at any time by contacting the Transfer Agent.

AUTOMATIC REINVESTMENT -- Dividends and capital gain distributions are
reinvested in additional shares of the same class and fund at net asset value
unless you indicate otherwise on the account application. You also may elect to
have dividends and/or capital gain distributions paid in cash by informing the
fund, the Transfer Agent or your investment dealer. Dividends and capital gain
distributions paid to retirement plan shareholders or shareholders of the 529
share classes will be automatically reinvested.

If you have elected to receive dividends and/or capital gain distributions in
cash, and the postal or other delivery service is unable to deliver checks to
your address of record, or you do not respond to mailings from American Funds
Service Company with regard to uncashed distribution checks, your distribution
option will automatically be converted to having all dividends and other
distributions reinvested in additional shares.

CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS -- For all share classes,
except the 529 classes of shares, you may cross-reinvest dividends and capital
gains (distributions) into other American Funds in the same share class at net
asset value, subject to the following conditions:

(1) the aggregate value of your account(s) in the fund(s) paying distributions
equals or exceeds $5,000 (this is waived if the value of the account in the fund
receiving the distributions equals or exceeds that fund's minimum initial
investment requirement);

(2) if the value of the account of the fund receiving distributions is below
the minimum initial investment requirement, distributions must be automatically
reinvested; and

(3) if you discontinue the cross-reinvestment of distributions, the value of
the account of the fund receiving distributions must equal or exceed the minimum
initial investment requirement. If you do not meet this requirement within 90
days of notification, the fund has the right to automatically redeem the
account.

AUTOMATIC EXCHANGES -- For all share classes, you may automatically exchange
shares of the same class in amounts of $50 or more among any of the American
Funds on any day (or preceding business day if the day falls on a nonbusiness
day) of each month you designate.

AUTOMATIC WITHDRAWALS -- For all share classes, except the R and 529 classes of
shares, you may automatically withdraw shares from any of the American Funds.
You can make automatic withdrawals of $50 or more as often as you wish if your
account is worth at least $10,000, or up to four times a year for an account
worth at least $5,000. You can designate the day of each period for withdrawals
and request that checks be sent to you or someone else. Withdrawals may also be
electronically deposited to your bank account. The Transfer Agent will withdraw
your money from the fund you specify on or around the date you specify. If the
date you specified falls on a weekend or holiday, the redemption will take place
on the previous business day. However, if the previous business day falls in the
preceding month, the redemption will take place on the following business day
after the weekend or holiday.

Withdrawal payments are not to be considered as dividends, yield or income.
Automatic investments may not be made into a shareholder account from which
there are automatic withdrawals. Withdrawals of amounts exceeding reinvested
dividends and distributions and

American Mutual Fund -- Page 45
<PAGE>

increases in share value would reduce the aggregate value of the shareholder's
account. The Transfer Agent arranges for the redemption by the fund of
sufficient shares, deposited by the shareholder with the Transfer Agent, to
provide the withdrawal payment specified.

ACCOUNT STATEMENTS -- Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments, will be reflected on regular confirmation statements from the
Transfer Agent. Dividend and capital gain reinvestments, purchases through
automatic investment plans and certain retirement plans, as well as automatic
exchanges and withdrawals will be confirmed at least quarterly.

AMERICAN FUNDSLINE AND AMERICANFUNDS.COM -- You may check your share balance,
the price of your shares or your most recent account transaction; redeem shares
(up to $75,000 per American Funds shareholder each day) from nonretirement plan
accounts; or exchange shares around the clock with American FundsLine or using
americanfunds.com. To use American FundsLine, call 800/325-3590 from a
TouchTone(TM) telephone. Redemptions and exchanges through American FundsLine
and americanfunds.com are subject to the conditions noted above and in
"Telephone and Internet purchases, redemptions and exchanges" below. You will
need your fund number (see the list of the American Funds under "General
information -- fund numbers"), personal identification number (generally the
last four digits of your Social Security number or other tax identification
number associated with your account) and account number.

Generally, all shareholders are automatically eligible to use these services.
However, if you are not currently authorized to do so, you may complete an
American FundsLink Authorization Form. Once you establish this privilege, you,
your financial adviser or any person with your account information may use these
services.

TELEPHONE AND INTERNET PURCHASES, REDEMPTIONS AND EXCHANGES -- By using the
telephone (including American FundsLine) or the Internet (including
americanfunds.com), or fax purchase, redemption and/or exchange options, you
agree to hold the fund, the Transfer Agent, any of its affiliates or mutual
funds managed by such affiliates, and each of their respective directors,
trustees, officers, employees and agents harmless from any losses, expenses,
costs or liability (including attorney fees) that may be incurred in connection
with the exercise of these privileges. Generally, all shareholders are
automatically eligible to use these services. However, you may elect to opt out
of these services by writing the Transfer Agent (you may also reinstate them at
any time by writing the Transfer Agent). If the Transfer Agent does not employ
reasonable procedures to confirm that the instructions received from any person
with appropriate account information are genuine, it and/or the fund may be
liable for losses due to unauthorized or fraudulent instructions. In the event
that shareholders are unable to reach the fund by telephone because of technical
difficulties, market conditions or a natural disaster, redemption and exchange
requests may be made in writing only.

CHECKWRITING -- You may establish check writing privileges for Class A shares
(but not Class 529-A shares) of American Funds money market funds. This can be
done by using an account application. If you request check writing privileges,
you will be provided with checks that you may use to draw against your account.
These checks may be made payable to anyone you designate and must be signed by
the authorized number of registered shareholders exactly as indicated on your
account application.

REDEMPTION OF SHARES -- The fund's Articles of Incorporation permit the fund to
direct the Transfer Agent to redeem the shares of any shareholder for their then
current net asset value per

American Mutual Fund -- Page 46
<PAGE>

share if at such time the shareholder of record owns shares having an aggregate
net asset value of less than the minimum initial investment amount required of
new shareholders as set forth in the fund's current registration statement under
the 1940 Act, and subject to such further terms and conditions as the Board of
Directors of the fund may from time to time adopt.

While payment of redemptions normally will be in cash, the fund's Articles of
Incorporation permit payment of the redemption price wholly or partly in
securities or other property included in the assets belonging to the fund when
in the opinion of the fund's Board of Directors, which shall be conclusive,
conditions exist which make payment wholly in cash unwise or undesirable.

SHARE CERTIFICATES -- Shares are credited to your account and certificates are
not issued unless you request them by contacting the Transfer Agent.
Certificates are not available for the 529 or R share classes.

GENERAL INFORMATION

CUSTODIAN OF ASSETS -- Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by JPMorgan Chase Bank, 270 Park Avenue, New York, NY 10017-2070, as
Custodian. If the fund holds non-U.S. securities, the Custodian may hold these
securities pursuant to subcustodial arrangements in non-U.S. banks or non-U.S.
branches of U.S. banks.

TRANSFER AGENT -- American Funds Service Company, a wholly owned subsidiary of
the investment adviser, maintains the records of shareholder accounts, processes
purchases and redemptions of the fund's shares, acts as dividend and capital
gain distribution disbursing agent, and performs other related shareholder
service functions. The principal office of American Funds Service Company is
located at 135 South State College Boulevard, Brea, CA 92821-5823. American
Funds Service Company was paid a fee of $10,053,000 for Class A shares and
$517,000 for Class B shares for the 2005 fiscal year.

In the case of certain shareholder accounts, third parties who may be
unaffiliated with the investment adviser provide transfer agency and shareholder
services in place of American Funds Service Company. These services are rendered
under agreements with American Funds Service Company or its affiliates and the
third parties receive compensation according to such agreements. Compensation
for transfer agency and shareholder services, whether paid to American Funds
Service Company or such third parties, is ultimately paid from fund assets and
is reflected in the expenses of the fund as disclosed in the prospectus.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -- Deloitte & Touche LLP, 695 Town
Center Drive, Costa Mesa, California 92626, serves as the fund's independent
registered public accounting firm, providing audit services, preparation of tax
returns and review of certain documents to be filed with the Securities and
Exchange Commission. The financial statements included in this statement of
additional information from the annual report have been so included in reliance
on the report of Deloitte & Touche LLP, independent registered public accounting
firm, given on the authority of said firm as experts in accounting and auditing.
The selection of the fund's independent registered public accounting firm is
reviewed and determined annually by the Board of Directors.

INDEPENDENT LEGAL COUNSEL -- O'Melveny & Myers LLP, 400 South Hope Street, Los
Angeles, CA 90071, serves as counsel for the fund and for Non-Interested
Directors in their capacities as

American Mutual Fund -- Page 47
<PAGE>

such. Certain legal matters in connection with the capital shares offered by the
prospectus have been passed upon for the fund by O'Melveny & Myers LLP. Counsel
does not provide legal services to the fund's investment adviser or any of its
affiliated companies or control persons. A determination with respect to the
independence of the fund's "independent legal counsel" will be made at least
annually by the Non-Interested Directors of the fund, as prescribed by the 1940
Act and related rules.

PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS -- The fund's fiscal
year ends on October 31. Shareholders are provided updated prospectuses annually
and at least semiannually with reports showing the summary investment portfolio,
financial statements and other information. The fund's annual financial
statements are audited by the fund's independent registered public accounting
firm, Deloitte & Touche LLP. In addition, shareholders may also receive proxy
statements for the fund. In an effort to reduce the volume of mail shareholders
receive from the fund when a household owns more than one account, the Transfer
Agent has taken steps to eliminate duplicate mailings of prospectuses,
shareholder reports and proxy statements. To receive additional copies of a
prospectus, report or proxy statement, shareholders should contact the Transfer
Agent.

CODES OF ETHICS -- The fund and Capital Research and Management Company and its
affiliated companies, including the fund's Principal Underwriter, have adopted
codes of ethics that allow for personal investments, including securities in
which the fund may invest from time to time. These codes include a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; preclearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; blackout periods on personal
investing for certain investment personnel; ban on short-term trading profits
for investment personnel; limitations on service as a director of publicly
traded companies; and disclosure of personal securities transactions.

LEGAL PROCEEDINGS -- On February 16, 2005, the NASD filed an administrative
complaint against the Principal Underwriter. The complaint alleges violations of
certain NASD rules by the Principal Underwriter with respect to the selection of
broker-dealer firms that buy and sell securities for mutual fund investment
portfolios. The complaint seeks sanctions, restitution and disgorgement.

On March 24, 2005, the investment adviser and Principal Underwriter filed a
complaint against the Attorney General of the State of California in Los Angeles
County Superior Court. The complaint alleged that the Attorney General
threatened to take enforcement actions against the investment adviser and
Principal Underwriter that are without merit and preempted by federal law. On
the same day, following the filing of the investment adviser's and Principal
Underwriter's complaint, the Attorney General of the State of California filed a
complaint against the Principal Underwriter and investment adviser. Filed in Los
Angeles County Superior Court, the Attorney General's complaint alleged
violations of certain sections of the California Corporations Code with respect
to so-called "revenue sharing" disclosures in mutual fund prospectuses and
statements of additional information. On November 22, 2005, the Los Angeles
Superior Court dismissed the Attorney General's complaint. On February 7, 2006,
the Attorney General filed a notice that he intends to appeal the Superior
Court's decision to California's Court of Appeal for the Second Appellate
District.

The investment adviser and Principal Underwriter believe that the likelihood
that these matters could have a material adverse effect on the fund or on the
ability of the investment adviser or

American Mutual Fund -- Page 48
<PAGE>

Principal Underwriter to perform their contracts with the fund is remote. The
SEC is conducting a related investigation as of the date of this statement of
additional information. The investment adviser and Principal Underwriter are
cooperating fully. In addition, a class action lawsuit has been filed in the
U.S. District Court, Central District of California, relating to these matters.
Although the suit was dismissed in its entirety, an amended complaint relating
to management fees has been filed. The investment adviser believes that this
suit is without merit and will defend itself vigorously. Further updates on
these issues will be available on the American Funds website (americanfunds.com)
under "American Funds regulatory matters."

OTHER INFORMATION -- The financial statements including the investment portfolio
and the report of the fund's independent registered public accounting firm
contained in the annual report are included in this statement of additional
information. The following information is not included in the annual report:

DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND MAXIMUM OFFERING PRICE
PER SHARE FOR CLASS A SHARES -- OCTOBER 31, 2005

Net asset value and redemption price per share
(Net assets divided by shares outstanding). . $26.52
Maximum offering price per share
(100/94.25 of net asset value per share,
which takes into account the fund's current maximum
sales charge). . . . . . . . . . . . . . . . $28.14

FUND NUMBERS -- Here are the fund numbers for use with our automated telephone
line, American FundsLine/(R)/, or when making share transactions:

FUND NUMBERS
------------------------------------
FUND CLASS A CLASS B CLASS C CLASS F
-----------------------------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . . 002 202 302 402
American Balanced Fund/(R)/ . . . . . . . . . . . . . . . . . 011 211 311 411
American Mutual Fund/(R)/ . . . . . . . . . . . . . . . . . . 003 203 303 403
Capital Income Builder/(R)/ . . . . . . . . . . . . . . . . . 012 212 312 412
Capital World Growth and Income Fund/SM/ . . . . . . . . . . . 033 233 333 433
EuroPacific Growth Fund/(R)/ . . . . . . . . . . . . . . . . . 016 216 316 416
Fundamental Investors/SM/ . . . . . . . . . . . . . . . . . . 010 210 310 410
The Growth Fund of America/(R)/ . . . . . . . . . . . . . . . 005 205 305 405
The Income Fund of America/(R)/ . . . . . . . . . . . . . . . 006 206 306 406
The Investment Company of America/(R)/ . . . . . . . . . . . . 004 204 304 404
The New Economy Fund/(R)/ . . . . . . . . . . . . . . . . . . 014 214 314 414
New Perspective Fund/(R)/ . . . . . . . . . . . . . . . . . . 007 207 307 407
New World Fund/SM/ . . . . . . . . . . . . . . . . . . . . . . 036 236 336 436
SMALLCAP World Fund/(R)/ . . . . . . . . . . . . . . . . . . . 035 235 335 435
Washington Mutual Investors Fund/SM/ . . . . . . . . . . . . . 001 201 301 401
BOND FUNDS
American High-Income Municipal Bond Fund/(R)/ . . . . . . . . 040 240 340 440
American High-Income Trust/SM/ . . . . . . . . . . . . . . . . 021 221 321 421
The Bond Fund of America/SM/ . . . . . . . . . . . . . . . . . 008 208 308 408
Capital World Bond Fund/(R)/ . . . . . . . . . . . . . . . . . 031 231 331 431
Intermediate Bond Fund of America/SM/ . . . . . . . . . . . . 023 223 323 423
Limited Term Tax-Exempt Bond Fund of America/SM/ . . . . . . . 043 243 343 443
The Tax-Exempt Bond Fund of America/(R)/ . . . . . . . . . . . 019 219 319 419
The Tax-Exempt Fund of California/(R)/* . . . . . . . . . . . 020 220 320 420
The Tax-Exempt Fund of Maryland/(R)/* . . . . . . . . . . . . 024 224 324 424
The Tax-Exempt Fund of Virginia/(R)/* . . . . . . . . . . . . 025 225 325 425
U.S. Government Securities Fund/SM/ . . . . . . . . . . . . . 022 222 322 422
MONEY MARKET FUNDS
The Cash Management Trust of America/(R)/ . . . . . . . . . . 009 209 309 409
The Tax-Exempt Money Fund of America/SM/ . . . . . . . . . . . 039 N/A N/A N/A
The U.S. Treasury Money Fund of America/SM/ . . . . . . . . . 049 N/A N/A N/A
___________
*Qualified for sale only in certain jurisdictions.

American Mutual Fund -- Page 49
<PAGE>

FUND NUMBERS
---------------------------------------------
CLASS CLASS CLASS CLASS CLASS
FUND 529-A 529-B 529-C 529-E 529-F
-------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund . . . . . . . . . . 1002 1202 1302 1502 1402
American Balanced Fund . . . . 1011 1211 1311 1511 1411
American Mutual Fund . . . . . 1003 1203 1303 1503 1403
Capital Income Builder . . . . 1012 1212 1312 1512 1412
Capital World Growth and Income
Fund . . . . . . . . . . . . . 1033 1233 1333 1533 1433
EuroPacific Growth Fund . . . . 1016 1216 1316 1516 1416
Fundamental Investors . . . . . 1010 1210 1310 1510 1410
The Growth Fund of America . . 1005 1205 1305 1505 1405
The Income Fund of America . . 1006 1206 1306 1506 1406
The Investment Company of
America . . . . . . . . . . . . 1004 1204 1304 1504 1404
The New Economy Fund . . . . . 1014 1214 1314 1514 1414
New Perspective Fund . . . . . 1007 1207 1307 1507 1407
New World Fund . . . . . . . . 1036 1236 1336 1536 1436
SMALLCAP World Fund . . . . . . 1035 1235 1335 1535 1435
Washington Mutual Investors Fund
. . . . . . . . . . . . . . . 1001 1201 1301 1501 1401
BOND FUNDS
American High-Income Trust . . 1021 1221 1321 1521 1421
The Bond Fund of America . . . 1008 1208 1308 1508 1408
Capital World Bond Fund . . . . 1031 1231 1331 1531 1431
Intermediate Bond Fund of
America . . . . . . . . . . . . 1023 1223 1323 1523 1423
U.S. Government Securities Fund 1022 1222 1322 1522 1422
MONEY MARKET FUND
The Cash Management Trust of
America . . . . . . . . . . . . 1009 1209 1309 1509 1409

American Mutual Fund -- Page 50
<PAGE>

FUND NUMBERS
----------------------------------------
CLASS CLASS CLASS CLASS CLASS
FUND R-1 R-2 R-3 R-4 R-5
-------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund . . . . . . . . . . . . . 2102 2202 2302 2402 2502
American Balanced Fund . . . . . . . 2111 2211 2311 2411 2511
American Mutual Fund . . . . . . . . 2103 2203 2303 2403 2503
Capital Income Builder . . . . . . . 2112 2212 2312 2412 2512
Capital World Growth and Income Fund 2133 2233 2333 2433 2533
EuroPacific Growth Fund . . . . . . 2116 2216 2316 2416 2516
Fundamental Investors . . . . . . . 2110 2210 2310 2410 2510
The Growth Fund of America . . . . . 2105 2205 2305 2405 2505
The Income Fund of America . . . . . 2106 2206 2306 2406 2506
The Investment Company of America . 2104 2204 2304 2404 2504
The New Economy Fund . . . . . . . . 2114 2214 2314 2414 2514
New Perspective Fund . . . . . . . . 2107 2207 2307 2407 2507
New World Fund . . . . . . . . . . . 2136 2236 2336 2436 2536
SMALLCAP World Fund . . . . . . . . 2135 2235 2335 2435 2535
Washington Mutual Investors Fund . . 2101 2201 2301 2401 2501
BOND FUNDS
American High-Income Municipal Bond
Fund . . . . . . . . . . . . . . . . N/A N/A N/A N/A 2540
American High-Income Trust . . . . . 2121 2221 2321 2421 2521
The Bond Fund of America . . . . . . 2108 2208 2308 2408 2508
Capital World Bond Fund . . . . . . 2131 2231 2331 2431 2531
Intermediate Bond Fund of America . 2123 2223 2323 2423 2523
Limited Term Tax-Exempt Bond Fund of
America. . . . . . . . . . . . . . . N/A N/A N/A N/A 2543
The Tax-Exempt Bond Fund of America N/A N/A N/A N/A 2519
The Tax-Exempt Fund of California* . N/A N/A N/A N/A 2520
The Tax-Exempt Fund of Maryland* . . N/A N/A N/A N/A 2524
The Tax-Exempt Fund of Virginia* . . N/A N/A N/A N/A 2525
U.S. Government Securities Fund . . 2122 2222 2322 2422 2522
MONEY MARKET FUNDS
The Cash Management Trust of America 2109 2209 2309 2409 2509
The Tax-Exempt Money Fund of America N/A N/A N/A N/A 2539
The U.S. Treasury Money Fund of
America . . . . . . . . . . . . . . 2149 2249 2349 2449 2549
___________
*Qualified for sale only in certain
jurisdictions.

American Mutual Fund -- Page 51


Statement of assets and liabilities at October 31, 2005 (dollars and shares in thousands, except per-share amounts)


Assets:
Investment securities at market (cost: $14,036,051)			$	16,289,781
Cash				180
Receivables for:
Sales of investments	$	16,774
Sales of fund's shares		22,179
Dividends and interest		26,627		65,580
				16,355,541
Liabilities:
Payables for:
Purchases of investments		9,504
Repurchases of fund's shares		13,964
Investment advisory services		3,200
Services provided by affiliates		7,260
Deferred Directors' compensation		1,758
Other fees and expenses		27		35,713
Net assets at October 31, 2005			$	16,319,828

Net assets consist of:
Capital paid in on shares of capital stock			$	13,441,449
Undistributed net investment income				70,363
Undistributed net realized gain				554,286
Net unrealized appreciation				2,253,730
Net assets at October 31, 2005			$	16,319,828

Total authorized capital stock - 750,000 shares, $0.001 par value (615,745 total shares outstanding)
	Net assets		Shares outstanding		Net asset value per share (1)

Class A	$	13,850,397		522,187	$	26.52
Class B		594,541		22,558		26.36
Class C		666,320		25,323		26.31
Class F		434,048		16,401		26.46
Class 529-A		150,726		5,689		26.50
Class 529-B		31,843		1,205		26.42
Class 529-C		47,498		1,798		26.42
Class 529-E		8,225		311		26.44
Class 529-F		2,888		109		26.52
Class R-1		11,855		449		26.38
Class R-2		99,241		3,765		26.36
Class R-3		180,954		6,851		26.41
Class R-4		43,085		1,627		26.48
Class R-5		198,207		7,472		26.53

Statement of operationsfor the year ended October 31, 2005	(dollars in thousands)

Investment income:
Income:
Dividends (net of non-U.S. withholding tax of $406)	$	332,446
Interest		72,492	$	404,938

Fees and expenses:(1)
Investment advisory services		40,923
Distribution services		44,661
Transfer agent services		10,570
Administrative services		3,049
Reports to shareholders		471
Registration statement and prospectus		681
Postage, stationery and supplies		1,221
Directors' compensation		478
Auditing and legal		173
Custodian		98
State and local taxes		133
Other		119
Total fees and expenses before reimbursements/waivers		102,577
Less reimbursement/waiver of fees and expenses:
Investment advisory services		3,269
Administrative services		177
Total fees and expenses after reimbursements/waivers				99,131
Net investment income				305,807

Net realized gain and change in unrealized appreciation on investments:
Net realized gain on investments		590,061
Net change in unrealized appreciation on investments		200,291
Net realized gain and change in unrealized appreciation on investments				790,352
Net increase in net assets resulting from operations			$	1,096,159

Statements of changes in net assets	(dollars in thousands)

		Year ended October 31
		2005			2004
Operations:
Net investment income	$	305,807		$	236,159
Net realized gain on investments		590,061			782
Net change in unrealized appreciation on investments		200,291			971,758
Net increase in net assets resulting from operations		1,096,159			1,208,699

Dividends and distributions paid to shareholders:
Dividends from net investment income		(269,575	)		(224,102	)
Distributions from net realized gain on investments		(27,858	)		(42,043	)
Total dividends and distributions paid to shareholders		(297,433	)		(266,145	)

Capital share transactions		1,708,978			2,178,397

Total increase in net assets		2,507,704			3,120,951

Net assets:
Beginning of year		13,812,124			10,691,173
End of year (including undistributed net investment income:
$70,363 and $34,159, respectively)	$	16,319,828		$	13,812,124


See Notes to Financial Statements

Undistributed net investment income	$	72,121
Undistributed long-term capital gains		561,741
Gross unrealized appreciation on investment securities		2,721,377
Gross unrealized depreciation on investment securities		(474,356	)
Net unrealized appreciation on investment securities		2,247,021

October 31, 2005

					Market value
Common stocks — 81.78%		Shares			(000	)

ENERGY — 7.11%
BJ Services Co.		1,800,000		$	62,550
Chevron Corp.		3,371,177			192,393
ConocoPhillips		2,633,178			172,157
Devon Energy Corp.		2,000,000			120,760
Exxon Mobil Corp.		3,335,000			187,227
Halliburton Co.		1,200,000			70,920
Marathon Oil Corp.		4,000,000			240,640
Schlumberger Ltd.		440,200			39,957
Sunoco, Inc.		1,000,000			74,500
					1,161,104

MATERIALS — 4.75%
Air Products and Chemicals, Inc.		1,200,000			68,688
Alcoa Inc.		3,250,000			78,943
Ashland Inc.		900,000			48,159
Dow Chemical Co.		977,250			44,817
E.I. du Pont de Nemours and Co.		1,700,000			70,873
Georgia-Pacific Corp.		1,900,000			61,807
International Paper Co.		2,350,000			68,573
MeadWestvaco Corp.		4,588,000			120,297
PPG Industries, Inc.		750,000			44,977
Praxair, Inc.		1,400,000			69,174
Sonoco Products Co.		2,359,000			66,760
Weyerhaeuser Co.		500,000			31,670
					774,738

INDUSTRIALS — 11.57%
3M Co.		700,000			53,186
Avery Dennison Corp.		2,275,000			128,879
Boeing Co.		750,000			48,480
Caterpillar Inc.		700,000			36,813
Emerson Electric Co.		1,350,000			93,892
General Dynamics Corp.		185,000			21,516
General Electric Co.		9,950,000			337,405
Lockheed Martin Corp.		1,200,000			72,672
Manpower Inc.		2,250,000			101,880
Norfolk Southern Corp.		5,882,000			236,456
Northrop Grumman Corp.		1,550,000			83,158
Pitney Bowes Inc.		1,850,000			77,848
R.R. Donnelley & Sons Co.		2,265,000			79,320
Tyco International Ltd.		6,031,200			159,163
Union Pacific Corp.		350,000		$	24,213
United Parcel Service, Inc., Class B		1,450,000			105,763
United Technologies Corp.		3,400,000			174,352
Waste Management, Inc.		1,800,000			53,118
					1,888,114

CONSUMER DISCRETIONARY — 9.92%
Carnival Corp., units		875,000			43,461
Clear Channel Communications, Inc.		4,500,000			136,890
Dana Corp.		4,170,000			31,317
Dollar General Corp.		5,000,000			97,200
E.W. Scripps Co., Class A		800,000			36,640
Gannett Co., Inc.		500,000			31,330
Gap, Inc.		1,500,000			25,920
General Motors Corp.		3,165,000			86,721
Genuine Parts Co.		600,000			26,622
Harley-Davidson Motor Co.		1,200,000			59,436
Johnson Controls, Inc.		3,145,600			214,058
Knight-Ridder, Inc.		500,000			26,690
Leggett & Platt, Inc.		5,945,000			119,138
Lowe's Companies, Inc.		810,000			49,224
Magna International Inc., Class A		1,780,000			124,102
Mattel, Inc.		6,000,000			88,500
NIKE, Inc., Class B		300,000			25,215
ServiceMaster Co.		4,750,000			59,755
Target Corp.		1,700,000			94,673
TJX Companies, Inc.		6,850,000			147,480
VF Corp.		1,150,000			60,087
Walt Disney Co.		1,400,000			34,118
					1,618,577

CONSUMER STAPLES — 4.67%
Albertson’s, Inc.		3,000,000			75,330
Avon Products, Inc.		1,800,000			48,582
Coca-Cola Co.		3,050,000			130,479
General Mills, Inc.		600,000			28,956
H.J. Heinz Co.		3,350,000			118,925
Kimberly-Clark Corp.		1,110,000			63,092
Kraft Foods Inc., Class A		700,000			19,810
PepsiCo, Inc.		1,370,000			80,940
Sara Lee Corp.		1,500,000			26,775
Walgreen Co.		2,100,000			95,403
Wal-Mart Stores, Inc.		1,550,000			73,331
					761,623

HEALTH CARE — 7.43%
Abbott Laboratories		5,800,000			249,690
Becton, Dickinson and Co.		600,000			30,450
Bristol-Myers Squibb Co.		7,907,200			167,395
Eli Lilly and Co.		4,330,000			215,591
Johnson & Johnson		600,000			37,572
McKesson Corp.		1,350,000			61,331
Medtronic, Inc.		1,250,000			70,825
Merck & Co., Inc.		4,750,000			134,045
Pfizer Inc		700,000		$	15,218
Schering-Plough Corp.		3,475,000			70,681
Wyeth		3,598,000			160,327
					1,213,125

FINANCIALS — 16.53%
Allstate Corp.		1,200,000			63,348
American International Group, Inc.		2,829,000			183,319
Aon Corp.		3,300,000			111,705
Bank of America Corp.		4,832,812			211,387
Bank of New York Co., Inc.		3,250,000			101,693
Citigroup Inc.		7,910,000			362,120
Fannie Mae		4,935,000			234,511
Freddie Mac		3,150,000			193,252
J.P. Morgan Chase & Co.		5,446,000			199,433
Jefferson-Pilot Corp.		1,471,100			80,734
Lincoln National Corp.		1,167,900			59,107
Marsh & McLennan Companies, Inc.		1,600,300			46,649
St. Paul Travelers Companies, Inc.		3,650,000			164,359
State Street Corp.		1,000,000			55,230
SunTrust Banks, Inc.		1,525,000			110,532
U.S. Bancorp		3,650,000			107,967
UnumProvident Corp.		8,400,000			170,436
Washington Mutual, Inc.		3,550,000			140,580
Wells Fargo & Co.		1,668,750			100,459
					2,696,821

INFORMATION TECHNOLOGY — 6.92%
Automatic Data Processing, Inc.		750,000			34,995
First Data Corp.		1,200,000			48,540
Hewlett-Packard Co.		10,200,000			286,008
Intel Corp.		1,900,000			44,650
International Business Machines Corp.		3,635,000			297,634
Linear Technology Corp.		1,050,000			34,870
Microchip Technology Inc.		4,445,900			134,133
Microsoft Corp.		7,000,000			179,900
Texas Instruments Inc.		2,400,000			68,520
					1,129,250

TELECOMMUNICATION SERVICES — 5.30%
ALLTEL Corp.		1,000,000			61,860
AT&T Corp.		7,434,600			147,056
BellSouth Corp.		10,000,000			260,200
SBC Communications Inc.		6,100,000			145,485
Sprint Nextel Corp.		6,700,000			156,177
Verizon Communications Inc.		3,000,000			94,530
					865,308

UTILITIES — 6.48%
Ameren Corp.		1,883,680			99,082
American Electric Power Co., Inc.		2,935,000			111,413
Dominion Resources, Inc.		850,000			64,668
Duke Energy Corp.		4,800,000			127,104
Exelon Corp.		2,548,400			132,593
FirstEnergy Corp.		1,620,000			76,950
PPL Corp.		1,724,000			54,030
Progress Energy, Inc.		950,000		$	41,410
Public Service Enterprise Group Inc.		800,000			50,312
Questar Corp.		1,500,000			118,125
Southern Co.		2,700,000			94,473
Xcel Energy Inc.		4,745,000			86,976
					1,057,136

MISCELLANEOUS — 1.10%
Other common stocks in initial period of acquisition					180,105


Total common stocks (cost: $11,074,210,000)					13,345,901




Convertible securities — 0.48%		Shares or principal amount

INDUSTRIALS — 0.08%
Tyco International Group SA, Series B, 3.125% convertible debentures 2023	$	10,000,000			12,838


CONSUMER DISCRETIONARY — 0.15%
Ford Motor Co. Capital Trust II 6.50% cumulative convertible trust preferred 2032		756,430			24,123


HEALTH CARE — 0.08%
Baxter International Inc. 7.00% convertible preferred 2006		250,000 units			13,542


FINANCIALS — 0.17%
Chubb Corp. 7.00% convertible preferred 2005		400,000 units			13,476
XL Capital Ltd. 6.50% ACES convertible preferred 2007		700,000 units			15,043
					28,519

Total convertible securities (cost: $97,333,000)					79,022




Bonds & notes — 1.24%		Principal amount (000	)

UTILITIES — 0.06%
Virginia Electric and Power Co., Series 2002-A, 5.375% 2007	$	9,960			10,020

MORTGAGE-BACKED OBLIGATIONS — 0.04%
Fannie Mae 6.00% 2017¹		6,729			6,886


GOVERNMENT & GOVERNMENT AGENCY BONDS & NOTES — 1.14%
Fannie Mae 6.00% 2005		160,000			160,337
Fannie Mae 5.00% 2007		25,000			25,114
					185,451

Total bonds & notes (cost: $201,925,000)					202,357


		Principal amount			Market value
Short-term securities — 16.32%		(000	)		(000	)

3M Co. 3.82% due 11/14/2005	$	45,000		$	44,933
Abbott Laboratories Inc. 3.80% due 11/8/2005²		18,300			18,285
American General Finance Corp. 3.93%-3.94% due 12/5-12/6/2005		49,600			49,407
International Lease Finance Corp. 3.66%-4.05% due 11/9/2005-1/6/2006		90,000			89,592
Avon Capital Corp. 3.95% due 11/23/2005v		25,000			24,937
Bank of America Corp. 3.68%-3.96% due 11/3-12/13/2005		130,000			129,488
Ranger Funding Co. LLC 3.95% due 11/29/2005²		40,000			39,873
BellSouth Corp. 3.86% due 11/18/2005²		37,200			37,128
CAFCO, LLC 3.86%-4.13% due 11/23/2005-1/11/2006²		140,800			139,985
Clipper Receivables Co., LLC 3.65%-3.98% due 11/10-11/30/2005²		167,500			167,162
Coca-Cola Co. 4.00% due 1/9/2006		29,800			29,565
DuPont (E.I.) de Nemours & Co. 3.71%-3.84% due 11/4-11/30/2005		62,150			62,030
Edison Asset Securitization LLC 3.74%-4.00% due 11/4-12/22/2005²		123,000			122,600
Federal Home Loan Bank 3.82%-3.94% due 12/16-12/28/2005		198,200			197,012
Freddie Mac 3.81%-3.99% due 12/22/2005-1/10/2006		119,800			119,029
Gannett Co. 3.74%-3.87% due 11/3-12/1/2005²		106,600			106,397
Illinois Tool Works Inc. 3.92% due 11/21/2005		50,000			49,886
International Bank for Reconstruction and Development 3.61%-3.65% due 11/8-12/19/2005		100,000			99,703
Kimberly-Clark Worldwide Inc. 3.78%-3.85% due 11/14-11/18/2005²		62,100			61,992
Medtronic Inc. 3.73% due 11/1/2005²		11,300			11,299
NetJets Inc. 3.70% due 11/7/2005²		20,000			19,986
Park Avenue Receivables Co., LLC 3.85%-3.91% due 11/17-12/2/2005²		90,700			90,468
Preferred Receivables Funding Corp. 3.94% due 12/13/2005²		45,600			45,385
PepsiCo Inc. 3.71% due 11/4/2005²		15,300			15,294
Pfizer Inc 3.94%-3.955% due 12/5/2005²		109,500			109,080
Procter & Gamble Co. 3.63%-3.79% due 11/7-12/15/2005²		190,000			189,338
SBC Communications Inc. 3.75% due 11/8/2005²		22,400			22,381
Scripps (E.W.) Co. 3.84%-3.87% due 11/30-12/14/2005²		25,000			24,898
Tennessee Valley Authority 3.63%-3.895% due 11/17-12/22/2005		149,100			148,468
Triple-A One Funding Corp. 3.80%-3.99% due 11/2-11/22/2005²		54,361			54,292
U.S. Treasury Bills 3.349%-3.415% due 12/1-12/22/2005		7,100			7,074
Variable Funding Capital Corp. 3.80%-3.94% due 12/7-12/16/2005²		75,000			74,660
Wal-Mart Stores Inc. 3.63%-3.89% due 11/8-12/13/2005²		186,400			185,874
Wells Fargo & Co. 3.73% due 11/2/2005		75,000			75,000


Total short-term securities (cost: $2,662,583,000)					2,662,501

Total investment securities (cost: $14,036,051,000)					16,289,781
Other assets less liabilities					30,047

Net assets				$	16,319,828

(1) Maximum offering price and redemption price per share were equal to the net asset value per share for all share classes, except for classes A and 529-A, for which the maximum offering prices per share were $28.14 and $28.12, respectively.

See Notes to Financial Statements

Share class	Initial sales charge	Contingent deferred sales charge upon redemption	Conversion feature
Classes A and 529-A	Up to 5.75%	None (except 1% for certain redemptions within one year of purchase without an initial sales charge)	None
Classes B and 529-B	None	Declines from 5% to 0% for redemptions within six years of purchase	Classes B and 529-B convert to classes A and 529-A, respectively, after eight years
Class C	None	1% for redemptions within one year of purchase	Class C converts to Class F after 10 years
Class 529-C	None	1% for redemptions within one year of purchase	None
Class 529-E	None	None	None
Classes F and 529-F	None	None	None
Classes R-1, R-2, R-3, R-4 and R-5	None	None	None

	Year ended October 31, 2005						Year ended October 31, 2004
Share class	Ordinary income		Long-term capital gains		Total distributions paid		Ordinary income		Long-term capital gains		Total distributions paid

Class A	$	241,884	$	24,216	$	266,100	$	206,064	$	38,064	$	244,128
Class B		5,905		1,015		6,920		4,617		1,279		5,896
Class C		5,998		1,035		7,033		4,073		1,110		5,183
Class F		6,839		672		7,511		4,386		683		5,069
Class 529-A		2,192		204		2,396		1,349		212		1,561
Class 529-B		253		50		303		180		57		237
Class 529-C		368		68		436		234		69		303
Class 529-E		97		11		108		62		12		74
Class 529-F		41		4		45		20		3		23
Class R-1		110		21		131		53		16		69
Class R-2		853		133		986		517		133		650
Class R-3		2,193		230		2,423		952		142		1,094
Class R-4		686		75		761		391		63		454
Class R-5		2,156		124		2,280		1,204		200		1,404
Total	$	269,575	$	27,858	$	297,433	$	224,102	$	42,043	$	266,145

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

Share class	Distribution services	Transfer agent services	Administrative services
Share class	Distribution services	Transfer agent services	CRMC administrative services	Transfer agent services	Commonwealth of Virginia administrative services
Class A	$29,430	$10,053	Not applicable	Not applicable	Not applicable
Class B	5,630	517	Not applicable	Not applicable	Not applicable
Class C	6,026	Included in administrative services	$859	$124	Not applicable
Class F	987		492	45	Not applicable
Class 529-A	230		158	16	$129
Class 529-B	292		36	12	29
Class 529-C	415		51	14	42
Class 529-E	35		9	1	7
Class 529-F	3		3	-*	2
Class R-1	116		17	6	Not applicable
Class R-2	639		127	405	Not applicable
Class R-3	759		228	73	Not applicable
Class R-4	99		60	5	Not applicable
Class R-5	Not applicable		97	2	Not applicable
Total	$44,661	$10,570	$2,137	$703	$209

Share class	Sales(1)		Reinvestments of dividends and distributions		Repurchases(1)		Net increase
	Amount	Shares	Amount	Shares	Amount	Shares	Amount	Shares
Year ended October 31, 2005
Class A	$ 2,171,256	82,538	$ 244,730	9,271	$ (1,304,528)	(49,512)	$ 1,111,458	42,297
Class B	113,209	4,336	6,605	252	(51,515)	(1,966)	68,299	2,622
Class C	219,038	8,394	6,527	249	(88,866)	(3,401)	136,699	5,242
Class F	166,663	6,353	6,693	254	(82,826)	(3,149)	90,530	3,458
Class 529-A	51,703	1,967	2,396	91	(8,069)	(307)	46,030	1,751
Class 529-B	6,724	256	303	11	(1,164)	(44)	5,863	223
Class 529-C	15,290	583	436	17	(3,281)	(125)	12,445	475
Class 529-E	2,615	99	108	4	(382)	(14)	2,341	89
Class 529-F	1,215	46	45	2	(278)	(10)	982	38
Class R-1	6,070	233	131	5	(4,993)	(193)	1,208	45
Class R-2	51,778	1,980	986	38	(21,790)	(832)	30,974	1,186
Class R-3	81,912	3,129	2,404	91	(22,970)	(872)	61,346	2,348
Class R-4	36,035	1,373	761	29	(30,094)	(1,154)	6,702	248
Class R-5	152,875	5,718	1,637	61	(20,411)	(768)	134,101	5,011

Total net increase (decrease)	$ 3,076,383	117,005	$ 273,762	10,375	$ (1,641,167)	(62,347)	$ 1,708,978	65,033

Year ended October 31, 2004
Class A	$ 2,249,778	91,778	$ 223,459	9,214	$ (991,735)	(40,523)	$ 1,481,502	60,469
Class B	179,897	7,391	5,661	236	(33,058)	(1,357)	152,500	6,270
Class C	245,538	10,093	4,919	204	(44,390)	(1,822)	206,067	8,475
Class F	184,317	7,536	4,602	189	(54,526)	(2,245)	134,393	5,480
Class 529-A	44,044	1,801	1,561	64	(3,580)	(146)	42,025	1,719
Class 529-B	9,686	398	237	10	(680)	(28)	9,243	380
Class 529-C	16,215	664	303	13	(1,648)	(67)	14,870	610
Class 529-E	2,434	100	75	3	(280)	(12)	2,229	91
Class 529-F	1,058	43	23	1	(55)	(2)	1,026	42
Class R-1	7,582	307	69	3	(1,822)	(75)	5,829	235
Class R-2	35,768	1,465	649	27	(7,664)	(314)	28,753	1,178
Class R-3	87,583	3,572	1,080	44	(11,818)	(484)	76,845	3,132
Class R-4	21,888	891	453	19	(4,981)	(203)	17,360	707
Class R-5	14,855	606	786	32	(9,886)	(407)	5,755	231

Total net increase (decrease)	$ 3,100,643	126,645	$ 243,877	10,059	$ (1,166,123)	(47,685)	$ 2,178,397	89,019

(1) Includes exchanges between share classes of the fund.

Financial highlights (1)

		Income (loss) from investment operations (2)			Dividends and distributions
	Net asset value, beginning of period	Net investment income	Net gains (losses) on securities (both realized and unrealized)	Total from investment operations	Dividends (from net investment income)	Distributions (from capital gains)	Total dividends and distributions	Net asset value, end of period	Total return (3)	Net assets, end of period (in millions)		Ratio of expenses to average net assets before reimbursements/ waivers		Ratio of expenses to average net assets after reimbursements/ waivers (4)		Ratio of net income to average net assets
Class A:
Year ended 10/31/2005	$25.10	$.54	$1.41	$1.95	$(.48)	$(.05)	$(.53)	$26.52	7.80%	$13,850		.58%		.56%		2.06%
Year ended 10/31/2004	23.17	.48	2.00	2.48	(.46)	(.09)	(.55)	25.10	10.81	12,044		.60		.60		1.97
Year ended 10/31/2003	20.20	.49	3.31	3.80	(.52)	(.31)	(.83)	23.17	19.31	9,716		.62		.62		2.32
Year ended 10/31/2002	23.22	.49	(2.29)	(1.80)	(.57)	(.65)	(1.22)	20.20	(8.42)	7,782		.60		.60		2.15
Year ended 10/31/2001	24.36	.65	.19	.84	(.72)	(1.26)	(1.98)	23.22	3.71	8,399		.59		.59		2.68
Class B:
Year ended 10/31/2005	24.94	.33	1.41	1.74	(.27)	(.05)	(.32)	26.36	7.00	595		1.38		1.36		1.26
Year ended 10/31/2004	23.04	.29	1.98	2.27	(.28)	(.09)	(.37)	24.94	9.92	497		1.39		1.39		1.18
Year ended 10/31/2003	20.11	.32	3.28	3.60	(.36)	(.31)	(.67)	23.04	18.32	315		1.41		1.41		1.49
Year ended 10/31/2002	23.13	.32	(2.28)	(1.96)	(.41)	(.65)	(1.06)	20.11	(9.11)	156		1.40		1.40		1.40
Year ended 10/31/2001	24.30	.44	.21	.65	(.56)	(1.26)	(1.82)	23.13	2.88	59		1.38		1.38		1.80
Class C:
Year ended 10/31/2005	24.90	.31	1.41	1.72	(.26)	(.05)	(.31)	26.31	6.91	666		1.44		1.42		1.19
Year ended 10/31/2004	23.01	.27	1.97	2.24	(.26)	(.09)	(.35)	24.90	9.82	500		1.47		1.46		1.09
Year ended 10/31/2003	20.09	.30	3.28	3.58	(.35)	(.31)	(.66)	23.01	18.23	267		1.49		1.49		1.39
Year ended 10/31/2002	23.12	.30	(2.28)	(1.98)	(.40)	(.65)	(1.05)	20.09	(9.20)	107		1.48		1.48		1.34
Period from 3/15/2001 to 10/31/2001	23.48	.24	(.35)	(.11)	(.25)	-	(.25)	23.12	(.48)	28		1.48	(5)	1.48	(5)	1.64	(5)
Class F:
Year ended 10/31/2005	25.04	.52	1.41	1.93	(.46)	(.05)	(.51)	26.46	7.71	434		.67		.65		1.97
Year ended 10/31/2004	23.12	.45	2.00	2.45	(.44)	(.09)	(.53)	25.04	10.70	324		.70		.70		1.86
Year ended 10/31/2003	20.17	.46	3.30	3.76	(.50)	(.31)	(.81)	23.12	19.14	172		.72		.72		2.14
Year ended 10/31/2002	23.20	.47	(2.30)	(1.83)	(.55)	(.65)	(1.20)	20.17	(8.57)	54		.75		.75		2.08
Period from 3/15/2001 to 10/31/2001	23.54	.34	(.35)	(.01)	(.33)	-	(.33)	23.20	(.05)	12		.76	(5)	.76	(5)	2.30	(5)
Class 529-A:
Year ended 10/31/2005	25.07	.51	1.42	1.93	(.45)	(.05)	(.50)	26.50	7.71	151		.70		.68		1.93
Year ended 10/31/2004	23.15	.45	2.00	2.45	(.44)	(.09)	(.53)	25.07	10.70	99		.71		.71		1.85
Year ended 10/31/2003	20.20	.47	3.31	3.78	(.52)	(.31)	(.83)	23.15	19.19	51		.67		.67		2.22
Period from 2/19/2002 to 10/31/2002	23.31	.34	(3.07)	(2.73)	(.38)	-	(.38)	20.20	(11.88)	19		.70	(5)	.70	(5)	2.25	(5)
Class 529-B:
Year ended 10/31/2005	25.00	.29	1.41	1.70	(.23)	(.05)	(.28)	26.42	6.79	32		1.55		1.53		1.09
Year ended 10/31/2004	23.09	.24	1.99	2.23	(.23)	(.09)	(.32)	25.00	9.72	24		1.59		1.59		.97
Year ended 10/31/2003	20.16	.27	3.30	3.57	(.33)	(.31)	(.64)	23.09	18.07	14		1.61		1.61		1.27
Period from 2/19/2002 to 10/31/2002	23.31	.20	(3.06)	(2.86)	(.29)	-	(.29)	20.16	(12.40)	5		1.60	(5)	1.60	(5)	1.36	(5)
Class 529-C:
Year ended 10/31/2005	25.00	.29	1.41	1.70	(.23)	(.05)	(.28)	26.42	6.82	48		1.54		1.52		1.10
Year ended 10/31/2004	23.09	.24	1.99	2.23	(.23)	(.09)	(.32)	25.00	9.74	33		1.58		1.58		.98
Year ended 10/31/2003	20.16	.27	3.30	3.57	(.33)	(.31)	(.64)	23.09	18.09	16		1.60		1.60		1.28
Period from 2/20/2002 to 10/31/2002	23.54	.21	(3.30)	(3.09)	(.29)	-	(.29)	20.16	(13.25)	6		1.59	(5)	1.59	(5)	1.38	(5)
Class 529-E:
Year ended 10/31/2005	25.02	.42	1.41	1.83	(.36)	(.05)	(.41)	26.44	7.35	8		1.02		1.00		1.61
Year ended 10/31/2004	23.10	.37	1.99	2.36	(.35)	(.09)	(.44)	25.02	10.32	6		1.06		1.06		1.50
Year ended 10/31/2003	20.16	.38	3.30	3.68	(.43)	(.31)	(.74)	23.10	18.72	3		1.07		1.07		1.80
Period from 3/7/2002 to 10/31/2002	24.93	.27	(4.67)	(4.40)	(.37)	-	(.37)	20.16	(17.78)	1		1.05	(5)	1.05	(5)	1.95	(5)
Class 529-F:
Year ended 10/31/2005	25.08	.52	1.42	1.94	(.45)	(.05)	(.50)	26.52	7.77	3		.64		.62		1.99
Year ended 10/31/2004	23.16	.43	2.00	2.43	(.42)	(.09)	(.51)	25.08	10.58	2		.81		.80		1.75
Year ended 10/31/2003	20.22	.43	3.32	3.75	(.50)	(.31)	(.81)	23.16	19.03	1		.82		.82		1.99
Period from 9/17/2002 to 10/31/2002	20.63	.05	(.34)	(.29)	(.12)	-	(.12)	20.22	(1.42)	-	(6)	.09		.09		.26
Class R-1:
Year ended 10/31/2005	$24.97	$.31	$1.40	$1.71	$(.25)	$(.05)	$(.30)	$26.38	6.86%	$12		1.48%		1.45%		1.17%
Year ended 10/31/2004	23.06	.26	1.99	2.25	(.25)	(.09)	(.34)	24.97	9.83	10		1.51		1.49		1.07
Year ended 10/31/2003	20.17	.26	3.33	3.59	(.39)	(.31)	(.70)	23.06	18.19	4		1.65		1.50		1.18
Period from 6/11/2002 to 10/31/2002	23.56	.12	(3.29)	(3.17)	(.22)	-	(.22)	20.17	(13.50)	-	(6)	1.24		.58		.60
Class R-2:
Year ended 10/31/2005	24.95	.31	1.41	1.72	(.26)	(.05)	(.31)	26.36	6.90	99		1.65		1.42		1.19
Year ended 10/31/2004	23.05	.27	1.99	2.26	(.27)	(.09)	(.36)	24.95	9.86	64		1.76		1.45		1.10
Year ended 10/31/2003	20.17	.29	3.28	3.57	(.38)	(.31)	(.69)	23.05	18.10	32		1.86		1.47		1.35
Period from 5/31/2002 to 10/31/2002	24.35	.14	(4.10)	(3.96)	(.22)	-	(.22)	20.17	(16.31)	3		.75		.61		.67
Class R-3:
Year ended 10/31/2005	25.00	.44	1.40	1.84	(.38)	(.05)	(.43)	26.41	7.37	181		.98		.96		1.65
Year ended 10/31/2004	23.09	.37	1.99	2.36	(.36)	(.09)	(.45)	25.00	10.32	113		1.05		1.04		1.49
Year ended 10/31/2003	20.18	.37	3.30	3.67	(.45)	(.31)	(.76)	23.09	18.64	32		1.14		1.08		1.72
Period from 6/6/2002 to 10/31/2002	23.70	.17	(3.44)	(3.27)	(.25)	-	(.25)	20.18	(13.87)	2		.53		.43		.83
Class R-4:
Year ended 10/31/2005	25.06	.51	1.41	1.92	(.45)	(.05)	(.50)	26.48	7.69	43		.69		.67		1.94
Year ended 10/31/2004	23.14	.46	1.99	2.45	(.44)	(.09)	(.53)	25.06	10.69	34		.70		.70		1.86
Year ended 10/31/2003	20.19	.44	3.32	3.76	(.50)	(.31)	(.81)	23.14	19.14	16		.73		.72		2.03
Period from 6/27/2002 to 10/31/2002	22.95	.17	(2.79)	(2.62)	(.14)	-	(.14)	20.19	(11.43)	-	(6)	.53		.25		.84
Class R-5:
Year ended 10/31/2005	25.10	.58	1.43	2.01	(.53)	(.05)	(.58)	26.53	8.05	198		.39		.36		2.22
Year ended 10/31/2004	23.17	.53	2.00	2.53	(.51)	(.09)	(.60)	25.10	11.04	62		.39		.39		2.18
Year ended 10/31/2003	20.21	.54	3.29	3.83	(.56)	(.31)	(.87)	23.17	19.50	52		.41		.41		2.53
Period from 5/15/2002 to 10/31/2002	24.66	.26	(4.43)	(4.17)	(.28)	-	(.28)	20.21	(16.98)	41		.18		.18		1.22

(1) Based on operations for the period shown (unless otherwise noted) and, accordingly, may not be representative of a full year.
(2) Based on average shares outstanding.
(3) Total returns exclude all sales charges, including contingent deferred sales charges.
(4) The ratios in this column reflect the impact, if any, of certain reimbursements/waivers from CRMC. During some of the periods shown, CRMC reduced fees for investment advisory services for all share classes. In addition, during the start-up period for the retirement plan share classes (except Class R-5), CRMC agreed to pay a portion of the fees related to transfer agent services.
(5) Annualized.
(6) Amount less than $1 million.


See Notes to Financial Statements